BMG Eliminates Controversial Royalty Deduction

BMG has announced that it is eliminating a standard US record label deduction which serves to reduce the income of songwriters, composers and lyricists.

Across the US industry, the various discounts and caps which are contained in the so-called controlled composition clause cost songwriters an estimated $14 million last year.

With immediate effect, BMG will voluntarily refrain from applying the reductions to any new record deals and remove them from its entire catalogue over the next year.

BMG CEO Hartwig Masuch said, “It is 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 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 1970s has long been resented by artists. Because it often establishes a cap on the total royalties payable on a given album, if artists record songs by third party songwriters, they can, in extreme cases, end up not only earning no money for their own songs but even owing their labels money.

Leading songwriter organizations have applauded BMG’s move.

David Israelite, President and CEO of the National Music Publishers’ Association (NMPA), said, “BMG deserves enormous credit for eliminating this poisonous practice. Controlled composition clauses in recording contracts have been one of the most harmful things to ever happen to songwriters. While their impact has been minimized thanks to NMPA’s efforts to make them illegal for digital products, there is still enough of a physical product market for controlled composition clauses to continue to plague the songwriting community. This is a wonderful pro-songwriter move by BMG.”

Crispin Hunt, Chair of The Ivors Academy, which represents music creators in the UK and Ireland said, “I welcome BMG’s determination to cease industry-sanctioned practices which uphold inequality for creators. The controlled composition clause has disadvantaged songwriters across music’s history. It belongs in a museum along with many other ‘tricks of the trade’. BMG’s abandonment of this regressive practice is a huge step on music’s journey to dignity. Music can’t change its past but we can change its future.”

Bart Herbison, Executive Director of Nashville Songwriters Association International (NSAI), said, “BMG ending the controlled composition clause in the company’s recording contracts is important, laudable and something that other record labels should embrace. The songwriter community has long waged battles over this practice that some have compared to ‘theft’. We salute BMG and challenge every record label to follow their lead and fully eliminate controlled composition immediately.”

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.”

Masuch said, “The controlled composition deduction is just one of a whole series of ways in which record labels have historically maximized their own profits at the expense of musicians. Eliminating this unfair practice is just the latest in a series of measures BMG is taking to make the music industry fairer to artists and songwriters.”

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.

Katovsky said, “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. 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.

“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 is an anachronism which has no place in the new music business.”

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About the Author

Jessica Nicholson serves as the Managing Editor for MusicRow magazine. Her previous music journalism experience includes work with Country Weekly magazine and Contemporary Christian Music (CCM) magazine. She holds a BBA degree in Music Business and Marketing from Belmont University. She welcomes your feedback at [email protected]

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