BMG Takes Giant Step For Songwriters
• BMG announced that it’s eliminating a longstanding U.S. record label deduction which serves to reduce the income of songwriters, composers and lyricists. These various discounts and caps contained in the so-called “controlled composition clause” cost songwriters an estimated $14 million last year (based on Year-End 2019 RIAA Music Revenue Statistics). BMG will immediately refrain from applying those reductions to any new record deals and remove them from its entire catalogue over the next year. The move forms part of BMG’s ongoing program to rebalance the music industry in favor of artists and songwriters by abandoning longstanding practices designed to reduce the incomes of musicians. BMG CEO Hartwig Masuch (left) said, “It’s unacceptable for the record industry to continue to apply deal terms which are solely designed to reduce the incomes of musicians. We have heard a lot during the coronavirus crisis of initiatives by music companies to support artists. The best way to support artists is not to subject them to unfair terms in the first place.”
In principle the controlled composition clause is simply a way for labels to secure the licenses they need to release records. In practice it has become a mechanism by which labels force artists who are also songwriters to accept a reduced royalty on physical product, typically with a 25% discount. The industry-wide practice, which dates back to the late ’70s has long been resented by artists because it often establishes a cap on the total royalties payable on a given album, and in extreme cases, if artists record songs by third-party songwriters, they can end up not only earning no money for their own songs but even owing their labels money.
BMG has now set up a taskforce headed by COO Ben Katovsky specifically tasked with improving fairness in music contracts. Its responsibilities include BMG’s recently announced review of historic acquired record contracts for signs of racial bias. “If you know your music industry history, it’s hard to dispute the fact that music companies have had a problem with treating artists fairly,” Katovsky said. “As the youngest of the big international companies, we were able to start from scratch and design out many of the worst aspects of the old business from our new deals. But inevitably we sometimes find examples of historic bad practice lurking in some of the catalogues we have acquired.” He added, “We have to be realistic — we cannot right all the wrongs of the past — but we’re going to try our damnedest. We are delighted to finally get rid of the controlled composition deduction. It’s an anachronism which has no place in the new music business.”
Leading songwriter organizations have applauded BMG’s move — as an example, Dina LaPolt, music lawyer, activist, and co-founder of Songwriters of North America (SONA) said, “BMG is taking a massive step forward for songwriters by removing the Controlled Composition clause from all of their recording agreements. This clause is an antiquated and restrictive provision in virtually all recording artist deals that seek to further reduce the songwriter’s mechanical royalties which, already regulated by the government, are much lower than any other income stream in recorded music. I sincerely hope the other record companies follow their lead.” [Photo credit: Barbara Dietl]
