Sony Music Disregards Unrecouped Balances For Heritage Catalog Artists

Sony has gotten their money from artists ten times over!! Is this the right thing to do aka “good business” or a huge tax write-off to make it “look good?”

 The perspective of Tim Ingham via Music Business Worldwide is a good starting point but Sony Music should know this is not the be all, end all.

This move has sparked a great deal of conversation with a plethora of  opinions.  What’s your perspective??

In historic move Sony Music is disregarding unrecouped balances for heritage catalog artists.

For some time, influential voices in the industry have called for the unrecouped balances of heritage artists to be written off by record labels. This would see modern-day royalty earnings of these acts get paid into their pockets, rather than being swallowed by a record label with whom they may have ended dealings decades ago.

That is especially true, in many cases, for heritage Black artists. Last summer, during industry-wide discussions surrounding Blackout Tuesday, veteran US artist manager and attorney, Ron Sweeney, called on the major record companies to implement a number of new policies in a strong op/ed for MBW. Sweeney wrote: “With respect to Black artists signed to you prior to 2000, that are no longer signed to your companies, zero out their unrecouped royalty balances and let their royalties flow to them so they can support themselves.”

Many in the music industry never thought we’d see a day where a major record company openly embraced such a plan. Those people were wrong.

In a letter sent to thousands of artists, Sony Music Entertainment (SME) 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”.

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

“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.”

What all this means in practice: Sony is effectively writing off / disregarding unrecouped balances going forward for qualifying artists.

The main reason the balances will technically remain on Sony’s ledger, we understand, is if an artist has reversion rights tied to recoupment. In order to track when reversion will occur in these cases, SME will monitor when the qualifying artist would have recouped if the firm had not been flowing through royalties.

But the bottom line here: If an artist who last received an advance from Sony Music prior to 2000 is unrecouped today, they’re now going to start seeing streaming and other royalty earnings landing in their bank account on the regular… including money backdated to January 1 this year.

The good news for those who’ve signed historical deals with Sony Music doesn’t end there, either.

Sony’s letter outlining the Legacy Unrecouped Balance Program confirms the new policy will apply to both “artists and participants” who meet the eligibility criteria. MBW has confirmed that “participants” in this case will also include producers, JV partners, and distributed labels who have inked direct deals with SME in the past.

Sony says that artists and participants who qualify for the Legacy Unrecouped Balance Program will be notified of their eligibility individually in the weeks ahead.

Sony Music insiders tell MBW that the Legacy Unrecouped Balance Program is a continuation of Sony Music Group boss Rob Stringer‘s determination to “do the right thing” when it comes to major-league decisions regarding his company’s relationship with artists.

It comes three years after Sony Music memorably dismissed unrecouped artist balances when distributing profits reaped from its sale of $768 million in Spotify shares.

That surprising move was in contrast to Warner Music Group which, in the wake of cashing in its $504 million Spotify stake, allocated the proportion it shared with artists (25%) against individual unrecouped balances.

Sony instead ensured that every penny of the portion of the $768 million it shared with artists (over $250 million, all told) was paid through to artists, as opposed to remaining within company coffers.

Meanwhile, Sony Music has also told qualifying artists (both heritage and non-heritage) today that they can now receive advances on projected earnings via a new feature called Real Time Advances, available through the Sony Music Artist Portal. This feature is currently available in the US and UK and will be rolled out in additional markets later this year.

Qualifying artists and “participants” can already use the Sony Music Artist Portal to request a withdrawal of all or part of their payable balance each month as soon as it becomes available using SME’s Cash Out feature,  launched last year.

In its “Artists Forward” letter today, Sony Music writes: “We’re driven by our mission to provide artists with the best levels of service. The program we are announcing today is part of that continuing work and further builds on our initiatives and investments in modernized contracts, flexible deal options, advanced data and analytics insights for creators and more.”

At least one leading independent label group in the music business has led the way in wiping unrecouped balances for heritage artists.

Beggars Group, home to XL, 4AD, Matador and others, has for some time wiped off all unrecouped credit on advances 15 years after the firm’s “active relationship” with an artist ends – i.e., after the last record of an agreed contract is released.

In 2016, Beggars co-founder and Chairman, Martin Mills, challenged the major labels to emulate this policy, 20 years after their own “active relationship” with each artist comes to a close. Some feel Sony Music met that challenge.

Sony Music’s letter appears in full below:

June 11, 2021

Artists Forward

Dear Sony Music Partner:

Today Sony Music Entertainment is announcing an expansion of the comprehensive support we provide to thousands of our artists around the world, with the launch of a new initiative called Artists Forward, prioritizing transparency with creators in all aspects of their development.

Legacy Unrecouped Balance Program

To enhance our level of service under Artists Forward, we are unveiling a Legacy Unrecouped Balance Program, creating more payment opportunities for our long-standing artists and participants around the world.

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.

 In addition, those eligible for the Legacy Unrecouped Balance Program can join other qualifying Sony Music artists in being able to receive advances on projected earnings using Real Time Advances, a new feature available through the Sony Music Artist Portal enabling instant account advances. It is currently available in the U.S. and U.K. and will be rolling out in additional markets around the world later this year. Qualifying artists and participants who use the Sony Music Artist Portal will also be able to request a withdrawal of all or part of their payable balance each month as soon as it becomes available using our industry-leading Cash Out feature.

Artists and participants who qualify for the Legacy Unrecouped Balance Program will be notified of their eligibility separately in the weeks ahead.

A Continuing Commitment to Artists

We’re driven by our mission to provide artists with the best levels of service. The program we are announcing today is part of that continuing work and further builds on our initiatives and investments in modernized contracts, flexible deal options, advanced data, and analytics insights for creators and more.

For more information, please speak to your local label representative or visit the Sony Music Artist Portal (sme-artistportal.com).

Best,

Sony Music Entertainment