“A Big Win For Artists” or “Another Hit For The Recording Industry”

By Ryan Fox & Bartley Morrisroe
Fordham Intellectual Property, Media & Entertainment Law Journal
IPLJ Article Permalink

Thirty-three years later, a look back at 1978 shows the pop-music industry in fine form. Something for everyone? Check. Nineteen seventy-eight saw the debut of Prince, and The Cars’ first album.  The Rolling Stones released Some Girls. There were albums by both Parliament and Funkadelic. Willie Nelson made Stardust. Most of all, the year now impresses as one of great style: Blondie, The Talking Heads. In different circles, Van Halen.

The Rolling Stones in 1978.

In comparison, the same year’s literary landscape looks rather bleak. This is admittedly not the place for a comprehensive survey, but it seems there was a gap between generations: Graham Greene and John Cheever releasing (respectively) crepuscular and compiled work, and writers like Ian McEwan and Don DeLillo not yet at the peak of their powers. The bright spots appear as Alice Munro’s Beggar Maid and The World According to Garp, by John Irving.

All these 1978 works have this in common: in 2013, the artists may terminate the transfer of any rights they have granted in these works to their record companies or publishers. Section 203 of the 1976 Copyright Act permits the termination of transfers 35 years after the original transfer date. The statute grants this termination right “notwithstanding any agreement to the contrary”; it persists even in the face of a contract granting rights in perpetuity. And because notice must be served at least two years before the termination date, these terminations are beginning now.

What has not been accounted for in the statute itself is the difference between the recording and publishing industries. As the survey of 1978 works beginning this post might suggest, the termination rate for musical works is much higher than for other types of creation. At the 35-year mark, it seems that, compared to literature, a higher percentage of music retains market value. The same statute governs both industries, but the termination right strikes a much harder blow to the already-reeling music industry. The time may be ripe to reevaluate termination provisions in light of the market changes of the last four decades.

The Day the Music Labels Died?

Starting with Napster, not much has gone right for record labels in the last twelve years. In 2013, however, the labels’ situation could go from bad to worse – the first group of musicians and songwriters can begin reclaiming control of their work from the labels under this previously little-noticed provision of the copyright law.

A recent New York Times article suggests that the recording industry may be preparing to challenge these terminations on the theory that the recordings were works made for hire. A far-fetched claim?  Well, it has already received some judicial support.

U.S. District Judge Denise Cote of the Southern District of New York found for UMG Recordings last September when Bob Marley’s family sued the label for the copyrights to five albums recorded between 1973 and 1977. The court found Marley recorded the albums as “works for hire.” The family argued unsuccessfully that the albums were not works for hire because “they were not traditional ‘commissioned’ works and because Bob Marley ‘would have continued to record his music regardless of whether [the label] had agreed to a recording contract.’ ” Since all of the albums were released prior to 1978, however, the case was decided under the Copyright Act of 1909, which allowed for termination rights only in specific circumstances after 56 years. The ruling is being appealed.

The bellwether case for the current copyright law could be that of Victor Willis, the original lead singer of the Village People, who filed papers this year to regain control of his share of “Y.M.C.A.” in 2013. The two companies Willis is suing, Scorpio Music and Can’t Stop Productions, argue Willis’s claim should fail because he was a writer for hire. They are also trying to distinguish Willis as an employee – a company creation, like The Monkees.

There is big money at stake. Linda Smythe, a spokeswoman for Willis, told the New York Times that “Y.M.C.A.” earns “upwards of $1 million a year.” The Times noted record labels’ sales had dropped to about $6.3 billion from $14.6 billion over the decade ending in 2009, leaving the labels highly dependent on sales of older recordings.

Who will own the rights to all this music?

Artists’ groups such as the Recording Artists’ Coalition, which was cofounded by Don Henley and Sheryl Crow, have now also become involved. While there apparently has been some talk of an industry-wide settlement, an anonymous recording industry executive told the Times there is no consensus among the big four labels about how to proceed.

What’s Behind the Act

The legislative history of the 1976 Act suggests the termination right was crafted to balance the inherently unequal bargaining positions of publisher and author, and to account for the fact that the ultimate value of a creative work is unfathomable at the time of contract. The evergreen status of Catcher in the Rye, for instance, could have been predicted by neither author nor publisher.

This seems like a provision protecting artists. But in a recent blog post Professors Kal Raustiala and Chris Sprigman prick a hole in that bubble of thinking. The termination right, they argue, amounts to a regressive tax. Since the termination right will be taken into account by record companies and publishers every time they negotiate a contract, “the most likely effect is to force deal prices down across the board.” Only the most successful artists have works that remain in the stream of commerce after 35 years; the poor stay poor, as the poet said, and the rich get rich.

One thing is for sure – there will only be more questions as we near 2013. For one, do producers, session musicians, and studio engineers qualify for a share of the rights? And what of British groups with American recordings? All of these battles are waiting in the wings.