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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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Want to Get Your Copyrights Back? (Here is What You Need to Know)

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Categories: Articles, Copyright, Music Industry, Music Publishing, Terminations, Tags: , , , , , , , , , , , , , , , , , , , , , , , , , ,

By: Erin M. Jacobson, Esq.

There has been a lot of buzz lately about songwriters and artists (and their heirs) reclaiming thei copyrights and striking new deals or self-administering/self-releasing. What many want to know, is who can reclaim copyrights and how?

There are certain provisions in the copyright law where, under certain circumstances, an author or that author’s heirs can reclaim copyrights that have been granted away at some time in the past. It’s a really complicated section of the law, and not all attorneys are well-versed in it, so it is important to make sure whoever you hire really knows the intricacies of filing terminations.

For purposed of this article, I’m going to go over the basics.

There are two main sections of the copyright law that apply to copyright terminations:

  • Section 304c applies to copyrights and grants before January 1, 1978. Termination under this section can be effected between 56 and 61 years after the original date of copyright, and termination may be effected in regards to one author’s share of the work.
  • Section 203 applies to grants made after January 1, 1978, regardless of the original copyright date of the work. Grants falling under this section may be terminated between 35 and 40 years after the grant date. If the grant includes the right of publication for the work, then that five-year period begins either on 35 years after the date of publication, or 40 years after the date of the grant, whichever is earlier.
  • Note that under Section 203, grants signed by more than one author require a majority of those authors or their heirs to terminate the grant. It is not like section 304, where one author’s share can be terminated independently. However, there are exceptions to this rule if separate grants were signed, such was the point at issue in the Victor Willis/ “YMCA” case.

Who can terminate?

  • The author
  • The author’s heirs, if the author is no longer living. (There are only specific people in a specific order of succession that are considered heirs. Again, make sure you have an attorney experienced with terminations advise you.)
  • If the author’s share is being terminated by the author’s heirs, those heirs must make up a majority (at least 50%) of that author’s termination interest.

Some additional points that apply to terminations under both sections:

  • When you want to effect a termination, you actually have to send a notice to the current owner of the copyright in advance of the termination date. This notice must be served not more than ten, but not less than two years before the effective date of termination. If you miss this notice window, you lose your right to terminate.
  • The notice must be recorded with the Copyright Office before the effective date of termination to be valid.
  • Works made for hire or grants by will are not eligible for termination.
  • Termination is a matter of law, so it can be affected regardless of any contract or agreement to the contrary.

Why is the right to terminate important?

Recapturing rights and starting to exploit them again can revive older compositions or catalogs, and help them to start making money again when they’re currently lost and forgotten in the catalogs of large music publishers. Also, this increased exploitation (or an advance in a new deal) would mean more money for the authors or heirs. The decision whether to terminate must be carefully considered based on the catalog at issue as well as the situation of the authors/heirs.

I regularly work with legacy clients and their heirs to determine the best plan for the catalog and filing termination notices, if that is the best choice for the client, so please contact me if I can help you with your catalog.

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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