Copyright Flaw is a column by our Editor which discusses current events on the legal side of the music industry involving copyrights, royalties, and government action. This is our first installment.

On Tuesday, a jury ruled that yes, in fact, Robin Thicke and Pharrell Williams copied (or stole) Gaye’s “Got to Give it Up” for their song “Blurred Lines,” and were ordered to pay the Gaye estate a total of $7.3 million for copyright infringement ($4 million in damages and $3.3 million in profits). Rapper T.I., who is also a credited writer on “Blurred Lines,” was not found liable.

This is the biggest copyright infringement payout in music to date. And it’s seriously going to change things.

The major issue at hand here is, obviously, what constitutes the copying of a song. But there’s so much more to it than that, and when I’m done this piece, I hope you’ll have a clearer understanding of the legal issues at play here, and how a complex, obsolete system of laws and government regulation, are impacting the music industry, the recording industry, and how we as consumers are able to listen to the art we love so much.

First, as it pertains to the most current “Blurred Lines” suit over one song, we have to remember that when we lay-people talk about a song, we’re really talking about two separate entities. This idea of one song essentially being double sided, or made up of two parts, is vital to your understanding of even the most basic legal aspects of the music industry. The song you hear, and the song written by the original songwriter, are considered two separate properties owned by two separate rights holders, protected by two separate copyrights. There’s what we hear, which is referred to as the mechanical version, or sound recording, protected by a one copyright. Then there’s the song we don’t hear, the song that we read, the song that’s published by the songwriter(s) and protected by a separate copyright.

As this article from musicologist Joe Bennett beautifully demonstrates, it’s blatantly clear that the written music of “Blurred Lines” is completely different in almost every way imaginable, from “Got to Give it Up.”

Embedded are Joe Bennett’s transcriptions of the written music of the two songs.

Screen Shot 2015-03-12 at 12.50.50 AM

Bennett also lists a number of other ways the songs are completely different:

  • Blurred Lines is 120 beats per minute.
  • Got To Give It Up is  122 beats per minute.
  • Both songs feature a syncopated cowbell part and an electric piano (Gaye’s bassline is actually played on a 1976 RMI harmonic synthesiser).
  • The vocal melodies and lyrics of the songs are very obviously different from one another.
  • The songs have different chord patterns from each other.
  • The recordings are in different keys; ‘Blurred Lines’ is in G; ‘Got To Give It Up’ is in A.

So how could it be then that a jury could feel the song has been copied? Simply put? To them, it sounds the same. Even though, the published music is clearly different, and even though, according to Bennett, Thicke and Williams did no sampling, they were found guilty because to the jury, it sounded the same. Something to note here is that this was a civil suit, not a criminal case, meaning that for a guilty verdict, the jury needed only a majority, and not a unanimous decision.

To explain how the jury came to this decision and what it means for the future of musicians and songwriters, I honestly can’t write it any better than Bennett, so you can read what he has to say:

So to make a successful accusation of copyright infringement, Gaye’s side would have had to argue that the production ‘feel’ (or as the King and Ballow press release puts it, ‘choice DNA’) of ‘Got To Give It Up’ could attract copyright. Any legal action would probably have required the court (with the help of musicologists) to define exactly how this ‘choice DNA’ manifested itself in the recording, in order to discuss similarities. The act of putting an electric piano together with a cowbell and a 120BPM disco beat would need to have been judged a creative act in itself, making instrumentation and possibly even genre into protectable Intellectual Property. Which would have had massive implications for future creators of music.

I told you this could significantly impact future copyright rulings. I urge you to reach Joe Bennett’s complete article.

The Lifespan of a Song: “Blurred Lines” Financials As a Demonstration of Song Copyrights

One of the most interesting parts, to me, and what can serve as a good reference of example of the different copyrights and ownerships involved in one song, is that as a result of the legal process, the financials of “Blurred Lines” were made public and broken down as such, according to Variety:

  • Total Revenue: $16,675,690
    • Robin Thicke: $5,658,214
    • Pharrell Williams: $5,153,457
    • T.I.: $704,774
    • Interscope, UMG Distribution, and Star Trak: $5,159,245 (It should be noted that UMG has testified it cost the company $6.9 million to create the hit, meaning they didn’t even break even. How, exactly, UMG spent the same amount of money creating one song, as it took to make the entire movie Dazed and Confused, is unknown at this time.)
  • Note: Williams earned $4.3 million in publishing royalties and $860,000 in production credits.
  • Total publishing profits: $8

This shows a lot of different numbers and includes words like publishing, royalties, and credits. It can get a little confusing but the easiest way to understand cash flow in the music and recording industries is to look at the life span of one song, so let’s start with its birth:

You are a musician and you come up with a song. Maybe you write it down, maybe you make a little demo of yourself. You register your song with the Office of Copyrights and now you own the copyright to your song. You now can do whatever the hell you want with it. You can personally reproduce the song, remix it, create different versions, distribute it, and perform it live. Makes sense, right? It’s your own damn song.

But what you want to do with it is to make some kind of money off of it, right? You need someone to buy your song. Selling your song all by yourself is no easy task, so you reach an agreement with a music publisher (usually a publishing company) who will do this for you. This contractual agreement generally involves you, the original songwriter and original copyright owner, assigning (transferring) the copyright to your new publisher. Your contract with this publisher will determine how often you will receive royalty checks and how much your royalty payments will be. (Most contracts are about 50/50)

Get it? Good, because we’ve just started.

Now you and your publisher have the right to receive four different royalty payments as a result from four separate licenses you may issue, though we’ll only focus on two, for now:

  1. Royalties from Mechanical Rights. – Or the money that is made and paid out from the sale of a mechanical recording of your song (think CDs, vinyl, digital downloads, etc.)
  2. Royalties from Performance Rights. – Or the money that is made and paid out from radio spins, plays in restaurants and bars, and other types of broadcasts..

Pretty straight forward, right?

Mechanical Rights

Let’s get back to your song. You’re sitting in your studio apartment, eating ramen and drinking cheap whisky from plastic bottles, trying to write more songs because no one has bought your song, yet. Meanwhile, your publisher contacts ACME Record Company and ACME likes what they hear and they think they can sell it, making everyone rich. Now they must purchase a Mechanical License from your publisher. This license will allow ACME to reproduce (mechanically) the song you wrote onto some kind of media (CD, vinyl, digital download) for distribution and consumption. Now, every time someone buys your song from iTunes, you and your publisher (based on that copyright transfer agreement you signed with them originally) split the mechanical royalty for the musical work (songwriter copyright) 50/50.

Simple, yes? Nope, we left something out.

You see, while ACME liked your song, they felt like everyone involved could make more money if instead of you singing, they recorded the song with Lady Gaga on vocals. They have every right to do this because they purchased the mechanical license from your publisher, which grants them the right to reproduce the song as they see fit. So they hire a team of producers, audio engineers and, of course, Lady Gaga, to make a new recording of your song. And the public eats it up. They buy a bunch of copies and you get your mechanical royalties as the songwriter. But guess who else has a piece of the pie? That’s right, Lady Gaga. As the recording artist, she has earned herself mechanical royalties (for her role as recording artist in the recorded music) for every copy sold.

Those terms “publisher” and “royalties” make sense now?” There’s more, but that’s what you need to understand when you look at the financial records. Pharrell Williams and Robin Thicke had different roles in the creative process of the written piece of music, as well as different roles in the production of the recorded work. Hence, the two different profit amounts.

***

Aloe Blacc and Taylor Swift Say Artists Aren’t Paid Enough. They May Be Right, But It Might Not Be That Easy.

While the “Blurred Lines” lawsuit may be getting all the press, it just scratches the surface of the current legal issues that revolve around how artists are earning money in the music industry.

In the first part above, we discussed how artists and songwriters earn money from the sale of their songs and, while it’s intricate, it’s pretty straight forward. But remember, that’s not the only way music is consumed these days. Every time someone hears your song while at a restaurant or bar, every time your song gets played on the radio (satellite or terrestrial), or streamed via Spotify or Pandora, royalties are issued, and this is where it gets seriously complicated.

Just ask, Aloe Blacc and Taylor Swift. Both artists have come out against streaming services like Pandora and Spotify for not paying artists enough money.

A couple weeks ago, Aloe Blacc, who recently penned an article in Wired Magazine that declared artists should be paid fairly for their work, appeared on Bill Maher’s “Real Time” on HBO to discuss the state of the music industry and issues of royalties. Blacc’s argument is eerily similar to Taylor Swift’s gripe about Spotify. Unfortunately, the YouTube user who surely has illegally uploaded the video has disabled embedding, so you have to click here to watch Aloe Blacc’s interview, but if you want to skip that, I’ve highlighted some quotes from the interview that stood out to me and should stand out to you as well.

“Wake Me Up” was the most streamed song ever on Spotify and on Pandora, for 168 million streams, to the three writers, we earned a little over $12,000. – Aloe Blacc

So for the biggest hit, Avicci had the credit on it, even though you wrote it and sing on it. I don’t understand that. That’s fucked up right there. – Bill Maher

A song like “Imagine” by John Lennon is worth a statutory rate equal to “Who Let the Dogs Out.” – Aloe Blacc

A painter or sculptor gets to choose the context and the situation in which their art is consumed. – Aloe Blacc

Let’s touch on a few of them:

So for the biggest hit, Avicci had the credit on it, even though you wrote it and sing on it. I don’t understand that. That’s fucked up right there. – Bill Maher

You see, remember how mechanical royalties (money from copies purchased) are paid out to both the musical work copyright owner (songwriter) as well as to the recording artist (recorded work copyright owner)? And that’s pretty straight forward right? Well, you don’t only hear a song if you have purchased a copy of the song, correct? Where else do you hear it? All over the damn place.

You see, if you’re a songwriter and Applebees wants to play your song in their restaurants, if Sirius XM wants to play your song on the air, if Clear Channel wants to play or song on any of their radio stations, if Pandora want your song in their catalog, they have to purchase whats called a Performance Rights license.

Performance Rights

Think of the two main licenses from before, mechanical and performance. Think of mechanical royalties as being paid out every time one person buys your song specifically (or album). Think of performance royalties as being paid out every time your song is played in a public venue where the people listening don’t really have control over what they hear while in that public arena. This part is important:

Mechanical royalties are paid to the songwriter (you), recording artist (Lady Gaga, from the example), and the publisher. Performance royalties are paid to the songwriter and publisher.

Did you catch that? Recording artist does not get paid from performance royalties (radio, digital streams, etc).

Now if you’re a songwriter, good for you, right? More money for you. Now all you have to do is track every time your song is broadcast over radio and digital streams and restaurants and bars. Good luck.

Just kidding, that would be impossible. Instead, you register your song with a Performance Rights Organization or PRO. There are two big players in the U.S. when it comes to PROs, ASCAP, and BMI. Between the two, they represent probably about 90% of all published songs in the country. Now it’s up to them to track it all, collect royalties, and distribute them to you.

Boom. Now we’re done. Take a breath. You understand royalties. Kind of. We’ll touch more on PRO’s a little later on. But for now let’s see what Spotify’s role is.

Is Taylor Swift’s Beef With Spotify Valid?

In 2006, the Copyright Office commenced a rate setting proceeding that lasted three years and set rates for what are known as Incidental Digital Phonorecord Deliveries or IDPDs, under which, Spotify falls. As a result, Spotify pays musical copyright owners (songwriters & publishers) 10.5% of the services revenue. That 10.5% is split between mechanical and performance royalties, by the way. (Houston Law Review)

Essentially, the government has declared that Spotify, as an interactive streaming service, must first pay for the licensing fees for public performance, and if that total does not amount to 10.5%, then the rest is made up for by being paid in mechanical licenses. And if you remember, from public performance royalties, only the songwriters (and publishers) are paid. On average, the remaining mechanical royalties (paid to songwriters, publishers, and recording artists) end up being 3.9% of Spotify’s revenue. As you can see, recording artists seem to get, well, screwed a little bit.

Or do they?

In reality, the arrangements between services like Spotify and the sound recording copyright owners are negotiated privately. The negotiating parties are under no legal obligation to disclose any of these agreements. What we do know, however, is that while the songwriters collectively earn 10.5% of Spotify’s total revenue, Spotify claims it pays out 70% of its revenue to rights holders. There’s a large gap there of 59.5% of total revenue that is split between labels, recording artists, distributors, etc. Though Aloe Blacc is credited as one of three writers, therefore earning a third of that 10.5%, he is not credited on the sound recording, and is therefore not entitled to any recording copyright royalties.

While we do not know exactly how much royalty money Spotify pays out to the recording copyright owner, we can look at a similar service, Pandora. Pandora is classified as a noninteractive webcaster (with Spotify users can choose any song any time, hence, they are interacting with the service, whereas, with Pandora, the user has no control over what song comes up next, hence, they are not interacting) and, according to the Houston Law Review, estimations confirmed by court documents reveal that about 4% of Pandora’s revenue goes to musical work copyright owners (compare that to the 10.5% of Spotify’s revenues) while it’s estimated that anywhere from 25% to 56% of revenues go to the sound recording copyright holders.

Meaning now that you and your publisher get that 4%, while Lady Gaga and the production team get that 25%or more.

In the “Free Market” of the Music Industry, “Who Let The Dogs Out” and “Imagine” Are Valued Equally.

So where are these numbers and rates coming from? Glad you asked. That’s where our US Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer rights comes into play. More on that in a minute…

The original Copyright Act of 1909 actually set a statutory rate – a set amount of money – that would be paid to to the copyright owner. At the time it was $.02 (2 cents) per mechanical copy sold. In 1976, Congress amended the act in two ways – first, they set a new rate of $.0275 (2.75 cents) per copy sold, or $.005 (.5 cent) per minute of playing time, whichever was larger. The second thing Congress did was establish a Copyright Royalty Tribunal which had the authority to adjust the rate every ten years. In 2004, Congress moved rate setting responsibilities to fall under the jurisdiction of the Copyright Royalty Judges. In 2006, the CRJ’s set a ten-year rate of $.091 (9.1 cents) per track or $.0175 (1.75 cents) per minute of playing time. (Houston Law Review)

That’s all for mechanical recordings and copyright. What about that public performance license for the radio and restaurants and such? Ever heard of a PRO? Of course you have. We talked about them earlier. They’re the organizations who help publishers and songwriters track the public performance of their songs. Remember, there are two main groups, ASCAP and BMI.

ASCAP got it’s start in 1913  when composers and publishers, behind Nathan Burkan, a lawyer from New York, founded the organization (American Society of Composers, Authors and Publishers) to ensure music writers were getting paid for the public performance of their work. These agreements usually come in the form of “blanket licenses,” which generally permits these licensed establishments (e.g. radio stations) use of the PRO’s catalog for a set term (generally 1-5 years).

ASCAP and BMI came under fire in the 1930’s and 1940’s by the US government, who accused the organizations of antitrust violations, monopolization of a market. Criminal charges were settled out of court, but the two became subject to civil antitrust consent decrees that established the following rules:

  • ASCAP and BMI were prohibited from obtaining exclusive assignments of performance rights from their members, meaning a songwriter could, in theory, grant licenses of sound recording outside of the PRO of which they are a member.
  • ASCAP and BMI cannot discriminate against “similarly situated licensees on price or terms.” (That is to say, ASCAP cannot reach an agreement with one restaurant group for one rate, and then charge another restaurant group an inflated rate)

The legality of the practices of these two large PROs continues to be in dispute today, as most recently as Tuesday, they were the subject of a Senate Subcommittee hearing. One on hand, those in favor of the current PRO structure argue that without the organizations, individual copyright owners attempting to license their work on their own would create chaos, and a market where infringement isn’t just possible, but seemingly constant and necessary. Those opposed to current PRO structures claim that blanket licenses eliminate competition among copyright owners – as in, my song is worth the same as your song.

This structure and blanket rate system are still in place today. In fact, when a PRO and a licensee (think, Spotify or Pandora, or any large corporation who requires a large catalog) cannot reach an agreement on the terms of their license deal, the contract is subject to an established Rate Court, located in the Southern District of New York.

One of the established regulatory practices imposed on PROs is an antitrust consent decree that declares that PROs do not discriminate similarly situated licensees when negotiating rates. The courts have defined “similarly situationed” licensees as “licensees in the same industry that perform ASCAP music and that operate similar business and use music in similar ways with similar frequency.” It’s this exact ruling that has led the courts to determine that PROs can discriminate between Pandora and terrestrial radio – that is to charge them a higher rate, and for Spotify, a considerably higher rate.

The current debate in the Senate, which held a hearing on this on Tuesday and is still available for you to watch here,  is the same as it’s pretty much always been: Are ASCAP and BMI violating anti-trust laws. Many argue that for most licensees, the two PROs do, in fact, operate as a monopoly. Fair market means that two parties can engage in a negotiation for an exchange of goods and services and both parties can willingly back out and still conduct their separate businesses (under the assumption both parties can conduct business with an alternative service, and their alternative choice of business would not significantly impact their revenue). This is not the case for most licensees.

The Radio Station Example of PROs and Antitrust

Take for example, your local radio station. Your local radio station (in this example) airs both original content, and syndicated content. The radio station may make the decision that, well, ASCAP has enough songs under their umbrella, let’s just go with that. But in the mornings, the radio station airs a syndicated show (a program that is actually produced by another radio station across the country, that has licensed the rights to your radio station for simulcast). Now your radio station runs the risk of airing syndicated programming that includes songs registered to BMI. They’ve now committed copyright infringement which is good for a $150,000 per infringed song. Basically, to protect themselves from constant lawsuits, they have to agree to licenses with both organizations – and both licenses are government regulated.

You be the judge, is that a practice of a free market? The problem is, because of government regulation, we don’t truly know what the free market would look like, or what the “fair market value” of a song would be. It’s never happened. But it’s something interesting to consider.

A painter or sculptor gets to choose the context and the situation in which their art is consumed. – Aloe Blacc

If we are going to “solve” any issues with copyright and royalties, we need to stop pretending music is like visual art. The analogies between musicians and painters and sculptors need to stop. The similarities are few and pretty much stop at they are all creative individuals. Pieces of art are not copied and sold like records. Consumers of art do not pay money to go see a painter in action. The painter doesn’t go from city to city painting the same paintings over and over in front of audiences. Painters would probably argue they spend more time creating one piece than a musician does. The overhead costs for painters do not compare to the overhead costs for musicians. the most successful painters are often not compensated nearly as much as the most successful musicians.

I can keep going but I’m tired and you probably get the point. The point is, those arguing artists need to be paid more from streaming services like Pandora and Spotify need to stop making the analogy. It only hurts them. Technology has developed in such a way that consumers are steering away from ownership. That is to say, I no longer feel the need to hold a physical copy of a record in my hand. Hell, I don’t even feel the need to own a digital copy. For $10 every month, I have access to the vast majority of songs I could ever want, on demand, on multiple devices. I don’t own any of these songs. And I don’t care. Guess what, most art consumers don’t own art, either. But they go to museums where, for a flat fee, you can have an annual membership and consume all the art the museum has to offer. Or you can pay a one time fee to just go for the day and consume all the art in the museum. See where the argument can go awry? Let’s stop making it, then.

The Music Industry and the Recording Industry are Not One in the Same.

The greatest accomplishment of the major record labels and their parent companies is that they have somehow been able to make the general public forgot that music existed before record companies. Music existed before we had the ability to record it. We keep hearing record sales are down, music sales revenues are down, etc. That may be true, but let’s all remember that music is bigger than record labels. if a business or corporation wants to stay relevant in an industry, they must adapt to industry changes. That is to say, look what happened to all those cell phone companies who once had the most popular mobile devices on the market: Blackberry, Nokia, Motorola. Where are they now? Long gone and nearly totally forgotten because the market moved away from the products they were selling and onto more advanced products with greater capabilities. Record labels, if they still want to be a player in the music industry, must realize that consumer culture is moving away from ownership. Eventually, I will have access to the internet everywhere I go. This means that I will have access to digital versions of all the music I could ever want. We have the technology to do that. Why would I ever feel the need to “own” individual works when I could have access to all of them? Because record companies want it that way. That’s why. Record companies seem to be the only businesses who think that in spite of technological and cultural changes, they can continue to sell the same product and conduct the same business practices forever. So far, with deep pockets and political clout, they’ve been pretty successful.

Let’s be clear, I’m in no way claiming that artists should not be paid for their work, whether they’re the recording artist or the composing artist. They must be compensated. As consumers, we must also pay for the music we hear, as well. The problem is that established industry tycoons have the influence to lobby for legislation that protects their own business interests, and these interests should never be construed as the interests for the artists who work for them, or the music lovers who consume their product. As I’ve demonstrated, there are a number of factors here, and they all need to be reevaluated. As technology has drastically changed our culture, we need to take a second look at the entire business and cash flow in the music industry, but we cannot do it simply based on protecting revenue streams of major record labels.

[Ed. note: Though I’ve been learning more and more about the topic of the last few years, in order to get specific information like dates and numbers as accurate as I possibly could, I relied on this article by Lee Ann Obringer as well as Lydia Pallas Loren’s “The Dual Narratives in the Landscape of Music Copyright” that appears in Issue 2, Volume 52 of the Houston Law Review.]

Advertisements

2 comments

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s