Record label giants are under fire ever since the leak of the 2011 contract between Sony Music and Spotify. Spelling out the $42.5 million the record label receives in advances; advances that arguable never seem to make it to the artists. (Check out our blog post about it here) Since the leak, Sony music has threatened legal action against The Verge, who originally published the story, to remove the contract from its site. There are murmurs of class-action litigation in the artist community, however there are certain issues with the specific language of some artists’ contracts and the level of artist participation in the dispute. Some major artists, to include Lady Gaga, have verbiage in their contracts designed to negate any claims to advances, fees, or any other compensation for deals involving their content being packaged with the rest of the label’s catalog. Meaning if streaming services pay advances on streaming, the artists has waived their right to their share by signing the label contract.
Major labels are now trying to run damage control, by trying to reassure artists and managers that advances are indeed being paid. They are citing “breakage” clauses in artist contracts, treating the leftover funds from the advances that don’t cover the actual payments for the streams, as “unallocated funds” from which to distribute to artists. Both the European Commission AND the US Copyright Office are currently investigating the terms of the Sony/Spotify agreement to make sure that the artists are being compensated appropriately. The organizations are also calling for complete transparency of usage for the artist, claiming “It is impossible to prove fair remuneration is occurring without transparency.”