Copyright Recorded Music

February 20, 2010 Peter Adediran

Copyright Recorded Music

The future of copyright recorded music

Introduction

Executive Summary

This report discusses the future of copyright recorded music law in relation to the recorded music industry. The way we access, produce, distribute, store and consume recorded music has changed dramatically with the introduction of the internet. This change has meant that the current copyright laws have to be brought in line with the consumer`s change in perception of choice and access to recorded music. Adapting copyright law to meet the perception of choice and access to recorded music is proving controversial.To understand the controversy, it is important to bear in mind, the public policy issue underpinning copyright law. The public policy issue referred to is the need to protect copyright owners in the interest of encouraging innovation. High quality recorded music benefits the public and enriches society and culture. If musicians are to be incentivised to create exciting, new high quality songs then they must be allowed to profit from their work.Conventional wisdom states that musicians can only profit from their work by being given monopoly rights to control the use, distribution and consumption of their songs. In other words, copyright law is in the public interest.The global recorded music industry, distribution and consumption paradigm has shifted in the last 15 years because of the Internet. This report will discuss which is in the greater public interest. To give consumers more choice through concentrating on high quality digital sales online or to control the supply and sale of recorded music online.

The traditional recorded music industry model is that the singer, songwriter or DJ who are together referred to in this report as artists (and for copyright purposes authors) receive an advance. Theoretically there are mechanical royalty payments from the publisher or record company. Mechanical royalties are royalties paid for the license to reproduce the songs for public distribution typically through records and CDs but also on DVDs and so on. In reality mechanical royalty payments are usually covered by the advance (Baskerville, 2006).The CDs, DVDs and so on are distributed to recorded music retail outlets such as HMV. The customer buys the artist’s CD at the retail price. The recorded music retailer keeps a percentage of the CDs retail price and the rest is paid to the record company or publisher. The publisher or record company then pays the artist royalties on the sales volumes.In the traditional model the artist has to be well known to be able to record and publish recorded music. This is because of the risk to the record company or publisher of incurring the cost of marketing; producing and distributing the artists work without knowing whether the songs will sell.First a publisher or record company is found who agrees to work with the recorded music. Then the copyright department determines that the ownership of the recorded music is clear and a contract is negotiated with the artist (author). Currently, the UK and US have a different approach to the necessity to register copyright of recorded music. In the US the publisher on behalf of the author has to register a claim to copyright with the Copyright Office and place copies on file with the Library of Congress (Baskerville, 2006). In the UK, copyright registration is not necessary however it is recommended. Registration is with the UK Copyright Service. With the Internet the UK position regarding copyright registration may become compulsory. This is because with digital downloads the possibility of infringement has become easier and prolific.

Music Distribution and Sales

Recorded music has changed in the way it is distributed and sold. This fact is compared with how copyright laws will have to change to meet the new challenges. The primary stakeholders in recorded music distribution and sales are the record and publishing companies and high street music retailers. The UK statutory mechanical royalty is 6.5% of the retail price or 8.5% of the published wholesale price (Adediran, 2002). Traditionally even well known artists needed record and publishing companies to be able to market and distribute their songs effectively. Digital downloads have turned this model upside down. Artists like: Crimea; Prince; Charlatans, Radiohead; and Madonna have realised that they make more money from live performances than from any royalties, mechanical or record sales.According to the National Association of Record Industry Professionals (NARIP) and iTunes Artist-Producer Royalty Calculation sheet:to download a single song from I-Tunes cost 99p.- 35p goes to Apple;

– 65p x 135% (wholesale markup x 12% (net artist net rate) = 10p goes to the artist (NARIP).

The Album from the store costs £10 or more. So at 8.5% for mechanical royalties alone that is just £0.85p for the artist and a much larger percentage of revenue for the record company. For well-known artists it is not problematic to offer their recorded music free on the web. They can easily make up their revenues on live performances, endorsements and merchandising. For less well known artists it would be more problematic to offer their recorded music free on the web. In addition the amount of mechanical royalties made from web sales for downloads is derisory (see above £0.10p mechanical royalties).

However mechanical royalties from CD and record sales are not much better for lesser well-known artists. In fact less well-known artists may be better off simply getting their work known through free downloads, so that they can make much greater revenues from live gigs and merchandising their brand.

It is also important to note that about 95% of the recorded music downloaded from the Internet is done so illegally (IFPI, 2009). In other words, artists are not getting revenues from digital downloads anyway. For the record companies current business model digital downloads is a commercial disaster. This is because with digital downloads and file sharing they get just a fraction of the retail price for record and CD sales. However the genie is out of the bottle and the problem will only get worse.

The record companies are on the wrong side of change. Rather than adapting their business models to what consumers want, they intend to address their falling revenues by strengthening copyright law. However public interest is the policy that underpins copyright law. Will strengthening copyright law be in the public interest?

In conducting this research legal text books, essential texts will be used as well as research online and offline. This report will combine text books with online information.

Overview

What is copyright and how does it affect music?

In the important legal treatise written by Bently and Sherman (2009) UK ‘Copyright’ is described in “British legal Parlance” as “the term used to describe the area of intellectual property law that regulates the creation and use that is made of a range of cultural goods including music “. Another definition is in the UK Copyright Designs and Patents Act 1988 (the 1988 Act).

The UK Copyright Designs and Patents Act is the primary source of the law of copyright in the UK. Under section 1 copyright is defined as follows:
“(1) Copyright is a property right which subsists in accordance with this Part in the following descriptions of work—
(a)original …musical or artistic,
(b)sound recordings….” (The 1988 Act)
These are complicated definitions of copyright. The important things to consider are that copyright is a property right, to stop others from copying, using, distributing or selling your original work without your permission. Copyright does not protect ideas but the expression of ideas. The owner of copyright to a piece of recorded music is generally the author of the work unless the music has been commissioned for somebody else (Adediran, 2002).

Global Copyright Law

The WIPO (World intellectual property organization) Copyright Treaty (WCT). The WCT is a special agreement under the Berne Convention. It deals with many different matters including the rights of authors:
– The right of distribution;
– The right of rental;
– The right of communication to the public (WIPO).

U.S Copyright

U.S law is very important in the recorded music business. The USA is still the largest single recorded music market. Under United States copyright law, as soon as you make a tangible copy of something, you have a copyright (Passman, 2008).

Global sales revenue for recorded music was $US 17.03 billion in 2009. The USA’s revenue was $4.63 billion by itself which is approximately 25% of world total revenue from recorded music sales (Paine, 2010).

The Recording Industry Association of America (RIAA)

The RIAA is the trade organization that supports and promotes the creative and financial vitality of the major music companies. Its members are the music labels that comprise the most vibrant record industry in the world. According to the RIAA their members represent 85% of the legitimately distributed recorded music in the US. That means that the RIAA represent the record companies and publishers in the largest market of a global multibillion dollar industry. The RIAA is the driving force that spearheads the resistance of illegal digital downloads and file to file sharing globally using copyright law (RIAA). According to their website any downloading of songs or peer to peer file sharing without permission is stealing.

UK Copyright Law

The earliest important UK law for this article is the Copyright Act 1956.

Copyright Law has always developed over the years to take account of new technologies. The introduction of the cassette tapes in 1962 saw an important change in the way music was stored, distributed and accessed. From the seventies until the nineties, tapes became one of the most popular formats on which to buy music. They were as popular as I-pods these days. They were at the cutting edge of personal music collections. The “mix tape” was a romantic rite of passage in the 1980s. However there was also a perceived sinister side to the new technology.

The new technology offered portability but also an increase in music piracy. In early 1980’s the British Phonographic Institute launched an anti-copyright infringement campaign under the slogan “Home Taping Is Killing Music” (Geoghegan, 2007).

The popularity and law breaking using cassette tapes caused panic among copyright owners. Copyright owners were worried about increased music piracy. In 1977 the Whitford Committee reviewed the 1956 Act and found that it did not address the perceived threat from cassette tapes (Bently and Sherman 2009).

By 1982 Sony with Philips launched the Compact Disc (CD). It took over from cassette tapes very quickly. The CD offered many benefits over cassettes. One of the most notable benefits was its usable shelf life — far longer than tape. By 1986, sales of CD players would eclipse record players, and two years later, CD sales outpaced records (Ed Oswald, 2007).

Copyright law was changed yet again in 1988. The 1988 Act is the primary source of UK copyright law. It has been amended a number of times following changes in technology and with the appearance of Internet.

The Digital Economy Act 2010, which came into force on the 08 June 2010 is the most recent law in the UK relating to copyright and recorded music (Adediran, 2010).

Current Issues

There are only two issues of major importance in recorded music today and that is so called “online music piracy” and the issue of royalty payments for digital downloads and streaming. The issue of royalty payments are outside the scope of this article.

There are two schools of thought on how to deal with online music piracy. One of them is, instead of trying to stop music downloads without permission, the music industry should embrace it.

The record companies should allow all their artists songs to be categorised together and accessed through websites. Ignoring unauthorised digital downloads and peer to peer file sharing the record labels should, concentrate on the quality of the music.

The reasoning is that consumers would prefer to pay for good quality downloads for micropayments with an a la carte choice.

The record labels are not in favour of the above school of thought. Many attempts to create legal digital download websites and peer to peer file sharing have failed because of the record companies withdrawing their interest. Examples of legal music websites that have failed to get record label backing include Napster with BMG and CDNow, Virgin Media with PlaysLouder MSP. However there are always new ventures to replace these.

One of the newest & most popular legal web streaming service is Spotify. As recently as February of this year Spotify’s launch in the United States had to be delayed as Universal and other big record companies withdrew from the venture (Carr, 2010).

The other school of thought is that of the major labels. They have pinned their hopes on changing behaviour rather than creating services that generate new revenue streams. Simply put, the record companies want to use copyright laws to change consumer behaviour (Patry, 2009).

Summary

This report has dealt with, in some detail, the issue of copyright laws relating to recorded music. In particular it has looked at how copyright law is being used to stop so called music piracy.

It is not clear whether copyright infringement will ever be prevented using copyright laws. After all before the Internet there was copyright infringement and no doubt there will be such infringement in the future. The attempts by the record companies to stop infringement will fail. However they may succeed in slowing down the process.

The really interesting question is whether the record companies are acting in self interest or in the public interest. This is a more difficult question to answer since what is the public is not so straight forward.

The public would include the singer-songwriter and millions of employees who work to bring recorded music to consumers. The public would also include those consumers who are happy to pay for songs on the Internet and would not download them without permission. The public would also include those consumers that would like the choice.

The question should be, will the quality and talent in music and culture as a whole suffer from music being accessed without permission on the Internet? There is a possibility that it might not. As stated earlier in this report cassette tapes were resisted by the record companies for the same reasons that digital downloads are resisted now.

The fear of the record companies was that new artists will not be able to earn a living from their work and that record companies will lose money if they changed their business models. Record companies did have to change their business models but artists just made more money from new ingenious ways. Their fears proved to be unfounded.

However there are significant differences between the Internet and the cassette tape. With digital and the Internet, millions of copies of recorded music can be distributed instantly globally. Whether these differences mean that downloading music without permission will have a negative effect on the future quality of music and culture is hard to forecast without any empirical evidence

References

Books:

Baskerville, D., 2006. Music business handbook and career guide. 8th ed. London: Sage Publications.
Adediran, P., 2002. A practical guide to business, law and the internet. London: Kogan Page.
Bently, L. And Sherman, B., 2009. Intellectual property law. 3rd ed. New York: Oxford University Press.
Passman, D. S., 2008. All you need to know about the music business. 6th ed. London: Penguin Group.
Patry, W., 2009. Moral panics and the copyright wars. New York: Oxford University Press.

Journals and articles:

Paine, A., 2010. Global Recorded Music Market Down 7.2%, Billboard magazine, [online] Available at: Accessed 26 November 2010.
Geoghegan, T., 2007. 10 uses for audio cassettes, BBC, [online] Available at: Accessed 1 December 2010.
Oswald, E., 2007. The compact disc celebrates 25 years, Betanews, [online] Available at: Accessed 2 December 2010.
Adediran, P., 2010. Digital Economy Act. [online] Available at: Accessed 2 December 2010.
IFPI, 2009. Digital music report [pdf] Available at: Accessed 1 December 2010.
NARIP. iTunes Artist-Producer Royalty Calculation sheet [pdf] Available at Accessed 1 December 2010.
Carr, A., 2010. Big Record Labels Bailing on Spotify for U.S. Launch? No, Tweets

Spotify, Fast company [online] Available at: Accessed 5 December 2010.

Websites:

Copyright, Designs and Patents Act 1988., The 1988 Act. [online] Available at: Accessed 30 November 2010.
WIPO. Summary of the WIPO Copyright Treaty (WCT) (1996). [online] Available at: Accessed 2 December 2010.
RIAA. Who we are. [online] Available at: Accessed 26 November 2010.

Bibliography

Written By Dovile Subaciute 2010 – The writer holds a first degree in media music management.