Are You Not Entertained?

Fighting the Power

2011-11-07T21:08:00.002-08:00

It seems to be a recurring theme in this blog, but now Chuck D has gotten in on the fun that artists like Eminem, Rob Zombie, and Rick James' estate have been enjoying. Chuck is now suing UMG, alleging that it has routinely miscalculated the royalties owed to artists like him for digital downloads, such as MP3s and ringtones, by treating them as "sales" of physical records rather than "licenses." This miscalculation in the aggregate could cost UMG millions.

What's more, Chuck's case could have an even bigger impact on EMI which has been up for sale since Citigroup took over the struggling company when previous owner, Terra Firma, defaulted on loan payments. As reported, any potential buyer will want to be protected against this looming financial disaster.

Your thoughts?

I'm Rick James, UMG!

2011-04-05T08:29:00.000-07:00

If cocaine is a helluva drug, then recent decision rendered against Universal Music Group could prove to be a helluva problem as well - how problematic should be revealed soon. Following in Em's footsteps, the estate of Rick James has filed a class-action suit against the UMG arguing that the company has failed to properly account for royalties and may owe its artists tens of millions of dollars. As I previously blogged here, here and here, at issue is whether record companies are cheating artists out of royalties by counting sales of downloads the same way it counts physical CDs (entilting the artist to royalty typically ranging from 10 - 18%), rather than as a license (which is typically split 50/50 between artist and record company). James' suit claims “By this lawsuit, the plaintiff seeks to compel UMG to account to and pay its other recording artists and music producers (ie, those not directly involved in the FBT litigation) their rightful share of the licensing income paid to UMG for downloads and mastertones of the recorded music licensed by UMG to these entities”. However, prior to evaluating James' claims, the courts must decide whether to grant the James estate’s case class action status, i.e. one that would allow any artists in a similar position to claim the larger royalty on digital revenues if the lawsuit were to be successful.

The saga continues...

Ready or Not - Here Comes a New Rap App

2011-03-24T09:05:00.000-07:00

I love win-win scenarios. So I was particularly intrigued by this new XXL app. Through this iPhone/iPad app, XXL magazine is giving aspiring mcs the opportunity to showcase their skills in 30 second clips. For $.99/upload, each mc can upload his/her performance, and will have the chance to be heard by music executives looking for the next big thing. Additionally, the best clips will be showcased on the XXL website and possibly in the magazine.

In addition to the recording function, the app also delivers hip hop news updates, and other hip hop-related content.

So, aspiring rappers have a new outlet to be heard, XXL extends its brand in meaningful ways, and consumers benefit from it all. I think this may actually be a win-win-win.

Check out a video report focusing on the app here.

Former Members of Misfits Band Punked in Trademark Dispute?

2011-03-22T13:02:00.000-07:00

The punk rock band the Misfits have found themselves in court over a trademark dispute. While the band broke up in 1983, a former member (Caiafa) did not register the band's trademark until some 17 years later in 2000. The registering former member has since gone on to make a small fortune licensing the use of the Misfits trademark on such items as skateboards and Vans sneakers. The remaining members claim that they never abandoned the trademark using it after the 1983 breakup, and therefore, are seeking an accounting of all licensing revenues generated by Caiafa's exploitation of the trademark.

The Misfit's predicament begs the question: Who owns your band's name? If your group were to break up tomorrow, who would own the right to continue using the group's name and logo? It may surprise you to learn that unless you and your group agree otherwise, your band is likely a partnership. Under partnership law, all partners would be equal owners of the band's name and any associated logo designs, and any current and former member would be permitted to use the name after the band's split. Trademark rights are determined on the basis of the "use" of a mark, not on who created it first. Considering each of the members of the group would be an equal co-owner of the group name under trademark law, the goodwill associated with that mark could become essentially worthless without the full cooperation of the former members - a highly unlikely result. In the end, it makes sense to have a band partnership in agreement in place to provide for a smooth post-band transition. Had the Misfits agreed, they likely wouldn't be involved in litigation now.

Eminem Wins Yet Again...

2011-03-21T08:25:00.000-07:00

It looks like we may be able to put the Eminem royalty case behind us. You may recall in my earlier posts here and here that at issue was whether digital downloads of Em's music are actually licensed uses (for which Em would be entitled to a 50/50 split) or the digital equivalent of physical sales (entitling him to a relatively paltry 12% royalty by comparison). The courts have sided with Em on this one, and the Supremes have upheld the lower courts deciding not to entertain Universal Records' appeal, thus ending this interesting chapter in an evolving industry.

Just how many contracts may be affected by the decision is unclear. Note the contract at issue is from the late 90's, prior to the advent of Napster, I-tunes and the like.While this certainly is an interesting topic, it probably won't have far-reaching consequences because the labels have long been hip to this glaring problem, and have shored up their agreements accordingly.

Obama Administration Calls for Copyright Crackdown

2011-03-16T13:21:00.001-07:00

In an apparent bow to the lobbying might of Big Media in the forms of the RIAA and the MPAA, the Obama administration has offered 20 recommendations to Congress regarding it proposed methods for shoring up the current state of copyright law. Among the general recommendations for stricter copyright laws and greater enforcement powers, specifically the administration has called on Congress to make illegally streaming copyrighted content online a felony offense in certain instances. Also amongst the proposals is a request that Congress enact a public performance right for sound recordings allowing for royalty compensation to artists and record labels when their music is played over terrestrial radio. Currently, sound recording copyright owners enjoy a public performance right only for certain digital performances.

To be sure, the rapid advance of technology has caught copyright holders off guard and scrambling for ways to compete against free. To the extent the administration's policy proposals are adopted, their jobs in this regard will be a bit easier, but by no means done.

Chicago Shows its Artists Love

2011-03-14T10:43:00.002-07:00

Just happened upon a great article recapping what sounds like an amazing event for the creative person wondering how to eat from her art - the Creative Chicago Expo.

The event provided a range of resources for creative artist including e-mail marketing, on-line fundraising, and music publishing. The goal at the end of the day was to empower creative people to earn a living from their passions.

What was particularly interesting to me was the idea that artists are "de facto businesses". Yet very few seem themselves as such, or have even basic business skills necessary to survive much less thrive in a competitive business environment. I enjoy working with budding "artistpreneurs" always attempting to ensure the marriage between art and commerce is preceded with the appropriate pre-nuptial agreementor in other instances, doesn't end in a messy divorce.

I applaud Chicago for its artist empowering efforts, and look forward to hearing about more initiatives like CCE. If you know of any such events, let me know!

NC Seeks to Crack Down on Agents - Should Agents be Worried?

2011-03-09T08:37:00.000-08:00

In the wake of several high profile player suspensions for NCAA rules violations, the North Carolina legislature is considering a bill that would make improper contact with student athletes a felony offense.

Passage of a bill like this could have a profound impact on agent behavior, and may impact how other states attack this seemingly growing problem of agent miscnduct.

I'll be following this one closely.

Em makes it rain...

2010-10-22T13:37:00.000-07:00

Well, we've been waiting to see how this issue would shake out, and it appears Eminem and his team have prevailed - and he's not the only one. In my previous post I outlined the potentially devastating consequences an adverse ruling for the Majors could have on the recording industry. In some instances an artist performing under a recording agreement executed prior to the advent of the digital revolution could be due more than four times the royalties currently paid! It's not clear how many artists this ruling affects, but it will no doubt a costly unforeseen problem to fix for the labels.

A Picture's Worth More Than a Thousand Words

2009-05-20T16:11:00.002-07:00

The Chris Brown/Rihanna saga has reconfirmed what we already knew. Like moths to a flame, collectively, we are drawn to celebrity drama-- and can't get enough. The more salacious the details the better.

Celebrities almost by definition don't enjoy the kind of privacy rights we mere mortals do. Their lives, whether intentionally or not, are open books, and grist for the gossip mill. Demand for all things celebrity is so great that a certain segment of the population has dedicated their lives to capturing every detail of the celebrity life. No doubt because doing so has become a lucrative pursuit. Rihanna's post-beat down pic was reportedly sold for $62,000.00.

Is a topless pic of Janet Jackson the same as releasing a photo of an alleged victim at her worst and most vulnerable?Should their be boundaries? A celebrity rights group called Stoparazzi thinks so. They are championing a new law against releasing photos or information that exploits victims of crimes, and would make doing so illegal whether there was money exchanged or not.

The bill reads in pertinent part : "If a private crime photo is distributed, the receipt of money for that act is irrelevant and does not diminish the detrimental effect such public distribution of private crime photos could have on the victim, the case itself, other victims of similar crimes etc. Just because the person who leaked it may have done it, for example, because they were disgruntled or vindictive or even, perhaps, to help the defense, and not for money, per se, should not make it legal."

What do you think?

Family Guy Demonstrates the Copyright Supremacy over Bourne

2009-05-20T16:11:00.001-07:00

Score another victory for free speech and the parody fair use defense to copyright infringement! Family Guy prevails again! Somewhere Uncle Luke is smiling!

And God Said . . .

2009-05-20T16:09:00.000-07:00

The NFL has settled the so-called "Voice of God" law suit by agreeing to pay an undisclosed sum to the estate of John Facenda - the legendary football announcer dubbed by many NFL fans as the "Voice of God." In the suit Facenda's estate accused NFL Films of improperly using Facenda's voice in a promotional film for a John Madden video game, violating Pennsylvania's right of publicity statute, as well as the Lanham Act.

Em Update

2009-05-20T16:08:00.000-07:00

The publishing company representing Eminem's music has lost in its suit against Universal Music. As previously mentioned in this blog, at issue was whether digital downloads are considered records sales, which command a relatively lower royalty rate, or licenses, which command a higher licensing fee. The decsion is important because had Universal lost, the decision would have provided powerful precedential effect, opening record labels to a potential flood gate of cases involving ambiguous or wholly absent provisions addressing digital distributions. Essentially the court recognized the changing landscape of the record business, and concluded that a digital download today is more akin to the sale of record than it is a license (for example use of a record in a film or TV show). To be sure, an important victory for a beleagured record industry that can use all the good news it can get.

The Resurrection of Hip-Hop?

2009-05-20T15:45:00.000-07:00

In the late 80s Public Enemy boldly declared "It takes a Nation of Millions to Hold Us Back". They may have overestimated that number by a few million. See, it would take only one judicial decision to hold them and a whole movement back. The court's decision in Grand Upright Music v. Warner Brothers Music mandated that hip hop artists wishing to incorporate sound recording samples must clear them. The court's message was clear and unambiguous when it declared anything less would be outright theft. However, as one commentator has suggested, an unintended consequence (or intended I suppose based on one's perspective) of the court's decision has been that creativity in general, and in hip hop in particular, has suffered as a result of the burndensome sample clearance process that has emerged in the wake of the Grand Upright decision.

The current licensing process is onerous and often costly. A party wishing to clear a sample must first track down all of the copyright owners - no easy feat. Assuming a party wants to sample an existing master, he would have to secure the two separate licenses: one for the use of the sound recording, and one for the underlying composition (rarely are the owner of the sound recording and the underlying composition the same). To add to the complexity, there are often multiple owners of the same underlying composition, each of whom must give approval before a license can be granted. On top of that, there are no standard rates for such licenses leaving each party to name his own price or none at all. So after all the time and effort spent to track down the appropriate rights holders, a producer can ultimatley be left with nothing for his troubles.

Generally speaking, I believe sampling, at its best, demontrates tremendous skill and creativity. I also believe sampling can be beneficial to all parties involved. For example, some of hip hop's seminal works borrowed from original songs that were cut, scratched, looped and flipped in creative ways to create something fresh and new. A generation of hip hop heads was raised and sustained by such artistry and creativity. At the same time, publishers benefited and continue to benefit by reaping revenues from the licensing of not only well known hits, but also obscure cuts that would otherwise never see the light of day. These tracks buried deep in some catalogues were given new life after being discovered by a new audience leading to further opportunities for exploitation. Though sampling was never particularly encouraged, savvy publishers understood that hip would open new revenue streams.

It seems clear to me that there is more to gain by licensing the use of samples than there is to lose. It is equally clear that that the current system is becoming unsustainable. So it seems the process clearing samples should be as fair and simple as possible. To be sure, copyright holders' rights should be respected, and writers and publishers should be compensated. However, that right to compensation should not serve to diminish the creativity of others. When the system is too inefficient, or when the prices for samples are too high, nothing gets licensed, and no new hits are created -the sampler and the samplee lose, as does listening public.

So what's the alternative?

A compulsory license, that is, a provision requiring copyright holders to extend a license to any party wishing to incorporate the existing recording in a derivative work. Copyright law has already provided for such a compulsory license where it comes to so-called mechanical right. The compulsory mechanical license basically works like this: once a song has been recorded and released, the coyright holder must license the use of the song to anyone who wants to can record and release it himself. In exchange, the licensee pays the song's copyright holder a statutorily-fixed royalty rate for each record sold. Most importantly, the copyright holder has no right to refuse the license, despite how repugnant the licensee may be.

When it comes to a compulsory license for samplers, three benefits immediately come to mind. First, a compulsory license to sample would inject a measure of predictability into the sample clearance process. Artists and their managers would know at the outset what portion of the budget to allocate for licensing. Drop dates could be firmer and less likely to be postponed due to licensing difficulties.

Secondly, because all of the variables affecting the sample clearance would be known at the outset, the process of securing the license would be quicker and streamlined. Accordingly, a process that can now span weeks or months could be reduced to mere days if not hours. At the same time, because it would be a much quicker process, it would be much less expensive transaction for the artist licensee.

Finally, and arguably most importantly, producers would be freed up to create the music they feel, constrained only by their imaginations.

Hip hop is dead? Maybe not, if the compulsory license idea gains traction. Perhaps, until then, we shouldn't believe the hype.

Who's the Real Shady?

2009-05-20T15:28:00.000-07:00

The proverbial devil is in fact often in the details. No contracts more often uphold this maxim than recording artist agreements. Many don't realize that in a typical recording agreement, a recording artist can get paid by her record label in many different ways and often at wildly varying levels. Eminem's case against Universal Music Group illustrates what can happen when the details aren‘t as clear as they could be. There are potentially millions in past and future earnings riding on this one.

In a typical recording agreement, an artist is usually paid half of the net profits earned from licensing a master recording to a third party. For example, if a third party were to use a recording in a movie, it would be granted a license to use the master, and the license fee received by the label would be split with the artist.

In contrast, an artist typically receives anywhere from 9 - 12 percent of the net profit earned by the label from the sale of a master through a third party.

So as you can imagine, how a transaction is characterized can have a dramatic effect on an artist's bottom line. It should come as no surprise then that labels are pressed to characterize digital downloads, which are fast becoming the dominant way to purchase music, as sales rather than licenses.

Slim isn't the first or only artist engaged in these kinds of battles. Most contracts today recognize the changing music landscape, and are explicit regarding the royalty for digital downloads. However, several artist contracts executed prior to the advent of the digital revolution are silent regarding such royalties, and thus subject to attack.

Assuming, for example, a label gets about 30 cents for each 99 cent iTunes download, characterizing the income earned from the download as income received from a third party license would net an artist 15 cents per download. On the other hand, characterizing the download as sale would net an artist approximately 3.6 cents assuming a 12% royalty, per download.

For the sake of argument, a label can justify the reduced royalty paid to artists given the costs associated with the sales of physical product: manufacturing, packaging, warehousing costs, shipping, and the risk of returns of unsold product. However, digital downloads eliminate the bulk of these costs to the labels, and accordingly their justification for compensating artists at a reduced rate.

Let's hope justice and reason prevail.