Category: Music and Business Law

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!

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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.


SXSW 2012: A Solid Recap from a Solid Company

*Disclaimer: L4M is fully biased as it works directly with Music Dealers.

Now that we’ve all had enough time to reflect on, (and recover from) our time at SXSW, we want to share a couple prominent themes we feel highlighted our own experience at the conference: striking change and profound gratitude.

If you’ve been attending SXSW for a while like we have, one thing is clear: the music industry has undergone massive changes, and nowhere are those changes reflected more intensely than at South by Southwest.

Since its inception over 20 years ago, SXSW has evolved from parking lot performances, bbqs and Shiners into a $65 million dollar event which attracts representatives from the world’s most powerful brands, industry heavy weights and thousands of musicians. The still-sizable and ever-changing industry descends on Austin, all seeking their piece of the pie. But what our conversations at the conference revealed is that this pie’s recipe has changed.

Clearly sugar, water, flour just aren’t going to cut it anymore.

Companies and individuals who were deeply entrenched and seemingly in a position of ever-lasting power have been swiftly unseated. New players have quickly emerged, whose foresight allowed them to gamble smart and win big on new online trends, social media and mobile technology. What we saw at SXSW this year were industry pros who were finally coming to the grips with the fact that they may have missed the boat.

The theme of many of our meetings went something like this: How are you guys succeeding? Why am I going to lose my job at a major label when you guys keep opening offices in new locations? How did you get involved with working directly with brands? Are you hiring?

Now, as you all know, the Music Dealers company and brand philosophy is and will always be: Artists First.

Which leads to our next point: Profound Gratitude.

We are nothing without you. This basic principle helped us build our core business, and will forever guide our day-to-day activities. For some reason, the old industry somehow forgot this, or will simply not accept it. Without music, there is no music industry. How can a company possibly succeed in this industry if they think about the music and artists after they think about themselves?

By putting our artists first, our clients and customers know what they are getting. They know that what we offer is legitimate art from the best emerging artists all over the world. Our clients understand the value in that and the weight that it carries with the consumer. Our core belief of Artists First will continue to give us collective opportunities that had previously been unattainable for independent companies and independent musicians.

While SXSW and the music industry may have changed, we can assure you that one thing has not: without hard-working musicians, neither would exist.

Thank you,

Your friends at Music Dealers

What Can Musicians Be Thankful For In 2011?

This Dancing Turkey is Definitely Thankful to Be Alive.

Perusing the local trade magazines or attending a music based conference can lead a musician (or someone who works with musicians) to believe that Armageddon is truly here.  If we hear one more speech or read one more article about the end of the music industry as we know it, we will certainly collectively go nutso. 

The truth is the entire economy is in the crapper.  We don’t know one industry that hasn’t been touched (well, maybe crime, if that is an industry).  Music has certainly not been immune.  However, we here at L4M are here to say that Debbie Downer needs to turn her frown upside down.  While the days of multi-multi platinum records and huge advances are certainly on death’s doorstep, the savvy musician can do more than just eek out a living.  Here are some things we think musicians should be happy about:

1.  The Internet.  Long hailed as the assassin of the music industry, the world-wide web offers more opportunities than it does problems if you know how to ride the waves.  Not only has the internet introduced the fan to new (and mostly legitimate) ways of finding new music, collaborative websites now allow musicians a means to create, promote and distribute their music.  Sites like TopSpin, BeatPort, BandCentral, SoundCloud and Facebook have become essential and typically inexpensive methods for sharing talent, ideas and product.  If utilized properly, the internet’s social media platforms can completely replace a label based pr system.  Access, affordability and a global reach are definitely something that the Internet provides to the musician willing to navigate it.

2.  Music Festivals.  Music festivals breath new life and huge opportunities to major label talent as well as emerging bands.  Bringing great music to enormous crowds coupled with innovative festival organizers oftentimes bring great results.  Not only are festivals bringing tremendous revenues to musicians and the organizers, they offer great opportunities to buzz bands to play in front of huge crowds and important taste makers.  On top of that, every festival brings with it industry parties, opening slots for after shows, and tons of press.  Emerging bands who strategically plan ahead for a visiting festival can really cash in (maybe not as much as Perry Farrell, but still…).

3.  Music Licensing.  It used to be that in order to get your music licensed your label or publisher would have to cozy up to a music supervisor.  With the amount of media content around the world growing at a record pace (think tv, radio, satellite radio, internet programming, commercials, film etc.) there is a matching need for quality music.  Jingles are a thing of the past.  Ad agencies with unlimited budgets for music is also rare at best.  Quality music that may originate from lesser known musicians but do not carry with it the rigors of publisher and label demands has become imperative.  Musicians who work to get their music to savvy music libraries can make money on both up front music licensing sync fees as well as the oftentimes lucrative performance royalties. 

4. The Remix.  Want to resurrect an old single?  Want to make some money as a producer by resurrecting that old singer?  Never before has the remix been more important.  DJ’s like Skrillex and Guetta have become über rich by making a name for themselves as talented remixers as well as great djs.  For popular musicians, remixes by producers or other bands can lead to revitalized sales of a falling single.  The remix is a handy promotional tool as well (Lady Gaga will be ever-present again for a while as she announces the release of an entire remix album).  Another means of collaboration, oftentimes between artists who would not otherwise work together is definitely a trend that we can all be thankful for in 2011. 

5.  Vinyl.  The LP appears to be back for good.  Collectors as well as a  new generation of music purchasers appear to be favoring holding something cool in their hands and not just in an electronic file living in an Ipod.  While still expensive to manufacture, vinyl sales in 2011 continue to defy the rest of the industry.  A positive trend that began several years ago, there does not seem to be a slow down to the sale of the old school vinyl record. 

What about you?  What are you thankful for as a musician or a music fan in 2011?  Please comment below.  Let’s stay positive and bring in the joy during this holiday season.  Having trouble doing so, slap on the collector’s edition of Justin Bieber’s Christmas album.  We have no doubt that you will soon be smiling!

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.