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2019 LEGAL ROUND-UP – AND WHAT IT MEANS FOR THE MUSIC INDUSTRY IN 2020

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Categories: Articles, Business, Legal Disputes, Legal Issues, Music Industry, Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

By:  Erin M. Jacobson, Esq.

 

This article was originally published on Synchtank’s Synchblog.

 

It’s been an interesting year in the music legal field. Some outcomes were positive steps forward for the music industry, and some, well, not so much. Here’s a recap of some of the most talked-about legal happenings of 2019, and what they could mean for 2020.


Katy Perry’s “Dark Horse” Infringement Lawsuit

Background: Christian rapper Marcus Gray, professionally known as “Flame”, sued Katy Perry and her collaborators stating that Perry’s song “Dark Horse” infringed on his song, “Joyful Noise”. Perry and her team testified that they had never heard “Joyful Noise” and therefore could not have copied a song of which they had no knowledge. The actual musical evidence was lacking in similarity as well.  However, the jury decided against Perry and her team because (1) the songs have a similar sound repeated in them, (2) “Joyful Noise” had been nominated for a Grammy in the Christian music category, and (3) Katy Perry had once been a Christian artist before she hit pop superstardom. Perry has appealed the lawsuit and the appeal is currently pending.

What it Means: Copyright infringement lawsuits require two elements to be proved, substantial similarity and access. The two works must show enough similarity that one could attest one creator had copied the other, and the infringing party must have had access to, i.e. heard, the allegedly infringed song. Access is often proven by performance of the infringed song on the radio, a producer who worked with the both artists or their team sharing music with the infringing artist, or other similar manner of delivery. Perry and her team were found guilty of infringement despite a lack of compelling evidence for both elements.

Copyright law also allows for independent creation, meaning that two people can write songs that sound similar, despite never having heard each other’s songs. However, it seems this tenant has been forgotten in this and many other recent infringement cases.

What to Look for in 2020: While there are definitely legitimate cases of infringement, verdicts like this will encourage the filing of more frivolous cases. Many artists are already afraid that anything they create will be taken advantage of by opportunistic people looking to boost their own fame by capitalizing on the publicity of someone else’s creation. Hopefully, we will see this verdict overturned on appeal.

 

Led Zeppelin “Stairway to Heaven” Copyright Lawsuit

Background: The trustee for Randy California, the late lead singer of the band Spirit, sued Robert Plant and Jimmy Page, saying “Stairway to Heaven” infringed on Spirit’s composition, “Taurus”. Despite the fact both of these songs are decades old, the case went to trial.  In this case, there was access (Spirit had toured with Led Zeppelin in the late 1960s) and some similarity, but no infringement was found. The lawyer for California’s estate appealed, and the new decision is currently pending.

What It Means: Those in the music industry agree this verdict was correct. While California could have sued during his lifetime, he chose not to do so, and the evidence here was not compelling enough to prove the infringement claim.

What to Look for in 2020: Hopefully, the original decision will be upheld. The industry needs some precedent for correct rulings in copyright infringement cases.

 

Spotify’s Appeal of the Mechanical Royalty Rate Increase

Background: Last year, the Copyright Royalty Board (“CRB”) judges decided that music publishers and songwriters will get an increase on their mechanical royalty rates. The timing of this proceeding happened to coincide with the efforts of the music industry to pass the Music Modernization Act (the “MMA”). The digital service providers (“DSPs”), including Spotify, Pandora, Google, Apple, etc. rallied in cooperation with the music industry to pass the MMA. After the MMA was passed, the DSPs (except Apple) appealed the CRB’s decision to increase mechanical royalties.  The appeal is pending.

What It Means: The CRB decision provides for a 44% increase in mechanical royalties to songwriters and music publishers, with incremental raises from the current rates until the 44% is reached in 2022. The DSPs supported the passage of the MMA to gain immunity for being sued for copyright infringement for failure to license and pay for all of the music streamed on their services. Once achieving that immunity, they appealed the CRB decision to try to avoid paying fair rates to songwriters.

What to Look for in 2020: CRB decisions are historically difficult to overturn, so hopefully the music industry will receive the new rates it was promised. Despite the goliath size and bank accounts of the DSPs, they need to realize they cannot push the music industry around and must pay fairly for the content on which many of the them have built their businesses.

 

Passage of the Music Modernization Act

Background: The Music Modernization Act passed in October of 2018, which promised more streamlined licensing procedures for music on streaming services, a new, centralized registration database, and hopefully a better system for creators and rights owners to be paid streaming royalties. 2019 has been all about actually turning these promises into reality. The Music Licensing Collective board was elected to oversee the operations of this new structure, they negotiated the funding for the database with the DSPs, and choose a vendor to build the infrastructure and supply the data (recently revealed to be The Harry Fox Agency).

What It Means: There will be a lot of changes in data practice, and a lot of work for creators and rights’ owners to learn a new system and register their works with the new database.

What to Look for in 2020: The database is slated to roll out in beta-mode, with it planned to be fully operational by 2021.  2020 will involve a lot of data uploads.

 

Taylor Swift’s Master Recordings Dispute

Background: Taylor Swift hit it big while signed to Big Machine Records, and then moved on to Universal Music Group.  Big Machine decided to sell its catalogue of masters to Scooter Braun, backed by some investment funds. Swift and Braun have a longstanding personal beef, and when the sale occurred, Swift took to social media to express her horror at her nemesis owning her masters. Swift stated she was not given the opportunity to buy her masters back. The parties engaged in a public back-and-forth. Taylor announced she will re-record all of her old masters in 2020 once her re-recording restriction from her Big Machine contract has expired. Later, Swift said Braun was blocking her from performing her older songs on the American Music Awards and using the older music in an upcoming Netflix documentary. Another public battle ensued, with Swift ultimately being able to perform as planned.  Now stories have emerged that Swift is denying all licensing requests for her music until she is able to re-record her masters in 2020 and then will resume licensing with masters she owns.

What It Means: Regarding the American Music Awards performance, this is the first time that a record label has publicly argued that a recorded television performance violates a contractual re-recording restriction, when normally that restriction is limited to recording new audio masters. When Swift does re-record her masters, it could negatively impact Braun’s recoupment of his investment. This dispute has opened the eyes of many artists as to what they may give up when signing a record deal, and there is a growing trend toward artists seeking to retain master ownership.

What to Look for in 2020: Swift will most likely continue with her plan to re-record her masters. More public mudslinging may ensue. Artists overall will increasingly seek opportunities that allow them to retain master ownership.

 

Overall, 2020 will see a lot of changes in the music industry. Hopefully, the results will be just as exciting as the anticipation for their arrival.

 

 

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Music Industry Cases And Issues To Watch In 2018

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Categories: Articles, Legal Disputes, Legal Issues, Music Industry, Music Industry Interviews, Music Publishing, Royalties, Streaming, Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

By:  Erin M. Jacobson, Esq.

This article was first posted on Forbes.com.

It’s been a year since I wrote about Music Industry Cases to Watch in 2017 and, unfortunately, not much has changed. Here’s an update on what’s happening in the music industry and what to keep an eye on for 2018.

The Department of Justice v. ASCAP and BMI

Background: I previously wrote about this issue here and here, and there hasn’t been much forward movement. To briefly recap, performance rights organizations ASCAP and BMI asked the Department of Justice (“DOJ”) — which oversees the consent decrees governing ASCAP and BMI — to reform the decrees based on today’s digital age. The DOJ responded by ignoring the music industry’s requests for reform and instead mandating a model of 100% licensing, which restricts a performance rights organization to license rights to perform a work only if the organization has the right to license 100% of that work. BMI appealed the decision and got an immediate verdict in BMI’s favor. The DOJ appealed and oral arguments on the case were just heard. (More info here as well.)

What You Might Expect: It could go either way.

How It Could Affect the Industry: If the DOJ wins, then the music industry might need to change its business model and overhaul all of its longstanding licensing practices. If ASCAP and BMI win, then the music industry will be able to proceed with doing business as it has been for decades and continue making efforts to improve the existing system.

Potential Reform of Royalty Rates by the Copyright Royalty Board

Background: As I previously explained here, the Copyright Royalty Board (“CRB”) held hearings to potentially update the mechanical royalty rates paid to songwriters and publishers for reproductions of compositions. The current mechanical royalty rates for physical products and digital downloads are 9.1¢ for compositions five minutes or less in length, and streaming rates are at fractions of a penny. The National Music Publisher’s Association argued for rate increases on behalf of songwriters and publishers, while digital service providers (like Google, Spotify, Pandora, Amazon and Apple) offered alternative rate structures that may lower rates overall. The CRB recently raised some rates for master recording owners, but the determination on mechanical royalties has not yet been revealed.

What You Might Expect: Hopefully this first determination for master owners will predict a raise in mechanical royalties as well. Whether mechanical royalties are raised still remains to be seen, but any increases that are granted would probably not be enough to remedy the music industry’s struggle with the value gap. David Israelite, President and CEO of the National Music Publisher’s Association (NMPA), graciously provided some exclusive quotes for this article, saying: “We are cautiously optimistic the CRB will return a rate structure that values appropriately the contribution of songwriters to digital music services. This is a very important decision as interactive streaming services become the dominant format for the enjoyment of music.”

How It Could Affect the Industry: If the CRB maintains or lowers the rates in favor of the digital service providers, the music industry would continue struggling with low rates of payment. If the CRB increases the rates, it would help the music industry’s cash flow issues, but probably still not support the music industry at the level it needs. Israelite also commented to us, “Regardless of the decision, the time has come for the government to get out of the business of setting rates for songwriters and to let the free market determine the value of songs.”

Many Lawsuits Against Spotify

Background: Spotify is an interactive streaming service required to pay both mechanical and performance royalties. As detailed here, Spotify has already agreed to several settlements for failure to properly pay mechanical royalties and has been sued several times for the same reason, with those cases still pending. Spotify made the argument that it shouldn’t have to pay mechanical royalties, despite previously admitting that it needed to do so.

What You Might Expect: Spotify’s argument is flawed in many ways, but their $16 billion valuation may hold some clout, or at least the funds to continue pushing their position. The music industry hopes to quash their arguments, but acknowledges that the lawsuits are just Band-Aids, and is striving to implement a more efficient system.

How It Could Affect the Industry: A legal decision set in Spotify’s favor could mean massive losses of income to songwriters, music publishers, and the music industry as a whole.  Hopefully, the streaming giant and the music industry will find a way to work together for their mutual benefit.

Many Music Catalogues Being Sold

Background: It’s old news for music industry folks that a large number of record labels are owned by just a few major corporations. However, acquisitions of composition catalogues are now hitting the spotlight after traditionally not garnering much attention. The catalogue purchase and sale market is booming, and those of us in this space (like me) are regularly looking at either buying or selling catalogues, depending on who we are representing. Many music publishing companies are also raising a lot of money from outside investors in order to gobble up other substantial catalogues. There are even rumors of music publishing giant EMI for sale at a $3 billion valuation.

What You Might Expect: There will be a lot more of these deals happening in 2018.

What It Means for the Industry: The majors will continue to buy the indies, and the larger indies will buy competitors and smaller companies. The music publishing world might get smaller, but there will always be more copyrights to go around. The downside is that the investors coming in with the funds are usually not in the music industry, meaning that the music publishing industry may now have to answer to venture capitalists, which has been a problem for years with major record labels. The good news is that these non-industry investors will need current industry experts to manage the catalogues they have purchased, continuing jobs and revenue flows throughout the industry.

*This article does not constitute legal advice.

Special thanks to David Israelite, President and CEO of the National Music Publisher’s Association (NMPA) for graciously providing quotes exclusive to this article.

Erin M. Jacobson is a music attorney whose clients include Grammy and Emmy Award winners, legacy clients and catalogs, songwriters, music publishers, record labels, and independent artists and companies. She is based in Los Angeles where she handles a wide variety of music agreements and negotiations, in addition to owning and overseeing all operations for Indie Artist Resource, the independent musician’s resource for legal and business protection. Ms. Jacobson also serves on the boards of the California Copyright Conference (CCC) and Association of Independent Music Publishers (AIMP).

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New Video: This Trial Will Determine Songwriters’ Income Over the Next 5 Years

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Categories: Copyright, Legal Issues, Music Industry, Music Publishing, Royalties, Videos, Tags: , , , , , , , , , , , , , , , , , , , , ,

Read the article here.

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This Trial Will Determine Songwriters’ Income Over the Next 5 Years

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Categories: Copyright, Music, Music Industry, Music Publishing, Royalties, Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

By:  Erin M. Jacobson, Esq.

This article was originally posted on Forbes.com.

When a song has millions of streams on Spotify and views on YouTube, most people think “Wow, that artist must be making a ton of money!” It’s easy to make that assumption when music superstars are seen on television wearing designer clothing and leaving the hottest nightclubs in town, only to drive away in their Bentley to charter a private plane to their yacht.

What most people don’t realize is that the above is 1) often an image, 2) accessible to only a small number of music creators within the music business, and 3) there are songwriters who wrote those hit songs and the music publishers that represent those songwriters who are earning a mere $10 per 1 million Pandora streams.

Here’s how the structure works. A songwriter writes a composition, which is usually owned or co-owned by a music publisher, a company that handles the management, exploitation and royalty collection for that composition. The music publisher and songwriter split the income from that composition. The main royalties paid for a composition are mechanical royalties for the reproduction of that composition on CDs and via digital means on iTunes and streaming services, and performance royalties paid when a composition is performed in public. Synchronization fees come into play when a composition is used in television or film, but that is a negotiated contract fee separate from a royalty.

While performance royalties have recently been in dispute, this article focuses on mechanical royalties. Mechanical rates are set by the United States government, specifically by a panel of judges called the Copyright Royalty Board (CRB). The CRB determines the royalty rates paid to songwriters and music publishers for every sale of a composition via CD or digital service like iTunes, as well as every time that composition is streamed on services like Spotify, Pandora, etc. The current mechanical rates are 9.1¢ for a sale (split by the music publisher and the songwriter), and streaming mechanicals are fractions of a cent per play.

This month, the CRB has opened hearings to set new mechanical royalty rates, which will be in effect from 2018 through 2022. The CRB will hear testimony from both music creators and music users and will make its decision in December 2017.

While this trial may not be hot news for anyone outside of the music industry, it will determine the amount of money music creators can earn for the next five years.

The music users’ side includes representatives from digital giants like Google, Spotify, Pandora, Amazon and Apple. These companies are lobbying to further decrease the royalties paid to music creators. For example, Apple wants to pay a flat fee of 9.1¢ per every 100 streams on Apple Music. Companies like Google, Amazon and Apple make billions of dollars per year, and Spotify and Pandora are not profitable but have billions invested in them, yet not one of these companies is willing to allocate more money towards the people that create the music on which they have built their businesses. It is also worth noting that not only have these companies built their business models on music but also are using music to promote their services, such as Amazon using free music streaming to sell Prime subscriptions.

The National Music Publisher’s Association (NMPA) and Nashville Songwriter’s Association (NSAI) are representing music publishers and songwriters at the CRB hearings. “[Tech companies are] creating new ways to distribute music [and] they are also fighting in this trial to pay as little to songwriters for the songs that drive their businesses,” wrote David Israelite, president and CEO of NMPA in a letter to songwriters. “[A] rate structure that allows global tech companies to build their empires on the backs of songwriters, without providing those songwriters with fair compensation, is unsustainable.”

The NMPA has issued an open letter to the digital giant companies, urging them to work with songwriters and music publishers instead of fighting against them. The letter is accompanied by a petition, which has already received over 7,800 signatures.

As I have previously written, the music industry will continue to wither without fair compensation to its creators and those that represent them. Creators of music are not all rich superstars. They are regular people with amazing talents to create music that impacts lives around the world. They are people with families and mortgages and bills to pay. They may not work a 9-5 office job, but that doesn’t make them different than the average American, who earns money from a job, and why shouldn’t songwriters and their representatives earn as well?

*This article does not constitute legal advice.

Erin M. Jacobson is a music attorney whose clients include Grammy and Emmy Award winners, legacy clients and catalogs, songwriters, music publishers, record labels, and independent artists and companies. She is based in Los Angeles where she handles a wide variety of music agreements and negotiations, in addition to owning and overseeing all operations for Indie Artist Resource, the independent musician’s resource for legal and business protection.