- ArtistshouseMusic -

What is the Public Domain, and is it a Good Thing?

cathy — Fri, 21 Jan 2011 13:44:36 -0800

What is the Public Domain, and is it a Good Thing?Overview “Public Domain” is one of those phrases that is tossed around a lot in the music business, but, I fear, frequently misunderstood. It applies to works that have fallen out of copyright. This article discusses why and when a work goes into the public domain, and raises the question as to the validity (or lack thereof) of this concept. Intellectual Property and the Public Domain As we have discussed in prior articles, when an author fixes an original work in a tangible form, he or she is immediately granted six exclusive rights. Similarly, when an individual or firm is granted a trademark or patent, the holder of either, like the holder of a copyright, has a limited duration monopoly. Copyright, trademark, and patent are all elements of Intellectual Property (IP), and, as with real property (i.e. real estate, etc.), the owner of the IP has certain exclusive rights. Unlike real property, however, copyright and patent rights eventually become non-exclusive, and fall into the public domain (trademark, if adequately protected and used, like real property, has no such expiration). Patents expire after twenty years. Upon expiration, the invention falls into the public domain. This is why, for instance, you will see so-called generic prescription drugs appear on the market (at a much reduced price) after the patents for brand-specific drugs have fallen into the PD. For copyright, there are two terms to be aware of with respect to when a copyrighted work falls into the PD. The first relates to copyrights held by individuals. In these cases, the copyright for the work held by the individual falls into the PD seventy years after the death of the last-living author of the work (so long as the work was published since 1978) in the US. That is, if a copyright is a joint work, the term lasts seventy years from the death of the co-writer who lived the longest. The second relates to copyrights created by corporations and/or works made for hire and/or anonymous works. In the US, these copyrights have a term of ninety-five years from publication or 120 years from creation, whichever is shorter. All signatories to the Berne Convention, which strove to unify copyright protection across countries agree to some exclusive duration prior to works falling into the PD. The duration varies from country to country. A complete list can be found http://ow.ly/3I92Q . Thus, whether a work was created by an individual or a firm, it will eventually enter the public domain. At which point, all of the exclusive rights that the creator enjoyed while the work was under copyright expire, and the work can be used, in any fashion, by whomever sees fit to do so without risk of reprisal for infringement. Arguments for and Against the Public Domain The question that should arise at this point is, “Why is there a PD, and/or why isn’t everything in the PD?” Copyright, generally, and the PD specifically have been the focus of much scrutiny as new technologies have emerged to not only allow for easy file sharing, but also for easy collaboration (mash ups, remixes, etc.). Current copyright law disallows the creation of derivative works (mash ups, remixes, etc.) unless the copyright holder of the original work gives permission. Of course, if a work is in the PD, it can be remixed and mashed up with impunity. These re-workings of copyright serve as a decent entrée into what appears to be at the root of the two competing points of view with respect to public domain. Those in favor of terms of exclusivity for the creator of works tend to take the stance that these works are valuable, and that they, the creator/owner of the work/copyright, should benefit financially should these works be exploited. Additionally, they feel that they should be able to take legal action, based on their exclusive rights, should someone infringe upon their copyright. For example, if someone does a re-mix of one of their copyrighted works without getting their permission/negotiating a deal, the holder of the copyright should be able to sue in order to stop the infringer from exploiting the work, and/or be awarded damages. Those in favor of works either falling into the PD more rapidly or not being protected by copyright at all feel that the exclusivity of copyright does not promote innovation. There are varying degrees of reform along the spectrum put forth by those who oppose the current exclusive terms on copyright. Some, like Lawrence Lessig, have proposed a so-called Creative Commons license that allows for creators to opt out of some or all of the exclusive rights that one attains upon creating an original work and fixing it in a tangible form. Others in the so-called “copy left” camp create a sort of licensing dynamic, in which works (often computer programs/source code) are intended to adhere to a freely distributable paradigm; often under the GNU General Public License. Conclusion The issue tends to boil down to those who feel that their works should be protected so that they (the creator/copyright holder) can be rewarded for their work and investment and those who feel that doing so (i.e. protecting the works) diminishes the likelihood of innovation and collaboration. This tension tends to get exacerbated when large corporations lobby successfully to extend copyright duration, such as the Copyright Term Extension Act of 1998, which is occasionally referred to as the “Mickey Mouse Protection Act.” Of course, there are now countless examples of holders of copyright giving, for instance, digital versions of their works away, and attempting to monetize other versions of the same work. For instance, The Cluetrain Manifesto (which you should read) can be read and downloaded for free online, but you can also buy the book itself. Similarly, artists are constantly giving away music (either for an email, or, as I’ve suggested, by taking a cue from the social entrepreneurship paradigm of “buy one, give one free,” or in many other ways) in the hopes that doing so will increase awareness of their work, and that this will ultimately drive revenue. It’s important to note that the examples above require a copyright system to be in place in order for those who hold the copyright to attempt to leverage their opting out of the system to a degree. In any case, it’s a fascinating time to wrestle with copyright, and undeniably we will continue to do so as technologies evolve.

Radio Radio Radio: Make Money and Get Played

cathy — Thu, 13 Jan 2011 12:16:58 -0800

Radio Radio Radio: Make Money and Get PlayedAs discussed in previous articles when an author creates an original work, and then “fixes” that work in a tangible medium (writes it down or records it), the author has created a copyright, and is granted six exclusive rights. Each right is important for different reasons, and each ties directly to potential revenue streams that are crucial for artists to understand in order to build sustainable business models around their creative output. This article highlights an anomaly with respect to United States copyright law as it relates to the exclusive right to publicly perform copyrighted material (in particular, when your music is “publicly performed” – i.e.played - by AM and/or FM radio). The goals of this article are: 1. To increase awareness of the rules around this public performance royalty; 2. To provide suggestions on how artists can best focus their energies in the ever-evolving landscape. The Exclusive Right to Publicly Perform a Copyrighted Work When you write a song and record it or write it down, it automatically gets protection under U.S. copyright laws. One of these laws states that no one else can “publicly perform” your song without paying you. As one example, the exclusive right to publicly perform a copyrighted work means that only the copyright holder of the song (the songwriter) may, for instance, play the song in a club. Additionally, it means that in order for a radio station to broadcast that artist’s copyrighted song, the radio station must have an agreement in place with the artist. Same deal if, for instance, a TV station airs a show in which a copyrighted song by the artist plays during, for example, the opening credits or in the background of a show. AM/FM radio stations get the right to pay and publicly perform a song by paying a Public Performance Organization. The Public Performance Organizations (PROs): ASCAP, BMI, SESAC In order for the above to take place, clearinghouse agencies were created – that is, a place an entity can go that represents a whole lot of songwriters. In the United States, these agencies are known as Performance Rights Organizations (PROs). There are three dominant ones in the United States: ASCAP, BMI, and SESAC. Each does the same thing: they act on behalf of the songwriters who have affiliated with them, and issue licenses to those who wish to broadcast (i.e. publicly perform) these artists’ copyrighted songs. Further, these PROs distribute the money they collect in license fees from these broadcasters to their affiliated writers whose copyrighted songs are publicly performed. For instance, club owners pay the PROs a flat annual license fee that allows artists to perform copyrighted music in their club. This is how any artist is able to stand up on any stage (assuming the owner of that stage has paid the PROs their license fee) and sing a Bob Dylan song. The PROs use a variety of methods (including visiting clubs) to determine which songs are being publicly performed. In a similar fashion, the PROs monitor radio play (via playlists submitted by the radio stations) and music played on TV (via “cue sheets” submitted by the networks) in order to determine which of the writers who have affiliated with them (i.e. the PRO) is having their copyrighted works publicly performed. The United States’ Inconsistent Stance on Performance Royalties Hopefully, to this point, this all seems (relatively) clear and logical. If it’s not clear, please review this prior article [http://blog.tunecore.com/2010/09/your-public-performance-rights.html]. There is a wrinkle. Recall that for each song, there are two copyright holders – the songwriter is one, The second is the entity that controls the right to the actual recording of the song (traditionally a record label). For all of the above, only one copyright holder gets paid: The Songwriter. This means, for instance, that every time Frank Sinatra’s version of Paul Anka’s song “My Way”* is played on radio, broadcast on TV (for instance, if it’s playing in a scene on a TV show), or (when he was still alive) performed by Sinatra in concert it is Paul Anka (and, assuming he has one, his publisher) who receives the public performance royalties from the PRO, and not Frank Sinatra. It’s important to be clear here: Frank Sinatra, obviously, got paid a fortune when he performed in concert. However, in order for the venue where these copyrighted songs were publicly performed to not infringe upon the songwriters’ exclusive right to publicly perform their copyrighted works, they (the venues) have to pay a license fee to the PROs who represent the songwriters. Similarly, when Frank Sinatra’s records are played on the radio, it may increase sales, which results in Frank Sinatra’s estate earning royalties from the record label. However, Frank Sinatra (or his estate) doesn't see a dime from the public performance of “My Way”; Paul Anka — via the PRO with whom he is affiliated, and who collects fees from the radio stations and pays out to its affiliated writers — makes money every time the song is played on terrestrial radio. The disquieting detail is that every industrialized country except the United States has a public performance right that is paid to the Sound Recording Copyright Owner (typically, the label). This means that not only the writer, but also the label/performer gets paid when a song is broadcast on terrestrial radio or analog TV. Further unsettling is the fact that when American-made music is played overseas, other countries collect royalties for it, but don’t pay American artists, because we don’t collect for artists here (only writers). In the example above, if Paul Anka’s song “My Way” is recorded by Frank Sinatra, and the song is played on the radio in France, money is paid to a French PRO for BOTH the songwriter and the label/performer. The French collection agency then gives the U.S. PRO the money for the songwriter NOT for the label/performer. The U.S. PRO then gives a % of the money it collected to the songwriter. Reforming the Performance Royalty As you would expect, there are initiatives afoot to normalize the United States’ stance on public performance; most specifically, bill S. 379, the “Performance Rights Act.” Here is a letter from Senator Leahy supporting granting copyright owners and performers a public performance right when their sound recordings are transmitted by over-the-air-broadcast stations. The debate — as all are — is complicated, and opponents to the bill argue that such legislation would essentially put those terrestrial radio stations who are still playing music out of business or push them towards talk radio. The important distinction is that it is only AM/FM terrestrial (i.e. non-digital) broadcasters who are exempt from paying a public performance royalty to copyright owners and featured performers of sound recordings. If music is played on Pandora, satellite radio, via a net simulcast etc, both the songwriter and the label/performer get paid. The Digital Performance Right in Sound Recording The Digital Performance Right in Sound Recordings Act of 1995 and the Digital Millennium Copyright Act of 1998 (DMCA) granted a performance right in sound recordings for certain digital and satellite transmissions. This means, generally, that whenever a song is streamed (in a non-interactive manner — i.e. without the listener’s ability to rewind, etc.) online, not only must the writer of the song be paid, but also the Sound Recording Copyright Owners (SRCO) and the performer. The PROs we’ve already discussed (ASCAP, BMI, SESAC) continue to collect fees from these web broadcasters on behalf of their affiliated writers when a song is streamed online, but now another organization, SoundExchange collects on behalf of Sound Recording Copyright Owners (SCROs) and featured and non-featured artists. When viewed in the appropriate light of inexorable technological trends and innovation, what all of this means is that, irrespective of what happens with the Performance Rights Act, an increasing amount of music is being streamed online and over digital TV (i.e. cable, Satelite), while a decreasing amount of music is broadcast over terrestrial radio/analog TV. Strategy for Artists As artists, it is therefore imperative that you both understand the rules governing the public performance of your music, but also take the necessary steps to ensure you are paid when your exclusive copyrights are used in this fashion. These specific steps are to affiliate with the PRO of your choice (ASCAP, BMI, or SESAC), and to register with SoundExchange (free). My hope is that, in so doing, you will receive the maximum amount possible each time your music is used. In order for this to occur you must be the writer, the performer, and your own label. So, get out there, start your own label, and get your music — the music you made, and control — used, and make some money so you can make more music! * In actuality, “My Way” is based on the French composition “Comme d'habitude,” written by Claude Francois, Jacques Revaux and Gilles Thibault. Anka negotiated the rights to this song, and re-worked it into “My Way.”

Understanding How to Profit from the Digital Performance Royalty

cathy — Thu, 13 Jan 2011 12:03:07 -0800

Understanding How to Profit from the Digital Performance RoyaltyIntroduction As discussed in previous articles when an author creates an original work, and then “fixes” that work in a tangible medium (writes it down or records it), the author has created a copyright, and is granted six exclusive rights . Each right is important for different reasons, and each ties directly to potential revenue streams that are crucial for artists to understand in order to build sustainable business models around their creative output. This article highlights an anomaly with respect to United States copyright law as it relates to the exclusive right to publicly perform copyrighted material (in particular, when your music is “publicly performed” – i.e.played - by AM and/or FM radio). The goals of this article are: 1. To increase awareness of the rules around this public performance royalty; 2. To provide suggestions on how artists can best focus their energies in the ever-evolving landscape. The Exclusive Right to Publicly Perform a Copyrighted Work When you compose a song and record it or write it down, it automatically gets protection under U.S. copyright laws. One of these laws states the no one else can “publicly perform” your song without paying you. As one example, the exclusive right to publicly perform a copyrighted work means that only the copyright holder of the song (the songwriter) may, for instance, play the song in a club. Additionally, it means that in order for a radio station to broadcast that artist’s copyrighted song, the radio station must have an agreement in place with the artist. Same deal if, for instance, a TV station airs a show in which a copyrighted song by the artist plays during, for example, the opening credits or in the background of a show. AM/FM radio stations get the right to pay and publicly perform a song by paying a Public Performance Organization. The Public Performance Organizations (PROs): ASCAP, BMI, SESAC In order for the above to take place, clearinghouse agencies were created – that is, a place an entity can go that represents a whole lot of songwriters. In the United States, these agencies are known as Performance Rights Organizations (PROs). There are three dominant ones in the United States: ASCAP, BMI, and SESAC. Each do the same thing: they act on behalf of the songwriters who have affiliated with them, and issue licenses to those who wish to broadcast (i.e. publicly perform) these artists’ copyrighted songs. Further, these PROs distribute the money they collect in license fees from these broadcasters to their affiliated writers whose copyrighted songs are publicly performed. For instance, club owners pay the PROs a flat annual license fee that allows artists to perform copyrighted music in their club. This is how any artist is able to stand up on any stage (assuming the owner of that stage has paid the PROs their license fee) and sing a Bob Dylan song. The PROs use a variety of methods (including visiting clubs) to determine which songs are being publicly performed. In a similar fashion, the PROs monitor radio play (via playlists submitted by the radio stations) and music played on TV (via “cue sheets” submitted by the networks) in order to determine which of the writers who have affiliated with them (i.e. the PRO) is having their copyrighted works publicly performed. The United States’ Inconsistent Stance on Performance Royalties Hopefully, to this point, this all seems (relatively) clear and logical. There is a wrinkle. Recall that for each song, there are two copyright holders – the songwriter is one, The second is the entity that controls the right to the actual recording of the song (traditionally a record label). For all of the above, only one copyright holder gets paid: The Songwriter. This means, for instance, that every time Frank Sinatra’s version of Paul Anka’s song “My Way”* is played on radio, broadcast on TV (for instance, if it’s playing in a scene on a TV show), or (when he was still alive) performed by Sinatra in concert it is Paul Anka (and, assuming he has one, his publisher) who receives the public performance royalties from the PRO, and not Frank Sinatra. It’s important to be clear here: Frank Sinatra, obviously, got paid a fortune when he performed in concert. However, in order for the venue where these copyrighted songs were publicly performed to not infringe upon the songwriters’ exclusive right to publicly perform their copyrighted works, they (the venues) have to pay a license fee to the PROs who represent the songwriters. Similarly, when Frank Sinatra’s records are played on the radio, it may increase sales, which results in Frank Sinatra’s estate earning royalties from the record label. However, Frank Sinatra (or his estate) don’t see a dime from the public performance of “My Way”; Paul Anka — via the PRO with whom he is affiliated, and who collects fees from the radio stations and pays out to its affiliated writers — makes money every time the song is played on terrestrial radio. The disquieting detail is that every industrialized country except the United States has a public performance right that is paid to the Sound Recording Copyright Owner (typically, the label). This means that not only the writer, but also the label/performer gets paid when a song is broadcast on terrestrial radio or analog TV. Further unsettling is the fact that when American-made music is played overseas, other countries collect royalties for it, but don’t pay American artists, because we don’t collect for artists here (only writers). In the example above, if Paul Anka’s song “My Way” is recorded by Frank Sinatra, and the song is played on the radio in France, money is paid to a French PRO for BOTH the songwriter and the label/performer. The French collection agency then gives the U.S. PRO the money for the songwriter NOT for the label/performer. The U.S. PRO then gives a % of the money it collected to the songwriter. Reforming the Performance Royalty As you would expect, there are initiatives afoot to normalize the United States’ stance on public performance; most specifically, bill S. 379, the “Performance Rights Act.” Here [link: http://www.scribd.com/doc/29299229/Commerce-Department-Letter-on-Performance-Rights-Act] is a letter from Senator Leahy supporting granting copyright owners and performers a public performance right when their sound recordings are transmitted by over-the-air-broadcast stations. The debate — as all are — is complicated, and opponents to the bill argue that such legislation would essentially put those terrestrial radio stations who are still playing music out of business or push them towards talk radio. The important distinction is that it is only AM/FM terrestrial (i.e. non-digital) broadcasters who are exempt from paying a public performance royalty to copyright owners and featured performers of sound recordings. If music is played on Pandora, satellite radio, via a net simulcast etc, both the songwriter and the label/performer get paid. The Digital Performance Right in Sound Recording The Digital Performance Right in Sound Recordings Act of 1995 and the Digital Millennium Copyright Act of 1998 (DMCA) granted a performance right in sound recordings for certain digital and satellite transmissions. This means, generally, that whenever a song is streamed (in a non-interactive manner — i.e. without the listener’s ability to rewind, etc.) online, not only must the writer of the song be paid, but also the Sound Recording Copyright Owners (SRCO) and the performer. The PROs we’ve already discussed (ASCAP, BMI, SESAC) continue to collect fees from these web broadcasters on behalf of their affiliated writers when a song is streamed online, but now another organization, SoundExchange [link] collects on behalf of Sound Recording Copyright Owners (SCROs) and featured and non-featured artists. When viewed in the appropriate light of inexorable technological trends and innovation, what all of this means is that, irrespective of what happens with the Performance Rights Act, an increasing amount of music is being streamed online and over digital TV (i.e. cable, Satelite), while a decreasing amount of music is broadcast over terrestrial radio/analog TV. Strategy for Artists As artists, it is therefore imperative that you both understand the rules governing the public performance of your music, but also take the necessary steps to ensure you are paid when your exclusive copyrights are used in this fashion. These specific steps are to affiliate with the PRO of your choice (ASCAP, BMI, or SESAC), and to register with SoundExchange (free). My hope is that, in so doing, you will receive the maximum amount possible each time your music is used. In order for this to occur you must be the writer, the performer, and your own label. So, get out there, start your own label, and get your music — the music you made, and control — used, and make some money so you can make more music!

Agreements Between Band Members: Dealing Fairly with Members Who Don’t Write Songs

cathy — Thu, 13 Jan 2011 11:48:01 -0800

Agreements Between Band Members: Dealing Fairly with Members Who Don’t Write SongsIn many bands there is either a single songwriter or a songwriting “team.” This archetype was established early — Jagger/Richards, Lennon/McCartney, et al. — and persists to this day. Whether it’s a single songwriter or songwriting team who come up with the necessary elements to create a copyright in a song, there are often others in the band (drummer, bass player, etc.) who have no claim over this copyright. Only Songwriters are Automatically Granted Rights Associated with Copyright As we’ve discussed in prior articles (Control Your Revenue: Transfer Your Rights, Your Public Performance Rights, Your First Asset, The Right To Reproduce, The State of The Music Industry & the Delegitimization of Artists) the owner(s) of the copyright are immediately — upon creation of an original melody and lyric that is “fixed” in a tangible form (i.e., written down or recorded) — granted six exclusive rights. From these rights comes the ability to make money in the music business. Whether the song is downloaded, streamed, used in a movie, or exploited in numerous other ways, it is the songwriter, and the songwriter only, who is compensated for the use of the exclusive copyright. So, if the guitar player and the singer write a song, and that song gets used in a TV show, it will be the guitar player and the singer who receive the income from the synchronization fee (and its associated royalties; e.g. public performance royalties if the show is broadcast, etc). The drummer, bass player and any other member of the band will see none of this money. Zip. Band members may not understand the rights around either creation of the copyright of the income generated from the various means of exploitation; too often, they believe that all income the band earns will be divided up. While they may be correct with respect to money earned from gigs, and potentially money earned from the so-called artist royalty if they are signed to a recording agreement with a label, they are gravely mistaken when it comes to money derived from the exploitation of copyrights of songs they did not write. To be 100% clear, only the writers (© holders) of the song receives royalties from the exploitation of the songs; non-writers do not. Why Bands with some members who write songs and others who don’t have problems What often happens is that a band is formed with a single songwriter, and, in the early parts of the band’s career — when the only money anyone is making is coming from live shows — everyone shares in the income equally. Then, much to everyone’s initial delight, the band gets some momentum, and a label releases a record, a TV show uses a song, the radio starts playing a single, etc., and all of a sudden the songwriter starts getting paid, while the other band members do not. For instance, when a song is released on a record/download, the writer and only the writer receives a “mechanical royalty”; when a song is used in a TV show/movie, the writer and only the writer receives a “synch fee/royalty”; when a song is played on terrestrial radio (i.e. not Satellite or Internet), the writer and only the writer receives a “performance royalty.” Pretty soon, the writer has a house and a car, while the other band members are still taking the bus and living at home. This creates obvious tension in the band, and too often one of two negative things occur: 1. The band breaks up; 2. The writer allocates a percentage of his copyright to the other members of the band. Avoiding Problems via an intra-band Agreement There are, however, ways to avoid either of these two negatives: an intra-band agreement. Put simply, this type of agreement — among other things, such as delineating decision making processes, etc. — stipulates the division of all money, including money from the exploitation of a songwriter’s copyright. This can be done any manner of ways, however, the way that seems to work best is to create an agreement that allows all members of the band to share in the income from all sources so long as the non-writing band members are in the band. If any of the non-writing band members leave the band, they forego any future income — including income derived from the songwriter’s copyrights. In this manner, two beneficial outcomes occur: 1. Bands stay together longer because there is a more equitable distribution of income. 2. The songwriter does not have to divide her copyright; all she is doing is dividing the income from the exploitation of the copyright, and not the copyright itself. Why you should not divide your copyrights — i.e. avoid co-writes whenever possible Too often, people do divide the copyright by giving non-writers a piece of the songwriting credit, and thus a perpetual claim to income derived from the exploitation of the copyright. In this scenario, even after a non-writing band member leaves the band, he will still receive income from the exploitation of the copyright…forever! Not only is this non-value adding in terms of keeping the band together, it also makes it that much harder to divide the copyright in the future (you now have less of it to divide). Conclusion While intra-band agreements should address a number of other things (and you must consult an attorney to draft these for you), a strategy for dividing all revenue amongst members — irrespective of if they are writers or not — must be a central point of any deal between band members. Doing so creates an incentive for bands to stay together, while not creating perpetual divisions of copyrights that result in past members of a band being paid even while they no longer add any value to the band.

Deals, Deals, Deals

cathy — Wed, 12 Jan 2011 14:14:20 -0800

Deals, Deals, DealsIntroduction Even as artists increasingly either release their own records, or work in partnership with their manager to do so, there is still a need to understand both the historical and emergent types of deals. This article presents a framework that delineates the differences between the most prominent types of deals. Future articles will look more closely at the contractual elements of each. The Royalty Deal Type 1: The Copyright Ownership Deal The most common type of deal that artists were offered emerged from the era when artists needed the label to pay for the creation of their recordings. In a pre-ProTools era it was inconceivable for an artist to make a competitive recording on their own dime. Similarly, artists were reliant on labels for distribution and promotion. Grant of Rights The artists thus trade the rights to their master recordings in exchange for the funds needed to create a recording, and for the promotional dollars and expertise the labels offer. Remember, the labels control the copyrights to the versions of the songs they release on the album (as signified by the (p) copyright mark); the writers maintain ownership of the songs used on the record (as signified by the ©), and license the songs to the label via a mechanical license agreement. Term Up until the early nineties (and, to a degree, continuing today) the vast majority of these exchanges were perpetual. Meaning, the artists assigned the copyright to the versions of the songs (not the songs themselves) the label release to the label…forever. Royalties The label attempts to exploit the compositions embodied on the record, and pays the artist a percentage of the profit (if any) after certain expenses were paid back (“recouped” in label parlance). In these types of deals, recoupables are typically limited to advances and some or all costs associated with independent promotion or publicity. Typically, the labels pay the artist somewhere between 10 and 20% of the suggested retail list price (srlp). Thus, if an artist had a “12 point deal” with a label it meant that for every record that was sold at a list price of (for easy math) $10, the artist would theoretically receive $1.20 from the label as an artist royalty. I say “theoretically” because the labels put in all sorts of deductions (packaging, free goods, etc.) to limit both the percentage paid and the number of records that earn royalties. Options As stated, the labels would have the right to exploit these masters in perpetuity. Additionally, the labels would often have options on future records. In other words, the label would have the exclusive right to determine if they (the label) wanted to release future records from the artist. Typically, the label would have anywhere from two to seven options that, in their sole discretion, they could elect to exercise or not. Territory The labels would also typically have the exclusive right to exploit the signed artist’s work throughout the world (or universe). While there are a ton of other elements in an artist contract with a label, the above represent the most material terms. This template, with little deviation, was the dominant one for decades. The Royalty Deal Type 2: The Term Deal One deviation from the above emerged simultaneous to the popularization of ProTools. As artists began to be able to record high-quality masters at greatly reduced costs, the value exchange between artist and label became strained. Artists no longer needed the labels’ money to record, and while they still needed the labels’ promotional money and expertise, the artists became increasingly unwilling to part with masters they themselves had funded. This dynamic led to far more so-called licensing or term deals. In these types of deals, the artist grants the label the rights to exclusively exploit the recordings for a set period of time. At the end of the term, the rights to the recordings revert back to the artist. The artist may then re-license them, sell them, or exploit them herself. This deal is obviously an attractive deal for many artists, as, beyond the financial implications, it also represents a sort of moral victory for the artist who is reluctant to forever part with their work. The caveat, of course, is that these deals tend to have little or no advances associated with them. Beyond these differences, the Term Deals operate essentially in the same manner as the Copyright Ownership Deals outlined above; that is, there are clauses for royalty, territory, number of options, etc. The 360 Deal While the license deals may have represented a move towards a more balanced label/artist relationship, the 360 deal represents a decisive shift back towards labels as acquirers of all rights. The 360 deal is a Copyright Ownership deal where the label has rights in not only the master recordings, but also in ancillary rights that artist typically kept sacrosanct; such as, merchandise, revenue from touring, and publishing. The labels’ argument is that as a result of their exploitation of the artist’s master(s), they increase the value of the artists merch, ticket sales, and publishing, and, thus, should participate in the revenue from these elements. The problem with this argument is that few if any labels have competencies in the area of merch or tickets. With respect to publishing, there are a host of conflict of interest issues with respect to a single entity controlling both the master and publishing rights of an artist’s work (these are not insurmountable, and there are benefits, at times, to a “one-stop” publishing/master relationship, but such situations are not without their challenges/potential for conflict). These 360 Deals have become de rigueur amongst the majors; if you want a major label deal, this is what you will be offered. All other deal elements are consistent with the above with respect to term, territory, and royalty. Net Profit Share (NPS)/Joint Venture (JV) Deals On the other end of the spectrum are deals seen with increasing frequency in the indie world, as well as between investors and artists. These deals, often referred to as JVs, but more accurately described as Net Profit Share deals are typically perceived as more artist friendly than any of the above-mentioned deals. In these types of deals, the artist typically delivers a finished master to the label. The label pays a small (if any) advance, and then spends money exploiting the master. In these deals, the label recoups all expenses associated with this exploitation (remember, in the deals above, recoupment typically tends to be limited to advances and money spent on independent promotion and publicity). This means that every dollar spent — for postage, manufacturing, advertising, etc. — is all recouped prior to an artist royalty being paid. Once this money has been recouped, the label splits the profit — on a net basis — with the artist. Meaning, if the label spent $5000 to exploit the master, and they recouped this $5000 through sales, at the very next record sold, the label would divide the profit after expenses with the artist. So, if the cost of goods sold on a per-record basis was $3 (for manufacture, marketing, etc.), and the label received $10 from the sale of the label, they would remit $3.50 to the artist and keep $3.50 for themselves. While these deals do seem more equitable on the surface, it’s important to keep in mind that few records recoup even when limited to advances and costs of independent promotion/publicity, and thus when you factor in all the other costs associated with exploiting records it can be very challenging to recoup all of the costs. There are two other important elements to consider with respect to these types of deals: ownership of the master, and mechanical royalties. You must define who owns or at least controls the ownership of the master during the term of these deals. Otherwise, issues will arise with respect to what happens if, for example, a larger label wants to buy out the record or the label, etc. The mechanical royalty issue is more complex. In all of the deals presented here, the labels are simply licensing the rights to manufacture the copyrighted songs of the writer on the label’s record (or download). This is accomplished via the use of a mechanical license agreement. Unless waived by the writer, the label must pay the writer a mechanical royalty as soon as the first copy of the record (or download) that contains the copyrighted songs of the writer is sold. In other words, the label can’t wait to recoup their costs prior to paying mechanicals — they must pay from record one. These issues aside, these deals are increasingly common outside of the majors. Whether you are a label or an artist, you will likely present or be presented with this type of deal. Summary There are infinite variations to the four principle deals presented above, and future articles will explore in more specific detail the elements associated with each, but understanding the key distinctions will allow you to make better informed decisions, whether you are offering an artist a deal, or being offered a deal.

Your Constituents Are Your Allies

cathy — Thu, 06 Jan 2011 13:00:10 -0800

Your Constituents Are Your AlliesWe hear the near-constant drumbeat of the importance of direct-to-fan marketing from virtually every corner of the record business. The sentiment is undeniably correct. Eliminating middlemen, and their accompanying transaction costs, is certainly good practice in any type of business. There is, however, something not quite right with respect to current thinking around direct-to-fan marketing. In short, if all we’re doing with D2F is eliminating the middleman, we are only improving efficiency within an inherently flawed system; we’re still “marketing at” people instead of “marketing with” them. As Hugh MacLeod correctly states, “If you talked to people the way advertising talked to people, they’d punch you in the face.” What’s right about this statement is that we know when we’re being “marketed at,” and we don’t like it. Clay Shirky, building upon the work of John Seely Brown, makes a distinction between the “lean back” era, and the “lean forward era.” In the “lean back” era — the era not coincidentally when the majors had their greatest stranglehold over both artists and consumers — we had little voice or interaction; we sat back passively and took whatever the gatekeepers/advertisers threw at us (“Here we are now, entertain us!”). “Lean back” implies passivity, and a lack of voice. While, from time to time, all of us just want to sit back and be entertained, for too long, whether we desired this or not, this was our only option. How else to explain so much of the pabulum that exists on the radio and TV? It’s sheer, mind-dulling repetition that, over time, causes us to hum a song we hate, or sit in a paralyzed/semi-catatonic state through Two and a Half Men. We know now that while we took it, we really didn’t like it. We know this because the Internet — the first pillar of the “lean forward” age — was the fastest adopted technology since fire. In other words, the moment we no longer had to lean back and take it — the moment we had access to the conversation via the Internet — we leaned forward and began creating, commenting, discoursing…conversing. Now we are pre-disposed to interact with our content. From a simplistic level, we lean forward and use our DVRs to fast-forward over commercials, or, perhaps, we use Boxee, and lean forward to filter our content via what our friends have “favorited” in their Boxee queue. More actively, we lean forward and grab content and remix it, or mash it up, or repurpose it to help let others know us better by Tweeting a link to a song, or highlighting a salient piece of text on an Amazon Kindle, and sharing that with all others reading the same book. All of the great Internet success stories realize that it is about conversation, rather than commerce. These companies — be they eBay, Amazon, Twitter, Facebook, Quora, Flickr, delicious, Groupon, Yelp, etc. — began with the premise that their customers were their allies. Rather than “marketing at” these people, these companies created “architectures of participation.” If you really think that Amazon, for instance, is only about commerce and not about conversation, ask yourself what you look at prior to making a purchase. If you’re like every other person on the planet, you look at the user submitted comments and star ratings. What do those who submit those ratings receive? Nothing. It’s not about that. The Amazon star ratings are an example of civic sharing at its most fundamental; it’s people doing what they’re hard-wired to do: share/converse. Music is something that people have always loved to share and converse about. Even in the “marketing at” era, architectures of participation emerged — one thinks of, for example, The Grateful Dead’s encouragement of tape traders; or the ‘zines (truly precursors to web blogs) that acted less as marketing tools and more as a means to disseminate information of interest; to genuine gestures of community such as R.E.M.’s long-running fan club. Our greatest challenge and opportunity with respect to the new tools — tools which make it possible to directly connect to fans — is to not use them simply as replacements for the mechanisms employed by the “marketing at” system. Twitter/Facebook cannot become a PR feed from an artist to her constituents lest it lose all its value. Your constituents are your greatest, and when all is said and done, your only allies. It is they who will compel their friends to check out your music, and, in so doing, grow your base. You as a content creator, therefore, have the responsibility to empower them in a genuine, non-jive manner. What bothers me about the current direct-to-fan approach is the air of condescension. There still seems this false hierarchical attitude: “I, creator, deign to give you, “fan,” access to ME…aren’t I great!” As Bruce Springsteen famously said, “The audience and the artist are valuable to one another as long as you can look out there and see yourself, and they look back and see themselves.” If you’ve followed this article at all, you’ll know that there’s simply no way I can tell you how to authentically converse with your constituents. I can, however, point you to some artists who are doing this: Kristin Hersh, Roseanne Cash, Jonathon Coulton, Sage Francis, Zoey Keating, Mark Isham, The Hold Steady….there are others, please leave your examples in the comments below. Study their approaches, and then determine how you can begin really utilizing your constituents as allies, rather than thinking of them only as consumers. Once you do this, you begin to realize that you’re not alone in this; it’s not you going direct to your “fans” in some sort of one-way anachronism, but rather you and your fans working to build something together.

What the heck is a derivative work, and why should I care?

cathy — Tue, 04 Jan 2011 14:44:02 -0800

What the heck is a derivative work, and why should I care?Overview When you are the author of an original work, and you fix that work in a tangible medium (write it down, record it), you are automatically granted six exclusive rights. One of the works that you don’t hear about very much is the right to create a “derivative work.” It, like all the other rights, is codified in the United States Copyright Act in 17 U.S.C. § 101: A “derivative work” is a work based upon one or more pre-existing works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship, is a “derivative work”. Put simply, the only person who can create or grant the rights for a derivative work to be created is the holder of the copyright for the original work. Translations When, for instance, The Gypsy Kings decided to do a version of The Eagles’ “Hotel California” (as seen in The Big Lebowski), sung in Spanish, it was a translation of the original work, and as such, not a cover. Thus, the Gypsy Kings had to get permission from the copyright holder(s) of “Hotel California” in order to create this derivative version of the work. Remember, you can cover any song that has been publicly released without getting anyone’s permission so long as you don’t make substantive changes to the lyrics or melody, and you abide by the compulsory license requirements (for a refresher on this topic, please see here [link]). A translation, however, is deemed to be a substantial change, and therefore a derivative work, which, as an exclusive right of the holder of the copyright, requires permission to be granted. As you can see from the above, it’s not just translations that are deemed derivative works, and require permission from the holder of the copyright. If you, for instance, wanted to create a movie or TV show based on a song, it would be deemed a derivative work. Samples However, where I believe derivatives will be relevant to most readers is with respect to sampling. Sampling is one of the most confusing elements of the music business, but through understanding derivatives it will help you better understand both the rules around samples as well as — depending on which side of the fence you’re on (sampler or sampled) — the money to be made/paid. A sample is when you take a piece of an existing copyrighted work and combine it with another work. If you refer back to the language from the Copyright Act regarding derivatives you’ll see explicitly where samples and derivatives overlap: “…any other form in which a work may be recast, transformed, or adapted.” Because a sample clearly involves “recast[ing], transform[ing], or adapt[ing]” one work in order to merge it with another work, the copyright holder of the work being recast, transformed, or adapted must grant permission for this to occur. Simply put, because a sample is a derivative work, you cannot sample someone else’s copyrighted work without permission. Note that there are actually often two copyrights that must be addressed when a work is sampled (and thus two copyright holders you must get permission from in order to avoid infringing): 1. The copyright to the song itself; 2. The copyright to the version of the song (i.e. the master). For instance, if you want to sample the guitar riff from a Beatles song, you would need to negotiate a deal with the copyright holder to the song (The Beatles’ publisher(s)) and negotiate a deal with the copyright holder to the version of the song from the recording which you are sampling from (The Beatles’ label). Either party can reject the request and not grant you the right to create a derivative work. Should they not reject the request outright, they will negotiate with you to attempt to come to terms. Unlike mechanicals there’s no statutory maximum rate for samples, so publishers and master holders will get everything they can — including the rights to the copyright of the song that is using their sample — in the negotiations. A lesser-known approach to sampling is often referred to as a “replay.” This is where a derivative work is created and used as part of another work via a re-performance/recording of a piece of the original work. For instance, instead of taking the sample of a guitar riff from a Beatles record, if an artist played the riff herself and then used that within her own song, she’d create a derivative work of the composition (the song), but not the master; i.e. a “replay.” In this case, the person creating the derivative “replay” would need to negotiate a deal with the copyright holder of the song (i.e. the publisher), but not with the copyright holder of the recording (i.e. the label). Of course, the publisher can reject the request. If you do not negotiate the rights to create a derivative work with the relevant copyright holder(s), you will be infringing on the exclusive right of the copyright holder(s) to create a derivative work, and you can be sued. It cuts both ways, of course, should someone want to sample your copyrighted work, he or she will have to negotiate a deal with you in order to do so, or risk you suing them for infringing upon your exclusive right to create derivative works. A note on the fair use defense of “transformativeness.” The Supreme Court held in Campbell v/ Acuff-Rose Music Inc. (i.e. the “2 Live Crew Case”) that while 2 Live Crew’s unauthorized use of elements of “Oh, Pretty Woman” (the song popularized by Roy Orbison, and copyrighted by the publisher Acuff-Rose) represented a derivative work, the infringement was defensible due to the fair use as 2 Live Crew’s version provides new insight to listeners, and thus represents socially important commentary (this is very similar to/overlaps with the fair use defense of parody). This transformativeness fair use defense is likely what, for instance, Girl Talk will rely on should any of the various copyright holders accuse him of infringing on their exclusive right to create derivative works. Don’t be confused with respect to some misinformation out there about how you can use small amounts of another’s copyrighted work in your composition — i.e. a “short” sample — and get away with it. There is no clear standard for what is considered de minimis usage, and thus you are at risk if you misappropriate any copyrighted material and create a derivative work in the form of a sample in your own composition. Similarly, ignorance is not a defense. If you, for example, create a derivative work without knowing or intending to do so; e.g., you put a riff in your work that is so similar as to be seen as a derivative work of another’s copyrighted material, but you didn’t know about this prior work. In this case, you are still infringing on the copyright holder’s exclusive right to create a derivative work. However, if you can show that there was no knowing or intentional infringement the damages against you (if any) will be less than if you intentionally and knowingly infringed. Summary The exclusive right to create derivative works is a lesser-known exclusive right that is granted to authors of original works who fix their work in a tangible form. However, as can be seen — particularly with respect to samples — it can be a very important and lucrative right.

Understanding Sampling, Cover Songs & Derivative Work

cathy — Tue, 04 Jan 2011 13:15:48 -0800

Understanding Sampling, Cover Songs & Derivative Work

Overview

When you are the author of an original work, and you fix that work in a tangible medium (write it down, record it), you are automatically granted six exclusive rights. One of the works that you don't hear about very much is the right to create a "derivative work." It, like all the other rights, is codified in the United States Copyright Act in 17 U.S.C. § 101 :

A "derivative work" is a work based upon one or more pre-existing works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship, is a "derivative work".

Put simply, the only person who can create or grant the rights for a derivative work to be created is the holder of the copyright for the original work.

Translations

When, for instance, The Gypsy Kings decided to do a version of The Eagles' "Hotel California," sung in Spanish (as seen in The Big Lebowski), it was a translation of the original work, and as such, not a cover. Thus, the Gypsy Kings had to get permission from the copyright holder(s) of "Hotel California" in order to create this derivative version of the work. Remember, you can cover any song that has been publicly released without getting anyone's permission so long as you don't make substantive changes to the lyrics or melody, and you abide by the compulsory license requirements (for a refresher on this topic, please see here ).

A translation, however, is deemed to be a substantial change, and therefore a derivative work, which, as an exclusive right of the holder of the copyright, requires permission to be granted.

As you can see from the above, it's not just translations that are deemed derivative works, and require permission from the holder of the copyright. If you, for instance, wanted to create a movie or TV show based on a song, it would be deemed a derivative work.

Samples

However, where I believe derivatives will be relevant to most readers is with respect to sampling.

Sampling is one of the most confusing elements of the music business, but through understanding derivatives it will help you better understand both the rules around samples, and - depending on which side of the fence you're on (sampler or sampled) - the money to be paid/made.

A sample is when you take a piece of an existing copyrighted work and combine it with another work. If you refer back to the language from the Copyright Act regarding derivatives you'll see explicitly where samples and derivatives overlap: "...any other form in which a work may be recast, transformed, or adapted."

Because a sample clearly involves "recast[ing], transform[ing], or adapt[ing]" one work in order to merge it with another work, the copyright holder of the work being recast, transformed, or adapted must grant permission for this to occur. Simply put, because a sample is a derivative work, you cannot sample someone else's copyrighted work without permission.

Note that there are actually often two copyrights that must be addressed when a work is sampled (and thus two copyright holders you must get permission from in order to avoid infringing):

The copyright to the song itself
The copyright to the version of the song (i.e. the master)

For instance, if you want to sample the guitar riff from a Beatles song, you would need to negotiate a deal with the copyright holder to the song (The Beatles' publisher(s)), and negotiate a deal with the copyright holder to the version of the song from the recording from which you are sampling (The Beatles' label). Either party can reject the request and not grant you the right to create a derivative work.

Should they not reject the request outright, they will negotiate with you to attempt to come to terms allowing your creation of a derivative work. Unlike mechanicals there's no statutory maximum rate for samples, so publishers and master holders will get everything they can - including the rights to the copyright of the song that is using their sample - in the negotiations.

A lesser-known approach to sampling is often referred to as a "replay." This is where a derivative work is created and used as part of another work via a re-performance/re-recording of a piece of the original work.

For instance, if an artist, instead of taking the sample of a guitar riff from a Beatles record, played the riff herself and then used that within her own song, she'd create a derivative work of the composition (the song), but not the master; i.e. a "replay." In this situation, the person creating the derivative "replay" would need to negotiate a deal with the copyright holder of the song (i.e. the publisher), but not with the copyright holder of the recording (i.e. the label). Of course, the publisher can reject the request.

If you do not negotiate the rights to create a derivative/sample work with the relevant copyright holder(s), you will be infringing on the exclusive right of the copyright holder(s) to create a derivative work, and you can be sued.

It cuts both ways, of course, should someone want to sample your copyrighted work, he or she will have to negotiate a deal with you in order to do so, or risk you suing them for infringing upon your exclusive right to create derivative works.

A note on the fair use defense of "transformativeness."

The Supreme Court held in Campbell v/ Acuff-Rose Music Inc. (i.e. the "2 Live Crew Case") that while 2 Live Crew's unauthorized use of elements of "Oh, Pretty Woman" (the song popularized by Roy Orbison, and copyrighted by the publisher Acuff-Rose) constituted a derivative work, the infringement was defensible due to fair use, because 2 Live Crew's version provides new insight to listeners, and thus represents socially important commentary (this is very similar to/overlaps with the fair use defense of parody).

This transformativeness fair use defense is likely what Girl Talk will rely on should any of the various copyright holders sue him for infringing upon their exclusive right to create derivative works.

There is no such thing as a "small enough" sample

Don't be confused with respect to misinformation regarding the right to use small amounts of another's copyrighted work in your composition - i.e. a "short" sample - without legal risk. There is no clear standard for what is considered de minimis usage, and thus you are at risk if you misappropriate any copyrighted material and create a derivative work in the form of a sample in your own composition.

Ignorance is not a Defense

Similarly, ignorance is not a defense. If you, create a derivative work without knowing or intending to do so - e.g., you put a riff in your work that is so similar as to be seen as a derivative work of another's copyrighted material, but you didn't know about this prior work - you are still infringing on the copyright holder's exclusive right to create a derivative work. However, if you can show that there was no knowing or intentional infringement, the damages will be less than if you intentionally and knowingly infringed.

Summary

The exclusive right to create derivative works is a lesser-known exclusive right that is granted to authors of original works who fix their work in a tangible form. However, as can be seen - particularly with respect to samples - it can be a very important and lucrative right.

YOUR FIRST ASSET: THE RIGHT TO REPRODUCE

cathy — Tue, 04 Jan 2011 11:06:18 -0800

YOUR FIRST ASSET: THE RIGHT TO REPRODUCEMy friend and colleague John Snyder, wrote an article entitled "The Magic of Copyright" a few weeks back. The article brilliantly puts forth the idea that by creating an original work and fixing it in a tangible form (writing it down or recording it), you not only immediately and automatically create a copyright in the work, but you create an asset. In an era of artists needing to become self-sufficient, and decrease (cease) their reliance on labels for success, it's crucial to begin thinking in terms of assets; they are what you have in order to generate the revenue needed to build a self-sustaining career in the music business….on your own terms! 6 EXCLUSIVE RIGHTS As John mentioned, when you create a copyright, you are immediately and automatically granted six exclusive rights. As set forth in Title 17, Chapter 1 §106 of the United States Code http://ow.ly/2vbd3 . They are as follows: (1) to reproduce the copyrighted work in copies or phonorecords [In layman’s terms, a “phonorecord” is a material object that embodies sounds (a CD, a cassette, vinyl, etc.). Importantly, a phonorecord is not the embodiment of sound when it is synchronized with a movie, tv show or ad.] (2) to prepare derivative works based upon the copyrighted work; (3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending; (4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly; (5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and (6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission. We'll work our way through each of these in the coming weeks. THE FIRST RIGHT: RIGHT TO REPRODUCE In this article, we'll look at the first right, and show how it relates to one of the most fundamental assets, but also most misunderstood, elements of the record business: the mechanical license. As stated in rule number one above, when you create a copyright, you are the only one who is allowed to reproduce the work. This is HUGE. It means that any time a work you hold the copyright to is reproduced physically (i.e. on a CD, vinyl, etc.) or digitally (download), the person who is doing the reproducing must get your permission to do so. If they don't get your approval, they are infringing on right number one of your exclusive copyright, and, so long as you have registered your copyright, you can take action against the infringing party — including suing them for infringement and, potentially, collecting both actual and statutory damages for the infringement. Because of this exclusive right, and because of the ability to sue and recover damages should this right be infringed upon, this right is a significant asset. It means that if someone - typically a label - wants to reproduce your copyright on, for instance a record or download, you have the opportunity to negotiate a fee in exchange for granting them a right to reproduce. MECHANICAL ROYALTIES V. ARTIST ROYALTIES This fee is negotiated via a legal instrument known as a "Mechanical License." You, the copyright holder, grant the label the right to make a "mechanical" reproduction of your copyrighted work(s) in exchange for a payment from the label. So, imagine you're a songwriter who also performs the material you write. You hold the copyright to the songs you've written, and thus — in addition to the other five exclusive rights — have the exclusive right to reproduce this work. Now imagine that a label approaches you, and wants to put out a record of you performing your songs. The label will make a deal with you as a performer that (typically) grants the label the exclusive right to release the music you perform (whether you write the songs or not) for some period of time. In exchange for this exclusivity, the label will (in theory) pay you what's known as an "artist royalty." This artist royalty is typically a percentage of the list price of the sale of the album. You'll hear, for instance, an artist say, "I have a 15 point deal with my label.” This would mean that the artist receives 15% of the list price from the sales of records (after recoupment of certain expenses and costs associated with the sale of the record), but this is a lesson for another time. This artist royalty satisfies the label's obligation to compensate the performer for the exclusive right to release the album of the artist’s performances, but does not satisfy the label's obligation with respect to the songs themselves. Remember, as a songwriter with a copyright to your songs, you have the exclusive right to reproduce the songs. The label must therefore negotiate a mechanical license with you for the right to reproduce these songs on the album they release. This "dual" royalty — an artist royalty, paid to the performer signed to the label, and a mechanical royalty, paid to the writer of the song (whether he or she is signed to the label as a performer or not) — is one of the most misunderstood parts of the music business. It's a dangerous thing to misunderstand. What it fundamentally means is that the asset you created as a songwriter, and thus has a copyright to the song released on an album, are going to get paid two times (assuming you recoup costs associated with the artist royalty), while those who are performers, but aren't songwriters will only get paid once (if that - remember, it's hard to recoup). Equally important, as the owner of the asset (the copyright of the song that is being reproduced) you are to be paid from record one; irrespective of whether the label has recouped their recoupable costs that they must prior to being obligated to pay an artist royalty. This is why in a band where there is one songwriter, and a handful of other band members who are also signed to the label, but don't write, it will be the songwriter who will be buying the house, while the other members are living in Mom's basement. TERMS OF MECHANICAL LICENSES At this point you should be asking, "How much do I get paid by these labels in order for them to have the right to reproduce my copyrighted work?" The answer, as it is with all things vaguely legal is, "it depends." However, mechanical licenses are a lot more calculable than other types of licenses (which we will discuss in future articles). This is because the mechanical rate is set by "statute." You may have heard of the term "statutory rate." This relates to the maximum amount someone who wishes to mechanically reproduce another's copyrighted work must pay the copyright holder. The current statutory rate is $.091 cents per song i.e. just about a dime). The rate goes up fractionally if the song is over five minutes in length. This statute was enacted into law by the United States Congress in order to reduce transactions costs associated with innovation. Copyright is always a play between the tensions of protecting and giving incentive to authors to create, and allowing for innovation to occur. What this statutory rate means is that anyone who wants to record and reproduce another's copyrighted work is able to… so long as they pay the copyright holder $.091 per song reproduced. This is referred to as a compulsory license; compulsory meaning that the copyright holder must (is compelled) to grant the license. The only caveat being that the compulsory license rule doesn't go into effect until the copyright holder has commercially released the copyrighted work. This is called the "first use" exception to the compulsory license. It allows the copyright holder to pick who gets to release their song first, and, importantly, negotiate whatever rate the copyright holder can get for that first use. Once it's been commercially released, however, anyone who wants may cover the song so long as they pay the mechanical royalty to the copyright holder, and abide by the other provisions of the statutory license rules: pay on all copies manufactured, pay monthly, pay the full rate, pay the current rate. Those of you interested in putting a cover on your record who are self-releasing a record, must abide by these rules. The Harry Fox Agency acts as a clearinghouse for many publishers, and your first stop should be there website in order to secure the license http://ow.ly/2vi5r. There is also a TuneCore PDF you can download that talks more about cover songs As above, the statutory rate sets the maximum amount one who reproduces a copyrighted work must pay to the copyright holder (the rate is adjusted periodically, and has historically gone up). This baits the question, "is there a minimum rate?" The answer is, "sure." If you're the copyright holder, you can elect to waive your mechanicals, and provide a gratis license. This might occur, for instance, if your song was being used on a record where the profits were being given to a charity or if you wanted to give it away as a free download for promotional reasons. CONTROLLED COMPOSITION CLAUSE Of course, between the max and the min there is an infinite range. The labels will tend to negotiate the rate down by 25% for songs that they reproduce on their albums that are written by artists who are also signed to the label as a performer. These songs are called "controlled compositions," and this clause in the recording agreement is called the "Controlled Composition Clause." In addition to reducing the rate, it typically provides that the label will: only pay on songs that are reproduced and sold (i.e. not paid on promotional CDs or songs given away for free to promote the release – like a CD mailed to a radio station for airplay); that they will treat songs over five minutes as if they were under five minutes; and that the rate is fixed at the time of delivery or release of the record (remember, from time to time, by law, the statutory rate goes up, but with the “fixed rate” provision you'll still get the same amount as you did when the songs was delivered or released); only pay on a fixed number of songs - typically 10 or 11 - so, if you deliver a record with 20 songs that are all controlled compositions, you're only going to be paid on 10 or eleven. SUMMARY These caveats aside, it should now be clear just how important the asset of the exclusive right to reproduce a copyright is. In some respects, it's the songwriter's best friend. Thanks for bearing with me through this. As above, the amount of misunderstanding about the mechanical royalty, and what exclusive right it relates to is second only to the misunderstanding around public performance royalties. We'll get to those soon. Please leave questions in the comments. For more information on subjects covered in this article, check out these videos from Artists House Music or download the free TuneCore Music Industry Survival Manual: The Basics You Should Know About Music Publishing and Copyright: Cover Songs: Donald Passman — one of America’s foremost entertainment lawyers and author of All You Need to Know About the Music Business, widely considered to be the single most essential and influential book ever written about how the music industry works — on the difference between artist royalties and mechanical royalties: http://ow.ly/2vbmK Michelle Singer, Director of Business and Legal Affairs for Jazz and Classics at Blue Note Records. http://ow.ly/2vbo6 TuneCore Music Industry Survival Manual: The Basics You Should Know About Music Publishing and Copyright: Cover Songs: http://www.tunecore.com/survivalguide1.1a.pdf

Songs in movies, TV shows, and ads: How do the licenses work?

cathy — Tue, 24 Aug 2010 13:46:43 -0700

Songs in movies, TV shows, and ads: How do the licenses work?I get asked this question (or a variant on it) more than just about any other music business related topic. I get it; it ain’t easy to understand, but it’s not that hard, and, understand it you must. Also, as much as I believe that the “music business” is dead, and it’s all just business; the one thing that is unique to the music business is how copyright is handled. That’s not to say that you have different intellectual property interests in music than in other businesses; you don’t. Rather, there are just various “terms of art” related to © that are unique to the music business. So…here we go: an attempt to explain the rules and licenses around songs being used in films, tv, and ads. Let me know if you have any questions; I’ll try to answer them in the comments, and maybe this can be an evolving document that we can reference. Any time a song is used in a film, tv show, ad there are two licenses required: 1. A synchronization (synch) license: This is a license the producer of the above must obtain from the writer of the song (if the writer has assigned her © to a publisher, the producer must go through the publisher).   This license gives the producer of the above the right to synchronize the ©’d song (important: not the recording of the song, but the underlying composition - the lyrics and melody) with the moving images in the tv show, ad, or movie.  2. A master usage license: the producer of the above must negotiate a license with the person who holds the © to the recording of the above underlying composition (i.e. the version of the song found on the CD).  Typically, the master usage holder is the label. If there is no label (i.e., it’s self-released by the artist), then the producer of the movie, etc. negotiates directly with the artist who self-released.  Thus, in the case of an artist who has not assigned their publishing rights to anyone and self-releases their own record, the producer of the movie, etc. negotiates “both sides” (i.e. the synch and the master usage) with the artist herself.  If the artist has done a publishing deal and a record deal, the producer negotiates with the publisher for the synch rights and the label for the master usage rights.  Unlike with mechanicals (i.e. the payment labels make to songwriters for the rights to mechanically reproduce a ©’d song on the album the label releases), there is no compulsory license for either synch or master licenses. Because there is no compulsory license for the synch or master usage, the producer must negotiate both of these licenses, and either the master holder or the publisher can deny the request.  In reality, the producer will approach one of the parties (the label or publisher - typically, publisher first - see below for why), and see if they can get the writer interested in the synch (most writers, of course, are falling all over themselves to have their music used). The producer makes the publisher/writer an offer, and then tries to shift the burden of the master clearance to the writer/publisher. At that point, they (both producer and the publisher/writer) push on the label to clear the master side (most labels, of course, are falling all over themselves to have their music used), and a deal is struck.   The fee is divided (typically evenly) between the publisher for the synch rights and the master holder for the, er, master rights.  Sometimes, the publisher will want to do the deal, but the label won’t. In this case — as you saw, for instance in I am Sam, where the publisher for the Beatles cleared the synch rights for the song, but the label wouldn’t make a deal for the master usage — the producers used different masters (i.e. they had artists cover the songs).  It doesn’t work the other way; if the publisher won’t grant the synch license, the party is over - this is why producers go to publishers first: they’re the dispositive party.  Importantly, in the US, when the Ad or TV show or Movie is publicly performed on TV (i.e. it’s broadcast), a performance royalty is generated for the writer and publisher of the song (often the same person). The performer (i.e. the person on the master) sees none of this performance royalty. Do note, that no performance royalty is generated from public performance in movie theaters, as they are (wink, wink, nod, nod) exempt from paying public performance royalties. Additionally, in 1995 Congress enacted the Digital Performance Right in Sound Recordings Act (DPRA). This act — in conjunction with the Digital Millennium Copyright Act of 1995 — created a performance royalty obligation to be paid by webcasters whenever they broadcast a ©’d work over the Internet. Significantly, this performance royalty compensates the performer and content owner (i.e., label) of the work. The publisher and writer are still compensated when their ©’d works are publicly performed online via the Performance Rights Organizations (ASCAP, BMI, SESAC), but now — due to the DPRA — the featured performer and content owner are also compensated. This brings the US in line with the rest of the world (with some glaring exceptions, like North Korea) with respect to paying a performance royalty to both the writer and performer. Of course, to date (though efforts are afoot to change this) this only applies to public performance when it is digitally transmitted; for terrestrial radio (i.e. FM/AM), only the writers are paid a performance royalty. SoundExchange collects from webcasters on behalf of their registered members. SoundExhchange's authority to collect for/distribute to these SRCOs comes from a designation by the Librarian of Congress and the US © office. So, when you’re watching Hulu and an ad comes on with music underneath that has been licensed by a producer of the ad from a label/artist, both the performer and the writer of the song are paide a performance royalty. Please note, the above really only scratches the surface with respect to licensing. There are, of course, complexities. For instance, when doing a deal for a TV show, you also have to factor in home video, etc. However, if you don’t understand the above, you sure won’t be able to dive deeper. Hope this helps.