Another bombshell dropped June 19, when UMA announced it had won legal action against Pav in a decision that further integrates Modular into the Universal group -- and creates more distance from Modular’s founder.
Pav is the laconic architect of Sydney-based Modular Recordings, a label which has delivered some of coolest bands to come out of Australasia, among them the Avalanches, Cut Copy, Wolfmother, Ladyhawke, the Presets and, of course, Tame Impala. A keynote speaker at the 2010 Bigsound conference, Pav curated the 2011 VIVID Live program at the Sydney Opera House. The promoter and once label chief established Modular affiliates in New York and London in recent years. Since the lawsuits were revealed, Pav has kept relatively quiet, responding to claims only through his legal team. He recently spoke to Billboard exclusively.
BMG Launches Suit Against Universal, Modular Founder Steve Pavlovic Over Tame Impala Royalties
Billboard: BMG is suing you and Universal in the U.S. for royalties owed, a sum of more than $500,000. What is the backstory?
Steve “Pav” Pavlovic: We’ve been in discussions with BMG for some time to resolve what mechanicals royalties Modular owes to BMG in regards to Tame Impala. The issue arose out of an unfortunate misunderstanding due to their being different ways of calculating and paying mechanical royalties in the U.S. compared to the process we were used to in the U.K. and Australia. We didn’t realize that the different statutory process in the U.S. required Modular to deduct and pay the artists’ mechanical royalties directly.
We were in amicable discussions with BMG about how we make good. Together we established that we needed an audit to work out exactly what we needed to pay. I’ve always offered BMG complete access to our distributors' records for them to audit and identify exactly what is owed by Modular U.S. But then it became complicated by the fact that Universal / Interscope took over the release of the Tame Impala album Lonerism from June 20, 2013 and the rest of the Tame Impala catalog from August 2014 so establishing who owed what became complicated. This is unfortunately one of the matters that I’ve been in dispute with Universal about and sadly Tame Impala were caught in the middle. I can only assume BMG became frustrated about the impasse between Modular and Universal effecting their situation and sought to take their own action to bring it to a head. I’m pleased to say though that in the last week we’ve been able to establish the payment actually due. Incidentally, my share is a fraction of what has been reported in the press. I believe with the sums now allocated to Modular and Universal the accounting can be settled quickly and therefore BMG are prepared to withdraw the case. (UMA on June 19 announced that court documents had been filed to dismiss the case against it and Modular Recordings Pty Ltd from U.S. legal proceedings brought in the U.S.)
Did BMG communicate to you about this lawsuit, or did you find out in the media as Universal claims?
Yes, of course I knew about it as I was sent the papers. I was surprised to see Universal say they knew nothing about it until they saw it in the media. I had known about it for weeks.
Kevin Parker commented during his Reddit AMA that someone at the top had spent all the money from recordings and he never saw any of it. What's your take on that?
As you know when new bands are signed to labels the label invests in developing that artist’s career and often pays them substantial advances which are then recouped from royalties in commercial success. Modular supported Tame Impala over the first four years of their career. At no point did our belief or support in Kevin waiver, and through that belief he was able to get into a position where he started to recoup that investment and build a substantial career. I'm sincerely sorry that Kevin became caught in the middle of the Modular and Universal dispute -- it’s an outcome I regret terribly.
As a separate matter, it is simply not correct to say that Kevin has never received a cent from sales internationally because advances are just that -- an advance payment against future royalties and Kevin has been the recipient of considerable international advances from BMG, Universal and Modular. Now that his international mechanical accounting has been resolved I remain committed to doing whatever I can to move my side of things forward as speedily as possible. I’ve obviously got a lot of regard and respect for Kevin and think he's one of the most talented musicians I've ever had the pleasure of working with. I also appreciate that these matters are complicated and often not well-captured in the press and passing online commentary.
Modular Recordings Expands Into U.K. & Europe
Universal’s initial statement on the BMG suit mentioned that you’re no longer involved with Modular and Universal. The June 19 announcement seemingly spells an end to your ties with Universal? How did all this come to be?
Universal have sought to acquire my shares since late 2013 but I could never agree to their terms. We reached an impasse in late 2014. In the end we tried negotiating a settlement that failed for various reasons. The situation became untenable as it was starting to affect the careers of artists signed to Modular and in particular those that I maintained a management position with. I remained a shareholder and director which formed the basis for our recent court case.
Despite all of the accusations between us the case came down to one key point. After months of negotiating the settlement agreement which sorted out all of the issues between us I deliberated about signing and then thought better of it at the last minute. I had felt bullied into agreeing the terms and then got my second wind and stood up to say ‘no’. Universal claimed that I agreed to sign and that this was legally binding and that therefore the deed is in effect. A deed is a solemn document and it has always been my understanding that for a deed to bind a person, they have to actually sign it. It seems illogical to me that someone cannot have the right to deliberate about executing a document, especially one that they feel pressured into signing. As the proceedings are still live I unable to say much more than this.
In Australia, Universal is claiming they gave money as an advance for an unspecified payment and you wrongly kept it to yourself. How do you respond to that?
This is a serious and implausible allegation which needless to say, I reject entirely. I’m disappointed with the Supreme Court hearing which ruled that the separation deed is in effect because it has robbed me of the opportunity to defend myself against this preposterous allegation at a hearing.
The Supreme Court of New South Wales ruled in favor of Universal Music Australia and found that you were bound by the terms of the 2014 settlement agreement with the company. What happens next? Does this mean you no longer have any control in Modular?
I have no choice but to walk away from a company that I founded 18 years ago and that has had the opportunity and pleasure of developing both the domestic and international careers of artist such as Wolfmother, The Presets, Ladyhawke, The Avalanches, Cut Copy, Bag Raiders, Tame Impala, Sneaky Sound System and most recently Movement. I stand by those achievements and having the belief and vision to further these artists' careers abroad when the Universal family passed on releasing them internationally. I took the risk and invested my own money to see them reach a broader audience. But at the end of the day that company was me. I created it. You can take me out of Modular but you can’t take the things that made Modular successful out of me.
What happens next for you? What do you hope -- and anticipate -- will be the outcome of these two court cases?
I’m really happy that we can put the misunderstanding of the BMG case behind us now that it is being withdrawn. I regret the press coverage over the matter which seemed completely out of hand but hopefully the truth of the situation is now clearer. In regards to Universal I continue to hope for what I have always hoped for: a fair and equitable "divorce." The nature of our relationship was that Universal provided the financial support and structure and that I (through Modular) provided the creative direction and cultural positioning. What I do is creative and intuitive and I have fulfilled my role with endless passion and energy. The issues between us have been left languishing for years and the lives and careers of so many of our artists have suffered. It’s an outcome that is very sad for me personally because it’s the bands that have always driven me as opposed to the business.
But like I said earlier, unfortunately this court case dealt with a technical legal point: the discrete issue of whether or not our settlement deed is presently binding or whether it actually requires my signature to have legal effect. The judge didn’t find in my favor so the deed is considered to be in force. And let’s be frank the judge didn’t respond favorably to me in any way. I owned up of my accord to the fact that I had told a Universal executive in an email that I had signed the agreement and that I could see that this was a misrepresentation of the facts given I hadn’t actually yet put my signature on the document. I offered that information as part of my evidence because I was trying to explain the context to the judge. The context was that I was under enormous pressure and strain as an individual bearing the full weight of an international corporation on my back. I wanted to obtain some time to get alternative advice because I didn’t feel I had received adequate counsel from my original lawyer. I admitted this in the interests of being honest about the chain of events but unfortunately the judge didn’t see it that way.
It was always a gamble to take on Universal but my principles wouldn’t allow me to roll over just because I was one person in the face of a music behemoth. I’m a man prepared to stand up for what I believe in and I’d rather go to bed at night knowing I’m strong enough to do that. I may not have the resources or experience or numbers to have executed a smooth public campaign in the manner Universal did but on the morning after the judgment how did I feel? I just hung out with my eight year old daughter who I would rather look in the eye and say I was prepared to take a gamble over what I thought was right. Losing the case is not nearly as bad as the feeling that would have come from not standing up for what I believe in. Universal aside, I’m just getting on with things because there is a lot more in my life than just this issue. I had a lot of good times with Universal and together and we made an undeniable imprint on the Australian music scene. It’s a shame that it ended this way but the records that I made will live on forever. I stand by the body of work I created with pride and great fondness.
I’m just looking to the future, but of course keen to settle up the past. I’m going to take some time to reflect on the situation and consider my next move. I look forward to bringing the same vision and passion that spearheaded Modular to my next venture -- and make no mistake there will be more ventures! Rightly or wrongly, I’m a fighter. And that’s what has driven me to take the risks I have -- good and bad -- since I was a teenager through until where I stand here as a 48 year old man now. Yes, a bit bruised but wiser; able to sleep at night and certainly no slower or less determined.