Hi Neil and others
It¹s Kristin from the Future of Music Coalition writing. I¹m so sorry that
I couldn¹t make it to the seminar last Friday, but I had an unexpected
family matter to attend to. I will also apologize in advance if what I say
below was already addressed during Friday¹s seminar, but here goes.
I can think of three reasons off the top of my head why it's problematic to
pay revenues to copyright owners as opposed to creators, at least in the
music realm. These mostly have to do with the relationships that currently
exist between most major labels and their contracted artists, and the
difficulties that many artists have had ensuring that they are rightfully
compensated for their work. Neil, I understand that you recognize the
problem of "meager" royalty payments in your journal article, but I want to
put my .02 in because I think the distribution component of any ACS
proposals deserves significant consideration and thought to ensure that an
equitable system is set up.
1. Determining who the actual copyright owner is of various works.
This may seem obvious, but many times it's not, especially as time passes.
Here's practical and *true* example. An artist that shall go unnamed here
had huge, huge hits in the 70s and 80s that I still hear when I'm walking
down the aisles of my grocery store, but his copyrights have been sold
multiple times as various labels have been merged, bought out, dissolved,
etc over the years. Now this artist has a full time business affairs person
that spends hours tracking down exactly what company actually owns the
copyrights on his various works. (Turns out, his works are spread out across
all five of the majors). Then, once the ownership is established, the
business affairs people have to start questioning these labels about the
royalties due on sales and, in some cases, start an audit process.
The bottom line is, if labels don¹t build the triggers to pay the artists at
the beginning of a contracted arrangement, as copyrights get sold or passed
around as the companies change, I would worry about their accountability to
artists whose copyrights they may own but with whom they don't have a
current relationship.
2. Contracts that were signed before digital media existed
To add to this, we have to remember that major label contracts are just
beginning to acknowledge digital distribution as a legitimate revenue
stream. What about all the contracts that were negotiated and signed
between, say, 1970 and 2000? What are the mechanisms that are in place at
the macro level for all of those creators to be paid when the contracts may
not even acknowledge this revenue stream? I assume that very powerful
artists can go in and renegotiate, but what about those that are less
powerful? Or, go back to problem 1. What if the creator isn't sure who
actually owns her/his works because of mergers and dissolutions? Who do
they negotiate with then?
3. Major labels' poor track record on accounting to artists
I don't want to discount the value that labels can give to an artist's
development, but the labels have a historically bad track record when it
comes to paying artists. Look at any major label contract in the "auditing"
clauses, where rules are set out about when artists can audit the label and
what they can see if they do one to see how difficult and expensive it can
be for an artist to verify the accuracy of his/her own royalty statements.
I will direct folks to our Major Label Contract Critique for some sample
language: http://www.futureofmusic.org/contractcrit.cfm
I would also inform folks about a bill introduced by Senator Kevin Murray in
the CA State Senate (SB 1034) that is an attempt to fix this problem by
stating that it is the "obligation of a recording company to accurately
account for and to pay royalties earned under a recording artist contract is
a fiduciary duty." It will be taken up again in the CA Assembly in 2004.
http://info.sen.ca.gov/pub/bill/sen/sb_1001-1050/sb_1034_bill_20030501_amend
ed_sen.html
Taking these into account, I think setting up the labels as the filter for
these levy payments presents some problems in ensuring that the creators are
paid fairly for their work.
An ASCAP, BMI or SoundExchange models of payment -- or the European models
that Volker and Felix describe in their paper --- are more equitable for
creators because it seems to me to be a lot easier to determine who the
creator is of a certain song than who the copyright owner is -- *especially*
in the P2P world where songs are traded without all the metadata that
connects the songwriter, performer, label, album, etc connected with that
specific work (until those embedded digital tags mentioned by some come to
fruition).
I agree that the ASCAP/BMI sampling scheme is less preferable than an actual
counting and that this procedure should not be adopted in the digital
future, no matter what the mechanism is. But, to their credit, the
songwriters and/or performers do get paid directly. In these cases, the
creators are responsible for making sure that these royalty collection and
payment organizations have their correct information about songs they
created, who gets paid what, address, etc. and the royalties generated from
public performances or webcasts are passed through to the songwriters and/or
performers in a second-generation transaction. I worry about adding another
layer in the middle ? namely the labels ? between the consumers and the
creators when it seems like we have other models around that are collecting
and distributing royalties to both creators and copyright holders with
reasonable success. And for the record, I'm not opposed to having levies
shared among various parties -- copyright holders, artists, songwriters,
etc. -- but I am concerned about the labels as the de facto copyright
holders in this example being responsible for the redistribution of those
monies.
Neil, your scenario about artists retaining their copyrights is possible,
and I hope it can happen, but just how much faith do we want to put in the
P2P networks that an artist could gain enough leverage through popular
download traffic that she/he could twist the arm of some major label folks
and retain copyrights when they're walking into their first deal? I think
they could be handsomely compensated through the levy system if they retain
control of their copyrights and operate independently, but I think it will
be a rare case that musicians seeking major label backing would be able to
retain copyright ownership.
I think it¹s more likely we see: A) more ³revenue sharing² models in the
future where labels give the artist a bigger advance or higher royalty rates
but, in return, the artist shares concert, merchandise and other ancillary
revenue streams with the label (stuff the labels don't have any control over
right now); B) the music industry becoming more like the movie industry
where musicians are more like freelance agents that shop their projects
around to labels on a case-by-case basis; or C) the opposite, where artists
will just stay away from the major label system entirely (as many, many do
now), maintain control of their copyrights and just make their own living.
But that¹s another discussion...
Anyway, I think it's important to recognize the difficulties in assuming
that paying the copyright owners ie the labels will ensure that the creators
will be paid fairly, if at all. At this stage I think it's valuable to
consider other models that pay creators separately from, or parallel with,
current copyright holders. Thanks and I look forward to more discussion.
Kristin
************************************
Kristin Thomson
Organizer, Future of Music Coalition
http://www.futureofmusic.org
Ph 215.351.9923 Cell 267.971.3088
************************************
"They that can give up essential liberty to obtain a little temporary
safety deserve neither liberty nor safety."
-Benjamin Franklin
I propose distributing levy proceeds to copyright owners, not directly to
creators, as is often done in Europe (and the U.S. e.g., webcasters
statutory license). If I remember correctly, Terry also proposes distributing
to whomever holds the applicable copyright. Volker Grassmuck and Felix
Stadler strenuously objected to this. I had wanted to follow-up with them at
the workshop but never got the chance. So Volker and Felix, I¹m asking you
now! My thought is this: For purposes of discussion, I will grant that
copyright industry intermediaries like record labels unfairly exploit creators
(although I must say that given what I¹ve learn from discussion on Pho, I¹ve
become much less dismissive than I used to be of record labels¹ role in
producing music and supporting creators and I recall Michael O¹Hare making
similar statements at our workshop regarding other intermediaries). If in
fact P2P distribution provides opportunities for creators sharply to reduce
their dependence on traditional copyright industry intermediaries, then
creators will be in a much stronger negotiating position. In fact, creators
might even be able to retain the copyright, so that they, not intermediaries,
are the ³copyright owners² for purposes of distributing the levy proceeds. On
the other hand, if, despite P2P opportunities for creators to reach audiences
directly, creators remain dependent on intermediaries (perhaps for packaging,
editing, financing production, marketing, etc.), then that means that
intermediaries do make a significant contribution, which would likely be
fairly and efficiently reflected in creator-intermediary licensing.
What¹s wrong with that picture?
Neil Netanel
Arnold, White & Durkee Centennial Professor of Law
University of Texas School of Law
Visiting Professor, UCLA School of Law (2003-04)