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Universal Music confirms it will start paying royalties to unrecouped heritage artists

By | Published on Friday 1 April 2022

Universal Music

Universal Music has, as expected, confirmed it is following the lead of its major label rivals, who in turn followed the lead of certain independent labels, in committing to pay through royalties to unrecouped heritage artists. The mega-major includes its commitment in this domain within its 2021 annual report, which was published yesterday.

When artists sign to labels they usually receive a cash advance which is then recoupable out of any royalties they are subsequently due under their record deal. Depending on the specifics of that deal, some of the other upfront costs covered by the label may be recoupable too. This means that when the artist’s records start making money, the artist’s share of that money – which is often a minority share – initially pays off any unrecouped balance.

It can takes years for that unrecouped balance to be paid off. Indeed, in many cases the artist never ‘recoups’, which means the artist’s tangible income from those recordings is any cash the label advanced and any remuneration the artist is directly due under copyright law via the collective licensing system (which is linked to the broadcast and public performance of music).

Of course, a label would argue that the artist’s wider business also benefits from its investment and marketing, unlocking a load of other revenue streams, and that’s a valid argument.

Nevertheless, unrecouped heritage artists are often aggrieved when they see their label earning from their catalogues while their cut of any money is still paying off old debts. And all the more so in the streaming age, where catalogue has become super valuable, mainly as a quirk of the business model.

That led to calls from the artist community that unrecouped balances should be written off after a period of time. Not least, because, a label usually goes into profit on any one artist investment long before the artist actually recoups, because on a conventional deal the label gets the majority of recordings income. Certain indies led the charge in this domain, with Beggars in particular known for writing off unrecouped balances after fifteen years.

Sony Music was the first major to make a commitment regarding unrecouped heritage artists, cleverly announcing its intent as the UK Parliament’s culture select committee was still working on its big old report about the economics of streaming. It hasn’t actually technically written off unrecouped balances like Beggars, but it is paying royalties through to unrecouped heritage artists whose deals pre-date 2000.

This was welcomed by the select committee, which wrote in its final report: “In a positive move, Sony recently announced that it would ‘pay through on existing unrecouped balances to increase the ability of those who qualify to receive more money from uses of their music’ for deals made before 2000, though at the time of writing Universal and Warner have not similarly followed suit”.

“We urge Universal and Warner”, the report went on, “to look again at the issue of unrecouped balances with a view to enabling more of their legacy artists to receive payments when their music is streamed”.

Warner Music then announced that it was basically making the same commitment as Sony via an Environment Social Governance Report that it published in February. At that time, Universal insiders indicated that a similar commitment would appear in the Environment Social Governance section of its then still being compiled annual report.

And, indeed, it does. In a section all about Universal’s environmental, diversity and artist welfare initiatives, the mega-major also announces it is launching a “goodwill programme” that will see it pay through royalties to “certain” legacy artists with unrecouped balances.

“Continuing to build on an industry-leading tradition of support programmes for legacy artists”, the annual report states, “in 2022, UMG is proud to initiate a worldwide goodwill programme for certain legacy featured recording artists and songwriters with unrecouped balances”.

“By not applying their unrecouped advances to royalty statements for any period beginning 1 Jan, 2022”, it goes on, “eligible creators and their immediate heirs who have not received any payments since 1 Jan, 2000, will begin receiving royalties, subject to certain conditions. Within the coming months, UMG will contact eligible artists and songwriters”.

If you’re wondering how Universal is an “industry leader” when it comes to supporting legacy artists, despite it being pretty late to the party on paying royalties through to unrecouped heritage acts, the major’s annual report then brags about its previous artist support initiatives. Well, one initiative in particular, really.

“Among its previous artist support efforts”, the annual report continues, “in 2001, UMG donated $2 million to the R&B Foundation, establishing the Motown/Universal Music Group Fund – making possible long-term continuity for the Foundation’s financial assistance programmes, such as grants to artists in need of financial and medical assistance”.

Although, obviously, the devil is in the detail regarding these commitments to pay royalties through to unrecouped heritage artists, the commitments have nevertheless been welcomed by artists, songwriters and their managers.

Although, those artists, songwriters and managers generally also point out that this is just one of various things they have been calling for in recent years to make the music industry more artist friendly.

Responding to Universal’s announcement, the CEOs of the UK’s Music Managers Forum and Featured Artists Coalition – Annabella Coldrick and David Martin respectively – said this morning: “The FAC and MMF welcome this positive announcement from Universal Music Group”.

“Writing off unrecouped balances should benefit many artists and songwriters who signed deals in a pre-digital era”, they added. “We look forward to seeing the full detail of these proposals, as well as discussing progress on other much needed reforms of the recorded music market”.