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Rockers Sue Sony Over Download Royalties
Ohreally_factor writes "According to an AP article, groups Cheap Trick and The Allman Brothers allege that Sony is paying them less than what they deserve for music downloaded from popular download sites such as iTunes. Because Sony counts such sales as the equivalent of a physical phonorecording sale, they deduct costs for packaging (20%) and breakage (15%) from the artists' royalties, just as they would if they were selling CDs through more traditional means. Seeing as how there is no physical packaging, nor physical inventory that might suffer breakage, one wonders how Sony will defend against these charges."
Read the article (I did - just when I submitted the story someone else's submission of it hit the front page)....
The suit seeks class-action status for all artists who signed between 1962 and 2002. That's not chump-change.
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"You are not remembered for doing what is expected of you." - Atul Chitnis
Seeing as how there is no physical packaging, nor physical inventory that might suffer breakage, one wonders how Sony will defend against these charges.
How? The same way they do it with CDs. You don't really think 15% of CDs break in shipment, do you?
The history of the breakage clause that exists in pretty much every modern royalties contract is a sad one. See, it originated back when music was distributed on records made of shellac, before the advent of vinyl. Shellac records were very brittle and very fragile, and when you packed a bunch of them in a box and shipped them to a store, it was pretty much guaranteed that some of them would arrive broken. At first the store owners and distributors tried to actually count how many were broken and adjust the invoices appropriately, but that was just too hard, and allowed merchants to take advantage by claiming a higher level of breakage than actually occurred. So they compromised and set an arbitrary percentage reduction of every invoice to cover broken records. The number chosen was about right, and it worked for everyone.
Obviously, since the record company wasn't being paid by the stores for that percentage of theoretically-broken records, the same amount was likewise deducted from the net proceeds before calculating artist royalties.
When vinyl came onto the scene, broken records became a rarity, rather than the norm, but the royalty deduction stayed.
When eight track tapes and cassettes came into being, and then CDs packed in protective jewel boxes, actual breakage became nonexistent except in cases of egregious abuse by the shippers, which the shippers were actually to cover. So the net effect of breakage on distributors is and has been zero for a long time. But the royalty deduction stayed.
So how is it any different that the copies are bits now? It's not like the CD breakage was any more real. Sony's response to that part of the complaint, at least, will be "It's a standard contract term, and they agreed to it."
Note to ACs: I usually delete AC replies without reading them. If you want to talk to me, log in.
It's not just confined to the music industry. The content creator in any medium tends to be the first to get ripped off.
For example, look at book publishing. Stores (especially large chains) have sweet deals. A book doesn't sell? Send it back, no cost. But if that's not enough, the large chains get discounts to carry books. They sell it to you at the cover price so that they get a larger profit margin than indy bookstores. In short, large chains rip off the publishers.
The publishers started looking at this, especially the discounts, and got frustrated. So what did they do? They take the already small author royalties (often around 10%) and decrease them -- typically 8% for general discounts and 6% for deep discounts. Take that value, subtract 15% for the author's agent (plus expenses, although those usually come out of the advance), and then factor in that the author has to do marketting in order to sell books unless they're a big name, factor in the used book market, and you start to get an idea of why all but the biggest authors tend to have second jobs.
"Are you hungry? I haven't eaten since later this afternoon." -- Primer
You're partly right, but partly wrong.
The reason a recording artist can't just re-record an album with a different record company is because the recording company has secured the mechanical rights, i.e., the recording rights.
Let's back up here. When someone creates a song, they own the copyright to that song. The copyright can be divided into component rights, i.e., publishing rights and mechanical rights. Recording companies do not generally try to buy the publishing rights from the artists, although there are certain exceptions to this*.) Generally, a songwriter will keep the publishing rights, and make a royalty every time the song is purchased or publicly performed.
*The most famous exception is the Beatles' catalog, which is not owned by their record company Apple Corp., but jointly by Michael Jackson and Sony. Apple Corp still holds the mechanical rights, however.
It's not offtopic, dumbass. It's orthogonal.
Thing is CDs still do break. Or, rather, they get charged back for that. If something happens to make a CD unsellable, be it a consumer complaining it's broken, packaging damage, whatever, Best Buy doesn't eat the cost, they charge back the supplier. SOP for retail. There's usually negoations between the supplier and distributor about each months chargebacks and they agree on a final figure. A friend of mine does just this, on the supplier end.
Ok so CDs still break, they still get chargebacks, so there's still justification for the charge, even if it's much less than the percentage.
However on digital downloads, it's going to be real hard to back up. Apple doesn't charge back, since there is no sales going from Sony. Once Apple has secured the rights for distribution, they take on everything. They just cut Sony a check. Thus Sony is going to be very hard pressed to justify the fee.
A contractual fee can be higher than reasonable, and still be legal. However if it covers something that doesn't exist at all, good chance it'll be rule unenforcable.
The argument is not, "There is no breakage on the internet therefore you can't have that 15%." The argument is, music downloads fall under the 'licensed music' portion of the contract and not 'record sales', which have different royalty structures. I don't know the terms of their contract and either do you, but they could have a case. Their label is not distributing the downloads, and certainly not on a physical medium, they're licensed to someone else, such as Apple. Its all about what a music download qualifies as under the terms of a contract written before there were such things.
And Apple's lawyers reply back to Sony "Let's talk about this 'DRM Application' money you have been holding onto, we think it may have something to do with us and FairPlay."
Please, go learn some basics about I.P. law in America.
ALL rights that someone has to a creative work that is not a mere identifier and not a mechanically novel creation are copyrights. A musician's only rights to their music are copyrights.
The start of the confusion, which is easy to make, is that a typical mass-media song has at least three distinct inter-related works, all with potentially different copyrights. First you've got the copyright on the song itself -- the sheet music, if you will --, then the copyright on the specific performance of that song the band did in a studio, and then you've got the copyright on the balanced and produced master of said performanc. And we're ignoring the potential for anything other than an original song on the air -- a compilation of songs on an album can have a distinct copyright, as can the album's cover art and ascetic layout, and of course there's the chance that a song contains within itself part of someone else's copyright enirely.
And, of course, once all of those copyrights are done, the various copyright holders have a network of contractual agreements on what rights are exchanged for what (i.e., the songwriter only lets the band play a song for a fee, the band only lets the company make an album for royalties and sometimes control et cetera), and these contracts often have limitations and standards that define what they can and can't do -- such as "sell this work to someone else" or just abou any other obscure thing under the sun.
Whoa whoa whoa... The Allman Brothers, Cheap Trick... You think MP3 *existed* when they signed their contracts? Depending on the wording of the contracts, there's an argument to be made that Sony doesn't have a right to ANY cut of/control of the music as published on ITMS. Even if online distribution is somehow considered to be covered, the contracts are probably pretty explicit that the fees collected from the artist are for packaging, etc, and if there IS no packaging, then the validity of the contract, in this specific area is certainly debatable. (IANAL) If you collect 35% from me for packaging and breakage, then by god, you better show me some receipts for packaging and breakage, or else I want my 35% back.
Just don't dismiss this as whining about shitty contracts. ESPECIALLY don't dismiss it out of hand when the #1 argument put forth by the xxAA's lately has been 'protecting the interests of the artists'. This is PERFECT proof that they don't give a flying fsck about the artists.
These people looked deep into my soul and assigned me a number based on the order in which I joined.
Presumably the contracts already contained language for licensing agreements. So for example if Sony licensed a track for use in a car ad, or a film, the band would get 1/2 the net. This seems to be what the article is saying. Sony's point will be that a license licenses the use of the track (ie the "mechanicals"), and that the sale of a track to a customer for 99c does not include such a license, so its a sale of media not a license of rights. The bands will argue that the agreement with the vendor is a licensing of the rights since it gives the vendor the right to manufacture and distribute copies of the track (here, manufacture = transmit over an internet connection). Note that, according to the article, Sony is not distributing directly to the end user - there is a middle man. If Sony does the manufacturing itself (ie, you always get the tune from a Sony server) on the surface it seems they would prevail. If the vendor does so, it seems the bands should prevail. However there is also the doctrine of "unfair surprise" and internet distribution being so very different from the modes of distribution in place when these contracts were signed, having the contracts ruled inapplicable seems a possible outcome. That would probably be best for the bands - otherwise it might be possible for Sony to adopt a narrow technical solution that would limit how much the bands get. Clearly, given that Sony appears to be trousering around 60c after all costs, having the bands get a mere 4.5c seems quite unfair. [note - this is all speculative, since I have not seen the contracts, the article is not totally clear, and I am not a lawyer - nor do I play one on TV. I have however, as an occasional musician, done a certain amount of reading on contract law applying to the music industry]
Squirrel!
Nice try. One of the top rules in contract negotiations is to keep control of drafting the contract.
You don't just give the other side a copy like that. You ask why they want it. If they want to add terms, offer to put in the terms for them, if they provide you a list. If they do want a copy, then that's fine, but you request a copy back. And if they send you something back (as opposed to just wanting something to review), you redline the hell out of it so that no change goes unnoticed. It's not that the sides don't trust one another, it's just that they don't trust each other so much as to throw caution to the wind.
Hell, the lawyer for the label is going to get paid no matter what, so he can afford to take the time to be careful. The band, OTOH, probably has less money for a lawyer, or worse yet, might be trying to negotiate on their own.
And you can always add a belt to your suspenders by putting in clauses in the contract that require changes to have been clearly identified through negotiations in order to be valid in the end.
-- This and all my posts are in the public domain. I am a lawyer. I am not your lawyer, and this is not legal advice.
Breakfast served all day!
Mechanical rights are a component of the publishing rights, which are held by the songwriter and/or publishing company. That licensing is negotiated separately from the general recording agreement, though if the recording artist is also the songwriter, there are, of course, special opportunities to get screwed. It is the sound recording/"master use" rights that the labels hold--rights specific to that particular recording. (The performance rights, synch rights, and the print rights are other components of the publishing rights.) The two main divisions of copyrights, then, are those in the composition and those in the recording.
Where the record label can interfere with an artist re-recording songs previously released with that label is the "exclusive" part of the "Exclusive Artist Recording Agreement", which stipulates that the artist will record only under that label for the term of the contract, and frequently includes a re-recording restriction for some number of years after the contract ends or the last album is delivered, creating a sad case where anyone but the original artist (assuming he's the songwriter) can cover the song for however long this restriction lasts. And unless the artist negotiates exemptions, such agreements can also prevent him from guesting on other artists' albums or including songs on compilations and movie soundtracks distributed by other companies.
I'm going to disagree with you. For compositions in the US there is a statutory mechanical reproduction (pressing the disk in old school terms) fee. Any one who pays this can record the song and sell the disk. The songwriter holds a "first-performance" right which may be granted to someone else on a negotiated basis, but once the song is recorded, any one can record that song without asking permission -- they just have to pay at pressing time. The recording company holds a copyright on the publishing of the performance, i.e., the disk.
Now, bands that were kinda successful (or not succesful at all) may still owe advances to the recording company. And the contract may require that any new labels reimburse the old label for the advances and that would put a damper on a re-do.
Songwriters of the Beatles era keeping their publishing was not as common as you make it out to be. And the money the songwriters get from the disk occurs not at sale but at pressing. Glossing over some of the ways people screw artists, for every $1.00 received as publishing revenues (commercial radio and live performances [collected by performance rights societies, such as ASCAP], inclusion on film soundtracks, advertising placements, sheet music sales) $.50 goes to the songwriter and $.50 goes to the publisher. The specific publishing deal may mean the songwriter also gets a bit of the publisher's $.50. The more successful the songwriter, the greater a piece of the publisher's $.50 the songwriter may get.
As far as copyrights go, there's nothing to prevent a band from rerecording its repetoire on a new label. The old record company only holds rights to the original masters, via the recording contract, the right to sell the disks in the warehouse, and the right to press more disks from the masters. Seems to me, five years ago or so, Prince was on the verge of re-recording his songs until he and Warners came to an understanding and Prince bought back his masters. I know I own some disks where 50s and 60s era artists re-recorded their hits years later for a different label.
Now the original packaging is the property of the old record company. So if we're being old school and talking about product in stores, this band would have to pay for original packaging and find a distributor who is willing to distribute what is duplicative product which will be placed side by side next to the originals (assuming the old company hasn't put the catalog out of print). So good luck with that. Of course, the packaging and distribution problems dissipate if we're thinking about mp3s via internet download only.
So, copyright doesn't interfere with the redo the repetoire plan in the mp3 age. Are there any other impediments? Well, recordings can be difficult to duplicate. The studio may be gone. The room may have lost its acoustic signature. The budget, in relative terms, may have been higher when the record company was cutting the checks (even though the costs were recouped from royalties). Digital sounds different than analog tape. Engineers are exercising different skill sets. Plus, who wants to listen back to the playback and say "25 years later and we play it just the same." Regarding those re-did disks I mentioned above: the originals were better, despite the new ones featuring real stereo recordings on better requipment with better musicians. I'll conclude with this note: with the arguable exception of the 1969 Memphis recordings, Elvis sounded best when he was young and hungry and in Sam Phillip's house at Sun. Some moments are quintessential; they don't last and they don't come back.