My colleague and good friend Joe Messina recently showed me an interesting article by Larry Rohter in the New York Times, “Record Industry Braces for Artists’ Battles Over Song Rights,” which for this entertainment attorney raised more issues than it solved regarding the termination of copyrights under changes to federal Copyright Law which occurred more than 25 years ago.
As of 1978, §203 of The Copyright Law allows the writer, author, creator who assigns a copyright, OTHER THAN A WORK FOR HIRE (which I’ll address below) to place the assignee on notice 2 years prior to the 35 year period that they intend to terminate the assignment of rights. The statute does not allow for any waiver of this termination of rights under contract. Please also keep in mind that this provision is only in the United States.
For years, major record labels raped up and coming musicians of their song publishing rights, taking away a large revenue stream from musicians who were already indebted to their labels when their first hit went gold or platinum. That’s because the music industry business model worked this way: The label would place a new artist in a studio with a producer chosen by the label and often with session men also chosen by the label. The starry-eyed newbie thought this was just fantastic because they were in a “recording studio” which had A/C and electricity that their parents were not paying. Yet, they were paying big time because the label advanced all these upfront costs but recouped them on the back-end when the song was a hit. The revenue was generated through the sale of records and CDs and through the mechanical licenses. Those so-called payments for “mechanical rights” were paid to the publisher and the writer for each record sold; therefore, the labels were paying themselves. So, if the record company owned the publishing rights then they were not only earning revenue from the sale of discs but also from the mechanicals.
Big labels (I now say that tongue in cheek) had publishing divisions. If you were signed to one of the WEA (Warner – Elektra – Atlantic) labels you often assigned your publishing rights to Warner-Chappell Music. It was a perfect fit for the megalithic labels but a sour note for the musicians.
For the inexperienced out there – look at the deal as a musical pie with only three slices – recording, publishing, writing. So, an all-American act named the B.Boys comes to the label. The record costs $250,000 to make in the studio (not including the costs to manufacture and distribute the discs which the label has yet another division to manage). The B.Boys now owe $250,000 to the label before the first disc is ever sold or played on the radio. If their piece of the “pie” only nets them 1¢ per album (OK, that might be an exaggeration but only by about a dime!!!) that means they would have to sell 25 million discs just to break even with the record company……….and that’s not discounting for the commissions they owe to their managers and agents. Also, I cannot even begin to address music industry math in this short space but it boggles the mind to see how they can consistently calculate the “net” of a project out to zero. It’s “magical math,” quite astonishing.
So, the acts go on tour and live their lives in a bus to live one step better than a homeless shelter. Thus, that first tour lasts for years just so the band can pay off everyone!
Then, lo and behold, the digital age is born and David Bowie is the first big act to take control by releasing an album solely through digital download and without owing one dime for its production to any record label. Well, let’s just say that was not Ziggy’s most successful album.
The digital landscape placed a stranglehold on the music industry, which now blames its demise on illegal downloads over the Internet. Musicians began fighting back long ago which is why the 1978 change in Copyright Law pre-dated the Internet revolution so let’s not misplace the blame here. The blame lies squarely with high-living industry executives who wanted to be the rock stars and balanced their libidinous desires on the broken backs of the working artists. Instead of the labels morphing the business model as the landscape changed, they locked themselves in marble towers like the cry-babies many of them were and refused to see or manage business differently.
At the end of this year, acts who released material in 1978 can now start the process to exercise their termination rights and recoup the publishing rights to songs they created. I highly doubt, however, it will be as easy as pie since the law has yet to be tested in court and since there is no bright line definition in the statute as to what will happen to the recordings themselves.
§203 clearly carves out termination rights as not applying to “works made for hire” and strong arguments can be made that the “Master Recordings” were owned by the labels themselves. I don’t think anyone who’s passed the bar and practices entertainment law could successfully argue that the musicians were “employees” of the labels. Clearly they were independent contractors and as such, the work can only be deemed a “work for hire” and outside the parameters of “termination rights” if it comes under one of nine statutory provisions or if the work had been “specially ordered or commissioned” by the label and the parties agreed to that project status in a written contract. Therefore, each artist’s rights to the recordings themselves will be evaluated in light of their individual contracts.
These battles will only just begin as this year comes to an end but keep in mind we are talking about acts and songs who peaked 35 years ago. Does anyone but their families care any longer?