– a Six Part Series

by Jeff Price


Part V: When Good Laws Turn Bad

Read Past Chapters
Part I: Music Purchases and Net Revenue For Artists Are Up, Gross Revenue for Labels is Down
Part II: The Impact of DMCA Streams and Why They Should Be Considered
Part III: How a Skewed Perspective Delegitimizes Artists
Part IV: The Growth Phase is Over? Improved Label Margins

Upcoming chapters:
Part VI: The Hills are Alive…..

In addition to the framing of “unsigned” artists as a lower or less valuable class, the laws in this country specifically created to protect copyright holders and artists can now inadvertently create obstacles for opportunity, revenue collection and legitimization.

As a starting point, in the U.S., any entity that wants to license music for TV, film or internet to “synchronize” with a moving image (called a “synch” license) usually starts by finding the music and then going to the websites of one of the three U.S. public performance agencies ( ASCAP, BMI or SESAC).  This allows the licensing entity to learn who controls the master and publishing rights. It also allows the licensing entity to make certain they are complying with U.S. laws by paying – via the performance agency – for any public performances.

If a song/artist is not registered with a public performance agency, there is no easy way to find the point of contact to get the licenses. In addition, if an artist is not registered with a performance agency, licensors have no way to pay the additional required public performance royalties thereby creating legal liability. In these cases, the licensing entity usually moves on to another song and the artist loses the opportunity.

Let me provide a more practical example – a group of 19 year-old kids in a band called the “Figure It Outs” record a bunch of songs on their computer at home.

To paraphrase an article from ArtistHouseMusic.Org founder John Snyder:

“The second they make their idea tangible, six ‘exclusive rights’ attach to that work, and they are their rights as the author or creator of that work to do with as they wish.

These six rights (in no particular order) are:

• exclusive rights of reproduction
• distribution
• public performance
• the right to make derivatives (translations, books, movies, video games)
• the right to publicly display (for example, sheet music applies more to visual art than to music),
• the right to control the digital transmission of your work.

The entire music business is built on the song and these six exclusive rights.”

However, no one in the “Figure It Outs” knows about these six rights or laws.   They have never heard of BMI/ASCAP/SESAC.  They created their music using Garageband at home in their own time. No one has ever educated them about US copyright laws in regards to music. They do not know what they do not know.

They then hear via a Tweet that they can have their music on iTunes via TuneCore. It sells, they do not know that there is a statutory rate “9.1 cents or 1.75 cents per minute of playing time or fraction thereof, whichever is greater” that must be paid to the publisher for the reproduction of the song. All they know is they made $0.70 from the sale of their single.  They also do not know that in 2008, legislation was passed dictating that the on-line interactive subscription pay to stream services must pay the publisher of each song a percentage of the revenue collected by the music store.  Unlike payments from download stores like iTunes, the mechanical royalty on interactive streams must be administered and paid out separately from the money made from the sale of the master. Despite a federal law requiring this payment, most of this money sits uncollected by the self-distributed artist.  The on line streaming services have no easy way to administer the payments and the songwriter has no idea they are not being paid.

The “Figure It Outs” then want to have their music on DMCA compliant radio like Slacker and/or Jango.  They upload it to those sites where it becomes available to play under DMCA compliant laws and receives organic plays.

They have no idea what the DMCA is. They do not know if terrestrial radio and/or non-terrestrial radio pay out revenue from the play of the songs.  They do not understand that 50% of the DMCA collected money is paid to the copyright holder and 45% going to the featured artist, or individual or band who recorded the track with the remaining 5% goes into a fund supporting backup singers and session musicians. And they never heard of SoundExchange as an entity to register with to collect this money.

Now some music supervisor from a big production company hears one of their songs and wants to use it as the theme song to a new TV show.  The supervisor goes to the websites of ASCAP/BMI/SESAC to learn who controls publishing, master and who is the point of contact on record.

The “Figure It Outs” do not understand that they have two rights to their songs – the master and the underlying copyright.  They do not know what a synchronization license is or how it works. They also have never been told that some organization will go out into the world to police and monitor public performances of their behalf.  They do not know how these rates are even calculated or how they are paid. They have not incorporated or created a separate publishing entity as required by the public performance agency as they have never heard of any of these concepts or rules.

Without this knowledge, they lose opportunity.  Compound this with the framing of them as illegitimate or of a second tier.

Things need to change.  The laws created in this country were made to protect and allow the monetization of copyright, but they were built around a model that is disappearing. They also certainly do not take into consideration the fact that the majority of music being created and distributed is happening outside of the old system.

Each one of these artists and songwriters deserves the same opportunity and income as other artists.   The problem is, there is no easy way to provide mass copyright education to the population of artists in the United States.  Worse, many of the laws in place assume there is some form of tracking that can occur around the use of a song to assure the songwriter and “label” get paid.  Music cannot be tracked unless it is registered somewhere that all entities plug into.

For this to happen, any artist that creates music must have some sort of tracking number associated with the music as soon as it is created.  This tracking number must get automatically deposited into the central database. This is just not going to happen.

Now add on top of this that those entities that use the music must have a simple way to pay everyone that needs to get paid.  For example, there is a DMCA compliant stream of the Figure It Out’s song, this money is paid to SoundExchange.  How can SoundExchange pay the money out if they do not have a name and address to send it to?

The old system, although creaky and not perfect, worked well enough, but technology created scale in a way that was never imagined.  The system is now broken but sadly, when these issues are discussed on Capitol Hill, there is no voice or representative for the millions of artists in the US that are now the new music industry.

As the old music industry works feverishly to plug the holes they see springing up, no one is paying attention to the gaping giant hole on that is now the real problem.  If attention is not paid, before we know it, the whole ship may go down.

Part IV of this series will discuss: The Hills are Alive…..

Read the entire series

Part I: Music Purchases and Net Revenue For Artists Are Up, Gross Revenue for Labels is Down

Part II: The Impact of DMCA Streams and why they should be considered

Part III: How a skewed perspective delegitimizes artists

Part IV: The Growth Phase is Over? Improved Label Margins

Part V: When Good Laws Turn Bad

Part VI: The Hills are alive…..


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