| 28 Nov 2023
Warner will share spoils from equity sales with artists

MUMBAI: The age old conflict between artists and record labels over a fair share of royalty payments seems to be tilting in favour of artists.

According to Music Week, Warner Music Group which released its Q1 earnings this week, has announced that it will share with artists any proceeds from the sale of Warner’s equity in a music streaming company. Warner has a stake in SoundCloud and Spotify (which is often rumoured to be preparing for an initial public stock offering), and in Deezer, which last year abandoned its planned IPO.

WMG CEO Stephen Cooper in his statement said, “Streaming is on a trajectory to become our primary source of revenue. As there is an on-going debate in the media regarding how artists should be paid for use of their music on streaming services, we wanted to take the opportunity to address this issue head on. While the main form of compensation we receive from streaming services is revenue based on actual streams, there are some services from which we receive additional forms of compensation. First, there is compensation that is commonly referred to as ‘breakage’ – which includes advances, minimum guarantees, non-recoupable payments and audit settlements. We are proud to have been recognised as the first major to implement a breakage policy, sharing this revenue with our artists since October 2009.”

“Second, there are equity stakes in some streaming services for which we have not paid. Although none of these equity stakes have been monetised since we implemented our breakage policy, today we are confirming that, in the event that we do receive cash proceeds from the sale of these equity stakes, we will also share this revenue with our artists on the same basis that we share revenue from actual usage and digital breakage. This policy stems from our desire to build deep and lasting partnerships with our artists. We strongly believe that aligning our interests with those of our artists is not only good for our artists, but also good for us and the health of the music industry.”

Warner has led the way by guaranteeing artists breakage payments since 2009 – a year after Spotify was born. Sony Music Entertainment has also enacted an internal ‘Breakage Policy’. The leaked 2011 contract with Spotify which broke out last year called for Spotify to pay a minimum guarantee that may exceed the royalties Sony would have otherwise received from the service. Following the leak, Sony’s top digital executive, Dennis Kooker, sent an email to Sony employees that said “virtually all” of the advances received under that 2011 contract were allocated to artists. Sony explained that under its breakage policy, it pledges to “share with its recording artists all unallocated income from advances, non-recoupable payments and minimum revenue guarantees that Sony Music receives under its digital distribution deals”. In 2015, Universal Music Group also confirmed to Music Business Week that it shares advances and ‘breakage’ cash from the likes of Spotify and YouTube with its artists as a matter of business policy.