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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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How Spotify Has Waged War With The Music Industry

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

By:  Erin M. Jacobson, Esq.

This article was first published on Forbes.com.

Spotify has waged a war with the music industry. The streaming company has a history of not paying mechanical royalties to songwriters and music publishers, and has already settled two separate class action lawsuits for failure to pay mechanical royalties – the first brought on behalf of music publishers by the National Music Publisher’s Association (NMPA) and the second, known as the Lowery/Ferrick case, brought by independent songwriters. Now, a host of top songwriters, including Tom Petty and members of Rage Against the Machine, Weezer, The Black Keys, and more, have come forward urging the court not to approve the terms of the Lowery/Ferrick case. These songwriters oppose the settlement amount in the Lowery/Ferrick case because when the costs are broken down, Spotify’s liability for not paying mechanical royalties would be to pay a mere $3.82 per infringed composition. The maximum liability under the law for copyright infringement is $150,000 per infringed composition. Quite the difference.

As I previously reported, Spotify was also hit with two independent lawsuits – again for failure to pay mechanical royalties — brought by songwriter/publisher Bob Gaudio and music administrator Bluewater Services Corporation. Even more recently, seven other music publishers have sued Spotify for the same violation.

The Gaudio/Bluewater suits accused Spotify’s practices being reminiscent of Napster, which caused Spotify to fire back with the outrageous claim that Spotify should not have to pay mechanical royalties to songwriters and music publishers at all. More realistically, Spotify has argued that copyright law does not define streaming and places the burden on the plaintiffs to show that Spotify is creating a “reproduction” and therefore required to pay mechanical royalties.

As I explained in my last article, streaming requires several licenses – sound recording licenses from the record labels; performance licenses for the compositions from performance rights organizations such as ASCAP and BMI; and mechanical licenses for the reproduction of the compositions. Spotify now argues that it is akin to other streaming services like Pandora, who only have to pay performance royalties. However, Spotify’s argument is flawed for several reasons.

  • First, Pandora and similar services online radio services are classified as non-interactive services because a user cannot choose to listen to a specific song on demand. This is similar to terrestrial radio, except it’s online instead of on the FM dial. In contrast, a Spotify user can choose and play any song the user wishes on demand, which makes Spotify an interactive service. Copyright law makes important distinctions between non-interactive and interactive services, and for the relevant purposes here, the most important difference is that non-interactive services are only required to pay performance royalties (as the use is only a performance, again, like terrestrial radio) and interactive services are required to pay both performance and mechanical royalties (because the nature of the technology actually consists of a reproduction of the data file in addition to the performance itself). Therefore, Spotify cannot rely on the requirements of a separately classified type of service when those requirements don’t apply to Spotify’s service.
  • Second, Spotify has previously stated that it “needs” mechanical rights as part of its operations and has argued in rate court proceedings to weigh in on what mechanical rate amounts it should have to pay. It is both hypocritical and faulty reasoning for Spotify to say it needs certain rights and subsequently argue the opposite.
  • Third, Spotify has previously settled the two class action lawsuits mentioned above in order to rectify its previous non-payment of mechanical royalties. Spotify’s excuse in these cases was that it was too difficult to pay everyone owed due to the lack of a comprehensive music industry database. Once again, Spotify previously accepted that it needed to pay mechanical royalties, but made excuses for its failure to do so, which is in direct opposition to its current claim that it does not need to pay mechanical royalties at all.
  • Fourth, the music industry has long ago come to a consensus that an interactive stream does require a mechanical license and there is evidence that Spotify actually does create reproductions of the files, specifically on users’ mobile phones.

While Spotify’s argument that a stream does not require a mechanical license was recently rejected in court, Spotify can still continue asserting that argument going forward. If a legal decision in Spotify’s favor set a precedent on this issue, it could mean massive losses of income to songwriters, music publishers, and the music industry as a whole. While there are several theories as to why Spotify has taken this approach, the simplest answer seems the most obvious – Spotify doesn’t want to pay. The scariest part of this whole situation is that with Spotify’s massive amount of funds, it has the power to continue litigating this issue with efforts to change the laws and practices of the industry to conform to its unwillingness to pay for the music it uses. It is unacceptable that Spotify has built its entire business on the usage of music content, but yet continually tries to get out of paying for the very content that sustains its customer base. Without music, there is no Spotify and it’s time Spotify stopped making excuses and started to value the music that built its business.

*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. Ms. Jacobson also serves on the boards of the California Copyright Conference (CCC) and Association of Independent Music Publishers (AIMP).

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Sync Licenses Explained!

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Categories: Articles, Copyright, Film, Music Contracts, Music Industry, Music Publishing, Performance, Royalties, Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

By:  Erin M. Jacobson, Esq.

A synchronization license is a license to use a composition in an audiovisual production. (A master use license is a synchronization license for the master recording.) A placement can be quite lucrative, but it’s important to understand how your music is being used. Here’s a basic overview of the main points in a synchronization license:

  1. Licensor

The licensor is the person who owns the music and giving permission for it to be used in the audiovisual project. The music publisher owns the composition and the record label owns the master recording. Independent musicians might own both.

The licensor’s information will also include the licensor’s ownership share of the composition or master that is the subject of the license. Also, the writers of the composition and their performance rights organization information will be listed.

  1. Licensee

This is the person receiving the permission to use the music in the audiovisual project. This is usually a production company, studio, or network.

  1. Timing

Timing is how much of the song will be used in the audiovisual project; for example, it could be thirty seconds or an entire song.

  1. Type of Use

This is basically how the music will be used. There are many different terms thrown around to designate the type of use, but without using a bunch of industry-specific terms, examples would be playing in the background, with or without people talking over it; a live performance; played on a radio; an opening or closing theme; or in the credits.

  1. Territory

The territory covers where in the world can the music be used within the audiovisual project. This might be worldwide, for a specific country, or even a local area.

  1. Term

The term is for how long can the music be used within the audiovisual project. This might be in perpetuity or only for a specific length of time.

  1. Media

This is a big talking point because it includes the types of media in which the music can be used as part of the audiovisual project. This can include TV (and what types of channels), theatrical (movie theatres), film festivals, the Internet, all of these, or only some of these. The rights section also includes language about whether the music can only be used in the specific project itself, or also whether it can be included in promotions for the projects and if so, what types of promotions.

  1. Money

Everyone’s favorite topic, i.e. the fee you are getting paid for the use of your music!  This is going to be a negotiated fee based on the type of use, popularity of the song, and other factors.

  1. Direct Performance

Direct performance rights are not present in every sync license, but are being seen more frequently. Basically, some licensees want to pay a buy-out fee of your performance royalties in an effort to move away from paying blanket license fees to the performance rights organizations (who would normally collect your performance royalties and pay those to you). One problem with this is that the licensees still have their blanket licenses with the performance rights organizations, so a buyout of performance royalties would leave you out of any income generated from performances over the amount of the buyout.

  1. Some legal language

This is for your attorney to handle!

 

One should always have an experienced attorney look over any license you receive. Contact me if you have a license you need reviewed.

 

Disclaimer: This article is for educational and informational purposes only and not for the purpose of providing legal advice. The content contained in this article is not legal advice or a legal opinion on any specific matter or matters. This article does not constitute or create an attorney-client relationship between Erin M. Jacobson, Esq. and you or any other user. The law may vary based on the facts or particular circumstances or the law in your state. You should not rely on, act, or fail to act, upon this information without seeking the professional counsel of an attorney licensed in your state. 

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Erin M. Jacobson, Esq. on TAXI TV

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Categories: Copyright, Law, Legal Issues, Music Contracts, Music Industry, Music Libraries, Music Publishing, Performance, Royalties, Streaming, Videos, Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

I appeared on TAXI TV yesterday discussing YouTube payments, royalty free music, cover records, and more!

Here’s the replay of the show:

 

Thanks to Michael Laskow of TAXI Music for having me on the show!

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Ways The Music Industry Can Change For The Better

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

By:  Erin M. Jacobson, Esq.

This article was originally published on Forbes.com.

2016 saw a lot of lawsuits and lobbying in regards to changes in the music industry. Here are a few major issues that need to be resolved in 2017 and beyond to help sustain the music business.

Higher rates for streaming and YouTube views

The rates creators and rights owners earn from streaming and views are currently fractions of pennies. A songwriter or rights owner needs to see millions of streams/views to make any substantial income from this revenue stream. Streaming services and YouTube are the biggest platforms for consumers to listen to music, but those that make music are not able to make a sustainable living solely off income from those sources. The rates need to be higher so that those who create music for a living are actually able to earn a living.

Music publishers need to be paid more

In a similar vein, music publishers earn less than record labels from YouTube, Spotify, and other streaming and digital services. There is no music – and no recordings to be made of music — without the creation of a musical composition first. When music publishers are paid less than record labels, not only are music publishers earning less, but the songwriters signed to those companies are earning less. If songwriters cannot make a living writing songs, then songwriting will become a hobby instead of a career.

Even though labels are making more than music publishers, the amount that the artists make is still substantially small due to the contractual terms with the labels. Again, the artists bringing songs to life are not making sufficient money based on their performances and interpretations of songs, and they will not be able to sustain a career that is financially inadequate. Creators need to be properly compensated and this should be recognized by anyone who values music in their life.

Support for fractional licensing within the music industry

The music industry has always operated on a fractional licensing basis where each writer or that writer’s representative controls the respective shares of the songs that writer has written. This model was threatened in 2016 by the Department of Justice that mandated performance rights organizations ASCAP and BMI move to a 100% licensing model, thereby potentially making millions of songs unlicenseable. BMI sued the DOJ and won, but the DOJ has appealed the decision and the outcome is pending. An upheaval of the fractional licensing model would wreak havoc on the music industry and cause creators and creators’ representatives, both within the US and abroad, to be compensated even less than they are now, or make their works unlicensable. This is an unacceptable solution and would be a massive blow to not only creators, but to the music business as a whole.

Cooperation between the law and the internet

When the copyright law was last written in 1976, the internet was not used by the public let alone as a way to consume music. Therefore all user-generated content websites, including YouTube, etc. are operating in a way not contemplated by the law when it was first written. The law needs to be updated to address how works can be licensed in a way that cooperates with the digital world while fairly compensating those who create the works being used. There also needs to be a better way to deal with online infringements. Most online infringements are dealt with via DMCA (another area of law needing reform) takedown notices, although YouTube is now allowing content owners to share in revenue from infringing videos through their content management system. Again, the amount of money shared in this scenarios is so small that it is not a sustainable model and goes back to the need for increased rates.

Consumers need to learn to value music

On a daily basis I am confronted with people who want to use music but don’t want to pay for it. They argue that they should be able to use the music for free because the writer or artist will make money on the backend from sales or promotion. However, that backend money is usually never earned as promised and results in the artist or writer allowing the use of his/her music for free. Companies want to pay less and keep the lion’s share of income for themselves, which again creates a problem for creators trying to live off making music.

Internet companies and radio make millions and sometimes billions of dollars per year, and they continue to lobby to be able to use music freely or at least pay less for it, as well as to loosen copyright laws. Many of these platforms have built their business on using music as their main commodity; yet they don’t want to pay for the music that is the central product of their business model. All of the performance rights organizations (most recently GMR) have been fighting with radio and other services to command higher rates for their members and affiliates, but they consistently get pushback from licensees that don’t want to pay. This problem doesn’t stop at the digital realm, as film and television companies also regularly try to offer low fees to use music in their productions.

When one thinks back on their life, usually there are certain songs that evoke certain memories, that were important at a specific life event, or that got one through a hard time. Couples usually designate at least one song as “their song.” Certain scenes in films and television shows would not come to life without the use of a particular song being used in that scene. Certain artists and albums serve as the soundtracks of people’s lives. Imagine if all of those memories were taken away because artists and songwriters could no longer have careers making music because they were not paid enough to make a living. Most people wouldn’t go into a store a take a piece of clothing or a table without paying for it, yet those same people think it is okay to take music for free. Most people would not think to ask if they could pay their doctor fractions of his fee because they can, yet people keep offering lower payments for using music. Music has value. Those that use or consume music need to recognize that value, or watch the quality and prevalence of music disappear from their lives.

*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 catalogues, 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.

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Music Industry Cases to Watch in 2017

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Categories: Articles, Copyright, Infringement, Law, Legal Disputes, Legal Issues, Music Industry, Performance, Royalties, Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

by:  Erin M. Jacobson, Esq.

This article was previously published on Forbes.com.

Following are the top music legal cases to watch in 2017, what to expect, and how they could affect the industry as a whole.

Global Music Rights v. The Radio Music Licensing Commission (and The Radio Music Licensing Commission v. Global Music Rights)

Background: As explained here, The Radio Music Licensing Commission (“”RMLC”) sued performance rights organization Global Music Rights (“GMR”) on anti-trust grounds for creating an artificial monopoly over and charging “exorbitant” licensing fees for works in its repertoire. In a separate and non-retaliatory suit (and explained here), GMR sued the RMLC claiming that the RMLC’s committee of radio stations seeks to discourage competition amongst these stations with the common goal of keeping payments to songwriters and music publishers artificially low and using its collective power to do so.

What you might expect: The parties will probably settle, as the implementation of judicial rate supervision would significantly curb GMR’s objectives in negotiating higher rates for its writers. If GMR had to submit to judicial rate setting proceedings, it is probable Irving Azoff would find a way around the regulations to command higher compensation for GMR writers.

How it could affect the industry: If radio does not want to pay GMR’s rates, then radio stations can refuse to play works in the GMR repertoire. As a result, these artists would lose the promotion and performance income provided by radio airplay. It could also affect writers belonging to other performance rights organizations that have co-written songs with GMR writers or covered songs by GMR writers.  The band Anthrax has already issued an open letter to Irving Azoff seeking to have its name disassociated with GMR, as the band is not a GMR client but is listed in the GMR repertoire because Anthrax covered “Phantom Lord” by Metallica (a GMR client) early in Anthrax’s career. Anthrax is afraid this association could stop radio stations from playing all Anthrax songs.

However, the radio stations themselves would also suffer because it would harm stations’ popularity with listeners if stations cannot play the music their listeners want to hear, resulting in a significant loss of advertising revenue.

The Turtles v. SiriusXM

Background: Flo & Eddie of The Turtles sued SiriusXM for playing their sound recordings without paying royalties. In the United States, all sound recordings made after February 15, 1972 are protected by federal copyright law. Prior to that date, sound recordings only had protection under state laws. In 1995, sound recordings were granted a digital performance right to earn royalties when played on digital media like satellite radio or streamed online. This case raised the question as to whether all sound recordings were entitled to the performance right or only those recorded post-1972. Flo & Eddie have been successful in several states to champion the right to royalties for owners of older recordings, but a New York appeals court just ruled against themsaying that the pre-1972 recordings are only entitled to protection provided by state laws.

What you might expect:  The outcome could go either way here, but its definitely one to watch. A settlement might also be possible for those involved in the lawsuit, however, a settlement would not dictate the future of royalties for other pre-1972 recordings not included in this class action suit.

How it could affect the industry: If it is found that pre-1972 sound recordings are entitled to a digital performance royalty, then owners of these recordings and the artists who recorded them would be entitled to an income stream much needed for older catalogues that do not currently make much money in terms of sales or other uses. Satellite radio and other Internet services would have to pay an appropriate amount of royalties, which seems doable for a company like SiriusXM worth billions of dollars, but potentially less so for smaller providers. If the appeal is upheld, then satellite radio and Internet services would continue to play these early recordings without paying royalties to the owners and artists of these recordings and would further the financial hardships for older artists without current hits.

“Blurred Lines” v. “Got To Give It Up”

Background: Pharrell Williams and Robin Thicke wrote and recorded a song (“Blurred Lines”) that they, as stated in interviews, wanted to sound like Marvin Gaye’s “Got to Give It Up.” The Estate of Marvin Gaye sued Thicke and Williams for copyright infringement and the closely followed trial yielded a jury verdict in favor of the Gaye family, with a judgment ultimately set at $5.3 million plus future royalties. The verdict inspired a string of similar lawsuits, including one challenging the originality of “Stairway to Heaven.”

A major issue within the trial was whether to consider only the lead sheet (musical notes) deposited with the Copyright Office (protocol at the time “Got to Give It Up” was registered) and not the recording of the song. Insiders of the music community debate the finding of infringement when many of the actual notes were not an exact match in both compositions versus looking at patterns and other music elements that were similar and repeated within both songs.

The case is now up for appeal. Thicke and Williams’ attorney claims that the trial court’s verdict will “chill” creativity. The attorney for the Gaye family argues in his appellate brief that the copyright for “Got to Give It Up” is not “thin,” and states a reminder that the
test for infringement is substantial
similarity and not virtual identity.

What you might expect: This case will once again be closely followed, but the verdict cannot be predicted at this time. A settlement is doubtful because the stakes have become too high for both sides.  This case has become much bigger than just the two songs involved.

How it could affect the industry: The impact of this decision could set an important precedent. If Thicke and Williams win, it would open the door to frequent usage of elements from older songs with little recourse for the copyright owners of the original songs. If the Gaye family wins, it would probably inspire even more lawsuits for infringement. Regardless of whichever party wins, this case may influence all future copyright infringement lawsuits involving music, as it may dictate which sources (lead sheets, recordings, etc.) can be considered in a copyright infringement suit and based on what is included in those sources, which elements of a composition can be protected and/or infringed.

The Department of Justice v. ASCAP and BMI

Background: Performance rights organizations ASCAP and BMI asked the Department of Justice (which oversees the consent decrees governing ASCAP and BMI) to reform the decrees based on today’s digital age. Music publishers asked for the ability to negotiate directly with companies licensing music for digital uses. The Department of Justice ruled against all that was asked for by the music community and decided to implement a model of 100% licensing, which mandates that a performance rights organization can only license rights to perform a work if the organization controls 100% of that work.

BMI appealed the decision and got an immediate verdict in BMI’s favor allowing the industry practice of fractional licensing to continue. The Department of Justice has appealed BMI’s victory and that appeal is currently pending.

What you might expect: This is going to be an ongoing fight to the bitter end.

How it could affect the industry: As explained in more detail here, a ruling in favor of the Department of Justice would force the entire music industry to completely change the way it does business, render hundreds of thousands of works to be unlicensable by ASCAP and BMI, place incredible burdens on composition owners to track performances, potentially require hundreds of thousands of contracts to be amended, and would also affect the music industry throughout the world due to the reciprocal agreements ASCAP and BMI have with performance rights societies in other countries.

*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 catalogues, 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.

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The Significance Of Irving Azoff Calling The Radio Industry A Cartel (Forbes.com)

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Categories: Articles, Business, Legal Disputes, Legal Issues, Music, Music Contracts, Music Industry, Performance, Royalties, Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

By:  Erin M. Jacobson, Esq.

This article was originally published on Forbes.com.

Global Music Rights (“GMR”), a performance rights organization founded by music industry mogul Irving Azoff, sued the Radio Music Licensing Committee (“RMLC”) this week for antitrust violations, claiming that the RMLC’s committee of radio stations seeks to discourage competition amongst these stations with the common goal of keeping payments to songwriters and music publishers artificially low and using its collective power to do so.

As I explained in a previous article, the RMLC recently filed a lawsuit against GMR claiming that GMR has created an artificial monopoly over works in its repertoire since GMR can dictate license fees and deny licenses to perform the music it represents if music licensees are not willing to pay GMR’s fees. Azoff founded GMR to offer a more boutique experience for the writers in its repertoire and seek higher licensing fees than ASCAP and BMI who are subject to government consent decrees and judicially restricted rates. The RMLC argued that the license fees required by GMR are exorbitant and seeks to lower them by forcing GMR to submit to judicial rate-setting proceedings, which would require a judge to mandate the rates GMR can charge its licensees.

GMR has been in negotiations with the RMLC since its inception, but still have not reached a deal because GMR will not agree to judicial rate-setting proceedings. GMR’s complaint states that its lawsuit is not in response to the RMLC’s previously filed antitrust suit against GMR, but rather “the group’s illegal conduct including price fixing, information sharing and threats of group boycotting.” GMR, who did reach a deal with two individual radio stations, argues that all stations should compete for the music they play, rather than banding together to force the music industry to succumb to low rates in order for music to be played. According to a press release from GMR, radio stations currently pay only about 4% of their revenue to songwriters and music publishers. To further put things into perspective, the RMLC represents over 10,000 radio stations that collectively bring in about $16 billion in advertising revenue annually, whereas GMR is an independent performance rights organization representing 70 songwriters and earns under $100 million per year.

As also explained in my prior article, radio stations rely on music for their content. Radio stations and other music content platforms repeatedly seek to reduce compensation to the songwriters and music rights owners that create the very music that establishes their listenership and drives their revenues. Although the stations behavior makes sense from a profit margin standpoint, it is still surprising that radio would seek to so significantly undervalue the music that comprises the foundation of its product.

The parties are at a standoff because if radio does not want to pay GMR’s rates, then radio stations can refuse to play works in the GMR repertoire. This is unfortunate for the artists in the GMR repertoire because they would lose the promotion and performance income provided by radio airplay. However, the radio stations themselves would also suffer because it would harm stations’ popularity with listeners if stations cannot play a requested new single by a GMR writer like Drake or Pharrell Williams, or even classic compositions by John Lennon or The Eagles. If radio listeners stop listening to stations because they do not play the music their listeners want to hear, then advertisers will stop buying advertising on those stations and move on to whatever other platforms their target markets have adopted. The RMLC is banking on being successful with this lawsuit as they were in their recent and very similar fight with performance rights organization SESAC. However, if the RMLC is unsuccessful at forcing GMR to submit to judicial rate proceedings, then radio stations will have the choice of either paying higher license fees for GMR artists or losing advertising revenue, a dilemma in which it would probably be to the stations’ advantage to pay the higher license fees requested by GMR than losing its advertisers.

Azoff said, “I will not stop the fight for fairness to artists and songwriters,” and he is not alone in his principles. Both creators and professionals within the music industry have seen rates steadily decline and are tired of accepting undervalued rates. Simultaneous to GMR’s battle for higher rates, songwriters and performance rights organizations have been combatting the United States Department of Justice amid other restrictions on music licensing. While the music industry is not dead yet, many within the industry are concerned about the viability of music as a career because without proper payment to songwriters and music publishers, the creation of music may be relegated to a hobby if the majority of creators cannot make a living from creating music.

*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 catalogues, 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.

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Radio Seeks to Pay Songwriters Lower Rates — Again (Forbes.com)

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Categories: Articles, Business, Legal Disputes, Legal Issues, Music, Music Industry, Music Industry Interviews, Performance, Royalties, Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Radio Seeks to Pay Songwriters Lower Rates — Again

By:  Erin M. Jacobson, Esq.

This article was originally published on Forbes.com.

A committee representing roughly 10,000 commercial radio stations has sued performance rights organization Global Music Rights (“GMR”) in an effort to further reduce the amount radio stations pay to music composition creators and rights owners for performances of their works. This committee is the Radio Music Licensing Committee (“RMLC”) and it claims that GMR has created an artificial monopoly over works in its repertoire.

Performance rights organizations (“PRO’s”) are organizations that track and collect performance royalties on behalf of songwriters and music publishers. In the United States, there are four PRO’s: ASCAP, BMI, SESAC, and GMR. ASCAP and BMI are the two largest U.S. PRO’s and are also non-profit organizations. Since 1941, ASCAP and BMI have been subject to consent decrees issued by the Department of Justice. These consent decrees are agreements that allow the government to regulate ASCAP and BMI’s license fees and how they operate in order to prevent monopolization and encourage competition. SESAC and GMR are both independent, privately owned companies that operate on a for-profit basis and are not subject to consent decrees.

Music industry mogul Irving Azoff founded GMR in 2013 in order to provide a more boutique experience for managing performance rights licensing and potentially command higher rates for the performances of works in its repertoire, which includes compositions written and/or performed by artists such as Adele, The Beatles, Pharrell Williams, Katy Perry, Madonna, and many more.

Because GMR is not subject to a consent decree, it can deny a license to perform the works in its repertoire and can also negotiate license rates as it sees fit. The RMLC argues that the license fees required by GMR are exorbitant and seeks to lower them by forcing GMR to submit to judicial rate-setting proceedings, which would require a judge to mandate the rates GMR can charge its licensees. This is similar to procedures mandated for ASCAP and BMI, but without subjecting GMR to a full consent decree. The RMLC previously filed a similar suit against SESAC and reached a settlement in the RMLC’s favor.

Terrestrial radio makes its money on advertising revenue, and while radio is far from dead, it no longer holds the status of its heyday. Terrestrial radio and other broadcasters regularly fight to reduce license fees, as terrestrial radio lobbyists were also part of the group in favor of the Department of Justice’s crackdown on ASCAP and BMI’s licensing platforms, the outcome of which is still pending.

Most observers of this situation usually fail to mention that the public perception of radio’s purpose is music promotion. Without music driving the listenership of certain stations, those particular stations would not earn the ad revenue from advertisers who want to reach those stations’ listeners. However, the stations repeatedly seek to reduce compensation to the songwriters and music rights owners that create the very music that establishes their listenership and drives their revenues.

Terrestrial radio isn’t the only industry trying to reduce payments to music creators and rights’ owners. Those of us who regularly handle music licenses know that attempts to undervalue music also come from Internet and digital companies, as well as small bars and restaurants. Visual productions seeking synchronization and master use licenses also regularly try to lowball license fees or request gratis uses.

It is up to music creators and rights’ owners to value music (#valuemusic) and require proper payment for uses of their music, and to those that use music to recognize the value that music brings to their project or business.

*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 catalogues, 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.

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The DOJ’s Discordant Decision: An Overview of the Ruling and Its Repercussions

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Categories: Articles, Legal Issues, Music, Music Industry, Music Publishing, Performance, Royalties, Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

doj-decisionPerformance rights organizations (“PRO’s”) are organizations that track and collect performance royalties on behalf of songwriters and music publishers. In the United States, there are four PRO’s: ASCAP, BMI, SESAC, and Global Music Rights (“GMR”). ASCAP and BMI are the two largest U.S. PRO’s and are also non-profit organizations. Since 1941, ASCAP and BMI have been subject to consent decrees issued by the Department of Justice (“DOJ”). These consent decrees are agreements that allow the government to regulate ASCAP and BMI’s license fees and how they operate in order to prevent monopolization and encourage competition. SESAC and GMR are both independent, privately owned companies that operate on a for-profit basis and are not subject to consent decrees.

In 2014, the music community asked for a review of these decrees and requested the removal of digital licensing from the blanket licenses offered by the PRO’s, allowing publishers to negotiate directly with and be paid higher rates by companies licensing music for digital uses.  This is referred to as “Digital Rights Withdrawal” or “DRW.” Digital giants like Google, Pandora, and Sirius/XM, joined by terrestrial radio, lobbied against DRW in order to pay smaller licensing fees to music owners.   The DOJ denied the music community’s request for DRW and has now mandated that music publishers be either “all-in” or “all-out” with the PRO’s, meaning that publishers must allow the PRO’s to license all types of performances of their catalogues or none at all.

In its recent ruling, the DOJ also chose to enforce “full-work licensing,” also known as “100% licensing.”   Under the practice of 100% licensing, any person with a percentage of ownership of the work has the right to license 100% of the work, not just the percentage owned. That licensor is then liable to account to other co-owners of the work for those co-owners’ share of compensation. This principle is in line with the provisions of copyright law governing joint works, and the longstanding language of the consent decrees supports the practice of full-work licensing. Despite the language of the consent decrees, the music industry has never operated on a 100% licensing basis. The principle of allowing one co-owner to license an entire work can be overridden by a contract between the parties, and the music industry has always operated on a “fractional licensing” basis where most owners agree in writing that each owner will administer its own share. Music users obtaining licenses have also historically accepted the practice of fractional licensing, and those users experienced with PRO licenses know that one must get a license from each PRO so that all shares of co-written compositions are covered. PRO’s also collect license fees from music users and pay its members/affiliates on a fractional basis, i.e. the amount collected or paid is proportional to the share of the composition controlled by that PRO.

While the language of the consent decrees and the practice of the industry have long been out-of-sync, the DOJ’s sudden decision to enforce 100% licensing may force an entire industry to change its longstanding way of doing business. The DOJ’s ruling stipulated that if a PRO cannot license 100% of a composition, then that PRO cannot license that composition at all. This means that any compositions written by co-writers belonging to different societies would potentially become unlicensable by the PRO’s.

What Problems Does This Create?

Those that lobbied against reforming the consent decrees failed to realize that their efforts to pay less may also prevent them from using or playing a large percentage of music, or may require them to remove music from rebroadcasts of older programming, because much of the music they wish to use may become unlicensable by the PRO’s.   If compositions are unlicensable by the PRO’s, then music users will have to go directly to music owners for performance licenses. While obtaining direct licenses may be feasible for more experienced users, many music users will not know where to find composition owners or how to go about obtaining licenses from them. If compositions become unlicenseable by the PROs and licenses are not obtained directly from the music owners, it is possible that many compositions may not be used, or many compositions may be used without permission resulting in copyright infringement.

All of these scenarios may hinder music owners from receiving payments for performance royalties, and without the PRO’s, music owners will be responsible for tracking and policing all uses of their music, which is normally too labor intensive and financially burdensome for most music owners.

Foreign performance societies, writers, and publishers are also affected by the DOJ’s ruling. Via reciprocal agreements, U.S. and foreign PRO’s work together to track and collect royalties for performances in a work’s home country and foreign countries. If certain works become unlicensable by U.S. PRO’s, then foreign societies and owners may have to track U.S. performances of their works in the U.S. Anyone in the U.S. wishing to use a foreign work not licensable by a U.S. PRO will have to get a direct license from the foreign licensor. In addition, U.S. owners issuing direct licenses may have to track and collect on foreign performances outside of the societies. Again, this creates burdens on all societies and owners, as well as opening the door for mass amounts of infringement and owners not receiving payments.

The DOJ proposed a solution of modifying all past agreements between co-writers of different societies to allow administration by one owner or PRO. This would apply to both U.S. and foreign writers and publishers. However, this is an impractical solution because many writers will not want another PRO that is not their chosen PRO collecting on their behalf; many writers do not speak to past co-writers or know where to find them; many writers are deceased, leaving one or more co-writers to deal with heirs that may not understand the principles involved or cannot be found; and many writers will not have the financial resources to have their agreements amended.

From a creative standpoint, many writers feel the DOJ’s decision will restrict them to only writing with co-writers from their chosen PRO. Restricting the freedom of writers to collaborate would be a fatal blow to creativity itself and cause many musicians to relegate music to a hobby rather than a career.

Where Are We Now?

The DOJ has allowed ASCAP and BMI a period of one year to comply with the new mandated changes, and if they are still non-compliant after one year, the DOJ can sue ASCAP and BMI for non-compliance with its decision. However, the one-year compliance period has not started yet, and will be delayed by the current efforts of BMI and ASCAP to get this decision reversed.

As of this writing, BMI has sued the DOJ and is appealing the ruling through legal proceedings. ASCAP is developing a lobbying strategy to seek much needed Congressional support and achieve changes from the legislative side. Those of us on the forefront of this issue feel it is best to wait until we have a definite outcome before spending time and resources on modifying agreements or making other changes to longstanding industry practices.  However, consult with me on this issue if you are concerned.

Some resources to take action and stay up to date include www.standwithsongwriters.org and www.artistrightswatch.com.

 

Disclaimer: This article is for educational and informational purposes only and not for the purpose of providing legal advice. The content contained in this article is not legal advice or a legal opinion on any specific matter or matters. This article does not constitute or create an attorney-client relationship between Erin M. Jacobson, Esq. and you or any other user. The law may vary based on the facts or particular circumstances or the law in your state. You should not rely on, act, or fail to act, upon this information without seeking the professional counsel of an attorney licensed in your state.

If this article is considered an advertisement, it is general in nature and not directed towards any particular person or entity.

 

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How Songwriters Just Got Screwed

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Categories: Articles, Legal Issues, Music, Music Industry, Music Publishing, Streaming, Videos, Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

The Department of Justice has recently come to a decision regarding the review of the 1941 consent decrees that regulate the license fees and operations of ASCAP and BMI. Because ASCAP and BMI are non-profit organizations, they are subject to government-regulated consent decrees, meaning the government regulates ASCAP and BMI’s license fees and regulates how they operate in order to prevent monopolization and encourage competition. When ASCAP and BMI cannot settle on a equivalent fees, the dispute is taken to a rate court where the fee is settled. There have been massive lobbying efforts on the part of the music industry to reform these consent decrees and update them to the needs of writers and publishers in the Internet age.

A review of these decrees opened in 2014 in order to modernize the decrees so that they were more applicable to the ever-changing and evolving music industry – an industry where music is vastly consumed through Internet and streaming services. The goal of the modernization was to bring royalty rates up to fair market value and for the ability of music publishers to remove digital licensing from blanket licensing in order to earn more money from online music and digital streams. Much to the music community’s dismay, no changes were made to the consent decrees and the DOJ has also declared the implementation of full work licensing, also known as 100% licensing, which will end the current practice of fractional licensing that has occurred in the industry for decades.

Under the practice of 100% licensing, any person with a percentage of ownership of the work has the right to license 100% of the work, not just the percent owned. Even a 1% owner of a composition can now license 100% of the work without consent from the other co-owners, and is responsible to account to the other co-owners for their share of the payment. This creates problems because it enables music users to shop for the lowest price between owners and will make it harder for music owners to get paid due to frequent lack of communication between co-owners.  It also disrupts the effective system of fractional licensing, a system that has helped insure that owners receive equal income shares and rights.

The other aspect of the DOJ’s decision removes the option for music publishers and composition owners to do direct deals with digital and other service providers, while still allowing PROs to collect other aspects of performance income. Now, music publishers have to choose to be “all-in” or “all-out” with the PROs, allowing PROs to collect all performance royalties on their behalf or none. This will wreak havoc by further complicating the licenses needed by music users, complicated the tracking of performances from these users, and disrupting the income flow that would otherwise be collected by the PRO’s.

The DOJ’s decision will cause drastic decreases in the income streams for music creators. It not only affects the PRO’s themselves but also the thousands of music publishers, writers, companies, and foreign performance societies that hold business with these societies and rely on these rates.  Not only does the ruling further cripple the already narrowing income streams for music creators, but it also inhibits the industry from growing and progressing within the digital age, and prevents streaming from becoming a financially viable method of music consumption.

So what can you do?  As a music consumer, you can #valuemusic and pay for any music you listen to. If you own an establishment that uses music, make sure you are paying what licenses you can so the music owners and creators are fairly compensated. Everyone can go to standwithsongwriters.org and write to your congressional representative as well as sign up to get updates on this issue and how to stay involved in supporting this much needed reform in valuing music.

I became a music attorney because I am passionate about protecting and advocating for the rights of my clients — the creators and owners of musical works.  Contact me to protect your rights.

Disclaimer: This article is for educational and informational purposes only and not for the purpose of providing legal advice. The content contained in this article is not legal advice or a legal opinion on any specific matter or matters. This article does not constitute or create an attorney-client relationship between Erin M. Jacobson, Esq. and you or any other user. The law may vary based on the facts or particular circumstances or the law in your state. You should not rely on, act, or fail to act, upon this information without seeking the professional counsel of an attorney licensed in your state.
If this article is considered an advertisement, it is general in nature and not directed towards any particular person or entity.
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