Exclusives 10 May 2023

GRM Exclusive: How the Law Helps Musicians Get Their Fair Share Of Royalties

10 May 2023

Written By: Lily Kalati

Following on from Part 1 which explored the aspect of equitable remuneration in tandem with current statute law and its applicability when it comes to music streaming, we now delve into the intention behind the law and what this means for today’s artists.

So what is the intention of the law?

The intention of the law in relation to making ‘work’ available  was to provide performers with greater control over the use of their performances and the ability to negotiate contracts. Prior to the making available right, a performer had no right to authorise or prevent a public performance, broadcast or recording of his performance. Instead, the performer was granted the right to equitable remuneration for such uses. Since the consent of the performer is now required to make the performance available on demand, they can choose the price/royalty for that consent. This can be contrasted with the right to receive equitable remuneration where the performer only has the right to be paid a prescribed amount. This is paid 50/50 between the label and performers according to industry standard rates. The performer has no say over who can broadcast a recording of their performance and have limited means to set the price. In this context the making available right offers stronger protections for the performer demonstrating why it has been made exempt from the right to equitable remuneration. In this way performers are given more control and flexibility so they can agree remuneration directly and negotiate their contracts how they see fit. The protection of creativity implies that creators enjoy due respect for the integrity of their work and the right to authorise the use of such work.

The reality of the law

The UK, along with many countries, implemented the making available right as an exclusive right, granted or withheld at will. This is listed as one of the performer’s property rights. While this was intended to be a benefit to performers, it is likely to be a disadvantage for those who enter recording deals with record labels. In almost all cases, the recording agreement will require an assignment of the exclusive right. Giving performers the ability to consent to the making available of their sound recordings is ineffective as in practise this right is assigned to the label who would exercise this on the performer’s behalf. Had the right to equitable remuneration been implemented as an exclusive right, undoubtedly the assignment of that right too would have been assumed by the labels. 

The performer’s right to equitable remuneration is a non-proprietary right. This acts as a safeguarding tool for performers who are often exploited by their record companies who would otherwise take advantage of their contractual obligations. By excluding equitable remuneration rights from music streams, performers have essentially lost out on the absence of statute guaranteed compensation which cannot be contracted out of or restricted in any way. The legislations attempt to provide the performer with more protection proves to be counterproductive.

Record labels have more power, experience and sophistication compared to new musicians who are still finding their feet. This means ‘companies have the contractual freedom to negotiate royalty rates with artists’, particularly where the law does not regulate the relationship effectively. This is driven by the significant uncertainty over who will be successful and recoup the record label’s investment, limiting the interest to offer attractive deals. Due to their weak bargaining position, performers find themselves agreeing to long term contractual commitments and assigning their copyright for long periods of time. The record label’s investment in recording and marketing the performer is recouped, not from the profit of the sound recording, but from the royalty. This means it typically takes a long time for artists to receive royalties, if ever. The right to equitable remuneration provision is not effective in addressing the inequality of bargaining power that comes with record label negotiations leaving musicians exposed to exploitation. The law must recognise this imbalance and offer the performer more protection to improve his position prior to negotiating contracts. 

There have been numerous examples of musicians being exploited by record labels in relation to streaming royalties. In 2016, Frank Ocean released his album Blonde independently, after fulfilling his contract with Def Jam Recordings. He later revealed that he had left the label because they were not willing to give him a fair share of streaming royalties. He claimed that the label was taking advantage of artists by paying them a lower rate for streaming revenue than for physical sales.

In 2020, Megan Thee Stallion filed a lawsuit against her label, 1501 Certified Entertainment, claiming that they had prevented her from releasing new music and taking advantage of her financially. She alleged that the label had taken a disproportionate share of her streaming royalties, leaving her with very little income from her music.

Another example is the rapper Lil Nas X, who made headlines in 2019 when his hit single “Old Town Road” became a viral sensation on the social media platform TikTok. Despite the song’s massive popularity, Lil Nas X initially struggled to get it onto streaming services, as his record label, Columbia Records, reportedly had concerns about the song’s genre-blending sound and its potential to alienate mainstream audiences. Once the song was finally released, it quickly rose to the top of the charts, but Lil Nas X claimed that he was not receiving a fair share of the streaming royalties. He later revealed that he had signed a record deal with Columbia that gave the label control over his music and the lion’s share of his earnings, leaving him with only a small percentage of the profits.

Streaming services may have revolutionised the music industry, however the amount of money that artists and record labels receive per stream on these services is often criticised as being very small. According to a report by Citigroup, streaming services pay artists and record labels only a fraction of a penny per stream. This means that an artist would need millions of streams to make a decent income from streaming alone. The small amount paid per stream is often attributed to the business model of streaming services, which rely on massive subscriber bases to generate revenue, rather than high profit margins per user. The issue of artists being exploited by record labels is compounded by the fact that music streaming platforms are keeping a significant portion of the streaming revenue, leaving little profit to be distributed to the record labels, let alone the artists. While streaming services offer unparalleled access to music for listeners, the compensation for artists and record labels remains a contentious issue.