Benom Plumb, Assistant Professor of Music Industry Studies at the University of Colorado Denver, reviews the biggest stories of the week affecting music royalties. He is a music industry professional, not an attorney.
As EMI Music Publishing Comes Up For Sale (Again), Investors Welcome ‘a Big Check’ (Variety)
Benom’s Take: Sony/ATV purchased the majority of the EMI Music Publishing catalog around 10 years ago for a reported $2.2 billion. However, this new sale is for EMI copyrights that Sony/ATV administers, but did not acquire ownership of in the initial purchase. Even though there are multiple potential investors interested in buying, Sony/ATV is most likely the highest bidder. This would make sense so that Sony/ATV can finally own 100% of the EMI Music Publishing catalog. The experts here are guesstimating the sale could go for approximately $1 billion-plus. Cha-ching!
What I think is most interesting about this news are the comments about investing in music publishing. Take these quotes for example:
“What’s not in doubt is that publishing is a very viable business these days.”
“There’s been an explosion of music use around the world because of digital connectivity, and that translates to value for publishing catalogs – or it should,” offers one industry executive. “If you’re looking at purchasing rights that involve publishing, and it’s blue-chip artists, this is probably a good time to buy.”
If you’ve got the cash to invest, this statement is definitely true. The royalties of blue-chip artists rarely decrease in value. However due to the lack of competition and transparency in the music biz, if you want to get in on the game, you have to be a big player financially and know the right industry decision makers.
Springsteen Catalog Leaves Sony/ATV for Universal (Show Biz 411)
Benom’s Take: Speaking of Sony/ATV, it appears that part of the reasoning behind Sony/ATV’s recent and quick copyright settlement with Sir Paul McCartney was due to Sony losing the Bruce Springsteen catalog. That would have been a double whammy for Sony/ATV to lose McCartney and Springsteen around the same time. As the article states, “Sony was likely unable to match that [Springsteen] money while holding on to Paul.” Now, Universal will control the Springsteen copyrights, which as the author states, “are worth a bloody fortune.”
I couldn’t tell you what the cost was for Universal to acquire Springsteen, but it was certainly in the millions. Most of the time, only deep pockets can compete in these kinds of deals. For example, one time I was trying to compete for a big artist’s catalog that was leaving one of the major publishers (Sony/ATV, Universal, Warner/Chappell). The artist required a minimum of a $1 million royalty advance to consider any offer. Yes, $1 million was the starting bid and unfortunately, I couldn’t compete with that.
Quincy Jones, Michael Jackson Estate Go to Court Over Royalties (Rolling Stone)
Benom’s Take: This is a classic mess between record producer, recording artist, and record company. Record producers typically receive upfront fees to initially produce the album, in addition to residual record royalties in various forms thereafter. The most typical producer royalty seen is 3% to 5% of total recording income (sales, streams, etc.). The $30 million in royalty underpayments Quincy Jones is claiming is due to licensing income dating back five plus years, mostly from Michael Jackson's posthumous releases. The details of this dispute all come down to Michael Jackson’s producer contract with Quincy Jones.
Under that contract, it would likely state what the producer fees are as well as a scale for residual royalties. Typically, the producer royalty scale is always tied to the artist’s royalty scale with their record company. So if Jackson gets more from his record company, Jones gets more. If their contract clearly states that the producer royalty is “x” but the royalty statements Jones receives do not mathematically equal “x,” Jones has a case.
The whole thing is based on finite royalty accounting and arithmetic, to be honest. I can’t imagine a man of Quincy Jones reputation would spend all this time and money in court if he and his people hadn’t run the numbers. In 2013 the claim was $10 million in royalties and now the dispute has grown to $30 million. Until we know the mathematical details, the jury is still out on this one. I will say this though: Every reputable industry professional I know of that has audited record companies or recording artists for underpayments have always found that royalties were underpaid. Always. Every time. So my bet is that Quincy Jones was definitely underpaid.