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.
Previously we reported on the Music Modernization Act, a bill proposed to ensure digital music services pay fair royalties to the copyright holders, and where it stands during its process to be become an enacted bill. As we are aware from the timeless SchoolHouse Rock classic “I’m Just A Bill”, in order to enact a bill it takes time and votes from different levels of Congress. The bill passed the House unanimously April 25, with a revised and amended version coming out of the Senate Judiciary Committee June 28. If the bill passes a Senate vote, it goes back to the House for a final sign off.
The bill seemed to be moving full steam ahead with no objections from any party until lobbyists discovered how much control private entities would lose to the newly formed MLC, Mechanical Licensing Collective. These offered amendments from the private sector have put the bill in danger of not passing. Technically, this copyright bill has until the end of the year to pass but legislators are targeting Oct 12 as the deadline. This date is before Congress adjourns for the midterm elections because after Congress goes on vacation, nothing new will be passed.
First the MMA received push back from The Blackstone Group, owners of SESAC and The Harry Fox Agency. They proposed an amendment that would allow the current mechanical licensing organizations to stay in control of mechanical royalties collection and administration. The Blackstone Group questioned why a government-commissioned mechanical licensing body was necessary, when these organizations already exist. After negotiations, the reps for the MMA clarified the restriction on what licenses can be administered by the MLC, which include sync, lyric and performance licenses. This allowed groups like SESAC and Harry Fox to maintain their clientele and continue business as usual, thus still allowing the MLC to collect data and administer mechanical royalties.
After putting out that fire, the MMA is now seeing restraints from another organization. SiriusXM is fighting a portion of the bill’s CLASSICS Act provision which calls for digital and satellite radio to pay royalties for playing pre-1972 master recordings, while terrestrial radio would be exempt.
The SiriusXm CEO has criticized the bill for expanding the royalty requirements for satellite radio without also expanding the requirements for terrestrial radio. Traditional radio doesn’t pay for the broadcast of any sound recordings and this bill does nothing to change that. During a period in which SiriusXM paid 2.2 billion for the use of post 1972 works, terrestrial radio paid nothing. The future of radio is digital and it would be wise for the drafters of the MMA to carve out language to fairly compensate artists in both the digital and terrestrial areas. At this point, neither side has figured out a solution and they only have a couple months left to do so.
Moving forward, the Music Modernization Act has only three paths to move through the Senate: 1. by speedy unanimous verbal consent, which would require all 100 senators to vote yes; 2. the more difficult floor process, which includes time for hearings and would require support of at least 60 Senators (46 Senators have signed on as co-sponsors); or 3. by attaching the MMA as a rider to another piece of legislation that is sure to pass.
Please continue to follow along the MMA’s progress (or lack thereof) here at L4M, @l4m, tkhlaw.com, @TrogliaKaplan or email us for more info.
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!
Due diligence is a phrase that is thrown around the legal world on a daily basis. “Is that borrower credit worthy? We’ll have to do our due diligence.” “Do we want to purchase that gas station? We will only know after we complete our due diligence.” Does the concept of completing due diligence in the music world ever come into play?
The answer is that it should. Just like a business looking to buy out its competitor or a bank trying to figure out if it should issue a credit line to a borrower, a musician should always complete due diligence before making any decision related to his career.
In my quest to get musicians treat their music like a business, I have often compared a music career to any other type of business. However, even though being a musician is similar to being a manufacturer of tires or a having a shoe store, there are different rules and procedures in the music industry. These different rules and standards are due partially because of the slick talkers and stereotypical music industry professionals but mostly from a successful system that has been in place for decades. If it ain’t broke, don’t fix it has been the mantra of the major label music industry for years. In this system, the typical scenario played out as follows: a musician breaks onto the scene or discovered by an A&R rep, the musician blindly signs a multi-album record deal, a manager is provided by the label and the label would control the musicians career for the length of the contract and beyond. As we all know, this system is no longer the norm. Due to the failures of the record industry over the last several years, the system has changed and the process for building a career as a musician has changed along with it.
While a musician was happy to sign the first contract that came from a “reputable” label in the past, that musician now has the ability to conduct her own due diligence. For a musician his or her music is her work product. Today, when that work product gets to a level where it is ready to share with the public and the public wants to hear it, several doors may open for the musician. Behind every door, however, is another business who wants to make money off of the musician’s work product. A manager, business manager, lawyer, label, publicist, publishing company, etc. etc. are all examples of businesses who make money off of your work product. But just like a business owner who is looking to hire a new CEO, a musician must conduct diligence before making a long term committment which may direct the musicians career and check book for the next several years.
So what should you look for as a musician who is looking to sign with a third party (a label, producer, manager, etc.)? How does a musician conduct his own due diligence? First, conduct your own research: google the hell out of the company or individual that is looking to work with you; talk to people in the industry to see what their experience has been with that company or individual; and spend a lot of time talking and observing what that individual or company is really like to work with. A label might have a good reputation, but that reputation could have been built on a success 10 years ago; what have they done lately? Ask for a specific plan for you and your band. How will the label help you get tours? How will the manager deal with finances? How will the lawyer bill you? We know that Sub-Pop has been successful with many of thier artists, but how do their contracts work? Will they enter into a license deal or maybe they are only a 360 deal label? Just because a label or management company has a good name doesn’t mean that they are a good fit for you.
It is always exciting to have someone interested in working with you and in some cases offer you money to work for them. But in today’s music world, you have to ask: is it worth it? Maybe you can do it on your own. Maybe you make your own start and then go with a label. Maybe your best friend is ok to work as your manager for a regional tour. All of these things must be thought about before signing on the dotted line. In the business world if one business is looking at buying out another business, the due diligence period may take months (years even). Lawyer pour over the existing contracts, the amount of money coming in and out of the company, the people working at the company, the systems in place that are working or need to be fixed. Why should your music career be any different?
Musicians should focus on music. That is what they are inherently good at and why they have the exciting prospect of people paying them for what they create. However, saying that “I only want to make music” and ingorning the decisions that effect your career as a musician can have devastating results. Do your due diligence before you make decisions that will effect your ability to continue to make music for a living. Once you have made smart decisions on who makes up your professional team, you can go back to what you are truly meant to be doing: making music.