Sony Music Moves To Pay Royalties To Artists That Still Owe It Money

It’s difficult to find examples of major record labels making a move in favor of the artists they serve unless under pressure, but it looks like we have one now. Sony Music announced in a letter to its artists that it will start paying its legacy acts royalties, even if they still owe the label money. Its new Artist Forward initiative is designed to ignore the unrecouped balance that an artist signed before the year 2000 might owe the company from advances.

What this means is that legacy artists can now begin to collect money on streaming retroactively back to the beginning of this year. Sony Music artists with outstanding label liabilities are no doubt rejoicing.

Good Will

And that’s exactly what Artist Forward is designed to do - to cultivate good will with artists. The company probably figured that most of the unrecouped funds was dead money anyway, so best to write it off while making the artists happy.

Sony’s letter states this new policy is called the Legacy Unrecouped Balance Program and says, “As part of our continuing focus on developing new financial opportunities for creators, we will no longer apply existing unrecouped balances to artist and participant earnings generated on or after January 1, 2021 for eligible artists and participants globally who signed to SME prior to the year 2000 and have not received an advance from the year 2000 forward.

“Through this program, we are not modifying existing contracts, but choosing to pay through on existing unrecouped balances to increase the ability of those who qualify to receive more money from uses of their music.”

But There’s Fine Print

If you read closely though, Artist Forward/Legacy Unrecouped Balance Program doesn’t cancel the debt that an artist might owe, it just ignores it for now. No doubt if the artist is still selling CDs and vinyl, those earned royalties are still being accrued against the debt, and if a new delivery format pops up that creates a new demand for the artists material at a premium price, you can bet that will still be counted against recoupment as well.

Also noted in the letter is that the program doesn’t apply to an artist that might have received an advance after the year 2000, although that probably doesn’t apply to many legacy artists anyway.

The Artist/Label Clash

Artists traditionally have many complaints about record labels, from insufficient marketing, to creative interference, to executive champions leaving the company, to unfair deal terms, but recoupment is perhaps the major issue that ultimately causes dissent.

The typical scenario is that the artist puts her heart and soul into creating a product that might actually sell well, yet she’ll still end up owing the record label money in the end after all the recording, marketing and touring bills are totaled up. At that point, the artist finds that she’s expected to pay for so many of the services that were thought to be free or the label’s burden, an unwelcome surprise to be sure.

The problem here is that the bill never goes away, and every statement brings a constant reminder that there’s still a large debt owed to a now faceless entity, especially if close label allies are no longer with the company.

With Sony’s latest initiative, artists will immediately begin to receive royalties from streaming. That revenue may be far less than expected though, especially given the restrictive terms of legacy deals that were never renegotiated to apply in the digital world. That will no doubt bring about another round of “streaming is the devil because it doesn’t pay anything” rhetoric from artists, but the wrath of the artist will probably be aimed more at the streaming services than Sony.

Regardless of that outcome, Sony Music made a well-thought out strategic move with much more upside than downside for the label, and for its artists.