MUSIC LAW: music DEALS
PRODUCTION DEALS = yahoo + youtube + warner and Payola
2013 Starting May 1st, all Warner albums will be funded by Kickstarter. Perennially third, the smallest of the three majors saw a need to shake it up, to move ahead of Sony and Universal in the game of music production. Lucian Grainge bought EMI, believing it was all about market share, economies of scale...but that's positively old school. Today you drill down into the niches, you solidify your relationship with your fan base, you grow from the bottom up, not the top down. Yes, Stephen Cooper has just thrown a curve ball so wide, Doug Morris won't even see it. Believing it's about radio and retail, septuagenarian Morris is putting himself out to his own pasture. Didn't he get the memo? Newspapers are dying, young people ignore mainstream media, to try to close young people via old media is like insisting baby boomers give up their Lipitor. Raw stupidity. Then again, the music business was always about muscle.
But now it's about data. Lucian Grainge hired Steve Barnett to run Capitol...he'd have been better off hiring a nerd, someone who knows the difference between a 0 and a 1...then again, does anybody in the music business truly know how digital works? I think not. The nerds have inherited the earth. And Perry Chen is the new Rick Rubin. You know, Mr. Vibe. Rick doesn't really produce records, not in the traditional sense. He just drives artists to capture the zeitgeist. And Perry Chen is riding the wave that Laird Hamilton is unable to get Rick to surf. Rick keeps losing his deal, whereas now Perry Chen is the king of deals. And the man who executes is Yancey Strickler. Who once upon a time worked at eMusic, before he became one of the Kickstarter troika.
Yancey was in L.A. two weeks ago, inking the deal with Cooper. You see in today's market you can't oversell. Oh, you can try to, but it backfires. You have one hit, and then your career is..sh**. We live in a land of one hit wonders. But even PSY got a couple of months. "Harlem Shake" was here and gone in a matter of weeks. You've got to play for the long haul. Something Doug Morris has never done, but Stephen Cooper is doing now. It's always outsiders that lead the revolt. So from now on, every act that raises $100,000 on Kickstarter will automatically get a Warner Music contract. Assuming the act wants it. Which in most cases it shouldn't, but acts are delusional and want a deal so they can tell mommy and daddy they've made it.
But there's another way to get your Warner deal via Kickstarter. If you get 1000 people to donate, you get a deal too. Since most Kickstarter bands don't have that many fans willing to pony up the bucks, don't expect Warner to be overwhelmed with new talent. As for the acts already signed to Warner? Cooper's stealth hire is Amanda Palmer. Unable to get anybody interested in her music other than her hard core fans, Ms. Palmer is now going where her talent truly lies, in marketing, in self-promotion. Her TED speech was just the beginning. Cooper had no idea who Palmer was, but when his niece told him at the seder to check Amanda out, Cooper did and pounced. Palmer is now wrapping up her musical career, and will be holding boot camps for all Warner artists imminently. Unwilling to spend the dough to fly acts to L.A. or New York, Palmer will go on a bus tour across America, meeting with each and every Warner artist in his or her hometown. The blogosphere will light up with hype. This is the story true fans are following, not Lady Gaga's golden wheelchair, not what's on TMZ or Radar, those are positively last decade. Palmer's gonna teach all those Warner artists the new reality. That your bond with your fans is all that counts. Build up the hard core. Rip them off for as many dollars as you can. It's all about the cash, baby. Palmer will teach them how to beg and sell, via Twitter, Tumblr and Facebook, even Pinterest! Finally, Blavatnik's purchase will pay off. The labels can't compete with the promoters. It's Live Nation and AEG that truly pony up the big bucks. But Cooper is smart, he knows that no act succeeds without fans, and that's what his new strategy is all about, fans. The old guard is toast. Tom Windish has made an exclusive deal to represent all new Warner talent. CAA is too self-impressed, saying it can get acts into movies when we all know it's about TV and the creators are the new auteurs and can't be told who to use anyway. All the established agencies are missing the boat, they're about commissions as opposed to talent development. It'll be the death of them.
As for sponsorship... It's toast. Now, the fans will sponsor the acts. It's a direct connection. Heart to heart. In one fell swoop, Mr. Cooper is wiping away decades of music business b.s. As for the rumor that every Warner act will be given a copy of Clive Davis's autobiography...that was a plant, by Mr. Davis himself, to goose sales, there's no truth to that rumor. But what can Warner do for you, after they've signed you? Well, you do get a free pair of Google glasses. And a Nest thermostat, assuming you're not living out of your car. But via a secret deal, Daniel Ek will promote you via Spotify. With Jimmy's MOG/Daisy/Beats Music tied in with Universal, Ek is desperate. But Ek knows it's all about talent, and he's lining up with the innovator. Cooper has also made a deal with Jeff Bezos. Every act will get fifteen gigs of cloud storage and their music will be available to all Amazon Prime members for free.
But it gets even better. Mark Zuckerberg will now allow all Warner artists to spam their entire fan base on Facebook cost free, in exchange for a record deal for one Facebook employee per year. And five Warner acts, not those already signed to the label, but those who come to the company via Kickstarter, will fill guaranteed slots at Coachella. Expect similar announcements to come regarding Lollapalooza and Bonnaroo. Rumor has it ACL will be excluded, since Austinites don't like to be told what to listen to. Yes, what Warner is selling is relationships. Which used to be with radio and retail, but are now with the tech set. Crowdfunding is here to stay. And Warner is guaranteeing results. If you pledge and the act doesn't deliver, you get the equivalent of your pledge in Warner stock. If you're under the age of eighteen, no stock will be forthcoming, but you can choose from the merchandise/rewards of other Warner Kickstarter artists. Cooper is clueless when it comes to music. But he realizes it's no longer about focusing on the few, but having a relationship with the many.
Why sign a band with no following? Why not go with those who have a start, entice them with perks, and then wait for one of these acts to blow up? And if they don't, it doesn't matter! There was no investment! The fans foot the bill! And ultimately, in two years time, it's going to take a while to write the code, Kickstarter and Warner will offer funding for tour buses and all the accoutrements of success.
Yes, Cooper is gonna load the entire cost of music development and exposure on the fans. And instead of getting 5%, Kickstarter will get 20% of Warner branded exclusive services. Just when you thought things were settling down, it's clear that tech and music are becoming even further intertwined, and it's those who think outside of the box who will win. If you're doing it the old way, you're on the road to failure. Warner Music is not. http://lefsetz.com/wordpress/ -- http://www.twitter.com/lefsetz
2013 Who makes the money?
The lion's share of revenue for streaming services is paid to rights holders. The Internet is still the best way to expose your music to fans. You used to have to buy it to hear it, or listen endlessly to the radio to hear one track. But now everything is available on YouTube! People subscribe to streaming services in the future. For portability. You've got to pay to get the tracks on your handset. And thousands sync like you own them, there's no costly bandwidth involved. Selling tracks is like selling CDs. Do you see any Tower Records stores? Do you see ANY record stores?
Once everybody has a subscription, there's TONS of money involved. The lion's share of revenue for streaming services is paid to rights holders. Assuming you own your rights, that will be a lot. Furthermore, you now get paid over the life of the copyright. Talk to any aged musician, the money's all in the PUBLISHING! You get paid forever. The upfront advance was never the size it was with your record deal, but now that you're sixty, you still get paid. Make a record that sticks, you'll get paid by streaming services for the rest of your life.
One thing's for sure. You're now in business with your fanbase. Know who each fan is, and sell sell sell and ask ask ask. They'll support you, always have. That's what going on the road is all about, a fan relationship. Ignore the hysteria about streaming payments. Just concentrate on making great music and building a fanbase. There's plenty of money to be made.
If you 're counting pennies, you're missing out on the big money. Kind of like music. If you want to charge people per track and sell fifty instead of letting thousands hear it for free and build a business, you're shortsighted. Then again, no one wants what sucks.
2012 Electronic Dance Music Promoters have to sell out.
First and foremost, because they don't have enough money. You can't compete with deep pockets. And once Sillerman or someone else collects competitors it gets ever harder to book talent and put on an event. Yes, talent goes where the dollar is. Not only the offer, but the guarantee you get paid. Loyalty gets lip service, but ultimately you go with the dough.
So who do you make a deal with?
Bob Sillerman doesn't mind paying too much. Because unlike his competitors, he's not in the concert business. He's in the money business. The goal is to build an asset and sell it. It's just that simple. How do you roll up something so shiny on the surface that those not in the know will overpay you for it. That's what Sillerman did with Clear Channel. So who do you go with if you're an independent? The guy who'll overpay you who will let you do it your way, because there's no infrastructure, no central management to get in your way?
Expect this to change. As it did at the original SFX. But for now, you make a deal with Bob, you get a huge check, and it's the same as it ever was. Furthermore, the more promoters he rolls up, the greater his and your leverage. The times they are 'a changing. And the reason they are is because of the music.
2011 EMI, the venerable music company that is home to the Beatles, the Beach Boys and the Motown song catalog, has been sold for $4.1 billion through a pair of deals that usher in a new wave of consolidation in the music industry. In a complex sale brokered by Citigroup, the Universal Music Group, a division of the French conglomerate Vivendi, will absorb EMI’s recorded music operations for $1.9 billion, while EMI’s music publishing division will be sold for $2.2 billion to a consortium of investors led by Sony. NYT
EXCERCISE YOUR Termination Rights NOW
When copyright law was revised in the mid-1970s, musicians, like creators of other works of art, were granted termination rights which allow them to regain control of their work after 35 years, so long as they apply at least two years in advance. Recordings from 1978 are the first to fall under the purview of the law, but in a matter of months, hits from 1979.
The provision also permits songwriters to reclaim ownership of qualifying songs. Records on file at the United States Copyright Office. NOTE: there is an earlier law that envisaged termination rights only in specific circumstances after 56 years.
Congress passed the copyright law in 1976, specifying that it would go into effect on Jan. 1, 1978, meaning that the earliest any recording can be reclaimed is Jan. 1, 2013. But artists must file termination notices at least two years before the date they want to recoup their work, and once a song or recording qualifies for termination, its authors have five years in which to file a claim; if they fail to act in that time, their right to reclaim the work lapses.
United States Copyright Office termination rights claims are initially processed manually.
Steven Marks, general counsel for the Recording Industry Association of America, a lobbying group in Washington that represents the interests of record labels. Record companies will argue, the master recordings belong to them in perpetuity, rather than to the artists who wrote and recorded the songs, because, the labels argue, the records are “works for hire,” compilations created not by independent performers but by musicians who are, in essence, their employees.
Lita Rosario, Esq. specializing in soul, funk and rap artists has filed termination claims on behalf of clients. Some artists feel so strongly about this that they are not going to want to settle, and will insist on getting all their rights back.
Rick Carnes, president of the Songwriters Guild of America.
Casey Rae-Hunter, deputy director of the Future of Music Coalition, advocates for musicians and consumers.
Kenneth J. Abdo, Esq. leads a termination rights working group for the National Academy of Recording Arts and Sciences and has filed claims for some of his clients. Independent copyright experts, however, find that argument unconvincing. Not only have recording artists traditionally paid for the making of their records themselves, with advances from the record companies that are then charged against royalties, they are also exempted from both the obligations and benefits an employee typically expects. Where do they work? Do you pay Social Security for them? Do you withdraw taxes from a paycheck? Under those kinds of definitions it seems pretty clear that your standard kind of recording artist from the '70s or '80s is not an employee but an independent contractor.
The Recording Artists Coalition, seeks to protect performers' legal rights.
Daryl Friedman, the Washington representative of the recording academy, which administers the Grammy Awards and is allied with the artists' position.
Do record producers, session musicians and studio engineers also qualify as “authors” of a recording, entitled to a share of the rights after they revert? Can British groups like Led Zeppelin, the Rolling Stones, Pink Floyd, and Dire Straits exercise termination rights on their American recordings, even if their original contract was signed in Britain?
Songwriters, who in the past typically have had to share their rights with publishing companies, some of which are owned by or affiliated with record labels, have been more outspoken on the issue. As small independent operators to whom the work for hire argument is hard to apply, the balance of power seems to have tilted in their favor, especially if they are authors of songs that still have licensing potential for use on film and television soundtracks, as ringtones, or in commercials and video games.
July 2010 Federal court ruling in New York changes the way music service providers pay royalty fees. Businesses typically secured those rights through performing rights organizations like BMI or ASCAP. Now music provider DMX can secure the public performance rights directly from the publishers for fees that were less than what BMI was asking us to pay. DMX, provides music to hundreds of thousands of stores, restaurants and other retail outlets across the country, now only has to pay BMI roughly half of what it was paying before. DMX can now afford to pay the writers and publishers more for using their music. This week's federal court ruling has enormous implication for much larger industries like radio and television, who pay tens, if not hundreds, of times the royalties that DMX pays.
History: Why are Labels so Rich and Artists so Poor?
Bessie Smith got $28k from her label during a ten year period in the Depression while her label was earning over $1 million. Jeanette Carter says that Oh Brother paid the Carter estate more for Keep On The Sunny Side than the Carter Family earned during their career. Ancient history? Talk to my very distant relative Natalie Maines of the Dixie Chicks -- a kid that speaks the truth in all circumstances -- about her experiences with Sony. Can they afford lawyers? Did that help? I'm sure it helped the lawyers. And the songwriting monopoly collection people (BMI, ASCAP, SESAC) are part of the problem, not the solution. Song publishing is an oligopoly, and the big houses get all the money due to the use of arcane formulas, and never traditional artists. Any doubts? Get yourself a summary of the on-going (since 1994) minutes of the anti-monopoly proceedings against BMI in the Federal Court, 2nd District, New York. Very often with indy labels artists are screwed because the music geeks who run them may be inept half-assed incoherent babblers rather than crooks. But they still inflict pain. Are the major label crooks worse than the crooks at Enron? No, they are the same. Are there honest people in this business? Plenty. But most traditional bands do better if they produce their own CDs to sell at gigs, getting the cost down to $2 or $3 per disc (depending upon who wrote the songs).
U.K. MUSIC COMPANY'S COPYRIGHT SUIT ENDS ON A SOUR NOTE IN NEW JERSEY 10/09
A federal judge has squelched a suit accusing a New Jersey company of invading the exclusive territory of Europe's largest distributor of sheet music. U.S. District Judge Renee Bumb ruled on Monday that Music Sales Ltd. of London had no standing under the U.S. Copyright Act to enforce a 2002 British court consent order in which Charles Dumont & Son of Voorhees agreed to cease any infringing activity. The copyright law doesn't apply because the New Jersey company has licenses to distribute the music in this country, so it isn't violating any rights in the United States, Bumb ruled in an opinion dismissing Music Sales Ltd. v. Charles Dumont & Son Inc., 09-1443. The case had implications for the British company's exclusive right to sell sheet music for thousands of songs, ranging from classics to top 40 hits —from "St. Louis Blues" and "The Girl from Ipanema" to works by Fleetwood Mac and Kiss.
Stephen Foster born in western Pennsylvania died on January 13, 1864, in Bellevue Hospital at New York City with .38 cents in his pocket, and he was signed to Columbia Records! He circulated manuscript copies among various minstrel troupes.
His family got next to nothing and was barely able even to pay his final hospital and burial bills. Stephen Foster was an accountant who also kept his own account books, documenting down to the penny how much his publishers paid him for each song, and he calculated his probable future earnings on each piece. His contracts were written out in his own hand. They are the earliest ones we know of between American music publishers and individual songwriters. At the age of eighteen he published his first song. A year or so later another of his songs, Uncle Ned, was being sung by nearly everybody in Pittsburgh. He was twenty-one when he wrote Oh, Susanna, for which he received two fifty-dollar bills and sung by the Christy Minstrels in 1848 became a national hit pirated by more than two dozen music publishing firms, who earned tens of thousands of dollars from sheet music sales. The song brought the publisher several thousand dollars. It was sung in all parts of Europe, and when Bayard Taylor was traveling in India, he heard a native minstrel sing it. AND Florida's State Song Swanee River (Way down upon de Swanee Ribber, Far, far away,) are still both sung in 2007! Foster's only real income was the royalty he earned on sheet music sales. Altogether he made $15,091.08 in royalties during his 37 years and almost nothing in performing rights (yearly average was $1,371 for his 11 most productive years). His widow, Jane, and his daughter, Marion, equally later earned $4,199 in royalties, so that the total known royalties on his songs amounted to $19,290. Today it would be worth millions. (Source: Center For American Music, 2003.) Stephen Foster started it the music business.
The clarity of royalties is an enormous issue.
You can visit UMPG and see your royalties. Call Income Tracking 310-235-4700
The scam is, the royalties have already been sieved through the UMPG royalty accounting system. You're not seeing what has been raped off the top.
Ask the biggest writer or Company at UMPG to get their society information from SACEM or GEMA, they will be refused. NBC-Universal cannot get its royalty information from source. At UMPG it can take up to 31 months to get your royalties from Germany.
UMPG copyrights all of its material whether sub-published or administered in its name worldwide. If you have material in their catalog and you want to get your statement from the performance and mechanical societies you can't. You are not the owner, UMPG is. At UMPG it can take up to 31 months to get your royalties from Germany. All foreign royalties go back to their U.K. office first, the fee is deducted and the royalties are held for the next pay period plus 60 or 90 days. Then they are sent to the U.S. where they are held another 60 or 90 days after the next payment period is due. Look to see if they try to deduct $40,000 from a small writer or small publisher because that's what it costs to start a lawsuit.
Actually, the black box is only unclaimed monies. In foreign countries, where the societies are mandatory, you get your mechanicals and performances by filing a claim for the song. If no one claims a particular song for 3 years or so, the monies it earned go into the black box and are distributed to the affiliated publishers in proportion to their earnings. ~ deeper throat
Label Compensation / A Fair Deal: 50% of the net should go to the act.
The majors' dominance came as a result of control of distribution, which they've lost, anybody can get on iTunes and Spotify. And sure, radio airplay still sells the most records, but radio is fragmented and losing power, so majors' dominance of this market is less important as time goes on. The majors no longer control the market. The streaming era has begun. And it's going to turn the music business upside down. Streaming is now here. Expect only one streaming service to triumph in America. Spotify has the early-mover advantage, but Apple has the installed base, and everybody's credit card number. Expect those with money and power to try and rig the game. Major labels will try and game the system, generating plays and income for their acts. The streaming service will do its best to try and quash this behavior, but even Google has trouble weeding out those who try to optimize search.
2009 landmark deal between independent record labels and YouTube The PIAS Entertainment Group, which represents 200 independent labels, has signed a global licensing and marketing deal with YOUTUBE that will mean artists and their record companies get a share of revenues from adverts shown alongside their works.
Google/YouTube has signed deals with CBS, Verizon, Viacom, Universal Music Group, Sony, BMG Music Entertainment, and Warner Music Group that allows YouTube to distribute content in exchange for a share of YouTube's advertising revenue. Unlike regular cellphones, smartphones have a PC-like operating system and download and run computer programs. YouTube and Smartphones are all about music, video, and the Web downloading that adds $10-$50/month to a phone bill.
Youtube has has deleted 30,000 clips of TV shows, movies and music videos after the Japanese Society for Rights of Authors, Composers and Publishers cited copyright infringement. Recently, Universal Music Group accused YouTube of illegally using its content and said the video site owes Universal "tens of millions of dollars." Warner is taking a different approach, allowing its content to be distributed through YouTube, either directly through music videos or through user-generated content that incorporates Warner material.
YouTube will pay Warner an undisclosed portion of the revenue from ads that are featured on pages that play video clips that include Warner content. Alex Zubillaga, executive vice president for digital strategy at Warner, commented that the "user-generated content phenomenon is something we believe is only going to continue to grow," saying his company wants "to be a part of it and...make sure we and our artists are being rewarded." NYT 9/19/06
BITTORRENT DEALS WITH STUDIOS TO OFFER VIDEO ONLINE 11/29/06
BitTorrent has made deals with Paramount, MTV Networks, 20th Century Fox, and smaller studios to permit its users to purchase or rent movies and buy TV shows when the new video service begins in February 2007.
The company signed a similar agreement with Warner Brothers earlier this year. Initially, customers will be able to play the video downloads only on their computers, but the company plans to support downloads to portable devices in the future.
DEAL REACHED FOR ONLINE MUSIC ROYALTIES
Songwriters and record companies in Britain reached an agreement over royalties for online music sales just as a copyright tribunal that would have decided the issue went into session. In the dispute, record companies were represented by the British Phonographic Industry, and Adam Singer represented songwriters. Singer heads the Mechanical-Copyright Protection Society Ltd and the Performing Right Society Ltd. Songwriters and composers had sought a royalty rate of 12 percent, an increase from the existing rate of 8 percent. Record companies wanted the rate to drop to 6.5 percent. In the final negotiations, both sides agreed to accept the 8 percent rate for three more years, which amounts to about 10 cents per song sold on Apple's iTunes service. The tribunal accepted the settlement, which is legally binding only in the United Kingdom. Nonetheless, experts said the deal could influence similar negotiations in other countries, including the United States and Germany. September 2006
A very clear concise explanation from Martin Tobias - Loudeye former CEO regarding the technophoic Music Labels (industry) refusal to get with digital music licensing. Label wants 95% of the money generated by an artist. It's really really great to listen to. Loudeye has digitized all the music in the entire universe.
Sell by the Byte
Creative Commons, MP3 Model, Larry Lessig, Courney Love, RIAA, JibJab, Copyright CopyLeft
Plugola & Payola
Plugola & Payola "This is not a pretty picture; what we see is that payola is pervasive," Mr. Spitzer said, using a term from the radio scandals of the 1950's in describing e-mail messages and corporate documents that his office obtained during a yearlong investigation. "It is omnipresent. It is driving the industry and it is wrong." FCC Chairman Kevin Martin has launched an investigation
Chairman Martin's statement:
* Commissioner Adelstein's statement:
* FCC Plans Payola Investigation
* FCC Launches Bribery Probe Over Payouts for Radio Airplay
* U.S. to Revisit Payola Inquiry
Senator Introduces Payola Bill
, Washington, D.C. November 18 2005
A leading lawmaker long critical of the negative fallout of radio consolidation introduced legislation today (Nov. 18) that seeks to close the loopholes on payola-like practices and stop alleged "muscling" practices by broadcast-venue owner companies from forcing performers to play for reduced fees or for free.
Sen. Russ Feingold, D-Wisc., says he crafted his "Radio and Concert Disclosure and Competition Act of 2005" after studying the New York Attorney General Eliot Spitzer's $10 million settlement in July with Sony BMG Music Entertainment, and realizing there is a need to help artists and also regulate such practices on the radio side.
Labels and independent promoters are not the focus of the bill. In his Senate floor statement, Feingold said that in addition to payola, "there are other abuses of power over airplay decisions by radio stations and their corporate parents," especially when they also own concert promoters and venues.
"This cross-ownership sets up a situation where the same corporation that is negotiating a contract for an artist to perform at its concert also controls the lifeblood of that artist's success," he added. "The result can be intense pressure on artists to play radio station-promoted shows and, often, to do so for less than the normal rate."
Moreover, Feingold added, "for any artist who deigns to refuse the direct or implied extortion from the conglomerate, as Don Henley's courageous testimony in a 2003 Commerce Committee hearing clearly explained, there is the risk of retaliation."
In addition to requiring such companies to pay performers or provide compensatory goods and services, the bill would simultaneously strengthen the FCC's ability to prove violations and punish offenders -- by authorizing the commission to increase fines and look at possible license revocation in some cases. "The prospect of putting a license in jeopardy will get their attention," quipped Feingold. The bill would "close the loophole allowing indirect payola, and prevent radio-venue crossownership from hindering fair competition," he said. It would require stations to disclose all receipts of payments or consideration that could be used as a front for payola along with a list of the songs played every month, broken down by label and artist.
It would also offer greater transparency through disclosure of the payments to radio stations from artists, labels, promoters and others who may have an interest in improperly influencing airplay decisions. Artist groups praised the introduction of the bill.
"Payola has always been a big problem for recording artists and it has been exacerbated by the horizontal and vertical consolidation of the media," said Randall Himes, assistant national executive director of sound recordings for the American Federation of Television & Radio Artists (AFTRA). "Updating the law in this area is long overdue."
"We're hopeful that the senator's efforts will encourage Mr. Spitzer and others to continue their valiant fight against payola and media consolidation in the radio and concert business," said Rebecca Greenberg, national director of the Recording Artists' Coalition (RAC).
RIAA chairman and CEO Mitch Bainwol said: "This bill is a step in the right direction. We support the artist groups in backing an update to the law that will prevent abuses and showcase more artists to fans across the country."
Other supporters include the American Assoc. of Independent Music; the American Federation of Musicians; Consumers Union; Free Press; the Future of Music Coalition; NARAS; and the RAC. A Feingold spokesman says the lawmaker will seek co-sponsorship after the Thanksgiving recess.
Sony has already agreed to pay $10 million for payola abuses after Attorney General Spitzer found they had funneled millions in money and prizes to radio broadcasters. FCC commissioner Jonathan Adelstein told reporters that Spitzer gave the agency “an arsenal of smoking guns” to ramp up enforcement against payola broadcasters. Several days later, FCC Chairman Kevin Martin pledged to do just that. The FCC and New York Attorney General's office are now investigating reported payola deals at large recording labels. Attorney General Eliot Spitzer has subpoenaed the records of the nation's biggest radio station chains. In November 2005, Sen. Russ Feingold (D-Wis.) introduced legislation, the "Radio and Concert Disclosure and Competition Act of 2005," expanding the definition of payola to eliminate the inside dealing and structural abuses in consolidated radio, which have locked local and independent artists off the airwaves for years.
Cost to Launch
The cost of a major label signing an artist, is about 500 thousand dollars. New Model: $189 Million in music downloads in 2005, CDs still account for 95% of music sales in 2004. Promotion on music-oriented social networking sites such as MySpace.com and PureVolume.com label emphasizes speed to market and spending money to promote artists rather than the manufacture of CDs. Artists signed to Cordless also keep the rights to their master recordings in the old deals record companies owned your masters in perpetuity.
Music- Performing Rights Societies
Creative Commons, MP3 Model, Larry Lessig, Courney Love, RIAA, JibJab, Copyright CopyLeft
Find statistics on what is being traded, and by whom, but without membership, you can't evaluate all the data. However you can "click here to see more detail" at the bottom of the chart. And then, use the drop down menu to change formats. Funny how you can get an INSTANT picture of what's TRULY happening in America. What people WANT as opposed to what the labels and the mainstream press SAY they want. "In America in December, 2005, on average, 6,978,715 people were simultaneously logged onto the p2p networks at any given time, says p2p research firm BigChampagne, which produces statistics centering on the file sharing phenomenon.
In 2004, the number was 5,500,314 and in 2003, 3,239,298, says the firm, which compiled statistics for the Organization for Economic Co-operation and Development Information Technology Outlook report for 2004." http://www.p2pnet.net/story/7693
What's The Deal With Production Deals?
By Bob Donnelly reprinted from Billboard 7/31/99
The production agreement is the single most regressive and anti-artist contract introduced in the music industry during the last two decades. If I told you there are many artists who have signed a deal that, in return for little or no advance, provides that they (1) give up the administrative control of their music publishing and 25%-50% of their publishing income to a company that never has, and never will be, a true music publisher, (2) give up 50% of their merchandising income to a company that never has, and never will be, a real merchandiser; and (3) give up their recording rights for the next 14 years in return for a retail record royalty of only 3%-5%, you probably would think I was referring to the dark days of the 50s when African-American recording artists were routinely deceived by white managers and record companies. While the days of cheating unsuspecting bluesmen may be over, I'm sorry to say the days of ripping off naive rappers and hip~hoppers is in its ascendancy.
The only difference is that this time it's often black managers, producers, and record companies that are taking advantage of black artists (frequently with the assistance of white music lawyers).
But the use of the production deal concept is not limited to black music, and its popularity seems to be growing exponentially into all other musical genres. God help us if that's what passes as progress in the music business these days.
In order to understand why a production deal is so virulently anti-artist, you must understand how a production deal works. In a conventional recording agreement, an artist is signed directly to the label. Let's assume for the sake of creating a hypothetical case that the artist was offered a signing advance of $50,000, a recording fund of $200,000 (out of which $180,000 went to pay off third-party recording costs and $20,000 in “backend" money was left over to distribute to the artist), and a retail record royalty of 12%.
That means that in this direct artist-to-label signing, the artist winds up with $70,000 and a 9% royalty (after deducting 3% for an outside producer). If that same artist signed the same deal with identical terms but did it through a production agreement in which the production company is entitled to 50% of whatever the artist receives, the artist would be lucky to net $35,000 and a 6% royalty.
But it gets much worse. Many production agreements provide that all costs (including recording costs) are recoupable solely against the artist's share of royalties. It is also common for production deals to require that the royalty payable to the producer of the album (usually 3%) comes solely out of the artist's share of royalties (thus reducing the artist in my hypothetical case to a total royalty of 3%).
The effect of these provisions is that the entire $250,000 paid out by the record company so far will be recouped only against the artist's meager royalty share rather than on an equal basis with the production company; which is gladly willing to accept 50% of the "'upside" but only a disproportionately small percentage of the "downside."
As in the days of Robert Johnson, Muddy Waters, and others, many artists are still not represented by a music attorney when they enter into these agreements. If the artist is wise enough to use an experienced music lawyer, there is some reason to hope that a production deal might be improved in the artist's favor. For example, the production company might agree to split the financial responsibility for the royal to paid to the producer, even though this is still more disingenuous than generous, since the artist's principal motivation for signing with a production company in the first place was to allow it to handle all production responsibilities and to be compensated for doing so out of its share of the proceeds.
Unfortunately, many rap and hip hop artists come from disadvantaged urban neighborhoods and can't afford to pay what often amounts to sizable legal fees. As a result, these artists are sometimes encouraged to sign retainer agreements whereby they agree to pay their attorney 5% to 10% of all gross royalties and gross advances (in perpetuity).
HOW IT SHAKES OUT
Applying this arrangement to hypothetical production deal, artist who used this retainer plan would be required to pay his lawyer $25,000 (ie, 10% of the gross sign advance of $50,000 and 10% of gross recording fund of $200,000) and a royalty of 1.2% (10% of the gross royalty of 12%).
So even if we assume that artist's attorney was able to get production company to reduce its share of record royalties by one-half of the producer's royalty (i.e. by 1.5%) the 6% royalty due to the artist for his half of the original 12% royalty would still amount to only 4.5%.
If you then reduce it by the 1.2% due to the lawyer, that royalty would equal an embarrassingly low 3.3%. And when you deduct the attorney's share of the advances (i.e., $25,000) from the $35,000 that the artist was due to receive, the artist will actually net a paltry $10,000.
And just when you might be saying to yourself it can't possibly get any worse than that--it does. Most production agreements allow the production company to recoup any coats that it incurred prior to entering into the recording/distribution agreement. Conceptually; this makes sense, because anyone who makes a capital investment in an artist's career should have the opportunity to recover that investment. At this point, I doubt that it would surprise anyone to discover that the entire amount of the production company's investment (let's say it was $10,000) can be recovered 100% out of the artist's share of income, despite the fact that the production company stands to gain 50% of all the monies earned under this deal.
So if the production company exercises its right to deduct this $10,000, the artist in my hypothetical case is now left with a royalty of 3.3% and a advance of zero dollars. It can't get worse than zero, you say? I say it can, because it is not uncommon for artists under these circumstances to also sign a management agreement with a "division” of the production company at the same time they enter into the production agreement.
One hopes the production company would avoid the outright conflict of interest and not commission the artist's income from the production deal. But if the company does commission it, or if a third-party manager is involved, the artist's royal points (which are currently 3.3%) could be diminished by an additional 20%, leaving the artist with a whopping royalty of 2%.
In other words, the artist who is the engine that drives this entire process may actually wind up receiving only 17% of the total royalty points in the deal and 0% of all the money that record company handed over to the production company in order acquire the artist's services.
Can it possibly get any worse than that, you ask? Of course it can. Most production agreements contain a clause that allows the production company to award itself a substantial portion of the artist's publishing rights for free. (This is exceptionally greedy when you consider that in many cases the production company already owns half of the publishing because it provided the “tracks.").
Young artists have been trained through music business seminars, self-help books, and the advice of fellow musicians to adhere to the mantra "Never ever give away your publishing rights." Apparently, there are still many young artists who are not getting the same good advice. As a result, they are routinely assigning over these rights for little or no consideration.
They don't understand that in doing so they are:
- (1) granting control over the administration of their compositions to a production company that is free to do whatever it wishes to the artist's songs--from changing the songs' titles and lyrics to licensing the artist's songs for a "Worst Songs Of The 90s" compilation album;
- (2) permitting the production companies to directly collect the majority of the publishing income, which means that the artist will probably be paid at a date that is considerably later than the date on which the production company actually receives that money;
- (3) granting the production company's publishing entity the right to change a 10% administration fee for doing exactly what it promised to do when the production company took the artist's publishing interest for free in the first place (is there no end to the hubris of these people?); and
- (4) allowing the production companies to “cross-collateralize” the artist's share of publishing royalties against any unrecouped balances in the record deal.
Probably the greatest irony of this publishing situation is that the major labels, which are the entities usually taking most of the financial risk by funding the cost of recording, manufacturing, distributing, and marketing the artist's albums, are themselves receiving 0% of the artist's publishing, which probably makes production companies the highest paid middle men in the history of the music business!
And yes, of course, it gets worse. Many production agreements also include a clause that allows them to own a 50% interest in the artist's merchandise rights. Do they get this interest in return for the large amount of capital that they have tied up in manufacturing and distributing the artist's merchandise? Of course not, they get It for precisely the same reason that they were able to command 50% of the artist's record royalties and the artist's music publishing royalties--they get it because they can. And they can get it because they are part of an industry that would prefer not to confront a system that works for everyone--except the artist. If a record label deals directly with an artist, it costs a 12% royalty. If a label deals with a production company for the services of that same artist, it still costs a l2% royalty. So why should they care? How about because it's wrong to allow anyone to be exploited, especially those who form the heart and soul of our business.
Production agreements prove the old adage that "no good deed goes unpunished." The genesis of these deals was an attempt to reward producers who could get new artists signed to record deals just by dint of their affiliation with those artists. .For example, if a producer with the stature of R Kelly or LA Reid and Babyface agrees to produce a previously unknown and unsigned act, chances are that it won't be long before several major record labels will be beating down the door to sign that artist. Reid and Babyface probably receive a 4% producer's royalty to produce an album by an established performer like Whitney Houston. Therefore, it makes sense that they should receive something more than their normal producer's royalty if it was really their stature as producers (rather than that of the artist) that caused the label to sign the new artist in the first place. Consequently, the concept of the production agreement was born.
One reason for the growth of production deals is that record companies have abandoned a good portion of the obligation to "develop" new artists. If a production company truly takes on the responsibility for helping an artist locate good songwriters, choose the right producers, fund the recording of an album, and "shop" for a deal, then I believe the production company is entitled to share in any financial rewards that the artist may receive. But like so many other things that have a benign and logical beginning, this process has become increasingly bastardized so that today it is not uncommon to find high school students who have never had a single record released handing out production agreements to young "wannabe" recording stars.
Even more distressing for me is what I perceive to be "racial profiling" on the part of some of my colleagues. Lf a white rock'n'roll artist comes to a lawyer with a production agreement that requires the artist to turn over 50% of his record royalties, a substantial portion of his publishing royalties, and 50% of his merchandise royalties to a production company when there is no record deal on the table, most of us will discourage that artist from mortgaging his future simply to have the opportunity to record a few demos. But if you assume the identical scenario, only this time the artist is a black rapper, I believe most music attorneys will try to negotiate better terms but will allow the deal to go forward. At best, there is a double standard in play here; at worst, it is a classic form of racism. In either case, it is the artists (and ultimately the entire music industry) who are the big losers.
HOW TO FIX IT
Here are my suggestions as to what can be done to fix this problem:
- 1. Record companies should dramatically curtail the number of artists whom they sign through production deals. I realize this will be tough to do, because everyone knows that "you don't look a gift horse in the mouth" and right now the moat profitable area of the record industry is the area that contains the greatest percentage of production deals--rap and hip-hop. But in the end, the most important relationship that any label has is with its artists, and once an artist starts to sell a large number of albums and receives a small royalty he or she is going to be understandably upset. (The Pebbles and TLC cases are perfect cases in point). We all know that the majors can get together when it is in their best interest to do so. Wouldn't it be great to see them act together for the benefit of their artists? And here's the best part-it won't cost them one extra dollar to do so.
- 2. Only real production companies with major label affiliations should sign artists to multiple album deals. If a producer with a proven track record for success is interested in working to develop anew artist, a production deal may be warranted. Why? Because the mere affiliation of a hot producer is often enough to earn a project a long hard look and listen by some top labels. If a record deal is not consummated within nine months, the artist should have the option to terminate the production agreement, and all rights to the artist's masters should thereafter be co-owned by the artist and the production company with neither party having the right to exploit these masters without the prior written consent of the other party.
- 3. The royalties and advances payable under production agreements must reflect each party's small contribution to the ultimate success of this project. Any third-party producer royalties and advances should be paid "off the top” of the deal. Thereafter, all royalties and advances should be spilt between the artist and production company according to the following schedule:
Album #1: 65%artist / 35% production company
Album #2: 75% artist / 25% production company
Album #3: 85% artist / 15% production company
Album #4 (and beyond): 90% artist / 10% production company
- 4. Production company agreements must be fair for both sides. All “recoupable” amounts must come out of both parties' shares in proportion tot heir royalty interests. The artist should be paid directly by the record company at the same time and subject to the same calculation of royalties as the production company is paid.
- 5. Let's not encourage artists to sign production agreements when a finder's fee agreement might be a suitable alternative. If someone is going to use the master recordings that were financed and recorded by the artist (as opposed to investing a substantial amount of his own capital to record some new demos), this is a classic finder's fee arrangement. In this situation, the artist should not be signing a production agreement but should enter into a deal that rewards the successful finder a portion of royalties and net advances. (I would suggest starting at 10% and then decreasing this amount for each succeeding album in the deal.)
- 6. Music attorneys should remember that artists and production companies retain them to be their legal representatives--not their partners. If a lawyer acts as a "finder" of a record deal, I have no objection to that lawyer being paid as a finder (see #5 above). But I am appalled that lawyers who are providing conventional legal services to artists are expecting to receive 5% to 10% of that artist's "gross" earnings "in perpetuity" while simultaneously arguing that managers and production companies--who deal with the artist's career for many, many more hours each day than the lawyer ever will--should be paid on "net" monies against a very short "sunset" clause.
- 7. Production agreements should not require an artist to give away any portion of his music publishing or merchandising rights. If a production company wants these rights, it should pay fair market value for them.
- 8. Let's agree that every production agreement must publish a calculation of what the artist will actually receive in net advances and royalties in bold type on page 1 of each contract. Most of the people who are likely to read this article are probably experienced music business professionals. Nevertheless, I'll bet most of you had difficulty following the pea as it moved from shell to shell when I explained the typical calculation of royalties in my hypothetical production deal. Just imagine how difficult it must be for an 18-year-old first-time artist with no business experience whatsoever to understand the ramifications of the contract he or she is being asked to execute. I'd like to believe that if production companies and their lawyers had to disclose a “truth-in-contract" clause in large, bold type that clearly acknowledges that artists like the one in my hypothetical case would receive an embarrassingly low royalty and advance, it might be harder for them to convince the artists to go along so willingly with this type of production agreement.
- 9. Let's not wait for a musician's union or a congressional commission or a state statute to tell us to clean up our act.
Let's do it ourselves simply because it's the right thing to do.