Category: Law
You and Taylor Swift
Whether you follow the music industry or not, it has been hard to avoid the ongoing saga that is Taylor Swift. There are hundreds of articles out there about all of the particulars and specifics of Taylor’s ongoing fight with Big Machine, the Carlyle Group and, most publicly, Scooter Braun. (Here’s one.). While relating to a super star who has a catalog worth $300,000,000.00 may be difficult, ownership of your art is infinitely relatable to musicians.
Let’s start with the basics. For the purposes of this article, we will focus on a traditional label recording agreement. When you sign a recording agreement you are agreeing to sell your recordings (the “masters”) to a label. They label will require you to deliver a certain number of records or albums over a certain period of time. In exchange they may pay you an advance (a loan against the money that is earned from those records) and will agree to pay you a certain percentage of the revenue that is earned from the exploitation (sales, streams, licenses etc.) of those records. That percentage will only be paid after they recoup all of the money that they have previously paid to you as an advance as well as amounts paid to record that music and oftentimes, to promote or market the records.
So that is how the money part of a recording typically works (more or less). The term of a recording agreement is a whole other animal.
Let’s use Ms. Swift as an example. Her original deal with Big Machine was to deliver 6 albums. She completed that delivery at some point in 2018. She recouped shortly thereafter (obviously). So she was free to go explore the market as a free-agent. But here is where it gets interesting and where many of our clients get confused. Just because the term of the recording agreement expired does not mean that the label gives up ownership of the records that were already delivered. That ownership is perpetual (aka forever). On top of owning the masters forever, Taylor’s recording agreement (as with most of them) had a restriction on re-recording of the masters. That means that for an extended period of time, Taylor cannot re-record any of the songs from the albums that are owned by the label. This restriction has led to the current and very public dispute with Scooter over whether Taylor can actually perform any of the songs owned by Big Machine/Scooter/Carlyle at the American Music Awards where Taylor is being honored for her legacy as a recording artist. Why would she be prohibited from performing these songs? Scooter and his squad were making the argument that the AMA’s will be recorded so that the re-recording restriction contained in her contract prohibits the performance. This has since been resolved and Taylor will be able to sing her heart out on all of her past hits at the award show.
Again, Taylor’s struggle is not exactly one that most musicians face. Most musicians do not experience a major venture capital firm (Carlyle) headed by one of the most public and powerful music industry moguls (Scooter, who also happens to be sworn enemy of Taylor’s), purchasing their legacy of master recordings for hundreds of millions of dollars. However, anyone entering into a recording agreement should know that they are selling, assigning and transferring the copyright and ownership of her recorded music to a third party. Accordingly, they will not own and certainly will not be in control of their past art.
For some, selling their art is not an issue. It is a centuries old practice that extends beyond music (think paintings, sculptures, movies etc.). However, for others it can be a tough pill to swallow. For those musicians who are aware and informed of the current financial model for the music industry, they know that owning their masters is not just artistically important but financially significant as well. So what is an artist to do?
First off and most importantly, know what you are signing. Find someone who has experience dealing with this fact pattern. Whether that is a lawyer or manager or just a musician friend, consult with them and ask questions. Further to that point, ask the people that you are considering signing with what their intention is. If the language of the agreement doesn’t match that intention, you should probably run away; quickly. Second, know that there is no longer just one type of recording agreement. The days of standard completely one-sided recording agreements are dead. While labels will always try to get the most out of any signing, musicians have options. There are license deals where you essentially license your masters to a label for a set amount of time. Once that time is over, the master revert back to you. There are deals to be struck with distributors. Distributors of music will fund artist projects without taking any ownership and simply recoup off of the streaming revenue that they are earning by distributing your music. There are a lot of carve outs and exceptions that can be drafted into a recording agreement that can solve for the situation that Ms. Swift has found herself.
If you are Taylor Swift today versus Taylor Swift at 15 you not only are ridiculously successful and rich but you are operating without a tremendous amount of leverage. Her new deal with Universal/Republic undoubtedly contains language that allows her to share in the ownership of her new masters or at the very least allots her the ability to buy them back at the end of her term. So while you may not have her catalog and leverage, you can at least arm yourself with knowledge, understanding and a team to help you navigate your way to Swift-like stardom!
Misconception #1: Once I Get My Deal, I’m Good.
As we have explained we work with clients in every segment of the industry from musicians to managers to labels to distributors and more. Because of our diverse client base and years of experience, we are able to recognize certain trends, hot topics, common misconceptions, and red flags while working within the music world. Each month we are going to look to highlight one of these areas that, to us, have a deep impact on an artist’s career as a musician.
The FIRST Industry Standard Podcast
Seems like everyone has a podcast these days. Not wanting to be left out, we are pleased to announce the launching of our affiliated podcast: The Industry Standard. Perhaps a little late to the game, we are trying to bring L4M to the masses by any and all media available to us!
Eddie Sanders and Josh Kaplan will be bringing this site to life (and then to the cloud) a couple of times a month. We will host the broadcast here but it will be available wherever you find podcasts. Hope you tune in and enjoy!
Sharing is Caring, but please paper your collaboration
As seen from our last L4M post, success in the music industry is often dependent upon the people around you; managers, lawyers, and booking agents make up your “team”. But what about those other musicians that help you create the sound? The artist’s you work with to make a song. Collaborations are so common these days even bands with numerous members are bringing in teams of producers, a second percussionist or guitarist, and additional vocalists. So why does it matter? You work with your friends to create great music, right? Its true, but defining roles and ownership is essential in protecting your music. Some of the biggest disputes in the industry today involve payments to collaborators, the rightful ownership to a song involving guest musicians and artists.
Take for example the dispute between Jack Urbont and Sony Music Entertainment over the theme song for Iron Man. (Urbont v. Sony Music Ent., 100 F.Supp.3d 342 (2015)). Sony released a song by hip-hop artist, Ghost Face Killah, which used a portion of the Iron Man theme song and only received permission from Marvel Television but not Urbont. The main issue being when Urbont worked on the original theme song with Marvel was whether his contribution was considered a work for hire or should he own part of the composition with Marvel. The parties ended up settling out of court after Sony was granted the right to use a work for hire defense against Urbont. So what’s the takeaway? You need to decide prior to releasing any music whether your bestie is taking a fee, getting any rights to the composition or both.
“Work for hire” is a legal term in the copyright act that in a nutshell means you are being paid for your services as a musician but will not own any of the intellectual property to the song. Think of it as any service you pay for, if a carpenter makes you an original table, you pay him or her for the workmanship and the table, but the carpenter doesn’t receive ownership in the table and doesn’t receive a portion of the funds when you resell it. Same for a work for hire musician or vocalist. Work for hires are the most common when the musician doesn’t create anything original, they are just playing or singing what you put in front of them. However, work for hires are becoming more and more common with writers, musicians and producers who contribute original material to the song. Why would they do that? First because you give them a big paycheck and second because they don’t think the song will make more money then the paycheck, it’s a win-win for them.
On the other hand, if you are a songwriter and you ask your friend the guitar player to come in and write the melody, it makes more sense to split the ownership of the composition. This is when you want a guest artist agreement in place so that you won’t have to track down the guitar player every time you receive a license request or want to make a remix. What if you want to use part of that melody in another part of a song? You will need to ask the guitar player for permission and he or she can argue that they want their ownership percentage to stay the same even though your using only a portion of the melody. A guest artist agreement will prevent this headache as you can outline each individual’s rights and permissions involved with the song.
Sometimes artists will collaborate and give both a fee and ownership over the composition. In this case, the fee is treated as an advance that needs to be recouped against profits. Think of it as paying the artist upfront for what you think they will make off of the sale of the song in the future. Until the song recoups the advance amount they won’t receive payment from a label or you, even though they own rights to the composition.
So how do you ensure that all of this is done correctly? Unfortunately, a handshake will not suffice. A legal document signed by both of you will be necessary. Lots of writers and producers use session sheets to delegate publishing splits, but this doesn’t clarify who can do what with the copyright and definitely doesn’t help you in a work for hire situation. Having a lawyer draft this for you is the safest bet, but the good news is that often you can reuse work for hire agreements by changing the name and the fee instead of paying for a new document every time (don’t tell your lawyer I said that). The most important thing is to read the agreement and make sure you understand it!! Ask questions, do your research, and know what rights you have or are giving up. Just make sure that on the day you hit number one you’re not scrambling to get your former bestie to sign a work for hire agreement.
by Lauren Schulz (lschulz@tkhlaw.com)
Pandora: More Users. Less Cash?
Pandora recently announced that it has passed 200 Million Users on its streaming music platform. This reportedly includes over 100,000 artists that compile the Pandora catalog of music.
Pandora which went public back in June 2011. Its stock has fluctuated after an inflated IPO. However, the recent news made public by the SEC, shows that its founders are cashing out as if they were dependent on streaming revenue to pay their bills (sarcasm intended). The SEC Form 4 report show that Pandora’s top brass has cashed out approximately $87.6 million dollars of their own stock all within less than 2 years of going public.
So what does this mean? Well, it means several things: 1. the executives are now rich (assuming they weren’t before they sold their own Pandora stock), 2. the stock will likely slide in value as the market watches the top executives’ behavior as an indication of the health of a company, 3. the streaming music model is not working well.
Point 3 should be the most alarming and obvious to artists. We’ve reported numerous times of the apparent inadequacies of streaming revenues (e.g. 1,000,000 streams equal some insanely low amount of money). With this new information it is clear that the streaming financial model in place with Pandora, while inadequate for most artists seems to be inadequate for Pandora itself. It appears that the royalty rates that Pandora agreed to pay the labels set the bar at too high of a rate to be a sustainable or scalable model.
For the artists out there, how much have you seen in terms of streaming revenue to date? Are you sound exchange numbers increasing in a proportional manner? Curious minds want to know.
Please write in with your comments. Stay tuned for more.
Will Copyright Laws be Simplified?
For decades the industry has struggled with interpreting the pre 1972 copyright laws on recordings. Due to complicated state copyright laws which directly contradict or confuse federal law, the music industry (artists on one side and labels/publishers on the other, naturally) have been battling over the rights in sound recordings. The issue has been coming to the forefront as many extremely popular works recorded prior to 1972 are up for recapture (See our articles on Recapturing here).
In a remarkable act of sanity by Washington, Congressman Jared Polis (NY) has introduced new legislation that aims to simplify, clarify and end speculation as to the true meaning of the US Copyright laws as they relate to sound recordings. The Sound Recording Simplification Act (HR 2933) is not wordy or complicated (yet). Rather it seeks to completely federalize all copyright laws thereby eliminating the existing confusion and contradiction created by conflicting state copyright laws.
The passage of this Act would help to eliminate a hurdle in songwriters recapturing their rights by eliminating the labels/publishers creative arguments of conflicting copyright statutes. Stay tuned to watch the progress of the Act.
Thinking of Streaming Some “Free” Programming? Careful!
Recent proposed legislation will make the illegal streaming (not downloading) of copyrights a felony rather than just a misdemeanor. Check out the proposed Senate Bill here, entitled Commercial Felony Streaming Act. This is not a surprising move as the music industry, headed up by the RIAA, has been on the warpath against illegal file sharing sites like Limewire for quite some time. The RIAA, backed by the labels, has essentially drained the pockets of Limewire (and others before that) in litigation. Now, with the deep pockets of the Hollywood lobby behind it, the government is stepping in to add an extra and potentially devastating punch not only to file sharing/downloading sites, but to those sites which illegally host streaming content.
The proposed Bill modifies the current punishment provision of Section 2319 of Title 18 (Criminal Infringment of a Copyright). What was once a misdemeanor, punishable primarily by fines, will now carry a much more severe penalty of higher fines and potential jail time. The penalties will be identical to those imposed against the file sharing/downloading sites. While the Bill is aimed at the proprietors of the sites that provide illegal content, experts expect to eventually extend to the users as well.
The Senate subcommittee on the Judiciary approved the proposed Bill and it will go before a vote of the full Senate shortly. Stay tuned for more updates.
CELABELS: Anyone Can Have a Music Label.
Music Mogul?
What are the requirements of owning and operating your own music label? Apparently having a recognizable name and a healthy checkbook and/or ego are prerequisites. Recently, Perez Hilton announced the launch of his label Perezcious Music, then David Letterman through his hat into the ring with Clear Entertainment and just this week, the most qualified American Idol judge, Ellen DeGeneres, joined the fracas by forming ElevenEleven Music.
So these media moguls who have worked very hard for a long time to reach their respective level of celebrity recognized the same thing that we have been writing about for the past few years: Major Labels are dying. There is a wide gap in the industry where well funded and well publicized projects can have a real impact and make real money.
The independent model (self funded, self produced, self released) has fizzled a bit over the best year or so. The glut of content and ease of production has made it harder to get noticed. But the labels remain in disarray and the old multi-album record agreements are not coming back. So is the only way to get your music out and actually noticed partnering with a celebrity?!? We’re here to say…not necessarily.
What do these new Celables (I want credit for this new moniker) s have that attracts musicians? 1. Money (in Letterman’s case, a whole lot of it); 2. Celebrity/Fame/Recognizability and 3. Easy Access to the Public.
Each one of the above three examples has enough money (or access to money) to fund a “major label” like push for an artist. (Notice that they are starting modestly with one or two artists evidently learning from the failed major label model of signing every artist and hoping one hits) That means that they can afford to pay for the production and recording of an album, pay for the marketing and advertising prior to and during the release of the album (including paying to get music in the right places, on the radio, on MTV, etc.), pay for a distribution agreement and pay tour support to get the artist out on the road in front of his newly purchased fan base. The obvious HUGE plus with being part of a Celeb label is the instant recognizability that it gives to the artist. Any piece of press that talks about Ellen’s new label will inevitably mention her new artist as well. Finally, what better way to push the artist in front of an enormous audience than to promote him or her on your own show or website. The Celables will push (as all of them already have on their own shows, websites, and other appearances) their artists to their previously established enormous fan base. Think how hard it is to get to perform on Letterman. Now think how easy it is to perform on Letterman, in front of millions of potential purchasers of music, if you are on Mr. Letterman’s label.
So how can an indie compete with a Celable? Well, there really is no replacement for the first requirement: Money. However, as we have consistently written here on L4M, if you push your music to the level where an investor may be intrigued enough to partner with you, you may be able to get a regular old rich guy to take care of this need. Now, your rich guy is probably not David Letterman, but with the rich guy’s best asset, money, you can purchase a lot of what the Celables have. Buying the right marketing, or better yet, partnering with the right marketing and public relations firm can get you the placements you need, the buzz you deserve and even land you on the Ellen show. Paying for an experienced management team can also get you that access as well as get you bookings at big shows or on legit tours.
The point, the model of a musician investor partnership can work. Does it work better if that investor is uber famous? Probably. But, putting the right team together and using money in a smart and creative way can get you to the same point as Runner Runner (never heard of them? they are Letterman’s band).
SELF-PROMOTION OF THE MONTH: NEW ARTISTS
As the L4M family grows, so does our client base. Check out this talented dude:
THE SHOW is about to start. Nasser THE SHOW Goins is what’s next in hip hop. You just might know it yet. Letting everyone know that Uncool is the New Cool this Hip Hop Rock Star has all the tricks. Check it:
L4M and Friends Make a Move
Exciting news from L4M headquarters. After following the recent trends in film and music, the L4M team (basically yours truly) decided that independent is, in fact, better. While we have always brought an unfettered view of the industry and have not exactly been held back by the “establishment”, we have officially started practicing what we have preached.
Along with a couple of other former partners and one new music guru, a new firm was formed. Troglia Kaplan Holzman will be the law firm behind the L4M crew for the foreseeable future. We are a general business law firm that specializes in helping creative individuals and their businesses navigate through the turbulent legal and business world that surrounds them. Our new firm will give us even more flexibility and availability to help musicians, film makers and artists to treat their particular craft as an actual business. Basically this move will allow our Left Brain Guide to the Right Brain Thinker grow and improve.
Contact us if you have questions or issues that you would like to see tackled by us and this site: josh@lawyer4musicians.com or info@tkhlaw.com.
To find out more about our newest L4Mer, click here and discover the man, the myth, the legend: Ajay Gosain.
HALLELUJAH!!! SECTION 181 PASSES THE SENATE!!!
We can all be like Kool and the Gang and C-E-L-E-B-R-A-T-E- good times, come on.
More than three months after the House passes a version of the Tax Extender Bill of 2009 (HR 4213), the Senate got off its collective rear end and passed a modified and heavily pork filled version of the Bill today. By a vote of 62 to 36 this persistent piece of legislation made it one step closer to becoming law (remember it still needs the President’s signature). Of importance to all of us, the Extender Bill contains a one year extension of Section 181. All film makers and investors may now breathe a collective sigh of relief.
Now that the extension is a whisker away from becoming law, all you film makers can start approaching investors and their confused accountants to tout the extradorinary tax incentive that is Seciton 181. Remember the tax dedcution that 181 offers is against passive income (although there are subtle nuances that allow active investors to take the deduction against active income). Also, musicians, videographers, web casters, 181 can be used for all qualifying films; which is to say it is not just for feature length films.
We at L4M routinely work with film makers in planning and drafting their film investment documents. Now with the help from our intrepid Senators, we can once again add language to these documents regarding Section 181 (and State tax credits) that make film investment a bit more attractive.
Now that 181 has passed, stay tuned for other development in film and music law. Thanks for reading and for all of your input.
Lawyer 4 Musicians 