Hits Daily Double is reporting that Universal Music Group has changed the way artists are to be paid for digital downloads. Previously they have charged artists a 25% packaging deduction that harkens back to the days of vinyl, a 15% free good deduction (promo copies), and a 20% "new media deduction". They have decided to eliminate that for digital downloads. It is a step in the right direction, but there is still a long way to go or artists to get a fair deal from the major labels. Currently this will only apply to the Universal artists, leaving Sony, AOL Time Warner, Bertlesman, and EMI sticking to their guns.

An interesting side note to this is that the labels seem to have done a turnaround in their treatment of royalties to artists. In the past digital downloads have been treated as "licensed" products rather than as recordings. "Licensed" usually means much lower royalties for the artist, than the "sale" of a recording. To artists this can be a huge difference. It looks like this is good for the artists, and may very well be. On the consumer side it looks as if it is increasing the stakes for the artist over downloaded music, so we may hear more artists entering the fray over so called "piracy". Time will tell.

One must note here that Universal has increasingly come under fire from the artists, and had several very large lawsuits and outspoken critics including among them Courtney Love, and most recently Joni Mitchell. (Universal owns Geffen). Add to that their precarious position financially and you can understand their motivation for bringing the artists home to roost.

For some reason this brings to mind a story in the book Hit Men: Power Brokers & Fast Money.... In this story an artist asks for a much larger royalty rate, as he realizes his original contract is far less than other artists are getting. He demands an increase, and the label head says "Sure, you got it, anything to keep you happy" The artist leaves and another person in the room asks the label head about it. "Are really going to do pay them more ?" The label head replies "Sure, 20% of nothing is still nothing"

Remember from the recording industries own testimony at numerous hearings, 95% of all artists never recoup, meaning they never see a penny of royalties. So this will not have any affect on 95% of the artists and will serve to drive the wedge between music fans and artists a little deeper if the artists sell their soul the second time.

From the article:

In a move being hailed by artist representatives as a significant step in the right direction, Universal Music Group has made a proactive move to change the economic relationship between artists and its record labels vis-a-vis paid music downloads. Market leader UMG has initiated a new download policy, meant to make downloads more financially meaningful to artists.

From an artist’s point of view, if he or she were (hypothetically) being paid 16 cents per download, less 20% for new media, less 25% for packaging, less 15% for free goods, the net would end just over 6 cents. Multiply that small payment by the small number of paid downloads actually being sold, and it isn’t hard to understand why many artists haven’t been overly concerned with that particular revenue "stream."

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