The Fair Trade Music (FTM) initiative is governed by Fair Trade Music International (FTMI), an independent, not-for-profit organization overseen by music creators from five continents. Our endorsement program is one of the main tools we use in helping to bring about an equitable music ecosystem that treats everybody in the music value chain fairly.
By certifying individual releases, Fair Trade Music provides consumers with the information they need to make better choices when streaming or purchasing music.
And by encouraging other like-minded organisations and creators to stand behind our Fair Trade Music principals, we hope to raise awareness of the issues within the industry and point the way to a sustainable resolution.
What Does “Fair” Look Like?
Defining the overarching principals of equality and sustainability were the foundation of the Fair Trade Music campaign. But as the initiative moves forward, it becomes vital to properly define the exactly what defines ethical behavior. What specific elements might a creator or an organisation be expected to embrace if we are to successfully transition our music economy?
Over the course of several months in the Spring of 2016, a group representing a wide variety of music viewpoints met to discuss this challenging question. Its aim was to define a set of example criteria that might exemplify a transparent, ethical and sustainable music economy. This group included recording artists, songwriters, composers, copyright and entertainment attorneys, music publishers, record labels and music accountants, among others.
We began by developing a list of criteria that would pertain to an individual single or album release. While this does not yet describe the channel, label, digital platform or store in which that music is being sold, it does give directional insight into the ideal behavior of the industry in equitably bringing creators’ work to the public.
“If the revenues don’t flow back to the creators, while the shareholders and CEOs of companies who deny the value of music enjoy literally billions in profits, something is terribly wrong.”
Example Release Criteria
We believe that an applicant wishing to conduct a Fair Trade Music release should exemplify the following ethical business practices:
1. Disclosure of Revenues
A record label or similar entity releasing an FTM certified release (“Applicant”) will regularly disclose through full, complete, and comprehensive accounting statements, any and all forms and levels of gross and net revenue and remuneration relating to the Certified Release, to the music creators and rights holders downstream of that revenue and remuneration. These criteria apply whether or not the Certified Release is in a recouped position.
This disclosure would include, but not be limited to the following:
- physical distributions and sales, and related revenue and remuneration;
- music service subscription, streaming and download revenue and remuneration;
- any other revenue and remuneration derived from the exploitation of the Certified Release;
- advertising revenues and remuneration related to music access; and
- music-related data mining revenue and remuneration.
2. Payment/Split of Royalties
Applicant will pay the applicable recording artist(s) no less than fifty (50) percent of net revenue derived from the Certified Release, and will pay all applicable creators and rights holders their royalties and payments due at a rate of no less than 100% of any and all statutory and industry-negotiated royalty rates, which rates shall not be subject to contractually-based deductions other than recoupment of advances (if any) rendered directly to such third parties.
3. Efficient Royalty Distribution
Applicant will efficiently, accurately and comprehensively distribute royalty earnings no less than semi-annually, and will engage best practices with respect to financial distribution methods as new and improved technologies emerge.
Applicant agrees to use, disseminate and respect the integrity of up-to-date standard identifiers (i.e. metadata in the digital realm) including the following examples where applicable: for sound recordings – ISRC, for musical works – ISWC, for authors – IPI, for publishers – IPI, and for performers – IPN.
4. Accurate Royalty Accounting
- Regularly account to the applicable creators and rights holders, and do so in a comprehensive, accurate and accessible manner. Reporting should include all costs and deductions related to the Certified Release, including without limitation recording, production, marketing, and distribution costs.
- Use best efforts to employ up-to-date technologies, real-time reporting and online portals wherever possible.
- Refrain from including contractual language specifying that failure to object to a particular accounting statement within a time period shorter than any applicable statute of limitations shall constitute a waiver of rights.
- Ensure the creator(s) is entitled to a right, upon reasonable notice, to have a certified public accountant (or applicable equivalent in a given jurisdiction) of his/her choosing and at his/her expense (unless otherwise agreed) audit the books and records of such Applicant no more frequently than once per year.
5. Compliance Audits
Applicant agrees and acknowledges that an independent accreditation organization has the right, at its own expense, upon reasonable notice, to perform a monitoring audit with respect to the Certified Release, no more frequently than once every 3 years.
6. Disclosure of Equity Stakes and Conflicts of Interest
Applicant will disclose third party and all other equity stakes connected to potential conflicts of interest to all applicable creators and rights holders, and will engage in fair sharing of all revenue and remuneration derived from such equity stakes and similar compensatory arrangements.
7. Ancillary Provision Terms and Maximums
Applicant must demonstrate that if Certified Release is subject to a so-called “360 Deal,” the terms of such agreement comply with the following:
- There shall be no cross-collateralization among or between income derived from different representation categories (i.e., master rights, publishing, merchandising, touring, etc.);
- All such representation categories shall be no longer than the master rights period, which master rights shall be subject to reasonable rights of reversion/termination and standard re-record provisions; and
- Maximum thresholds of Applicant remuneration shall be fair subject to industry norms.
The First Fair Trade Music Certified Release
In July 2016, the new album by Edward Sharpe & the Magnetic Zeroes “PersonA” became the world’s first release to carry the “Fair Trade Music” certification.
The band’s label Community Music, chose to split the profits from all album sales equally between itself and the artist; a decision which has entitled the release to carry the Fair Trade Music seal.