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Mr Probz sues Sony Music again in ongoing royalties dispute

By | Published on Tuesday 27 September 2022

Mr Probz

The Dutch artist and producer Dennis Stehr, better known as Mr Probz, has filed new legal proceedings against Sony Music in the Amsterdam courts in an ongoing dispute over how the major calculates and reports his royalties.

He accuses the major of deliberately failing to calculate his cut of any income on an ‘at source’ basis and of withholding bookkeeping files that his accountants need to see in order to effectively audit the money he is due. The legal action seeks “full payment of royalties after the deduction of a reasonable distribution fee to Sony Music”, which Stehr reckons equates to millions of euros.

Stehr and his company Left Lane Recordings originally entered into a licensing deal with Sony in the Netherlands in 2013 in relation to his track ‘Waves’ and the Robin Schulz remix of that recording. A subsequent deal the following year gave the Sony-allied US-based dance label Ultra involvement in the tracks in North America.

The royalty rate Stehr and Left Lane received from those deals varied between 20% and 50% depending on the market and some other factors, but crucially with digital income the artist’s share was to be calculated based on the monies received from each digital service by any Sony subsidiary or partner in any market.

That provision – ie that the artist royalty be calculated based on ‘at source’ income – seeks to address a common gripe that artists have had over the years with record deals. Labels often allow local subsidiaries and partners to manage the release of their recordings in other markets, and those local subsidiaries and partners will then usually charge a commission on any income.

Which poses the key question, if the artist is due 20% of any monies generated by their recordings, is that 20% of what was received by the local subsidiary or partner, or 20% of what is received in the artist’s home country, ie after the local subsidiary or partner has taken their cut. With an ‘at source’ provision it should be the former.

Stehr’s then manager first raised concerns in 2018 about how Sony was calculating and reporting royalties stemming from the 2013 and 2014 licensing agreements, reckoning that his client was being underpaid by the major.

Based on those concerns, Stehr asked the accountants at Grant Thornton to undertake an audit the following year. But the auditors subsequently reported that they couldn’t get access to paperwork outside of the Netherlands to assess whether royalties were being properly calculated in other markets. Regarding North America, Sony seemingly said that the accountants should talk directly to Ultra, while Ultra said they should talk to Sony.

The dispute over royalty calculations and reporting then went legal in 2020, with Stehr and Left Lane accusing the major of being in breach of contract. And on that basis, they sought to cancel the licence relating to the Mr Probz recordings. Sony objected to those claims, but the producer prevailed in court.

In a statement regarding the new litigation, Left Lane summarises the outcome of the 2020 legal battle as follows: “In September 2020, Stehr and Left Lane BV successfully filed a lawsuit against Sony Music Entertainment and Ultra. Among other things, SME had not disbursed royalties correctly, transparently and timely. With this judgement, Stehr and his company retrieved all exploitation rights to Left Lane BV”.

“The court ruling also determined that SME had to provide various accounting documents”, the new statement continues. “Also, the already initiated audit, by Grant Thornton, at both SME and Ultra Records had to be completed. The audit verified whether SME and Ultra Records have complied with the ’at source’ provision in the licence agreements with Stehr and Left Lane BV in the past”.

“As a result of these audit reports, new facts and circumstances have emerged”, it confirms. “Grant Thornton’s audit reports conclusively show that SME and Ultra Records are unable to demonstrate that all royalties have been accounted and disbursed ‘at source’ to Stehr/Left Lane, as contractually agreed”.

It adds: “The audit reports also display that SME and Ultra, from the start, never intended to comply with this ’at source’ provision and apparently knew that such an agreement would not be honoured, given the contractual system SME has developed. By doing so, SME and Ultra Records have deceived and misled Stehr and Left Lane BV. If Stehr had known that SME withheld royalties in this way, he would never have entered into a contract with them”.

“The most striking finding”, it then says, “concerns that SME and Ultra mutually agreed on, unbeknownst to Stehr and Left Lane BV, charging distribution fees for exploiting Probz’s music rights (so-called inter-company discounts). These fees are deducted before calculating the artist’s royalty. However, an ’at source’ provision in a record contract does not allow two mutually related parties to deduct an agreed distribution fee, since the settlement basis is at the source”.

Based on what was unearthed during the audit, Stehr says that his new lawsuit “is demanding full payment of royalties after the deduction of a reasonable distribution fee to SME – this amounts to a multi-million-euro claim”.

Stehr himself adds: “It is important that this case is won, not only for myself but also for other artists who have signed into ‘at source’ agreements with one of the largest music entities in the world. This case can prove that artists have possibly not received the compensation to which they have been entitled to for years”.

“For an individual artist, filing a lawsuit of this size against a major is often impossible”, he goes on. “When there is a conflict, they often feel intimidated by these influential record labels. They usually don’t have the resources to compete against these giants in the music industry, on whom they are also financially dependent most of the time”.

“From the start, I have not received the compensation I was entitled to and I suspect I am not alone”, he concludes. “What we have discovered after years of litigation and the recent audits is so crooked that I have no choice but to take these steps”.