This may not be news to most of you, but in light of DiMA’s Jonathan Potter blaming music publishers for the sorry state of digital downloads, it’s a topical reminder.
Music companies – and we blur the distinction deliberately for the moment, for the sake of simplicity – paid songwriters in two ways. For what they called ‘licensing’ – for masters and movie soundtracks, for example – the artist took home 50 per cent of the deal. For ‘royalties’, the artist typically gained or 20 per cent of wholesale or 10 per cent of retail. Along came the digital download services. When the labels cut deals for their catalogs with third parties, they considered it a royalty, rather than a licensing deal. That reduced the amount of money going to songwriters overnight.
Now many of these deals were with wholesalers such as Iris, or Orchard, who are essentially intermediaries in the distribution chain.
To you, a deal between a label and a distributor may look like a wholesale deal, and walk like a wholesale deal, but it doesn’t quack like a wholesale deal. The labels regarded it as a retail deal.
So overnight the artists’ cut fell from 50 per cent to 10 per cent. Attorney and author Steve Gordon, who was at Sony Music at the time, put it quite succinctly: “It’s all about fucking the artist.”
De-obfuscation: By law, the music collection agencies who operate on behalf of songwriters in the US cannot refuse a license. Getting money from the deal is another question. The big four labels own the major publishers, although this is in a state of flux, with the third and fourth biggest labels (EMI and Warner) looking to merge: they own the two largest publishers, and divestment is a possibility.