Monday, 7 April 2014

Should the Masters own the Masters?

Ann Harrison’s Music: The Business is one of the most useful guides to the UK music industry. When it comes to sound recording copyright, though, it does present something of a puzzle. Harrison addresses clause 9.2 of the Copyright, Designs and Patents Act 1988, the legislation that still determines copyright issues in the UK. This is the clause that is concerned with the ‘authors’ of different types of copyright. Harrison refers to the original wording of the bill, which states that when it comes to the authorship of a sound recording ‘that person shall be the person by whom the arrangements necessary for making the recording are undertaken’. Harrison then explains, ‘This is generally taken to mean the person who paid for the recording to be made’ and goes on to state that this ‘person’ is usually regarded as being the record company. Her explanation is interesting in two respects. First, that she feels a need to unpack the wording of the bill. The language isn’t opaque but it’s not straightforward either. Second, that she points towards a consensus point of view. It would appear that there has been some argument about this wording and that a general conclusion has been reached.
            The explanation does matter. The wording could indicate that the owner of sound recording copyright is the party that commissioned it. If so, the record companies’ ownership of copyright is defensible. There are many parties involved in arranging a recording project, but most record releases would not happen if the artists were not signed by a record company and if the record company had not released the funds to get the recording underway. However, if the wording is taken according to the consensus point of view – that the ‘arranger’ is the person who paid for the recording – then the record companies’ ownership of copyright is on shakier ground. As I have written in an earlier post, record companies don’t pay for recordings, artists do. The funds are given out but they are taken back again. In providing artists with ‘advances’ to finance their recordings, record companies expect two things in return. One is ownership of the sound recording copyright. The other is that artists will pay back the money via their royalty income.
And so, what should ‘arranging’ be taken to mean: is it commissioning, does that commissioning have to involve financing, or is it financing alone? In an attempt to clear this up, I shall look at the wording of copyright acts and at statements made by the major record companies.
The first UK act to include sound recording was the Copyright Act of 1911. Clause 19.1 states, ‘Copyright shall subsist in records in like manner as if such contrivances were musical works’. It nevertheless regards authorship of musical works differently to the authorship of records. In the former case the author is the songwriter; in the latter it is ‘the person who was the owner of such original plate at the time when such plate was made’. In the early years of sound recording this would have been the record company. Prior to the arrival of magnetic tape recording in the 1950s, music was recorded directly to acetate discs. These 'plates' were commonly recorded in the record companies' own studios and would have been produced and engineered by staff who were salaried employees. The musicians who made them would have been viewed as commissioned artists. This point of view is made clearer in the Copyright Act of 1956. Clause 12.4 states that ‘where a person commissions the making of a sound recording, and pays or agrees to pay for it in money or money's worth, and the recording is made in pursuance of that commission, that person, in the absence of any agreement to the contrary, shall be entitled to any copyright subsisting in the recording’.
The 1956 act opens up both aspects of the arranger’s role. It does, however, provide several hoops that record companies have to go through in order to justify their ownership of copyright. They have to have commissioned the works and paid for them and ensured that this ownership isn’t compromised in their contractual agreements with their artists. The 1988 Copyright, Designs and Patents Act has less clarity. There is no qualification of the phrase ‘the person by whom the arrangements necessary for making the recording are undertaken’. We don’t know if ‘arrangements’ refers to commissioning, to funding, or to something else entirely. The vagueness of this statement reflects the complexity of the recording world. In the years between the 1956 and 1988 Acts the methods of recording were transformed. The old system of in-house record making was largely abandoned. Instead of making recordings at record company premises using record company employees, most musicians were now issued with recording advances, which were commonly spent on independent recording studios with independent staff.
How, then, have the major record companies interpreted the 1988 Act? In 1994 the Monopolies and Mergers Commission issued a report titled The Supply of Recorded Music. As Martin Cloonan has stated, this document provides ‘the most detailed analysis yet undertaken by a government body on the ways in which parts of the music industries work’. It is also provides one of the few instances in which the majors have justified their ownership of sound recording copyright. They believe that they should own it because they have paid for the records to be made.
In making their case, the record companies refer to a debate about the 1988 Act, which took place on 30 November 1987 in the House of Lords. Here the members address the authorship issues raised by clause 9.2 of the Act. Their debate is largely concerned with filmmaking, an art form that had been lumped together with sound recording in the original version of the Act. The Lords argue whether directors should receive a share of copyright (because they are the recognized ‘authors’ of a film) alongside producers (who are already awarded copyright and are regarded as being responsible for commissioning films and arranging their financial backing). They also admit the original wording of clause 9.2 is unclear. An attempt is made to amend this clause using terms similar to the 1956 Act. Lord Kilbracken argues that the author should be defined as the party ‘who commissions that recording and pays or agrees to pay for it in money or money’s worth’. In the end, the Lords withdraw this amendment, mostly on the grounds that it is getting late and they don’t have time to debate it further.
What the major record companies take from this debate is that the owner of copyright should be the party who ‘made and paid for the arrangements’. Moreover, they place a particular emphasis on the ‘paid for’ aspects. In clause 12.108 of The Supply of Recorded Music, the majors make the following joint statement:
It was clear that, in drafting the relevant provisions of the 1988 Copyright Act dealing with the grant of copyright in sound recordings, Parliament had intended that the record company should be the holder of that right, since it was the record company which generally made the necessary arrangements for the making of the recording, including the provision of the necessary finance. There was authority as to the meaning of `the person by whom the arrangements ... are undertaken' in relation to films. The courts had held that the word `undertake' meant `be responsible for', especially in the financial sense but also generally. It could therefore be assumed that in using the same formula for sound recordings as for films in the 1988 Copyright Act, Parliament had intended that copyright should vest in the person who had undertaken the financial responsibility for making the recording. The ownership of that copyright was the reward for the risk they had undertaken. The 1988 Copyright Act was entirely consistent with the Rental Directive, which made it clear that the producer of a film or record was intended to refer to the person by virtue of whose investment a recording or film came into being.
Elsewhere in the report, this ‘investment’ is called into question. In clause 10.57 the International Managers’ Forum argue that record companies don’t actually pay for the recordings. They state, ‘Record companies almost never make a capital payment to the artist in return for the company’s acquisition of copyrights’. The organization’s own suggestion (in clause 10.54) is that ‘Ownership of copyright should either remain with the artist (subject to a limited licence to the record company) or revert to the artist on the happening of one or more of the following events: (i) recoupment of recording costs; or (ii) a given number of years after either release or recoupment; or (iii) on the artist leaving the record label; or (iv) on the record label becoming insolvent'.
            The major record companies have a (partial) answer for this, once again highlighting their financial risk. In clause 12.102, they state:
the expenditure by a record company on an artist represented an investment risk which would benefit both the artist and the record company if the risk paid off; if it did not, the record company would lose its money, whereas the artist would not only lose nothing but would also have received substantial advances on royalties which he or she would be under no obligation to repay to the record company. Investment in nine out of ten artists was not fully recouped.
The use of statistics here makes it look as though 90% of the record companies’ investment is unprofitable. What it fails to mention is that the profits from the 10% who do succeed vastly outweigh the losses from the 90% who fail. In addition, it fails to explain why artists who have recouped their advances, and who have thus paid for their recordings, should not be awarded ownership of their sound recording copyrights. In clause 12.99, however, the major labels admit that this is an industry in which the successes pay for the failures. They state that ‘It was only by concluding contracts which embodied such terms as retention of copyright, exclusivity and a reasonable length of contract term that the companies could reap the necessary long-term benefits for those few artists who succeeded’.
            Ultimately, the record companies are reliant on their high rates of failure to justify their ownership of sound recordings. As I have stated above, this is shaky ground. They are also unwise to place faith in the 30 November 1987 House of Lords debate. Although the suggested amendments weren’t made at the time, section 9.2 of the 1988 Act was later updated. Clause 9.2a of the 1988 Act originally stated that the author is ‘the person by whom the arrangements necessary for the making of the sound recording or film are undertaken’. Sound recording and film were separated out into two separate categories in The Copyright and Related Rights Regulations 1996. Consequently, clause 9.2aa of the Copyright, Designs and Patents Act now states that ‘in the case of a sound recording’ the author shall be taken to be ‘the producer’. This does not mean ‘producer’ in the usual music industry sense of the term. Instead the government’s meaning of ‘producer’ is derived from film production, and is clarified as such using the old wording of the act: it is ‘the person by whom the arrangements necessary for the making of the sound recording are undertaken’. Thus the new version of the clause is as unclear as the old one.
The amendment that is more interesting is clause 9.2ab, which was also added into the Copyrights, Designs and Patents Act in 1996. In this clause film production is addressed separately and a new authorial voice emerges alongside that of the producer. In the case of a film, the authors are now taken to be ‘the producer and the principal director’. This amendment is quite radical in terms of a commissioned work. Where ownership was once taken to reside solely in the party that made and paid for the arrangements, the act is now suggesting that artists can claim part ownership. If this idea were to spread to sound recording the record companies’ ground would shake some more. 

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