Business News Industry People Labels & Publishers Legal Top Stories

Modular hails win in high profile legal dispute with Universal, settles another with BMG

By Chris Cooke | Published on Wednesday 7 October 2015

Australian indie music company Modular has today welcomed two legal developments in its favour, one in relation to an ongoing dispute with Universal Music, the other over Tame Impala mechanical royalties.

The indie’s dispute with Universal related to a new deal that was negotiated last year between the two companies, which were already existing business partners. Under the deal, Modular founder Stephen Pavlovic would have given up his stake in and directorship of the record company. In the end he chose not to sign the agreement, but Universal argued that various email exchanges constituted the deal being done, and earlier this year the Supreme Court Of New South Wales ruled in the major’s favour.

But Pavlovic appealed, and now the appeals court has overturned that decision, with the judge saying “whichever way the matter is looked at, I do not think that a binding agreement was reached”.

Welcoming the ruling, which means he retains his 50% stake in Modular and his directorship, Pavlovic said: “I’m obviously greatly relieved that my position has been vindicated by such powerful minds. I built Modular out of sheer passion and a belief in unique creativity. I regret terribly that that the bands I have nurtured and adored all these years were caught in the cross-fire between Universal and I. It’s stressful to be one man staring down a corporate giant the size of Universal. However, I felt I had no choice but to fight for myself, the label I created and for the bands that we represent”.

Noting that his company had previously had a good relationship with the mega-major, he went on: “I’ve always held Universal, and [its President of Asia Pacific] George Ash in particular, in high regard. We enjoyed many great years together as partners and I’m sad that we have reached a bitter end. I wish him and all beings universal love. I’m hopeful that time will heal all wounds and that the respective bands and labels alike can get on with the job of what drew us all together in the first place – a desire to see great artists brought to the world stage”.

Though the wound healing might have to wait while other legal wrangling is completed, with Universal seemingly considering taking the dispute to the Australian Supreme Court. Speaking on behalf of Universal Music Australia, its General Manager of Legal & Business Affairs told Billboard: “We are disappointed by the appeal court’s ruling because last year’s settlement agreement was intended to help achieve an orderly process for Mr Pavlovic’s exit, and now we are compelled to pursue in court the terms that we had believed were settled last year”.

The second Modular dispute was with BMG, which represents the publishing rights of Tame Impala. In June it sued both Universal and Modular claiming that they had failed to pay the ‘mechanical royalties’ due for the song copyrights on the Tame Impala records the label had put out, reckoning $450,000 was owing. Universal then distanced itself from the dispute, saying a company wholly owned by Pavlovic was the holder of the mechanical licence from which the unpaid royalties were allegedly owing.

But according to Pavlovic, that case is now set to be dismissed by the Southern District Court of New York, seemingly after all parties reached an agreement. The problem was apparently a confusion over the way mechanicals work Stateside, where the publishing side of record releasing is covered by a compulsory licence and therefore statutory rates.

On all that, Pavlovic says: “I’m pleased that the misunderstanding about the US statutory rate for the calculation of mechanical royalties has been resolved in the commercial manner always intended by the parties. I’m deeply sorry for any upset caused to Tame Impala given that I’ve always been such a staunch supporter and fan of the band; and to BMG, given the relationship we’ve always enjoyed with them”.

He then included a sneaky name-check for us over here in the media, by adding: “I also regret the heavy handed press coverage of this aspect of Modular’s affairs which was completely inaccurate and out of hand. However, I hope that, with Universal and Modular’s respective obligations to BMG on behalf of Tame Impala now resolved, that a line can finally be drawn under this unfortunate chapter”.

Sounds good to me. And look, here is the line ___________________________