Category: Music and Business Law

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)

 

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#Squad

I’m sorry (again) for the lack of posts over the last several months (make that years).  The truth is that we have been too busy working and have let our attention to this important outlet lapse.  Instead of promising to write more, we want to make sure we are posting quality info that can actually help musicians.

In line with that thinking, here is the most important thing that we have come to understand a bit better over the last 12 months or so:  a musician’s team (#squad) is more important now then it has ever been.  The team is still in second place behind the music (position 1a) and the work ethic of the musician (1b), but in today’s music industry, the people that you have working for you, representing you and seeking opportunities for you is more crucial now then ever before.

There has been plenty written about the demise of the major label system.  What seems to be going largely unnoticed or undocumented is the growing roll of those left behind: Managers.  Management (effective management) has now become the true one-stop-shop for a musician.  Management is the new label.  As management, we are faced with the same set of facts and challenges as a label.  An artist creates music and now wants to bring it to the masses.  Yes, you can get that music out yourself as an artist but how do you make a dent in the din of new releases on Spotify, SoundCloud or Apple?

To make a living as an artist you need to do more then just post your music on the internet. You still need to get a significant number of eyeballs and eardrums to consume your product.  So the management team is faced with this challenge without (typically) the luxury of having the deep pockets, employees and relationships that labels have (or had).

An artist’s manager is now in charge of planning a release schedule, getting artwork created, lining up press (more than your mom reposting on facebook), booking shows, figuring splits, clearing samples, registering publishing, monetizing all outlets including YouTube and SoundCloud, paying out band members, featured artists, promoting the release and live shows, finding potential brand sponsors and licensing opportunities etc. etc.  All of this without a budget.  I’m tired just writing all of these duties and responsibilities.

I’m not implying that a manager is going to literally be able to do all of these things himself, but he will have to figure out who to line up to help with this process.  Managers must either strategically team up with the right professionals or outsource these services without breaking the bank.  Yes, getting your music on all outlets is pretty easy (TuneCore etc.) but getting on a top Spotify Playlist is not.  Yes, booking a show in your home town is very doable but playing in another city is not.  Yes, finding someone to remix your track is not hard but figuring out the rights of that new recording is not.

Our opinion is that artists should do what they are best at: making music.  To permit this, managers need to keep everything else moving forward.  Managers must leverage all relationships and forge ahead with qualified distributors, booking agents, pr agents, and lawyers to realize real success in today’s industry.

I’ve been told to write about what you know best so I can share the story of how we have created our team over here at The Propelr (www.thepropler.com).  Obviously we have legal taken care of (www.tkhlaw.com) but we brought on staff to handle all admin from calendar/schedule to financial bookkeeping to merchandise fulfillment.  We partnered with a PR company that shares in our percentage income from artists or gives us preferred rates when we need to use their services (ttps://subvertagency.tumblr.com/).  We have a licensing company working out of our space that is constantly pitching our music (http://brewhousemusic.com/).  We share space with a branding and marketing agency (www.workwithdomino.com) that helps with artwork, social media campaigns and overall branding for our clients.  There is a concert promoter working out of our office too (www.silverwrapper.com).  So short of having a booking agency in house, we have created a co-op of sorts that allows us to really serve our clients much in the same manner that labels used to do.  Obviously I am biased, but I don’t see how else you can really provide value to an artist without building this type of squad.

Want to learn more?  Just hit us up.

Blurred Lines Decision

I’m happy to have been quoted in this article by Paul Schrodt and the Business Insider.

Please take a look here:  http://www.businessinsider.com/blurred-lines-case-music-copyright-2015-12

The Golden Oldies – Recapturing Pre-1978 Copyrights

We have covered several topics on recapturing copyrights here at Lawyer 4 Musicians (see Recapture Basics and Heir’s Rights), as the clock started for copyright owners to terminate a record label or publisher’s grant of rights in 2013. But what if you granted the rights to your copyright before the Copyright Act came into effect (before 1978)? Are they lost for forever? What if I am an heir who has inherited hundreds of songs that are being controlled by someone else? Never fear, with just a gentle tweak in termination timelines, the Copyright Act addresses recapturing of copyrights pre-1978.

Section 304(c) of the Copyright Act allows the copyright owner or his or her heirs to recapture a grant of their copyrights starting on the 56th year from when the copyright was originally registered. Why is it 56 years instead of 35 like post 1978 copyrights? Glad you asked…A little history for you . . . prior to the enactment of the Copyright Act, a copyright was split in two consecutive 28-year periods (this means you could own a copyright for 28 years and then renew it for an additional 28 years) for a grand total of 56 years. Once the Copyright Act was enacted amendments were passed to extend pre-1978 copyrights for an additional 19 years and then again another 20, totaling a whopping 95 years (28+28+19+20). Section 304(c) allows copyright owners or their heirs to recapture for the remaining 39 years that were added by the amendments, (with a few rare exceptions).

The rest of the recapturing maze is the same as post-1978 copyrights . . . simple right? Sort of. The copyright owners or their heirs have a 5-year termination window after the 56th year during which the grant of rights may be terminated. But in order to exercise the termination, the owner must provide written notice to the grantee with an effective termination date falling in the termination window. The notice must be served between 10 and 2 years prior to the effective termination date. Here is an example:

Copyright Registered: June 15, 1950

Termination Window: June 15, 2006 – June 15, 2011

(1950 + 56 years = 2006 + 5 year window = 2011)

Now the tricky part . . . the notice is dependent on the date you want the termination to occur. If you take the above example and want the termination to be effective on January 1, 2010, the termination notice needs to be given to the grantee after January 1, 2000 (later than 10 years before) and before January 1, 2008 (prior to 2 years before). The notice needs to be signed by the owner or if the owner is deceased, those entitled to more than 50% of the copyright interest (see Heir’s Rights article). Then the notice needs to be recorded in the Copyright Office prior to the effective termination date.

A bit complicated, but if you can do the math and send the letter those copyrights are as good as yours! And, of course, we are here to help. Just ask!

Stay tuned for more posts on Lawyers 4 Musicians, after a long hiatus we are back, keeping you updated on all the ins and outs of the music biz!

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.

Internet Radio Fairness Act: Oxymoron?

Protesting Royalty Rates (or something similar)

The current hot topic debate in the music industry involves the Internet Radio Fairness Act (“IRFA”).  Recently, the debate is getting louder as the top artists in the music world and successful Internet radio companies clash over the bill.  Supporters of IRFA say it is vital to the survival and success of all digital music streaming companies to end a flawed royalty system, but opponents claim it represents a disproportional cut in pay that musicians have come to and may eventually rely upon.  It’s no surprise this debate revolves around money, but let’s not mute what’s more important: the long-term health of the digital music business itself.

How are the current Internet Radio and Streaming royalty rates set?  Music rights owners (publishers, labels and independent musicians) and the digital radio companies do not negotiate the price of a license for streaming digital music.  Instead, Congress’ Copyright Royalty Board (“CRB”), a three-judge panel, directly sets the price once every five years after SoundExchange (remember SE represents both master owners and performers which can include labels as well as independent musicians) and the digital radio services (online, satellite and cable radio companies) present evidence about the value of recorded music and the technology for delivering it to music listeners.  Then, the CRB determines the royalties each kind of music service will have to pay out for the next five years.   SoundExchange is then charged with distributing out those royalties to its members.  The Performing Rights Organizations have their own equally confusing method for collecting and distributing royalties from internet broadcasts.

The debate or heavy complaining which led to the introduction of IRFA is coming from streaming services like Pandora.  CRB has decided on dramatically different royalty rates: Internet radio companies like Pandora, the IRFA’s most vocal supporter, purportedly pay more than 50% of their revenue in performance royalties; satellite radio companies like Sirius XM pay about 7.5%; cable radio companies like Muzak pay about 15%, and AM/FM radio pays nothing.  The result of these high royalty rates have forced most online streaming services out of the music business; most notably some giants such as AOL, Yahoo, and Microsoft.

With the rise of services like Pandora and Spotify, the labels and publishers went to extraordinary lengths to ensure that they would be paid a “fair” amount and the artists lobbied hard as well.  Any change, however minimal, will be met with angry voices screaming (or singing) on the other side.

IRFA is designed to give Internet radio stations a fairer calculation process for setting the price of their music and lower this difference.  The goal is to put services like Pandora, Spotify, Muzak, SIriusXM, on the same or similar footing.  But 125 major label artists including Rhianna, Ne-Yo, Billy Joel, Maroon 5, and Missy Elliot penned a letter opposing IRFA.  Their unified voice argues that IRFA will cut deeply into current Internet radio royalty earnings by an estimated 85%.

Who is right?  Who is wrong?  Who knows? What we are sure about is that, without a doubt, Internet radio is good for consumers. It allows for more music choices with more control for the listener, pushes songs from both major record labels and the nation’s rising independent musicians, and enables greater exposure and potential compensation for thousands of artists who would otherwise never be heard.  Rights owners see this medium as a meaningful revenue stream that is only going to grow overtime.  And the more listeners and the more plays mean Internet radio companies must pay more in overall licensing and rights fees to stream the music.  Supporters of IRFA say that not only will these lower rates drive more innovation in legal music distribution, but also ensure more artists are fairly compensated for the performance of their recordings.

It is hard for us at L4M to pick sides in this fight.  We have been writing about the changing music industry for almost five years now.  We spotted Spotify as a potential solution and also a potential problem prior to its US launch.  It comes as no surprise to us or our readers that there is a fight over how much streaming radio plays should pay out to artists.  Obviously, we want to see a fair resolution, but that gets us into the existential debate over what is fair and how much is art worth.  We’re not getting into that debate in this entry (save that for a night filled with several glasses of scotch and smoking jackets).

What do you think?  Comment, email or discuss over Thanksgiving dinner (please don’t).

This article was penned in part by aspiring L4Mer Jessica Rzotkiewicz

Publishing: The Writer’s Share. How do we split it up?

writing

We’ve written several times about the confusion that is music publishing.  It can be argued that the first publishers and labels got together and decided they were going to create a system wherein they would be the only ones who truly understood where revenue generated from the sale, performance or exploitation of music.  However, with the passage of the last 150 years or so, that excuse doesn’t exactly hold a lot of weight.

The writer’s share of publishing (one half of the publishing pie) is usually controlled by the writers rather than a third party.  So this little piece of the overall publishing/master owner picture can still, arguably, be controlled by you and your band.  The question of how you divide it up, well that’s up to you.

When you collaborate with your own band, the most successful and conflict-avoiding method is to divide it up equally.  Four members of the band, each band member gets 25% of the composition.  Another method is to split the writer’s share by splitting the lyric writer and the melody writer (assuming they are different people).  If one person wrote the lyrics and one person brought the melody, then each gets 50%.  This is not to suggest that certain bands use a completely different method.  Several famous large bands had one writer, with the other band members following the lead of that writer.  Nothing has to be set in stone.  One song could be written by everyone and another by only one member.  It really depends on the situation.  So, unless you have an agreement in place that dictates how all songs will be split, no matter what, you should approach each song with a clean slate.

A more common occurrence these days in pop and hip hop is to have producers provide the melody, professional lyric or song writers bring the lyrics and a performer add her/his own twist to create the overall composition.  In those cases there is often a pre-negotiated split and advances or fees paid to the producer and writer.  Certain stars can claim writer’s share even if they had little or nothing to do with the writing of a song, simply because of the clout that they bring.

The key to any split is to discuss it first and put it in some sort of writing over some garcinia cambogia extract tea.  Whether you have an overall band member agreement that spells out how a song is split up or you fill out a session report indicating the roles that all musicians present during a recording session played, something needs to be in place prior to registration.

Once you have certainty on the splits and you plan to release the song or try to license it, be sure that you register it to match your split agreement with your PRO and SoundExchange.  If and when the song generates performance royalties, the writers will get paid based on this registration.  Without it, no payments.