Sony Music’s Historic Policy Change

Yesterday, Sony Music made a historic announcement which will be spoken about in the Music Industry for many years to come 👏🏻

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What’s up people?

In a letter sent to thousands of artists yesterday, Sony Music Entertainment- one of the biggest record labels in the world, and home to artists such as Britney Spears, Enrique Iglesias, and Beyonce, has announced the launch of a new initiative called ‘ Artists Forward’, which it says focuses on:

“ Prioritizing transparency with creators in all aspects of their development”.

What does it mean? 🤔

SME’s landmark new policy under “Artists Forward” is called the Legacy Unrecouped Balance Program.

But what do Unrecouped Balances mean and why is it such as big deal?

Let’s get into it 👇🏻

To be “ Unrecouped” under an agreement means that an artist has received an advance but has not yet earned monies equal to that advance.

But why are artists paid advances?

Usually, when up-and-coming artists are signed onto record labels, they are paid out an advance- as a signing bonus of sorts to help cover their expenses and reward them for their faith in the label.

A lot of times, such artists get exploited for their lack of understanding of the business side of things.

However, when it comes to advances, there’s nothing such as free money right? 💸

These advances are a prepayment of revenue streams that are defined in the contract under which the advance is paid-meaning that if a record company pays Artist A an advance of $100, Artist A must also ask what sources of revenue are going to be applied against that $100 in order to recoup it.

Typically, recording costs, video production costs, artist advances, and tour support have been recoupable from record royalties in traditional record deals, and writer advances and a handful of other costs have been recoupable from revenues.

The writer’s share of public performance royalties for songs or the featured artist’s share of public performance royalties for recordings is not typically applied against unrecouped balances.

Those royalties are paid on a “non-recoupment basis” meaning that they are not taken by the record company or publisher to recoup an unrecouped balance. Likewise, performance fees for live shows are not typically applied against unrecouped balances.

Now, that is a lot of coup 🤒

If you made it this far, it seems like you’re digging our content! Why not support us and share this Newsletter with someone? So how exactly is Sony Music planning to change this?

The letter they sent out yesterday, says:

“As part of our continuing focus on developing new financial opportunities for creators, we will no longer apply existing unrecouped balances to artist and participant earnings generated on or after January 1, 2021, for eligible artists and participants globally who signed to SME prior to the year 2000 and have not received an advance from the year 2000 forward. Through this program, we are not modifying existing contracts, but choosing to pay through on existing unrecouped balances to increase the ability of those who qualify to receive more money from uses of their music.”

What does this mean?

Sony is effectively writing off unrecouped balances going forward for artists signed onto the label before the Year 2000.

Basically, If you’re an artist who last received an advance from Sony Music prior to 2000, and the amount is unrecouped today, you’re now going to start seeing streaming and other royalty earnings landing in your bank account on a regular basis.

Check out how a typical royalty statement looks like 👇🏻

Pretty cool right?

The Music Industry and especially the big record labels have for long been challenged to make the revenue-sharing model more transparent between artists, and Sony Music’s latest announcement is a big step in the right direction 👏🏻

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Originally published at https://incentify.substack.com.