Jun 08, 2009
Posted by: Hitsville

Creative accounting never goes away

As the labels continue to see their public business models implode, you gotta figure they’re going to spend even more time making sure that their private ones don’t.

The private ones, of course, involve screwing artists by not paying them royalties. I was just catching up on the latest suit involving such shenanigans.

Cher is suing Universal, saying it owes her and the heirs of Sonny Bono royalties from two compilation albums. There’s a fairly substantive Hollywood Reporter story on it here.

The article doesn’t make it 100 percent clear, but the issue seems to be the difference between royalties and licensing fees. Universal farmed out both Cher’s and Sonny & Cher’s music to another label for compilation purposes; in general terms, that would fall under the rubrick of licensing, fees from which might typically be split between label and artist fifty-fifty.

This is how the fees break down if an artist’s song is used in a movie, or is picked up for a Now That’s What I Call Music collection, on the grounds that it’s essentially free money.

A normal record sale, by contrast, would generate a normal royalty payment, which might typically be 20 percent of the wholesale price of the CD.

Cher’s suit says that Universal let a Warner repackaging arm put out the compilations, but tried to route the money back to make it look as if it had come in through normal Universal sales channels, and subject to the lesser percentage.

As the labels continue to sue file-sharers—and generate press clippings that cite unchallenged the labels’ crazily high estimates of their alleged losses—it’s important to remember that the real criminals are the labels themselves. They routinely underpay royalties, and then make it punitively difficult to audit.

Mar 09, 2009
Posted by: Hitsville

The facts about the RIAA’s retreat on file-sharing suits….

… come at this very strong blog, Copyrights and Campaigns, the work of DC lawyer Ben Sheffner. He does a quick recap of how the retreat was first reported and covered since. Nothing really earth-shattering, just, you know, the facts.

He also writes lucidly and candidly on an ongoing Patterico brouhaha and the Jammie Thomas case—that’s the one where the RIAA took a file-sharer to rial and got a judgment.

Most amusingly Sheffner, who is apparently a Republican, is a strong supporter of the RIAA’s file sharing suit, for all sorts of reasons, some of which are detailed here.

He’s wrong about this*, but it doesn’t take away from the substance of his blog. He seems to be pretty intellectually honest.

* For the record, the RIAA’s suits are ineffective; file-sharing has grown immensely since their inception. They are a distraction; the industry should have been harnessing the new technology, not fighting against it. It’s a PR nightmare; it is much easier now to root for the industry’s downfall, whereas it has deserved that fate for many years, for reasons I’ll detail in the next paragraph, and never managed to engender such hostility. And finally it’s harmful to the tiny tiny percentage of users who are getting ensnared in this, the low-hanging fruit of the most unsophisticated file-sharers who don’t know how to minimize their risk in various ways. These people are like the kids who are rotting in Texas jails for minor marijuana infractions.

Why does the industry deserve to be dismantled? Because it has been paying radio stations to pay its music, and it has never paid artists their royalties, and has used its power to make it difficult to hold it to account.  The indignance we hear about file-sharing, a minor offence, has never been demonstrated about the Great Royalties Ripoff, which is a massive industrywide fraud.

Aug 12, 2008
Posted by: Hitsville

The Allman Bros.—digital artists rights pioneers. Who knew?

There’s an interesting aspect to the Allman Brother’s recent suit against Universal. (Here’s the story from Billboard; link via the Daily Swarm.) The front line in royalty disputes in the digital age is whether processes like streaming or selling a song digitally are equivalent to a traditional sale (on which the royalty rate might be roughly ten percent of wholesale) or a traditional licensing (say, for a movie soundtrack, where the label and artist might split the one-time proceeds equally).

Here’s how Billboard describes the sticking point in the Allmans’ suit:

The lawsuit, filed in Manhattan federal court, said UMG [Universal Music Group, which bought up Polygram, which distributed Phil Walden’s Capricorn] “refuses to pay Plaintiffs at the correct royalty rate for its digital exploitation of the Capricorn Masters,” including from compact discs, digital downloads and ringtones.

The agreement dated back to a 1985 agreement between the band and Polygram, which Universal bought, that said the band would be paid half of profits from the sale of records by third parties such as Apple’s iTunes or any other commercial usage not specified in the agreement, the lawsuit said.

The story is somewhat unclear—there was no iTunes in 1985. The story also says part of the suit is about CD sales, which were already around in 1985, so it’s difficult to believe the dispute is about the royalty rate on those. And, finally, the story could just be a poor encapsulation of standard industry boilerplate. But as written it looks like the band had the prescience to sign a contract, way back then, that gave them a clear claim of a 50 percent share of, in effect, new media exploitation.

May 01, 2008
Posted by: Hitsville

A ruling on streaming royalties for songwriters

A federal judge has ruled on a complicated case about how ASCAP-represented songwriters should be paid for music streamed by online services like Yahoo and AOL.

ASCAP has a PDF of the decision here. WSJ ($) story here, WashPo here. Wired News has the AP story on the ruling here.

Note that this doesn’t apply to artists and record companies, just royalties stemming from the rights of songwriters, the so-called publishing world. ASCAP is one of two major organizations that represent songwriters and publishing companies; the other, BMI has its own deal with the services. The ruling applies to AOL, Yahoo and Real Networks.
I haven’t read the decision yet. While some figures in the decision are blacked out, it seems that the judge reasoned that since radio pays, on average 2 percent to songwriters, the online streaming word, which involves a lot more listener choice and control, is more valuable and hence should pay more, or 2.5 percent.

That’s an interesting observation. According to the stories, that could total $100 million from the three services over an eight-year period in question, based on all sorts of variables. More on this later.

Mar 01, 2008
Posted by: Hitsville

The Napster settlement; where did the money go?

The New York Post has an unexpectedly substantive story about the funds from the settlements the majors made with the various file-sharing networks some years back. If you recall, Napster alone shelled out more than $250 million to three of the four major labels. (Sony/BMG by that time had corporate connections to the service.)

None of this had yet been disbursed to the artists. (They are the ones the record companies are fighting for, right?)

A contingent of prominent artist managers claims that little to none of that money has trickled down to their clients. They are now considering legal action.

“Artist managers and lawyers have been wondering for months when their artists will see money from the copyright settlements and how it will be accounted for,” said lawyer John Branca, who has represented Korn, Don Henley, and The Rolling Stones, among others.

“Some of them are even talking about filing lawsuits if they don’t get paid soon.”

The story talks to an unnamed company source who said that after legal fees there wasn’t much left. The writer also quotes Irving Azoff, who says that some labels are trying to assess the money against unrecouped advances.