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Domino Records settles Four Tet dispute, commits to pay 50% royalty on digital

By | Published on Tuesday 21 June 2022

Four Tet

Domino Records has settled its legal battle with Four Tet over what royalty rate he should be paid on streams. The label has agreed to pay a 50% royalty, which is what the musician argued he was due under his 2001 record deal. It had previously been paying him 18% of any streaming income generated by his Domino released records.

Writing on Twitter yesterday, Four Tet – real name Kieran Hebden – stated: “I have a bodacious update on my case with Domino Records. They have recognised my original claim, that I should be paid a 50% royalty on streaming and downloads, and that they should be treated as a licence rather than the same as a CD or vinyl sale. It has been a difficult and stressful experience to work my way through this court case and I’m so glad we got this positive result, but I feel hugely relieved that the process is over”.

He then posted a court filing in which Domino’s lawyers stated that “on all streaming and download income in respect of which our client has not yet accounted to you, our client will pay a royalty rate of 50%”. Meanwhile, regarding past digital income, “our client will pay you the sum of £56,921.08, calculated to be the difference between royalties which would have been payable at the 50% rate you claim and what has been paid at the 18% rate to date”.

There has been much debate and dispute over the years regarding how labels should interpret old record contracts that don’t talk about streaming – or even digital – when it comes to deciding what cut of streaming income should be paid to artists. Some labels apply whatever the rate was for physical discs to streaming, but lots of artists argue that the rate on digital should be higher because a label’s costs and risks are lower.

A more specific version of this dispute – which was relevant in the Four Tet v Domino case – is the sales v licence debate. Old record contracts often had one rate for when recordings were sold and another for when recordings were licensed, with the latter much higher than the former. So, in the case of Hebden’s 2001 deal, the rate on a sale was 18% whereas the rate on a licence was 50%.

In those old deals, ‘sale’ basically referred to the sale of physical products – ie vinyl, cassette, CD – while ‘licence’ traditionally referred to sync deals, or when tracks were licensed to another label’s compilation, or if a record was licensed to another label for release in another market. However, a record company’s deals with the streaming services are also clearly ‘licensing deals’, so many artists have argued the that higher licence rate should also apply to streams.

There has been plenty of litigation regarding the sales v licence debate over the years, albeit mainly in the US, and often involving old record contracts that don’t mention digital at all. However, with Hebden, the Standard Royalty Provisions that accompanied his 2001 contract did actually set a rate for downloads, which was 18%.

Domino argued that the 18% rate should also apply to streams, because technically speaking a stream involves a download. But Hebden countered that, because there was no specific provision for streams in his deal, the terms for licensing income should apply, which would pay him a 50% royalty. And to that end, he sued the label in a bid to get court confirmation that his interpretation of that 2001 record deal was correct.

As the case proceeded, some extra complications emerged. At one point Domino removed Hebden’s recordings from the streaming services and offered to pay back royalties on previous streams at the 50% rate. With the tracks no longer streaming and the dispute over past royalties resolved, the label’s lawyers argued, there was no active dispute for the court to consider.

But the Hebden side hit back, arguing that actually there was now an additional dispute to take to court, that being the dispute over the label removing his recordings from the streaming services. At a court hearing late last year his lawyer argued that – in addition to underpaying their client – Domino was now in breach of contract and liable for so called restraint of trade for taking down his recordings.

The judge overseeing the case rejected the restraint of trade claim, but said Hebden could add the extra breach of contract claim in relation to the removed recordings to his lawsuit. Those recordings subsequently returned to the streaming services while the legal battle proceeded. However, the extra elements to the dispute delayed things and risked pushing the whole case over to the main high court.

Such a shift to the main high court would have been a big deal for Hebden. The dispute so far had been pursued within the specialist Intellectual Property Enterprise Court, which was key for Hebden because it meant any potential liabilities to cover the other side’s legal costs were capped. Had the matter moved to the main high court, the potential liabilities would have become untenable for the musician, who would likely have been forced to abandon his lawsuit.

So, on one level, Domino could have pushed to get the case moved to the high court – when it proposed such a move at last year’s court hearing the judge seemed to be erring towards backing that proposal – and in doing so probably killed the case.

However, even when Domino seemed to be in a stronger position in terms of the legalities, once the litigation was in the public spotlight, it was definitely losing the PR battle. Even more so once it had removed Hebden’s recordings from the streaming services. Because, whatever the legal reasons for doing so, the musician’s fans were much more likely to agree with his lawyer, who told the court last year that that was a “deliberate, cynical and outrageous” move.

Which means, even if the label felt that it could possibly have defeated Hebden’s litigation – one way or another – in court, achieving something nearing an amicable settlement became a much more attractive option for Domino’s owners.

This whole dispute was also unfolding, of course, as the economics of streaming debate was underway in Parliament, on the back of things like the #brokenrecord and #fixstreaming campaigns. Although that Parliamentary review of the streaming music market covered many things, the highest profile aspect of the debate was how labels are sharing streaming income with artists, especially artists on record deals negotiated before the streaming boom.

MPs proposed a number of ways to help artists get a bigger cut, including a contract adjustment right that would force labels to renegotiate old deals; a reversion right that would see recording rights revert to an artist after a certain number of years; and the introduction of an ER system on streams, so that artists would be paid digital royalties directly via the collective licensing system at industry standard rates.

That timing meant that the Four Tet v Domino legal battle even had a political element to it, adding to the PR challenges faced by the label. So it’s perhaps not surprising that a settlement was forthcoming at this point.

Technically speaking it’s a ‘part 36 settlement’, which is a legal mechanism that incentivised Hebden to take the deal. Hebden’s legal advisor Aneesh Patel explained in a statement yesterday: “The way a part 36 works is that, if he declined the offer but achieved the same result at trial, he would have had to pay all of Domino’s legal costs from that point onwards”. However, he added, that settlement offer “more or less offers what he was asking for from the beginning”.

Hebden did not get everything he wanted though. Ideally he’d have liked to negotiate a deal that allowed him to take ownership of those old recordings, which – under the 2001 record deal – Domino will own for life of copyright.

“Sadly Domino still own parts of my catalogue for life of copyright and would not give me an option to take back ownership”, his tweet noted yesterday, adding: “I hope these types of life of copyright deals become extinct – the music industry isn’t definitive and given its evolutionary nature it seems crazy to me to try and institutionalise music in that way”.

But on the core dispute over royalty rates, the settlement is a win for Hebden. That immediately poses the question, does this set any kind of precedent that could benefit other artists stuck in old record deals? Of course, there’s no actual judgement in court here, and the sales v licence debate wasn’t argued before or settled by a judge. But could Hebden’s achievement motivate other artists in similar situations to push for a better deal?

The fact that Hebden’s settlement is public is key, because when labels do out of court settlements with artists aggrieved by old contracts those settlements are usually NDAed to the sky, meaning no one else can know what was agreed and therefore what is possible. That the outcome of the dispute is public was important to Hebden, Patel added in his statement yesterday. “Importantly for Kieran, it was not a confidential settlement, meaning he could share the result with others”, he said.

“I hope that Kieran’s actions and the successful outcome he has achieved will give other artists more confidence to make fair challenges”, the lawyer added. “I hope that the awareness this case has brought will also help add momentum to the ambitions of the #brokenrecord campaign”.

It has to be said, although NDAs are common with music industry settlements, some of the sales v licence disputes in the US were class actions with the resulting settlements being public domain. And while, in some cases, that did result in a nominal uplift in artist royalties on digital income, the impact was never as dramatic as some might have hoped or even expected.

Nevertheless, there might be a fair few artists on old deals wondering if they – or their manager or lawyer – should make a call today. And, as Patel noted, the case is sure to be used in the ongoing campaigning by artist groups for better streaming royalty rates on old record deals, campaigning that is currently focused on the various committees and research projects convened and commissioned by the UK government following last year’s Parliamentary report.

Responding to the news of yesterday’s settlement, the CEOs of the Featured Artists Coalition and Music Managers Forum, David Martin and Annabella Coldrick, said they hoped other labels currently paying physical era royalties on streaming income might now be motivated to reconsider their position.

They said in a joint statement: “We’re delighted to see that Kieran Hebden aka Four Tet’s case with Domino Records has reached a conclusion. The settlement which has been agreed reflects the fact that legacy recording contracts are not fit for purpose in the digital era”.

“That record labels continue, unilaterally, to apply analogue contract terms to streaming is inappropriate, unfair and legally questionable”, they added. “Other record labels must use this opportunity to act on modernising the royalty rates which artists receive for the exploitation of their work in the digital landscape”.

This story is discussed on this edition of our Setlist podcast.