Purchasing and/or illegally sharing music files has been fairly standard for almost a decade. In reality we have had MP3s since 1994. So why in most artists recording contracts do labels still refer to digital sales as “New Media”? There is nothing new about it.

Digital consumption of music has been with us for almost 14 years. Labels cynically use the terminology “New Media” so they can cut artists actual royalties by 50% or more. They go even further claiming 10 – 15% packaging and breakage deductions after they have already deducted 50% of your royalty rate…(breakage in digital media…surely and oxymoron?). So with declining hardcopy CD sales and digital not exactly picking up the gap and artist receiving less than 50% of regular hardcopy CD sales artists are quite literally being screwed.

If you were shocked by what is stated above, try and put your mind to the following question. Just what is happening to the payments labels have been receiving as advances from digital stores and as legal settlements from fallen P2Ps such as Napster or Kazaa? Or even the advances they receive from hardware manufacturers where they license-in their catalogue of music to be pre-loaded so the consumer receives the music when they purchase the hardware item? Where does this money actually go and what are the IFPI, publishers and government doing to ensure that artists get paid for this income?

Do artists receive any of it? Or does it make its way into what labels call “non-attributable income”? How can it be termed “non-attributable” income if it is money received for the music of each labels artists? It is in fact entirely attributable and should therefore be paid out to artists as such.

No major labels have been willing to comment on this important subject. Tim Clark from IE Music puts it plainly as follows: “ It’s called black box income because it is hidden. And not to put too fine a point on it, it’s as close to stealing as [he] would be allowed to say” (Musically.com Issue 171 page 5). The main point there is that labels are receiving large up-front advances from, hardware manufacturers, digital stores and new digital music start-ups and that money does not reach the artist plain and simple! Can the labels defend this action, or is it the reason they do not want to discuss this issue as it is entirely indefensible?

All labels tend to be concerned about these days is “market share”. It’s non-attributable income and it doesn’t have go to the artist – it goes straight to the bottom line. I myself have on numerous occasions brought this fact up at music industry conferences where senior major label executives are speaking and they avoid answering any questions whatsoever in relation to the “black box” advances income and its distribution to artists. Why? What have the labels got to hide?

One has to ask is it little wonder that large acts (Radiohead, Madonna, Prince etc) are leaving their record labels and launching new and creative business models where labels are generally cut out of the picture? The benefit these major artists have is that they have already been made successful by the large major label marketing budgets and it is probable without them, these same artists would not actually be able to make the moves they have done without that previous investment. Where does this leave new artists and the potential revenue to be made and what is left for the major labels to invest in new talent if all their large successful profit centre artists are leaving in droves?

This all sounds so depressing, but questions do need to be answered and labels need to become transparent if they are to survive in this new and fast changing world. Technology is driving new music consumption habits and digestion abilities, you cannot fight it, however transparency from labels is of paramount importance for artists to have confidence in being able to derive a fair and equitable income.

My suggestion is this: instead of screwing artists harder in the tighter margin digital age, labels need to leverage their ownership of the copyrights and negotiate better deals with the new distribution pipes (ISPs, Digital Stores and Mobile Network Operators etc). Yet they also need to go further and demonstrate that they are also not screwing artists harder in the process. If the labels cannot manage this than what incentive is their for an artist to produce music if they are going to used and abused in such a lamentable manner by the very businesses which rely on their talent to even have a business in the first place.

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