Thursday 26 November 2015

MusicTank debate points out the reality of how the music industry uses the law to underpay performers

Performers and songwriters - the actual creators of recorded music - have been making noises recently in the ongoing debate about reforms to copyright. Indeed the Featured Artists Coalition and the globally-focused International Artists Organisation have issued an urgent call to the European Parliament demanding That the Parliament ensures that performer rights be included in the European Union's current review of copyright law. The move comes as part of the campaign called Artists In Europe which is a bid to "ensure that protection for artists' intellectual property sits at the heart of the new legislation".

Songwriters have already had a say. BASCA chairman Simon Darlow has used his speech at the 2015 Ivor Novello Awards to criticise current 'safe harbour' provisions in EU and US law, pointing out that the likes of YouTube undermine streaming services, and were exploiting safe harbour legislation saying this was "undermining the value of our music". But even those who do pay songwriters and their publishers don't pay much. Internet radio service Pandora is currently appealing the US Rate Court's decision to order it to pay 2.5% of revenues to compensate BMI songwriters and publisher members. The rate of rival PRO ASCAP of 1.85% was upheld by the US Second Circuit Court of AppealsAnd some don't pay at all!  In late August PRS for Music wrote to it's members saying it is beginning legal action against online music streaming platform SoundCloud after "five years of unsuccessful negotiations".

On Tuesday 10th November it was the turn of London to be at the centre of this ongoing debate - with a panel and debate at the University of Westminster organised by MusicTank. The context of the event were the conclusions of a Report titled Making Available, Communication To The Public & User Interactivity by former LLM student Fiona McGugan (Featured Artists Coalition & Music Managers Forum) which considers the evolution of communication rights that overshadow conventional distribution and reproduction rights as music consumption increasingly shifts away from ownership, towards access models of streaming services. Understanding how this right is applied, territorial variations in the application of rights, and how licensing structures are determined according to the levels of user-interactivity of digital services lie at the heart of possibly the single biggest issue facing the music industry in recent times - how much artists (performers) get paid. Fiona kicked of proceedings with a presentation explaining that many artistes were facing desperate times because streaming was considered (at least by the major record labels) to be a 'making available' right and so no 'Equitable Remuneration' would apply - which of course it would IF streaming was considered a form of broadcasting - a communication to the public. So artistes get paid a seeming pittance.

But the underpayment of artistes is not new. Back in 2004, Californian state senator Kevin Murray wrote this in a report in US recording industry practices:

“Much like the public generally dislikes politicians, but love their individual representatives, Artists have respect for their record company handlers, but distrust the companies themselves and the system they operate under. They see themselves as victims of an indentured servitude system designed to keep them perpetually indebted to the companies who also own the product of their labor. Some artists expressed gratitude for the initial investments made by the record companies in their talent, but feel cheated by their meagre share of the proceeds when the gamble pays off. One artist’s representative went so far as to accuse the record companies of running a continuing criminal enterprise.

The record companies are genuinely appalled at the accusations and feel that they are the true victims. They are insulted that after making multi-million dollar investments in artists, few of which actually pay off, that they are then held hostage by the successful few. They claim they are forced to pay large advances and otherwise accede to whims of spoiled, pampered artists who make millions, yet whine that they are oppressed. They further complain that artists should be helping fight the real enemy of digital piracy, instead of accusing record companies of thievery.”

More recently in the context of the class actions brought by artistes in an attempt to increase their digital download royalties, the Dixie Chicks called the royalty and accounting process “systematic thievery”.

With Universal announcing on the same day that its last quarterly figures showed that streaming income had now overtaken download revenues (with digital already having taken over physical sales and licensing combined), it's important to stress that the definition of what a stream is makes a huge difference to artiste's payments, as the major labels are seemingly applying old style royalty rates to streaming income - in many cases (and in particular with heritage acts), taking 90%+ of all streaming income they receive This has been successfully challenged in the courts in Sweden and Finland and panellist Horace Trubridge (Assistant General Secretary, Musicians Union) said that the MU would fund a challenge in the UK - and said that the MU now  think they had found a suitable litigant (although the CopyKat notes that in the US, the majors simply ignored a ruling won by FBT Productions against Universal which gave FBT a 50% share of digital revenues) and WarnersSony and UMG all managed to persuade thee artistes in class actions to settle on terms that were little better than old style physical product contracts with marginally better royalties and the carrot of the share of a lump sum pay off (that had already been raided for huge legal fees). Trubridge, who had once been in a successful 70s pop band, said his band got just 3% of the 'recorded music' share of any stream - with his label (who were originally Magnet, now owned by Warners) taking the rest - 97%.  As Horace said, hardly fair and there are many heritage artistes and non-featured artistes in the same boat (or worse!), although Horace reserved his real venom for YouTube - the world's leading streaming company, which has somehow avoided directly paying for using sound recordings. 

Benoît Machuel (General Secretary, International Federation of Musicians) provided some very useful statistical information, and pointed out that much of the information pumped out by the record label's trade bodies including the BPI, RIAA and in particular the IFPI is NOT reliable, and is clearly presented to suit their business models, as well as giving a useful European perspective and alerted the packed audience that the Fair Internet for Performers campaign says:  "performers are still not fairly rewarded when their performances are exploited via online on demand services. Most of them receive an all-inclusive fee at the time of the recording for all type of exploitation of their performances. Others receive an insufficient proportional remuneration. The campaign has called on European institutions to "create a sustainable cultural and creative sector where performers get a fair share of online revenues, through an unwaivable remuneration right for digital uses of their work, collected from the users who make the performances available on demand and subject to mandatory collective management." Benoît told the packed room that from an average €9.99 monthly streaming subscription (e.g. Deezer or Spotify:

- all featured artists combined and listened to in a month share €0.46 euros
- authors (SONGWRITERS)  €1.0 euro
- the state/ taxation €2.0 euros (more than the authors/ performers’ share combined)
- producers (labels) and streaming services combined received €6.54.

With no record labels willing to provide a panellist, it was left to Alexander Ross (Partner, Wiggin LLP) and chair Keith Harris OB (a band manager and until recently PPL's Director of Performer Affairs) to offer some balance. Fiona McGugan also suggested that the rental right (which does offer the much needed Equitable Remuneration) could play a part. 

Interestingly Ross revealed details of a recent paper from the University of Amsterdam, commissioned by and written for the EC (DG, Internal Market), and titled Remuneration of authors and performers for the use of their works and the fixations of their performances, which had made a number of recommendations on the remuneration of authors and performers (or the “creators”) for the use of their works and the fixations of their performances - noting in particular the complexities of the music industry - "The supply chain in the music industry is particularly complex with distinctions between offline and online distribution of music, different repertoires and authors and performers" and further notes that transparency is lacking and payment flows complex. But this is what they suggest:

- Policy 1: Specify remuneration for individual modes of exploitation in the contracts
of authors and performers.

- Policy 2: Improve the cross-border transparency of the national systems.

- Policy 3: Limit the scope for transferring rights for future works and performances
and future modes of exploitation.

Policy 4: Create a more conducive environment to support the role of trade unions,
freelance associations and CRMOs when they fulfil similar functions.

- Policy 5: Facilitate the exercise of the right of making available. This policy option
effectively represents a fall-back in the event that the other policies fail to protect
authors and performers sufficiently and is broken down into three possibilities:

- Voluntary collective management of the right of making available.

- Unwaivable right to obtain equitable remuneration from the producer/publisher.

- Unwaivable right to equitable remuneration administered by a CRMO.

This writer is sure the major record labels will NOT be happy with this report - although some points  - particularly (1) and (2) above, seem both aspirational and couched in Eurobabble. (5) is particularly interesting and gets to the heart of the problem, not least as it is becoming increasingly obvious that allowing labels to directly collect revenues will not help artistes, either in the short term or the long term.

As the debate drew to a close, it was clear that whilst both recording artistes and record labels - as well as non featured artistes and the the UK's recorded music collection society PPL - have shared goals in fighting piracy,  getting US terrestrial radio stations to pay for the use of sound recordings and maximising revenues from new digital formats, not least through improved models with the streaming platforms and other digital players, the real ire was reserved for the major record labels, who seemingly have no intention of changing their business models and offering a fair share of digital revenues to artistes - and yet want artistes to support their move in, for example, extending the copyright term for sound recordings and striking better deals with the digital platforms.

Keith Harris had opened the panel discussion suggesting this was an issue that needed simple solutions. But as the panel progressed,  it was clear where we have ended up is anything but 'simple' playing field. With the record labels making the calls - its going to be artistes who have to fight for change. To my own mind - and in that classic situation where the EU Directives really DON'T fit the new technologies (which of course were never even imagined when some of the legislation was put in place) - you need to go back and ask what streaming really is - and almost certainly we need to redefine 'making available to the public' and 'communication to the public'. Whilst the the Court of Justice of the European Union (CJEU) has pronounced on on the right of communication/making available to the public within Article 3 of the InfoSoc Directive in Svensson and also in  C More Entertainment AB v Linus Sandberg, C-279/13 - this whole area is getting more and more confused - and that won't help artistes get a fair share of the digital pie. Whether the artist community can persuade either legislators or perhaps arguably the courts that streaming should be properly defined - and that they should be getting a fair share of digital (and indeed other revenues) remains to be seen. As it stands, labels will be quite happy that the CJEU said that "in order to be classified as an act of 'making available to the public' within Article 3(2) of that directive that, in order to be classified as an act of ‘making available to the public’ within the meaning of that article, an act must meet, cumulatively, both conditions set out in that provision, namely that members of the public may access the protected work from a place and at a time individually chosen by them" as it means that almost any service EXCEPT for a traditional radio or TV broadcast including even 'skipable' internet playlists can be classified under the making available right - amongst the rights the labels hoover up in standard terms and which they can 'remunerate' artists for on a royalty basis - with no need to make any payments that might be equitable. So here the nuances of technological development not only fall outside of any specific legislation, that legislation which was put in place to protect performers and artistes is now somewhat annoyingly being used against them.

Berklee’s Fair Music report and the French Government’s Agreement For A Fair Development Of Online Music - a voluntary code of conduct between artists, labels and digital platforms - have also added heat to the debate, not least in the wake of a well-documented leaked streaming contract, that shed light on a model renowned for its fondness for NDAs, which highlighted the inequality of bargaining power between creators and rightsholders. The French code provides that: "Labels agree to share with artists ‘all revenues and remuneration they receive from digital music broadcasting and distribution services when monetising their recordings’. (‘Revenues and remuneration’ means monetary and non-monetary benefits directly linked to recordings, including where those benefits cannot be specifically attributed to a rights-holder. This must include all the unrecouped advances/minimum revenue guarantees obtained from online music service providers – aka “breakage")"; a limit on royalty reducers used by labels to artificially reduce the already often pitiful percentages paid to performers;  provides that labels will ensure transparency in accounting -  showing an overall summary of reductions, explicitly showing their cumulative effect on the artist’s revenue as a value and/or percentage, and that the position of the major label's equity stakes in streaming and other platforms will be discussed.

France may have taken a lead here. McGugan's report calls for:

-  Precision and clarification in the EU Directive And WIPO Performances and Phonograms Treaty (WPPT) 

-  A new deal for legacy contracts

- Collective licensing for the "making available"  right

- Compulsory licensing for first reproductions

As Featured Artists Coalition board member and Pink Floyd drummer Nick Mason said: "Artists are not looking to fight technology, or the fantastic access digital services and technology gives music fans. We want to foster innovation and push the uptake of these new and exciting opportunities for communication and creativity. However, we must make sure that the system pays back the artists of the future whose hard work and talent will make the services successful for the long term".

Nils Svensson, Sten Sjögren, Madelaine Sahlman, Pia Gadd v Retriever Sverige AB, CJEU, Case C. 466/12 2014 and also see Rosati, E. (2014) Early Thoughts on Svensson”
communication/making available, ‘new’ public, altering the scope of exclusive rights 

Remuneration of authors and performers for the use of their works and the fixations of their performances (2015) Dr. L. Guibault , Mr. O.M. Salamanca &  Dr. S.J. van Gompel. This study was carried out for the European Commission by Europe Economics by the University of Amsterdam (IViR).  ISBN 9789279471629 and the report is downloadable here:

US Recording Industry Practices was written by California state senator Kevin Murray, Chair, Senate Select Committee on the Entertainment Industry in 2004.  This proposed both a fiduciary duty on record labels and statutory penalties on labels failings to account for royalties. Senator Murray, formerly a talent agent,  reportedly later joined the recorded music industry. I can no longer locate the paper online, but some of the detail can be found here: California 's Recording Industry Accounting Practices Act, SB 1034: New Auditing Rights for Artists

Footnote: Best revelation of the night? having been asked why established and successful bands re-sign with record labels - the agreed answer was 'so the band's manager has someone to blame when something goes wrong' !


Nelson said...

But these also help the artist to get exactly payment for the work they have done. Even its not a good idea to pay less to artist Because this will limit the artist skills.

michael said...

If you pay the under wages no one will really ready for work and in music industry all you need is to money for promotion of your business. So its not fair.