According Music Business Worldwide today, Beatport has written to labels telling them that it won’t be paying owed royalties for the past quarter until its parent, SFX Entertainment, completes its ‘going private’ process.
In a letter to music rights-holders sent last night and obtained by MBW, Beatport told labels that the ‘going private’ process had “trapped certain earned label payments”. It added that the company, which recently struck an exclusive content partnership with Spotify, believes the process will be “coming to an end in the next few weeks, at which time all payments will be able to be made”.
The big problem for the small labels we’ve spoken to is cash flow: this blocked payment covers three months of income, from April-June, and was due to be paid last Thursday (June 30).
With Beatport accounting for 90% of digital income for some dance labels, such a delay in a primary revenue source risks badly damaging their stability. Meanwhile, Beatport is now taking on SoundCloud by permitting anyone to upload and monetize their own mixes on the platform.
But there’s a big catch for these artists: according to the terms and conditions of Beatport, it will only pay 10% of a download sale to the creator of a mix, and a measly 5% of income from a stream.
That’s for all rights, too.
As stipulated in Beatport’s terms and conditions: “[This] royalty is your sole compensation and includes all payments due to you in connection with the Content, including any mechanical royalties, public performance monies, or other music publishing monies to which you may be entitled as a writer or composer.”
“BEATPORT’S PARENT COMPANY, SFX, IS INVOLVED IN A ‘GOING PRIVATE’ PROCESS THAT HAS TRAPPED CERTAIN EARNED LABEL PAYMENTS. THIS PROCESS IS COMING TO AN END IN THE NEXT FEW WEEKS.”
The owner of SFX, Robert Sillerman, aims to take the company off the US stock market by purchasing the shares he doesn’t currently own in the ‘EDM’ promoter and festival owner.
Sillerman is believed to currently own around 37.4% of SFX. The firm has now completed a “go shop” period, in which the company was permitted to solicit acquisition proposals from alternative purchasers. That appears to have led the way for Sillerman to complete his buyback, which will cost him $774m.
However, some now question whether Sillerman will be able to raise the funds needed to purchase the remaining shares in SFX.
If he can’t, then an asset sale – which may or may not involve Beatport, bought by SFX for $50m in 2013 – would be a possible option to bring down the pricetag of the business.
As for its 5%/10% payments to artists who upload mixes, the terms and conditions of Beatport now include the below text:
“For each copy of one of your Mixes sold by Beatport, we will pay to you a royalty of 10% of the amount actually received by Beatport. For any sales made in Euro (EUR) or British Pounds Sterling (GBP), the royalty will be calculated based on the conversion to United States Dollar (USD) using the rate as published on xe.com.”
It adds: “For each play/stream your UGC Stream receives on the Website or Beatport branded channels, we will pay to you a royalty of 5% of the amount that the UGC Stream receives, based on a pro rata share (a fraction, the numerator of which is the number of plays/streams on the Website and Beatport branded channels and the denominator of which is the total number of plays/streams on the Website or Beatport branded channels) of funds made available for the payment of streams on the Website or Beatport branded channels.
“YOUR 5% ROYALTY IS YOUR SOLE COMPENSATION AND INCLUDES ALL PAYMENTS DUE TO YOU, INCLUDING ANY MECHANICAL ROYALTIES, PUBLIC PERFORMANCE MONIES OR OTHER MUSIC PUBLISHING MONIES TO WHICH YOU MAY BE ENTITLED AS A WRITER OR COMPOSER.”
“In addition to its other rights and remedies, Beatport may withhold payment from any person attempting to defraud, falsely inflate plays/streams, or in any way tamper with the UGC Streams, who does not fully comply with these Terms, and/or in amounts reasonably related to any indemnifiable claim hereunder.”