Artists and managers welcome Warner’s commitment to pay royalties to unrecouped heritage artists


February 2, 2022

Warner Music yesterday announced that it is following Sony Music’s lead regarding paying royalties through to heritage artists whose recordings it controls and who are still paying off unrecouped advances and costs. That piles the pressure onto Universal Music in this domain, although sources have told Music Business Worldwide that it will make a similar announcement in due course.

Under most record deals, a label can recoup any advance it pays to an artist – and usually some of its other upfront costs too – out of future income, and often specifically the artist’s cut of future income. That means that although an artist is technically earning royalties under their record deal from the off, they don’t get any new money in their bank account until the label has claimed back all those recoupable costs.

This practice has become all the more controversial since the streaming boom began and the value of each label’s catalogue has surged, especially where artists are yet to recoup on really old record deals. Critics of the practice also point out that – because the label is usually getting a majority share of any income generated by an artist’s recordings – it has often gone into profit on its original investment in an artist long before said artist has recouped.

Some indies have long written off unrecouped balances after a period of time, the Beggars Group being particularly well known for doing so. Then last June, in the wake of the economics of streaming inquiry in the UK Parliament that put artist remuneration in the spotlight, Sony Music announced that it would start paying royalties through to all artists who signed their record deals pre-2000, even if there were still unrecouped balances.

This move was widely welcomed by groups representing artists, songwriters and managers – and by MPs on the culture select committee who were busy writing the report that followed their streaming inquiry. In that report the committee called on Warner and Universal to make a similar pledge.

Warner complied yesterday within its first ever Environment Social Governance Report, a document that sets out all the ways Warner Music is a responsible business doing responsible things for the benefit of its artists, songwriters, employees, clients and the world at large.

In that report the mini major formally announced “a legacy unrecouped advances programme where, for our artists and songwriters who signed to us before 2000 and didn’t receive an advance during or after 2000, we won’t apply their unrecouped advances to royalty statements for any period beginning 1 Jul 2022 or after. The programme will also benefit other artist royalty participants such as producers, engineers, mixers and remixers”.

The move was welcomed by the UK’s Featured Artists Coalition and Music Managers Forum, both of which have long campaigned on this issue.

Those organisations’ respective CEOs David Martin and Annabella Coldrick said in a joint statement: “Warner Music Group’s announcement is a positive step towards the artist-centric music industry that we advocate for. The FAC and MMF have long campaigned for artists’ unrecouped balances to be written off after a fixed time period. In light of this we are pleased that two of the world’s major music companies have now implemented this policy, recognising that such steps do not harm their business and help to create a fairer music economy”.

Hoping that Warner joining Sony in this domain is a sign that further artist-friendly policies will be adopted by the majors in the future, Martin and Coldrick added: “We welcome this move and hope the positive changes to ensure artists are properly paid in the streaming era will continue. We would like to see old unrecouped debts written off in full, not just disregarded, and would like to see this implemented on a rolling, annual basis so all artists will eventually benefit”.

The biggest record company in the world, Universal Music, is usually late to the party when it comes to implementing artist-friendly policies of this kind. However, it did ultimately follow the lead of its rivals when it came to commitments to share the profits of any unallocated advances and equity sales that stemmed from its licensing deals with the streaming services like Spotify.

According to MBW’s sources, Universal’s commitment on paying through royalties to unrecouped heritage artists could be included it its own upcoming update on Environment Social Governance. Which would be good.

With all three majors paying through royalties to unrecouped heritage artists, all the organisations representing musicians and managers could move on to the next demand on the list which is – let me check – oh yes, a commitment to pay a minimum royalty rate in line with what is standard in new record deals on all recordings in a label’s catalogue, oblivious of the royalty rates stated in any one old record contract. Basically, for the majors to follow the lead of the Beggars Group. Again.

Warner’s big old ESG Report also runs through all the various charitable, social, cultural, diversity, sustainability and mental health initiatives it has instigated and run in recent times, seeking to demonstrate that all things considered, it’s a fine old corporation.

On the report, Warner Music boss man Steve Cooper says: “Becoming a more equitable and sustainable company is a moral, commercial, and creative imperative. WMG operates in more than 70 countries around the world, each with distinct customs, cultures, needs, and regulations. So, our sustained, global approach to ESG requires us to have a sophisticated local, individualised line of action”.

“We’re exploring what creating positive change should look like for our company, our artists and songwriters, and the broader community”, he adds. “We’ve made some great strides so far, but this report isn’t just a snapshot of what we’ve done to date – it’s a long-term commitment to action and accountability”.

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