Estate Planning for Composers: 10 Things to Do Before You Die

Making preparations for your eventual demise isn’t fun. But there are far more important things you can do for your musical legacy than writing a requiem. Proper planning for your death or incapacity is important even if you don’t have a spouse or kids and involves more than just making a will. Besides, what better time than in the dead of winter to deal with these issues?

So here’s a bucket list of ten things composers and other musicians should do before they die. You don’t have to do everything all at once and some steps are more important than others. But get started! Spoiler alert: it all boils down to organizing your musical life, deciding who you want to be in charge of it once you’re gone, and then working with professionals to ensure a smooth hand-off.

1. Organize your files. All contracts, royalty statements and other important documents should be kept together and clearly organized. Get a filing cabinet and a bunch of manila folders.

Create clearly labeled physical files for:

– PRO (ASCAP, BMI or SESAC) membership agreements both as a writer and, if applicable, as a publisher

– your publishing company documents (e.g., d/b/a certificate, operating agreement, bylaws)

– songwriter, composer or other music publishing agreements for any works represented by other publishers

– copyright registration certificates

– agreements with collaborators and/or owners of copyrighted text, including royalty splits/payment information

– recording contracts if you’re a recording artist or have self-produced any recordings

– mechanical licenses from record labels or Harry Fox for any recordings of your works

– all commissioning agreements, particularly if there are any unexpired exclusivities

– film, TV, advertising, videogame, corporate and other scoring agreements

– copies of recent royalty statements (e.g., past 3-5 years) from performing rights organizations (PROs), music publishers,     record labels, Harry Fox (HFA) and other entities that are supposed to pay you for the use of your music

Organize your digital files, too:

– clearly label all your Sibelius, Finale, PDFs, audio and other digital files in specific folders

– back them up onto a thumb drive and/or cloud storage

– organize, label and back-up PDFs of physical documents listed above

2. Create an easily accessible master list for the passwords to:

– your computer(s)

– your PRO and SoundExchange account(s)

– your web site and web hosting account(s)

– your email and social media account(s)

– any online services where you’ve posted your music

– any password service for any of the above

3. Make sure all your works have been registered with ASCAP, BMI or SESAC. You need to do this regularly in order to get paid public performance royalties. Also, if you are self-published, it’s the easiest way for potential licensees to find your music other than Googling you to find your web site. And periodically check to make sure works represented by other publishers are properly registered, too. (If you’re a recording artist or have self-produced recordings you should also sign up with SoundExchange and register your works there as well).

4. Assign the copyrights in your works to your publishing company if it’s a corporate entity. If you don’t have a publishing company or it’s merely a sole proprietorship (e.g., Jane Doe d/b/a Jane Doe Music) this is not an issue – there’s no need to assign something to yourself. However, if your publishing company is some other form of business entity (e.g., S Corp., LLC, LLP) you probably should do this. Since PROs only track payees, not owners, merely registering your works in the name of your publishing company with your PRO may not be sufficient when it comes to any sale or transfer of your publishing company. A one-page assignment of copyright with a schedule of works may be all that’s needed.

5. Register your works with the Copyright Office. While registration is permissive, rather than mandatory, there are many benefits to registration, including proof of authorship, the existence of deposit copies of your work and availability of statutory damages if your work’s infringed. You can do a group registration under certain conditions and you can do it online at www.copyright.gov.

6. Make a list of works represented by other publishers. It can be a simple Excel spreadsheet with columns for the title of the work, instrumentation, the publisher’s name and contact information.

7. Let someone know where all the above information is kept. Any master list and instructions should be in a separate document kept with your will and other estate planning documents and insurance policies.

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While you’re organizing your files and making sure your works registrations are up to date, here are some things to think about regarding estate planning for your music and other creative properties:

8. First, find a local trusts and estates (T&E) attorney. While the Copyright Act is federal law, T&E law is largely governed by state laws, which can vary greatly. Moreover, you want to meet with a local T&E lawyer about drafting important documents such as your will, living will, health care proxy and any trusts for the benefit of loved ones. Your T&E attorney will ask you all the right questions about how you want to deal with your estate, including tax issues, and will customize an estate plan for you in accordance with your state’s and applicable federal laws.

9. But, also consider working with an entertainment lawyer, too. While there are T&E lawyers who are well-versed in copyright and the music business, most are not, especially if you live in an area that’s not a big arts hub. So, it may be helpful to have an entertainment lawyer work with your T&E attorney. The entertainment lawyer need not be local, but should be someone with copyright and music business expertise, including things that are specific to “new music.” The pitfalls avoided will be well worth the modest additional cost.

An experienced music lawyer can be helpful because this attorney can:

– assist your T&E lawyer in ensuring that the applicable provisions in any will, trust or assignment documents are appropriately drafted. This way, copyrights, royalties, scores and other aspects of your creative life will not merely be vaguely lumped together with other personal property or financial assets – especially if you want to divide up ownership of individual works or royalty streams or you want specific instructions as to the disposition of individual scores, instruments and mementos.

– ensure that appropriate documentation is supplied to PROs, publishers, labels and other entities so that your beneficiaries will have their rights promptly recognized and royalties will continue to be paid, rather than placed on hold.

– determine whether royalties are being properly paid and whether certain agreements may be terminated either through contractual provisions or by the termination provisions of the Copyright Act.

– perform a valuation for your works or assist an estate appraiser so that any deals your estate makes with respect to the sale or administration of your catalog will be a fair one for your loved ones.

– negotiate an agreement for the sale and/or administration of your music as part of your estate plan that would only take effect upon your death so as to avoid your executor or your loved ones having to deal with arcane areas where they lack expertise. Any agreement would have to address financial terms, such as acquisition fees, advances, royalty splits and other contingencies, such as the ability of an executor to back out of a deal and/or make alternative arrangements if the publisher/administrator ceases to exist or is otherwise unable to comply with the terms of the agreement.

10. Consider having a separate music or arts executor. The person you choose as the executor of your overall estate should be the person you trust the most to deal with your home, your finances, the care of your loved ones and most of your other physical possessions. However, that person may not be the best one to deal with your music and any other literary or creative properties (e.g., did she really mean to put that C# in the horn part?). So, just as you may consider consulting an entertainment lawyer as part of your estate planning, you may want to consider naming a friend or colleague who is familiar with your music to serve as a special music or arts executor to deal with your compositions and other creative works. You should discuss your choice of executor(s) with the individuals you choose and should have back-ups. Executors can decline to serve – or may even predecease you.

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As with other aspects of your estate planning, paying attention to issues relating to your music now, before you either die or are incapacitated, will not only give you peace of mind but will spare your loved ones unnecessary cost and anxiety. It’s the best way to protect your creative legacy.

Five Things Composers Should Ask About Working With a Publisher

In December, I was invited by Jennifer Higdon to speak about various aspects of the music business to the Curtis Institute’s Composers’ Forum. I was peppered with some very pointed questions about the music publishing prospects for emerging composers. The students were justifiably skeptical because a publishing deal isn’t for everyone. But there are also alternatives besides signing your works away to a publisher or doing everything yourself.

Here are five questions a composer should ask to determine whether a publishing deal makes sense:

1. What exposure do you already have? Just as a record label won’t sign a band that doesn’t already have a following and a self-produced album, publishers need to see that you are worth the investment of their resources. So, if you already have a resume that includes performances, awards, commissions and residencies (not all boxes need be checked) that’s a foundation a publisher can build upon. It also shows that you’re serious about your career and are willing to work at it.

2. What kind of works do you mostly write? Publishers are best when dealing with large-scale works such as orchestral works or operas. And even if a composer submits a Sibelius or Finale “manuscript” it’s still very costly and time-consuming to produce performance materials acceptable to professional orchestras and opera companies. Because they are voluminous and expensive to produce, performance materials for symphonic and operatic works are rented rather than sold. Publishers make the most money, both for themselves and the composers they represent, from the rental and performing rights income.

Works for smaller ensembles, such as string quartets, works for solo piano, piano and voice and other ensembles of say, eight players or fewer, are mostly sold rather than rented. After deducting print costs, publishers make much less money off of these works. Public performance income is also typically much lower than a larger-scale work of comparable length. Similarly, works for concert band or chorus are also sold rather than rented. These will be “new issued” like books and will generate sales in the first year or two. After that, unless the composer continues to supply new product, i.e., new band or choral pieces, a single work will likely languish – as far too many composers have found out the hard way.

3. Who’s performing your music? If you’re a member of an ensemble and you write for that group there’s no need for a publisher intermediary. You also have to ask yourself if you really want other groups to perform your music. And even if you do, if your ensemble has unique instrumentation it’s less likely that other groups will program your works.

4. Will a publisher promote my music? Publishers have long-established relationships with artistic administrators at orchestras, opera and ballet companies, as well as domestic and international music festivals, individual conductors and soloists. However, all publishers have an existing roster of composers that need care and feeding. For example, at Boosey & Hawkes, where I used to work, not only do they have living composers like Adams, Reich and Rouse, but the heirs of Bernstein, Carter, Copland, Stravinsky and many others still want these composers’ works programmed as much as possible. Classical publishers haven’t been immune from the ills that have plagued the music industry for more than a decade. And everyone’s promotion staff is stretched thin. That said, some publishers do a better job than others. Ask around.

5. Do I really want to handle the business of being a composer? This includes photocopying and shipping scores and parts, negotiating commissions and license agreements, managing expenses and being your own publicist. Some composers are good at this and enjoy it. Others, not so much.

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In short, if you are a composer that writes mostly smaller-scale works, particularly if it’s for your own ensemble, you may well be better off selling downloads from your own web site.

However, if you:

– want to write large-scale works
– have an existing catalog that’s generating some income
– are getting commissions and performances
– have gotten some awards and/or a residency or two

Then, a publishing deal may be something to consider.

However, publishers sign very few composers. Boosey, Schirmer, Presser, Peer, Peters, Schott, Subito and any others will sign only about a handful of composers a year combined – not each. That’s less than a composer per publisher per year. Why? Because it’s a very expensive, long-term commitment and each of these publishers has continuing obligations to its existing composer roster.

Bonus Question: What should I ask if a publisher’s interested in me?

Here are five basic questions to ask:

– Will they pay an acquisition fee for my “back catalog” of pre-existing works?

– Will they pay an advance on royalties for works written during the term of the contract?

– Will I retain ownership of any portion of the copyrights to my works or will the publisher own them outright? In other words, am I being offered a publishing, co-publishing, administration or distribution deal – or some combination of them?

– What are the royalty splits for various income types (print, rental, grand rights, synch, etc.)?

– How will they promote my works, including increasing my income and getting commissions for me?

Those are just the preliminaries. A typical publishing contract has many other terms that need to be understood and often negotiated. Entering into a publishing agreement can be the most important career decision a composer can make. Any composer contemplating signing up with a publisher should consult with a knowledgeable attorney. And a good lawyer can also suggest and negotiate possible alternatives to a pure publishing or pure DIY relationship, such as hiring a publicist, administrator or music distributor.

Fat Chance for Skinny Puppy’s Guantanamo Claim

Yesterday, my astrologer friend, Elisabeth Grace, asked me to make a prediction of my own. She forwarded this article in The Guardian and inquired as to whether I thought the band Skinny Puppy has a case. As the article points out, the band’s music apparently was used as part of the “enhanced interrogation techniques” on “detainees” at the Guantanamo Bay facility operated by the US government on the grounds of the naval base there. The band is now demanding payment from the US Department of Defense in the amount of $666,000 for the unauthorized use of their music in this manner. Although I’m sympathetic to Skinny Puppy’s plight, I’m skeptical as to whether they have a cognizable claim.

Let’s assume that one of the guards got his hands on a Skinny Puppy CD and that he and his buddies thought it would be “persuasive” to blast the music at high volume on the prison grounds. Could Skinny Puppy have objected to this usage and can they now demand payment from the US government? Although Gitmo is on the island of Cuba, it is United States territory, so presumably, US law applies. The US Copyright Act grants copyright owners the exclusive right of public performance in Section 106.

However, this right does not apply to the public performance of a sound recording, such as a CD, LP or download when played over loudspeakers or broadcast by radio or TV. There is only a public performing right in a sound recording when it’s performed by means of a digital transmission, such as by streaming over the Internet. The US is one of less than a handful of countries (including North Korea and Iran) that does not have a broader public performing right in sound recordings.  So, neither the band nor its label can sue for the unauthorized blasting of the Skinny Puppy tracks over loudspeakers at Gitmo.

And that’s even assuming that such a broadcast constitutes a “public” performance under the US Copyright Act. Although there is no public performance right in a sound recording, there has long been such a right in the underlying musical compositions. It is this right that performing rights organizations (PROs) like ASCAP, BMI and SESAC have been licensing for decades. The songwriters and music publishers of the songs embodied in recordings that are played over loudspeakers at stadiums and nightclubs and other public venues are paid for this use by the PROs that license these facilities.

Section 101 of the Copyright Act defines a public performance as  a performance that is “at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered.” I’ve not researched this issue, but performance at a federal detention center or any other prison probably isn’t a “public” performance. For example, ASCAP and BMI license local – but not federal – governments and prisons don’t seem to be covered by these licenses.

To further illustrate the distinction between a public performance, over which the songwriters of the Skinny Puppy works could have a claim and a private one where they would not, consider this example: If I were to blast a Skinny Puppy CD in my apartment, that’s a private performance and neither the band, the label, the songwriters, SoundExchange, nor ASCAP or BMI could come after me. However, my neighbors could call the cops for creating a nuisance – but that’s not a copyright claim or one that the band would have standing to bring.

And while there isn’t a blanket government use exemption, the feds would likely argue, somewhat ironically no doubt, that even assuming there is a “public” performance of the Skinny Puppy songs at the prison, the use by the government was “fair use” as it was in the course of lawful governmental activity (at least according to Justice Department memos) and not for commercial gain. If the government can claim “fair use”, it’s as if they had permission. For example, if a local fast food joint had ASCAP and BMI licenses and used certain music to deter teen loitering, the songwriters would have no say as to this particular use or the volume of the playing,  although the neighbors — but not the songwriters or the recording artist —  might object as a nuisance.

Any other claims the band might have may well be pre-empted under the Copyright Act. But as quoted in The Guardian article, the band’s keyboardist acknowledges that their point isn’t financial gain. It’s just one more more in a litany of public  moral outrages associated with Guantanamo. Unfortunately for Skinny Puppy, they can’t sue based on any such moral rights.

 

Copyright Law, Capitol Hill and the Music Business: Can This Marriage Be Saved?

On Wednesday, I attended a luncheon sponsored by the Association of Independent Music Publishers. Like last month’s AIMP lunch, the room was packed with my PRO, music publishing and copyright lawyer colleagues. This time it was for a panel discussion on copyright reform and the music business. The panel, moderated by attorney Michael Sukin, consisted of Jacqueline Charlesworth, General Counsel of the US Copyright Office, Steve Marks, General Counsel of the RIAA and David Israelite, President of the NMPA.

Charlesworth, who started the discussion with a brief PowerPoint recap of recent developments, joked that she was asked by Sukin to sit between Messrs. Marks and Israelite – and she did. In the past, RIAA and NMPA were perhaps more frenemies than besties, with sometimes divergent interests. Charlesworth summarized the various House hearings on copyright and the music business as well as the Copyright Office’s music licensing study which is still in progress. She said there is a consensus that Section 107, the current fair use statute, does not need to change as the four statutory factors were adequate guidance for the courts.

Charlesworth also gave a recap of the hearing regarding Section 512 DMCA takedown notices, with most agreeing that the process doesn’t work. She also addressed the status of the proposed Songwriter Equity Act, which I’ve previously discussed, and the RESPECT Act, which would provide that pre-1972 recordings (which are not protected under federal copyright law) would be subject to the statutory licenses for streaming recordings. This would mean that online services would have to pay royalties regarding the streaming of recordings of classics from the Big Band era to the Beatles and beyond. Recently, two courts have determined that even absent federal copyright protection such royalties would need to be paid under California state law.

Steve Marks discussed royalty payments to labels by streaming services and the disparity among them. He said Pandora pays about 50 cents per user per month in royalties to labels whereas Spotify pays $7 per user per month. One is on a statutory license for a non-interactive service (i.e., users can’t select individual songs) whereas the other is interactive, and therefore subject to market rates. You can guess which is which. He said this disparity doesn’t make sense since the user experience is similar and the distinctions between interactive and non-interactive are increasingly blurred. He agreed that the current music licensing “system” is broken, using as an example of one instance where 1500 separate licenses were needed for one 20-song album. I’m thinking that’s an awful lot of split copyrights and samples to be cleared.

Both Marks and Israelite stressed that statutory rate-setting provisions should be amended to reflect a free market benchmark, i.e., what a willing buyer and seller would negotiate. Marks also stated that with respect to music services he favored pursuing new licensing models, including blanket, collective and bundling of rights. He also stated that both labels and publishers should be paid directly by services (i.e., no pass-throughs) with all rights holders having audit rights.

Israelite stressed that like health care reform and immigration reform, copyright reform means different things to different constituencies. To what he characterized as “extreme academics”, copyright reform means looking at copyright through the prism of the public good and getting material into the public domain as quickly as possible. They and their Silicon Valley funders believe that copyright duration should be shortened and that fair use and application of compulsory licenses should be expanded.

By contrast, Israelite said most of the creative community view copyright as a property right that needs to be strongly protected in order to incentivize creators to create new works. Historically, Israelite pointed out, copyright reform had always been about strengthening copyright protections.

Israelite spoke eloquently on the stifling effect statutory and Consent Decree regulations have on songwriters and music publishers, pointing out that labels have about 8% of their income regulated while publishers have 75% of theirs subject to Congressional or Consent Decree oversight. As a result, Pandora pays 50% of its revenue to labels but only 4% of its revenue to publishers who are subject to rates dictated by statutes and Consent Decrees. The panelists all touched upon the current Justice Department review of the ASCAP and BMI Consent Decrees, a topic I discussed here.

Very little of the discussion covered new ground. However, what was interesting was the degree of mutual support that RIAA and NMPA had for their respective interests. For example, Israelite expressed strong support for copyright protection for pre-1972 recordings and a terrestrial public performance right for sound recordings. Similarly, Marks expressed support for Consent Decree reform and to amend the Copyright Act in Sections 112 and 114 to have rates regarding musical compositions set using a fair market benchmark.

This more closely united front is undoubtedly the result of common perceived “enemies” that did not exist historically such as Google/YouTube, Apple/iTunes, Pandora, Spotify and anti-copyright academics such as Lawrence Lessig. None were singled out by name. And of course, the music industry needs these online services as much as they need the content that labels and publishers provide.

While none of the panelists felt that major changes to copyright law as a whole would be forthcoming anytime soon, they did feel that some changes with respect to music could happen in 2015. And something else to watch is RIAA and NMPA’s working on ways to address “micro-licensing” issues: license requests that often aren’t handled because the dollar value is too low to justify the administrative costs. Finding a way to effectively deal with these micro-licenses potentially lead to many millions in additional revenue while helping users whose requests are too often ignored.

Back to the Future: Will the Seventh Circuit Transform Fair Use?

Last month, the Seventh Circuit in Kienitz v. Sconnie Nation signaled what may be a seismic shift in how “fair use” cases are judged. In order to see why, let’s briefly review the statutory and judicial framework.

First, fair use is not a “right” as some “copy-left “ advocates would argue, but is a defense to copyright infringement codified since 1978 in Section 107 of the Copyright Act. And contrary to popular belief, there are no bright line rules as to what is and is not a fair use. For example, there’s no magic number of bars of music you can borrow or any certain number of seconds of a clip you can post or, as we’ll see, a prescribed portion of a photographic portrait that one is automatically free to use.

Rather, as the Supreme Court reiterated in the 1994 case Campbell v. Acuff-Rose Music, fair use is determined by the courts on a case by case basis using the four factors of Section 107:

1. the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

2. the nature of the copyrighted work;

3. the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

4. the effect of the use upon the potential market for or value of the copyrighted work.

In Campbell, the Supreme Court held that 2 Live Crew’s use of a portion of the Roy Orbison hit, Oh, Pretty Woman, in its similarly titled song, Pretty Woman, constituted a fair use parody of the Orbison song in that only so much of the original work as was necessary to comment on that original work was used in the 2 Live Crew recording. In its analysis of the first statutory factor, the Court cited with approval Judge Pierre N. Leval’s influential 1990 Harvard Law Review article, Toward a Fair Use Standard, as to whether the use of the Orbison in the 2 Live Crew work was “transformative,” in that “it adds something new, with a further purpose or different character, altering the first with new expression, meaning or message….” The Court, noted, however, that “transformative use is not absolutely necessary for a finding of fair use” but that “the goal of copyright, to promote science and the useful arts, is generally furthered by the creation of transformative works.”

Since Campbell, the Second Circuit, historically the nation’s second most important copyright court, took the “transformative use” ball and ran with it. Recent cases, such as the Google Books decision and Cariou v. Prince, held that copying of entire works constituted fair use on the basis that the use was “transformative.” Cariou, for example, involved Richard Prince’s alteration of entire photographs taken by Cariou. The Second Circuit held that the use was “transformative” and therefore a fair use, even though Prince’s works did not comment on Cariou’s, as was the case in Campbell. Any cursory Google search will yield a plethora of articles critical of Cariou.

This leads us to the Seventh Circuit and Kienitz. The case concerns a photo of the Mayor of Madison Wisconsin, Paul Soglin, taken by Kienitz. Soglin, with Kienitz’s approval, posted the portrait on the city’s website. The controversy arose because Soglin wanted to shut down an annual street party that he had once attended as a student many years before. Sensing some irony, defendant Sconnie Nation downloaded the headshot from the website, removed the background, changed the coloring and shading and added the slogan, “Sorry for Partying.” You can see the before and after pictures in the Court’s opinion. Sconnie Nation sold a total of 54 shirts, clearing a modest profit, and engendering the infringement action by Kienitz. Relying on Cariou, the parties argued whether or not defendant’s use of plaintiff’s photograph was “transformative”, with the District Court deciding that it was. Writing for the Seventh Circuit in his typically pithy manner, Judge Easterbook took a cynical view of this:

Fair use is a statutory defense to infringement. The Copyright Act sets out four non-exclusive factors for a court to consider. The district court and the parties have debated whether the t-shirts are a “transformative use” of the photo – and , if so, just how “transformative” the use must be. That’s not one of the statutory factors, though the Supreme Court mentioned it in Campbell v. Acuff-Rose Music, Inc. The Second Circuit has run with the suggestion and concluded that “transformative use” is enough to bring a modified copy within the scope of §107. Cariou applied this to an example of “appropriation art,” in which some of the supposed value comes from the very fact that the work was created by someone else.

We’re skeptical of Cariou’s approach, because asking exclusively whether something is “transformative” not only replaces the list in §107 but could also override 17 U.S.C. §106(2), which protects derivative works. To say that a new use transforms the work is precisely to say that it is derivative and thus, one might suppose, protected under §106(2). Cariou and its predecessors in the Second Circuit do not explain how every “transformative use” can be “fair use” without extinguishing the author’s rights under §106(2).

We think it best to stick with the statutory list, of which the most important usually is the fourth (market effect). [Citations omitted]

In the remainder of its 7-page opinion, the Court went through each of the four factors and affirmed the District Court’s finding of fair use, noting that while non-copyrightable elements, such as the Mayor’s face, were used in the Sconnie Nation shirts, the copyrightable expression in Kienitz’ photo was largely expunged: “Defendants removed so much of the original that, as with the Cheshire Cat, only the smile remains.”

Despite its rejection of the Second Circuit’s approach, the Seventh Circuit reached the same conclusion as under a transformative use analysis. It remains to be seen whether any other courts will adopt the Seventh Circuit’s retro approach in eschewing “transformativeness” as the touchstone of fair use. And if so, will they then find against fair use in cases, as in Author’s Guild v. HathiTrust and Cariou, where far more copyrightable expression was retained in the wholesale copying of works? In sum, adoption of this “new” approach may not necessarily signal a reversal of the trend to expand fair use.

Finally, it would be interesting to see what the Court would have done if Soglin, a public figure, had filed suit for violation of his right of publicity in the unauthorized commercial use of his likeness, albeit one with political overtones.

Pubs and PROs: Making Sure Your Live Gig is Properly Licensed

A couple of weeks ago, a friend of mine called to pick my brain about music licensing. She lives in an old town in the Hudson Valley that has a burgeoning music and arts scene. She’s a jazz singer and, possessing an entrepreneurial bent, she produced a series of live jazz concerts at a local restaurant. Given that her day job is in publicity and marketing, it wasn’t surprising the performances were well attended — and well received. Everyone, my friend, the performers, the restaurant owner and the patrons, seemed happy.

Then my friend told me that the restaurant started getting phone calls and letters from the three performing rights organizations (PROs), ASCAP, BMI and SESAC. For the uninitiated, PROs license the right of public performance in copyrighted (i.e., non-public domain) musical works, a right granted under the US Copyright Act. More specifically, they license “non-dramatic” rights, so musicals, operas, ballets and other “dramatic” works aren’t works that the PROs license (although individual songs from such works often are – yes, this can get complicated). PROs license radio and TV stations, web sites, arenas, concert halls, nightclubs and, more to the point, bars, restaurants and other similar establishments where music is performed. While there are certain exemptions for having to pay for using recorded music under very limited circumstances, where a restaurant or bar is playing live music, the PRO piper must be paid.

Now, the three PROs each do the same thing, albeit in slightly different ways and some songwriters will prefer one over the others. Think of them as Ford, Chevy and Dodge. They issue “blanket” licenses to licensees, such as a restaurant or club, which entitles the licensee to play any or all of the songs in that PRO’s repertoire however often it likes, all for a set fee based upon the establishment’s music usage. It’s kind of like buying a ticket to an all-you-can eat buffet. But, the key is no one PRO has a majority of the popular repertoire in any genre, so a venue frequently has to take a license from all three of them. But that’s still way more efficient than trying to get individual licenses from the owners of dozens, if not hundreds, of songs.

As an aside, my friend mentioned that one of the musicians said that he was a member of ASCAP and that therefore he could perform all the music that ASCAP licenses, kind of a gratis blanket license. I said that wasn’t quite correct. The PROs obtain “non-exclusive” rights from their members. So, if a musician is performing his own songs, he can do so freely without the venue having to take a license. But, that doesn’t mean he can license public performances of songs by Jerome Kern, Thelonious Monk, or Bob Dylan, writers, represented by ASCAP, BMI and SESAC, respectively.

As someone who once was a legal beagle at BMI as a card-carrying member of the “copyright police” who would prosecute infringement actions against venues that performed music – and it was always live music we went after and only after numerous attempts to get the owners to take a license– I know that the staffs at the PROs are doing their best to collect the public performance royalties the songwriters are entitled to under federal law so that they can earn a living, pay their bills and continue to write the music we want to hear.

My friend said that even though the owner was happy to have the live music, he didn’t want to pay for the licenses. I suggested that they have a cover charge, a portion of which would go to the owner to pay for the licenses over time, and the rest to the performers. She said that neither she nor the owner wanted to do that as many patrons simply wanted to have a meal and might go elsewhere if there were a music charge. I then suggested that she continue to do what she’s done (as is common in many clubs) that instead of a cover charge, she passes the hat around to the patrons who make voluntary contributions to the musicians but, as with a cover charge, a certain percentage would go to the restaurant off the top to pay for the licenses over time and the rest would go to the musicians.

In fact, I suggested that this could even be a selling point in that she make a short announcement, including a suggested donation amount, stressing that they’re doing the right thing to ensure that not only the performers of the music, but the people who wrote the music, get paid their due. She thought it was a great idea. Unfortunately, the restaurant owner didn’t. So, when I followed up about a week after making my brilliant suggestion, my friend said that she was going to stop being an impresario for the time being.

That made me sad. The PROs want music to be performed. They’re not in the business of saying “no,” but the writers they represent are entitled by law to be paid. So, it’s a major bummer when musicians lose a gig because the owner doesn’t want to pay the freight. But what can my enterprising friend do?

Here’s one possibility: There are lots of venues, bars, clubs, etc. that regularly perform live music and have licenses from the PROs. That’s a sunk cost for them. She might find a venue where they don’t have music at a particular time (e.g., 6pm as most shows don’t start until 9pm) or a night such as a Sunday or Monday when the place is silent. Maybe the atmosphere won’t be ideal, but the owner can maximize the value of the license it’s already paying for (although the fees are somewhat calculated based upon how many nights the venue has live music).

The venue might also see it as an opportunity to experiment with other genres, such as an early set of jazz and standards at a place that typically plays covers of classic rock or country and thereby increase its customer base. Because the PROs want their licensees to get maximum value for their license fees (so that they’ll continue to pay and have music), the General Licensing departments of the PROs could actually be a resource to suggest venues for that kind of situation.

I’m curious to know if any of you have any other suggestions for my friend. And if you’re curious about how and why ASCAP, BMI and SESAC license bars, restaurants and clubs (what they refer to as “General Licensing”), please click here, here and here. And you might also read my post about how the CEOs of the PROs feel about upcoming challenges and opportunities for their business.

A Peek from the Peaks of the PROs: the ASCAP, BMI and SESAC CEOs Speak

Yesterday, the Association of Independent Music Publishers (AIMP) sponsored a luncheon where veteran entertainment lawyer Bob Donnelly interviewed the CEOs of the three performing rights organizations (PROs): ASCAP’s John LoFrumento, BMI’s Mike O’Neill and SESAC’s Pat Collins. The meeting took place before a packed house in the performance space at the barbecue joint, Hill Country, in Manhattan and it was the heads of the organizations, rather than any of the musicians they represent, who took the stage for a discussion that lasted about 90 minutes.

Rather than having a panel discussion, Donnelly interviewed each leader separately while the other two left the room, supposedly to avoid any possibility of collusion. O’Neill, who spoke last, joked that he LoFrumento had a nice chat while Collins was interviewed. And after the meeting, a senior BMI executive confirmed to me that the theatrics were not legally required and further stated that “if I were going to collude with ASCAP I wouldn’t do it in front of the entire music industry.”

Topics included the Department of Justice (DOJ) review of the ASCAP and BMI Consent decrees and the proposed Songwriter Equity Act, subjects I’ve previously written about here and here. The ASCAP and BMI Rate Court proceedings with Pandora were also a major topic of discussion as was the development of the MusicMark portal for registering works.

Much ink has been spilled over the Pandora decisions in the ASCAP and BMI Rate Courts, entities I’ve previously discussed. In short, both Rate Court judges largely sided with Pandora, with LoFrumento noting that all of ASCAP’s proposed rate-setting benchmarks were rejected by Judge Cote and O’Neill discussing BMI’s similar fate. One of the central issues in both cases was the ability of a publisher to withdraw certain digital rights from the PROs and license them to users directly while remaining a member of the particular PRO for all other uses, such as terrestrial broadcast and live performances. Both Judges said “no” with O’Neill stressing that the ASCAP judge said the publishers were “all in” while the BMI judge said that the publishers would be “all out,” meaning none of their repertoire would be covered by a BMI license if they withdrew. Both cases are on appeal.

The attempts by major publishers such as Sony/ATV to withdraw digital rights and do deals directly with licensees could have a significant impact on PRO revenues and the ability for independent publishers to obtain comparable terms. That said, the consensus was that partial withdrawal of rights should be permitted, instead of the Rate Court rulings of “all in” or “all out” as this flexibility fosters competition. Regarding withdrawal, Donnelly asked both LoFrumento and O’Neill what would happen if a publisher were to withdraw rights but the writer did not. Both were equivocal, with O’Neill elaborating that the situation would require a case-by case evaluation of many factors, including provisions in the publisher and writer contracts and the status of any advances.

In the discussion of the Rate Court Proceedings, the Songwriter Equity Act and the DOJ Consent Decree Review, all three leaders stressed that the rules for music licensing (emphasizing performance, but including mechanicals) need to be changed from current benchmarks to market rates, with consideration of what a willing buyer and seller would negotiate as the appropriate rate-setting inquiry. All maintained that the current rate-setting system has significantly undervalued music for decades.

LoFrumento, Collins and O’Neill were all in favor of scrapping the ASCAP and BMI Rate Courts, which lead to very lengthy and costly litigation, and replacing them with arbitration. For example, LoFrumento stated that 10% of ASCAP’s costs are paid to outside counsel. The CEOs favor a three-member arbitration panel whose members would have music industry expertise and would serve limited terms, unlike Rate Court judges who serve indefinitely.

Given the discussion of Consent Decree reform, competition was a theme throughout the discussion. When asked about SESAC being at a disadvantage because, unlike ASCAP and BMI, it has to earn a profit for its private equity owners, Collins stated that they, like all private companies, have to compete and that “nobody joins SESAC to be paid less.” However, he conceded that unlike ASCAP and BMI, SESAC does not disclose what percentage of their revenue is paid to writers and publishers. And O’Neill, when asked about Irving Azoff’s new venture that includes licensing performing rights, chuckled and replied: “Competition is good no matter what, even if it’s bad.” He went on to say that BMI started as a competitor to ASCAP and that competition made both companies stronger.

The three leaders all seemed to agree that the future for the PROs is for each to be an efficient portal for licensees, a one-stop shop for music users. This would entail some form of bundling of music rights ( e.g., mechanical and synch rights, in addition to performing rights) which would need to be allowed under the Consent Decrees. They also indicated that while technology continues to allow for movement from sampling to a census of performances, some areas, such as “general licensing” including payment on performances in clubs, do not lend themselves to a census.

With regard to creating a more efficient environment, both LoFrumento and O’Neill touted their collaboration with SOCAN on MusicMark, a portal which allows publishers to register works only once if they use common works registration or electronic batch registration formats and those works will be registered with all three organizations. MusicMark, however, is not being built as a hub for licensing, which would still be done separately by each of the PROs.

When asked why SOCAN, rather than SESAC was an initial collaborator, O’Neill replied that SOCAN, unlike SESAC, already has both ASCAP and BMI data and they were the logical partner to help reconcile the data. LoFrumento stated he expects MusicMark to be operational in 2015 and the goal is to create a hub where others, including SESAC, HFA and CMRRA could participate. When asked if SESAC plans to join, Collins stated “we applaud the initiative and have an interest in being part of it and we’ll see how it goes but we’re not part of it today.”

*****

Regardless of what type or genre of music one writes, income from public performances has always been, and continues to be, a critical component of any composer’s income. All composers should be aware of the continuing market, legislative and legal challenges the PROs face – and the entities that are posing these challenges to their ability to earn a living. It’s not often that the CEOs of all three PROs share the same stage – even if not at the same time – and the fact that each of them sees becoming a one-stop for a variety of music rights licenses as critical to their future success is something worth noting.

Stax of Songs in Competing Claims to Produce a Jukebox Musical

Some of the most successful recent Broadway shows have been “jukebox” musicals. You know, shows that consist of taking a well-known recording artist’s hits and then staging them with a strung-together story. Think Jersey Boys, Motown: The Musical and Beatiful:The Carole King Musical. Shows like these are popular with producers because of the perceived minimized risk in promoting known musical quantities with a built-in audience.

However, producing such shows are not without risk, particularly when it appears that somebody may have either forgotten or conveniently ignored the distinction between copyright in a sound recording and copyright in the underlying song that’s embodied in the sound recording. I’ve previously written about these two separate copyrights in the synch licensing context:

To use pre-recorded music in an audio-visual work, whether it’s a feature film, TV show, video game or a video on a web site, like YouTube, you need the permission of both the copyright owner of the recording (typically a record label) and the permission of the copyright owner(s) of the underlying song that’s embodied in the recording (typically one or more music publishers).  Why? Because the Copyright Act says so.  The permission that you need is called a “synchronization” license – as you’re synchronizing music to picture – or a synch, for short.

So, for example, if you wanted to put the classic Otis Redding recording of (Sittin’ on the) Dock of the Bay in your next feature film, you’d need to get the permission both from the copyright owner of the song (Irving Music) and the permission of the record label (Stax). However, if you simply want to cover the song (as many artists, such as Sara Bareilles, have done), either live or on a recording, you only need the permission of the publisher, here obtained through BMI for a live gig or through Harry Fox to release a cover record.

This brings us to Evergreen Media Holdings, LLC v. Wood Creek Capital Management, LLC, a lawsuit that was recently filed in federal district court in Connecticut. This action involves competing plans to create a jukebox musical from megahits recorded on the legendary Stax label, such as songs written and recorded by Otis Redding and Isaac Hayes. The plaintiffs allege that they have obtained exclusive rights to create a stage show of songs recorded on Stax from the music publisher, Rondor Music, which controls the copyrights to the songs.

Defendants are alleged to have made a deal for both a live stage show and a film musical with Concord, which apparently owns the rights to many of the master recordings originally released on Stax – but not with Rondor. Defendants issued a press release touting their upcoming project and plaintiffs were naturally none too pleased by this.

Although the right to use copyrighted works are at the core of the dispute, the lawsuit is not a copyright infringement action as no theatrical production has yet been created or produced. Rather, the complaint alleges tortious interference by defendants, violations of the Connecticut Unfair Trade Practices Act and seeks a declaratory judgment that plaintffs have the sole right to create a Stax musical .

Taking the complaint at face value, it appears that with respect to the creation and performance of a live show, plaintiffs have obtained the rights to the songs (but not to any recordings of the songs) while defendants have permission to use the recordings but not the songs embodied in them. The creation of a book musical requires that the producers obtain so called “grand” or dramatic public performing rights to the songs. Such dramatic rights are controlled and licensed directly by the copyright owners of the songs (music publishers) and not through ASCAP, BMI or SESAC, which license only “small” or non-dramatic public performing rights. Small rights licensing by performing rights organizations include performing songs in concert or by way of broadcast or internet transmission. No permission from the record label is needed.

So, it would appear that plaintiffs have a pretty strong case as it looks like they have the necessary rights to put on a show and defendants don’t. However, defendants would not be without their own bargaining chips. Concord may well control the right to use the Stax name and logo and plaintiffs would be hard-pressed to market their musical without reference to the label. It’ll be interesting see if these parties can ultimately reach a harmonious accord.

The Justice Department Is Knocking on ASCAP & BMI’s Doors

The United States Department of Justice recently announced it would be conducting a review to examine the effectiveness of the ASCAP and BMI Consent Decrees. In announcing this review, DOJ stated:

The Department understands that ASCAP, BMI and some other firms in the music industry believe that the Consent Decrees need to be modified to account for changes in how music is delivered to and experienced by listeners. The Department’s review will explore whether the Consent Decrees should be modified and, if so, what modifications would be appropriate.

It’s usually not a good thing when the Feds come knocking on your door. Here, however, ASCAP has publicly applauded DOJ’s inquiry:

We are gratified by the Department of Justice’s decision to open a formal review of the ASCAP and BMI consent decrees. Since the ASCAP decree was last reviewed in 2001 – before even the iPod was introduced – new technologies have dramatically transformed the way people listen to music. ASCAP members’ music is now enjoyed by more people, in more places, and on more devices than ever before. But the system for determining how songwriters and composers are compensated has not kept pace, making it increasingly difficult for music creators to earn a living.

In my prior post about the proposed Songwriter Equity Act, I briefly described why the ASCAP and BMI Consent Decrees are out of step with today’s digital music marketplace:

[S]ince the 1940s, ASCAP and BMI have operated under Department of Justice Consent Decrees which were last amended in 1994 (BMI) and 2001 (ASCAP), long before the advent of digital download and streaming services. The ASCAP and BMI Consent Decrees are each overseen by a federal District Judge in the Southern District of New York. When a user (e.g., Pandora) or group of users (e.g., the radio broadcasters) can’t agree with ASCAP or BMI on an appropriate license fee, the parties can have a “Rate Court” proceeding before the judge overseeing the ASCAP or BMI Consent Decree. The Rate Court judge then must determine a “reasonable rate” for the particular user. However, there are certain limitations placed on the judge by the Copyright Act as to how to determine a “reasonable rate” for the user(s) in question.

The ASCAP and BMI Consent Decrees were entered into as part of a settlement of anti-trust litigation. At the time, it seemed like the PROs had a certain amount of market power when dealing with radio and later, TV stations. The PROs now argue that the playing field has dramatically changed in the ensuing decades and it’s new players like Apple (iTunes) and Google (YouTube) and telecommunications companies like Verizon and Comcast that have the real power and that therefore the Consent Decrees should either be amended or scrapped because of this and other shifts in the marketplace. And by including the functioning of the Consent Decrees in its music licensing study, the Copyright Office may ultimately share the PRO’s view.

And now, it’s possible that DOJ may share the PRO’s view, which is critical since DOJ, not the Copyright Office, has the authority to modify these decrees. One major concern is that under both Consent Decrees, a user who doesn’t like the rate that ASCAP or BMI proposes can simply send a letter to the Rate Court Judge requesting a proceeding to determine a “reasonable rate” and that user is then automatically licensed. That, when combined with the Rate Court Judge’s recent decisions, which do not necessarily reflect a market rate (see my previous post), often leads to lower fees for songwriters than comparable fees paid to labels and recording artists.

For example, Van Dyke Parks wrote yesterday that if the 2 cent mechanical royalty of 1914 were adjusted for inflation, the comparable payment in today’s dollars would be 2 dollars, not the 9.1 cents that songwriters currently receive. By contract, Parks points out, record labels and artists, typically split 40 cents of a 99-cent iTunes download whereas publishers and songwriters, whose livelihoods are far more regulated by the government, have to split that 9.1 cents mechanical royalty.

The Justice Department is soliciting comments from the public regarding the ASCAP and BMI Consent Decrees until August 6, 2014. Send them to:  ASCAP-BMI-decree-review@usdoj.gov.  If you are a songwriter or music publisher, you may want to consider letting DOJ know that compelling the PROs into issuing licenses and then having a fee determined by a single federal judge in a proceeding that can cost in the millions of dollars and where, unlike labels, ASCAP and BMI can’t conduct a real arm-length negotiation, is something that needs to be changed – and soon.

Raging Bulls, the Supreme Court and Running the Clock on Copyright Infringement

Yesterday, the U.S. Supreme Court issued its decision in Petrella v. Metro-Goldwyn-Mayer. This case is a copyright infringement action regarding the iconic MGM film, Raging Bull, which garnered Robert De Niro a Best Actor Oscar for his portrayal of boxer Jake LaMotta (but failed to win one for its director, Martin Scorsese). The key issue here in this case is whether the doctrine of “laches” bars a plaintiff from being able to bring a copyright infringement lawsuit. Spoiler alert: by a 6-3 decision, reversing the 9th Circuit, the high court decided that the doctrine did not bar the lawsuit, primarily because such actions are already subject to the Copyright Act’s three-year statute of limitations.

As a subplot, a lot of ink has already been spilled over how the Justices sided with respect to this decision. Justice Ginsburg, a member of the Court’s so-called Liberal wing, wrote the majority opinion and was joined by her Liberal colleagues, Justices Kagan and Sotomayor, as well as Conservatives Scalia, Thomas, Alito. Justice Breyer, who generally sides with the Liberals, wrote the dissent and was joined by Chief Justice Roberts, a Conservative, and Justice Kennedy, who is frequently the swing vote in 5-4 decisions. Unlike cases with particular social implications, such as those involving the free exercise of speech or religion under the First Amendment, decisions involving statutory construction are often decided 9-0, or with splits that don’t adhere to particular ideologies or political party lines.

Getting back to the main story, I’ll spare you the lengthy exposition which features the vesting of renewal rights in pre-1978 copyrights, the distinction between “legal” and equitable” remedies and the merger of law and equity in federal cases with the 1938 adoption of the Federal Rules of Civil Procedure. You can read the 39-page opinion for that.

Here’s what creators, assignees and licensees of copyrighted works, such as screenplays, films and music, need to know. First, for those who may not know, “laches” is the doctrine by which a court will, in extraordinary circumstances, deny plaintiff the right to proceed with a lawsuit where he unreasonably delays in bringing that lawsuit. Second, the Copyright Act’s three-year statute of limitations in section 507(b) might be described as applying on a “rolling basis.”

Generally, the clock begins to run on filing a copyright infringement action from the time the claim, “accrues,” which is usually when the first infringement takes place. For example, if a you’re a songwriter and someone steals your song and puts out a record in June, 2014, you would have three years from that time to file a copyright infringement action or forever hold your peace. Or would you? Let’s assume that the infringing record is a hit and remains in for print for more than 20 years, including re-releases in various new formats. Despite being aware of the infringements all along, you don’t file a lawsuit until 2034, twenty years after the initial release of the infringing recording and after the label has expended a lot of money in producing, distributing, marketing and re-issuing the record.

One might think that the statute of limitations would totally bar such a lawsuit. One would be wrong. You, as plaintiff songwriter, can still sue, but you can only base your claim on infringements that occurred during the prior three years, i.e., 2031-2034. Anything that happened between 2014 and 2031 would be time-barred. With that in mind, let’s look at the relevant facts in the Raging Bull case.

After retiring from the ring, Jake LaMotta collaborated with his friend, Frank Petrella, to tell his story. They wrote several versions, one of which was a 1963 screenplay which was registered with the Copyright Office with Mr. Petrella as sole author. Frank Petrella subsequently died, prior to the commencement of the “renewal” term for you copyright geeks, and the screenplay became the sole property of his daughter, plaintiff, Paula Petrella. Although Paula first had her lawyer contact MGM in 1998 regarding alleged infringement of the screenplay, she didn’t file suit until January, 2009, nearly thirty years after the release of Raging Bull, along with re-releases in VHS, DVD and licenses to cable and satellite TV companies.

Although Ms. Petrella only sought relief for infringements for the prior three years (and therefore anything that happened prior to 2006 was not involved), MGM viewed the lawsuit as the waste product of a raging bull and that laches should bar her complaint. MGM felt it unfair to have to defend a lawsuit that plaintiff could have brought decades earlier when memories fade, witnesses die and documents are lost. The District Court, Court of Appeals and the dissenting Supreme Court Justices agreed.

The majority of the Supreme Court, however, felt that laches was not a bar a lawsuit in light of their being an applicable statute of limitations. A plaintiff has a right to decide whether to pursue and infringement action, and subject to the statute of limitations, when to do so. Moreover, the same evidentiary concerns that MGM raised, also affect plaintiff, who bears the burden of proof. The Supreme Court did point out that the doctrine of “estoppel” could bar a copyright infringement action where the plaintiff engaged in deceptive or misleading conduct regarding the defendants.

So, just because the statute of limitations may have passed regarding first infringements, it doesn’t mean the clock’s run out on later ones. As always, if you think you have an infringement claim that you might want to pursue, you should consult your local copyright lawyer.