Indies try to explain the digital deal

August 2014

Recorded music, artistes


The independent label’s global trade body, the Worldwide Independent Network has launched a new “

“Fair Digital Deals Declaration” to make clear their digital deals to artistes – with over 700 indie labels signed up including XL, beggars and Domino. It’s all a bit vague, and there’s nothing binding and it, it doest set minimum remuneration levels even as a percentage – and it doesn’t even remotely approach a standard of good practice – but it’s a lot more open than the position taken by the major labels


Key points in the Fair Digital Deals Declaration include:

1. We will ensure that artists’ share of download and streaming revenues is clearly explained in recording agreements and royalty statements in reasonable summary form.

2. We will account to artists a good-faith pro-rata share of any revenues and other compensation from digital services that stem from the monetisation of recordings but are not attributed to specific recordings or performances.

3. We will encourage better standards of information from digital services on the usage and monetisation of music.

4. We will support artists who choose to oppose, including publicly, unauthorised uses of their music.


Announcing the initiative, Alison Wenham, from the UK’s indie label group AIM, and Chairman, said: “A healthy commercial relationship based on mutual trust and partnership between artists and labels is critical to the long term financial health of our industry”. She went on: “We believe that this new initiative, which seeks to put in place simple, fair and transparent guidelines for labels dealing with third party digital partners is a template for best practice. We invite companies – majors and indies – to join the hundreds of companies who have already signed and put a stop to the practise of diverting revenues from the artists without whom we would not have a business”. The boss of pan-European indie label trade body IMPALA, Helen Smith, added: “This initiative reflects the close relationship between artists and their labels in the independent sector and it’s great to have such a high take up from Europe already. Nearly two thirds of the signatories so far are European labels”.

Its (2) that might cheer artistes the most. As Billboard recently pointed out –  it is an “existing standard practice of large rights holders and some major labels to ink special deals with online platforms that give them additional compensation in exchange for access to their music catalogue. Whether as cash or equity, this revenue is not directly linked to any particular artist, album or song; accordingly, musicians rarely receive a share.” Both the both the Featured Artists Coalition (FAC) and the Music Managers Forum have been increasingly vocal about the problems the ‘non-disclosure agreements’ that cover so many digital deals between the major labels and services cause, meaning that, bizarrely, beneficiaries of those arrangements often aren’t allowed to know what exactly was agreed.

Welcoming the WIN initiative, the FAC said in a statement: “We applaud how this sets the bar for industry-wide transparency and best practice in its dealings with artists. In recent years, there have been widespread reports, shrouded in the secrecy of Non-Disclosure Agreements, that digital deals with distributors contain huge upfront payments”.

“These ‘catalogue-access fees’ or ‘non-artist specific advances’ are rumoured to run into hundreds of millions of dollars with long-term royalty rates being significantly lowered in exchange. Unfortunately, it is these rates upon which artist payments are based and excess income that is not attributable to individual artists goes straight to the bottom line of the companies concerned”.

The FAC statement concludes: “WIN describe this in terms of fairness. The FAC would go one step further and say that all labels should have a fiduciary duty to artists, as well as their shareholders, to protect and grow the value of the copyrights which are core to their business, and conduct third-party agreements with artists’ best, long-term interests in mind. This declaration is a huge step forward for the record business and their relationships with artists and we look forward to seeing the list of participants grow to encompass all those who invest in those artists”.

An interesting point. In the USA the major labels rejected any notion of a fiduciary duty to report and account properly to their artists after the now long forgotten report by Californian Senator Kevin Murray (Recording Industry Practices) who suggested the fiduciary duty as an important addition to the label – artiste relationship.


Making the duty to pay royalties a fiduciary duty essentially means that the artist would have a moral right, in addition to the contractual right, to receive fair and accurate royalty statements and would have additional remedies available to them to enforce their rights, including, potentially having the contract end. Normally contractual relationships are not subject to fiduciary duties, the theory being that parties to contracts have other remedies, primarily the right to sue for breach of contract, available to them. There have been examples however, where contractual relationships have given rise to fiduciary duties. This would happen in a circumstance where one party has sole control over the information necessary to determine if there was a breach. If one enters into a contract to have a bathroom built in ones house, one has the means to inspect the job to find out if there is a breach. In the case of record contracts the record company has sole control over sales and accounting data. The artist has no easily accessible and independent means to judge whether or not the royalty statement is accurate or there is a breach. While there is a right to audit, it is an expensive and time consuming process and in most contracts is severely limited so as to make it incomplete at best. While the fiduciary duty has not been specifically held by courts to arise in recording contracts, the facts and circumstances of recording agreements suggest that the fiduciary relationship is applicable. This can easily be confirmed by simple legislation.

Record companies argue that artists and their representatives would use the fiduciary duty as a lever to wring more money out of the record company or ultimately to get out of the recording contract. While I am sure the more aggressive artist’s representative or a very angry artist would attempt to do so, this approach would only work if the record company has engaged in deceitful behavior by not paying royalties due. In any case, the statute could easily be drafted to preclude claims of breach in frivolous claims or for insubstantial or immaterial breaches. The situation where the parties have good faith differences in interpretation of a clause in the contract could be addressed similarly.

The International Music Managers Forum has also issued its own call for more clarity in the digital domain. The trade body notes that, for all the talk back in the day of the web cutting out the middle man for artists, in fact “within the digital music value chain there are a number of stakeholders, positioned between creators and consumers”. Those stakeholders play a key role but, says the IMMF, have a duty to the artist community to ensure “transparency” and “fair remuneration”. Indeed the IMMF says it will refuse to support any stakeholders who do not embrace those basic principles. The IMMF states: “Digital holds an unprecedented potential to deliver transparency, itemisation, and line-by-line accessible accounting to all stakeholders in the digital music value chain. However this potential will only be realised for creators if they are fairly and transparently involved and empowered. It is in each stakeholder’s own interest to work with, and not against, the interests of our creators, because without the creators there would be no value chain in the first place”.

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