palestra internacional: estudo da remuneração do streaming com dra. susan abramovith (advogada...

A Fair Deal for Artists:Non-Attributable Income and the

Streaming Royalty Controversy

I Fórum Internacional - Direito Do Entretenimento

October 1, 2015Susan H. Abramovitch, Partner

Gowling Lafleur Henderson LLP

Phone: (416) 814-5673

[email protected]

Overview

• Artist Agreements – Rights and Royalties

• Early 1990s: Traditional Record Sales

• Mid-1990s: “New Media”

• 2005: Digital Downloads

• 2015: Digital Streaming

• Non-Attributable Income

• Worldwide Independent Network (WIN)

2

Changes in Music Consumption

• Artist agreements have

traditionally focused on the

sales of albums

• How do digital downloads

and streaming fit?

• Many provisions could apply

• It will come down to the

language of each particular

contract

3


4

Traditional

Record Sales

“New Media”

Digital

Downloads

Digital

StreamingEarly 1990s

Mid-1990s

2005

2015


5

Traditional

Record Sales

“New Media”

Digital

Downloads

Digital

StreamingEarly 1990s 2005

2015Mid-1990s

Early 1990s: Traditional Record Sales - Rights

“All Master recordings... and all Records made

therefrom... shall... be exclusively and perpetually

[the Label’s] property...”

6

Excerpt from 1990 artist recording agreement:


Record

“Means any reproduction of a Master recording in any form

now known or later developed in which sounds, with or

without visual images, are fixed by any method now

known or later developed...”

7



“[The Label has] the sole exclusive and unlimited right

throughout the universe to:

...manufacture Records, by any methods now or

hereafter known...

...to repackage, sell, transfer, deal in, exploit or otherwise

dispose of such Master recordings and Record... in any

and all media and manner...”

“[The Label]... may license Master recordings to third parties

on a flat fee basis”

8


Early 1990s: Traditional Record Sales - Royalties

“… with respect to Records sold…

[the Label] shall accrue hereunder a royalty

at the rate… of thirteen percent (13%) in

respect of the First LP… computed on a

royalty base of the “suggested retail list price”

or “list category” (“SRLP”) of Records (less

Container deductions and any taxes) in the

country of sale…”

9



Audiophile Record

“means a Record embodying sound without visual images,

which is made for digital playback and includes,

without limitation, compact discs.”

10



11

“With respect to sales hereunder of Audiophile Records, the

royalty shall be the same dollars-and-cents royalty

which accrues hereunder with respect to vinyl disc

Records…



12

Traditional

Record Sales

“New Media”

Digital

Downloads

Digital


Mid-1990s

2005

2015

Mid-1990s: New Media - Rights

“[The Label] and any Person authorized by [the label] shall have

the unlimited and exclusive rights to manufacture

Records by any method(s) now or hereafter

known...”

13


Mid-1990s: New Media - Royalties

“[The Label] agrees to pay you in

connection with the Net Sale of

Records consisting entirely of Masters

hereunder and sold by [the Label] or its

licensees, a royalty computed at the

applicable percentage…”

14



“With respect to new Record configurations (i.e.,

Record configurations other than vinyl disc, analog-tape

cassette, or compact disc, e.g., digital compact disc (‘DCC’),

digital tape and audiophile Records), the royalty rate shall

be eighty percent (80%) of the otherwise applicable

rate”

15


“The royalty shall be... fifty percent (50%) of [the

Label’s] net receipts with respect to... licenses of

Masters recorded hereunder for distribution other than through

Normal Retail Channels”

16



Net receipts

...shall mean royalties or flat payments received by [the Label]...

which are solely attributable to the Masters

hereunder”

17



Record Sale vs License?

18

Are digital downloads a record sale or a license?

Eminem (2010)1

• Contract contained separate royalty

provision for licensing Masters to

3rd parties

• Agreement with iTunes to sell

permanent downloads was a license

to use a Master

• This resulted in a 50% royalty instead

of 12%

[1] FBT Productions v Aftermath Music, 621 F (3d) 958 (9th Cir 2010).


19

Traditional

Record Sales

“New Media”

Digital

Downloads

Digital

StreamingEarly 1990s 2005

2015Mid-1990s

2005: Digital Downloads - Rights

“[The Label] and any person authorized by [the Label] has the

unlimited and exclusive rights to manufacture Records by any

and all methods now or hereafter known embodying

any portion or all of the performances embodied on the Licensed

Masters...”

20



Record

“all forms of reproduction, now or hereafter known,

manufactured and/or distributed... including but not limited

to sound-alone Recordings, audiovisual Recordings,

interactive media... and Electronic Transmissions”

21



Electronic Transmission

“Any transmission to the consumer, whether sound alone, sound

coupled with an image, or sound coupled with data, in any form,

analog or digital, now known or later developed (including but

not limited to, Limited Downloads, Permanent

Downloads, Streams, “cybercasts,” “webcasts,” “streaming

audio,” “streaming audio/video,” “digital downloads,”… and any

other forms of transmission no known or hereafter

devised)…”

22



Electronic Transmission

“…whether or not such transmission is made on-

demand or near on-demand, whether or not a direct or

indirect charge is made to receive the transmission and whether

or not such transmission results in a specifically identifiable

reproduction by or for any transmission recipient…”

23


2005: Digital Downloads - Royalties

“...[The Label] agrees to pay you in connection with the

Net Sale of Records consisting entirely of Licensed Masters

and sold by [the Label] or its licensees, a royalty computed at the

applicable percentage... of the applicable Royalty Base

Price...”

24



“All references in this agreement to the “sale” of Records...

shall include the license... for third parties to sell

Permanent Downloads, Limited Downloads, Streams, or other

Electronic Transmissions hereunder to users (directly or

indirectly)”

25



26


Royalty Base Price

“The Suggested Retail List Price less all excise, sales and

similar taxes and less the applicable Container Charge.”


27


If [the Label] sells the applicable Record other than on a

wholesale basis (e.g., [The Label] licenses the right to

stream or download Masters hereunder via Electronic

Transmissions): the SRLP will be equal to one hundred and

thirty percent (130%) of that portion of [the Label’s] Net Receipts

which is directly and identifiably attributable to the

sale of such Record.


28

Traditional

Record Sales

“New Media”

Digital


2015Digital

Downloads

2005

Mid-1990s

2015: Digital Streaming - Rights

“[The Label] and its licensees each has... the exclusive rights to:

(i) reproduce, adapt, transmit, manufacture and distribute

Records embodying the Basic Works in any medium

now or hereafter known or developed (including,

without limitation, in connection with products, services or

media, such as Storage/Playback Devices;

personal computers; ...and the Internet, wireless

communication technologies and other digital

media platforms...”

29



Basic Works

“All such Masters, Videos, [Label] Artist Websites, [Label] Artist

Website Material, Artist Domain Names, Enhanced Material,

Mobile Material, Artist Applications, Artwork, other works and

individual elements thereof”

30



Records

All forms of reproduction, transmission or communication, now or

hereafter known... including but not limited to sound-alone

Recordings, audiovisual Recordings, interactive media (e.g.,

video games), and Permanent Downloads, Limited

Downloads, Streams, Recording Tones,

Subscription Records and other Electronic

Transmissions.”

31


2015: Digital Streaming - Royalties

“... on Net Sales of Records and Non-Record Basic

Works hereunder sold by [the Label]... [The Label] will

pay you a royalty equal to the royalty rate... Multiplied

by the applicable Wholesale Price for such a work...”

32


2015: Digital Streaming - Royalties

Wholesale Price

If [the Label] sells the Record concerned:(1) On a wholesale basis... the Wholesale Price will be equal to the [Label] Revenues on sales of

that record.

(2) On the basis of a retail equivalent price (e.g. ... directly to a consumer via Electronic

Transmission...) the Wholesale Price will be deemed to be equal to seventy percent (70%) of

such trail equivalent price...

(3) On any other basis (e.g. [Label] grants the right to distribute

the Record concerned as a stream via Electronic

Transmissions), the Wholesale Price will be deemed

to be equal to that portion of the [Label]

Revenues which is solely attributed to the sale

of such Record.

33


2015: Digital Streaming

• Value to customer and streaming services is the

size of the collection, not necessarily individual

albums

34

• Compensation is given

for access to the

catalogue

• Equity

• Marketing

• Catalogue advances

• Payments

Worldwide Independent Network (WIN)

• A network of independent industry trade bodies

representing sound recording rights holders

35

WIN Fair Digital Deals Declaration

36

WIN Fair Digital Deals Declaration

We will:

…

2. Account to artists a good faith pro-rata share of

any revenues and other compensation from digital

services that stem from the monetization of

recordings but are not attributed to specific

recordings or performance.

…

37

Thank You

montréal ottawa toronto hamilton waterloo region calgary vancouver beijing moscow london

Susan H. Abramovitch, Partner

Tel: (416) 814-5673

Email: [email protected]

palestra internacional: estudo da remuneração do streaming com dra. susan abramovith (advogada...

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