Tag Archives: royalties

What is the Fair Market Value of a Song?

As the housing market in the U.S. heats up, the fair market value of homes is on the rise. As the digital age in music has brought more music available to more people than ever before, is the fair market value of songs on the rise as well?

Many of us have bought and sold houses at least once in our lifetime. When you want to sell yours, the process goes something like this. You look around at the market and determine what you think the house is worth compared to others around you, and then you price it a little above that. That’s the “starting point”. Normally, someone will make an offer which is less than the starting point price, not really expecting the offer to be accepted, but anticipating a counter offer of somewhere between the two. After some more back and forth, the price normally ends up somewhere right around the center of the starting point and the counter offer. You feel pretty good because you negotiated a deal in the ball park of your starting point, which would be considered successful if you sell a $200,000.00 house for $195,000.00. But what if the house you just sold had a fair market value of $400,000.00?

The seller normally sets the starting point price. It may not always be a realistic value, but it is the sellers right to set it wherever he wants. And by doing so, he sets a sort of expectation, or paradigm of the value of the house. And most of the time, others accept that price as a ballpark true value. The negotiations generally begin based on that starting point, even if it is way off the mark.

Let’s relate that to the music industry and the value of a song. When the royalties for owners of song copyrights used in recordings was first defined in the 1909 Copyright Law, they were based on piano rolls and the early phonorecord discs and cylinders. There was a physical product associated, and necessary, in order to bring the music to the consumer. The product’s primary function was music delivery. The license rates for songs started around 10% of the retail price of the product. However, over the following decades, as product prices increased and the statutory license rate stayed at 2 cents, that percentage decreased to substantially less than 10%. When statutory rates began increasing in 1978, song owners saw their royalties once again get closer to the 10% ballpark value of the physical product.

During that time, song uses in media like television, motion pictures, television advertising, and even video games became more popular. When both the song and the original artist’s recording were used, the licenses were normally of an equal value for each. That is, if the master recording received $5,000.00, then the song owner would receive $5,000.00. The process soon moved to each of the rights holders making the deal to include a “most favored nations” term, meaning that the recording and the song copyright owners would each be guaranteed to receive an equal amount. This “equal value” practice was accepted for uses where there was no physical product used primarily for music delivery. If there was physical product involved, its core purpose was to deliver some other value, such as a movie, a show, or a game.

As an industry, we seemed to settle in to valuing a song compared to a recording around 10 to 90 for licenses for physical delivery products, and 50/50 for uses without physical products.

So my obvious question is this. Why do we use a ballpark 10% value as a “starting point” when negotiating rates with digital delivery entities, where no physical products are involved? Have we, as an industry, been lulled into accepting a 10 to 90 relationship with recordings when a more proper value is closer to 50%, as we have practiced in certain media? Should the creation of new words and music really be worth a tenth of the value of an artist’s interpretation and performance of that original work?

I applaud those who have been on the front line of negotiating new rates for songwriters and publishers. NMPA, NSAI, SGA, and others have continuously pushed for better and better rates for song copyrights. I believe the publisher and songwriter communities would be in a worse situation were it not for the efforts of these fine organizations and individuals. But I want to encourage all of us to pause a bit, look at the current valuation paradigm, and ask the question, “why not 50%”?

When we start with a ballpark 10% value, then we feel better when we negotiate a rate of 11.5% for certain rights. Sony ATV and EMI Publishing recently negotiated a direct performance license rate with Pandora which is estimated to be an increase of 25% from the prior rate. However, the old rate was 4.1% of Pandora’s revenue, compared to the almost 50% of revenue paid for the recordings. We started at less than a 10/90 ratio, and now applaud the fact that someone was able to nudge the rate up to about 10% of what recordings get.

Billboard recently published an interview with Marty Bandier, chairman/CEO of Sony ATV Publishing, who was asked about what Pandora thought when he asked for a higher rate for publishers and writers. Marty said, “When you compare it to the rate record companies are getting, it was really miniscule. How do you differentiate the song’s value from the artist performance? Are they that disparate to warrant that kind of spread?” Is Marty suggesting the “miniscule” rate for songs is way out of proportion?

Del Bryant, president/CEO of BMI, published an open letter to the industry just yesterday (2/12/13), regarding the withdrawal of catalogs from performing rights organizations by some music publishers for certain digital uses. In it, Del says, “While recent developments may have added complexity to an already complex rights landscape, we see opportunity. We see an opportunity to level the digital playing field and to allow the courts to consider all precedents across the digital spectrum. We see an opportunity to value performances of musical works fairly when compared to performances of sound recordings.” (Italics mine). Is Del saying he believes the values are unfair at the current levels?

I realize I will probably ruffle quite a few feathers in the industry with this view, especially record companies and artists. But I would call on all of us in the publishing industry to shift our paradigms on the value of songs. As in house selling, if we identify our “starting point” around a 10% or slightly higher value, we can only expect slight increases. But if we work to shift the industry’s thinking to something around a 50% value for the song, as we have already accepted in many areas of licensing, then perhaps we really can, in Del Bryant’s words, level the digital playing field and value music works more fairly when compared to recordings.

I am only one opinion. I welcome and encourage comments and discussion on this topic. Let’s kick this around a bit. What do you think? Feel free to comment below.

Why not 50%?

John Barker
ClearBox Rights, LLC

“We see the world, not as it is, but as we are – or, as we are conditioned to see it.” – Stephen Covey

© 2013 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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Is Copyright Registration Necessary? (Part 3)

It is possible you could be missing certain royalties for your songs because you haven’t registered the copyright in the U.S. Copyright Office.

In Part 1, I answered the question, “Is copyright registration necessary for copyright protection”? The answer is a simple “no”. Copyright protection exists as soon as the song is put into any tangible form. In Part 2, I went over some of the advantages of registering your copyrights, which are 1) making a public record, 2) creating “prima facie evidence”, 3) the necessity in order to file an infringement suit, and 4) the ability to receive statutory damages and attorney’s fees. In this next and final Part 3 on registrations, I’ll address the ability, or lack thereof, to receive certain royalties for your copyrights.

The “Compulsory License” was first introduced in the Copyright Act of 1909, with the intent of making licenses more easily available for mechanical piano rolls, and the newly introduced phonorecord cylinders and discs. However, the practice throughout the years has been that most users of copyrights would negotiate a mechanical license, rather than jump through the numerous legal hoops defined in Section 115 necessary for such a compulsory license. (We’ll get into the details and terms of compulsory licenses in a later blog). The compulsory license was a little used clause for most of 100 years. In fact, Mary Beth Peters, the acting Register of Copyrights, testified to a subcommittee of Congress in 2004 that “Up to this day, very few notices of intention (for compulsory licenses) are filed with the Copyright Office”.

Then along came the increased activities of digital music delivery sites. With these digital providers attempting to clear millions of songs in order to launch their services, they began hiring “License Agents” to file for and administer compulsory licenses for their digital music offerings. They did this by having the License Agents send a “Notice of Intention” (NOI’s) of the use in order to comply with the compulsory license as defined in the Copyright Law.

However, a little noticed clause in Section 115(c)(1) says, “To be entitled to receive royalties under a compulsory license, the copyright owner must be identified in the registration or other public records of the Copyright Office. The owner is entitled to royalties for phonorecords made and distributed after being so identified, but is not entitled to recover for any phonorecords previously made and distributed.”

So, according to the law, even though your song has been published (which is a requirement before a compulsory license is available), and you may have earned significant income from your song, and even though your song may be well known and identified in many public records, until your copyright is registered in some manner with the copyright office, you are not legally “entitled” to receive royalties from compulsory licenses; or even to recover past royalties earned after you register the copyright.

Having the song registered in the Copyright Office does not necessarily mean it has to have a copyright registration filed. But the law does say, “…the copyright owner must be identified in the registration or other public records of the Copyright Office.” Those “other public records” could include transfers of ownership, license agreements, termination of transfers, or other records where you, the owner of the copyright, are identified. But the law is clear that these public records must be filed in the Copyright Office in order for you (the copyright owner) to be “entitled” to receive these compulsory license royalties.

So, a song could be a number one hit on radio, or even number one on iTunes downloads, and yet have royalties legally withheld from any streaming service (Spotify, Rhapsody, etc.) which licenses their content through the practice of compulsory licenses, until the copyright and owner information has been registered in some manner in the Copyright Office.

This should be pretty good motivation for copyright owners to register, in some manner, their copyright and information in a timely manner, at least after the song has been released in some commercial manner, making it eligible for compulsory licenses.

I would love to hear any thoughts and comments from others in the industry about this practice.

John Barker
ClearBox Rights, LLC

“Education is learning what you didn’t even know you didn’t know.” – Daniel Boorstin

© 2013 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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Is Copyright Registration Necessary? – (Part 2)

In Part 1, we answered the question, “Is copyright registration necessary for copyright protection”? The answer is a simple “no”. Copyright protection exists as soon as the song is put into any tangible form. However, there are advantages to registering your copyrights when it comes to defending your work, which I’ll address in this Part 2.

Before I dive into that, I want to clarify something. The act of “registering a copyright” (on Form PA) is different from “recording a document” related to a copyright. The former is used to register the actual copyright, showing the authors and then current owners. The latter is simply to put in public record a document related to the copyright, which can be a transfer of ownership of the copyright, an assignment, a termination of transfer, or other types of actions. A chain of title in a copyright is found through a string of recorded documents, and not through the registration of the copyright. In other words, each time a copyright is assigned or sold, a new document may be recorded to substantiate the action. But under normal situations, a Registration of Copyright is necessary only one time, which is what we’re talking about here.

Now, on to the advantages of registering a copyright, in which I believe there are two primary areas. The first is the act of making the copyright available in public searches. While the copyright office may not be the most commonly used site people use to search for copyrights, it is arguably the safest for accurate information and the most recognized. So to make a public record of a copyright, and provide a way for others to find the copyright and the owner’s information, you may want to register it. But the real advantages to registering a copyright are in cases where you need to defend the copyright against any kind of misuse or infringement, which is the second primary area that I’ll break that down into three parts.

First, a registration becomes what is called “prima facie evidence”, which means evidence that is legally sufficient to establish a case or fact. In the Copyright Act, Section 410(c) reads, “In any judicial proceedings, the certificate of a registration made before or within five years after first publication of the work shall constitute prima facie evidence of the validity of the copyright and of the facts stated in the certificate.” Other techniques in verifying your copyright, such as mailing it to yourself, or keeping recorded copies with dates, or other means of collecting witnesses to the fact that this was your copyright as of a certain date, can still be fine methods of eventually proving the facts. However, none may be as effective, or at least as easily proven and acceptable in the courts, as “prima facie evidence”.

Second, in the event your copyright is infringed, you cannot take the case to court until the copyright has been registered [Section 411(a)]. If you are aware of an infringement, you may immediately register the copyright. The valid date of registration will be the date stamped by the Copyright Office that your registration was received, not when the document was finally processed, which could be months later, (as long as the registration was ultimately acceptable by the Copyright Office).

Third, if you prevail in the infringement case, you are eligible, in most cases, to be awarded statutory damages and costs and attorney’s fees only if the song has been registered, and only for the infringements which took place after the effective date of registration, unless you happened to register the song within 3 months of the first publication [Section 412]. (By the way, statutory damages can be as high as $150,000.00 per infringement for “willful” infringements).

So there are advantages to registering the copyright in the U.S. Copyright Office. Are those advantages worthy of spending $35.00 – $65.00 per registration for all songs? That answer is dependent on your frame of mind and approach to these kinds of legal issues. I would say it is not a great danger to not register all your copyrights, but there is certainly a level of risk associated. I do know that most publishers and successful songwriters only register their copyrights once they are published, if at all. And if your initial decision is to not register the copyright, it can always be done at a later date. You just might miss some damages and awards for wrongful uses prior to that registration, but how likely is it that something like this might occur with your songs? Much like buying insurance, you should weigh the cost of security with the likelihood of an unpleasant event occurring. But now, at least you should be making a more intelligent choice based on your better understanding of the complex copyright law, and the risks and benefits associated with registering your copyrights or not.

Are there other advantages to copyright registrations? There are, related to what is called “compulsory licensed uses” and collecting certain royalties, which we’ll address in Part 3 next week.

John Barker
ClearBox Rights, LLC

“If you steal from one author, it’s plagiarism; if you steal from many, it’s research.” – Wilson Mizner, US playwright, author (1876-1933)

© 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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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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