Who Will Take Labels To Task For Their Double Standards?

A week ago lawyers for the Temptations were the first to launch legal action against a major label for failure to pay through the advances they received from Spotify to have access to their catalogue of music. TMV have written about the double standards of labels numerous times. This article examines the double standards of labels but also the potential ramifications for the recorded music business if The Temptations win their legal action.

Let TMV also be very clear the non-payment of label licensing advances through to artists is not just restricted to advances from Spotify, it goes across all digital music streaming and al-la-carte services.

The irony in respect of this current case is that an artist is bringing their label to court to question whether they are effectively stealing from the artist. Yet on the flip side we continually hear from the record industry that pirates are the thieves that are destroying the industry and thus those that we the general public should be worried about. Well if you’re a genuine fan of a band, and The Temptations’ allegations are true, TMV would suggest that as a fan you should be equally worried about the fact labels are stealing from the artist you admire.

TMV in no way condones piracy or the illegal sharing of content in any form whatsoever. However we also equally abhor stealing from artists. Stealing is stealing folks and its time labels began practising what they have been preaching.

Court papers released by The Temptations also outline the archaic nature of the industry. The fact labels still believe it is morally right to charge artists a packaging and returns deduction on digital downloads is clearly deluded. Please labels outline a definition of how a digital download involves packaging. TMV already know for a fact that WMG charge all digital services a substantial fee (it’s over £25,00 per month year in the UK alone), to deliver their tracks to each digital music retail service. A manager of a global artist has informed TMV that he has seen “an upto date contract from a major independent with a 15% packaging deduction across the board”. This does prove that such dodgy behavior is not just restricted to the major labels. Shame on you whichever major independent you are!

So instead of incurring costs for supposed “packaging” of digital products, labels are in fact receiving fees on top of astronomical advances to deliver catalogues of their artist’s rosters music to digital music services. Subsequently TMV can see no legal case to claim a ‘packaging’ deduction from digital downloads.

The same goes for returns of stock. Please would UMG (the plaintiff in The Temptations action) inform TMV firstly of its definition of a return of stock and how it relates to digital downloads. Secondly we would also like to be presented with a demonstration of a digital return of stock in reference to your roster of artists.

Another problem, which one lawyer in the biz has drawn our attention to, is the fact that iTunes does not “sell” records. Before you scratch your head and say – that is crazy, the lawyer in question has drawn our attention to the fact that iTunes in fact only gives “licenses” of the tunes to the user. Why is this important? Because many labels, particularly those where the artists signed their deal before iTunes existed, try to squeeze the royalties from iTunes into their “record sales” royalties – calculated (in the case that the lawyer mentioned) at 4% of RRP. This compared to the 50% royalty that the same label has to pay on licensed income. Now you can see why most of the cases that have been settled (between the artist and their label) in this area are settled confidentially and out of court.

Moving onto the wider ramifications for the industry in respect of The Temptations case, firstly TMV are surprised other heritage artists have not yet launched similar action to that of the Temptations. Perhaps, they are waiting for one artist to set a precedent of sorts? That said, the lawyer that we spoke to in the UK is gearing up now for a case on the digital royalty on iTunes “licensing” right now. Also, if The Temptations do win their case than it will send shockwaves through the recorded music business.

Since the advent of the 21st Century labels have been licensing their catalogues to numerous digital music services displaying countless different business models. The fact is, as far as TMV can ascertain, no artist has ever received payment from these advances demanded by the labels to license their catalogue of artist’s music to such digital music services.

So whilst labels trade on their catalogues of artist’s music to leverage extortionate advances from digital music services, it seems that they do not pay the legally owed parts to the roster of artists they used to negotiate the advance in the first place. Nice if you can get away with it. Yet it gets even murkier in respect of Spotify.

First these labels trade on their roster of artist’s music without paying any advances through to said artists and then they also own a percentage of the service which has recently been valued at between $3.5 – $4 Billion dollars. In all between all four major labels and Merlin the independent body representing key indie labels around the world 18% of Spotify is owned by the recorded music business. Sounds like “double dipping” to us.

Artists continue to complain of worthless payouts from Spotify, so labels win on both sides; they pay none of the advances they received from Spotify to their roster of artists and, labels get to share in the spoils of any Spotify IPO. TMV have always stated an IPO was always the exit plan for Spotify’s founders in collusion with the labels from the get go.

Where is the Featured Artist Coalition in all of this? Why can’t they put together a class action on behalf of their member artists? The launch of The Temptations legal action against UMG details a clear case for all artists. However, it is only large established artists and their associated management teams that possess the power to take this kind of action.

TMV did reach out to UMG and Spotify for comment, but both declined to make a comment. FAC did not manage to get back to us in time for deadline but expect a followup in the next few weeks. It is TMV’s view that bodies such as the FAC should take action to protect artist large and small both for now and the future.

So whilst, Spotify’s founders, recorded music labels and other investors all look to get a sizeable payout, what do artists get in return? Basically zero, zilch nadda! As a record label, as a person in the music business or just as a music fan do you believe it is right that artists get ripped off in such a blatant manner? Please do leave us your thoughts below in the comments section.

Related posts:

1. No More Double Dipping For The Barefoot Producer
2. Google Willing To Help Record Labels Combat Music Piracy, But It’ll Cost Them
3. Major artists sign to Indie Label in JV Deal: What does this trend signify for major labels?
4. Why Major Labels Continue To Be Apple’s Slave!
5. Facebook – Learning Tricks From Record Labels

Posted by Jakomi Mathews on Apr 3 2012. Filed under featured, Labels. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.