4 Bombs Hovering Over Major Label Heads

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Things like piracy, CD sales erosion, macro-economic deterioration, and unbundling are serious problems for the major labels – and the broader music industry.

But their damage happens over a period of years, it’s not an overnight phenomenon.

Bombs, on the other hand, drop quickly and wreak widespread destruction.  There’s a clear and decisive before-and-after – and there are several now hovering over the heads of major label offices.  Here are four of those powder kegs.

> A Decisive, Pro-Cloud Court Ruling.

In other words, if the decision in Capitol Records vs. MP3tunes stands, major label groups have a major problem.  Google and Amazon are likely to move forward without paying typical ransoms, and others will undoubtedly follow that lead.  These are recurring licensing payments that could keep major labels afloat – or, sink the majors if ultimately bypassed.

> A Decisive, Pro-Termination Ruling or Law

It’s been lurking for decades, but artists are finally testing the waters on 35-year termination clauses.  Majors are considering a full-blown legal fight, though this could go seriously wrong.  For starters, a decisive legal precedent could easily favor artists, depending on the interpretation of the Copyright Act of 1976.

Or, even worse for labels, legislators could impose a law to mandate the return of legacy masters – as is currently being proposed by representative John Conyers.

Either exacts a demonstrable impact the day after.  According to stats published by Billboard, a whopping 47 percent of album downloads and 60 percent of track downloads come from catalog.

> Serious Price-Fixing Fines

The majors are now facing a consolidated class action lawsuit on long-running price-fixing allegations. Specifically, coordinated ‘favored nations’ negotiations over a-la-carte pricing could result in violations of anti-competitive laws in the US.  And, result in large fines payable to a large group of litigants.

> Performance Royalties on Radio

This is a bomb the labels are lighting themselves.  Because according to several sources close to the US terrestrial radio industry, if the majors successfully legislate performance recording royalties on radio plays, stations themselves are likely to take aggressive action to avoid those charges.  That could involve creating separate contracts with artists that sidestep performance royalties altogether – and drastically reduce spins for major-backed artists in the process.

Another source pointed to much tighter playlists involving proven, older hits – not new stuff.  That is, unless there’s serious money or compensation being paid for the play.  “The [major] labels will lose their ability to create a single,” the programming source told Digital Music News.  And, there are few promotional channels more important for the majors.