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Guest Post: We are Not Blind to the Harsh Economic Realities of Streaming: An Interview with an Indie Publisher
[Following is an interview with a reader who is an independent publisher about how they view the future for songwriters and independent publishers in the streaming upside down world to the right of the decimal place. The publisher requested to remain anonymous.]
Chris Castle/MTP: I want to ask you about challenges in the streaming reality for an independent publisher. So, readers get the context, about how many titles are in your catalog and what responsibilities do you have as a publisher or administrator?
Publisher: Our companies were originally founded in 1958 in Hollywood at Vine and Selma. We control over 2100 recorded known songs collectively – in four main publishing firms – which also includes 35 administrated composer artist’s own publishing firms as well, worldwide. We handle all licensing, collection, royalty accounting, back royalty recoveries and sync licensing, inhouse. This we do for 46 years now.
MTP: One of the threshold problems that I’ve seen with the way royalties are calculated for streaming is that the per-stream rate shifts from period to period which makes it impossible to tell a songwriter—let’s not forget about them—how much they are getting paid. Do you find that’s an issue for publishers or am I making too much of that information gap?
Publisher: That information gap IS holding us down, we have no way to know HOW it’s calculated as it is and those calculations ABSOLUTELY are not making any sense, there is no explanation, continuity or pattern to deciphering the differences for each part of the service’s tiers – and the amount of units reported to support the varied rates, it follows no logic at all. It changes from period to period and often you’ll see 25,000 units on a Spotify Premium plan that PAYS nothing. WHY? We have no rights to audit and are helpless to question this with hundreds of thousands of excel statements that keep making LESS sense.
The rates are always different and incomprehensible!
PANDORA (PREMIUM/ AND PLUS
RATE UNITS TOTAL
0.1667 44755 0.57303
.24368 19756.5 0.24368
ITUNES MATCH AND FAMILY AND ITUNES MATCH
RATE UNITS TOTAL
0.000027 964 0.02
0.000511 1323 0.67
0.00048 2816 1.35
0.00001 1345 0.01
0.000011 4832 0.05
SPOTIFY FREE!? PREMIUM
0.00020 4765 0!
0.000174 1441 0!
[NOTE: The Music Modernization Act creates an optional audit right for the MLC to audit service once every three years. Remember this is an optional right created in the Mechanical Licensing Collective–not songwriters–to audit services operating under the blanket license (unclear when that three year period starts running, but probably 1/1/21, so the first audit can start after 1/1/24). Unclear how songwriters can require MLC to audit services, or if the MLC’s audit right applies to periods before 1/1/21. MLC is also allowed to use an “alternative verification process” which doesn’t preclude a settlement without an audit. MMA is unclear on how audit recovery is shared.]
MTP: Along that same line, Apple proposed a penny rate of $0.00091 in the last Copyright Royalty Board rate setting (aka Phonorecords III, which is currently being appealed for other reasons by Spotify, Google and Pandora). Do you think that a fixed penny rate would be easier or more difficult to calculate? Apple’s proposal was rejected. Was Apple’s rate more or less than you collect now?
Publisher: Of course, accounting with a penny rate would be easier than these fractional mini pennies. YES, it seems as though GETTING at least a penny rate per stream, would be SOMETHING at least, better than all the units practically accounted AS free goods! The rate rise promised in the MMA is still on the horizon, yet that certain MMA Copyright Act granted yearly increase HAS NOT arrived yet, not until 2021 AND because the still HOSTILE-to-Creators and GREEDY Streaming Companies – are Appealing it now.
MTP: Under the current regime, how difficult is it to calculate songwriter payments for streaming?
Publisher: It’s real hell, you do your best to get it, account it and pay it out but honestly, it’s not making any financial sense. The logistics over the last 6 years on its delivery by excel downloads is absolute insanity. You can do five hours of just taking it off of each excel Song line – 0ver to the Individual Writer statement, and after the hours of cutting it – you find the grand total of the WHOLE STREAMING check with 21,000 rows turns out to be $10.00! The accounting is so time consuming, and with its tiny micro pennies, too often is beyond heartbreaking seeing the endless devaluation of thousands of copies of your famous songs for so little.
MTP: Would you say that on a per-songwriter basis it costs you more to administer songwriter payments than you make? How about on a per-stream basis?
Publisher: THERE is NO question whatsoever EXACTLY how much the cost of Administration has exceeded the EARNED revenue since Napster and file sharing became legalized as Streaming. We have been under siege with OUR COSTS and our Administrative workload heavier and harder – but digital LOSSES are still growing each month.
If you ACTUALLY compared it to the example of the mechanical days of CD Song units sold at 9.1 cents – (pre-streaming) the resultant digital sea change to streaming NOT CD sales – has actually cost us over $126,000 in losses of normal record income in 6 years. My accountant thinks its just crazy. In order to survive the expense of administrating and office overhead and more- we were driven absolutely to the wall at the end of December 2018 and forced to personally leverage (my own private shares of some very famous songs controlled by a big company). Yeah, a ten-year loan against this income that was supposed to be part of my retirement.
The venture capital investors are buying up Catalog like vultures preying on the Indies who have been hurt. It’s a part of the history of Songs and it’s a travesty. But this is what Streaming rates have done to the business of Music Publishing/Administration UNTIL those rates are raised to an equitable and fair market value number. We have had to work DOUBLETIME in doing film/tv sync licenses at a fast pace just to help supplement our streaming income. It’s terrible that we have to do all this while the Corporations use our Creations and profit, while we collectively suffer. I’ve had to spend my own savings to advance to Writers and Clients in hardship during these times because THEY come first.
MTP: Spotify’s failure to match is a key issue in the recent lawsuit by Eminem’s publishers. How has the matching been for you since Title I of the MMA went into effect?
Publisher: IT’S A friggin nightmare, I don’t have the personal time to DO all of this MATCHING and reclaiming our titles THAT THEY failed to even LOOK for. IT’S SO UNFAIR to put this on us the Victims of their infringing our works. YET we have no choice now BUT to GET THEM FOUND, FILED and claimed under The Spotify settlement, and The Rhapsody settlement too, and HELP get those PENNIES back for our Writers and Publisher clients.
MTP: If you could change anything about the current system what would it be?
Publisher: The three major labels who first invested in this scheme and enabled themselves to ELIMINATE the manufacturing costs, and put all the Masters in the vaults – and devalued the price of songs with these terrible streaming rates really represents THE Corporate take over of the Song Business as we knew it. The only thing other than setting us free from this slavery and unfair business competition and constant bleeding loss of royalty value – IS – WE want a fair market streaming rate that will help restore our Writers and Clients to some kind of sustainability in order for them to be able to pay their bills and survive these terrible years of attack on their livelihood and income. Nothing less. Will the MMA law now bring us to that remedy and healing, I surely pray it does?
MTP: Is there anything you’d like to add?
Publisher: I hope this article reaches every creative person who’s suffering privately and silently and helps to show them they are not alone, and we are not blind. That is my desire. Hugs and thank you for making it possible. Even anonymously I give this..this truth, as solace to all of us trying to make sense of it all.
Rut Roh: @LibraryCongress Hoster Cloudflare Discloses “Incorrect” Submissions to Treasury Dept. Office of Foreign Assets Control For Blacklist Payments by Narcotraficante
Cloudflare’s drip drip drip: If we’re caught dealing with criminals it could have a material adverse effect on our business.
As reported by Mengqi Sun in the Wall Street Journal, 8Chan and Library of Congress hosting provider Cloudflare amends IPO documents on September 10 to disclose to the Treasury Department’s Office of Foreign Assets Control violations of U.S. economic and trade sanctions regulations by trading with terrorists and narcotraficante that have been blacklisted by the U.S. but paid money to Cloudflare. AKA blood money.
Isn’t it time for the U.S. Government to at least review any contracts with Cloudflare? Sounds like a job for the Scooby Doo Gang.
Fortunately, #irespectmusic fan Rep. Ted Deutch was already on top of it and had questioned the wisdom of continuing that contract at a recent House Judiciary Committee oversight hearing.
As we all collectively gasp, ask yourself this question: If Cloudflare has this problem–why doesn’t Google have a much bigger version of the same problem?
Here’s the except from the amended Cloudflare IPO document (Form S-1 filed with the Securities and Exchange Commission):
We are subject to governmental trade sanctions laws, and export and import controls, that could impair our ability to compete in international markets and subject us to liability if we are not in full compliance with applicable laws.
Our business activities are subject to various economic and trade sanctions regulations administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and U.S. export control and similar foreign laws and regulations, including the U.S. Department of Commerce’s Export Administration Regulations (EAR). We incorporate encryption technology into certain of our products, and the encryption products and the underlying technology may be exported outside the United States only with the required export authorizations, including by license, a license exception or other appropriate government authorizations, including the filing of classification requests or self-classification reports. Further, the U.S. economic sanctions laws and export control laws include restrictions or prohibitions on the sale or supply of most products and services to U.S. embargoed or sanctioned countries, governments, persons, and entities. Even though we take precautions and have implemented policies and practices to assist in compliance, there is a risk that we may not be in full compliance with these laws.
In 2019, we learned that we may have failed to comply with certain U.S. export-related filing and reporting requirements and may have submitted incorrect information to the U.S. government in connection with certain hardware exports. Upon learning of these potential violations and associated export control requirements, we promptly initiated a voluntary internal review and are taking remedial measures to prevent similar export control anomalies from occurring in the future. In May 2019, we submitted a voluntary self-disclosure to the Bureau of Industry and Security regarding potential violations of EAR and a voluntary self-disclosure to the Census Bureau regarding potential violations of the Foreign Trade Regulations. These voluntary self-disclosures are under review by the respective agencies.
In May 2019, we submitted a voluntary self-disclosure to OFAC related to our non-compliance with certain economic and trade sanctions programs. Specifically, we identified that our products were used by, or for the benefit of, certain individuals and entities included in OFAC’s Specially Designated Nationals and Blocked Persons List (the SDN List), including entities identified in OFAC’s counter-terrorism and counter-narcotics trafficking sanctions programs, or affiliated with governments currently subject to comprehensive U.S. sanctions. A small number of these parties made payments to us in connection with their use of our platform. Although we have implemented, and are working to implement additional controls and screening tools designed to prevent similar activity from occurring in the future, there is no guarantee that we will not inadvertently provide our products to additional individuals, entities, or governments prohibited by U.S. sanctions in the future. The voluntary self-disclosure is under review by OFAC.
Additionally, we currently provide products to certain OFAC-sanctioned regions based upon general licenses issued by OFAC to engage in such activity. We continue to review the OFAC sanctions and our practices to verify compliance.
These efforts related to export controls and OFAC sanctions could result in negative consequences for us, including costs related to government investigations, financial penalties and harm to our reputation. The impact on us related to these matters could be substantial.
In addition, various countries regulate the import of certain technologies and have enacted or could enact laws that could limit our ability to provide our products and operate our network or could limit our customers’ ability to access or use our platform and products in those countries.
If we are found to have violated the U.S. or foreign laws and regulations, we and certain of our employees could be subject to civil or criminal penalties, including the possible loss of export privileges and fines. We may be materially and adversely affected through penalties, reputational harm, loss of access to certain markets, or otherwise. Obtaining the necessary authorizations, including any required license, for a particular transaction may be time-consuming, is not guaranteed, and may result in the delay or loss of sales opportunities. In addition, changes in our platform, products, or screening process, or changes in export, sanctions, and import laws, could delay the introduction and sale of subscriptions to our products in international markets, prevent customers in certain countries from accessing our platform and products or, in some cases, prevent the provision of our platform and products to certain countries, governments, persons, or entities altogether. Any decrease in our ability to sell our products could materially and adversely affect our business, results of operations, and financial condition.
@jameshanley5: ‘It’s a better way’: Deezer unveils User Centric Payment System ambitions #irespectmusic
[Deezer is getting out ahead of the growing backlash against streaming service royalties with a blog post on the company’s site entitled “Deezer wants artists to be paid fairly.” Deezer becomes the first platform to commit to implementing a User Centric system (can we please not start calling it “UCPS”). I’ll be interested to see their proposal in action. Deezer does seem to have grasped the core issue of User Centric, whether it’s based on the ethical pool concept or otherwise: There is no reason for the vast numerical majority of artists to stay in a system that results in fans paying for music they don’t listen to and an ever declining payout for those who are in it. In the cold light of dawn, the science is in and the artists are out.
Streaming “Catalog” is any release older than 18 months–I cannot tell you how insane that is, but that is a topic for another day. When you consider that “catalog” makes up a substantial majority of streams, it compounds the need for user centric royalty distribution instead of the current crisis.
And if songwriters were given a chance to abandon their legacy revenue share structure that they will be stuck with for years to come in favor of a penny rate as Apple proposed in the CRB Phonorecords III, they’d probably do it, too.]
[Deezer] CEO Alexis De Gemini said Deezer’s market-leading position in its home country had inspired the shift.
“We’re now a very important financier of the creation of music in France,” he said. “The streaming industry right now, through its paying system, generates more revenues towards specific genres loved by younger users, to the point that… important genres for people above 35 and 40 have their artists making less money than expected in the previous world, where each CD was sold, and the money was going artist by artist.
“We have started to take that mission to try and change the way the money is reallocated. It doesn’t have any impact on Deezer turnover in France, nor globally. But we believe it has an impact in the way we impact creativity, hence, the music we will bring to our users in the future.
“Just in France, UCPS is going to have the top streaming artists make, maybe, 10% less revenues. And on the other side, those who are making very weak revenues are going to be maybe making 30% more. We believe that this readjustment, which is tiny, can help a lot of artists who today are not getting any dime from the streaming business.”
YouTube’s Animal Abuse Videos
If you’ve been following Rep. Ted Deutch’s “Preventing Animal Cruelty and Torture” bill co-sponsored with Rep. Vern Buchanan, it may come as a surprise that there is actually such a thing as “animal crush” videos. It’s just too sad to really discuss in any detail–other than to commend Reps Deutch and Buchanan for stepping up on this bi-partisan legislation.
Like every other awful thing in the world, a search for “animal crush” on YouTube brings you a slew of horror, all of which is available to children as well as the deranged. And it’s not like YouTube doesn’t know these videos are there–here’s one that is “age-restricted”.
Someone had to make that decision–someone at YouTube.
Sara Amundson, President, Humane Society Legislative Fund, said, “Decades ago the Federal Bureau of Investigation recognized the seriousness of animal cruelty and its link to escalating violence toward humans. Representatives Deutch and Buchanan are tremendous advocates for animal protection, and we are grateful to them for seeking to eradicate malicious cruelty.”
In 2010, Congress passed the Animal Crush Video Prohibition Act, which made the creation, sale and distribution of animal crushing videos illegal. However, these depraved acts of cruelty against animals remain legal. Buchanan was a co-sponsor of the legislation when it passed the House in 2010. The PACT Act builds on the 2010 law by closing this loophole and prohibiting certain cases of animal abuse.
If it is a felony to make animal crush videos, and its illegal to sell and distribute them, then someone please explain to me why YouTube is not complicit and an accessory. Maybe Susan Wojcicki could explain to the Congress how the Communications Decency Act shields YouTube on this one, too.
Pandora’s Answer in Wixen v. Pandora (Lyricfind): Can you ever find what you don’t look for?
Remember Wixen Music Publishing sued Pandora over Lyricfind’s purported license for song lyrics. The case is being heard in Los Angeles before District Judge Stephen V. Wilson. (If that name rings a bell, he was the trial judge in Metro-Goldwyn-Mayer Studios, Inc. v. Grokster.)
Specifically, Wixen makes this allegation in paragraph 5 of the complaint (my emphasis):
Pandora may claim that it had obtained licenses to display the lyrics to the Musical Compositions from one or more sources, including an entity called LyricFind, the self-proclaimed “largest lyric licensing service” in the world, which claims that it “has licensing from over 4,000 music publishers, including all majors.” However, as Pandora knows, and has known, LyricFind did not have the authority to grant licenses to Pandora for the display of any of the lyrics to the Musical Compositions on its service.
Pandora has now answered Wixen’s complaint, which is pretty much the typical “we deny everything those guys said” type approach with one exception that caught my eye. It could be nothing, but it is an odd phrasing to me.
In response to paragraph 5 of Wixen’s complaint, Pandora responds to Wixen’s allegations (also in paragraph 5 of the Answer, my emphasis):
The allegations of Paragraph 5 [of the Complaint] contain speculation and conclusions of law to which no responsive pleading is required. To the extent a response is required, Pandora: (i) lacks information and belief as to the allegation that LyricFind is “the self-proclaimed ‘largest lyric licensing service’ in the world, which claims that it ‘haslicensing from over 4,000 music publishers, including all majors,’” and on that basis denies such allegation, (ii) lacks information and belief as to whether LyricFind had the “authority to grant licenses to Pandora for the display of any of the lyrics to the Musical Compositions on [Pandora’s] service”, and on that basis denies such allegation, and (iii) denies the remainder of the allegations of Paragraph 5.
Maybe this is a nothing issue and maybe I am over-thinking it. God knows this would not be the first time that happened. However, I do find it an odd phrasing.
Wixen’s allegation was that Pandora knew that LyricFind did not have authority to grant Pandora the rights to Wixen-represented songs. How might Wixen think Pandora “knows and has known” LyricFind did not have the rights? A simple explanation might be because Wixen told them so, and probably told them so more than once. In fact, I would not be surprised if Wixen told them so repeatedly while Pandora disregarded Wixen and continued to exploit the song lyrics at issue. (And this is the primary reason these companies get sued in my experience.)
Note that there is no qualifier on this allegation by Wixen such as “on information and belief” which usually means that the speaker is not speaking from first hand knowledge, but rather something they have been told and that they believe at the moment of utterance. This is kind of like saying “our client informs us that….”
Pandora’s response is not “we have a contract with LyricFind in which they represent they have the rights” or better yet, “LyricFind has provided Pandora with the underlying license from Wixen demonstrating that they have the rights.” Remember, this is arguably a core issue in the Wixen case, if not the core issue: Did Pandora reasonably rely on their license with LyricFind that represented that LyricFind had the rights to Wixen’s catalog? Or, did Pandora have actual knowledge that LyricFind did not have the rights to Wixen’s songs?
At this point, it is hard to know the answer to either of these questions definitively. But–it does seem that if LyricFind did have the rights, and assuming LyricFind’s license to Pandora was otherwise solid, isn’t it kind of game over at that point? Wouldn’t you think Pandora would be screaming it from the rooftops?
Instead, Pandora seems to be saying it lacks first hand knowledge of what authority LyricFind had to grant rights to Pandora, and on the basis of their lack of knowledge denies Wixen’s allegation (the apparent antecedent of “that basis” in the Answer). Which I guess means that they haven’t asked LyricFind, and that’s kind of the dog that didn’t bark. Wouldn’t you think they’d make it their business to find out? Perhaps even long ago? But to put a bit finer edge on it, perhaps a bit uncharitably, can you ever find what you don’t look for?
Wixen, of course, can very likely discover through a subpoena or deposition what communications exist between Pandora and LyricFind on this issue, so if they did talk about it, it’s only a matter of time until it comes out, unless they can somehow keep those communications from discovery which I doubt.
Not taking anything away from Wixen Music Publishing, but this case is quite interesting because it could have wider ranging ramifications–if LyricFind did not have the rights to license Wixen repertoire to a client the size of Pandora but did so anyway, how many others are caught up in that mess? That’s a pickle of a whole different water, to mix a metaphor.
Status conference with Judge Wilson on September 9, stay tuned.
The Time to Hesitate is Through: Amazon’s Thievery Requires Decisive Action
Emmanuel Legrand reports in his excellent newsletter that:
Music industry trade group the Recording Industry Association of America(RIAA) has asked the US government for tougher measures against infringers, in particular in the online marketplace. The proposal was part of a submission to the US Department of Commerce, as part of its request for comments on the state of the state of counterfeit and pirated goods.
You can read the RIAA’s submission here. Note that everyone who participates in a recording is screwed by counterfeits including artists, producers, songwriters, musicians and vocalists.
Counterfeiting and pirating of physical music products facilitated by online platforms continues to cause harm to our members. In 2019, we conducted two studies to identify the amount of counterfeit offerings of music CDs on popular online platforms, including a study on the prevalence of high quality counterfeit box sets on certain platforms and a study on the prevalence of high quality counterfeits for a broad sample of current and evergreen album titles released by the major U.S. record labels. As further discussed below, each of these studies showed significant counterfeit activity on the noted online platforms, including findings that:
- A recent sample purchase program found 100% of new high quality box sets offered for sale through eBay or AliExpress in the U.S. were counterfeit; and
- A recent sample purchase program found 11% of new CDs offered for sale on Amazon were counterfeit, and 16% of new CDs sold on eBay were counterfeit.For the study on box sets of music, we identified and made test buys on eBay and AliExpress’s U.S. platforms of 10 well known artist box set titles released by major U.S record labels. Each purchase was made after a search for “brand new” box sets of the titles selected, and a purchase of the 4 lowest priced box sets on each platform, without regard to seller location. We then examined the products that were shipped to us. On both eBay and AliExpress, 100% of the test buys of the box sets were counterfeit. This is of particular concern as box sets are premium physical music products designed for the superfan that often contain the most significant sound recordings in an artist’s repertoire.
The conclusion is:
Trafficking of counterfeit and pirated goods, whether in the form of physical CDs, box sets or artist merchandise, as well as online infringement of music and music videos in digital form, continues to significantly impact the music industry. We believe more can be done, including implementation of voluntary measures as well as governmental action, to deter and reduce such activity, and create a healthier online ecosystem where all can thrive.
Amazon apparently was the only one of the bootleggers who responded, and did so with the usual non answer and deflection:
Our customers expect that when they make a purchase through Amazon’s store—either directly from Amazon or from one of its millions of third-party sellers—they will receive authentic products. Amazon strictly prohibits the sale of counterfeit products and we invest heavily in both funds and company energy to ensure our policy is followed. We work with and empower brands through programs like Brand Registry, Transparency, and Project Zero to ensure only authentic products are sold in our stores. We investigate any claim of counterfeit thoroughly,including removing the item, permanently removing the bad actor, pursuing legal action or working with law enforcement as appropriate.
Sound familiar? Kind of like how YouTube responds to the community flagging? Investigating after the illegal goods are being sold is not the point. Getting caught is not the point. The point is stopping the illegal goods from getting onto the platform in the first place.
The reason this drivel from Amazon sounds like tired crap is because it is tired crap. And crystalizes that they think the problem is getting caught and that what they really want is to keep getting away with it.
And this is where I disagree a bit with RIAA–the time for voluntary measures has passed. Someone needs to go to jail–someone high up who almost invariably knew what was going on (for example, grand jury documents told the U.S. Attorney for Rhode Island “Larry Page knew what was going on“).
Then we can talk again about voluntary measures to keep their butts out of the slammer–not their pathetic little “Project Zero.” I got your project zero right here.
Remember the great continuum that has driven homo sapiens for millennia:
FEAR <———> GREED
We need Jeff Bezos closer to the FEAR end than the GREED end.
Remember that data is the new exposure, streaming is the new physical and that both these tropes have something in common–artists are being driven to substitute away from low to no margin streaming and away from sustainable margins on physical like CDs with no revenue replacement. (Unless you’re in the 5% of tracks that account for 90% of streaming revenue in the hyper efficient market share distribution of streaming revenue.)
Against that background, we find that the online platforms like eBay, Alibaba and Amazon are going even further toward evil and doing little or nothing in their rush to drive physical retail out of business to stop the sale of counterfeit CDs delivered to your door by Amazon Prime or Ali-express. And most honest business folk would probably think they are pretty shameless about it and ask how could they get away with sucking up the revenue from counterfeits into their maelstrom of cash?
But before you go down that rabbit hole, you need to understand an important fact about the mind set of Silicon Valley–and it’s the same mindset that gave us both Google and Theranos. It’s not that they made a choice to do evil. It’s that they don’t understand there is a choice about doing evil. It’s how these little soulless people sit in front of Congress and lie and feel good about themselves. The Internet is their Ring of Gyges and they are unconcerned about justice because their thing is getting away with it, not getting caught and getting richer than Croesus.
Somewhere in their development they lacked the normative guide–or “sherpa” in their case–that should have developed a self-governing code to map their behavior. Parents, pastors, priests, rabbis, teachers, all failed to make a dent. These are the kind of people who don’t stop when the European Commission fines them billions. They don’t care how they treat their employees as long as they’re the richest man in the world. They don’t care about ripping off artists. Their reaction to getting caught is not fixing the problem, their reaction is to buy the shillery and try to make us look greedy for expecting them to behave.
If a $5 billion fine didn’t work, how about $50 billion? Let’s try that. But even in the Silicon Valley dual class stock system, the corporate royalty might start thinking about offering up an executive to save the company rather than pay truly appropriate fines.
This is why the solution probably isn’t voluntary. It probably has a lot more zeros on it than any normal person would think reasonable, or is a court order for very specific behavior, or simply prison.
Artist Glossary of Industry Terms: Re-Recording Restrictions
If you’ve been following the Taylor Swift situation with her former label, you’ve probably seen the unsurprising news that Taylor plans to re-record some or all of her prior catalog. This raises the issue of the customary “re-recording restriction” and “re-producing restriction” found in artist and producer agreements respectively.
Re-recording restrictions are designed to give the label that invested in the recordings a reasonable time period to exploit their exclusive rights. (This may also give Label 1 a chance to benefit if an artist they dropped enjoys new success on Label 2 sparking commercial interest in that artist’s back catalog.)
Here’s what these look like. First a more negotiated one:
After the Term, Artist shall not, prior to the later of the following dates, perform for any person, firm, or corporation other than us, for the purpose of making Phonograph Records or Master Recordings, any Song which was recorded hereunder or under any other agreement between you or your affiliates and us or our affiliates for which we or our affiliates paid an advance against royalties hereunder or under such other agreement (whether or not in respect to Recording Costs) or which is released by us for commercial sale to the general public no later than six (6) months after the expiration of the Term; provided that if any such Song was recorded in a Master hereunder and we are otherwise entitled to release such Master in Phonograph Record form, prior to performing such Song for any third party for the purpose of making Phonograph Records, you shall notify us of our failure to have so released such Master and we shall have six (6) months after the date of such notice to so release such Master, upon which release the Song embodied in that Master shall be subject to the provisions of this subparagraph, and; further provided that if we fail to so release such Master within that six (6) month period, you shall have the right to perform that Song for any such third party irrespective of the provisions of this subparagraph: (i) the date five (5) years subsequent to the last date on which a Master Recording embodying that Song was delivered to us hereunder (but a Master or arrangement thereof included on a “Greatest Hits” or “Best of” LP shall be deemed to have been last recorded when such Master was originally recorded; or (ii) the date two (2) years subsequent to the date on which the Term hereof ended.
And then a more plain vanilla one that is not negotiated (“you” refers to the artist’s loan out personal services corporation):
You warrant and represent that you have the sole and exclusive right to the services of Artist as required herein. You warrant and represent that Artist will not perform for any Person other than Label (and neither you nor Artist will license or consent to or permit the use by any Person other than Label of Artist’s name or likeness) for or in connection with the recording or exploitation of any Record embodying a Composition recorded or delivered by Artist under this agreement prior to the later of (i) the date five (5) years after the date of Delivery hereunder to Label of the last Master embodying that Composition, or (ii) the date two (2) years after the expiration or termination of the term of this agreement or any subsequent agreement between Label and you or Artist or any other Person furnishing Artist’s recording services. Your agreement with the individual producer of each Master hereunder will restrict said producer from producing a Composition produced by such individual hereunder on another Master for any Person other than Label for at least two (2) years from the date of Delivery to Label of such Master.
Note that this language includes a flow down requirement for the producer agreement–one that is typically negotiated by the artist engaging the producer (not the label). So if the artist plans to use their original producer, you want to be sure that the producer’s re-recording restriction is not more restrictive than the artist’s.
There is a long history (particularly in Nashville) of artists re-recording their hits and it is a standard–albeit not that common–practice that could easily be anticipated.
Sometimes this happens significantly after the artist is dropped. Quick story–in one situation, we were releasing a “best of” compilation with the cooperation and participation of an artist who had been off the label for a good ten years. It turned out that they had one track we didn’t own that was a big hit. It would have been nice for the fans to include it on our record. I asked the releasing label for a license and offered very reasonable terms, including a generous advance that was likely well more than the label would have earned in royalties even under the very fair royalty rate we offered. The band was ready to go back into the studio and reunite for this recording.
I don’t think the other label believed this when I told them, but we had to impose a deadline on our offer as otherwise we weren’t going to be able to pull all of it off on schedule. The deadline passed, our offer expired, so the band went in the studio and recorded a great version of the original track–and they did it for costs only because that’s what the artist wanted to do.
The punchline is that you need to listen to your artist, even if they are not on the label. I always felt that if an artist was someone we thought highly enough of that we got into business with them in the first place, we would always treat them (and their heirs) with that same level of respect, on or off the label, recouped or unrecouped. For example, I would almost always seek artist consent for either current roster or back catalog master licenses even if we were not contractually obligated to do so, a practice for which I caught hell from PolyGram. Too bad.
Another answer to the re-recording restriction is that the artist values the label relationship enough that they prefer to come back to the home label and ask to have their back catalog released or licensed back. It doesn’t always work out that way, but that’s better than having them re-record for someone else.
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