Last week, both Warner Music Group and Sony Music Entertainment announced plans to share any proceeds from a potential sale of equity the majors have in streaming services. WMG owns a stake in Deezer -- which abandoned a planned IPO last year -- and both have equity in Spotify, which is rumored to be plotting an IPO of its own.
In separate announcements Feb. 4 and Feb. 5, respectively, WMG and Sony each disclosed that those payments would follow the current policy in place to share "breakage" with artists.
Universal Music Group, the largest record label by market share and which also owns equity in Spotify, declined a request for comment, with a company spokesperson telling Billboard it is in a quiet period ahead of parent company Vivendi's full-year earnings report, scheduled to be release a week from today.
Within the music industry, "breakage" generally refers to the difference between the required royalty payments labels make to artists and the actual royalties accrued, which then follows the rates established for streaming royalty payments. Today, the International Music Managers Forum (IMMF) released a long statement calling the majors' promises "obvious" and calling for a more detailed discussion to establish an open and fair model for future potential equity proceeds to be shared with artists. "Those labels who have made these generous offers should be in a position to define and calculate what they mean, not only for artists but also for their own corporate shareholders.," IMMF chair Volker May writes. "In the spirit of this new openness, and to share, in good faith, IMMF asks that the labels provide detail to their generosity."
More specifically, the IMMF is calling for a system that weights each artist on a label based on when that artist was contracted to the label (and for how long over the share-holding period), total streams per artist, potential artist streams, and other possible factors. Acknowledging that it does not have the answers to all of these questions, the organization is calling for an open debate from all sides to establish a criteria that would make "the equity issue" a separate payment model from the breakage and streaming royalty policies currently in place.
"We don’t envy the labels having to consider such a complicated issue," May writes, "But we do know that the label owners, the artists, and policy makers like the European Commission and US Copyright Office, who have expressed concern for creators’ rights, will appreciate an inclusive debate on sharing best practice before any further extraordinary value hits the labels bank accounts."
The equity issue first came up last year after a leaked contract emerged between Sony and Spotify that detailed an agreement that Spotify pay a sizable advance to Sony and provide the label free ad space in addition to the guaranteed streaming rate, money which artists feel they are entitled to a piece of. Any leftover revenue from that agreement would fall within the (increasingly wide) definition of breakage, according to the labels, and is paid out accordingly.