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Synching Up Copyright, Contracts, Amazon and Warner Music Group

A little over a week ago, I attended through meetup.com, a panel discussion on synchronization licensing. As a refresher, synchronization licensing, or “synch” licensing, is the permission required to incorporate copyrighted music into audio-visual works, such as films TV shows, ads, videogames and, yes, YouTube videos. The panel was put together by Legal Hackers and included computer types, artists (including one who produced a video of a 7-foot clown singing – quite well, I might add, a cover of Lorde’s “Royals”) a music publisher and a copyright lawyer.

If this discussion had occurred a few years ago, I would have expected it to have a copy-left, copyright-is-bad slant. However, in this digital, DIY climate, even the video remix artist on the panel recognized the importance of copyright and was quite knowledgeable about synch licensing. Everyone seemed to agree that artists should be paid, but obtaining synch licenses is a real obstacle because of what economists would call high “transactions costs.”

Proposed solutions included compulsory licenses, as with audio-only “mechanical” licenses” like those issued by The Harry Fox Agency and/or some form of “blanket” license similar to those that ASCAP and BMI provide. The problem is, many artist contracts have approval rights for synchs because unlike a simple cover, putting their music to video, especially if it’s to a product, service or cause they don’t like, can drastically change the meaning of the music. So, there’s no clear solution yet, but it will probably involve technological improvements in song identification and licensing procedures.

Speaking of contracts that make it more difficult for creators to earn income from their works, Amazon is launching a new streaming service to compete with the likes of Spotify, Pandora and YouTube. I was recently asked by a client to advise as to whether he should sign up. Having reviewed the Amazon contract, the executive summary of my advice, in which others concur, is “don’t.” Among other things, Amazon states it can change the royalty rates at any time. That’s bad enough. But the contract also says you can’t take your works out of their service unless you also take your music down from all the other services. That’s even worse.

Amazon is obviously a 900 pound gorilla with very clever lawyers but I think they may be a little too clever here as other lawyers are pointing out that these provisions are perhaps a tad overreaching. But going back to basic economics, moral outrage from the blogosphere won’t make Amazon change its terms. That will only happen if content owners refuse to sign up and Amazon doesn’t have enough music to offer to be able to compete.

And speaking further of contracts, it’s just been reported that Warner Music Group’s labels have entered into a $11.5 million settlement with various artists, including Sister Sledge, relating to payment for distributions of downloads and mastertones (ringtones). This class action lawsuit focused on whether these distributions were “sales” or “licenses” of the artists’ master recordings. In a typical recording contract, sales are typically paid in a 10-15% of the sale price and subject to all forms of deductions and recoupment, depending upon the language of the contract. License fees, on the other hand (such as a synch license for using the song in a film or TV show, for example), are typically split 50-50% between the label and the artist. In older recording contracts, the language may not be clear as to how these newer technologies should be handled. You can guess which side made which argument.

The takeaway: you – or at least your lawyer – should always carefully read any contract.

Artists and Labels Paid for Radio Airplay?

Composers know that they should sign up with a Performing Rights Organization (PRO) such as ASCAP, BMI and SESAC to make sure they receive royalties for when their works are publicly performed in live performance venues, when broadcast on radio or TV or streamed over the Internet. Most people don’t realize, however, that when a work is played over the radio in the US, the writers and publishers of the composition receive payment for the performance through the PROs but the recording artists and record labels don’t receive a dime. So, whenever a radio station played Frank Sinatra’s recording of “New York, New York”, Kander & Ebb and their publisher got paid, but Ol’ Blue Eyes and Reprise Records did not.

In most other countries, there is a public performing right in a sound recording, but not in the US. There have been attempts over the years to fix this inequity. For example, since 1995, as amended in the Digital Millennium Copyright Act of 1998 (DMCA), there has been a limited public performing right in a sound recording. But, it only applies to “digital transmissions” which basically constitutes streaming over the Internet. SoundExchange was formed to act as a licensing collective, like the PROs, for this growing revenue stream and they pay artists and labels.

Last month, however, something occurred that may be a step in the right direction. Clear Channel, which owns 850 radio stations, and Warner Music Group, one of the industry’s major labels, announced a private deal where Clear Channel will pay public performance royalties to Warner and their recording artists. Clear Channel, apparently, will get a more favorable rate with respect to online streaming, which if you have been following what has been going on with Pandora’s continuing lobbying of Congress to reduce the rates they pay, has been an ongoing battle between webcasters and publishers and labels. Warner, in return, will receive promotion from Clear Channel, which likely means increased airplay, for their artists.

Is this a good thing? Paying artists and labels for the public performance of their recordings is certainly a step in the right direction toward aligning the US with the rest of the world. But at what cost? In exchange for increased exposure on Clear Channel stations, royalty rates for streaming are being nearly cut in half. And unlike the situation with SoundExchange, artists are not directly paid, but will be paid by the label. What is perhaps of even greater concern, however, is that this is a private deal between two industry giants. It remains to be seen whether this will deal set a precedent that will eventually enable all recording artists and labels (including indie, and artist-produced recordings) to collect public performance royalties. It probably won’t happen soon. A Congressional bill that would have given labels and artists a public performing right akin to what composers and publishers have long enjoyed died in committee in 2009. But one can hope – and lobby your local Congressman.

Update: On September 30, right before the government shut down, Rep. Melvin L. Watt (D-NC), introduced H.R. 3219, the Free Market Royalty Act, which would among other things create a public performance right in sound recordings when played on AM or FM radio.

This article was originally published in September 2013 on the ScoreStreet web site.