History Repeats Itself in Recording Contracts

I'm reviewing a long history of agreements for a client who had a stellar career that spanned some sixty years. It's been very interesting to see how recording agreements evolved from the forties. This artist spent a significant amount of time with one label and I'm tempted to write a long article on the history of the recording contract - when and how royalty calculations evolved and how far many modern provisions have departed from their original intent.

However, another interesting thing I just noticed is how certain language dropped out for decades, only to reappear in our modern landscape. One particular agreement, dated from 1976, includes the following provision (I've substituted the label name with "Label"):

If, during the Term hereof, Label shall become entitled by law to receive royalties (or the like) on account of the public performance in the United States of records made from master recording recorded hereunder, then (unless such law shall provide for the direct payment to you, from a third party source, of any related royalties (or the like); or unless such law shall provide for Label to allocate such royalties as between Label and you in any specified manner, in which latter event, of course, Label shall comply therewith) one-half (1/2) of all such royalties received by Label with respect to (or attributable to) such records shall be retained by Label for its own account, and the remaining one-half (1/2) thereof shall be added to (and deemed to be) royalties accruing to you by Label hereunder.

In 1976, there was a hope that labels might get a performance royalty for sound recordings. It took nearly 30 years to get a performance royalty in digital performances, and the fight continues for terrestrial radio performances. However, it's interesting how this language from over three decades ago is once again relevant.

Content Owners Must Consider Fair Use Prior to Issuing Takedown Notices

I haven't posted here in several months but this case warrants mention. Yesterday, the District Court for the Northern District of California issued a ruling in Lenz v. Universal that would require content owners to consider whether a particular use is a fair use before issuing a takedown notice under the Digital Millennium Copyright Act ("DMCA").

The case originates from a home video posted on YouTube that features a baby dancing to the Prince tune, "Let's Go Crazy." Universal sent a takedown to YouTube, which complied and sent notice of the removal to the poster, Stephanie Lenz. Lenz responded by requesting that the video be reposted because it constituted a fair use and therefore did not infringe Universal's copyright. The video was later reposted and remains there today.

Lenz filed suit, alleging misrepresentation pursuant to 17 U.S.C. Section 512(f). Among the requirements for filing a takedown notice, the content owner is required to affirm that it has a "good faith belief that use of the material in the manner complained of is not authorized by the copyright owner, its agent, or the law." It is Lenz's contention that Universal did not have such a good faith belief because it did not consider whether her use was authorized by the law as a fair use.

Universal moved to dismiss the case for failure to state a claim. Universal's position is that fair use is not a matter it must consider before issuing a takedown notice because fair use is merely an excused infringement of copyright rather than an authorized use.

This issue touches on one of the odd paradoxes of copyright law in the U.S. Fair use is almost universally spoken of as a "defense" to copyright infringement, rather than a permitted use. However, as pointed out by Bill Patry (in an earlier post that I cannot currently find), this dichotomy is frequently overstated.

The court looks to the language of the statute, wherein Section 107 provides that "[n]otwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work . . . is not an infringement of copyright." Because fair use is not an infringement of copyright, it is not contrary to the law, and if it is not contrary to the law then it necessarily must be permitted. Therefore, one can only conclude that an act which is "not contrary to the law" is one that is "authorized by law." The court continues:

Accordingly, in order for a copyright owner to proceed under the DMCA with “a good faith belief that use of the material in the manner complained of is not authorized by the copyright owner, its agent, or the law,” the owner must evaluate whether the material makes fair use of the copyright. 17 U.S.C. § 512(c)(3)(A)(v). An allegation that a copyright owner acted in bad faith by issuing a takedown notice without proper consideration of the fair use doctrine thus is sufficient to state a misrepresentation claim pursuant to Section 512(f) of the DMCA. Such an interpretation of the DMCA furthers both the purposes of the DMCA itself and copyright law in general. In enacting the DMCA, Congress noted that the “provisions in the bill balance the need for rapid response to potential infringement with the end-users [sic] legitimate interests in not having material removed without recourse.” Sen. Rep. No. 105-190 at 21 (1998).

This is a very interesting holding because it places the fair use analysis on the front-end and seems to entirely eliminate the notion that "fair use" is only a defense to copyright infringement. It seems to make perfect sense and perhaps sheds some clarity on the role fair use will play in our industry in the future.

Of course, at the same time it places a far greater burden on the content owners. Prior to this ruling, content owners were issuing takedown notices for any use that was not licensed by them. Certain fair uses are clear - news-reporting, for instance. However, now the content owners must review all of the personal videos posted and determine whether or not such use is fair. The courts have had a bearish time making this determination on their own and I imagine it will be even more challenging for the content owners to get it right. And, if they fail, they risk being on the hook for a bad faith finding. Then again, it could be that if the content owner can show it made a good faith effort to determine whether the use was fair, but was wrong, then the court could not find that the takedown was issued in bad faith.

It should be remembered that the court is not saying Lenz's use is a fair use, but only that Universal had the burden to evaluate whether or not it was a fair use prior to issuing the notice. Hopefully, the parties do not settle and the case is allowed to proceed on the merits, so that both users and content owners will have a decision to rely on to help all of us figure out what is and is not a fair use in our current media environment.

Irony

Just a quick one here, but Gerd Leonhard, self-proclaimed "media futurist" and shameless self-promoter, has released a new book, Music2.0. I admittedly have not looked too deeply into a lot of Leonhard's positions because so many of them sound foolish and ignorant on their face. From what I gather, his main vision is that recorded music as a commodity is a thing of the past, and he seems to be a huge proponent of using recorded music only as a means to get eyeballs for advertisements.

So I really find it funny that Leonhard, who thinks that copyrighted material should be subject to blanket licenses and distributed rather freely, and should depend on whatever means other than traditional sales to generate revenue, has a book for sale . . . for sale, through eBay. The "buy it now" price? $45!!! Sure, he let's you bid on it, starting at the modest reserve price of $12.99, though that's barely less than a CD at retail.

Why doesn't he just post it on his MySpace page, let people read it there for free, and hope he gets a few ad clicks in the process? If he can beat Billy Bragg over the head for speaking out against Bebo and other social networks' for their use of music, why is he releasing his book in such a traditional manner?

He's obviously a smart guy and I'm sure he has a brilliant answer to this question; I'd just love to know what it is.

OneRepublic Makes Forbes List

Thanks to hypebot for pointing to Forbes' article, The Year's Hottest New Music Stars. As Bruce points out, no one will care about most of these artists in 6 months, though I hope one artists who's not included in that forgettable "most" is #10 on Forbes' list, OneRepublic, which also happens to be a client. ;) It's cool that they are mentioned here because Forbes took so many things into account, including digital track downloads and album sales, ringtones, press mentions, and activity on peer-to-peer networks, though I obviously have some mixed feelings about that last category.

Vinyl + Free Downloads = Way to Go

I read this morning on Digital Music News that Elvis Costello will release his upcoming album, Momofuku, on vinyl and digital download only. DMN points out, apparently with some surprise, that a free download code comes with each album.

To anyone who's bought vinyl over the last couple of years, getting a free download of the album is nothing new and, in my opinion, is a brilliant idea. It provides the best of both worlds - highest-possible quality plus portability. I get the vinyl for my home and the free download for my iPod.

I've always been a proponent of highest quality audio, which is why I still loathe the MP3 format, and all "lossy" formats generally. However, if I'm only listening to it in my car or with earbuds then sometimes I'm willing to accept lesser quality. If it's a particularly special album, one that might highlight the imperfections in digital compression, then I'll rip the album to digital on my own, using my own settings and file formats.

The label's strategy for vinyl + download, however, satisfies the wants and needs of 99.99% of the population. As I've written on several other occasions, vinyl is the wise and relevant answer to the music industry's woes - it gives consumers a physical product with better sound quality than any download, and it even comes with artwork, liner notes, and sometimes even lyrics. Best of all, it is valuable and it cannot be duplicated.

CDs succeeded over vinyl not because of sound quality but because of convenience (portability, durability, ability to easily jump to tracks). Virtually all popular digital formats are successful over CDs because of even greater convenience (even more portable, even more durable, even greater flexibility in song selection). However, most MP3s sound considerably worse than CDs and CDs, while nice, still do not sound as good as vinyl.

Vinyl is not nostalgia. Vinyl is simply a better medium for delivering music. The only thing it lacks is convenience, a problem easily solved with free digital downloads.

Since a download is virtually free to distribute (bandwidth notwithstanding), and since a downloaded track provides all the things that vinyl lacks, it makes complete sense to offer downloads together with vinyl. As I pointed out before, cutting CDs out of the distribution picture is all but inevitable because the fidelity is gotten from the record and the convenience from the download; the CD offers nothing over these two formats and is likely to go the way of the 8-track.

Way to go, Elvis Costello.