Friday, March 27, 2009

4.26.09 ROYALTY

The March 2009 edition of CRUMBS Night Out is happening, well, tonight, if you’re reading this on Thursday March 26, at the Linda Norris Auditorium on Central Avenue. The fun starts at 7 with a set from Albany’s Sea of Trees, riding the release of their debut album Animal Sounds. At 8 the music biz panel of myself, attorney Paul Czech and our old pal Peter Iselin will talk (and answer your questions) about how songwriters make money, at least hypothetically! You’ve seen the names ASCAP, BMI, and SESAC, but do you know what these organizations do? And who’s Harry Fox and what’s he doing with that agency of his? We’ll try our level best to explain it all, and no, Harry Fox is NOT going to be there to explain himself. I have no idea how that got out there. I don’t even know if there is a real Harry Fox, or whether he’s just some kind of weird cultural icon, like the patron saint of troubadours or something.

On a related note, there’s some legislation before Congress you should know about, and if you ask me, you should support as well. The House Judiciary committee recently held hearings on bill HR 848, legislation with the droll name “The Performance Rights Act.” The bill provides for the creation of a “performance right” for sound recordings. And what does that mean, you ask?

Well, I’ll tell you. Until 1972, the federal copyright laws didn’t protect sound recordings. Compositions, the songs, had been protected since the 1800’s, but records, nope. If somebody bootlegged an album, a record company would have to chase the pirates around the state courts and rely on a patchwork quilt of state statutes and common law to get justice. It was awful. Then in 1972, Congress finally got around to dealing with the issue, and was faced with a huge push-back from the broadcasting industry. You see, traditional copyright gives the copyright holder rights not only in making copies of a work but in the performance of the work as well. So by giving copyright status to sound recordings, the record companies would then be able to demand payment for the non-private playing of records, like on the radio.

The broadcast lobby prevailed on Congress to make a bizarre exception to the law, to create federal copyright protection for sound recordings, except with no performance right. The given rationale for this odd little law was that since radio airplay promoted the sale of albums, radio shouldn’t be expected to pay record companies a royalty in addition to providing a nice promotional service. Never mind that for every other type of creative work, the performance right is perfectly OK, whether the performance promotes sales of copies of the work or not. The broadcast lobby convinced Congress that recordings were different.

So ever since we’ve had this weird situation where radio stations pay songwriters royalties for playing music on the air (through ASCAP / BMI /SESAC) but not then record companies / musicians (and, at least hypothetically, musicians). So when you hear “Respect” on the radio, Otis Redding gets paid, but not Aretha. Dumb, huh?

But wait, it gets dumber. In the 1990’s, the internet came along, and the broadcast lobby (now with help from the record companies), were afraid of competition from the internet and satellite radio, so they convinced Congress that digital transmission of recordings were different than terrestrial radio, and created a performance right for digital radio. That’s right. Webcasters and satellite radio now pay royalties to not just songwriters, but record companies and musicians as well, while broadcast radio continues its free ride.

One nice aspect of the digital royalty program is that record companies get 50% of this revenue, while the featured musicians on the recordings get 45%, and back-up musicians get 5%. For many musicians, who either signed bad deals or have otherwise been ripped off by their record companies, this digital performance money is the first time they’re seen since getting paid maybe a measly advance or session fee way back when.

Meantime, every other country in the civilized world has long collected performance royalties on recordings from radio. But none of these countries will pay U.S. record companies or performers any of this money, because we don’t collect these royalties for their artists.

The Performance Rights Act seeks to rectify this, to create a performance right and royalty stream for terrestrial (broadcast) radio performances of sound recordings, to bring us in line with the rest of the world, and to compensate record companies and musicians for the use of their works. The old argument that “radio promotes sales” is looking pretty weak these days, since there ain’t much sales of recorded music going on, radio or no.

The broadcast lobby is, as you’d expect, apoplectic over the bill, appealing to the ignoramuses among us by labeling the performance right royalty a government-imposed “tax” of good all-American business. Nonsense. It levels the playing field with digital radio, it brings us into conformance with the rest of the world, and in so doing it loosens up millions of dollars all over the world that should be flowing to U.S. record companies and musicians. It’s long overdue.

Friday, March 13, 2009


Depending on what tribe you run with, you may know that the band Phish played their first shows in over five years last weekend down in Hampton, Virginia. Over the past couple years I’ve gotten quite an education about Phish fandom through my working on the development of the book PhanArt: The Art of the Fans of Phish, compiled and just published by my client Albanian Pete Mason. The book collects fan-generated art, most of it stuff that was sold and traded in the parking lots and fields surrounding Phish concerts and festivals in the years prior to the band temporarily calling it quits in 2004.

The book is a 420 (!!!) page dizzying collection of pop, appropriation, and, in some cases, flat-out fine art that speaks to the band’s deep subculture and the peculiar mass obsession that fuels it.

So it was with more than a casual interest that I watched the goings-on in Hampton over the weekend. On Thursday I got a fairly freaked-out message from Pete that the local papers were reporting that lawyers for Phish were in court seeking a seizure order for counterfeit goods being sold at or near the concert venue. Was this the portent of some very un-Phish-like bad vibes?

Well no, it wasn’t. Getting orders like this is standard operating procedure for many big touring outfits like Phish. Even the most groovy of groups protect their trademarks (and their authorized merchandise vendors) from counterfeiters, and one very effective way of doing this is by getting a prospective seizure order from the local federal court that allows the U.S.Marshals to authorize the band to police what is being sold around the venue. Back when I was clerking for Judge Cholakis in federal court in Albany, similar orders were granted for the Grateful Dead (the grand pooh-bahs of grooviness) and other major acts coming to town.

It’s never a perfect system. The folks doing the street policing are typically not schooled on the nuances of trademark law, so along with seizing the obviously counterfeited goods (t-shirts that are blatant rip-offs of official band merch, or that feature registered trademarks of the band) sometimes more innocuous stuff that doesn’t infringe anything, gets seized as well. I remember getting calls in 1991 from a furious independent t-shirt vendor (now a prominent Albany attorney) who had his inventory of totally legal shirts seized by over-zealous Dead trademark cops outside the Knick.

What made the Phish situation different was the public announcement, perhaps made to warn would-be counterfeiters to stay away. As fate would have it, the judge rejected the application, because (a) the public announcement violated the statute that provided that applications for seizure orders were supposed to be made in secret under seal, and because (b) the Phish lawyers failed to serve the local U.S. Marshals with the application, again as provided in the statute. The news reports from Hampton indicated that the judge was pretty angry about this, and that the hearing wasn’t particularly pleasant.

D’oh! My first thought was “there but for the grace of God go I.” Getting reamed by a judge in open court, deserved or not, is no fun. I got slammed once in a packed courtroom for failing to put page numbers on a six-page brief. It was awful, and I’ll never forget it, and I’ll never forget page numbers on a document again. Now, I even put a “1” on the bottom of a one-page document.

What happened in Hampton? I’m guessing that the Phish lawyer was doing business as usual, and ran into a judge that refused to allow any cutting of corners. Like I said, the public announcement, while maybe not consistent with the “under seal” requirement of the law, had a laudatory intent, to avoid ugly street confrontations with would-be counterfeiters in the middle of what was sure to be a crazy scene outside the concert venue. Not serving the U.S. Marshalls may have been an oversight, but the requirement strikes me as ministerial—it’s not like the Marshalls are going to oppose the application.

But anyway, the whole episode didn’t appear to indicate the long (albeit sometimes tenuous) relationship Phish has had with the dozens, maybe hundreds, of street artists that sell band-related (but non-infringing) art and merchandise in the parking lots, fields, and hotels around the concert venues. These artists generally know the rules, and some of their efforts to push the boundaries (like hiding and disguising Phish logos and trademarks in a design or artwork) resultin some of the most clever and interesting fan-generated works. And Pete tells me that new stuff was selling like crazy in the lots at Hampton all weekend long.

And if there’s any lingering questions whether Phish maintains reasonable and fan-friendly intellectual property policies, they posted high-quality recordings of all three of the Hampton shows for free download at ‘Nuf said.