Fine tuning practice to changing standards

Due to the current acceleration in the evolution of the music industry, attorneys must change the ways that they represent their musical clients. Historically, music was primarily marketed and distributed by record labels through physical albums. The current trend in the industry involves distribution through various forms of digital media that create an entirely new set of rights issues that directly affect how musicians profit from their intellectual property. Some attorneys believe that if they focus solely on the underlying rights within music, they can sufficiently represent their clients. Lawyers, however, must address rights issues as well as understand both how new media has changed the music industry and how those changes affect their clients. Attorneys who represent musicians secure the artists’ rights in their work and negotiate deals that allow their clients to reap the financial benefits of those rights. Every songwriter and singer wants to exploit their music in a manner that creates income. Income is generated through publishing a song and licensing the use of a master recording. The major sources of music publishing revenue are derived from mechanical licensing (licensing the right to reproduce and distribute audio only compositions), public performances (payment for performances at a place open to the public), synchronization (licensing­sing the right to synchronize a musical composition with audiovisual content such as a television show), and print rights income (licensing the right to print the notes of compositions). Record companies hire singers to create master recordings that the record company then sells and shares the profits of the copies of the recordings they sell with the singer.

Many attorneys currently advise their musical clients on how to capitalize on the exploitation of their music based on traditional music formats. For example, they believe that their clients should strive to attain a recording contract with a major record company that will pay the artist to create master recordings. They also advise their songwriter clients to sign contracts with publishing companies who will track the usage of their compositions, collect license fees and pay the author directly. These attorneys believe that record companies have large budgets and posses invaluable resources that will help new artists gain recognition by developing the style of a new artist, marketing the album to ensure that masses of people become familiar with the artist and are interested in the music enough to buy the album. Since the largest record labels are also affiliated with distributors they can distribute the album to many locations while an individual artist would not be able to infiltrate as many markets. Likewise, publishing companies are equipped to monitor the use of compositions they license and collect and distribute the royalties to the authors.

Although singers and songwriters continue to profit from their relationships with record companies and publishers, the changes to the business of music in the last decade has changed how attorneys advise their clients. In the 90s there were six major record labels but today there are only four (Sony Music Entertainment, EMI, Universal Music Group and Warner Music Group). Conversely, the amount of musicians has not decreased. Record labels are highly selective as to which artists they will extend contracts and how they structure those deals. The major labels and publishers alike are offering smaller advances, only contracting for one to three albums and demanding to represent the artist in all territories worldwide.

In response, an attorney should use the following three strategies to better counsel his or her client on the new music industry trends. First, advise them that signing with a major record label may no longer be the best way to profit from music. An artist can market themselves via a personal website, or a social media website such as Myspace.com or facebook.com or a media website such as Youtube.com. The artist can also sell their music digitally thorough media sites such as iTunes.com or Amazon.com thus regulating how their music is distributed and cutting costs. Second, if the client still wants to contract with a major record label, the attorney must inform the client that record companies are subsidizing the dwindling physical album sales by demanding payment from ancillary earnings. Ancillary earnings include all revenue streams from the artist’s profits related to the sound recording or composition. For example, a record company would profit from record sales (traditional earnings) and ticket sales from tours, T-shirts and other merchandise sold at concerts or otherwise (ancillary earnings). An attorney must understand what ancillary rights the record company is requesting and negotiate what percentage of those earnings, if any, is reasonable to give the record company. Third, and arguably the most onerous task to implement, attorneys must investigate how technology has evolved since U.S. copyright regulations were first enacted and how those changes may affect an artist’s deal. The list of “new” technologies changes fairly rapidly. For instance, cassettes were considered new in the 1980s and compact discs were considered new in the 1990s. Currently, there are new media formats and methods of distributing music. Artists can digitally format their music. Digitally formatted music can be distributed via the internet, on mobile devices and incorporated into video games. An attorney should understand that songs digitally sold on iTunes and Amazon can be sold as single tracks or albums. In practice, an attorney may negotiate a deal with a record label where an artist must produce two albums. It would be in the artist’s interest for the attorney to specify that an album may take the form of a number of singles sold digitally at different times as opposed to 10 to 12 songs sold in one physical format at the same time. Ultimately, a music attorney must understand how the music industry has evolved to properly structure deals that will protect rights and generate income simultaneously. Traditionally, an attorney sufficiently protected her or his client’s rights by advising the client to secure a copyright in their composition of a work or performance of that work and carefully negotiating that the artist receives remuneration for that work from their record label. Today, an attorney must combine her or his knowledge of music proprietary rights and understand what parts of the music industry are emerging as the profit centers of industry, how record labels and publishers are requesting ancillary profits and how musicians can contract with many different entities to recoup the most revenue from their musical property. Moreover, attorneys must understand that the future of musical sharing is boundless and is still to be defined. Thus, every music attorney representing singers and songwriters should be vigilant to follow a strategy that protects their client’s rights as they are exploited in current formats and how they will be exploited in the future.

Jamila Naomi Glean, Esq. is a freelance transactional attorney practicing Intellectual Property law, specializing in drafting and negotiating software and entertainment agreements.