The Present and Future of Music Law

On 25 August I took part in the book launch for The Present and Future of Music Law, a collection edited by Tony Rigg, a music industry practitioner, business consultant and educator affiliated with the University of Central Lancashire, and Ann Harrison, a partner at SSB Solicitors Limited and the author of the classic guidebook, Music: The Business.

 

It was a game of two halves. In the first section, Rigg and Harrison discussed the current state of music law with industry experts, including Peter Hook of Joy Division and New Order, music industry executive Silvia Montello, and Sumit Bothra, the director of the management company ATC.

 

The second half featured the contributing authors introducing their chapters in discussion with the editors. I led the way with my chapter, ‘Copyright, Royalties and Industrial Decline’, which opens the book.

 

The launch is available via YouTube (my bit starts around the 50:30 mark):

 

 

The Present and Future of Music Law is a great collection but as an academic publication it has a typically high price. However, for a limited period there is a discount if ordered direct from the publisher, Bloomsbury.

Words and Music: Doing the Splits

In his book Performing Rites, Simon Frith tells the story of a correspondence between the novelist/lyricist Margaret Radclyffe-Hall and the publishers Chappell and Company, which took place in 1918. Radcylffe-Hall had written the words to the hit song ‘The Blind Ploughman’. She had not received any royalties, however, and wrote to the publishers seeking redress. William Davey, the chairman of Chappell, excused his company’s parsimony on the grounds that:

Unfortunately, we cannot afford to pay royalties to lyric writers. One or two other publishers may, but if we were to introduce the principle, there would be no end to it. Many lyrics are merely the same words in a different order and almost always with the same ideas. Hardly any of them, to be frank, are worth a royalty.

He concedes that he has ‘admiration’ for the words to ‘The Blind Ploughman’ and offers her a one off payment of 20 guineas for her troubles. Frith states that Davey’s ‘letter is interesting in a number of ways, not least for its revelation that Chappell was, apparently, routinely breaking the law – the Copyright Act of 1911 included lyricists in musical composition regulations even though music publishers had campaigned against this’. Frith is alluding to clause 19.2.b.ii of the Act, which states, ‘a musical work shall be deemed to include any words so closely associated therewith as to form part of the same work’. Here, British law was following the Berne Convention of 1886, which sought copyright protection for ‘musical compositions with or without words’.

            Frith is right. It is interesting that Chappell were refusing to pay Radclyffe-Hall. What’s less clear is whether the publishers were breaking the law. If the issue was to do with sheet music, then presumably so: Chappell would have been printing copyrighted words without permission. If the issue was to do with royalties for public performance or for the sale of records (the mechanical right), then things are more complicated. It is mechanical royalties that clause 19.2.b.ii is referring to. Despite the 1911 Copyright Act's recognition of the integral importance of lyrics, however, it set no value on what they were worth. In fact, as far as I am aware, British copyright law has never determined what portion of a song’s performance or mechanical royalties should go to the lyricists and what portion should go to the musical composers. The responsibility for determining these splits was first taken on by music copyright societies. France took the lead here. It established the world's first collection society in 1851. It is of consequence that this society was formed jointly by a lyricist, a composer and a publisher, a partnership that is reflected in its title: Société des auters, compositeurs et éditeurs de musique (SACEM). It was determined that these three parties would share copyright money in equal proportions. When the UK eventually set up its own Performing Right Society (PRS) in 1914, the same split was adopted. Other countries have used different methods, however. The German society, GEMA, originally determined that publishers could have no more than a 25% share. Moreover, while France has retained is three-way split, other countries have moved towards a model where the publisher has a 50% share and the songwriters split the remaining 50% between them (albeit that in private the publisher might also give the songwriters a portion of their share).  

For much of the 20th century, whatever the size of the remaining portion, its most common allocation was to be divided equally between a lyricist and a composer. It was in the inter-war period that much of the ‘Great American Songbook’ was composed. Many of these classic 1920s and 1930s songs were written by partnerships: Harold Arlen and E.Y. Harburg; George and Ira Gershwin; Richard Rodgers and Lorenz Hart; etc. and etc. In each case the former wrote the music and the latter wrote the lyrics, and in each case the composers and lyricists were allocated an equal split of the royalties. The Brill Building songwriting teams of the 1950s and 1960s also operated according to this split, as did the songwriting partnerships in British beat groups. It has been prevalent in musical theatre and has been used by classicist indie songwriters. The idea of a divided split between lyricist and composer is also maintained in much copyright advice.

It has, however, been challenged in a number of ways. One of the problems that traditional splits have presented for self-contained groups is that they are equitable for some members, but not for others. The songwriters will end up richer than the other performers in the band. In many cases the high earners will be the guitarist (who is receiving royalties for writing the music) and the singer (who gains royalties for the words). This disparity has caused bands to split. Alternatively, they might amend their ways. Queen used to allocate songwriting royalties to the principal songwriter of each song, but by the end of their existence were splitting shares for all songs four ways. The Clash were another group who progressed towards presenting their songs as group compositions. Other groups, among them some of the longest-lived, have decided from their inception to allocate shares equally to all members. U2, REM, Coldplay and Elbow all operate in this manner. Others devise more complicated methods. Each member generally receives a royalty share for every track, but these are not allocated equally. The most ‘important’ members (still commonly the singer and the guitarist) will receive a larger allocation. These practices aren't limited to ‘authentic’ guitar bands, either. Some pop acts, such as the Spice Girls and the Sugababes, split their shares between writer/producers and the singers in the group, and the same is true for many solo artists who work with songwriter/producers. In the pop world, too, there is a wide variance in shares. Sometimes they will be split equally, other times more complicated divisions are devised.

Songwriting spits have also been complicated by the practices of sampling and interpolating. Hip-hop tracks, in particular, are a mess of credits. Many, in fact, remain perpetually unresolved. Hip-hop and dance music have also turned traditional musical hierarchies on their head. Where it used to be the case that a song’s melody and words were deemed to be of most value, these genres have seen more credit accorded to the beat. This could be considered an ironic outcome for hip-hop, the most word-based of all popular music forms. It was this genre, however, that shone a light on how unfairly some copyright allocations had been devised. The raps of hip-hop have traditionally rested upon sampled drum breaks. The drummers who devised these breaks have failed to see any royalties for their work. Clyde Subblefield played the famous 'funky drummer' solo, but it's composition credits go to the composer of the song's 'melody', James Brown. Gregory Coleman devised the 'Amen Break', often considered to be the most sampled drum solo of all, and yet the royalties go to Jester Hairston, writer of 'Amen', the song that Coleman's band, the Winstons, were covering. Fewer drum breaks are sampled today. Rhythm tracks are instead created by producers, who will then send these beats to other songwriters so that they can be completed with melodies, harmonies and words. As if mindful of the past injustices meted out to drummers, these producers will demand half of the songwriting royalties. Correspondingly, there are now songwriters who specialize in writing only one part of the song, whether that be the hook or an eight-bar of rhymes.

 There’s something good about these changes. The complexity of pop composition is being recognised and more of the interested parties are receiving some shares. It is also good that popular music copyright is no longer in thrall to classical conventions, with their emphases on melody and harmony over rhythm and timbre. Nevertheless, if the old melodist/lyricist split represented an unfair reflection of the contributors to a work, the new methods fail to bring us any closer to knowing exactly who did what, or towards an understanding of what any of it is really worth.

They also have another consequence. In many cases it is rhythm that is on the rise. When it comes to rock music, the bass players and drummers in bands now appear on more songwriting credits. When it comes to dance music, the producers of rhythm tracks are often the ones who are determining the splits. It is generally assumed that this is happening at the expense of the other musicians, and it is true that many guitarists and keyboard players now receive a lower share of the royalties. There is, however, another activity that is getting squeezed. On the surface, lyrics are still worth 50% of the songwriting shares. If you look at the credits for any song, at least half of the writers' income is going to somebody who is credited as an 'author'. When it comes to popular music, however, few of these writers are only responsible for the words. Most are instead listed as 'composer-authors', meaning that they have an input into both the music and the lyrics. The complicating factor here is that it is not just the main lyric writers who are adopting this credit, in many cases it is being applied to all of the members of a band. It is also being applied to all the members of songwriting teams. And it is being applied no matter how great or small the contribution to the lyric writing is. In fact, there's really no way of checking whether these numerous composer-authors actually contributed to the lyric-writing process. As a consequence, the author who was responsible for writing the majority of the lyrics might well end up with less than 50% of the songwriting share. The composer-author title is reflective of modern songwriting practice. At the same time, it allows songwriters to circumvent the strict 50/50 lyricist/composer split that some of the collection societies require. It has also had another consequence: the composer-author credit has helped to provide longer-lasting copyright protection. But that’s another story for another day . . .

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. 

There's No Success Like Failure

Some adolescents go through a quotations phase. They want to show off their wisdom by memorising a few neat aphorisms. I was one of those kids and I supported my interest by buying a small book of quotations. This had pages of quotes from Shakespeare and the bible, and a good dozen or so from Oscar Wilde. There was only one, however, from a popular musician. This was Bob Dylan’s lyric from ‘Love Minus Zero, No Limit’, in which he claimed that ‘there’s no success like failure’.

            I know that it’s become a clichéd term, but it’s pertinent to popular music because it is the code by which it lives. The whole economic structure of the record industry is premised on failure. In fact, it ignores Dylan’s rejoinder that ‘failure’s no success at all’. The main reason why record companies have power and income is because they own sound recording copyrights, and they only own these copyrights because they are bad at their job. Hardly any of their acts succeed: it has been argued that as many as 95% fail to achieve profitability. This failure rate helps to keep the struggling artists in hock and the successful ones in check.

The ownership of sound recording copyright is perhaps the most dubious of all record company practices. Copyright is usually awarded to the ‘creator’ of a work. When it comes to songwriting copyright this is fairly straightforward: the creators are the writers, therefore copyright is automatically awarded to them. Sound recording copyright is different. In the UK, according to the 1988 Copyright Designs and Patents Act, the creator of a sound recording is the party ‘who made the arrangements for the recording to be made’. In practice, this is usually translated as being the party who paid for the recording. But record companies don’t pay for recordings, artists do. Or at least they attempt to. The costs of production are advanced to artists and are then ‘recouped’ from their royalties.

It is only when artists have made a clear profit against both their personal and recording advances that they start to see income from their record sales. IFPI’s recent Investing in Music report suggests that the recording costs for a ‘significant project’ can vary between $200,000 and $300,000. If we estimate that the average dealer price of an album is $8 and that an artist's royalty is 18% of this amount, this would mean that an they would have to sell between 139,000 and 208,000 copies in order to clear their recording advances alone. Some artists can achieve this and thus could argue that they have paid for their recordings. And yet even if they do so, it is almost unheard of for them to be awarded the sound recording copyright.

The artists who don’t reach the break-even point, for either their personal or recording advances, don’t have to pay back the deficit on their accounts. However, rather than this being an act of generosity on the part of the record companies, it is a situation from which they profit. It is on the basis of these failures that they justify their ownership of the copyrights of the artists who succeed. Moreover, artists are caught in a vicious circle. It has been argued that one of the main reasons why they have to ask for large advances is because they don't make any money out of sound recording copyright, but the reason why they don't make any money out of sound recording copyright is because they can't pay off their large advances. Record companies claim that as many as 95% of all artists fail to achieve profitability. And it is on this overall failure rate that they justify their ownership of all sound recording copyrights. Ann Harrison has quoted the record companies’ claim that, ‘If they had to return the copyrights of successful artists, they say they wouldn’t be able to invest as much in new artists in the future and that the culture of the nation would suffer as a result’. Once again, this presents them in a potentially generous light. It needs to be remembered, however, that it is the record companies who are responsible for such a high rate of failure: they crowd the market with music knowing that most of it will not succeed. And their 95% failure rate adds up: it becomes part of the expense of launching a new act. Failure contributes to the punitive nature of recording contracts and to the inflation of sales targets. These targets are set so high that few artists can achieve them; thus they live in fear that they will be the next ones to be dropped.

One of the other quotes in my little book was ‘knowledge is power’, a term that has been loosely attributed to Francis Bacon. In the past, the major labels claimed that it was impossible to have knowledge about what would sell and that this is what led to them spread their bets. Whether this is true or not, they have used their inabilities wisely. It has long been an industry in which failure is power.