There’s a lot of change going on when it comes to owning your own master recordings. At the 2006 DIY Convention, a panel that included Joe Escalante of the Vandals; Brian Zisk of the Future of Music Coalition, Ron Gertz of Royalty Logic and others debated the merits of signing versus the DIY way….
AR: Anita Rivas, attorney
JL: Jon Lowie, Echospin
RG: Ron Gertz, Royalty Logic
BZ: Brian Zisk, Future of Music Coalition
CH: Chris Hereford, Burn Logic
JE: Joe Escalante, The Vandals/Barely Legal
AR: We have a lot of talented people on this panel, a couple of lawyers, and I guess what I will do first is introduce the panel members and let them talk a little bit about themselves. After that we will focus on some of the issues that face the artists and independent labels today.
First we have Joe Escalante he is the bass player for The Vandals, he owns a record company called Kung Fu Records, he has Kung Fu Films, he makes films, he stars in films, he has a current show called Barely Legal on Indie 103, and he is also a lawyer. He actually started out as a T.V. lawyer for CBS and UPN, so he has a lot of experience, and you have probably heard him of him on that station.
Then we have Jon Lowie from Echospin. Jon has just been added to the panel so I don’t have lots of information, but I believe there is some information on the handouts of the D.I.Y Convention. What I understand about his business is that it is a digital download service that puts the consumers directly to the artists, right?
JL: It lets you sell your music in a download directly from your own website or wherever you want to stick the link we give you for your music. You set your own price, you deal directly with your fans using very slick technology that does everything iTunes does but a lot better.
AR: Then we have Ron Gertz. Ron is a genius and he knows the copyright law. He is an expert witness all the time, he is a very controversial figure, and he is the owner of Royalty Logic, which is kind of like ASCAP or BMI because they collect performance income but it’s for the master side. They are kind of in competition with Sound Exchange, which is owned and controlled by the Recording Industry Association, which is interesting that Sound Exchange is owned by the record industry and they are dispersing money to artists. He can tell you more about that.
He also has another company called Music Reports, and he represents everyone from QVC, Sprint, and all the major broadcasters. We are probably going to start off with Ron giving us the landscape.
Next is Brian Zisk, who is one of the founders of the Future of Music Coalition, and-
BZ: We are an artist advocacy and education group out of Washington D.C, even though I am based out of the Bay Area, and you can find more information at www.FutureofMusic.org. We have also have a children’s video company. I also promote artists like the Michael Barkley Blues Band.
AR: Then we have another new panelist, Chris Hereford, from an organization called Burn Lounge. It’s well funded, it’s a new concept, and from what I understand is that they have something set up like iTunes, where they acquire the rights from major labels and then they allow consumers to act as retail outlets and sell the music that they like, and it’s also available to independent labels and other parties out there. If you sell records through your website you can make some money back from it. Yahoo and Google do those sorts of things.
That’s the introduction. Do you guys want to talk about yourselves for a few minutes? I heard that we might be able to go a little longer. Does anyone want to talk about themselves and what they are doing? No?
We can start off with the landscape and we are going to start off with Ron for a general landscape, then Brian can talk about the legislative side and what is going on, because we kind of want to talk to you guys about who are the enemies, who are the good people, who can you trust, and if trusting is possible.
It’s interesting because 3 of these guys are friends of mine and I see eye to eye on them with a lot of things, but in other situations they are enemies. I love Ron because he is great, he’s honest, and straight up, but he represents the broadcasters and he doesn’t like performance rights. Is that right? Tell me what the story is.
RG: I think for any industry that pays music publishers and take performance rights $600 million dollars a year, you people in this room have to find some way to make them your friends, and they want to be your friends.
AR: What he is telling you is a piece of the picture. A billion dollars was collected between for performance rights for SESAC, BMI, and ASCAP, and that money comes from radio and T.V. All that money goes into this pool and gets distributed by the members. There is no money like that.
Let’s say that your music is heard on the radio, the Rolling Stones don’t get paid when their music on the radio, only the writers do, and that creates a lot of controversy and problems internally between band members. You get one person who is getting all the song money and everyone else is dirt poor, that is part of the reason, and all that money goes from the writers to the publishers and none of it goes to the record industry, which is spending a lot of time to market those bands, and to the musicians on the road promoting those songs. That is where Ron and I would differ on that, and probably Brian would agree with me, but it’s interesting to hear these different positions. They are going to tell you this themselves, so I am sorry for interrupting that.
Back to Ron telling the story of what is going on right now.
RG: Anyone who tells you about the landscape, you have to realize that it’s their version of the landscape, and I fully recognize that this is my version of the landscape. It comes from being a former musician, a touring musician at that, and getting on the wrong end of a recording contract and trying to figure out in law school about how they did it to me. I learned and I have been learning that over and over again in each context.
My company, MRI, represents all the major Fortune 500 broadcasters in the country, including wireless carries, companies like Musak, which pay a tremendous amount of money in royalties, you should only be so lucky as to have your music playing in an elevator at 3am, and we provide service to Sprint, Wal-Mart, and others.
What MRI does is it calculates royalties owed to the performing rights societies, to the Fox agency, to publishers, to record companies, and we handle all that electronic.
I also run a company called Royalty Logic. After creating all the systems with the same data as ASCAP, the same data as BMI, the same data as the Fox Agency, the same one as the Library of Congress, the same data as all the record companies, and I realized that the data sucked. Trying to figure out who owns what in this business is almost impossible, it will never be wonderful, it will only be tolerable over our lifetimes, and as a result a lot of money simply flows through the cracks. It occurred to me that since we created the systems to do all this stuff, maybe artists are to be able to tap into the same data, and here was my thinking: I got into sequencing a long time ago because I was a musician and a lawyer, and I realized that technology was going to do something that you all know, which is lower cost of production, make it easier to get into the business, by the way this is all just simple economics, it was going to lower the cost of reproduction, and it was going to lower the cost of distribution.
I was also a teaching assistant in economics in college, there is this law we learned, and the law is that in a relatively efficient market place, where the cost of production and distribution approach zero, which is what the Internet does, the law is that the price that could be charged for that unit approaches zero as well. The problem for the record industry and the music publishing industry is that means tons of piracy, so you see a lot of law, the fact that piracy is ripping the guts out of the music industry, and it will soon do the same thing with the video industry. That law of economics that creates such angst about piracy also means that works can be promoted for almost no marginal costs, hence the D.I.Y convention, and you people are going to try to do your best to take advantage of the laws of economics.
I was sitting at lunch with one of the international copyright professors and I asked him where this business is going, and he said to me let me ask you a question, you are a copyright lawyer, who are going to be the copyright owners of the future? Right now it’s the publishers, the record companies, the majors, and who are going to be the copyright owners later on? I thought to myself that I understood where he was going. The wise man was giving me a clue, the creators are going to be the copyright owners, the ones in control, and I thought about why. I had to go back to 1976 when I studied the copyright law before the new copyright law went into effect on January 1st, 1978, and that law created something wonderful. It created a termination right, which meant that 35 years after a work was assigned to a record or publishing company, the creator could terminate those rights, and it means that the major record and publishing companies lose the rights. That refers back to the creators and I was wondering when that was going to happen.
RG: 2013. All those artists who did deals in 1978 are going to get there rights back and they are going to own it all. What do they need in their future? They are going to need a way to license their works, and they are going to need a way to collect their works, they are not going to need music publishers, record companies, and a couple of major artists decided that they were going to wait until their agreements were over and do their own deals.
The world changed for me one day when I was watching NBC, I forget how many years ago, and it was Garth Brooks sitting on the Gold posts in Texas Stadium taking phone calls. He was asking people to call him on the phone and tell him which video of his they wanted to see. People called live, he bought the hour of time on NBC, and while they played his video there was a crow on the bottom that said, “Want to get Garth’s latest album? Dial the following number.” That’s when I realized that the world was never going to be the same. I knew major artists were going to control their own material, they were going to be the copyright owners and the ones in control of licensing.
I began to think about the other ones that are going to control it. It’s the ones who understand that the marginal costs of reproduction and production is zero, that the price is zero, and that is you people. You people are going to control your own rights. The ones who are doing it themselves can own their publishing, their masters, and you are going to be the creators with the ability to make your own deals. Your issue is going to be getting your royalties. All of the rights you have right now, the rights of the song, the rights of the recording, the performance rights, the separate reproduction rights, they are all collected by different companies like ASCAP, BMI, and SESAC, who collect performance rights for songs. The Fox Agency collects mechanical rights for songs. Sound Exchange and my company represent masters and artists, and they collect performing and reproduction rights for digital transmission of recordings. These are all words of art.
So, there I was after having lunch with this copyright expert, and I realized that I blew it and I knew I should have started a collective. I started a collective, hence the reason why Anita says a lot of people hate my guts, but fortunately I managed to get a few people who understood that the law is going to change, that artists are going to control their rights, and that they want to be represented much more vigorously than they could be by the popular major industry institutions. Artists like Dr. Dre, Metallica, The Rolling Stones, Sam Cooke, and a whole bunch of others decided that they wanted a different way to collect their money.
The landscape is that you are going to be the controllers of the rights. You are going to be looking for competitive alternatives for how your royalties get collected, and as more and more music gets available to more people there are going to be more laws that create pools of money that get divided up among creators by collective licensing organizations, and you are going to need a choice. There is going to be a tremendous amount of competition among the collectives, you should go out and do your research, and have a great time because it’s a wonderful time to be in the music business.
AR: One more for Ron. You have The Rolling Stones as clients, can anybody in this audience sign up with your company? How does that work?
RG: Yes. Actually we have not been concentrating on D.I.Y people, but if you are interested then send me an e-mail, Rgertz@Royaltylogic.com, and I will put the broader membership forms up on the website.
AR: Brian, why don’t you tell us about what is going with the legislature and the lobbyists for the special interests out there? Who are they?
BZ: Basically you have the representatives of the recording industry who claim to represent the artists but don’t. Then you have the digital media folk who want to get the music for free, so basically you get these private agreements between the recording industry and the digital media folk, and they present it to the legislature as a negotiated agreement, which should be codified into law. Who does that leave out? The artist.
What can you do about it? Talk to your representatives. There are a lot of laws that come down the pike, there are a bunch of people who track them, like us, like the Future of Music Coalition, or Ron, but track what’s going on and if you hear about something that you don’t like then call your legislature. You can show up with your guitar, do whatever to meet these people, become a face that they have to see and deal with, and present your position. You guys are the ones who got them elected, you don’t pay their bills like the IRA does, but that’s not how it should be. Show up, voice what you believe, and take the influence you rightfully have.
RG: Could I add one thing to that? Just so you understand, the record industry and the music publishers are losing control of distribution, their respective entities that collect royalties realize that if they are losing control of distribution and if they want to remain relevant they have to at least remain in control of the money, and all of this stuff in Washington ends up happening through collectives. The law has been changed a number of times in the recent years and most recently with the Copyright Royalty Judge, Reform, and Distribution act, which passed last year, which created a permanent copyright royalty barred that adjudicates rate and terms of industry wide licenses, and the regulations pursuant to which royalties are distributed by the collectives to members. In law it’s called Interest of Parties.
If you are not a member of one of the collectives that participates in those proceedings, you have no voice, and if the collective doesn’t send in it’s notice on the appropriate date, then the collective has no voice. That is why you have to look at the collectives out there and try to figure out which ones are more interested in artist’s rights and you should become members of those collectives. That is the only way it works.
Congress likes grassroots efforts, so whatever organization that gets together on a grassroots basis it has a lot of weight at Congress, but right now most of these things are out of Congress’s hands and they are in the hands of the copyright royalty board proceedings, which are just battling economists back and forth about the most boring testimony that you could ever imagine. There is legislation coming down a pike that is going to affect everybody, so you people in this room need to get involved.
AR: What about the mechanical rate? Do you want to talk about that?
RG: How many of you don’t know what a mechanical license is? It’s when songs are recorded on CDs, tapes, whatever, there is a royalty that is paid for the right to make and distribute phono records, and that rate has gone up to 9. something cents per unit sold and distributed.
The way your royalties are collected is through a collective or directly on your own. The major collector in this area is the Harry Fox Agency, which represents the major music publishers, but a lot of the major artists, representing 40% of the music but 60% of the revenues, don’t go through the Harry Fox agency. Instead they themselves administer their rights and it’s those works that the major labels have had a problem licensing to the subscription and other musical services, because those artists want to make sure that the record companies pay them on downloads for their artists and they have said that they aren’t going to give licenses for their songs until they make sure that the accounting on their other stuff is right.
The record industry decided they had to solve this problem, they couldn’t let the artist control how they distribute their masters, whether it’s in subscription services, ringtone downloads, ringbacks, wireless, and so there are several proposals floating around that want to change Section 115 into what is called a blanket unitary license that would cover all rights necessary for subscription services to do whatever they want. The quid pro quo was that the Harry Fox Agency would become the sole and exclusive collective for collecting these rights, meaning all the major artists would have to receive their royalties through the Harry Fox Agency and they would not be able to administer those rights themselves, and if the law passes that way it will be the end of independent music publishing. That is why you need to get involved. Plus you get less money.
AR: Let’s talk to Joe. Joe has that show and he gets lots of questions. What are the main questions that you get on your show? What are artists concerned with primarily?
JE: I have a radio show every week on Indie 103.1 here in L.A, and we take calls from people like yourself who are getting started in the music, television, or film business, and mostly people are interested in how they are going to get paid and they know that they are creating stuff but they are confused on how you get paid for radio. They want to know if you do get paid for radio and how they can get paid if their song is on television or in a film, if it gets played on the Internet, if it gets played on iTunes, that is also confusing to them, but even more confusing is what if someone puts one of their songs on their MySpace site as their favorite songs, how do they get paid for that? There are a lot of different answers for those things, but people just want to know how they are going to get paid.
Ron is very involved in how people get paid.
AR: We have some more people on the panel and they can talk about some things that they are doing in order to help monatize music.
JE: The difference between these things are kind of statutory, like the mechanical royalties, trying to codify what a royalty rate would be for an Internet download or whatever, and on the other hand there are the synchronization rights for the right to synchronize your song with a film or a show on television. It confuses people why one is a negotiation and why one is statutory.
I answer the questions in like 30 seconds, but they are not the kind of answers you are going to get here from Ron. It’s better to talk to him.
AR: Should we talk to Ron first before we move on to the digital use? How do people get money for putting their music on a visual on the Internet, how do people get money for that? Can people use that as a copyright infringement? What is that? What are the rules? Actually Brian can talk about that too because he was going to explain the code.
BZ: Just control your rights. If you control your rights you have the ability to get paid on them, if you don’t control them you are at the mercy of someone else who decides that they may do the exceptional thing and account properly.
RG: Brian is right about controlling your rights. Don’t give up your copyrights, but the problem is you can’t control your rights.
BZ: You can but it’s a devil’s bargain.
RG: You own the copyright, but you can’t control where it goes, and that’s the problem. You can’t control if it goes to a place that has contractually agreed to report use back to a collective. Unfortunately, there are a lot of places where music gets used and it just doesn’t get paid for, or it gets used in a situation where it’s licensed, but the reporting going back is so bad that it doesn’t tick on the information received by the collective.
BZ: Especially with smaller artists who tend to fall through the cracks.
RG: This is not a perfect world. Unfortunately, everyone works on statistical sampling technologies, which if the samples are drawn correctly can be pretty dam good, but nothing is perfect and there is no such thing as a census.
The answer is to make sure that your music is not only controlled by you, but if it becomes popular it will show up somewhere. Barring that, if you k now someone is using music without a license, you own the copyright, and then you can tell them that they have to pay a license fee or try and work out something that allows them to use your music but to also identify it as your music.
BZ: What you are saying is that you are not going to be able to know who is playing your music on their website. Right now there is no way to know if someone is playing your music on their website.
RG: It depends on the website and the service, but there is such a proliferation of websites and uses, that it’s just not cost effective to be able to monitor them all.
AR: I have one more for Joe. A lot of people probably talk to you about copyright registrations, they say that they can put it through the mail, but maybe you should explain why it is important to register.
JE: It seems silly, but I get a call probably every other week from people saying that they mailed their songs to themselves and they want to know if they are protected in case someone steals their songs, and I usually tell them that there is no legal effect unless you put Anthrax in the envelope. It just does absolutely nothing.
I can’t say it enough, register your songs properly, you can go to the US copyright website, and they have a great explanation on what all of that means. Same with trademarks, there are some societies like the Writer’s Guild, there are some music ones too, that if you put your song on a CD, send it to them, and then they can register it somewhere.
RG: Here is a number you should understand. Less than 25% of all the songs and recordings released by major labels since January, 1, 1978 have been registered.
MR: I worked at Capitol as an intern and I don’t think it’s a conflict or a secret. They had a staff including David Bowie stuff, like years of copyright registrations, and it was my job to go through them all, but they were years and years behind.
JE: Whenever I find out that something has been infringed, like when I watch MTV and I hear one of my songs get played in the background, I usually call them the next day, I have Anita call, sometimes they are friendly and sometimes they aren’t, but it always seem like even for me, I’m a lawyer, that every time it’s one of those songs that was infringed I always go back to look at the paperwork and I see that it was done wrong or that it wasn’t registered at all. I’m always sorry because they laugh at you after that. Registration is important. I blow it all the time.
AR: You have won some.
JE: Yeah but I blow it. You think you are done, you go back and look, and they aren’t done.
AR: It’s a lot to keep track of. I was going to say that the really important thing for the registration is the attorney’s fees, because it’s not a threat, you have to prove actual damages to winy any award, and if you are a new artist without sales then you are not going to be able to afford to hire an attorney. The other side will be considered if you haven’t registered because then you have statutory damages available, which is like 150,000 per count, they used to be last time I looked, but it’s still out there available as a threat and you can use that. If you don’t register it then don’t even bother them if they are playing it.
JE: When they say on the panel that if you hear someone using your music or something you created, and they didn’t have a license and you go after them, there is usually very little you can do because you can’t afford an attorney. It’s not that much but it’s still the principal of the thing, you have to stop and you have to nip it in the bud, but if you had registered properly then there would be these attorney’s fees that you would be entitled to recover if you win and if it’s a slam dunk case if you win, then you have a whole pool of attorneys that will take it on a contingency, so all of a sudden you have enough money for a lawyer. If you didn’t do that then you don’t have anything.
AR: Plus you can’t sue if you don’t register. It sucks because then you don’t get the benefit of anything in the law.
Now we are going to go on-
BZ: Do it yourself. Don’t wait until you have money to hire an attorney to register your copyright, you can do it yourself very simply.
JE: Send a letter.
AR: Go to Joe’s website. I think there are links and information about it too.
RG: Or just the copyright office website.
JE: That’s the link we have.
AR: You have to have the same artists all the way through. You can’t register you doing a solo thing, you doing a band thing, it has to be all the same author.
RG: It’s a trade off because you can protect all the masters, but if you want to protect the songwriting you need to register everything.
AR: PA. It’s a separate form for songwriting, but again let’s say it’s just you, you are the only who wrote and sang, then you can do the songwriting and the master in an SR form, but it has to be consistent without multiple people on it. The ones that have other people who co-wrote you have to do separately. You have to do it in black ink, you can’t use white out, or it will get returned. There are a lot of little annoying technical things.
BZ: You can also do silly things like make a 400 song compilation-
AR: Exactly. That is the best thing to do. Ron?
RG: You can figure it out before you file it, but just file it as soon as possible.
JE: Don’t be afraid to put it out there because you have some protection before it’s registered.
AR: Send it certified mail or Federal Express.
RG: You are actually covered for 3 months after the release without a formal copyright filing.
All you need to understand is that your work is protected when it’s first fixed in a tangible medium of expression, those are the actual words from the law, meaning you write it down, you record it, and it’s protected. The next issue is the registration, which gives you statutory damages, attorney’s fees, and the registration can occur anywhere from a couple of months to a year after you send it into the copyright office. When it’s actually catalogued, that is when somebody can presumably go to the copyright office website and find you registration, but unfortunately the copyright office does not maintain a relatable database. What they have is one big text file and unless you have the proper search algorhythms through this monster text file, it’s very difficult to find a title listed on 40 titles on one registration.
Correcting my language earlier, 75% of our searches of the copyright office database result in no match, if you want to save money by doing a catalogue registration do it, but as soon as you have a song that breaks out you should separately register it.
AR: Now let’s get to the new guys. Did you want to say one more thing Joe?
JE: Don’t be afraid to get your stuff out there. Another problem that I have with my show is that people are afraid. People stealing your work is actually really rare.
RG: My clients, the television industry, the wireless carriers, Muzak, DMX, they don’t steal, they want to find you, and they want to pay you. They own their own copyrights and if they are infringing yours then they are going to have a hard time enforcing theirs. The legitimate companies you don’t have to worry about, it’s everybody else. Obscurity is a greater threat than piracy, so get your stuff out there.
AR: The new guys are going to talk about digital downloads and monetizing music. Let’s start with Jon.
JL: Thanks. Our business, Echospin, is a little simpler because it doesn’t deal with broadcast rights and other things that are collected by the collectives. We try to simplify things for ourselves because we are not attorneys. Our agreements with our artists and labels, and soon filmmakers, just says you have the rights to sell this to people that want to buy it from you and you represent that you have all those rights. Then you can use our technology to sell them directly to people who want to buy them, and we have assembled all of these technologies into one little wizard that pops up in front of your website when you click a link, actually there is a whole ad in the program so if you visit our website you can learn more about it, but basically it gives you a simple way without any risk of not collecting your money.
Even if we went bankrupt you are still able to collect the money. We deduct a very small fee per transaction, independent artists don’t get charged any set up fees at all, and then you can sell your music to anyone that you want without the fear of labels who get paid by the collectives who are paid by the broadcasters who steal the money.
AR: You don’t take any fees?
JL: We take a fee when a sale is made. You put the link up on your site it will cost you nothing, but when someone clicks on it you have this magical Echospin experience and then we collect the money from them right in front of your web page. We deliver the music to them and then we pay you afterwards.
Echospin.com. We also report the album and track sales to Sound Scan, so that is a good way to do it, because if people are coming to your site then instead of sending them somewhere else you might as well keep control over your fans as well. The fans put in their e-mail address and their zip code, they buy your thing, and now you have all of this information for yourself and you probably made more money. You set the price on all this other stuff so you have total control over the distribution and you have the benefit of our geekiness.
There is no exclusivity whatsoever. We have never even asked for that. We have talked to artists and producers who have felt pressure from their distributors to not do things on their own such as this, because they might upset their distributor, and that seems rare so don’t listen to that.
We are on MySpace too, you will see a bunch of artists who just put this link up there that we gave to them, it lets people buy from your MySpace page, and then people can visit your MySpace page from your e-mails.
AR: Let’s talk to Chris next and then we are going to open it up for questions.
CH: I can’t take credit for the idea, but my good friend, Alex Arnold, is the CEO and founder of Burn Lounge. We actually met about ten years ago. I am an investor in the company, basically what Burn Lounge does is that we are a digital content and digital distribution company, and we created Ban the Fan retail. We created a software that enables anyone and anywhere as a fan of music, whether it be artists, music fans, entrepreneurs, to actually build their own iTunes and use our catalogue of music to go out to sell and promote. Whether it’s EMI, Universal, Warner, Sony BMG, we have contracts with all 4 major record labels.
She talked about monatizing digital downloads, that is exactly what we are doing, we are being able to monitize the referral. If I hear a good song and tell someone to go to my Burn Lounge to buy that song then I get paid. We have a ton of unsigned artists to Burn Lounge for distribution, because now they can go out and empower their fans to actually go into business with them.
We just signed Metallica, they signed exclusive with Burn Lounge, they are one of the biggest groups out there trying to fight piracy, they sued Napster, and Metallica now has their music on Burn Lounge and they will be sending e-mails out to their fan club to stop the pirating and start profiting. We want to go into business with you. You can go out and promote your music, as well as other artist’s music, and get paid to do so. That is why a lot of the big artists are excited about it, because now it’s like an Amazon.com affiliate model where they can earn commission of off other artist’s music, but they don’t own the rights or content to it.
We have an unsigned artist that we just had perform at the Key Club on Sunset, his name is Kafe Anderson, who I think is the next big star, and he is putting his music exclusively on Burn Lounge, and he is empowering his fans to go out to promote and sell. We have 12,000 retailers right now that have their own storefronts, that have their own iTunes, and probably we’ll have 100,000 or more by the end of 2006. More retail outlets than Blockbuster and Tower, and that is kind of what we deal with at Burn Lounge, we help unsigned artists as well as major artists to distribute music.
AR: Now we have some questions.
CH: One thing that I want to mention too is that we have a magazine called Burn Lounge Magazine, this was our second edition, and if anyone would like to receive a copy of that then we can get you to give your contact information and we can send you guys out a copy. It really focuses on the digital music industry and the technology as well as highlighting artists and entertainers.
AR: The question is do you get performance income from airplay on college radio and NPR stations? Are they exempt?
RG: The answer is that royalties are paid, whether you get paid or not is another story, and like I told you all of this is now statutory and regulatory. Last Wednesday was the filing deadline for being able to participate in the next copyright royalty board proceeding to determine their rates and terms for non-commercial broadcasting.
We are one of the collectives that have been involved in that and one of the tough tasks we have is to try and change the way the royalties get paid once they are assessed. The big battles are going to be over how the recording requirements function and how the distribution functions, and unfortunately Section 118 of the copyright law, which deals with, never really develops good procedures and rules with regard to the distribution side. That is a classic example of why you have to get involved with the collective. It’s so you can have your interest in proper reporting and payment represented at least in the only form of the copyright royalty board that you have available to you now.
AR: What do you mean when you say get involved with the collectives?
RG: The different collectives have different ideas about how royalties should be paid, who should it be paid to, and how they should be distributed. The traditional performance societies have different ways of doing it. This is unfortunately an area where one could authorize ASCAP, BMI, SESAC, The Fox Agency, or any number of players, to do this for you whether or not the enemy has the ability to pull it off. The data processing expert needs to pull it off as well.
Unfortunately, artists have not been represented in this area, had they been represented properly then the collectives that are currently engaged in collecting this royalty stream would have seen to it that there were more defined laws about how the royalties get paid, and you see that they don’t even exist. That is why I saw that there are going to be artists under collectives that are going to get these laws and regulations enacted.
JL: He’s asking how a fan would get paid off of selling an artist’s music. Basically, we are a software company, so we sell what is called Isoftware, independent content editing software, and- are you an artist? Yes? Ok. Let’s say you submit your music to Burn Lounge, to our A&R department, it’s ingested into our catalogue, and now that music is available for anyone who is a retailer with Burn Lounge that has their own Burn Lounge to sell your music. Right? So they will purchase our Isoftware for $29.95, it’s an annual fee, to have your own iTunes, and the fan that you have promoting and selling your music buys our software and when they go out to sell your music they earn a percentage. They get 20% of the profit margin and we have a guaranteed 5 cents per individual download, and that’s the commission that they will earn for selling that song.
They buy the software and then they have a chance to customize their site. They highlight 10 different albums on the front of their website, they create playlists for their friends, they promote them, and then they get paid.
A lot of artist’s fans want to know what they listen to, so they will not only sell your music, but they can actually help other band’s music get sold. You start working together.
AR: She asked why don’t you sue for infringements? Triple damages?
BZ: I agree in a lot of ways. You are not guaranteed to get your lawyer’s fees, you are also not guaranteed to collect anything, and it’s very expensive to sue. Those are just some of the downsides and I’ll let these folks talk about the upsides.
MR: You have to have a really good case, but if you have a good case then you can get someone to do it on contingency.
CH: There always seems to be some reason why you are not getting these triple damages and the $150,000.
RG: Which is very hard to prove. Actually there is no such thing as triple damages in copyright litigation. Statutory damages are up to $150,000 for willful infringement for profit.
The problem with having a litigation strategy as the way to make money, well it’s not a good way to make money, and it just means that you are not running your business. I will tell you, as a lawyer and former musician, that anytime you are involved in a lawsuit it’s not a business deal, it’s an emotional suck, and it will consume your life.
JL: Sometimes suing people is not worth it and it’s just better to go back to your craft. Don’t let your life get consumed by what you could have got in some kind of litigation.
RG: The value isn’t going to go to zero over infringement, because the main players, who are going to be the main parties distributing music, own their own copyrights. They will argue about the fees but they will pay, because they don’t want to be sued for copyright infringement.
The radio industry, the Internet industry, and all of my clients pay hundreds of billions of dollars in royalties, because they need to be legal. They are publicly traded companies and they can’t infringe copyrights.
Here is the real problem, for all the big parties worldwide who want to distribute music, they want to have two questions answered. How big of a check do I write? Where do I send it? Unfortunately, the conflicting things that are happening among the collectives and the copyright answers is that no one can answer those questions. That’s the problem. Once those questions get answered, and they are going to get answered in my view by Congress in the form of statutory licenses, once those questions are answered then the floodgates are going to open.
AR: I would tell you to register at the U.S. Copyright office because there are benefits that you receive by registration. It’s the same in the U.S. If your song is worth 5 cents, then why are you going to sue someone if they are going to use your music, you should say thank you that they are using your music. You need the registration to give you the benefits of statutory damages and attorney’s fees.
RG: There is actually loophole that says if the music was recorded outside of the United States then you can still sue for statutory damages without having registered with the copyright office.
AR: Do you have to register in your own territory? Isn’t it reciprocity?
JE: We got some bootleggers making stuff here that was from Hong Kong and imported here without having registered here, but the DMCA says that if it is done overseas then it’s still outstanding.
RG: Forget about all of this. It’s not meaningful for the people who are sitting in this audience. Which copyright law is applicable? The copyright law of wherever you are. That means in every territory there is a different copyright law and different rules. It only means something when there is a lawsuit, and there is only going to be a lawsuit that you care about if you made a lot of money, because the major players will pay you whether your work is registered or not.
I have a research department of 12 people who are looking for copyright owners, they aren’t looking at the copyright office first and they are using all their business contacts to find out who we pay. They don’t care if it’s registered. Legitimate companies don’t care. When so much of the money is collected through collectives, then the real issue is your relationship with your respected collective, and unfortunately for you guys you have a whole bunch of collectives that you need to become members of. You have to choose ASCAP or BMI, you have to choose whether you are going to collect your mechanicals yourself, and if your works are being recorded by others then you can’t. You have to decide whether you are going to have The Harry Fox Agency collect your mechanicals. ASCAP and BMI pay publishers and writers, Sound Exchange and Royalty Logic pay copyright owners and artists, unions pay non-featured performing artists and musicians, and you have to expect that you are not going to make a dime from anything. Not one dime.
Unless your works are heard they are not going to show up in surveys, they are going to fall through the crack, and I think in the future there is going to be a tremendous amount of competition among the collectives internationally. You are going to want to be with a collective that says they don’t need to split all their royalty streams to pay different companies administrative fees, you are going to want to belong to one collective that collects everything, and when that becomes available to you then you will find that you are going to make a lot more money. The money will come faster and you won’t have so many hands on the check. This is where the business is trying to catch up to the technology that has put your own careers in your own hands. I will tell you that it is changing very quickly.
I have taken a lot of shit for creating a for profit collective. I figured what is wrong with a collective that isn’t a non-profit organization? Why shouldn’t the people who run the collective have the same profit motive as the people who represent them? Why shouldn’t those people they represent have the ability to fire my ass if they don’t think I am doing a god job? If I am an efficient organization then I will collect for 10%. It’s all about competition and I am an American who believes in competition and accountability.
RG: You find a good lawyer by asking people you trust. Find out who the top acts are, find out who their lawyers are, and see if you if you get to see an associate in their firm.
AR: That’s all the time we have, but thank you to our panel and to our audience.