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.
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!
Recently I was on a panel at Northwestern Law School with another lawyer, a musician (who happens to ba lawyer too) and an ASCAP representative. Our topic was the effect that cloud or subscription based music services will have on performers and songwriters. While I definitely had my own opinions on the topic, it was ear/eye opening to hear from my fellow panelists.
Most music lovers seem to have their own private way to listen and enjoy their music. While there is a lot of overlap amongst listeners (iPods, satellite radio, pandora, car radios, home stereos) everyone has their own unique method to purchase, stream, listen and (now most importantly )travel with their collection. In the past we would break out our record collection and play records in the family room. Then came the cassette and the walkman. Our record collections became somewhat mobile and we could grab our favorite tapes and walk around or drive while listening to our collection of music. Technology allowed for better sounding recordings to travel along with us with the invention of the CD. However, like one of my panel compatriots aptly pointed out, a music fan was a prisoner to his cd collection; still rather bulky and highly scratchable, you would have to lug a box/book of cds with you on each road trip and hope that they did not fall between the seats or get scratched on the dashboard.
Enter the MP3. A computer file that is quickly dowloaded and containes cd quality sound. The digital album revolutionized the way we consume music. As with most revolutions, the infrastructure that existed prior to the revolution (the big music label system) fell. Brilliant entrepreneurs and crafty opportunists from Apple to Napster entered the fray and came out making billions of dollars from the shift. For the everyday consumer of music, it became easier to listen to music wherever you wanted to do so. Your entire record collection can now fit into the palm of your hand, be programmed to your car’s stereo or be shared with people in your office with a click of a button.
Now that the digital age of music is over a decade old, there is yet another shift occurring. Technology again is making it easier for people to listen to their music collection regardless of where they are. The clouds have come rolling in.
Pandora has already helped put the cloud on the map with approximately 80 million users (1 new user every second per the www.digitalmusicnews.com). But services such as Spotify, Sony’s Qriocity and Google’s delayed cloud service will take it one step further. While Pandora allows you to listen to music based on bands or songs you tell it you like, the cloud subscription services allow you to pick all of your music. Essentially, you will no longer have to actually purchase a song, let alone an album. Rather, you will pay a monthly fee that will allow you to pick your favorite songs, categorize them, rank them, etc. and, most importantly, take them with you. Whether you are listening on your hand-held device (smart phone or iPod type device), on your computer, in your car or listening to your home stereo system, your music will be there waiting for you. As long as you keep paying the monthly fee, that music will be with you.
As a consumer, I think cloud based systems are the bees knees. Technology should make things easier and better. Allowing me to go from my office to my car without missing a beat of the song I was just listening to (I’m very fast) and without plugging anything in, is amazing. As a lawyer who represents musicians and songwriters, I’m worried. For interactive internet based music providers (where the user gets to select the songs he/she wants to listen to) the royalty rates are negotiated between the labels/publishers and the cloud provider. This means that the labels and big publishers negotiate pre-determined revenue shares for each stream of a song; typically a teeny tiny fraction of a dollar (in England the rate is thought to be around 0.00085 pound). A famous example of how potentially horrible these rates can be is the report that Lady Gaga who had over one million streams of Poker Face on Spotify in the UK earned $167.00 (click here for more on that).
The labels and publishers in the US are fighting for more per stream. But don’t go rooting for them quite yet. They are negotiating deals so that they actually get an equity or ownership stake in the cloud based service. So while it appears as though they are fighting for the artists (which some of them might actually be doing), they are also positioning themselves to make as much money as they can in the process. If the clouds make it unnecessary to ever download and actually own a song, how are the songwriters and artists going to recapture that lost income? As of now, the songwriter lobbyists are doing a good job of asking that question and fighting to establish fair payments for musicians.
The laws in place that cover interactive internet radio and subscription services did not imagine the day when streaming would eclipse downloads. That day has clearly arrived: “Streams of music are eclipsing everything,” Universal Music Group UK chief David Joseph recently told the Guardian. “It’s a different digital currency to downloading. You’re dealing with 175 million single tracks bought a year compared to 7 billion streams of music.” (from The Digital Music News). Just as technology has adjusted, the laws dealing with fair payments to the providers of content need to be modified.
The bottom line is that just as the cassette replaced the record, the cd replaced the tape and the mp3 replaced the cd, the cloud is going to replace the downloaded mp3. The clouds are rolling in and the artists may be left in the impending dark.
So you are in the studio working on your latest masterpiece. However, you and your band mates decide that one of your songs needs a little something extra. Whether that something extra is a guest rapper, vocalist, guitar player, percussionist, cowbell expert or Spoonman; there are few things to keep in mind before you bring that superstar, indie hero or friend into the studio.
Ponder upon these questions: Who will own the master recordings? Who will own the publishing? Who can license the song for use in TV shows, commercials, movies or video games? There is another biggie: If your guest is signed to a label, can you release the song at all?
Let’s take each issue in turn. First, who will own the master recordings? Often, the label or entity paying for the recording, mixing and mastering sessions will own the masters. In today’s music industry scene, where more artists are self-financing and recording themselves, the band or group will own the masters. In these instances, the performers will collectively own the masters. Since our guest is a performer does she or he own part of the master? Ready for your favorite answer? Here we go—-maybe. It all depends on what agreements, if any, you have with our guest.
If there is no agreement in place the master could be considered a joint work in which case any master owner could license the master. Now, if our guest came in to do a small part you probably would not be too happy to find that he/she licensed the song without asking you. Thus, you should probably have an agreement in place. If our guest was performing under your direction and guidance or if the performance is specially commissioned you could have our guest enter into a work made for hire agreement. Under this scenario ownership of the master would vest in you. You should address terms such as payment, royalties, credit and so forth within the agreement. If our guest was not performing under your direction or otherwise did not qualify as a work made for hire, the other option is to have our guest assign any ownership over to you. In an assignment our guest would transfer any ownership he or she may have to you within that assignment. Again, you would address payment and royalties. Lastly, you could allow our guest to retain ownership, via a license, while at the same time keeping the exclusive right to license the song.
Next, let’s think about the publishing in the song. As we all know the publishing is made up of the melody and lyric (yes lyric, not lyrics) of a song. So, did our guest assist in writing any of the melody or lyric of the song? This seems an easy question and answer, but oftentimes leads to band breakups and costly court battles. Again, we emphasize the importance of filling out split sheets. It may hurt our bottom line, but will save you years of anger, time and frustration. Under copyright law, when there are two or more authors for a song and the authors intend for the work to be one song they are considered joint authors. If there is no writing stating otherwise, any author can license the song as long as they share royalties and the use doesn’t diminish the value of the work. How do you prove diminishing value? Good question. It is almost impossible to answer. So, we will leave that alone for now. If someone came in and suggested a lyric change , slight key change or tempo change is that person an author? Probably. How would you feel if our guest went ahead and started licensing the song without asking you? Not upset? Wonderful. You may be happy with some exposure and a chance at some money. What if you were negotiating a license and then found out the song had already been licensed by our guest? Not so wonderful? The way to avoid this is to have something in writing stating who can license the song. It can be all the authors, a majority of authors, a key member or anything you feel works for everyone. This could (and should) be part of your inter-band agreement. But, if our guest isn’t in the band you will need a separate agreement to cover his or her contribution. Again, the ways to do this are: i) work made for hire, ii) assignment or iii) license.
Lastly, what if our guest is in a record deal? Record deals usually require the artist to provide exclusive services for the label. Thus, any recording done by that artist must be cleared with the label (the label can also deny or claim ownership). The artist may have a “sideman” clause in the record deal which allows him or her to do outside projects in which he or she is not featured. You can enter into a “step-out” deal which allows you to use the performance of our guest and release and license the sound recording. If our guest is involved in the development of the melody and lyric and is also in a publishing deal you will have to get permission from the publisher. The publisher will want some copyright ownership and may want some administration rights. So, it will save you time and stress if you ask our guest what type of deals, if any, he or she is currently in.
Collaborations can be great. Collaborating with other artists can bring new life to a song. Your creativity may be enhanced by working with artists that you do not normally work with and can, often times, lead to a song you never envisioned. So collaborate away. Just be cognizant of the issues that come along with it.
Music is everywhere. You turn on your tv, see a youtube video or turn on the radio and hear a famous artist performing a song. But who makes money when the public hears or sees a performance?
It is a common misperception to think that the artist you see or hear is making all of the money from that song. In the pop world, especially, this is not true. Don’t get me wrong, the famous artist probably has more money than you or I could ever dream of. However, the main revenue streams come from songwriting. Oftentimes, pop stars do not write their own songs. Songwriting for bands or artists can bring in huge amounts of money. The main areas of revenue from songwriting come from mechanical royalties, performance royalties and synchronization licenses.
Suppose you write a song and a major artist (for this post let’s use Justin Timberlake) decides he wants to record your song and put in on his next album. If your song has never been released to the public his label will have to pay you a First Use Mechanical License. This gives Mr. Timberlake the right to be the first person to reproduce and distribute your song. The rate for a First Use is negotiable and varies widely. You have to weigh the exposure of being on Justin Timberlake’s next album vs. your leverage in getting paid. But, keep in mind; this will not be your only source of revenue. Let’s say you and Timberlake’s label settle on $15,000 for the First Use right (this could be and probably is higher or lower).
So, you now have $15,000 in your pocket but cannot be the first one to record and release your own song. That tradeoff is up to you. Let’s assume you think it is worth it. What other sources of revenue streams can you now expect from this song?
First off, for every copy of the song reproduced you should receive 9.1 cents. Usually, this is only paid on each copy sold (digital or physical). So, for every album sold you should received 9.1 cents. If your song happens to be the single or a hit, chances are your song will sell digitally as a single more than the entire album. So, for every 99 cent download you should receive 9.1 cents. If the single or single and album combined sell 1,000,000 you should receive $91,000. Not bad. Not bad at all. Keep in mind that label contracts and tricky accounting can lower these numbers. However, the 9.1 cent rate is set by the government.
Another lucrative source of revenue is from synchronization licenses. Every time a song is placed with a visual (think on a tv show, in a video game or in a movie) the writer and publisher must grant a synchronization license. This is a negotiated rate. A hit movie can pay in the hundreds of thousands of dollars for a theme song or a song that plays in the climax of a movie. A television show will pay less but this difference can be made up in performance royalties.
Did someone say performance royalties? Yes. In addition to getting paid to have your song in a movie or television show you will also receive money each time the tv show airs, the movie is shown outside the U.S. or shown on tv. Lastly, if your song is a single and receives radio airplay or is played on the internet you will receive performance royalties. All of these performance royalties are collected and distributed by performance rights organizations. In the U.S. we have three; ASCAP, BMI and SESAC.
As you can see being a songwriter can be a very lucrative business. You will have access to multiple revenue streams. Think of the writers of the song “Toxic” by Britney Spears. She did not write that song. However, every time it aired on MTV or radio the writers received performance royalties; every time her album sold or someone bought “Toxic” the writers received a mechanical royalty. If anyone wanted to use the song in a video game, movie or tv show , the writers would get paid multiple times. Also, if any cover versions are done the writers would receive mechanical royalties. I really wish I wrote that song.
Protecting yourself as a songwriter is not an easy proposition. Seek counsel if anyone wants to buy your song or if you are going start publishing your own material.
SHAMELESS SELF PROMOTION OF THE WEEK:
Come check out L4M and a ton of other experts on music and advertising at the Billboard Music and Advertising Fall seminar on September 15-16, 2010 at the Westin on Michigan Avenue right here in Chicago. We are on a panel and will be floating around all weekend. Follow up the seminar on the 16th with a L4M sponsored show at Bottom Lounge featuring Blah Blah Blah. More info coming soon.
Did you know that the U.S. is grouped with China and Ghana as one of the only countries that does not pay royalties to the performers of a song that is aired publicly (Radio/TV)? Weird, right? Well this odd and troubling (for some) fact may be changing soon. Here is my fellow L4M’er, Eric Malnar with his take on the Performance Rights Act and what changes may be on the horizon:
The Performance Rights Act (the “PRA”) was introduced in the U.S. Senate (S.379) and the House of Representatives (H.R. 848) in February of last year. So why are we talking about this now? Well, as most of you should now, L4M was recently in Austin, Texas for the 2010 SXSW festival and the PRA was the topic of an interesting and heated panel. Interestingly, all sides of the issue were represented, except of course the radio stations (these are the guys who are supposedly adversely affected by the bill). Perhaps invitations were sent but nobody from the radio world wanted to appear on the panel…who knows. It is a shame because it would have been nice to hear their perspective especially since it appears as though the Obama administration is supporting the PRA and it might actually become law.
As a musician or someone who makes money through music, should you care about the Performance Rights Act? Well, it depends on what you do. As many of you know, every time a song is played on terrestrial radio a royalty is supposed to be paid to the songwriter. However, there is no payday for the artist who appeared on the song (singer, guitar player, chime and etc). For example, if I wrote a song for a famous pop singer I would receive the royalty not the singer. This is currently the system for terrestrial radio. Think of Aretha Franklin singing RESPECT. Everyone in the world has probably heard that song, but every time it is played the royalties for public performance go to the writer (specifically his estate) Otis Redding.
Digital sources of music are governed under a different law. Under the Digital Performance Right in Sound Recordings Act of 1995 (“DPRSRA”) digital music providers are required to pay performance royalties for performance of the sound recordings. Many feel that the difference in the way royalties are paid for terrestrial radio versus digital providers is unfair. The PRA would remedy this scenario by requiring a royalty for the singer as well as the background musicians. So as you can imagine, the digital folks, like Pandora and LALA are excited about the passage of the PRA because they feel it will provide a level playing field.
Another often heard argument in favor of the PRA is the fact that other countries do not have the same terrestrial radio exception that we have here in the States. In other words, money is being collected overseas for American artists but it is not being paid because the U.S. does not have a reciprocal system.
Wow, so this all sounds too good to be true, what is the catch you ask? Well terrestrial radio stations are not happy about the PRA. They argue that this will drive up costs and either put them out of business or force them to change their format to talk radio. Thus the dilemma, is it worth receiving new rights under the PRA to the potential detriment of your opportunity (as an artist) to have your music played on terrestrial radio? Back in the day when my band was struggling to get exposure we would have done almost anything to get played on big radio. If the radio industry, which claims to be struggling, pulls music from most of its stations, another avenue for musicians to get exposed is closed.
Regardless of what happens it is important for every artist to understand his or her rights as a songwriter, performer or both. As recording contracts morph into more intricate deals (e.g. 360 Contracts) artists need to be versed on all avenues of revenue. It is no fun talking about music and money in the same sentence but at the end of the day, you need to pay the bills so you can live to play another day.
Stay tuned for updates on the PRA and more insight into some of the hot topic areas of music in film.