Nothing stands still, and time keeps ticking like a metronome. New musicians arrive with new ideas, new plug-ins, and new instruments. Technology marches on as well, making it possible for every small bedroom-pop artist to suddenly upload an entire catalogue to Spotify. Some of those artists are even picked up by major labels and end up paying their mortgage with their royalties (in the immortal words of Connor Price, “Used to say I didn’t care for dollar signs, now I pay my mortgage off of Spotify”). It may surprise you, but the law doesn’t stand still either. That’s why we’re telling you about an important development in music law in this column.

Legal Keynotes | 01

There’s nothing like being signed!! A healthy relationship between you and your publisher, label, and manager is essential for peace of mind. A strained relationship leaves marks on your career, and nothing strains relationships like money. That’s why three artists, Henk Westbroek, Arriën Molema (Room Eleven) and Marinus de Goederen (a balladeer), took their case to court. Their complaint? Their recording contracts didn’t mention anything about revenue from streams and downloads.

These days, it’s almost unthinkable for anything not to be connected to streams and downloads (I’m just about one step away from downloading a cup of coffee every morning). Many record contracts were signed in a time when streaming didn’t yet exist. Naturally, this leaves all parties scratching their heads: what should we do now? Do we renegotiate? Introduce a standard rate for all our artists? Wherever revenue flows, cracks begin to widen.

Universal chose the latter option. The three artists received a standard portion of streaming royalties, based on the remuneration for reproduction rights (which you might know better as “mechanical rights”). This remuneration is based on a clause that sets out the rate for “other exploitation.” The artists disagreed: they believed a different rate should apply and that the contracts were being interpreted incorrectly. Spoiler alert: the court sided against the artists.

There are quite a few legal intricacies tied to this ruling. For instance, it’s not entirely clear how streaming should be classified (is it a license? Is it mechanical?). What is clear is that the court doesn’t want to make a ruling on this point. Lobbying and debate about the precise qualification of streams has been ongoing for years, and a definitive ruling would have major consequences for the practice. But that issue stands apart from the question of whether the contract was applied correctly. Here, the artists come up empty-handed. Based on what the creator knew, could have known, or could have expected at the time of signing, the contract was neither unreasonably burdensome nor incorrectly applied. The artists also argued that they no longer perform and have therefore become more dependent on streaming.

When dealing with contracts like these, the court looks carefully at the artist’s position, weighing all relevant circumstances and reasoning from what is fair and reasonable. It may not always feel like it, but judges do take into account the vulnerable position of artists, who are often the weaker party. We saw something similar not too long ago in the Martin Garrix case. In this case, the court concluded that the contract was not misinterpreted and that the remuneration was not unreasonable. Even though the parties did not explicitly make a deal about streaming, the agreement was not unreasonable at the time it was signed. The streaming rate the artists receive is also in line with market standards. So while the artists do not necessarily benefit from these rates, they are not harmed either. The fact that the artists might have a stronger bargaining position today, and could perhaps negotiate a better deal, does not change the fact that the deal, with the knowledge available at the time, was a fair one.

This highlights a few important lessons: contracts are not assessed based on present-day circumstances, but on the standards that applied at the time of negotiation and signing (there are, of course, exceptions).

What have we learned?

• A new exploitation technique on the horizon can be a good reason to call your manager and ask whether it’s time to renegotiate;
• The fact that an artist is considered the weaker party does not mean every case will swing in your favor;
• Contracts are (almost) always evaluated based on what applied at the time of signing, not what the situation looks like today.

Link: Universal doesn’t have to increase royalty payout to three artists (Dutch)

Thanks for reading this article! The legal nuances run much deeper and unfortunately don’t all fit here, but luckily, that’s what legally inclined sharp minds are for. Questions? Comments? Panic? Send them my way: [email protected]