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Childish Gambino countersues Glassnote in royalties dispute

By | Published on Monday 17 September 2018

Childish Gambino

Donald Glover, aka Childish Gambino, has counter-sued his former label Glassnote in a dispute over royalties, which includes a disagreement over how monies administered by American collecting society SoundExchange should be shared between label and artist.

The revenue share arrangement in Glover’s deal with Glassnote was basically a 50/50 split. SoundExchange already allocates 50% of any money it collects to performers (45% to featured artists, 5% to session musicians). However, Glover reckons he is also due 50% of the money SoundExchange pays to whoever controls the copyright, in this case Glassnote.

The label counters that it’s industry convention to assume that with SoundExchange monies, the artist’s royalty is that which they receive direct from the society.

Glassnote released three Childish Gambino albums under its deal with Glover, before he opted to sign his next record deal with Sony Music. It then went legal back in July, seemingly seeking to pre-empt a royalties lawsuit by the artist.

Its bullish legal filing focused specifically on the SoundExchange royalties question, stating that: “Apparently unsatisfied with the approximately $10 million in royalties already paid or due to him by Glassnote and the 45% of the public performance royalties from SoundExchange … [Glover] has continued to demand from Glassnote payments corresponding to SoundExchange royalties which he is legislatively and contractually precluded from receiving”.

Glover’s company DJR – which was actually the other party in the Glassnote licensing deal covering the Childish Gambino albums – filed its own legal papers last week. In them, DJR goes through Glassnote’s litigation paragraph by paragraph, disputing most of what the label said, except for basic statements of fact like Glassnote being an independent record company and that Glover performs music under the name Childish Gambino.

In its actual countersuit, DJR raises a number of royalty issues that, it says, were uncovered last year when it audited Glassnote’s accounts from 1 Jul 2014 to 31 Dec 2016. It asks the court to force the label to pay all the outstanding monies related to those issues as well as the extra SoundExchange royalties Glover’s company believes it is due.

The dispute over SoundExchange royalties relates to the wording of specific terms in the original DJR/Glassnote agreement regarding the definition of ‘net proceeds’ and ‘gross revenues’, and whether or not those include the label’s share of SoundExchange income. The contract made specific mention of monies collected and distributed by the collecting society, but the two sides seem to disagree on what those specific terms actually mean.

For its part, DJR argues that “the licence agreement does not treat the net proceeds SoundExchange royalties any differently from other income included in the calculation of gross revenues”. It then argues that “Glassnote’s unilateral retention of 100% of the net proceeds SoundExchange royalties materially breaches DJR’s rights under the licence agreement because it improperly computes gross revenues and understates the net proceeds that are distributable to both Glassnote and DJR”.

However the specifics of the DJR/Glassnote contract could and should have been interpreted, it is true that Glassnote’s approach – assuming the artist’s royalty on SoundExchange income is that which the society pays to them direct – is the industry standard.

Which means that if this case were to go to court, and if Glover prevailed, lots of other labels would likely be revisiting the specific terms in their contracts regarding SoundExchange income, to double check whether there are any ambiguities in their agreements too.