David Balfour explores the background and intentions behind the Fair Digital Deals Declaration

17 July 2014 - Editorial

The launch of the Fair Digital Deals Declaration this week by the Worldwide Independent Network (WIN) is interesting on a number of levels.

The voluntary Declaration intends to increase transparency and trust between artists and labels by inviting labels to sign up for a clearly-stated set of standards and goals. Labels and distributors who sign up to it are essentially making a pledge to play fair with digital royalties and deals, and to always seek to promote the value of artists’ work and copyrights, rather than using those rights as a bargaining chip to secure revenue for their own companies.

Whilst the Declaration is wide-reaching in its pledges, perhaps the most interesting promise is the one whereby labels undertake to “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.”

WIN explains the thinking background to this pledge in its press release, noting that:  “‘In recent years a pattern has emerged whereby large rights owners can secure huge lump sum payments, typically for equity, access, administration, ‘breakage’ and other non-attributable charges.” 

This growing reality of modern digital service deals has been a particular bugbear of artists and independents alike. Artists are concerned that these up-front payments typically mean that they will see no share of this money, as they’re not usually linked to any kind of specific usage of their works.

Such deals are also problematic for smaller labels, who find it extremely difficult to compete for value with the biggest rightsholders. This often means that they’re offered royalty rates which have already been heavily undermined by the withdrawing of significant financial value elsewhere in the deal, in advances, revenue guarantees, equity shares etc. To add insult to injury, smaller labels are then often told by services that ‘every one is getting the same rate’, which may be true when looking at one narrow aspect of the agreement, but is clearly fantasy in wider financial and value terms.

Indies already have a powerful advocate in trying to secure more equitable deal value thanks to the deals negotiated by Merlin. Nevertheless, there’s a feeling that it’s not just the actual individual deals that are problematic – but the general way that these deals are increasingly structured. Should labels who sign up to the Declaration therefore pledge not to sign any deals which might include such financial measures? This would be foolhardy. Labels, or Merlin, have to fight to extract value wherever they can when they negotiate with services. They might prefer that it’s always linked to actual usage of recordings, but a pragmatic approach dictates that they cannot always dictate every aspect of those deals, and have to secure what they can where they can.

What the Declaration therefore sees labels committing to is to “account to artists a good-faith pro-rata share” It’s powerfully artist-friendly commitment, one which has been warmly welcomed by the Featured Artists Coalition. It’s also a very clear shot across the bow of major labels who, indies often feel, are the driving force behind these kinds of deals, seeking to divert as much revenue as possible directly to their own bottom lines and away from royalty commitments.

We would not dare to speculate on the strategy or aims of the largest labels, nor to lazily assume that the largest companies all handle their businesses in the same way. It’s fair to say though that the growing number of these new kinds of deals in the market does little to create an atmosphere of greater transparency. Ultimately it’s for labels, artists and managers to judge whether these businesses are acting fairly. As always, some of the greatest frustration comes from those artists who may already be locked into deals and cannot escape from them even if they wanted to.

The Fair Digital Deals Declaration may not change things overnight but it’s clearly a step in the right direction. We do wonder however, of those labels that do sign up, how one can judge in time whether they are sticking to their pledges? It’s worth noting that within music companies of every size there can exist diverse and even conflicting standards of transparency. This can be as true of smaller labels as it is of the largest. We don’t doubt that all the intentions of the Declaration are good but we also feel that some of the very large companies signing up to it will also need to somehow prove that they are sticking to their pledges in spirit and practice. We’re not sure what the mechanism for that might be, but it’s ultimately as important as the stating of the values in the pledge. Essentially though, if artists and managers feel that they can hold labels to account for a set of stated values, that can hardly be a bad thing.