BMG Royalty Accounting Tweaked For 'Transparency

November 20, 2002

BMG is eliminating standard deductions on royalty payments to artists in an apparent response to artists' unrest over what they see as antiquated business practices.

BMG is doing away with the free good allotment, which allows the majors to pay royalties on only 85% of sales; packaging costs, which allows them to subtract 25% of the retail cost from the first figure; and the cost of underwriting technology enhancement to the CD, which allows them to subtract a further 20%. At the same time, BMG is switching its royalty payment from a percentage of suggested list price to a percentage of the wholesale cost. The changes are not designed to result in any royalty payment gains for artists.

BMG VP of legal and business affairs Jim Cooperman says the company wants to "simplify and make more transparent" the royalty payment process. "It's clear that there is some confusion in the artist community regarding how the royalties are calculated and they would like more clarity," he says.

The move was welcomed by Barry Bergman, president of the Music Managers Forum-U.S. "We are in favor of any policy which makes royalty accounting more transparent and believe that switching to a wholesale method of accounting is less subjective, especially on sales outside of America," he says. "We look forward to seeing how this will be enacted."

-- Ed Christman, N.Y.