Category: Music and Business Law
What to do During a Pandemic (for musicians)
So much has been written already about the devastating effects that COVID-19 is having on our industry. Social distancing, whether suggested or mandated, means no live performances. No live performances means no money for venue owners, security and staff, ticketing companies, the artists and their teams. Without live performance revenue all of these individuals are without the revenue that normally pays their bills.
While some of the potential and actual legislation and ordinances put forward by government officials will look to help our industry, specifically bartenders, wait staff and other hourly workers, the musicians and their teams will likely not benefit from the same. As we have highlighted so often, the music industry has shifted in such a way where the majority of musicians who make a living via music depend almost entirely on live performances and the merchandise and sponsorship opportunities they afford them.
We, like the rest of the world, do not have an immediate solution to make up for the loss of income caused by COVID-19. However, our experience allows us to make a few suggestions specific to our musician friends and clients to help during this uncertain time.
1. Create more content. This should really be the primary focus of all artists right now. Take advantage of this odd period of time where the world is forced to stay at home to give your fans new content to consume. There is no doubt that people will be glued to their devices now more than ever. Fresh content can keep current fans engaged and introduce you to a new and bigger audience. Whether it is releasing new music, creating video content or streaming live on the ever growing digital platforms like Twitch, Mixer or Caffeine, keep active and keep in front of your fans. Maybe accelerate that release plan and delay that tour schedule.
2. Plan ahead. Hindsight is always 20-20 and it is far easier said than done to save money for a rainy day or a pandemic, but take this time to plan out the rest of your year. Plan financially as well as creatively. While very few people expected this type of event to occur on a global level, now that it is here, we can all plan for it to happen again. Get with your team, including your business management or financial planner, and figure out where you stand and how to maximize revenue for the future.
3. Review your current status. Remember those contracts you signed last year or the year before? This would be a good time to review them and see where you stand. Are you recouped? Have you delivered everything you were supposed to deliver to satisfy your obligations? Is it time to request an accounting or an audit to find the royalties that still haven’t arrived? Take this time to talk to your counsel and look at your contractual situation.
We are living in a crazy time right now. Focusing on what you can control rather than the unknown is solid advice for everyone at a time like this. For musicians and creatives, controlling their careers by following some of these suggested steps is a great way to start taking back some of the control that has been lost due to COVID-19.
PLEASE STAY SAFE AND CONTACT US WITH QUESTIONS, CONCERNS AND IDEAS.
How Do You Split Up Publishing?
Publishing is an often discussed and rarely understood element of music. For those working as musicians or within the industry, understanding publishing and how it is divided is essential. However, even for those of us that have a grasp on publishing, answering the question of how publishing is or should be split is not easy.
There is no bright line rule or formula that must be followed when divvying up the publishing of a composition. In a common (and usually fair) scenario the publishing is split equally between all writers who contributed to a song. In an even clearer scenario, one writer (typically a producer for pop/dance music) comes up with a melody and a writer comes up with the lyrics. Then those two split the publishing 50% each.
As we all know, life and the music industry is just not that simple. Think about a band that has 4 members. One member writes the lyrics, one comes up with the hook, one contributes to the melody and one just plays the drums (sorry drummers). Should each band member get 25% of the publishing? Again, it depends!
If a band is truly collaborative then the drummer in the above example may have written the entire melody to another song while the lead singer fixed his hair in the mirror. Or maybe the guitarist wrote the entirety of a song while the rest of the band was at the bar. The scenarios of how a song are created are limitless. That is why we often recommend that a band enter into a band member agreement that states that all songs, regardless of who did what, are split equally. A band, like a family, is a delicate and complex thing full of personalities, egos, opinions and emotions. Setting up an equal split at the outset and putting that into writing can diffuse fights before they occur.
On the other hand, having a pre-determined and documented split could also build resentment and disdain. If your bassist never contributes to the creation of a song and the other members work tirelessly at song writing, chances are that the s$%t is going to hit the fan eventually and the agreement will be revisited to eliminate or lessen the bassist’s participation.
Bands are actually easier when it comes to splitting up publishing as compared to pop and hip hop music. It has been widely written about that many of today’s top 40 artists co-write with may top-line (lyrics) writers and producers. That’s if those pop and hip hop artists write at all.
It is not uncommon for a pop song to have 3 to 7 writers on it. Look at this year’s Grammy nominees to see just how many people it takes to create one song. A commonplace is to have a team of top liners work with one or two producers to create demo songs. Those demo songs are pitched to various artists by A&R reps from labels and publishing companies as well as managers and other industry insiders. A demo song could make the rounds looking for a home for years. Once it is finally selected by a recording artist the publishing splits are sometimes the last thing to be determined.
Playing out the above example, let’s say Kelly Clarkson selects a demo song that was written by the writing team of Julia Michaels and Justin Tranter (top liners) and produced by Mark Ronson. Kelly then puts her spin on the song and brings in her own producer, Jesse Shatkin, to tweak the production a bit. So now you are looking at 5 people that get a share of the composition. Now the question becomes, how are those 5 people splitting it up?
Again, the method is not always the same. However, the typical way a pop song’s composition is split is 50% to the producers who create the melody and music and 50% to the lyricists. In our above example, Mark and Jesse may split the 50% tagged for the producers and Julia, Justin and Kelly split up the remaining 50%. Are the splits going to be equal amongst them? We will leave that up to their respective lawyers and managers!
The bottom line when it comes to publishing splits is that it is always better to have a conversation with your co-creators sooner rather than later. The last thing anyone wants is to release a song, watch it do well and then fight over the splits. Trust us. That is no fun for anyone involved.
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!
Independent Contractor No More? (and why that matters to musicians)
There is a key distinction in the law that differentiates between an employee and an independent contractor. Employees are entitled to certain benefits and protections that contractors are not; chief amongst them, wage protection (minimum wage requirements and overtime benefits etc.), health insurance and paid time off. Contractors, on the other hand, are viewed as hired guns that can be paid lump sums, do not qualify for overtime and are not eligible for insurance coverage offered to employees. The music industry is dominated by contractor relationships. Think of studio musicians, managers, dancers, producers, writers, roadies, back up singers etc. All of which, until recently, fell squarely in the independent contractor category.
California, the largest hub for the entertainment industry in the world, took a different take on the employee versus contractor feud. In recent legislation signed by Governor Newsom, CA AB5, Californians will be considered employees unless and until their employer can show that the work that they perform falls under a specific set of criteria. Specifically, a worker is an employee under AB5 if his or her job forms part of a company’s core business, if the bosses direct the way the work is done or if the worker has not established an independent trade or business.
While the law was a direct result of the so-called “app” industry (e.g. Uber, Lyft, Postmates etc.), the repercussions could clearly spread across other industries. So what does this mean for musicians and the industry as a whole in California?
As written, AB5 would arguably classify a recording artist as an employer and her manager, tour manager, guest artists, choreographer etc. would all be her employees. This would require the artist to set up a payroll system, withhold taxes, set hourly wages, pay for overtime, potentially offer insurance and everything else that a normal company would provide to an employee. Anyone in this industry knows that this shift would be a monumental change and frankly, is just not practical.
Unlike other industries, music industry organizations (RIAA, A2IM and others) lobbied to ban the legislation altogether rather than seek an exemption. Doctors, accountants, travel agents, real estate agents, cosmetologists and other sought and achieved carve outs so as to not fall under the new qualifications of AB5. Alleged in-fighting amongst music industry leaders resulted in full inclusion under the law rather than a potentially helpful exemption.
The fear that AB5 will gut the entertainment industry in California is real. Other states are already looking to capitalize by attempting to lure “contractors” to within their borders. Still other states are looking to model their own laws after the California law and touting their own version of employee protection.
The law does not go into effect until January 1, 2010. Until then there will most likely be litigation that may delay its start date. We will continue to monitor the situation and provide updates.
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!
SoundCloud Listened (to us)
Sometimes speaking out works.
@SoundCloud listened and modified its new artist contract.
Thanks to some solid journalism (take that #fakenews), and the power of artists and their representatives (like yours truly), SoundCloud revised its new artist monetization agreement. The program introduced by SoundCloud four years ago allowed select artists to earn a share of ad revenue and subscription fees by monetizing the use of their music. Finally ready to go to the masses (and keep up with competitors), SoundCloud announced the ability for all Premier Members to monetize. With the announcement came a long form, click-through, agreement. That agreement left quite a bit to be desired.
The biggest outcry from the artist community was over a “Covenant Not to Sue”. Basically this means that if SoundCloud screwed you in some way, you would have no right to seek retribution in court. We were less concerned with that clause as we were with the completely ambiguous payment schedule, the improper method for notifying artists of changes to payment terms and the extremely short amount of time to review statements (if and when the statements were ever delivered). While the Covenant Not to Sue is concerning, there was arbitration language included which offered artists the ability to challenge any issues with SoundCloud through the arbitration process rather than in court. There is a definite difference between a law suit progressing in court versus a matter in arbitration, but it is not extremely unusual to have this type of clause in this type of agreement.
The ambiguity was far more concerning to us. How can anyone agree to enter into a business relationship where the party who is owed money has no idea when or how they are going to get paid? How could you agree to enter into an agreement when you aren’t sure if the agreement has been modified and you could actually be earning less than what you originally agreed to? To us, these types of unclear and unfair terms were the main issues with the SoundCloud artist monetization program.
With the help of @verge and others, SoundCloud, took heed and modified its agreement. Unlike our current government, when the people are outraged and nothing gets done, SoundCloud reexamined its agreement, agreed there were fundamental flaws and took the necessary steps to make the needed changes. Kudos to a company who caters to musicians for actually listening to musicians. I hope this trend continues.
The Songwriter Curse (Avoid the NOI(d))
It seems to be a constant battle for songwriters to economically receive what is rightfully theirs. First, fighting with labels over rights and royalties, then finding a publisher (big enough) to collect those royalties, now going after digital service providers to payout those royalties, and the government for providing an obnoxiously low rate for reproductions rights and an outdated statute that can’t seem to keep up with the technological age. Yes, it has been a rough one as these factors are often working together in perpetuating this curse more commonly known as the compulsory license.
A compulsory license for sound recordings was created by Section 115 of the Copyright Act and allows anyone to reproduce and distribute a composition that has been released to the public either by digital or physical means with the copyright owners permission. (sounds good). Most of the time an artist records the composition, the label sends the created recording to its distributor and the distributor sends it to the digital service providers or DSPs (Spotify, Amazon, Google, iHeart, you name it) who in exchange receive dollars through subscriptions, ads and downloads. It seems like DSPs should be giving songwriters a call right? (Because they are reproducing the composition and saving it to their platforms to be streamed or downloaded.) Shockingly, they don’t call. In fact, if you are an independent songwriter (not represented by a major publisher), it is unlikely that you are paid mechanical royalties from any of the DSPs. Why? Because of the compulsory license and these evil excel spreadsheets called “author unknown” NOIs.
If you want a compulsory license, Section 115(a)(2)(b) of the Copyright Act requires you to serve the copyright owner of the composition with a notice of intention (or an NOI). However, IF there is no registration or public record filed with the Copyright Office of your ownership of that composition with an address where the licensee can serve you the NOI then you are considered an “author unknown”! (insert evil laugh). Basically, did you file and pay the Copyright Office to register your copyright that you already own (even though under no law are you required to register your copyright to validate your ownership) for the purpose of getting paid a royalty that, by statute, you are rightfully entitled to? That’s some hardcore bs, right? In fact, instead we are going to give DSPs and whoever else, an out to not pay you. Just submit an “unknown author” NOI to the Copyright Office, which is basically an excel spreadsheet with the title of the song, the DSP info, and unavailable written across the columns for any type of songwriter info. It doesn’t matter if the song is registered with a PRO, if you submitted the metadata to the label to give to the DSP, it probably doesn’t even matter if you call Spotify up and say “hey I’m your missing songwriter!” Nope, after a copyright search you are done. Also to add more bad news, if you file for your copyright tomorrow Spotify, Google and Amazon are not required to back pay on any of those royalties as long as they submitted an NOI to the Copyright Office.
Although a bummer, we will end on a positive note that this curse has not gone unnoticed and some are choosing to do their part to help. Insert Sound Exchange NOI database! (Superhero sound!) A simple system that organized the unknown author NOIs submitted to the Copyright Office so that you can easily discover who is not paying you and for which song. Although its not exactly putting the money you are owed into your pocket, it is getting us a step closer considering the Copyright Office database for NOIs is next to impossible to navigate. It consists of huge excel spreadsheets submitted by DSPs that often are not even downloadable without a zip compressor. If you are able to download the excel sheets, you will see DSPs list hundreds sometimes thousands of songs in no particular order that are submitted daily! It is an absurd waste of time. So thank you Sound Exchange for making it easier for the songwriters out there. I encourage all songwriters to sign up (its free) and search for any NOIs here. We at L4M are going to do our best to keep on this fight and find best practices to get these royalties paid out for our clients. We will keep you posted, but feel free to comment with suggestions and success stories as we want to keep songwriters informed on how to avoid those unknown author NOIs!
The Music Modernization Act of 2017
Wait a second…What just happened? Did the United States government actually try to address a problem that has effected millions of Americans for years by introducing a Bill before Congress? Did those blowhards in Washington D.C. stop fighting and tweeting and actually do the job that they were sent there to do?
Here is a draft of H.R. 4706, The Music Modernization Act of 2017.
For years now the streaming revolution has completely disrupted the way consumers listen to music, the way musicians release music and the way rights holders (musicians, publishers, labels etc.) get paid. With the recent onslaught of litigation against giants like Spotify and Apple Music, lobbyists in D.C. seem to have been effective in getting our legislative branch to try to address an over decade old issue.
With the goal of ensuring that streaming platforms (a) don’t get sued, (b) mechanical royalty rates are set as independently as possible and (c) theoretically, getting money to the right people in a faster way, the MMA sets up several new processes for the music industry.
In typical Washingtonian fashion, the Bill introduces yet another bureaucratic body to oversee and administer digital licenses and pay all copyright owners (so long as your works are registered correctly). While, in theory, this sounds like an intelligent move, there are numerous questions about the efficiency of yet another “agency” involved in paying monies to the correct rights holders. We think it is definitely a move in the right direction by centralizing all digital blanket licenses and the decision makers for mechanical royalty rates (without a commission or overhead cost put on the backs of rights holders), but the move begs the question of how effective other government led regulatory bodies have been in the past (Government Shutdown ring a bell?). Lobbyists have touted this move as a departure from the tenured “judges” that rule over the PRO’s (ASCAP and BMI) and allows for a more impartial method in determining amounts paid for performance royalties to songwriters.
Since the inception of streaming services, platforms have avoided paying mechanicals because after filing the required Notice of Intent (or NOI) there is no further requirement to determine the actual right holder of a particular song. So if your information isn’t found or hasn’t been registered, Spotify, Apple, Amazon etc. haven’t had to pay you for streaming your license. The MMA attempts to do away with this giant loop hole. The new oversight/governing body will attempt to collect all data (by working with Content ID/Google and other data aggregators) and theoretically make sure that every song is registered so that every right holder is paid (some minuscule amount) for every stream.
The Bill then sets up a more “free-market” system for determining what mechanical royalty is actually paid to the rights holders (now that they will all be contained within this database). The rights holders and the platforms will have the ability to negotiate and set rates rather than relying strictly on government set rates.
The Bill was introduced to the House Judiciary Committee before the end of 2017 and there it sits. We will be watching carefully, along with millions of musicians and industry folks, to see how it progresses, what changes are made and how much pork is added to it.
Need a Publisher? Are you Sure?
Maybe it is a millennial thing or maybe it is just a product of the industry but we consistently hear several things from new artists that are trying to make it to the next level:
“I need a manager”
“I need a label”
“I need a publisher”
Sometimes there is a need for one of these. Sometimes there is a need for all of them. But when does an artist really need a publisher?
We think there are only a couple of situations where a musician who writes music truly needs a publisher rather than self-publishing:
1. You are a top-line (lyrics) writer or producer that needs a publisher to set up writing/recording sessions with other similar or more established writers or producers.
2. You are in need of a substantial check as a loan/advance.
Going in reverse, the only way you are going to get to #2 is if you have a previously released catalog of music that is making substantial revenue on the publishing side of things (actual record sales, licenses, performance royalties etc.). Obviously, easier said than done.
So in our opinion #1 is probably the best and primary reason that an artist should consider or seek out a publishing situation. If you are a writer/producer that either writes for him/herself or has written for another artist and your goal is to try to continue to do so or write with writers who have credits on gold/platinum albums, a good publisher should be able to facilitate this. They should be able to pair you with established and up-and-coming artists that have budgets behind them. Getting in with those artists and getting music actually released with a budget for radio/pr etc. obviously builds your own value and the value in your publishing.
As many of you know, getting tracks to the top artists is incredibly difficult. Even if you have a direct line to the artist you still have to get through the artists, management, publisher and label to even have a shot of getting a placement on that artist’s album. Getting a writing session with the artist is even more of a challenge.
If you are at the point where you have the chops, you have a history of writing really solid music, your previous writing is actually earning you some money and you can write for other people, you want to make sure that you are doing everything you can to maximize your value and that of your publishing. We have so many stories of writers/producers that were involved in big songs that weren’t credited the right way or were left off registrations for some reason or the other. So making sure you are handling your publishing yourself is the first step in preparing yourself to even be considered by a major publisher.
Please don’t get it twisted (as the young folks say), if you self-publish you better be able to administer your works or have a lawyer/manager who knows how. Without registering your music with the PROs or securing correct split sheets or hounding labels for statements or hitting up independent artists who have used your music, you are essentially lighting money on fire. You have to know what rights you have in and to your publishing and how to go about collecting it. Registering works is not complicated. Understanding how and when you get paid from those works is.
There are several companies popping up that are offering admin services. Some are directly tied to the big publishers but then you have companies like CD Baby and Tunecore rolled out an admin service and functions a couple of years back. Songtrust is another one that offers a ton of services including administration of publishing. We have clients that have positive things to say about each one and those that have negative things to say about each one. So we will leave it up to you to decide if one of these outlets is right for you.
Remember, if you write a song and do nothing to register it or attempt to collect on it, it’s not really “published”.
Just like everything else in music (or most industries for that matter) you have to work your way up. You won’t get a publishing deal that makes sense unless you have already proven yourself as a writer. It is tough to prove yourself as a writer without getting a break in a very competitive industry. But you won’t get a break at all if you don’t treat your writing like an actual business and get the people you need to be in your corner to help you do so.