Taylor Swift makes a payout to all Universal artists a clause in her new record deal

Taylor Swift's latest record deal contained a clause in which Universal finally committed to sharing any gains from a future sale of Spotify (which the company invested in along with Sony and Warner) with all its artists, not just those whose accounts are in the black.

It's a major victory that closes a loophole that let Universal promise to give money to artists without ever doing so, and still reaping the PR benefits.

It's a complicated story, so bear with me a second.

Concentration and funny accounting

The music industry is one of the most concentrated in the world. There are only a small handful of big record labels and they have all converged on a set of abusive practices. They haven't necessarily done so via a conspiracy. It's enough that their senior execs get regularly poached from one company to another, spreading the bad practices, as they go -- and even without that, the companies could just copy one another's most abusive practices -- as soon as company A wrings a new concession from musicians, company B can jump on the bandwagon and demand this from all its artists, citing company A as precedent.

Among the bad practices the companies force on artists is funny accounting that lets the companies claw back most of the money the artists generate. Artists are paid advances against eventual royalties for their work, which they must earn back before they start getting paid. But artists are also required to pay back the costs of producing and promoting their work: the studio time, mixing, tour expenses, marketing and PR, etc. Many of these services are provided by the record company itself, which gets to charge arbitrarily large sums, even though it's just one division of a company providing services to another division of the same company, with no markets setting the prices. And since the artists eventually settle these bills, the company is incentivized to overcharge on these intrafirm pro-forma invoices.

That means that long after your record is paid off, you can still find yourself receiving no royalties, because you still owe your label for the services it billed itself for while getting your music into the world (the companies also engage in dirty tricks like deducting a standard percentage from every royalty payment to account for "breakage," the percentage of vinyl record albums that are spoiled in transit between the warehouse and the record store, and this deduction is taken across the board, even from your streaming and digital sales income).

But we're not done yet! Many records are "jointly accounted," meaning that even if you've earned enough to pay back your advance and expenses from your record, you still don't start earning royalties until your next record is fully paid off. Some deals run to several records, and a single expensive failure among these records means that none of them ever generate income for the artist.

Privatized gains, socialized risks

In this world, the artist, not the label, assumes all the risk for their work (production costs, promotion costs) and the the label serves mostly as a lender and an advisor, but then it gets to pocket the lion's share of the revenues generated from the work, despite having shifted the risk to the artist (unlike book deals, where, at least, the publishers traditionally assume all the costs of promotion and production, and in deals where the artists contribute to these expenses, the royalties jump from a 90-10 split to a 50-50 split).

In an antitrust world where the labels hadn't been permitted to buy their competitors, artists might be able to shop around dozens of large labels and find ones that had better terms. Today, all the majors have the same standard deals, and none but the biggest artists can hope to negotiate variances in the standard contract clauses.

Now, in the early days of internet music, artists discovered that they could do an end-run around some of these abusive practices by touring, treating the record as a promotion for live performances, but then the "360 deal" (where the label takes a share of concert revenue, t-shirts, etc) became standard (again, across all the major labels).

Lax antitrust also means that the labels get to collude in business ventures that might afford artists a way out of the sharecropper system. Sony, Universal and Warner were all allowed to acquire an equity stake in streaming giant Spotify (you may recall that artists frequently complain that they are grossly underpaid for streaming plays, while Spotify and its competitors counter that they send billions to the labels, whose abusive contracts allow them to pocket this money, rather than share it with the artists -- the fact that the same labels are also able to elect the streaming services' board of directors is clearly part of this story).

Enter, Taylor Swift

Which all brings me to Taylor Swift!

When Spotify had its IPO, the labels all publicly committed to sharing any capital gains from an eventual sale of their Spotify shares with the artists in their catalogs. But when artists started to ask whether these payments would actually be made to artists or artists' accounts, the labels went silent.

It became clear that what the labels planned on doing was taking the share of Spotify money earmarked for artists, and use that money to offset the accounting-fiction "debts" the artists owed the labels for the use of the labels' horrendously marked-up in-house "services" -- meaning that the labels would pay the artists' share to themselves, and still trumpet that they had given it away to artists.

Sony cashed out of Spotify last year and ended up paying artists fairly, without regard to their "account status" with the company, Warner cashed out, but kept all the artists' money. Universal -- the largest record label in the world -- had not yet publicly committed to the Sony approach of paying artists, rather than Warner's approach of keeping the artists' money.

As part of Swift's deal with Universal, she made the company commit to the Sony approach -- to ignoring account balances when it came to paying out the capital gains from Spotify sales to artists.

I hate you Ronald Reagan

This is fucking great but it's also terrible. Why the hell were the labels allowed to grow so concentrated? Why were the three largest "competitors" in an industry allowed to collude to buy a large share in a business that affected their whole supply chain?

This is the end-game of the University of Chicago's "public harm" theory of antitrust, which was sold to Ronald Reagan and then amplified by every president since, including Clinton and Obama. Under this theory, companies are permitted to grow as large as they want, by any tactic they want to deploy, including the dirtiest of tricks, so long as they only fuck over their supply chain, their competitors, and their workers, while never raising prices for "the consumer." Public harm theory let the music industry grow to a vertically- and horizontally-integrated octopus whose tentacles reach into every corner of the value chain, siphoning off the artists' share of the income generated by their creative labor just as surely as Walmart's growth allowed the company to pocket the workers' share of the profits from their labors in Chinese factories.

Swift's deal is a perfect parable about how artists actually get paid: not by blindly ratcheting up copyright (giving artists more copyright just gives labels more power, since those new rights are non-negotiably acquired from the artists as a condition of doing business with the labels), but by increasing competition for artists' services.

Looking for our car-keys under the lamp-post

The online music world was an opportunity wasted by artists: what could have been a second power block that could be played off against labels to get better deals for artists has instead been allowed to essentially merge with the labels, whether through direct equity stakes (Spotify) or through systems that give labels the ability to dictate policy on the platforms, like Youtube Music, which had its terms set by negotiation with the Big Four labels and then non-negotiably rammed down the throats of indies and smaller labels.

Big Tech and Big Content are largely indistinguishable in their contempt for artists and their rapacious drive to reduce the share that artists get in order to pay their shareholders. What's more, Big Tech and Big Content have pretty much the same shareholders: the same big institutions, hedge funds, and one-percenters. They're not so much two sectors as two warring divisions within a single firm, whose managers are trying to increase the size of their annual bonus by fucking over the managers of the rival divisions to make themselves look better.

As artists, we're taught to recognize this lever called "copyright" and assured that yanking on it hard enough will make the machine pay out, and little is made of the fact that the payouts from yanking on this lever are heavily taxed by the corporations we work for, sometimes at a rate of more than 100%. No one teaches us where the lever labeled "antitrust" has been hidden, and whenever we go looking for it, there's a slick exec with a fancy car steering us back to that "copyright" lever and assuring us that it's all the leverage we'll ever need.

A source close to the matter tells Rolling Stone that Swift’s alignment with UMG chairman/CEO Sir Lucian Grainge’s approach to artist payments — specifically, his interest in offering Spotify equity to artists without withholding any money owed — was instrumental in the singer’s decision to sign a deal with Universal over the other labels. While sources declined to give financial details, citing the still-hypothetical nature of the matter, Swift said in her announcement that the Spotify provision involves “much better terms” than what Sony and Warner offered.

“As part of my new contract with Universal Music Group, I asked that any sale of their Spotify shares result in a distribution of money to their artist, non-recoupable,” Swift wrote in an Instagram post. “They have generously agreed to this, at what they believe will be much better terms than paid out previously by other major labels.” Swift added that the Spotify provision “meant more to me than any other deal point” of the new contract, which also gives her ownership of her masters going forward, and that it’s a sign “we are headed toward positive change for creators — a goal I’m never going to stop trying to help achieve, in whatever ways I can.”

Taylor Swift’s New Record Deal Affects Thousands of Other Musicians [Amy X. Wang/Rolling Stone]

(Image: Eva Rinaldi, CC-BY-SA)

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