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Business and contracts in the recording and music publishing industry

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Want to learn more about business and contracts in the recording and music publishing industry? In this presentation originally delivered as part of the Media and Copyright Issues Panel at the 2014 IPIC McGill Copyright Master Class, leading entertainment lawyer Susan Abramovitch provides a helpful overview of the business, including:

-Rights of the artist/songwriter
-Artist recording agreements – from term and territory to budget and royalties
-License agreements
-Pressing and distribution agreements
-Publishing agreements
-Income splits
-Income from compositions
-360 deals

Published in: Law
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  • DOWNLOAD FULL BOOKS, INTO AVAILABLE FORMAT ......................................................................................................................... ......................................................................................................................... ,DOWNLOAD FULL. PDF EBOOK here { https://tinyurl.com/yyxo9sk7 } ......................................................................................................................... ,DOWNLOAD FULL. EPUB Ebook here { https://tinyurl.com/yyxo9sk7 } ......................................................................................................................... ,DOWNLOAD FULL. doc Ebook here { https://tinyurl.com/yyxo9sk7 } ......................................................................................................................... ,DOWNLOAD FULL. PDF EBOOK here { https://tinyurl.com/yyxo9sk7 } ......................................................................................................................... ,DOWNLOAD FULL. EPUB Ebook here { https://tinyurl.com/yyxo9sk7 } ......................................................................................................................... ,DOWNLOAD FULL. doc Ebook here { https://tinyurl.com/yyxo9sk7 } ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... .............. Browse by Genre Available eBooks ......................................................................................................................... Art, Biography, Business, Chick Lit, Children's, Christian, Classics, Comics, Contemporary, Cookbooks, Crime, Ebooks, Fantasy, Fiction, Graphic Novels, Historical Fiction, History, Horror, Humor And Comedy, Manga, Memoir, Music, Mystery, Non Fiction, Paranormal, Philosophy, Poetry, Psychology, Religion, Romance, Science, Science Fiction, Self Help, Suspense, Spirituality, Sports, Thriller, Travel, Young Adult,
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Business and contracts in the recording and music publishing industry

  1. 1. Recording and Music Publishing Business and Contracts IPIC McGill Copyright Master Class Media Copyright Issues Panel August 8, 2014 Susan H. Abramovitch, Partner Gowling Lafleur Henderson LLP Phone: (416) 814-5673 susan.abramovitch@gowlings.com
  2. 2. Overview The Rights Owners in the Music Industry: I. The Artist/Songwriter II. The Record Label III. The Music Publisher 2
  3. 3. 3 Overview I. The Artist /Songwriter as Original Owner A. Composition vs. Recording B. The Rights of the Artist/Songwriter
  4. 4. 4 Overview II. The Record Label A. Record Label B. Types of Rights Controlled by the Record Label 1. Agreements with Record Companies C. Understanding an Artist Recording Agreement 1. Term 2. Territory 3. Advance and Recording Budget 4. Royalties a) Pricing b) Packaging and Deductions c) Net Sales and Free Goods d) Reduction for CDs/New Tech e) Royalty Rate 5. Accounting 6. Mechanical Royalties 7. Creative and Marketing Controls
  5. 5. 5 Overview III. The Music Publisher A. Types of Rights Controlled by the Music Publisher B. Publishing Agreements 1. Ownership of Copyright 2. Term and Reversion Copyright 3. Administration and Creative Control C. Income Splits D. “At Source” vs. “Receipts” Deals E. Income from Compositions 1. Mechanical Royalties 2. Public Performance Royalties 3. Combined Rates for Online Music Services 4. Synchronization 5. Advances IV. 360 Deals
  6. 6. I The Artist/Songwriter 6
  7. 7. I A) Composition vs. Recording All rights start with the artist/songwriter • Composition vs. recording: • Songwriter writes composition • Copyright subsists immediately • Artist performs/records music • Copyright subsists immediately 7
  8. 8. I B) The Rights of the Artist/Songwriter • A composition is a musical work • s.2: “musical work” means any work of music or musical composition, with or without words, and includes any compilation thereof; • Copyright in composition includes the rights to: • Publish if unpublished • s.3(1): if the work is unpublished, to publish the work or any substantial part thereof • Produce or reproduce in any material form • s.3(1): the sole right to produce or reproduce the work or any substantial part thereof in any material form whatever • Record • 3(1)(d): in the case of a literary, dramatic or musical work, to make any sound recording, cinematograph film or other contrivance by means of which the work may be mechanically reproduced or performed 8
  9. 9. I B) The Rights of the Artist/Songwriter • Copyright in composition includes the rights to: • Perform in public/communicate by telecommunication • s.3(1): to perform the work or any substantial part thereof in public • s.3(1)(f): in the case of any literary, dramatic, musical or artistic work, to communicate the work to the public by telecommunication • Including making available • s. 2.4(1.1): …communication of a work or other subject-matter to the public by telecommunication includes making it available to the public by telecommunication in a way that allows a member of the public to have access to it from a place and at a time individually chosen by that member of the public • Synchronize with moving picture • s.3(1)(e): in the case of any literary, dramatic, musical or artistic work, to reproduce, adapt and publicly present the work as a cinematographic work 9
  10. 10. I B) The Rights of the Artist/Songwriter • Copyright in performer’s performance includes the rights to: • s.15(1)(a)(i), (ii): Perform in public/communicate by telecommunication • s.15(1)(a)(iii), (b): Fix in any material form/reproduce if sound recording • s.15(1.1)(d): Make available • Copyright in sound recording includes the rights to: • s.18(1)(a): Publish for the first time • s.18(1)(b) Reproduce in any material form • s.18(1.1)(a): Make available 10
  11. 11. II The Record Label 11
  12. 12. II A) Record Labels • Various types of record labels • Major Labels: • Sony, Universal, Warner • Independent Labels: • True North, Maple, Roadrunner, Secret City Records • Out of the Box Labels: • Starbucks, Electronic Arts, etc. 12
  13. 13. 13 II B) Types of Rights Controlled by the Record Label Rights of the Record Label Depend on the Type of Contract the Artist Enters Into • Three Main Deal Structures: 1. Artist Recording Agreement 2. License Agreement 3. Pressing and Distribution Agreement (“P&D”)
  14. 14. II B 1) Agreements with Record Companies 1. Artist Recording Agreement • Label: • Responsible for marketing, promotion, manufacturing, distribution • Pays for recording • Exclusive recording services rendered to the label by the artist • Owns copyright in recording (in perpetuity) • Artist: • Paid advance/royalties 14
  15. 15. II B 1) Agreements with Record Companies 2. License Agreement • Label: • Responsible for marketing, promotion, manufacturing and distribution • Exclusive recording services rendered to the label by the artist • All rights in the record exclusively licensed to the label for the exploitation period • Artist: • Produces own record • Retains ownership of copyright • Paid advance/royalties 15
  16. 16. II B 1) Agreements with Record Companies 3. Pressing and Distribution Agreement • Label: • Responsible for distribution • Granted exclusive distribution rights for a Term • Retains distribution fee and pays balance of net proceeds to Artist • Artist: • Produces own record • Retains ownership of copyright • Responsible for marketing, promotion, manufacturing 16
  17. 17. II C) Understanding an Artist Recording Agreement Key Components of an Artist Recording Agreement: 1. Term 2. Territory 3. Advance and Recording Budget 4. Royalties 5. Accounting 6. Mechanical Royalties 7. Creative and Marketing Controls 17
  18. 18. 18 II C 1) Term • Measured in terms of a number of album cycles
  19. 19. • World versus specific territories • Release commitments 19 II C 2) Territory
  20. 20. 20 II C 3) Advance and Recording Budget • An Advance: • A lump-sum payment made by the record company to the recording artist • Advance + Recording Costs vs. “All-in” Recording Fund: • “All in”: includes funds intended to cover both the recording costs and the artist advance
  21. 21. 21 II C 4) Royalties • Expressed in terms of a percentage, or a number of “points” • To assess the actual value of a deal, a “penny rate calculation” must be undertaken PENNY RATE equals SLRP or PPD less PACKAGING DEDUCTION less FREE GOODS times ROYALTY RATE ► ◄ [The calculation of SLRP – PD – FG is sometimes called the “Royalty Base Price”]
  22. 22. 22 II C 4a) Pricing (SRLP/PPD) • SRLP: Suggested Retail List Price • PPD: Published Price to dealers • In Canada, the PPD published by most record companies is around $12.00 per CD • Digital downloads- net receipts basis
  23. 23. 23 II C 4b) Packaging Deductions • CDs - 25% packaging deduction • Downloads- Rationale for packaging deduction?
  24. 24. 24 II C 4c) Net Sales and Free Goods • Free goods ≠ Free product • Free goods = Discounts • Can be a % discount or free records given for resale • Deduction may appear as: • Royalties will be paid on X% of records sold (e.g. 85% of records sold); OR • Royalties are payable on 100% of records sold; provided that “records sold” will be defined as records shipped less free goods and/or discounts
  25. 25. 25 II C 4d) Reduction for CDs/New Tech • CDs - Historically 20% reduction • “New technology”- Up to 25% reduction • It is important to negotiate progressive reduction of the reduction over time
  26. 26. 26 II C 4e) Royalty Rate • CDs • 12-18% SRLP or 15-30% PPD. • Digital Downloads • Danger: same rate as CDs but applied to net receipts vs. 35-50% of net receipts
  27. 27. 27 II C 5) Accounting • Accounting 1.Semi-annual accounting (within ninety days) 2.Reserves for returns
  28. 28. 28 II C 6) Mechanical Royalties • Royalties paid to the publisher for the right to embody compositions on records • Rate is fixed by industry-negotiated agreement or certified tariff
  29. 29. 29 II C 7) Creative and Marketing Controls • Approval rights over: • Producer and studio • Compositions and sequencing • Videos and singles • Re-editing, re-mixing and re-mastering • Synch licensing • Artwork • “Non-phonographic uses”
  30. 30. 30 III The Music Publisher Music publishing = Exploitation of musical compositions (as opposed to recordings)
  31. 31. 31 III A) Types of Rights Controlled by Music Publisher Three principal rights: • Reproduction (“mechanical”) rights • Includes any physical reproduction (CD, vinyl etc.) and digital downloads • s.3(1): the sole right to produce or reproduce the work or any substantial part thereof in any material form whatever • Public performance/Communication by telecommunication right • Radio, television, live performances, internet streaming • s.3(1): to perform the work or any substantial part thereof in public • s.3(1)(f): in the case of any literary, dramatic, musical or artistic work, to communicate the work to the public by telecommunication • Including making available - s. 2.4(1.1): …communication of a work or other subject-matter to the public by telecommunication includes making it available to the public by telecommunication in a way that allows a member of the public to have access to it from a place and at a time individually chosen by that member of the public
  32. 32. 32 III A) Types of Rights Controlled by Music Publisher Three principal rights (cont.): • Synchronization • Putting music in a TV show, movie, video game • s.3(1)(e): in the case of any literary, dramatic, musical or artistic work, to reproduce, adapt and publicly present the work as a cinematographic work;
  33. 33. III B) Publishing Agreements • Publishing Agreements • Administered directly by songwriter or by music publisher • Songwriter may want to negotiate approvals over uses • 3 main publishing agreement structures: 1.“Full” Publishing Agreement 2.Co-Publishing Agreement 3.Administration Agreement 33
  34. 34. 34 III B 1) Ownership of Copyright 1. Full Publishing Agreement • Assignment of 100% of copyright 2. Co-Publishing Agreement • Assignment of 50% of copyright 3. Administration Agreement • No assignment of copyright
  35. 35. 35 III B 2) Term and Reversion of Copyright 1. Full Publishing Agreements & 2. Co-Publishing Agreements: A. Term • The period during which the songwriter is required to deliver compositions to the publisher • Measured as # of records or # of years B. Length of time the publisher retains rights in songs delivered during Term • Ranges from a few years to life of copyright • “Reversion” of the copyrights • Songwriter may regain ownership of copyright and/or administrative rights at some point over the life of copyright
  36. 36. 36 III B 2) Term and Reversion of Copyright 3. Administration Agreements A. Term • The period of time over which administration happens B. No Reversion
  37. 37. 37 III B 3) Administration and Creative Control • Administration of composition involves • Registration of copyright • Defense of the copyright in infringing situations • Licensing exploitation • Collection and distribution of income derived from the composition • Typical approval rights • Synchronization Licenses • Issuance of Mechanical Licenses for less than the statutory (or “Stat” rate) • Changes to the English language lyric, title or the basic melody • Foreign Translations • Parodies
  38. 38. III C) Income Splits 38 1. Full Publishing Agreement • Publisher’s Share ≈ 50% • Songwriter’s Share ≈ 50% 2. Co-Publishing Agreement • Publisher’s share ≈ 25% • Songwriter’s share ≈ 75% • Calculated “at source” or based on the publisher’s “receipts” 3. Administration Agreement • Publisher’s share ≈ 5 - 20% • Songwriter’s Share ≈ 80 – 95%
  39. 39. III D) “At Source” vs. “Receipts” Deals 39 • “At Source” vs. “Receipts” Deal • “At Source”: Songwriter’s share calculated upon gross amount paid at the source by licensee using composition • “Receipts”: Publisher remits to songwriter 75% of that which it receives
  40. 40. 40 III E) Income from Compositions Income from Compositions • Mechanical Royalties • Public Performance Royalties • Synchronization Income • Print + Other
  41. 41. 41 III E 1) Mechanical Royalties Physical • CMRRA/CRIA Agreement • 8.3¢ for song 5 mins. or less + 1.66¢/ extra minute(s) or fraction thereof Digital • CMRRA/SODRAC (CSI) Tariff - Online Music Services (2008- 2010) • Royalties payable by online music services for the reproduction of musical compositions • Permanent downloads (temporary or limited) downloads + streaming
  42. 42. 42 III E 2) Public Performance Royalties • Radio play • Television broadcast • Live performance • Streaming over the internet (but not downloads) • Rates are set by tariff approved by Copyright Board • Royalties administered by SOCAN
  43. 43. 43 III E 3) Combined Rates for Online Music Services Certified Rates for Online Music Services CSI Rate SOCAN Rate Total Rate Permanent Downloads 9.9% N/A 9.9% of retail price Limited Downloads 9.9% N/A 9.9% of subscriber fees On-demand Streaming 5.18% 7.6% 12.78% of subscriber fees The N/A indicators in red are a result of the Supreme Court’s 2012 ESA v SOCAN decision.
  44. 44. 44 III E 4) Synchronization Income • Negotiated between the parties • Whatever the market will bear as consideration
  45. 45. 45 III E 5) Advances • Non-returnable pre-payment to the songwriter of songwriter’s royalties • Crucial to assess value of deal to ensure not being paid pipeline
  46. 46. 46 IV 360 Deals
  47. 47. IV “360” Deals • “360” Deals • Becoming more common as risk increases in music industry • Artist engages a single company for multiple functions: manager, record company, publisher, merchandising • Financially can be attractive as 360 deals typically split net receipts rather than pay record-based royalty rate • Risky as more egg in one basket • One-stop shopping 47
  48. 48. Thank You Susan H. Abramovitch, Partner Gowling Lafleur Henderson LLP Phone: (416) 814-5673 susan.abramovitch@gowlings.com

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