This Week In Royalties: Majors Making Indie Moves

Jun 02, 2017

Benom Plumb, Assistant Professor of Music Industry Studies at the University of Colorado Denver, reviews the biggest music industry news of the week affecting music royalties. He is a music industry professional, not an attorney.

Sony Music Merges The Orchard and Red Essential Into Single Artist/Label Services Division (Hypebot) 
Benom’s Take: The major record company, Sony Music, owns two “independent” artist and label service companies, The Orchard and Sony Red (Red Essentials). I always chuckle when I hear that a major owns an “independent.” Let’s be honest, if a company is owned and operated by major and “merged” by a major - it’s a major. What they really mean is that these companies provide label services FOR independent artists and independent record companies. The services offered to their independent clients include physical and digital album distribution and sales, marketing, promotion, TV/Film licensing and neighboring rights (sound recording public performance royalties) in more than 30 international markets.

So when it comes to artist and label services for the independents, The Orchard and Sony Red are certainly two of the most prominent and “go-to” companies in the industry. Both have reputations that precede them (for better or worse) and combining the two companies definitely makes sense from a corporate efficiency standpoint. However, I tend to agree with Merlin’s CEO, Charles Caldas, on the merger. Caldas is quoted as saying that the merger is “not positive news for the indie labels and artists affected” and called out the majors for their “faux-indie imprints land-grabbing independents rights in order to bolster their market shares.” Major record companies are not inherently bad or evil, but it is all too easy for independents to get lost in the shuffle at an oversized corporate entity pretending to be an “indie.”

Warner Music Group Divestment Process of Over $200 Million In Recorded Music Assets Almost Complete (Music Business Worldwide)
Benom’s Take: Speaking of majors and independents, this news is very interesting and a positive story for the redistribution of power from majors to indies. In February 2013, Warner Music Group purchased the Parlophone Label Group for a reported £487 million from Universal Music Group. Warner agreed as a condition of the deal, to divest somewhere in the ballpark of 25% to 33% of Parlophone’s value and/or portions of the Warner Music catalog to non-major music companies. Over four years later, it appears the divestment process is nearing completion.

It’s very surprising to me that part of the goal of the Warner divestment process was to “reunite” artist catalogues with their current independent label homes. In fact, the idea and action of “reuniting” is pretty rare for an industry stereotyped for greed and swindling. Notable mentions are Tom Wait’s first two classic albums “Closing Time” and “The Heart of Saturday Night.” Warner sold these to independent powerhouse, Epitaph Records, which has been Waits’ label home since the late 90’s. Warner also sold Radiohead’s early catalog, in addition to albums by The Buzzcocks and Hot Chip. I only wish that the artists themselves could have had the leverage to purchase their assets back individually, instead of their current label homes. Nevertheless, these recorded music assets are leaving the major company for the indies and I think that’s a good thing.

U.K. Royalty Collection Society PPL Pays Out More Money Than Ever Before (Billboard)
Benom’s Take: More good news for international royalties. PPL is the UK equivalent of SoundExchange, representing the public performance rights for sound recordings and recording artists in the UK. However, there is one big difference between PPL and SoundExchange. PPL licenses and collects royalties for both digital and terrestrial radio performances, while SoundExchange only collects royalties for digital radio performances of sound recordings (i.e., only internet streaming and satellite radio, not AM/FM radio). That’s because the AM/FM radio royalty does not exist in the United States, but it does exist throughout greater Europe and the UK. PPL’s revenue grew by 8% and the society distributed approximately $230 million in royalty payments to its members. The majority of this distribution (approximately $163 million) came from standard broadcast and public performance licensing.