File Sharing

“Total album sales in the United States, including CDs and full-album downloads, were 428 million, a 14 percent drop from 2007, according to data from Nielsen SoundScan. Since the industry’s peak in 2000, album sales have declined 45 percent, although digital music purchases continue to grow at a rapid rate.”[1]

The present day situation regarding “sound-file sharing” has received a gloomy explanation over the past 8 years. Unlike the threat of illegally copied cassette tapes or compact disks in the past, online sharing is peaking and the illegal sharing of mp3 files to cut average record sales in half. Although most workers in the music industry describe the switch of income from record sales to tours, merchandise and publishing as a “quickly changing business;” these “changes” along with a recently plunging economy continues to have an effect on every end of the business – not just the record labels. Without sales of CD’s, the recording studios must charge less to compete with what are now standard home-based recording software and there- fore hire less musicians to work. Publishers now have less big hit songs from which to gain revenue and must continually fight for the stagnant values of royalty rates to rise. Signed musicians deal with from the cross-collateralization while unsigned musicians cannot afford to continue their careers due to record labels reluctance to sign new artists, a more competitive online wash of bands on myspace, and the higher cost of living. In return, musical instrument and sheet music retailers sell less product due to poorer or no discouraged customers; music education suffers from lesser interaction with instruments in schools despite plunging federal and state funds for music in public schools. A good publisher must be not only aware, but included in the changes that the music industry holds due to issues such as file sharing.

Many feel as though the changes that the industry is suffering from is opening new doors to new ideas that could find other ways to sell music or keep copyrights from being infringed by the masses. While digital sales slowly start to measure up to the previous standard in sales many writers of the subject contemplate possible remedies for the industry’s slump.

In What They'll Never Tell You About the Music Business, Peter M. Thall provides and extensive list of the issues that the impact of file-sharing and the industry’s present situation has caused (it is really EXTENSIVE):

“There is a war going on, and you may be surprised when the combatants are identified. Here are some of the important issues involved:

-                      First and foremost, of course, CD burning and illegal song swapping, and the ever-increasing sophistication of the software that facilitates the co-opting of music for personal use

-                      The need for database protection

-                      Piracy

-                      Cut-rate retail prices

-                      Deregulation and consolidation of radio and television ownership

-                      The continuing consolidation of the major players in the entertainment industry

-                      The paucity of “new music” in major media, which goes hand in hand with the record companies dependence on the “super artist”

-                      A growing trend among hardware manufacturers to give away “content” to sell their gadgets

-                      The growth of satellite radio, with its attendant opportunities and challenges

-                      The incredible cost of A&R and motion picture and television production

-                      The location and relocation of servers to offshore countries where no copyright laws apply

-                      The continued chipping away, by the U.S. Congress, at copyright (e.g., the ill-named Fairness in Music Licensing Law)

-                      The claim, by internet users that they have first amendment protection

-                      Nonexistent or insufficient harmonization of rights clearance procedures worldwide

-                      Insistence of most-favored nation provisions, forcing prices to rise to the highest quoted license fee, but limiting the price paid for the most valuable songs to the price paid to the least valuable

-                      The need to establish acceptable and reasonable rate for permanent download, limited download; on-demand streaming; subscription services, etc.

-                      Mechanical rate issues: per-copy or percentage? More or fewer compulsory licenses, for an array of uses?

-                      Expansion of the tariff on digital audio tapes to analog tapes and blank CDs and DVDs

-                      Resolution of the conflict between support of intellectual property rights vs. the fear of dampening developing technology…”[2]

This list is pretty comprehensive and puts a lot of pressure on legislators to figure out statutory rates in reference to digitally transmitted media. It is true that the slow federal governing process largely affects the industry when it comes to royalties and provisions of copyright law, however most of the law is, and has always been, decided by judges on a case-by-case basis. Sadly, this means that the court will only take as long as the lawyers and business affairs departments of international conglomerate corporations hash out their discrepancies about what they think the rates should be, and turn the lawsuit into something that must be explained to a judge a year after the problem was first posed; and by that time technology has already moved on to create a bigger backlog of payments. Simply blaming a slow government and big business lawyers is not the answer.

 The Copyright Royalty Board (CRB) is part of the legislative branch of U.S. Government. The board consists of three judges appointed by the Library of Congress that decide any government action in dealing with copyright provisions and determine the statutory rates the publishers and artists receive for sales of intellectual works and it is up to the industry to try and convince this board of three people to change the laws that might govern their yearly pay. 

            Guilds, unions and associations such as the Music Publishers Association (MPA represents writers and publishers)  and the Recording Industry Association of America (RIAA represents record labels) have rallied against each other for changes in the statutory rate only to come to a stalemate: 

            “Despite an increasing penny mechanical rate for physical goods (like CDs) roughly every two years over the last 20 years or so, the CRB instead kept the 2006-2007 rate for the next five years (through 2012): the greater of 9.1 cents per track or 1.75 cents per minute of playing time. This is far short of music publishers’ proposal of the greater of 12.5 cents per track or 2.4 cents per minute of playing time for physical products and, for permanent downloads, the greater of 15 cents per track or 2.9 cents per minute of playing time -- to be periodically adjusted to reflect changes in the consumer price index.”[3]

Although the stat rate for physical product is unchanged at 9.1 cents, one real change was the statutory rate for ringtone or “mobile” sales to 24 cents giving much power to the publishers for one of the fastest selling music products in the market. This was at least a step in the direction to change, but there are many more obstacles that lie ahead:

  “The judges have not yet formally adopted the settlement reached among publisher, label and digital service groups setting a formula for calculating rates for interactive streams and limited downloads...”[4]

            The CRB takes time to decide on government regulations, but negotiated contracts such as policies regarding synchronization rates, business resumes. A growing trend for licensing videos is that a publisher might ask for a penny rate for digital downloads, and a percentage of retail price for all other digital services including streaming, subscription services etc. It is possible that the CRB waits for the industry to decide royalty rates for itself before computing a government regulated system. For those concerned with synch in DVD or Blu-Ray type home video uses, a statutory rate might be in the future of U.S. legislation.

“To stop this widespread thievery, the RIAA periodically issues well-publicized lawsuits against file sharers across the United States. While some people stop sharing music files at home for fear of lawsuits, many others have simply started downloading files at work, shifting the blame to their employers computer networks”[5]

            What the future might hold is that programs that harbor illegal downloading will be forced to pay performance and publishing royalties. If radio stations and television stations and video streaming sites like YouTube must ante-up to performing rights organizations, why doesn’t LimeWire or Kazaa? It seems like although the challenge is great, online tracking of file sharing should be required of these programs if they are going to sell advertising space, just as cue-sheets are required of major motion pictures; and it should be up to ASCAP, BMI and SESAC to collect the revenue.

This is also a biased opinion, but it seems that perhaps Metallica’s lawsuit with Napster began this rampage of individual downloader’s being sued for infringement by illegal sharing, and decreased the moral for copyright protection while increasing the public’s knowledge  and will to try and get music for free. What it seems they should have done was just to force Napster to begin paying quarterly blanket licenses, as they should all to those selling ad-space from free downloading programs, instead of suing individual citizens to the ground; but now they are stuck waiting for the government to solve their disputes.  

Besides government action, possible remedies for file sharing could include a new type of performing rights organization that would track online trading and turn that into revenue for writers and publishers. Even if the new organization could only possibly track a portion of shared files on a portion of websites, perhaps one shared file could cost as much as a single text message, and users could pay on subscription basis. Now is the time for a new monopoly company to step up and become the new ASCAP.

 Bands like Radiohead who can afford to give away their music for free, might be able to survive based on performing income and merchandise alone. The one thing that has not changed is the non-stop emergence of musicians who produce themselves (like the Beatles writing and performing-which was a new thing for the fifties) who not only dance and act, but , produce, write, videotape, negotiate contracts, and run their business single-handedly as one premium package.

Speculation will continue as time goes on, many will strive to make money from tours instead of records. The industry is expected to change even more, but the creativity of technological discovery has the potential to fuel the music business with a push in the right direction as opposed to mass flush of intellectual property being given away for free. Sound-file sharing is a problem now, but it could be what keeps the industry alive in the coming decades; people will find other ways to sell their music.

[1] Sisiario, Ben. Music Sales Fell in 2008, but Climbed on the Web. New York Times. 31 Dec. 2008.

[2] Thall, Peter M. What They'll Never Tell You About The Music Business: The Myths, The Secrets, The Lies (& a Few Truths). Billboard Books, 2006. p316

[3] Butler, Susan. NSAI Celebrates CRB Rulings. Nashville Songwriters Association International 30 Oct. 2008. http://legislative.nashvillesongwriters.com/news.php?viewStory=83

[4] Butler, Susan. NSAI Celebrates CRB Rulings. Nashville Songwriters Association International 30 Oct. 2008. http://legislative.nashvillesongwriters.com/news.php?viewStory=83

[5] Wang , Wally. Steal This File Sharing Book: What They Won't Tell You About File Sharing. No Starch Press, 2004

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Arrangements And Derivative Works

Arrangement [Ger. Bearbeitung]. (1) The adaptation of a composition for a medium different from that for which it was originally composed, usually with the intention of preserving the essentials of the musical substance: also the result of such a process of adaptation.”[1]

            There are many types of derivative works. Although the copyright laws allow the right to make derivative works exclusively to the copyright owners, it has been customary to create adaptations of others works since before copyright was ever made the law. Most every musician and composer create arrangements of their favorite music, which is why a publisher must be ready when:

(1)   The publishers song is being arranged by an outside writer

(2)   One of the publisher’s signed writers arranges a song written by an outside writer

(3)   The writer splits credit for an arrangement with another arranger

(4)   The publisher’s signed writer arranges a work that has fallen into Public Domain

Before determining who gets credit, a publisher must also must know what qualifies a work as an “arrangement” and not a “cover.” A cover song is basically a copy performed by another musician who is not the original writer. Although many cover versions are not exact copies of the original musical work, traditionally there's no intention of receiving writers credit when performing or recording covers; whereas  an arrangement can constitute for shared royalties between the original writer and the new writer. Another thing a publisher or anyone working in industry should be aware of is the difference between a different sound recording of the same work, and an arrangement of the work. If a new rock group recorded Beethoven’s 5^th symphony exactly how Ludwig wrote it, that would just be a “cover.” If the new rock group added a solo and lyrics, that would be an example of an arrangement.

For a music publisher it is almost an everyday thing to determine the percentage of credit that a new writer can take for their adaptation whether it includes lyrics added to an instrumental piece, new chord changes, timing differences, style differences or even different ways of interpreting the writing on sheet music! All of these questions are determined by the publishers and their lawyers, some disputes seem to be never ending.

If a new version of a somewhat dormant song can only bring in extra revenue for the original writer and publisher, agreements can happen rather quickly. It is in the case of popular artists and their hit songs that they might not want others to even release cover versions let alone receive writers credit.

This Business of Music by William Krasilovsky uses the case of “When the Red, Red Robin Comes Bob, Bobbin’ Along” in Woods v. Bourne Co. F.3d978 as an example of one of these arranger disputes where the new writer changed parts while reading the sheet music:

“This was a test action supported by the Songwriters Guild of America to contest the claim of the former publisher that, notwithstanding a valid termination of publishing grants, the old publisher continued to be entitled to receive ASCAP publisher credits when old records containing prior arrangements were performed. After a full trial the district court ruled that although musical arrangements are recognized as a possible derivative use to be protected against termination, the courts ruling should not be read in a vacuum. The courts ruled that a mere cocktail piano arrangement or preparation of arrangement for sheet music or folio use does not qualify for a claim to all recorded renditions of the song involved.”[2] This is how deeply a civil lawsuit over copyrights can look into what qualifies a song as an arrangement.

Often a record label will not have cleared a product with a new arrangement before it reaches the public. Of course the publisher would be paid indefinitely for mechanical uses, but if the song needed to be licensed for a synchronization use, the publisher has the right to deny the arrangement on that release. Many products have been pulled off of the shelves, or royalties have been backlogged because writers and arrangers cannot decide on who gets what percentage.

The PRO’s can provide good leverage for a publisher to negotiate the split of writers' credit with the publisher of the original version, usually because the PRO’s will only render an arrangement worthy of royalties if the new version is “substantially different.” Showing that the song has new qualities, with a society to back up the claim can persuade the original publisher to let the new writer get a piece of the royalties. However, if there is no original publisher, or if the work is in Public Domain, the record label releasing those works might agree to pay a small amount if anything for PD arrangements:

“The contracts of many record labels state that the recording artist grants to the label a free mechanical right license for copyrighted arrangements of songs in the public domain that are recorded and controlled by the artist. This results in greater profits to the record company since there are no mechanical royalties to be paid.”[3]

Many of the decisions about PD arrangements also lay within the performing rights societies that determine whether a new arrangement can be registered for royalty collection. A good first thing to do for a publisher with an arranged song is to register those arrangements with a performing rights society:

 “When ownership of a copyright is split, administration of the property can be difficult. Where coauthors are involved, ASCAP, BMI and SESAC will honor directions from the co-owners to divide performance royalties among the writers and publishers involved… ASCAP, BMI and SESAC are accustomed to paying (often reduced) royalties to authors and publishers of arrangements based on works in the public domain.”[4]

Usually for PD arrangements, BMI will pay 20% writers credit to the new writer(s), ASCAP will pay 15% and SESAC will pay 10%. Here is an example message that a record label might send to a publisher that is claiming rights to a PD title when the songs are not controlled by the recording artist:

“You are claiming copyright ownership on behalf of the arrangers and arrangements listed above. Mike Lerman Recordings Inc., policy is to use your performing rights society’s credit rating to calculate royalties for Public Domain titles provided there is no prior agreement addressing the PD works. Your performing rights society, BMI, grants a 20% credit for Public Domain titles, and as such your mechanical license will reflect your pro-rata share of this percentage. If your performing rights society has reviewed this title for content and original merit and found it to be worth more than the standard percentage, please provide documentation of said review at this time. Please feel free to contact your performance society or myself if you have any questions.”

Some foreign publishers often have a big problem with this message because they are used to getting full pay for their Public Domain arrangements overseas where arrangers take full writers credit. Although most foreign publishers royalties are collected from the territorial performing rights organizations (that often allow full rates for PD arrangements) they must register their arrangement with ASCAP, BMI or SESAC if they want to be paid for licenses in the USA. Many foreign publishers return the with e-mails explaining that the record label’s “policy” has no merit and that they should receive full credit; along witha demand that the song must be pulled from that release and taken from the shelves under an infringement lawsuit. However, the result will most likely conclude with the label sending that publisher a license with the reduced rate anyway regardless of the (and most of the time the publisher still signs it!) After all, as far as this author has witnessed, US copyright law does not obligate USA based record labels to pay for PD arrangements in the first place. 
When it comes to public domain arrangements of works in the public domain (perhaps majority of printed music) there are ways of telling if the written music is an arrangement:

“Often the sheet music publisher will tell you so somewhere on the work. The absence of a copyright notice in the publisher’s name is also a sure sign that the work is not a new arrangement.”[5]

For publishers and writers alike it is extremely important to know how to treat arrangements and other derivative works. Although negotiating the splits on new arrangements can be tricky, it is imperative that people use these arrangements to keep old songs a live. Music in the public domain is made public for a reason, if a new writer can change the piece enough to sound like a new song, a portion of writers credit should be the incentive for derivative works to be recognized.

[1] Randel, Don Michael The Harvard Concise Dictionary of Music and Musicians

Harvard University Press, 1999

[2] Krasilovsky, William M. This Business of Music: The Definitive Guide to the Music Industry Billboard Books, 2007

[3] Krasilovsky, William M. This Business of Music: The Definitive Guide to the Music Industry Billboard Books, 2007

[4] Baskerville, David The Music Business Handbook and Career Guide.  Thousand Oaks: 2006

[5] Fishman, Stephen. Public domain: How To Find & Use Copyright-Free Writings, Music, Art & More. NOLO Publishing.  2008

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Sub-Publishers (foreign partners)

If a publisher has established their business in the United States, their copyright protection and licensing power will be limited to musical products released in the USA [and maybe Canada]. If they want to be paid royalties for a product being sold in another country, they might or might not need a “sub-publisher.” A sub-publisher is basically a foreign business partner that takes a small percentage of the royalties gained in that territory in return for monitoring copyrights, exploiting usage for licensing, and collecting royalties for the domestic publisher. Although the sub-publisher doe’s not own any of the copyrights; the privileges of the original publisher are passed to the foreign co-publisher for administration and exploitation in that territory.

This could be extremely important for a few reasons: (1) Copyright Laws are different in other countries, (2) If a domestic publisher’s writer is extremely popular in another country, it might be worth it to have a satellite partner to encourage the songs use (3) If the country is far away, it may cost more to enforce your rights in a foreign court than to just forget about it. A good publisher can’t forget about it, and must be able to make money while foreign territories are still listening. Before negotiating in different languages, a publisher needs to know a little about international copyrights:

“There is no such thing as an “international copyright” that will automatically protect an author’s writings throughout the world. Protection against unauthorized use in a particular country depends on the national laws of that country. However, most countries offer protection to foreign works under certain conditions that have been greatly simplified by international

copyright treaties and conventions. There are two principal international copyright conventions, the Berne Convention for the Protection of Literary and Artistic Works (Berne Convention) and the Universal Copyright Convention (UCC).”[1]

This means that, a writer that publishes a song in country that is a member of Berne or UCC (the only two conventions mentioned on the U.S. Copyright Office website), their work will be recognized and protected (to an extent) in other member countries as well. The U.S. was the founding member of the UCC and joined the Berne convention in 1989, so any American writer is protected within the boundaries of the conventions memberships. If the publisher wishes to gain copyright protection in a territory that has no convention membership or copyright protection in general, the publisher may have to consult an attorney specializing in international law.

When it comes to collecting money, a U.S. publisher would normally go to a performing rights organization like ASCAP or BMI to monitor national usage. Most foreign territories have their own PRO’s and unlike the USA, they are usually run by their government. Examples of these foreign PRO’s are SGAE (Spain), SAIE (Italy), SADAIC (Agentina), SACEM (France), ACUM (Israel), AEPI (Greece), MCPS (UK and associated), GEMA (Bulgaria, Germany, Poland, Romania, Turkey) and many more. The good news for a U.S. publisher that has signed with ASCAP or BMI is that U.S. PRO’s usually have deals made with these foreign societies already, and certain foreign PRO’s will have registered with ASCAP or BMI for collection purposes. This means that a U.S. publisher can use ASCAP or BMI’s resources to receive foreign royalties!

The Harry Fox Agency is also international. It can collect from foreign societies for mechanical licenses: “HFA only issues mechanical licenses to record companies in the United States. However, HFA does maintain reciprocal representation agreements with affiliated foreign collecting societies and the territories they represent. This provides collection and monitoring services to HFA-represented publishers in these territories.”[2] Therefore, a domestic publisher can use Harry Fox to issue mechanical licenses to foreign territories (there are many) as well- if they want to pay the fees.

So if a publisher is within the United States: its copyright is protected by the Berne and UCC convention, can gain global performance royalties from ASCAP and BMI, and can issue international licenses via the Harry Fox Agency – WITHOUT A SUB-PUBLISHER.Then what’s the point of a sub-publisher? The truth is that a small publisher without any hit song might not, but a big publishers with giant hits and catalogs almost always need that presence in faraway lands. What HFA and ASCAP and BMI cannot do is exploit the copyrights. A domestic publisher can hire those companies all day to issue licenses or monitor foreign broadcasters, but if nobody in those territories are using the music or playing the music to be broadcasted, there are no foreign royalties.

A typical sub-publishing deal is more than just collecting the money and administration; it is a partner overseas that a domestic publisher can trust to bring attention and business to the catalog.

According to Making music make money by Eric Beall: “A good sub-publishing deal should lead to:

-       Covers of your songs in the local market

-       Placements of your songs in local television and radio programs

-       Promotion of your releases in the international territories

-       Tips on local projects seeking material

-       Publicity and marketing for your company and catalog”[3]

Many sub-publishers even find local writers in their territory to co-write songs with the U.S. to create more business; good sub-publishers can be the reason for a No.1 hit song in some country! 

The other reason a U.S. publisher might need a sub-publisher is timing. Like ASCAP and BMI, foreign performing rights societies pay the writer and the publisher separately. Once the performance royalties are collected by a foriegn PRO, and then through ASCAP or BMI, it will probably take much longer for the publisher to receive the money than the writer. So on the publisher side, it’s definitely worth the small percent for the Sub-publisher to get the big check a little earlier. Like ASCAP and BMI, foreign PRO’s must have the songs registered before they can pay anyone what they have collected. When a U.S. publisher has not registered their songs with these foreign PRO’s they will still collect for those songs even if they are unclaimed. This unclaimed money is called the “Black Box” by the music industry and usually can only be collected from by the big time auditors. Forein PRO’s will do everything they can to keep the money (they can collect interest of the unclaimed shares) so a good sub-publisher might help collect that money before it is gone forever.

What does a sub-publisher charge? In All You Need To Know About The Music Business, Donald Passman explains: “The range of deals for subpublishing allows the subpublisher to retain anywhere from 10% to 50% of the monies earned, with the vast majority of deals being from 15% to 25%. The contracts are actually written the opposite way, stating that the subpublisher collects all monies and remits 75% to 85% of it to the U.S. publisher.”[4]The industry way of telling the split is “75/25” that refers to the domestic publisher giving up 25% to the sub-publisher.

This also depends on the type of use. “For printed music, if the subpublisher actually manufactures and sells the stuff, it pays the U.S. publisher from 10% to 15% of the marked retail selling price, the norm being 10% to 121/2%”[5]

For cover records recorded in the foreign territory, or any deal where the sub-publisher was a star player in getting that deal (maybe their local writer contributed or translated the lyrics) the sub-publisher can try to charge more for such releases (as they should). Also, the sub-publisher usually charges more for performance uses (usually 50/50 with the domestic publisher) as they would get less on those uses from Performing Rights Societies collections filtered through ASCAP and BMI. This type of deal can only happen when the sub-publisher has a good deal of bargaining power and might never get it when negotiating with large U.S. publishers like Warner Bros. Music Corp. or Universal Music Publishing Group.

Many American publishing firms make deals with one sub-publisher who can collect from many other territories as well; it causes notice to be brought to another contractual point that a good publisher must use is called an “At Source” deal. This deal requires that all royalties should be computed wherever the foreign money is collected; as opposed to in another territory in which another middle-man might receive money that’s owed to the U.S. publisher(“Receipts-Basis” deal.) “In a receipts deal, the writer would only get royalties based on monies received by the original publisher.”[6] The problem is that if a U.S. publisher collects 75/25 from say, a European sub-publisher to collect from all Europe. So the European collector collects from its sub-publishers who take their share, then the European publisher takes their share and then the money comes to the U.S.!  That would be 75% of 75% =37.5% !! So a good publisher would include an “At Source” clause to its contract to actually get the 75%.

            Another trick for a U.S. publisher with a few big hits is to ask for an advance from a sub-publisher: “If you have one or two songs in your catalog that have generated some heat in the U.S., it is perfectly reasonable to expect an advance from a sub-publisher. The amount will depend on just how big your hits were, the viability of your genre in the foreign territory, and the size of split the sub-publisher will receive.”[7] The advances can help out a great deal during tough times, and a U.S. publisher with a good history should not sign any contracts without something upfront. If there are no advances, the deal is known as a “collection deal” and can sometimes lower the sub-publishers percentage of income to around 10% to 15%.

International relations are becoming more and more common with the globalization of internet sales and giant conglomerate record labels, so every publisher should be aware of the dynamics of international collections and sub-publishing to achieve success. A good international copyright attorney can find the best sub-publisher or save millions in an overseas dispute, but the more a publisher knows off the bat, the more money is left for the music.

[1] U.S. Copyright Office  www.copyright.gov 

[2] Harry Fox Agency  http://www.harryfox.com/public/infoFAQInternational.jsp#1

[3] Beall, Eric. Making music make money : An Insider's Guide to Becoming Your Own Music Publisher Berklee Press 2003

[4] Passman, Donald. All You Need to Know about the Music Business. Simon and Schuster, 2006

[5] Passman, Donald. All You Need to Know about the Music Business. Simon and Schuster, 2006

[6] Baskerville, David The Music Business Handbook and Career Guide.  Thousand Oaks: 2006

[7] Beall, Eric. Making music make money : An Insider's Guide to Becoming Your Own Music Publisher Berklee Press 2003

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