Monthly Archives: December 2012

Is Copyright Registration Necessary? (Part 1)

I hear this question all the time. A songwriter asks, “Do I need to register my song to get copyright protection?”, and then another writer will give their misinformed opinion. Here is my answer, in simple, black and white:

Registering a copyright with the U.S. Copyright Office does not provide federal copyright protection to the song.

That is not my opinion. That is a fact. Unfortunately, it is a fact that most songwriters, and many publishers, don’t get. There is a difference between “securing copyright protection” and “registering the copyright” of a song. These are two distinct events.

Before the Copyright Act of 1976, a song obtained federal statutory copyright protection only after the song was both published and had a notice of copyright affixed to it. (If no notice was affixed to the song which was “published” prior to January 1, 1978, then there was no copyright protection, and the song was considered public domain). However, the Copyright Act of 1976 changed that by stating that federal statutory copyright protection is obtained as soon as a song is fixed in any “tangible medium of expression”. [Section 102(a)]. No publishing of the work is necessary; no accompanying copyright notice is necessary; and no registration of the copyright is necessary. This means that your song is fully protected by federal copyright law the moment you write it on a napkin, record it on your smart phone, or any other means in which you put it into a tangible form. Period. That’s all it takes.

With this copyright protection, the owner now has the full and exclusive rights to reproduce the song, prepare derivative works, distribute, display, or publicly perform the song, and to give (or deny) permission to others to do any of those activities. (This includes the ability to prevent anyone from using the song under a compulsory license, which we’ll get to later).

So what does the act of registering a copyright in the U.S. Copyright Office provide? For one, it creates a public record that you claim you wrote this song as of a certain date. But the $35.00 to $65.00 filing fee per registration (depending on whether you file electronically or by paper), can be expensive, especially for developing writers who may write multiple songs per week with less likelihood of earning royalties. Remember, the song already has full copyright protection. The goal is to generate proof that this is your original work as of the date it was created without having to pay the prohibitive registration fees.

If you affix the song in some tangible medium and then put it away on a shelf somewhere for fear that someone might steal all or parts of it, then you may have a tougher time in proving that the song was created by you and actually existed as of the date that you wrote it. You want to do certain things to stack the odds in your favor that you can successfully prove it is yours. Rather than hide the song, you should make it known. The more people you play it for, the more people you create as “witnesses” to the fact that this is your song. Some people suggest mailing the song to yourself and receiving a postmark showing the date on the unopened package. That’s fine. Some will perform it and record it with a date stamp. Also good. Some may store it on a computer or in an on-line storage locker with a date. Any way you can show that the song existed, written by you, with a date attached, will provide a certain level of proof that you are the copyright owner.

As we’ve gone over, the act of registering has nothing to do with copyright protection. In fact, in Section 408(a), the law clearly states, “Such registration is not a condition of copyright protection.” So to answer the first question, “Is copyright registration necessary for copyright protection”? The answer is a simple “no”.

The act of registering the song also does not prevent the unlawful activity of copying or infringing on the song. So why would anyone need to register the copyright with the copyright office? Well, the registration does provide the copyright owner with certain abilities and advantages in defending the copyright, and also in receiving certain royalties, which are both important. We’ll cover those advantages in Part 2 next week.

John Barker
Clearbox Rights

“Get your facts first, then you can distort them as you please.” – Samuel Clemens

© 2012 John Barker. All rights reserved. Information contained in this Blog is of a general nature and should not be considered or relied on as legal advice. Any reader of this Blog who has legal matters related to information addressed in this Blog should consult with an experienced attorney. This Blog contains no warranties or representations that the information contained in it is true or accurate in all respects or that it is the most current or complete information on the subject matter covered. John Barker is President and CEO of ClearBox Rights, LLC.

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Intangible is not Insignificant

This is one of my pet peeves.

Someone will contact us about using a song we represent, and they will want to use it for free. The reason? They are making copies to give away as a promotion. We’re told the artist has agreed, and if we all give a gratis license for this marketing use, it should promote more products to be sold in the future, in which we can all enjoy our share.

The music industry has generally accepted this practice as reasonable. Perhaps the promotion is giving away 5,000 units in order to “prime” the marketplace. Maybe it is to package the music at no additional cost with some other product that is popular in order to be introduced to a new market. Perhaps it is to be used as a loss leader to entice the buyer into a purchase, a “buy one, get one free” campaign. Or even as a fund raiser for a good cause.

All good marketing, right? But here’s my rub.

Marketing is an expense. It is standard practice to pay for an advertisement, or a sponsorship, or any other type of brand awareness, including promotional trinkets and merchandise. There’s a budget for that. In the physical recording product world, that budget pays for things like mastering, duplication, the cost of plastic CDs, the paper packaging and inserts, printing, and shipping costs. All the tangible parts have a price tag. And no one asks for those parts to be given for free.

But what is the real value in the product being given away? Are people enticed because they want something tangible like a shiny plastic disc, or cool packaging? Or is their interest in the intangible part; a new song or a new recording?

When asked to license something for free…whatever the reason…my first question is normally whether or not the CD manufacturer, the print company, or the other participants have agreed to give their parts for free as well. If the argument that giving some away now will encourage greater sales in the future, wouldn’t that apply to all parts, including the plastic and paper?

I know where the real value is. It is in the unique creation we call a “song”, and the performance we call a “recording”; the intangible parts. We should treat those with greater respect and consideration. All of the other elements exist primarily for presentation and delivery.

Don’t be so quick to give the real value for free.

John Barker

“If you undervalue yourself, no-one’s going to come along and raise your price.” – David Williams

© 2012 John Barker. All rights reserved. Information contained in this Blog is of a general nature and should not be considered or relied on as legal advice. Any reader of this Blog who has legal matters related to information addressed in this Blog should consult with an experienced attorney. This Blog contains no warranties or representations that the information contained in it is true or accurate in all respects or that it is the most current or complete information on the subject matter covered. John Barker is President and CEO of ClearBox Rights, LLC.

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Simple Complexity – Music Licensing in the Digital Age

(This is an unedited version of an article published in MusicRow Magazine “Digital Toolbox” Issue, Dec. 2012)

The complexity of music licensing for new formats is nothing new. Do you remember a number of years ago when the courts got the recorded music license rates wrong before Congress stepped in and corrected things? But wait… I’m not talking about the beginning of this millennium. I’m talking about a century earlier; in the early 1900s. Remember that one?

The year was 1909, and a newly published song was “By the Light of the Silvery Moon”, by Gus Edwards and Edward Madden. The popular song was available in sheet music, player piano rolls, phonograph cylinders, and the newly introduced gramophone discs. While Mr. Edwards and Mr. Madden were able to license and collect royalties for their song in print music, they almost missed out on royalties for the other uses. The year before, in February 1908, the Supreme Court ruled that manufacturers of player piano rolls did not have to pay royalties to composers (White-Smith Music v. Apollo Company). The reason? The court ruled that piano rolls were not copies of the song, but instead parts of the machine that reproduced the song. The primary issue was whether or not something was recognizable to an ordinary human being to be a copy of a song. And of course, it would be next to impossible for anyone to simply look at a cylinder punched with holes and recognize music. Further, this same argument could be applied to phonograph cylinders and gramophone discs which were filled with grooves. In 1908, the future record industry had been set up by the Supreme Court to operate royalty free!

Fortunately for songwriters, along came Congress with the Copyright Act of 1909. The Act specifically identified player piano rolls as a “copy” of a song, and introduced a “compulsory license” for what they termed a “mechanical” use, named so because the piano roll was indeed a mechanical machine component to play music. The term and license also applied to the phonorecord cylinders and discs. And the amount of this new license was set at two cents per song, per copy. These royalties were normally paid twice a year, at six-month intervals, due to the laborious task of manual accounting.

The number of opportunities for songwriters was growing. The publishing license world was simple. And the royalty flow was slow.

Over the next 69 years, the music industry saw lots of changes. Phonorecord singles and albums became the format, and stereo sound was introduced. Radio became the popular means to discover new music, and ASCAP, BMI and SESAC (Performing Rights Organizations, or “PROs”) were formed to monitor performance royalties. Television and motion pictures began broadcasting lots of music. Popular artists were selling millions of copies of recorded product. The recording music industry had increased exponentially,… and the mechanical rate for songs remained at two cents.

In 1978, the compulsory license rate increased to $.0275 (although it has since increased to today’s rate of $.091). In the 80s and 90s, new formats, including compact discs were introduced, and the music industry kept on growing. At that time, there were five primary categories of licenses for music; mechanical (recorded), print, synchronization (visual and audio combined), performance, and other, (such as dramatic and grand rights). The royalties were still normally paid twice a year, at six month intervals.

There were now even more opportunities for songwriters. An increasing number of songwriters made more money. The simple world of licensing had become more complex. And the royalty flow was still slow.

Then came digital.

According to IFPI (International Federation of the Phonographic Industry), in 2004, there were approximately 1 million digital tracks available by licensed providers, and the digital music trade revenue was $420 million. In 2011, there were close to 20 million tracks available, with trade revenue of $5.2 billion. According to RIAA, in 2000, the music industry was 100% physical product. In 2011, it was about 50% digital. With this rapid growth in digital formats came the added complexities of new licenses for songwriters.

In an attempt to somewhat simplify the multifaceted digital landscape, I will break down the classifications of digital uses to seven categories. Each of the digital music providers known today fall under one or more of these groups.

(1) Permanent Digital Downloads (PDDs)

(2) Limited Downloads (subscription, limited time/plays)

(3) Interactive Streaming (on-demand streams)

(4) Digital Performance (non-interactive streaming)

(5) Ringtones

(6) Digital Print Music / Lyrics

(7) Digital Video

A good example of PDDs would be iTunes. We purchase the song and permanently download it to our devices for future, unlimited, private use. Other digital providers in this category include eMusic, Amazon, Microsoft’s newly introduced Xbox Music, and Rhapsody (until they recently announced they were dropping song download sales). The license rate for songs in PDD’s is the same mechanical rate as for physical product, which is $.091 per song, per copy.

Limited Downloads and Interactive Streaming include subscription models, such as Spotify, Xbox Music, and the new Rhapsody, where the user can access their songs as long as their subscription is active, or they can control the streaming. There are very complex license rates which apply to these uses, which we’ll look at a little later. Digital Performance, which is for the most part not controllable by the user, would include Pandora, XM/Sirrius Radio, iHeartRadio, and other internet radio stations. These entities pay artist and record label royalties to SoundExchange, and the publishers and songwriter royalties to ASCAP, BMI or SESAC. SoundExchange then distributes those royalties almost evenly between the labels and artists for the recorded rights, and the PROs distribute the song royalties to publishers and writers.

Ringtones are licensed at a recently agreed rate of $.24, and Digital Print Music/Lyric reproductions are normally based on a percent of the actual price of the digital print use. Digital Video, which includes YouTube, is licensed using an intricate formula based on advertising revenue.

In early 2009, the Copyright Royalty Board (CRB) published an agreement between music industry trade associations for record labels, music publishers and songwriters, and digital music providers, to define five offering types of Interactive Streaming and Limited Downloads, and to set license rates for each. Those types were 1) Standalone non-portable subscription streaming, 2) standalone non-portable subscriptions for mixed uses, 3) standalone portable subscriptions for mixed uses, 4) bundled subscriptions services, and 5) Free non-subscription ad-supported services. Each of the uses have a distinct formula which starts with the greater of 10.5% of the service’s applicable revenue, or a service type minimum, which includes a penny rate for each monthly subscriber and varying percentages of the service royalty. This is all less performance royalties paid to the PROs, and then measured against a royalty pool floor based on the number of monthly subscribers.

Easy enough, right? Well, maybe not. In fact, most of the digital providers ended up hiring a third party company to license, calculate and distribute these royalties to the publishers. Three of the primary third party companies, or “license agents”, are The Harry Fox Agency, Music Reports, Inc (MRI), and RightsFlow, which was acquired by Google about a year ago.

Bet let’s add to the complexity. This year, the same group that defined the 2009 rates added five more mechanical use categories, with their own defined rates, which should be published soon by the CRB and effective beginning 2013. Those are 1) Mixed Service Bundle (if your cell phone service subscription includes a music service), 2) Paid Locker (a subscription locker service, like what iTunes offers), 3) Purchased Content Lockers (a locker, possibly free, made available for purchased downloads or physical product), 4) Limited Offering (a subscription service offering limited streams or downloads for select sets of recording), and 5) Music Bundles (when multiple physical or digital records, or ringtones, are bundled as one transaction). These rates are based on a percentage of revenue (such as 17.36% for some formats), varying on label content and whether the costs are direct or pass through, less performance royalties.

Now, let me first say that I applaud those who were involved in the negotiation of these sophisticated rates. It had to be done, it needed to be comprehensive, it needed to be agreed to by all parties, and timing was critical. And I believe publishers and songwriters were well represented. Well done!

But… the U.S. music royalty structure is beginning to look dangerously similar to the U.S. tax system, which has been called an “extraordinarily complex mess.” I’m beginning to reminisce about the simple two cent rate for a player piano roll. Or at least the $.091 for a simple physical record or an “old fashioned” permanent digital download. (Did I really just use “old fashioned” with PDD?). Not only are the rates next to impossible to understand, the license and royalty flow is becoming a tangled network. I made a diagram using all the players in the digital music license space, from the service providers, the product owners, the license agents, the collection entities, down to the publishers and writers. (This does not include the label and artist royalties paid through SoundExchange). After I painstakingly attempted to connect the flow of licenses and royalties to each appropriate entity, (not counting the ten newly defined mechanical uses), and realizing that there are easily over 60,000 publishers and hundreds of thousands of writers, I stepped back and realized why our license space is in such disarray; and this is just the digital part. (See diagram below).

Current Digital License Space for Publishing

ImageWe can do better. Einstein said, “Out of complexity, find simplicity”. As an industry, we’ve successfully set up the first part (complexity). Now let’s find that second step. Maybe we need to change it up a little. Maybe we need to challenge our current perspective a bit.

The complexity of licensing is definitely a problem area. There is no centralized database of songs. There have been, and continue to be endeavors at setting this up. But unfortunately, the attempts almost always include a large number of players with different agendas. And trying to satisfy everyone dilutes the efforts and ultimately fails, which is what we’ve seen so far. Who will step up with a simple solution?

Another problem area is the proper value of a song, and how that compares to the value of a recording. Publishers want increased fees from Pandora, while Pandora is suing ASCAP and lobbying SoundExchange to pay less. Publishers are arguing that the digital performance royalties paid to labels and artists through SoundExchange are greater than the royalties publishers receive for those same performances. (Pandora’s 2012 annual report shows it paid 49.7% of its revenue to SoundExchange for artist and label royalties, while 4.1% went to PROs for writers and publishers). Publishers and songwriters normally receive a lesser percentage of revenue for any format of downloads than the labels and artists, yet in the world of film & television licensing, most standard licenses for the publishers and masters are of equal value. What is the correct balance?

The timing, efficiency and transparency of the licenses and royalty flow are slow, inaccurate, and a bit foggy. Many companies continue to pay royalties twice a year, a six month intervals, although our advanced computer systems have taken the place of pen and paper ledger entries which existed when this payment structure was initially set up. In a digital age where we have the full data of a sale almost immediately, and digital providers who can easily pay at least on a monthly basis, there are publishers who prefer not to receive the royalties monthly, as it is more difficult for them to process. (Kudos to SESAC who recently announced monthly accounting for some of its members).

One monitoring service stated that they believe 80% of music played on commercial television is unreported or misreported, yet we can use our smart phones to identify the song we’re hearing while sitting in a restaurant. Some digital royalties continue to be paid to publishers without specific songs identified. And I have personally experienced negotiations with a significant digital user who refuses to allow standard audit rights for publishers. Where is the efficiency and transparency we are capable of? I just wonder how long any of us would stay with a bank which concealed this fundamental data. .

We can do better. We should demand better. We allow ourselves to be seduced into accepting lesser accomplishments because they are new and unproven, when we should instead be insisting and delivering on superior achievements which closer match the technology capabilities we possess.

I’m an optimist. I’d rather be optimistic and wrong, than pessimistic and right. (At least the journey would be more enjoyable). And I believe this is an exciting, dawning of a new age in the music industry. More music is available to more listeners, on more devise in more places, than ever before. Is today a better day for a songwriter than any decade before? Absolutely!

So who’s going to figure this out? How can we define the simplicity? Who’s going to win? Einstein also said, “The significant problems we face cannot be solved by the same level of thinking that created them”. So the answer may not be more steps in the same direction. Maybe the answer will be found by looking back at history; or maybe it will be sparked by some small startup company with a new approach; or maybe the answer will be illuminated like it was in 1909, “By the Light of the Silvery Moon.”

John Barker

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Songwriters are no longer dying to get their copyrights back.

Writers can now get their songs back in the living years, through the added terms of Section 203 of the 1978 Copyright Act. (That is, starting after January 1st of 2013). The Copyright Act permits writers, or their heirs, to terminate grants of copyright assignments and licenses made after January 1, 1978, within a 5 year window, effective 35 years after the date of the original grant.

While congress’ original intent in coming up with “renewals” for copyrights in the 1909 Copyright Act was for the writers to have an opportunity, later in life, to enjoy the benefits of their earlier successful works, publishers made it a practice to have writers assign those future renewals to the publisher. The only “out” was if the writer didn’t survive to the renewal date, whereupon the future assignment of renewal to the publisher wasn’t valid. In order for pre-1978 songs to revert back to the writers, they pretty much had to die. That caused some obvious problems with retirement planning. Renewals became more like a life insurance policy rather than a living retirement subsidy.

Now that’s all changed. Big songs first assigned in the year 1978 are eligible to be “recaptured” by the living writers effective in 2013. There are still some specific hoops to jump through, such as when and how to send the termination notices (not greater than 10 years and not less than 2 years before the 5 year window). But, for the most part, these rights cannot be assigned away ahead of time. So now, for the first time in over 100 years, the intent of the U.S. Congress for the majority of living writers to enjoy the benefits of their works later in life is becoming a reality.

John Barker

“What a wonderful life I’ve had! I only wish I’d realized it sooner.” – Colette

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Digital Apples

Digital Apples

Recently, an article appeared in Digital Music News (http://www.digitalmusicnews.com) about Ellen Shipley, a Grammy award winning writer, and that her popular co-written song “Heaven Is a Place On Earth”, was streamed 3.1 million times on Pandora, and she received a check for only $39.61.

Sounds outrageous, right? But let’s dig in a little to the details.

Pandora is a non-interactive streaming provider. That means that the user is basically listening to Pandora as one would listen to a traditional, or “terrestrial” radio station. You select a station and sit back to hear what plays. While you are able to skip a limited number of songs, you cannot “control” what you hear.

Further, each “stream” can be compared to one person listening one time to a song on their personal radio, which is one “listen”. If a terrestrial radio station in a major market of over 10 million people broadcasts the song one time, it could receive hundreds of thousands of individual “listens”. So, accumulating 3.1 million “listens” could happen with very few single broadcasts.

With all that said, would $39.61 in airplay royalties to a co-writer of a song that was broadcast a handful of times on one terrestrial major market station in the U.S. really be outrageous?

Now, to be clear, I am on the side of having writers and publishers fairly compensated for their works. And I believe many areas need to be increased, including Pandora. (Pandora’s 2011 Annual Report showed that while they paid almost 50% of revenue to artist and labels through SoundExchange, only 4.1% of revenue was paid to songwriters and publishers through the Performing Rights Organizations. I believe that is unfairly unbalanced).

But let’s compare “digital apples” to “digital apples” in making our arguments. Comparing the number of digital streams to terrestrial broadcasts is misaligned. Rather, we need to be focusing on the proper balance of the value of the song compared to the recording.

John Barker

“Every story has three sides to it – yours, mine, and the facts.” – Foster Meharney Russell

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ClearBox Rights Introduction

Welcome to the ClearBox Rights, LLC blog!

We are an Independent Rights Management Company, currently focusing primarily on the administration of music copyrights. We recently celebrated our two year anniversary, and I would like to first take this opportunity to thank those who have put their trust in our company to manage their valuable Intellectual Properties.

ClearBox Rights’ mission is to transform the management of intellectual property for owners and creators through transparent and efficient administration services through a cloud based software solution, and to connect and empower creators and owners directly into the complex digital and physical rights and revenue environment.

I have been asked by a number of clients and industry friends if we had a newsletter or any type of publication to help keep them educated on issues related to copyright administration and related matters which impact writers and publishers. In the last few weeks, we’ve been invited to make various presentations and publish articles regarding music copyrights and licensing in the fast changing digital age, so we thought this would be an appropriate time to dive deeper into social media in an attempt to fill some of those requests.

This blog will be published at least once a week, and will address various timely copyright related issues. Other than publishing full copies of articles as they appear in other publications, the weekly blogs will be kept to a minimum length in an attempt to address an issue and prompt discussion, but not burden you with lengthy verbose.

If you have any level of interest in songwriting, music publishing, copyright administration, or related licensing and legal matters, I believe you will find this to be an interesting blog to follow. I invite you to read along, and also to comment and discuss issues as they arise.

I am optimistic about the future of music. Today, music is available to more people, from more people, than ever before. We just need to modify the business model. Sometimes, the things we fear most – conflicts, disorders, imbalances – can be our primary motivation for creative change.

John Barker

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