What They'll Never Tell You About the Music Business

by Peter M Thall

  Still, boundaries are falling. The rule of reciprocity referred to above requires that the artist claiming neighboring rights be a citizen of one of the countries on the schedule of qualifying countries. However, it also allows a citizen of a nonqualifying country to bypass the residency restriction if the recording is produced in a qualifying country. Unfortunately, Canada, like the United States, is not on the reciprocal list, so stopping over in Toronto or Montreal to record your album will not help you here.

  TWO NEIGHBORING RIGHTS–FRIENDLY COUNTRIES: THE UK AND THE NETHERLANDS

  You may be wondering why, if historically the issue of neighboring rights has been all but dead in the water in the United States, I am making such a fuss about them to readers of this book, most of whom are US citizens? Because some of the countries that do have broad neighboring rights policies—and their resident societies—will pay neighboring rights royalties to US citizens under certain circumstances. For example, if the producer of a sound recording is a citizen of one of those countries (I will call them NRF—neighboring rights–friendly—countries), he or she is eligible to receive these royalties; if the producer or artist is an American, but records in an NRF country, he or she may be entitled to those royalties.

  Throughout the world, NRF countries are holding millions of dollars of royalties. It is not as if these royalties have been abandoned by them. Indeed, once a defined period of time has passed (different for each society), these monies will find their way out of the societies’ coffers and into those of non–United States companies’ and artists’ pockets—or into the Black Box. To say that it takes a specialized service to capture all, or a majority, of these royalties is an understatement. The following section describes some routes that can be taken to recover royalties that would otherwise be lost forever.

  The Rental Directive

  The United Kingdom and the remaining members of the European Union offer reciprocal protection in “qualifying countries” (not, of course, including the United States) for the purposes of paying remuneration to performers. This is a result of a European Commission “directive” to encourage the collection of royalties under a newly created “rental and lending” right for recorded performances. A performer is entitled to claim equitable remuneration if the sound recording in which his or her performance is embodied was included in a cable program service, broadcast, or played in public in the United Kingdom after December 1, 1996 (the “exploitation”), and either (1) the country in which the recording was made appeared in the schedule at the time of the exploitation or (2) at the date the recording was made, the performer was a national, citizen, or resident of a country appearing in the schedule at the time of the exploitation.

  NEIGHBORING RIGHTS COLLECTION AGENCIES

  As neighboring rights are expanded in the United States, whether technically copyright-driven or otherwise, a number of companies have created worldwide-connected collection services to wade through the various conditions that need to be met in order to justify a claim. For example, now that Sound Exchange collects satellite-generated performance royalties for record companies and artists (and producers), the lack of reciprocity whereby other countries would honor our citizens similar rights in their countries has been largely erased. The same result occurred with AARC, which collects blank-tape and related income for its members. Some countries require that an artist be a citizen of that country in order to collect neighboring rights from that country. The lead singer of Foreigner, Mick Jones, is a beneficiary of this rule, being a citizen of the UK. Recordings that were produced in, say, England, such as the CARS’ “Heartbeat City” are also eligible.,

  Every artist should enter into some kind of agreement with one of these agencies as there may well be money just waiting for collection. Some of the agencies that have entered this field will even pay advances to eligible artists. And, of course, the artists need not have a foreign connection when it comes to royalties payable by Sound Exchange and AARC.

  Here are some of these collection services:

  Fintage House (www.​fintagehouse.​com) This is one of two important agencies originating in the Netherlands—it is a spin-off of a large banking organization. Fintage has tons of experience in extracting money from countries around the world that are traditionally very difficult to deal with.

  Kobalt Music Group (www.​kobaltmusic.​com) This Netherlands-based company with a huge US presence is an independent music publisher, which offers global administrative and creative services to writers, publishers, and other publishing rights holders.

  Sony Music Entertainment (UK) This is a division of Sony Music and is obviously very well connected throughout the world. When the English company does not know the idiosyncratic rules of a particular country relating to neighboring rights, they have experts in place in most countries of the world to help them. This is a tremendous asset for them and for their licensors/artists.

  PremierMuzik (www.​premiermuzik.​com) This is a Canadian company based in Quebec but with reach well beyond our own “neighbor.” This is a boutique with all of the benefits of a small company. They will get to know you, your attorney, your accountant, and you will consider them part of your personal team to maximize your income from all neighboring rights sources.

  Royalties Reunited/PPL (www.​ppluk.​com) Royalties Reunited collects airplay royalties, including royalties resulting predominantly from analog radio and television transmissions. These are the true neighboring rights. The entity that actually collects these royalties is Phonographic Performance Limited (PPL). Royalties Reunited claims to have royalties just waiting to be claimed by more than five thousand performers totaling several million pounds. Those qualifying for the royalties are the individual performers on the recordings, including session performers, not the “band” entity per se.

  The Association of United Recording Artists AURA based in the UK, represents featured artists, and the Performing Artists’ Media Rights Association (PAMRA, www.​pamra.​org) collects for both featured and nonfeatured musicians and singers. At either of these sites, you can enter your name (or if you are an artist’s representative, your client’s name) in the applicable field, and if money on your behalf—derived from radio and television transmissions, bars, clubs, gyms, and wherever else recorded music is played—is being held on you or your client’s behalf, that information will be provided. Try it.

  Through subagreements, all of these companies collect performance royalties not only for performances of sound recordings in their home countries, but also for those generated in practically all other countries of the world and particularly in at least fifteen of the most lucrative countries, including the United States (thereby running into competition with Sound Exchange). Others include Austria, Belgium, Denmark, Finland, France, Germany, Holland, Ireland, Italy, Japan, Norway, Spain, Sweden, Switzerland, and Brazil. As noted, Sony is one of the neighboring rights collection agents that have their own divisions throughout the world. Other companies such as peermusic and the other majors are getting into the game as well.

  As to all of these companies, once you sign up with them, you do not need to fill out the burdensome, and burdensome number, of applications for collection rights. Nor will you miss out signing on with some obscure companies/collection services that you, and even your attorney and accountant, have never heard of. The agents I have identified, and others, are members of the major music societies around the world and collect directly from them, thereby reducing the amount of time it takes for a person entitled to such royalties to receive them. They have changed the traditional standard for issuing accounting statements which was stuck forever on a semiannual or quarterly basis. Some will account on a monthly basis, and their websites offer private and confidential account information reports on a 24/7 basis. Of course, they themselves are accounted to most often semiannually, or perhaps quarterly, so the great majority of your income will not be received by them, and reportable to you, monthly, but rather every three or six months.r />
  I should point out something that might help you in deciding whether to appoint a worldwide agent or to pick and choose among other neighboring rights societies before granting to the worldwide agent whatever remains. For example, the UK, France, Canada, and many other countries have neighboring rights societies all their own. And the United States has Sound Exchange and AARC. Why not sign directly with them and then appoint an agent to handle the outliers? Because it is thinking small. To deny a collection agency that you have appointed the ability to collect neighboring rights in the big territories by signing directly with their respective societies and to give the collection agency merely the rest of the world is not always wise. First, even with respect to the countries’ own societies, your agent can keep a better eye on their processes than you can; that’s what they do. Second, dividing up the world detracts from their power to help you when things get dodgy. Third, by giving the agent only the smaller territories, it is more likely to lose money than make a profit (even if they do not provide advances) as the amount of work to register your recordings in every applicable country of the world is enormous. The best thing that you can do yourself is to give your appointed agent at least a chance to make a profit. If they cannot share in the worldwide rights, the economic model on which they structure their companies and their staffs fails and it would not be surprising if their attention to your particular catalogue turns out to be less than energetic. I should add that the time it would take to act out this bifurcation of the world hardly will ever be worth it. If you are a recording artist or a small record label, don’t you have better things to do with your time than becoming the world’s most clever licensor of neighboring rights?

  PERFORMING AND OTHER OBSCURE RIGHTS IN SOUND RECORDINGS

  In most of the world outside of the United States, rights to perform sound recordings are considered neighboring rights. Thus, the inclusion of this section here. Until very recently, lost, misplaced, neglected, and abandoned would be an accurate description of them. But they are slowly being discovered through a combination of legislation and jurisprudence.

  Analog Performing Rights in Sound Recordings: Still Waiting

  For decades, recording artists and their record companies have sought to create a performance right for analog performances by an amendment to the Copyright Law. They have been characterized by major PR events in Congress where the recording stars of the time (Frank Sinatra anyone?) would lunch and chat with Congressmen only to see their long-sought law discarded as unpassable.

  Currently, the US Copyright Law, unlike those equivalent laws of most other countries in the world, does not recognize a federal performance right for analog radio. The proponents of a law granting recording artists performance income from analog performances point out that only China, North Korea, and Iran fail to have legislation in effect that causes analog radio stations to pay artists. Unless the performances are of a digital nature (for example, via webcasting, cable, satellite or stream), even a Taylor Swift record, produced in 2015, would not garner performance royalties no matter how much it was played on AM or FM stations throughout the country. Foreign performing rights societies will not, of course, pay performance royalties for performances of American-originated recordings performed on their radio stations because American performing rights societies are barred from collecting performing rights monies in the US for their artists’ recordings. If things change, then the foreign societies will be bound to reciprocate and pay American recording artists on this use. Since American recording artists are still the most important source of contemporary music in the world, (along with a few Brits, an occasional Australian, and a masked French duo, a lot more money is lost to Americans than would be earned by foreign artists. It has always seemed to be a no-brainer to pass legislation permitting this. It would even help the US balance of payments. But things have not changed for the better. During years of failure, the proposed legislation was referred to as the Performance Rights Act. Maybe they should change the name, as the publishers did in pursuing their legislative agenda, now called the Songwriters Equity Act. Still, the resistance of the National Association of Broadcasters and many others is unremitting, so I do not expect an amendment to change the copyright law anytime soon. In the meantime, performing sound recordings on analog radio do not generate any money whatsoever for sound recording owners via federal copyright law.

  The Discovery of Performing Rights in Pre-1972 Sound Recordings

  Flo & Eddie of The Turtles brought a lawsuit in 2013 that might turn upside down the law as we have known it for over a hundred years—that is, that until the US copyright law was changed to grant federal copyright to sound recordings (that is, anything recorded commencing January 1, 1972) was passed, no such rights existed for any recordings issued prior to that date. The Flo & Eddie claim was that their recordings, released in the 1950s (!) were nevertheless protected by common law copyright regardless of when they were recorded. They acknowledged that the Copyright Act gave them nothing in terms of protection, but in the absence of federal law, they believed that the rights of people to their own property was sacrosanct. If these rights were not preempted by the federal government, then they still exist. They claimed that it was wrong for courts to deny them their property rights in sound recordings granted by the various laws of the fifty states that impacted private property (the venerable “common law”). The proponents of this claim acknowledge that similar protection may not exist in every state, but they believe that it surely does in New York and in California (where the lawsuit was brought). In their view, therefore, SiriusXM, the defendant, would be liable not for federal copyright infringement per se but for a kind of infringement characterized by the conversion of assets, unfair competition, theft, and the kitchen sink for performing their sound recordings on satellite radio, webcasts, and cable networks without permission.

  The plaintiffs claimed that their sound recordings, created prior to the date on which the US Copyright Law was changed to grant federal copyright to sound recordings (that is, January 1, 1972) were nevertheless protected by common law copyright regardless of when they were recorded. The proponents of this claim acknowledge that similar protection may not exist in every state, but they believe that it surely does in New York and in California (where the lawsuit was brought). If they are right, then SiriusXM, the defendant, would be liable not for copyright infringement per se but for conversion of assets, unfair competition, theft, and the kitchen sink for performing their works on their satellite radio transmissions. To the shock of the Copyright Bar, a California court agreed with them. Similar lawsuits have been brought against Pandora and eventually against terrestrial radio. CBS Radio, iHeartMedia and Cumulus, the country’s largest radio station conglomerators have all been sued. Others who have not yet been sued will inevitably be called before their state courts by similar claimants.

  Ironically, Flo & Eddy have found common bond with Sony Music Entertainment, Universal Music Group, and Warner Records Group, all of which have sued SiriusXM as well, and which have apparently achieved several hundreds of millions of dollars in settlements. Whether they will succeed when the last appeal is decided, especially in view of the fact that the federal law is likely to change soon with respect to analog performances, is not predictable. It is not even clear whether the next iteration of the Performance Rights Act will protect analog performances of pre-1972 recordings. But if they do prevail, what a boon to the record labels and their artists (who are destined to receive the lamb’s share of the newfound monies). Then the only issue will be how much, if any, of their recoveries (which will likely be blanket sums, not attributable to any particular artist’s recordings) will be shared with the artists and their producers. The second most important court in the land, the Second Circuit Court of Appeals, based in New York, will hear an appeal on this issue about the time this book is published. Which way will they come out on the question of whether there exists a public performance right outside of federal law in New York, Cali
fornia, or other states? One of the dilemmas that the court will have to consider is what to do with a sound recording if they agree that it requires permission to be played on the radio in New York or California, but may freely be performed on the radio in any of the other forty-eight states. Will that reality alone constitute interference with interstate commerce so as to negate the claim that there exists such protection in New York and California? We will see.