Archive for the 'music law' Category

08
Jun
09

Why Radio & Music Industry Sucks Nowadays

Defining the Music Industry Crisis
Author: chris purifoy
April 21, 2009

“To every problem there is already a solution whether you know it or not.”
-Grenville Kleiser (1868-1953)

With this in mind, I would like to attempt to identify the main problems that have threatened to destroy the vision that was born on the streets of Tin Pan Alley. I urge readers to add to the list and help me begin this journey towards resolution.

11 of the issues that make up the current Music Industry Crisis.

1. Internet radio is the future yet providers can not sustain growth due to growing taxes on streaming music and a lack of clear revenue models.

2. 360 deals strain everything and everyone causing countless problems yet they are a necessary evil for struggling funding partners (Labels, publishers, Management, etc. . ).

3. Social networks and other web 2.0 outlets provide easy and personal access to fans yet the growing number of networks dilutes the overall message and dramatically increases the time spent marketing.

4. Apple has been an incredible innovator in the quest to a brighter music industry. We owe them a great debt. However, their unprecedented high market share in digital music sales mixed with their stubborn and controlling business models leave no bargaining room for funding partners (labels, publishers, etc..). Growth and innovation in this important industry sector (music retail) is therefore stifled without the ability for competitive trials. In addition, Apple’s 30% take on each track sold leaves little for the artists and song writers.

5. Physical Retail stores have lost the ability to turn a profit unless attached to a one stop business model (i.e Walmart, Hastings, Best Buy, etc.). As a result the true music pushers, independent music retail stores, are almost extinct.

6. Traditional radio, though still an important promotional front, has lost much of its glory to the on demand world of iPods, satellite radio, and Internet radio. It has therefore become increasingly more difficult to predict market trends without a standard radio format to follow. The result is a much higher risk/return ratio for funding partners (Labels, Publishers, etc..), which in turn limits the number of acts that ever see a major market entry.

7. The RIAA in an attempt to combat the growing number of music pirates, proclaimed war on piracy by means of civil suits with individual copyright infringers. Many average American citizens were made an example of with outrageous and bizarre settlements. The music industries’ minds were in the right place. They had intended to create the perception of risk for stealing music and in turn, change consumer thinking. In the end however, it only generated a false image of a “Greedy Recording Industry”. This wall between the consumer and the industry has instead furthered the cause for this viral pirating trend.

8. Video and audio sharing networks act as a breeding ground for the spread of illegal music in the form of audio and videos. These new networks cut into the profits of funding partners (labels, publishers, etc.) yet act as a wonderful way for independent artists and major artists alike to receive viral promotion. In addition, simple mathematics states that all of the illegal media sharing portals can not be shut down. Lawsuits cost money, and the recording industry doesn’t have much. Instead, the industry goes after the major outlets one at a time. But for every 1 that is shut down, 7 more are built in its place. Let us just say that this fire is out of control.

9. And let us not forget, stealing music is still more convenient to the average consumer than buying music. In addition, the only way to fully shut down music piracy would be to turn on “Big Brother” and violate very important privacy privileges. Therefore, it can never truly be stopped as long as we live in a democratic society. The solution must lie in connotation and change. Though it may appear that the RIAA is doing more harm then good, they have it right. The battle ground is in the mind.

10. (Addition) The music industries, both production and business, are now intimately and infinitely tied to digital and to the Internet. The systems that govern digital music across the web are not yet fully realized by the core of the music Industry. A clear vision for the future of these newlyweds (music and Internet), has not yet been defined. The marriage is still rocky and working out its kinks. The solution can be found in the collective mind of the industry. To quote our motto, “We must unite to restore.”

11. (Addition & Invitation) The Live Scene

The first round of comments from the Linkedin music business network laid claims to a crisis within the live music scene. The live scene has been neglected by this article. I invite anyone who works in live sound to help me analyse this market niche for problems. Your collective wisdom will greatly aid me in future editions of this article as I seek to once and for all define the music industry crisis.

09
Apr
09

Did Frank Zappa Come Up File Sharing In 1983?

Coming from The Real Frank Zappa Book and discusses his response to “the home taping movement” and the attempt to get everyone to rebuy their old albums on CD by proposing a system where you could subscribe to whatever genre of music you wanted and get it delivered in batches. He first talks about how ridiculous it is to focus just on selling discs of music:

MUSIC CONSUMERS LIKE TO CONSUME MUSIC . . . NOT PIECES OF VINYL WRAPPED IN PIECES OF CARDBOARD.

Then he talks about how to “embrace” home taping:

It is our proposal to take advantage of the POSITIVE ASPECTS of a NEGATIVE TREND afflicting the record industry today: HOME TAPING via cassette of material released on vinyl…. First of all, we must realize that the taping of albums is not motivated by ‘stinginess’ alone …. People today enjoy music more than ever before, and, they like to take it with them wherever they go. THEY CAN HEAR THE DIFFERENCE BETWEEN GOOD AUDIO AND BAD AUDIO . . . THEY CARE ABOUT THAT DIFFERENCE, AND THEY ARE WILLING TO GO TO SOME TROUBLE AND EXPENSE TO HAVE HIGH QUALITY ‘PORTABLE AUDIO’ TO USE AS ‘WALLPAPER FOR THEIR LIFESTYLE’.

So he makes the following suggestion:

We propose to acquire the rights to digitally duplicate and store THE BEST of every record company’s difficult-to-move Quality Catalog Items [Q.C.I.], store them in a central processing location, and have them accessible by phone or cable TV, directly patchable into the user’s home taping appliances, with the option of direct digital-to-digital transfer to F-1 (SONY consumer level digital tape encoder), Beta Hi-Fi, or ordinary analog cassette (requiring the installation of a rentable D-A converter in the phone itself . . . the main chip is about $12).

All accounting for royalty payments, billing to the customer, etc. would be automatic, built into the initial software for the system.

The consumer has the option of subscribing to one or more Interest Categories, charged at a monthly rate, without regard for the quantity of music he or she decides to tape.

Providing material in such quantity at a reduced cost could actually diminish the desire to duplicate and store it, since it would be available any time day or night.

Monthly listings could be provided by catalog, reducing the on-line storage requirements of the computer. The entire service would be accessed by phone, even if the local reception is via TV cable.

The advantage of the TV cable is: on those channels where nothing ever seems to happen (there’s about 70 of them in L.A.), a visualization of the original cover art, including song lyrics, technical data, etc., could be displayed while the transmission is in progress, giving the project an electronic whiff of the original point-of-purchase merchandising built into the album when it was ‘an album’, since there are many consumers who like to fondle & fetish the packaging while the music is being played. In this situation, Fondlement & Fetishism Potential [F.F.P.] is supplied, without the cost of shipping tons of cardboard around.

We require a LARGE quantity of money and the services of a team of mega-hackers to write the software for this system. Most of the hardware devices are, even as you read this, available as off-the-shelf items, just waiting to be plugged into each other so they can put an end to “THE RECORD BUSINESS” as we now know it.

Just imagine how different the music industry might be today if he’d been able to move forward with that idea. 1983 was probably too early, but jump forward ten years… and we’d be facing a very different sort of music industry.

08
Apr
09

Music Coalition wants to rewrite rules of music business

The Future of Music Coalition has released a set of principles that it hopes will govern the distribution of revenues from new models of music sales. The big labels are unlikely to be amused by its ideas. By John Timmer

As revenues from sales of traditional media have plunged, the music business has been looking for alternate ways of making money from its products, including a variety of subscription services, ad-supported streams, and blanket licenses. The focus of these efforts has largely been on how to ensure that revenue gets collected by the industry in general instead of disappearing into the black hole of piracy, but there’s a related issue that doesn’t receive as much attention: how that money gets distributed once it’s collected. In an attempt to highlight this issue, the Future of Music Coalition has released a set of principles for the compensation of musicians. Although the document focuses on money from new distribution models, it reads much more like an effort to rewrite the rules of the entire business.

The FMC calls itself a “research and advocacy organization that seeks a bright future for creators and listeners,” two groups which tend to have contentious relationships with the major record labels. Based on the document and an accompanying explanation, the FMC isn’t a big fan of the labels, either. So, for example, one of the principles calls for the ability of artists to audit the flow of cash related to their works through the record label’s coffers. In explaining this, the FMC states, “Music industry history is full of stories—anecdotal and otherwise—of misleading accounting by copyright owners.”

That’s hardly the only place where the copyright owners get slammed, as the discussion also states that, “the history of the music industry is littered with stories of artists who have not been paid anything for the sales of their recordings.” That appears in the explanation of the first principle, which is that revenue should be “equitably shared” between music’s creators and the copyright holders. Of course, said holders presumably think that the existing system is fair, which explains why a big portion of the document is spent resetting those rules.

The most critical aspect of this probably occurs in the statement on “direct payment.” Here, the principles say that any transfer of revenues to copyright owners are limited to three years. This would eliminate one of the common business practices, in which record companies would pay for recording, distributing, and promoting music, and then count that as a debt that entitled them to recoup their costs from the artists’ share of any profits. Were these principles adopted, the labels would have three years to get their costs back, after which they can write it off. The concept of direct payment is meant to ensure that the labels would never have access to this money in order to take their share past this point.

A lot of the remaining principles focus on the fact that many of the online services get their music through agreements that abstract a lot of the relationship between music and revenue. So, for example, the labels got an equity stake in MySpace in return for providing the contents for MySpace Music. Other bulk catalog licensing deals exist where the value of the license is a bit easier to determine. In either case, those deals are ultimately dependent upon the content produced by artists, and FMC wants to make sure they get their cut. The same goes for money recovered from copyright infringement lawsuits

Many of the other items are a grab bag of artists’ rights issues. So, for example, in a digital distribution model, it should be possible to accurate track precisely what songs are getting played, so there’s no excuse to not have accurate reporting of this, and revenues distributed accordingly. The FMC also doesn’t want independent musicians and minor labels left out of agreements negotiated with the major labels and, as mentioned above, wants to see transparent accounting of the revenues from these agreements, along with a right to audit for artists.

It’s unlikely that artists will get the sorts of rights that the FMC envisions; there are too many entrenched interests involved, and a lot of groups with a financial interest in blocking these proposals from being adopted. Still, the statement of principles is a good reminder that the music business is far from a monolithic entity, and there are many within it that have conflicting goals. As a result, even if one of the new revenue models winds up being successful, that’s unlikely to mean the end of the power struggles.

12
Mar
09

Is Compulsory Licensing the Resurrection of Hip-hop?…

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 benefitted 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 posible. 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, there 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.

Finallly, 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.

Julian Haffner is a partner at Richa Haffner, P.C. located in Bethesda, MD. He received his J.D. from Howard University School of Law and his B.A. from Swarthmore College. Julian counsels clients in the entertainment industry, focusing on forming and advising small to mid-sized entertainment entities, drafting and negotiating contracts related to music, television, and film, and dealing with trademark, copyright, and other intellectual property matters. His entertainment clients include recording artists, composers, music producers, music publishers, record companies, and independent film and television producers.

He can be reached at haffner@richahaffner.com




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