BMG Cancels an "Unacceptable" Royalty Deduction — But Will Artists Be Getting That Money Back?

October 12

	Last week BMG has announced that it is eliminating the so-called "controlled composition clause" from its record deals in America. The decision will affect both new deals and those relating to catalogue, a lot of which BMG acquired from other record companies. This standard US record industry practice forces artists who are also songwriters to accept a reduced mechanical royalty on physical releases. The mechanical royalty relates to the song copyright, of course, which the label itself is not usually involved in. In the US the mechanical copying of songs is subject to a compulsory licence and therefore mechanical royalty rates are set in law. However, because of the "controlled composition clause" in record contracts, the labels get a 25 percent or larger share of artist-songwriter residuals. That means the artist earns less from their song copyrights whenever discs are sold. Additionally, BMG noted that labels sometimes limit the total number of songs that they’ll pay mechanical royalties for, regardless of how many tracks are on the album at hand. But the precise extent of the practice is once again unclear. Moreover, the effort to correct the clause is part of the "ongoing program to rebalance the music industry in favor of artists and songwriters," BMG specifies in the text. “It is unacceptable for the record industry to continue to apply deal terms which are solely designed to reduce the incomes of musicians”, BMG CEO Hartwig Masuch said yesterday while confirming his firm’s new policy on controlled composition clauses. “We have heard a lot during the coronavirus crisis of initiatives by music companies to support artists. The best way to support artists is not to subject them to unfair terms in the first place”. Needless to say, the move has been welcomed by the music publishing and songwriter communities. SONA co-founder Dina LaPolt, National Music Publishers’ Association (NMPA) President and CEO David Israelite, Ivors Academy Chair Crispin Hunt, and Nashville Songwriters Association International (NSAI) Executive Director Bart Herbison offered statements in support of the move. BMG CEO Hartwig Masuch, for his part, took aim at the steps other labels have taken to aid artists amid the pandemic. “It is unacceptable for the record industry to continue to apply deal terms which are solely designed to reduce the incomes of musicians,” said Masuch. “We have heard a lot during the coronavirus crisis of initiatives by music companies to support artists. The best way to support artists is not to subject them to unfair terms in the first place.” In spite of the pandemic’s far-reaching market impact, BMG reported all-time-high half-year revenues last month, proceeding shortly thereafter to ink a strategic partnership (including a co-owned hip-hop label) with French football club Olympique de Marseille. Source: https://www.digitalmusicnews.com