Tag Archive for 'Music royalties'

iTunes, DRM and Artist Royalties

published
on October 3, 2008
by
ACtual
in future of music, music, music business, music law, and politics
. 0 Comments Tags: , , , , , , , , .

Earlier this week, alarm bells were ringing when a quote from Apple in 2007 found its way back to the top of the news heap. That quote? That if royalties were to change to a point of being unprofitable to Apple, it would shut its iTunes store down. Now even the thought of this, among Apple and its competitors, has been brewing frightening thoughts for the consumers for a while due to the fact that virtually all the music these stores sell is DRM protected. Of course, the DRM is built into the song, so what exactly happens if the company selling the songs ends their existence? Well, it looks like the DRM for the material would expire, leaving consumers with hundreds if not thousands of “purchased” songs that will no longer play anywhere. As a music lover (and legal buyer of mp3s), this kind of news, even if it is an undeveloped thought, causes a good deal of frustration. Here the studios want consumers to pay for music, foregoing the option of downloading all the music they want illegally for free, but the copyright protection within the music means that if the retailer goes down, the files go down with it? That’s like buying a CD at Tower which is then erased when Tower goes out of business (you all do still remember Tower, don’t you?)

So what can we do about it when the very mechanism that has allowed music labels to go digital, and therefore the infrastructure that controls all of our legal downloads, is compromised by companies willing to close their DRMs? Unfortunately, not much. Short of burning all of your DRM tracks to a CD and then re-ripping them to mp3s to strip of them of their DRM (and some sound quality in the process), if a store goes down and discontinues its DRM licensing, all the tracks you’ve bought could die on your iPod. This to me seems like the ultimate Trojan horse of the music industry…we don’t want you to have mp3s, but if you do, we’ll create a way so that once they’re in your music library, should the stores you bought them from close, we’ll demolish your entire music collection from the inside.

I understand the purpose of DRM, but unfortunately its just not a viable business model if there are ways to stop the music playback at any point after the purchase. The point of buying music is that you have it forever. All the CDs I bought are still mine and will be mine for as long as I manage not to lose or damage them. The idea that you could buy a song which at some point in the future becomes unusable is, to me at least, outrageous.

The reason that all of this has come about this week is because the Copyright Royalty Board (CRB) was weighing a decision to raise the artist royalties on digital downloads from 9.1 cents per song to 15 cents a song. From what I can ascertain from the article announcing the steady royalty fees, a .99 cent iTunes song is sold like this…

1) Apple sells the song for .99. 2) Apple keeps .29. 3) Apple gives .70 to the record label. 4) Record label gives the artist 9.1 cents, keeping 60.9 cents. I don’t know about you, but even at 9 cents a song, it seems like the labels and iTunes are getting over on the artist. Are we really supposed to believe that the iTunes store deserves to keep almost three times as much money for a song it sells than the artist receives?

What this scare does do is make it painfully obvious that the record labels and online music stores need to create a way and find a method to allow consumers to legally retain their music, no matter what happens to the store you buy it from. Should royalty rights eventually be raised in favor of the artist, it would be a travesty for Apple to claim it can no longer operate iTunes profitably (with the number of sales they have per year and the fact that they’re getting money just to be a middle man, it would be very hard for me to accept the idea that they aren’t profitable), disable the DRMs and leave music consumers with a bunch of dead and unusable files. Apple needs to show a little more foresight and decency when it comes to wolf cries of lost profits with a change from 9.1 to 15 cents of royalty. This could have been Apple simply playing politics in order to protect its profit margin, but even then the greed factor, given what the artists out there are making, comes into play.

For now (the CRB’s decision lasts 5 years), it appears we can rest easy. But it makes it clear that more thorough examinations of the digital music sales industry, DRM technology and what the rules and technology mean to consumers are necessary and should not be ignored.

Survey: How Do You Collaborate With Other Musicians, Engage With Fans, and Profit From Your Art?

published
on July 18, 2008
by
Alan Khalfin
in collaboration, music, music business, technology, web 2.0, web 3.0, and website
. 2 Comments Tags: , , , .

Musicians, we need you!

We have teamed up with our friends Hypebot and Indie Music Tech to find out how musicians collaborate on music with other musicians, how they engage fans, and how they profit from their work. We hope to find out how musicians are doing these things online, and if they are, whether they’re satisfied with the tools currently offered.

If you’re a musician, please take a minute to take the survey. The results should be very interesting and we’ll be sure to share them with you! The first 100 people to complete the survey will get a sweet ass MixMatchMusic t-shirt!

You can take the survey here.

WTF is Music Publishing?

published
on June 13, 2008
by
Alan Khalfin
in music, music business, and music law
. 11 Comments Tags: , , , , , , , , , , , , , , , , , , , , , , .

As a law student who geeked out on Copyright law, the single most frequent question I’m asked is: “Dude, what the hell is music publishing?” This is a very loaded question that triggers a discussion about music Copyright law and the various royalties that stem from each music Copyright.

Copyright law divides the musical process into two parts: (1) the writing of the song and (2) the recording the song. This is a distinction most DIY cats don’t make because they’re doing both! But, in the “traditional” (and rapidly fading) music industry, the songwriters wrote the songs and the recording artists recorded and performed the songs (except for the singer/songwriters who did both). Most likely, you’ve never heard of the songwriters, but are overly familiar with the recording artists.

There are thus two copyrights that apply to music (both of which come with “exclusive rights“):

1. Copyright for the Song (form PA): This covers the underlying musical composition of the song (music and lyrics) and belongs to the songwriters/music publishers. It covers the writing of the song itself, as opposed to a recording of the song.

2. Copyright for the Recording of the Song (form SR). This covers the audio recording that is made of a song. It covers the actual recording of a particular composition, and belongs to recording artists/record labels.

So, music publishing is the business of creating/administering/monetizing the copyrights for the song. Record labels, on the other hand, do the same for the sound recordings (the “Masters”). While a song is only “written” once (and can only be copyrighted once), many different sound recordings can be made of the same song (and each recording would have its own sound recording copyright). Once a first recording (“first use”) is made of the song, anybody else can then “cover” the song based on the statutory royalty.

Note, I said “cover” and not “sample”. When you’re covering something you need permission from the songwriter, and not from the recording artist who recorded the famous version of the song. In the interest of creative growth, copyright law requires that the songwriters grant you permission , via a compulsory statutory royalty. If you’re covering something, you might be able to get the license here.

So, why should musicians care about this? For a moment, lets put aside the ongoing debate of where musicians earn most of their money. At least some of the money earned actually comes from the purchase or use (licensing) of the music. In an age where a successful musician must aggregate as many sources of revenue as possible (the long tail of music revenue, anyone?), musicians should be aware of the specific royalty chains that attach to each copyright.

From each of the two copyrights, a specific royalty chain ensues. Thus, there are royalties owed to the writers (the publishing side) and separate royalties owed to the recording artists (the Master side).

On the publishing/writer’s side:

1. Mechanical Royalties: Due from sale of recordings of the song through MP3s, CDs, LPs, etc. The current statutory rate is 9.1 cents or 1.75 cents per minute of playing time (whichever is greater).

2. Synchronization Licensing Fees: Due when a piece of music is “synced” or matched with a movie, tv show, commercial, video game, etc. These fees also apply to online audio-visual production.

3. Public Performance Royalties (via ASCAP, BMI, and SESAC): When a song is played/performed/streamed/broadcast publicly (on the radio, internet, on TV, etc), royalties are owed for this use. Performances are generally broken down into feature performances and background music. If there is a sync license deal, additional royalties are owed for the broadcast of the works the music is used in.

On the label/recording artist’s side (excluding tours/merchandise):

1. Money from the “exploitation” (sale) of the Masters in various formats (MP3, CD, LP, etc). For this, mechanical royalties are due on the publishing side.

2. Master Use Licensing: A sync license only covers the license for the composition of the song, and a separate license needs to be obtained for the use of the masters.

3. Digital Performance (via Sound Exchange): There is a limited public performance right in sound recordings when performed by digital transmission (generally, there is are no public performance rights in sound recordings). For most digital performances, there is a compulsory statutory license, but for some a case-by-case license fee is negotiated.

So, if you want to make as much money as you can off your music, you gotta mix and match your revenue streams. A general understanding of both publishing and sound recording law is thus pretty darn helpful!

A good reference for the issues covered in this post is, Music, Money, and Success by Jeffrey and Todd Brabec. Please note that this post attempts to provide an overview of music law, but by no means covers all the issues that arise. Please don’t take this as legal advice!