By Paul M. Quin, Esq.
Any artist who has ever dealt in any way with a record label understands the importance of leverage. A new and essentially unknown artist, almost regardless of talent, has little room to obtain a more favorable deal than the one initially offered. As artists prove their commercial appeal, of course, and provide profits to their labels, their negotiation capital rises. The second contract, or in some cases revisions to the first, can be much more lucrative: financial success provides the necessary leverage for a more beneficial deal. In almost all cases, however, certain demands by the artist such as ownership of the Masters remains off the table. Moreover, those successful artists tend to use that leverage to gain a better deal for themselves. While there is nothing wrong with that, Taylor Swift has recently set the bar much higher.
At the end of 2018, Taylor Swift left Big Machine Records and signed with Republic Records, a subsidiary of Universal Music Group (“UMG”). While acknowledging that artists with Swift’s level of success are few and far between, the deal she and her team negotiated with UMG is exceptional, both from Swift’s perspective as well as the perspective of her fellow label mates. Overwhelmingly, ownership of the Master Recordings belongs with the label and is not even up for negotiation. Ownership of the Sound Recording Copyright (“SR”) provides the owner with control over how and where the music is used, especially its use in television, film or any other synchronization with a visual component. In maintaining such control, the rights holder also reaps the financial benefit. Swift’s deal with Republic allows her to retain ownership of the Master Recordings and, therefore, control the use of the sound recording. This, in essence, allows her to double her revenue from any synch licenses she makes as well as to maintain creative and artistic control. Swift, however, used her leverage and negotiation capital to obtain additional concessions from UMG which would benefit other artists under the UMG umbrella.
Specifically, UMG owns a stake of approximately 3.5% in Spotify, estimated at a value in excess of $800 million. Swift and her team made it a condition of her deal that should UMG sell its Spotify shares, then UMG must distribute a share of the proceeds to all artists on its roster. Such a condition is presumably based upon the premise that the value of Spotify has increased due to the creativity of artists and that currently an absurdly, disappointingly low royalty finds its way back to the artist’s bank account. That Swift would use her negotiation capital to bargain for the benefit of others is not just refreshing, but sets an example for others.
While few artists have the leverage of Taylor Swift, the example she sets in contract negotiations with labels is inspiring. May those artists of similar standing emulate her and may those on the way up aspire to her message and approach. Whether you are a fan or not, go download a Taylor Swift CD on the Republic label. If you are an artist with significant leverage, make it your mission to match Taylor Swift’s approach. Doing so makes this business better for all.
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