Sony Music has cancelled the debts of thousands of artists who signed to the record label before the year 2000.
It means that many will now, for the first time, earn money when their songs are streamed on services like Spotify and Amazon Music.
Sony said it could not name the eligible acts due to confidentiality agreements, but a source said it would “include household names”.
It said some artists stood to receive “many thousands of dollars per year”.
How do recording artists get in debt in the first place?
Musicians typically take on debt when they first sign to a record label. They are given a lump sum, known as an advance, to pay for recording studios, video shoots, distribution and other expenses. The money is then paid back when they sell their music.
However, many artists never earn enough to repay their advances, often because they get unfavourable royalty rates from their own record companies. Heritage black artists have been particularly affected.
And until the debt to their label is repaid, those artists are not eligible to receive income from streaming, and other royalty payments.
Sony’s announcement came in a letter to artists on Friday
“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,” it said.
In other words, the debt hasn’t been explicitly wiped out – but Sony will ignore it and pay royalties to affected acts, backdated to 1 January 2021.
Music industry lawyer Aurelia Butler-Ball said the scheme would “unlock” streaming revenues that artists were not previously entitled to, under contracts signed during the CD and cassette era.
“Many of the record deals [made] before 2000 didn’t recognise that streaming platforms would ever exist,” she said. “Therefore, artists didn’t have the right mechanisms in place to see those revenues.”
Sony’s announcement came in a letter to artists on Friday whilst it was also revealed The Church of England co-owns Beyonce’s Single Ladies and other reputable records.
It sounds bizarre – but the church is one of hundreds of investors in a company called Hipgnosis, which, for the past three years, has been hungrily snapping up the rights to thousands of hit songs.
So far, it has spent more than $1bn (£776m) on music by Mark Ronson, Chic, Barry Manilow and Blondie. Its latest acquisition is the song catalogue of LA Reid, meaning it has a share in tracks like Boyz II Men’s End Of The Road, Whitney Houston’s I’m Your Baby Tonight and Bobby Brown’s Don’t Be Cruel.
When those songs get played on the radio or placed in a film or TV show, Hipgnosis makes money. And so, by association, does the Church of England, along with other investors like Aviva, Investec and Axa.
Did you know that the Church of England is a co-owner of Rihanna’s Umbrella and Justin Timberlake’s SexyBack?
According to Hipgnosis founder Merck Mercuriadis, the music he’s bought is “more valuable than gold or oil”.
“These great, proven songs are very predictable and reliable in their income streams,” he explains.
“If you take a song like the Eurythmics’ Sweet Dreams or Bon Jovi’s Livin’ On A Prayer, you’re talking three to four decades of reliable income.”
He says hit songs are a stable investment because their revenue isn’t affected by fluctuations in the economy.
“If people are living their best lives, they’re doing it to a soundtrack of songs,” he explains. “But equally, if they’re experiencing the sort of challenges we’ve experienced over the last six months, they’re taking comfort and escaping in great songs.
“So music is always being consumed and it’s always generating income.”
Mercuriadis, from Quebec, Canada, got into the music industry after calling the Toronto office of Virgin Records every day for months until they gave him a job in the marketing department, where he worked with acts like UB40, The Human League and XTC.
In 1986, he joined the Sanctuary Group, ultimately becoming its CEO, where he managed the careers of Elton John, Iron Maiden, Guns N’ Roses, Destiny’s Child and Beyoncé, as well as working on the relaunch of Morrissey’s career in 2004.
Kanye West recently called him one “of the most powerful and knowledgeable people in music“.
The idea for Hipgnosis came to Mercuriadis in 2009, around the time Spotify launched in the UK.
“I could see that streaming was going to change the landscape, and was going to make the music industry very successful all over again,” he says.
He points out that the industry’s traditional benchmark for success is the platinum record – which, in the US, represents a million sales. It sounds impressive, he says, until you realise that a hit film like Toy Story 4 sold 43 million tickets.
“So that immediately tells you that, while the vast majority of the population may enjoy music, very few of them put their hand in their pocket and pull out a tenner and pay for it.”
Streaming changed that, he says, because previously passive consumers were willing to pay a monthly subscription. “Instead of the focus being that one in 350 people would actually pay for music, the focus is on all of them.”
Source: BBC News