MUIN 360 Final

Study online at quizlet.com/_5p1oqe

1. Copyright Basics: What is publishing -the ownership and admin of copyrights in musical compositions
2. Publishing Deals with rights in (as compared to sound recordings)
compositions... -although they are publishers, as part of the job, may license compositions for use in
sound recordings
3. 3 Eras of Publishing Phase 1-The Copyright Era (1900-1970)
Phase 2-The Copublishing Era (1970-1995)
Phase 3-The No Deal Era (1996-2004 approx)
Phase 4-Return to Copublishing (2004-present)
4. Phase 1 -copyright era
1. sell (C) but retain right to writer royalties (50%)
2. publishers provided song-plugger sources
3. sometimes part of record deal
4. still exists in latin music and to some extent in Nashville

Publishers wanted the copyright, but artists still wanted ownership

Publisher would get 'publisher share' and writer would get 'writer share'
50% of the copyright

my notes:
-in order to monetize writers gave up copyright
-perfomers and writers considered separate rn
-value of the composition therefore required a performer
-trends soon change when performers begin writing own songs and diddnt necessarily
need publisher
5. Phase 2 -the copub era
1. see below
2. 75/25 split between writer and publisher

How most deals look today in 2015

Basically, the publisher doesn't own the entire the copyright
The writer (owner) usually gets 75% of the money
This changed because of The Beatles
The first successful writer/performers
Publisher isn't need to shop around for performers to perform your songs
John and Yoko fought for a long time to get out of their early publishing deals
They were the transition
6. Phase 3 -no deal era
1. no deal, or sub-pub only deal or admin deal
2. see below re form of deals
3. manager/attorney handles publishing in US; foreign subpub, if at all
4. example is Tori Amos
5. and for these limited rights, publishers may pay substantial advances

Successful writers who felt like they didn't need a publisher

EX: Diane Warren
Had no publishing deals
Had someone collecting money for her
Other writers needed help
7. Phase 4 -return to copub
1. response to different nature of music business
2. publishers have a marketable function again meaning placement in non traditional music areas (games,
film, TV, commercials, etc)

Writers didn't want to be in a world where they had to 'be the publisher'
Business changed
No one was paying for recordings so mechanicals matter less
-cash flow
8. Publishing Income ways in which compositions are exploited
Sources -worldwide (ave. last 10 years)
1. mechanicals (35-45%)
2. performances (35-45%)
3. sync (10-30%)
4. print (10-25%)
-estimate for US alone in 2013 (based on NMPA survey)
1. performances (50%)
2. mechanicals (25%)
3. synchronization (20%)
4. other (5%)
-estimate for US alone in 2014 (based on NMPA survey)
1. mechanicals (49.5%)
2. performance (22.5%)
3. sync (20%)
4. other (8%)
9. Mech Licenses -a way in which compositions are monetized
Mechanical Licenses
-these and perf rights are 2 highest paying
Paid by whoever owns the recording
Label
Artist
Etc.
Paid to Agencies
Usually Harry Fox Agency (99% of the time)
Agency works for owners of copyright in the composition
Direct licenses with the owner of the recording
10. Perf Rights Paid by:
Blanket licenses
Clubs, hotels, restaurants
Paid to:
PROs
They pay to whoever they have their deals with
Publisher, Artist, Manager, etc.

-these and mech licenses pay highest

-ex: USC gets blanket license from ASCAP and BMI etc , you get license from PROS
11. Sync Sync Licenses
Paid by: producer of the media
Paid to: owner of copyright

-if same music but different start time can't get sync
-musical compositions performed in audio recordings
-music comp synced with audio visual material
12. Print Print (includes online sheet music)
Paid by: whoever is making the sheet music
Paid to: owner of copyright

-not most important revenue stream

-websites with sheet music require print licenses
13. Mechanical Royalties 1. sales of sound recordings, paid by record company's to publishers)
2. mechanical license required
3. compulsory license v. first use license
4. controlled composition clause

-2 types are compulsory and first use

14. Compulsory License v. 1. current statutory rate for compulsory license 9.1 cents per cut (under 5 min)
First Use License 2. latest rate scheme eliminates licenses for mandated regular increases in compulsory license rates - the
9.1 cents rate in in place indefinitely
3. no limits on rates for first use licenses
15. Controlled Composition 1. 3/4 or other reduced rate
Clause 2. fix effective date (delivery, release)
3. cap on # of tunes
4. limit records on which payments owed (ex: no payment on promo copies)
5. reduced rates on non-top-line exploitations
6. free sync licenses
16. Performance Income 1.US-ASCAP,BMI,SESAC
2.UK-PRS
FRANCE-SACEM
GERMANY-GEMA
3. usually one society per country but Brazil has had as many as 160
4. covers performance in TV, radio, nightclubs (clubs 10% of share)
5. covers performance in movies, outside of US/Canada
6. writer share paid directly to writer!!
7. what's it worth?
a)"happy birthday" earnings from 2013 = 2 mill (when court hadn't determined that warner/chappell didnt
have (C) to the composition)...almost all from TV and movies
b) radio-very big, six or seven figures/yr.
8. collect on artist's performance in Europe
a) get set lists and itineraries, then go to societies
b) ASCAP and BMI just starting to do this in US
9. which society?
a)how much will u make?
b)in long run? advances? (SESAC competes on advances)
c) wait as long as possible
17. Synchronization ...motion pics, TV, etc. video sync
Licenses 1. still need a master use license if you use original recording
2. buyout/flat fee
-this DOESNT include public performance (still must be paid)
3. 10K-100K-500K for movie main title type uses
18. Print 1. for current artists, can account for as little as 5% of total income
2. of primary importance with catalog songs
3. for contemporary artists, mostly folios (need photos and guitar tabs) and church choirs and "worship"
arrangements and high school and college marching bands etc.
19. Types of Deals 1. ESWA - exclusive songwriting agreement
2. Co-Pub Deal
3.Administration Agreement
4. Sub-Publishing Deal
20. ESWA 1. publisher owns 100% of (C)
2. old style deal, writers needed publishers to shop and plug the songs
3. still in use in Nashville and latin music, where plugging matters
4. these songs pay the rent today, most of the catalog

-no term rights for good for pubs

in a W for H deal:
-pubs owns right from inception
-doestn mean writer has nothing
-anytime pub exploits comp the writer is recognized ?
21. Co-Publishing 1. 75/25 split
Deal 2. still the most common type of deal with major publishers
3. writer share (50%) of total song: 100% to writer
4. publisher share (50%) of total song: 50% to writer, 50% to publisher
5. writer has total interest of 75% in song
6. the whole 75% owned by writer is used for recoupment of advance
7. note: public performance dollars go directly to writer, so not available for recoupment

-no deal era

-pubs only have admin rights

-Performance monies are paid directly to writer and directly to pub (this matters with recoupment)
a. 1/2 of pub share is sent directly to writer which gives pub less money to recoup against monies otherwise
payable to writer since they aren't receiving writer's share
b. in regards to recoupment, depends on revenue streams
22. Administration 1. writer owns the (C)
Agreement 2. admin fee kept by administrator, taken off the top
-12.5% to 30%, still usually 15%
3. term 3 to 5 yrs
4. if the admin deal is for no advance, its often called a "collection deal"
23. Sub-Publishing 1. basically an administration deal for a limited territory
Deal
-doesnt own C
-less than whole world
24. Deal Points of 1. term
Co-pub deal 2. territory
3.scope
4. retention/reversion
5. advance
6. royalties
25. Term of Co-Pub Deal 1. artist/songwriters have delivery commitment
a) 1 LP + 1 LP + 1LP + 1 LP
b) sometimes now, 1LP + 1LP + 1LP, or 2 +1
c) LP is certain # of songs by writer
-possible to continue 4ever
2. traditional songwriters have a true term deal
a) 1 year + 1 year + 1 Year + 1 year
b) sometimes now, 1 +1 +1, or 2+1
c) often require a certain # of released songs
-say 8 songs @ 100%, 4 actually recorded and released
-possible to continue 4 ever bc term suspended and you are stuck in first k period
3. publisher doesn't ave to exercise option until record is delivered!!!

likely has to add up to 8 100% writers share which gets complicated with cowrites

-writer shouldnt depend on 7 year statute but they can use it to get out of pub deal?
-applies to personal service K
-completed songs=product not services
-likely than writer is employee in pub deal so can't depend on statute?

-
26. Territory of Co-pub 1. generally still the world
deal 2. less than the world for some publishing and all sub-pub deals
3. many attorneys try to do territory by territory even on co-pub deals

-foreign 65%
-for co you won't have 75/25 split because theyll want piece before sending over
27. Scope of Co-pub 1. which songs? catalog? only writer recordings?
deal 2. only material recorded by others?
3. use in commercials?
4. use in films?
5. translations? samples?
6. control over first use?

-some pubs can't use first use without written permission, it depends on writers preference
-translator entitled to revenue % 8%?
-writer should negotiate no sample license or translation without their consent as well as no commercial use
-sample: check who will own C

-pubs given favorable audit terms, 3 yrs?

28. Retention/Reversion 1. traditional: publisher retained for life of (C) (subject under 1976 act to right of termination)
2. today, almost always a reversion right
-revert 7 to 15 years after term ,if recouped
-reversion if not exploited
-typically a reversion at 2 years after term

2 kinds of terms in pub deal

1. how long is exclusive right between writer and pub (1+1+1)
2. how long pub has to exploit C during term? reversion

Reversion: writer can get rights back

-based on status of account ($ advances etc)
-if writer has recouped with pub then they get comp back, but doesn't mean they get back when term ends (7
to 15 yrs after exlsuice term ends)
-writer can get rights back if pub fails to exploit 2 years after term ends, but likely you won't be able to either
29. Advance 1.amount of advance depends on term, territory, scope, retention/reversion PLUS expectations of sales/income
-advance is typically
a)typically negotiate (smaller advance for earlier reversion?)
b)historically, often same size as record advance
c) reductions in last year or so, now as much as 1/2 to 3/4 less, not uncommon to see advances in $100K-125K
range
2. Advance against writer share only
3. Expectations (hard to judge)
a) samples cut in to income
b) non-controlled and over the cap songs cut in to income
4. typical deal
a) LP 1 = 100K
b) LP 2-4 = % of earnings in prior period
-usually 2/3 with floors and ceilings
c) LP 2=100-200K, LP 3=150K-300K, LP4=200K-400K
d) amounts based on control of specified % of songs
-if less, reduce proportionaletly
-typical control required= 80-90%
5. When Payable?
a) 20K signing bonus
b) 5K living expenses
c) 25K upon signing record deal
d) 25K upon release of LP1
e) 25K when soundscan hits 200K
f) subsequent LPs, on release of LP

say you get 5/8 100% writer share then u get 5/8 of advance ?
-reduced advance if writer doesnt deliver
-

-advance against monies otherwise payable to writer

-360 deal vs. sub pub
a. match advance with competitors
b. the pub may match record label offering or 10x advance
c. 360 deal ask for matching right

-pubs keep floors low, ceilings go up

-advance split-up in many ways
30. F. Royalties 1. US: 75/25 split of net revenues (writer gets 75%)
a) US income accounts for about 35% of total income
b) watch for administration fees that come off the top (sometimes as much as 10%)
2. Foreign: 75/25 split
a) foreign income accounts for about 65% of total income
b) try to get "at source", not "receipts in US"
c) true 'at source' deals very rare
d) try to cap foreign fees, 20% cap is common
-often a "deemed fee 10% or 20% cap" deal
e) "local cover" inducements...watch them
3. pay quarterly
4. audit rights: 3 years, 3 1/2 to sue
31. Film and TV A. Watch out- every studio has its own affiliated publisher
Deals 1. on newly recorded material, they'll ask for publishing
2. often ask for 100%, paramount insists on 50%
B. Ownership percentages is a negotiable point (except for paramounts 50% floor)
32. Sampling
33. Developing issues in Copyright in an
Internet Age: Conceptual Issues
34. Infringement Issues and Procedures
Raised by the DMCA-"safe harbor" and
"take down procedures"
35. D. What is a "safe harbor"?
36. D. What is a "service provider"?
37. D. Statue provides for 4 limitations on
liability for infringements in....
38. D. Note: failure to qualify for "safe
harbor"...
39. D. Once a service provider has qualified as
a "service provider" pursuant to the
statute....
40. D. In addition to the threshold
requirements the service provider must
meet, the provider must also be in
compliance w/ several provisions....
41. E. Take Down Notice Procedures
a. watch the details
b. how much of "our" copyright, if any, will be left?
A. As in the case with other (C) issues, one must consider both sound recording and
composition issues
B. Although specific procedural rules are provided in the statutes, one must still
consider the practical aspects-does it make economic or strategic sense to follow the
statutory procedures in each case?
A. Section 512 of the Copyright Act
B. "Safe Harbor" provisions
C. Provides "safe harbors" for online service providers, but only in certain
circumstances
D. What is a safe harbor?
1. A provision preventing internet service providers from being accountable for (C)
infringement committed by users of the service
-a "provider of online services or network access, or the operator of facilities therefor"
(which would, eat least for the moment, include, by way of example, Verizon, google,
FB)
a) transitory communications (ex: traditional ISP)
b) system caching
c) storage of info at the direction of users (ex: user generated content)
d) info location tools (ex: search engines)
-if the provider falls within one or more of such categories, then there is a BAR on
monetary damages, and restricted availability of injunctive relief against the provider)
-doesnt mean the provider is automatically liable for infringement, merely means that
the claimant may proceed against the provider, but must prove the elements of
infringement, subject of course to the provider's standard defenses against
infringement claims
-in order for the liability limitations to apply to the provider, the provider must meet 2
threshold requirements
1. the provider must adopt and reasonably implement a policy of terminating the
accounts of subscribers who are repeat infringers
2. the provider must accommodate and not interfere with "standard technical measures"
(measures that (C) holders, on a multi-industry basis to identify or protect copyrighted
works, are available on a non-discriminatory basis, and do not impose substantial
burdens on service providers)
1. the provider must not know of the infringing activity (whether because of actual
knowledge or because of circumstances from which infringing activity is apparent or
obvious)
2. if the provider is able to control the infringing activity, it must not receive any direct
financial benefit from the activity
3. if the provider receives notification in compliance with the statutory "take down
notice" procedures, the provider must comply with the "take down notice" procedures
and requirements
1. "take down notice" provisions are the procedures applicable to the provider "safe
harbor" protections in connection with user generated content
2. apply only to storage of content at the direction of a user, they do not apply to
content created by the service provider
42. E. Take Down a. if a content owner believes its rights have been violated (and after good faith consideration of any valid fair use
Notice Process defenses, see Lenz case in CH 15), the content owner may submit a notification to the provider (each provider must
provide notification to the (C) office of the address of an agent to receive such notices)
i) take down notice is submitted under penalty of perjury
ii) any person who knowingly misrepresents that material is infringing can be held liable for damages (including
costs and attorneys fees) incurred as a result of misrepresentation
b. if the provider promptly removes or makes unavailable the allegedly infringing material, then the provider
cannot be held financially liable to the content owner in connection with the alleged infringement
c. as long as the provider promptly notifies the service subscriber who posted the content that is the subject of the
take down notice, the provider cannot be held liable to the subscriber in connection with the provider's take down
d. the subscriber who posted the content has the right to respond to the take down notice by filing a "counter
notification" with the service provider
e. if the subscriber files a proper counter notification in compliance with the statute, then the provider must make
the posted material again available within 10-14 days (unless the content owner files a lawsuit)
i) the counter notification is submitted under penalty of perjury
ii) the counter notification must state that the posted material was removed through mistake or misidentification
43. General A. Terminology: distinction between streaming, downloads, subscription, promotional uses
Licensing
Issues
44. Terminology: a) on demand?
Streams i. for promotional purposes?
ii. for commercial purposes? if so, how paid?
b) randomized (ex: internet radio)

performance license allows for streams because non interactive

45. Terminology: a. how paid?
Subscriptions b. downloads allowed?
46. Terminology: a. permanent?
Downloads b. limited use?
i) time limits?
ii) external devices limits?
47. What Licenses 1. Performance Licenses (ex: radio)
are necessary? a) performance licenses required in this circumstance
for streams... 2. Mechanical License
a) while an argument can be made that mechanical licenses may be required for these uses, it has not been
successfully made, and this position is not generally accepted
b) copies made?
c) permanent copies?
d) server copies v. copies on the user's drive (if only temporarily on the user's drive, does the copy infringe the
publisher's "reproduction" right?)
48. What Licenses are 1. Mechanical Licenses?
necessary? for a) mechanical licenses required in almost every case
downloads... b) when triggered?
c) what about "convertible" uses? (temporary download that turns in to a permanent, or more permanent
download?)
d) what about limited time period uses? (are they transfers of copies?)
2. Performance Licenses
a)while arguments can be made that a performance license may be required for downloads, general rule is
that no performance license is required
b) is there a "perceived" performance apart from the "transfer", from server to consumer drive?
c) is there always a performance?
d) 10/3/11 decision by US Supreme Court not to hear an appeal by ASCAP of a 2nd circuit opinion holding
that a digital download does NOT create a public performance requiring a performance license. Since the
supreme court declined to hear the case, the 2nd circuit opinion is precedent only in the 2nd circuit
e) as a practical matter, is getting a performance license likely to be an issue? even if one might be required?
might there be a blanket license already in place?
49. Direct Licensing a. is licensing directly from the owner of the (C) (as opposed to going through the performance rights orgs)
Issue: What is "direct
licensing"?
50. Potential Issue in -since both ASCAP And BMI in the US are subject to court administered consent decrees (for anti trust
Direct Licensing purposes) and one of the provisions of the consent decrees is that PROs can't deny a public performance
license, and if there is a rate dispute is it resolved pursuant to consent decree at a "rate court" hearing before
a federal judge
-accordingly, publishers (particularly Sony) have felt PROs cannot negotiate "marketplace" rates for digital
uses of their material
-ex: Pandora pays 50% of its revenue to sound recording owners and artists but only 5% to owners of
copyrights in compositions
-beginning in 2011, move by some publishers to "pull" from PROs the right to licenses compositions to
certain "new media" users
- by 2012, all major publishers attempted to negotiate directly with Pandora and not go through PROs
-Pandora didnt like having to pay more, so went to "rate court" hearing procedure re: both BMI and ASCAP,
asking the "rate court" to rule that the PROs are required to license all of their repoirtore to all potential uses,
so as not to license on a discriminatory basis
-"rate court" sided with Pandora
-potential new strategy for publishers? modify the consent decrees, not use PRO's at all?
51. What Payments are 1. the (C) office has generally adopted the industry negotiated mechanical rates for streams and "conditional
necessary?: what are downloads" or "incidental" digital phono record deliveries ("DPDs")
the rates for a) DPDs that time out or are temporarily buffered or cached)
mechanical licenses? b) in general the formula looks to a % of the services revenues (anywhere from 10.5% to 12%), less
performance fees, allocated on a per play basis, with minumin royalty
2. in dollars and cents terms, that absolute numbers are not large (not uncommon for per stream pennies for
a particular composition too be in range of a quarter of a cent), remember the formula may start with a % of
the service's revenues, but it's divided many times (there are not just compositions but sound recordings, ands
there are allocations based on plays as well)
3. for permanent downloads, it's clear that the rate is the same as for physical sound recordings (9.1 cents for
5 min or less)
4. Ringtones (much less of a market now than when the rate was worked out) are 24 cents per unit
52. Rates for Webcasts 1. Rates are set by Copyright Royalty board (CRB)
a) CRB is part of the library of congress, and consists of 3 copyright royalty board judges
b) responsible for setting rates pursuant to the Copyright Royalty and Reform Act of 2004
c) CRB just issued its 4th set of rates (sometimes referred to as "Webcasting IV" at the end of 2015
(includes rates for 2016-2020)
2. Rates for webcasts, radio shows, that transmit original programming or simulcasts over the Internet
a) for web casters that meet the legal definition of a "non interactive" digital music service
b) for instance, Pandora will pay the Webcasting IV rates unless it has negotiated other rates with the
rights owners (in fact, pandora does have a direct deal with Merlin, the Independent rights group, and a
direct deal with Naxos, a classical record label)
c) would apply to also radio companies such as iHeart (with the exception of direct deals that heart has
cut directly with, for instance, big machine)
3. does not apply to satellite radio or cable radio (those rates are set in a separate rate proceeding (so
for instance, only the webcasting aspect of Sirius XM is affected by Webcasting UV)
53. Rates for Webcasting a. limited master recording performance right for digital transmission
continued... -webcasting IV covers only those performances!! so monies payable to record labels, recording artists,
-as you recall the DMCA and musicians
created a... -only affects licensing of master recordings
54. Rates for Webcasting -the licensee may obtain a compulsory license at the CRB determined rate
-unless the licensee has -these payments are made by licensee to SoundExchange, which administers the payments
cut a direct deal with the -the split is 50% to master rights owner (usually record label), 45% to artist that recorded the music, and
(C) owners.... 5% to the musicians (via payment to the unions)
55. Chart ...
56. The Future A. Web is worldwide, yet publishers/artists have territory based deals. how to reconcile?
B. Turf Wars between Harry Fox agency (collects mechanicals), ascap, bmi, seas (collect performance),
sound exchange (digital performance rights), telecommunications companies, Google, apple, etc
-who has the right to collect?
-what licenses are necessary?
-new players exploiting these uncertainties, crossing traditional lines, trying to set themselves up as
primary licensing agencies
i) music reports, Inc. (MRI)
ii) RightsFlow
iii) these and similar entities working to do licensing as agents for licenses, as opposed to licensors; may
be licensing multiple types of licenses (both mechanichal and performance licenses for instance)
57. General Concept of Fair A. Purpose of Copyright Laws is the dissemination to the public of creative works
Use B. to assist in this dissemination, congress has places limitations on the exclusive rights granted to (C)
owners (as we've noted earlier)
C. in addition, the (C) law acknowledges some specific rights that non owners have with respect to uses
of copyrighted intellectual property, the most prominent of these rights involve the uses known as "fair
use"
D. the doctrine of "fair use" has been part of common law for decades, but first codified and recognized
statutorily as part of the Copyright Law with the '76 Act, in section 107
58. Section 107 1. Provides that Fair Use is subject to interpretation by courts, but describes the factors a court should
consider in determination whether a use is permitted because it is a "fair use"
59. The 4 Factors in Section 407 that
courts use to determine whether
use is "fair use"
1. the purpose and character of the use, including whether such use is of commercial nature or
is for non profit educational purposes
2. the nature of the copyrighted work
3. the amount and substantiality of the portion used in relation to the copyrighted work as a
whole; and
4. the effect of the use upon the potential market for or value of the copyrighted work

-factors must be considered together and not individually

60. Recent Issues Concerning Fair Use
on Youtube or Similar Services
61. Legal Actions Relating to Music:
-Copyright Infringement Actions
-note: lack of financial gain by the alleged infringer in not necessarily determinative
-note: educational or nonprofit use is not automatically fair use, especially if factor #4 is pretty
prominent)
-in general, but not always and the analysis must always look at all of the factors, the effect of
the use upon the potential market for or value of the copyrighted work is the most important of
the factors
A. copyright holders often use DMCA take down procedures to have "home videos" etc with
music as the background removed from online
B. Some such cases can be argued fair use
C. 2015 9th circuit case (Lenz v. UMG) says a copyright holder may be liable for damages if it
does not consider whether the use is fair use before sending a take down notice
A. requirements for action
1) Ownership of the material by Plaintiff (person who takes action to court?)
a. prior to filing litigation, plaintiff must have actually registered a copyright for the term
2) copying by defendant (accused of infringing)
a. elements of proof
i) access: work publicly released or performed, copies sent to defendant, implied access (ex:
tapes sent to recording studio utilized by both plaintiff and defendant) AND
ii) substantial similarity: compare % of similar portions of the work with non similar portions,
subjective test=use "use reasonable persons" opinion as to similarity, use of experts to
demonstrate similarity OR
iii) striking similarity: works are so similar as to preclude a possibility of independent creation,
no access proof is required, requires expert testimony

note: sliding scale used to determine similarity and access. the more direct access the less
similarity needs to be demonstrated and vice versa
62. Copyright Infringement Actions: 1. Fair Use
Defenses to Action a) news reporting
-reiews, articles, websites
b) satire and parody
-cannot use more than "necessary" to "conjure up" the OG work
c) educational broadcasting
2. Prior Creation
a) independent creation
3. Not subject to Copyright Protection
a) work not an original or unique "expression of an idea" and thus not susceptible to copyright
protection (ex: dog barking, laugh)
63. Actions Largely Specific to Music A. sample claims occur when a master recording includes a portion of another master
Industry: recording (whether of a protected composition or otherwise) without authorization from the
1. Sampling Claims copyright owner of the OG master recording
-common sample use is of specific guitar lick, drum beat, or vocalization

-damages in sampling claims are as with an other infringement

64. 1. Sampling Claims 1. Master recording
-what are the rights involved? and 2. Publishing
who controls them??
65. 1. Sampling Claims -concept is for people to be able to use minimal amount to sample and not be accused of
-the concept of "de infringement, in favor of those using samples
minimus" use
1. with respect to compositions: what's protectable under (C) law?
2. With respect to master recordings, is there such thing as de minimus use?
a) Bridgeport Music v. Dimension Film, 6th circuit
-this court case eliminates de minimus concept saying they need a license to sample with master
recordings! but they could argue fair use...
b) real world issues: who tracks issues? how easy are uses to spot?
66. 2. Muscial Composiiton a) once a musical composition has already been recorded and released to the public pursuant to the
Claims authorization of the (C) holder of the copyright in the musical composition and is no longer "first use"
composition, the composition is subject to the (C) Law compulsory mechanical license provisions
-in the event the composition, or a protectable portion of the composition, is utilized in a new musical
composition (as opposed to a recording of the OG composition), or the character of the composition is
altered in a new "version" of the composition, each without prior authorization, the new user is subejct
to a claim of infringement of the mechanical (C)
b) damages are as with any other infringement
67. Remedies for Copyright 1. Actual Damges: injury to market value of plaintiff's work
Infringement 2. Defendant's profits: note the profit calculation depends on % of infringing material comprising the
whole work
3. Statutory Damges
4. Injunctive Relief
5. Penalties for Violation of DMCA Anti-Circumvention Statutes
68. Remedies for (C) a) non willful infringement: generally between $750 and $30K (no more than 30K)
infringement: Statutory b) willful infringement: infringement continues after notice or with knowledge that action constitutes
Damges copyright infringement, up to $150L
c) note: cannot recover statutory damages unless registration completed before the alleged
infringement occurred, or, if not registered before the alleged infringement, if the registration was
completed within 90 days after first publication
69. Remedies for (C) a. prevents further distribution and sale
infringement: Injunctive b. impound and destruction of infringing articles
Relief c. recall orders
70. Remedies for (C) a) as provided in Ch 12 Title 17
infringement: penalties b) in addition to remedies stated above
for violation of DMCA c) for violation of rights in copyright protection or copyright management information systems, if
Anti Circumvention "willfully and for purposes of commercial gain" penalties up to $500K and imprisonment up to 1 year,
Statues for 1st offense, penalties double for subsequent offenses
d) 2010 5th circuit decision that DMCA prohibits "only forms of access that would violate or impinge on
the protections that the Copyright Act otherwise affords "copyright owners"-merely bypassing a
technological protection that restricts a user from viewing or using a work is insufficient for a DMCA
violation
e) system of "exceptions" to anti-circumvention statue violations - constantly being revised. if actions fall
within an exemption, no criminal penalties
71. Seven Year Claims -CA Labor Code Section 2855 provides that the exclusivity provisions of a personal service contract
may not be enforced against an employee, including a musician, beyond 7 years of commencement
-Section 2855 further provides that if a musical does not produce the required number of records under
the agreement during 7 year term, the record company has an action for damages against the musician
for lost profits
-Often artists and record companies negotiate more favorable terms of their agreements prior to the
expiration of the initial 7 year term
-in order to accomplish a negotiation without violating the statute, there must be a "window" of time
between the 2 contracts in which the artist is theoretically free to negotiate with other labels
-it is also important that the new K clearly void the old K, so that the artist cannot argue that he is still
under the terms of the old agreement, including the initial seven year term
72. Injunction Issues A. cannot require specific performance for a personal service!! (CA civil code section 3390)
B. Can move for an injunction to prevent a performer from working elsewhere, under following
conditions...
73. B. Conditions in which can 1. an injunction may be ordered under section 3423 of the code of civil procedure, in order to prevent
move an injunction to the breach of a K for the performance of personal services which are of "special unique, unusual,
prevent a performer from extraordinary or intellectual character" and for which the minimum compensation provisions are
working elsewhere satisfied as follows:
a) for K entered in to prior Dec 31, 1993: 6K/year
b) for K entered in to after Jan 1 1994:
-9K first year, 12K second, 15K third through the 7th years
-additionally, for the 4th and 5th years of the K, an additional 15K per annum must be actually paid to
the performer, during the 6th and 7th years of the K an additional 30K per annum must be paid
- if the K doesn't provide for the required payments or the required payments havent actually been
made, then the provisions of the statute must be satisfied by tendering to the artist, at any time prior to
entry of court order, an amount equal to ten times the amount by which the actual payments previously
made to the artist are less than statutorily required
74. Personal Management A. many managers don't work with one- if the artist aint happy, let them go
Agreements B. if the manager insists, then pretty much negotiate it
-Is written agreement C. Effect of Talent Agency Act
necessary?
75. Personal Management A. California Labor Code Section 1700.4
Agreements -persons procuring employment from others must be licensed by the labor commissioner
-Talent Agency Act -BUT the activity of procuring and negotiating recording agreements is specifically excepted, and does
not require licensing under the Talent Agency Act
B. Exception applies only to procurement of recording agreement- gigs, etc remain subject to labor
commissioner supervision
C. If subject to Act, contract must be submitted for approval, including approval of commission
percentage. bond must be posted
76. Terms of the Management A. Term
Agreement 1) 3 to 5 years, no more than 5
2) escape clause: if artist doesn't earn $x within certain period, can terminate early (ex: if earnings over
first two years of 5 year deal aren't at least $300L, right to terminate)
-generally fair to give manager at least 2 years
-after 1st 2 years, each target period can be one year with minimum dollar amounts (ex: 200K for year
3, maybe 500K for year 4)
3) manager may insist that escape clause dollar amts include similar offers the act turns down
77. Management Deal 1) 15-25% with possibility of escalations or de-escalations (depending on whether the deal starts high or low)
-"During Term" 2) percentage of what?
Compensation -usually of "gross", note this can mean that the manager makes more than each member of the artist, if artist
is a group
-occassioanly of "net", but if based on net, usually limits on expenses that can be charged against manager's
commission
3) Exclude some earnings:
a. songwriting (except maybe songs written under record deal)
b. any other areas in which manager doesn't provide services (acting, writing, etc)
-manager may claim "I create opportunities" or "record career leads to"
-should negotiate carefully
c. exclude payments that don't go in to artist's pocket
-recording costs
-producer payments
-tour support
-costs of collection
-opening act payments
d. no double commissions: if there's a loan out company, commission only at corporate level
78. Management Deals 1. managers are typically paid dollars earned after the term if generated under K entered in to or
-Post term substantially negotiated during the term (and amendments, modifications or extensions of those agreements)
compensation 2. Ways to limit
a) only with respect to records released to during the term... not likely to get this limit
b) reduced % more likely
-50% on stuff released after management term (theory: manager doesn't have to promote) and 0% on stuff
written or recorded after term-not likely
-most likely: manager continues to receive commissions thru 3 years after term, reduced during that period
(often via a sliding scale over the 3 years ending at a 0% commission rate)
3. note: artist will have to pay new manager too! most managers won't agree to limit themselves just
because artist is paying old manager
79. Obligations to 1. guarantee to get record deal?
Manager 2. guaranteed certain amount of tour income or income in general
80. Limits on Manager -what should the manager be able to d0?
Authority 1. Cash checks? negotiate contracts on behalf of the client, artist try to limit
2. Managers often want power of attorney, if at all artist should limit
3. Limit to ONLY IF:
a) artist unavailable (how likely is this in 2016)
b) artist has verbally approved
c) relates to personal appearance within next 3-4 weeks
81. Basics of Taxation in A. Because substantial income is often concentrated in a short time period, artists potential for large tax
Music Business exposure is greater than for the average person
-Overall planning B. Minimization of tax is perfectly acceptable - what is illegal is avoiding payment of whatever tax is owed
concepts C. Basic strategies for minimization of tax liability
82. Basic Strategies for 1) deferral: to attempt to defer incidence of taxation until the artist's income is lower, so the tax rate is no
minimization of tax longer as high (based on progressivism of tax rates, and the "marginal" tax rate concept that applies in the
liability US tax code)
2) Shifting: attempt to move income from higher tax rate entities (historically have been individuals) to lower
rate entities (historically have been corporations, but not so much now) (treat individuals as corps to pay
less tax rate)
3) Allocation: attempt to allocate costs/expenses to larger (or higher tax rate) income streams (opposite of
shifting)
83. Note specific distinction
between tax credits and tax
deductions
84. Basics of Taxation: overall
planning concepts
85. Basic Taxation Concepts
-Income as an employee
86. Income/earnings as self
employed person or
independent contractor
87. Partnership income
88. SubChapter S income
89. Concept of "Net Income"
1) credits: "dollar for dollar" reductions in the actual tax owed! computed after the tax owed has been
computed
2) deductions: reductions in the income upon which the tax is calculated; accordingly, the value of the
deduction depends on the tax rate, and will never be "dollar for dollar"
3) example:
a. 100K of income
b. tax brackets of
-$0 $10K: 0%
->$10K <$30K: 10%
->$30K <$75K: 15%
->$75K <$125K: 25%
c. with no deductions or credits, tax of $15K (do the math)
d. with a 5K credit, tax of $10K (do math)
e. with a 5K deduction: adjusted gross income of $95K (do math), tax on $95K = $13,750 (do math)
-so what is $5k deduction worth?
-tax savings of $1,250 (do the math)
-tax of $5K if no deduction EQUALS 25% value- the same as the marginal tax bracket
E. Possible strategies for so called "loan out corporations"
F. Tax Minimization and tax sheltering and similar strategies require advice of tax professionals
G. important to file and pay on a timely basis
1. Income as an employee
a) employee "income" is the amount paid to the employee or provided to the employee, by the
employer
b) employer issues W-2 Form at end of year
c) Employer pays all applicable payroll taxes
-e.g. 1/2 of SS and Medicare taxes
-e.g. federal and state unemployment taxes, workers comp premiums
d) employer withholds tax based on exemptions elected by employee; excess tax over amount
withheld is then owed by employee to IRS; if the withheld amount is more than the tax owed, the
employee gets a refund when she files her tax return
e) if expenses not reimbursed by employer, employee may deduct if more than 2% of adjusted gross
income
a. payor of compensation is to issue a 1099 form to payee
b. self employment/indep contractor income reported on schedule C together with all applicable
related business expenses, to equal "net income"
c. self employed persons use pay self employment tax
-equal to total of employer and employee contributions for SS/Medicare (currently 15.3%)
a. partnerships files a tax return but income flows thru to the partners
b. partnerships must file a form 1065
-informational return
-includes income received by partnership
-includes partnership expenses
c. each individuals share of net income is reported to the individual on a K-1 form
d. the individuals k-1 from is then used to report net income on the individuals tax return on schedule
E of form 1040
a. similar to partnership income is that an S corporation files its own return but net income flows
through to the shareholders
b. net income reported to stockholders on a K-1 form
c. shareholder reports K-1 income on the shareholder's individual return
a. income MINUS
b. business deductions MINUS
c. personal deductions MINUS
d. NET INCOME
90. Under Reporting of Income a. penalties for substantial underreporting
b. if willful underreporting, possible criminal penalties
91. Expenses 1. Employees may deduct business expenses that would be deductible if paid by the employer, but for
which the employer does not reimburse the employee
-deduct on form 2106
-limited to the portion that exceeds 2% of employees adjusted gross income (limit does not apply if
employee meets the criteria for a "qualified performing artist")
2. Self employed and independent contractors are allowed to deduct most business expenses that
relate to producing income (the expenses are deducted from income to arrive at net income, and the
individual is taxed only on the net income)
-ex: auto expenses (for cars an individual owns)
-ex: equipment
-ex: travel
-ex: food/entertainment
-ex: home office
92. Self Employed/Indep a. if car is used for business/job and used only for that purpose, individual may deduct entire cost of
Contractors: Auto operation
Expenses b. if car is used for both business and pleasure, individual allowed to deduct only the cost of the
business use
c. mileage: use the best for the individual of (A) the standard mileage rate or (B) the actual expenses
(in order to use standard mileage rate, you must elect to do so with the 1st year you use the car for
business-but you can thereafter change your election)
d. separate rules for leased cars
93. Self Employed/Indep a. depreciate if useful life or more than one year (depreciate over a 3 to 7 year period)
Contractors: Equipment b. many specific rules: must examine on case by case basis
Expenses
94. Self Employed/Indep A. may deduct travel expenses if the individual has a permanent residence ("tax home"), as long as the
Contractors: travel primary purpose of the travel is business related. documentation required
expenses B. if the individual can't establish a permanent "tax home"/permanent residence (because ex: constantly
on road), travel expense deductions will be disallowed
-individual may then declare a residence or base of operation
95. Self Employed/Indep a. 50% of food and entertainment business expenses may be deducted from income
Contractor: Food and b. business purpose, names and place must be documented
Entertainment Expenses c. in lieu of documentation, it is often possible to deduct a standard meal allowance (amount depends
on when and where one travels)
96. Self Employed/Indep a. office must be used exclusively for the business and must not cause the business to show a loss
Contractor: Home Office b. office must be the "principal place of business" for the business
Expenses c. "home office" deduction is huge red flag for IRS audit selection
97. Avoid being treated as a "hobby": -business
1. In order for an entity to deduct losses, the IRS
must be convinced that the operation in question
is actually a a. in general: the IRS looks to see the operation (1) does not generate a loss
and (2) is the main source of income
b. at the very least, the operation should keep business like records, have
separate checking accounts, and invest in tools of trade (at very least,
business cards, letterhead, etc)
c. the operation should look like a business and should operate based on
profit motive
d. the general IRS guideline for profit motive is that the business must make a
profit in 3 out of 5 years
-this is guideline not a rule
-expenses, may, in general, be deducted as long as the profit motive can be
substantiated even if profits aren't being generated
e. beyond the 3 out of 5 years guideline, there are 9 factors the IRS will
consider in determining whether an activity is engaged in for profit
98. 9 factors the IRS will consider in determining -beyond the "3 out of 5 year guideline"
whether an activity is engaged in for profit 1. the activity is carried on in a business like manner
2. the time and effort put into the venture indicate an intent to run a profitable
venture
3. the operator depends on income from the venture for her livelihood
4. losses are due to circumstances beyond control ,or so are typical of the
startup pattern of your business
5. you change methods of operation in an attempt to improve profitability
6. you or your advisors have the knowledge needed to carry on the activity as
a successful business
7. you have been successful in making a profit in similar activities in the past
8. the activity does make a profit is SOME years (and the size of the profit)
9. you can expect to make a future profit from the appreciation of assets used
in the operation
99. In attempting to show a profit motive or in -it may be advisable to shift income and expenses between years, or allocate
attempt to meet the "three out of five years" expenses between other businesses
guideline...
100. If you can't show the operation is a business.. -the IRS will deem it a "hobby" and will disallow the loss deductions
101. Other Tax Considerations 1. Adequate Tax WithHolding
2. Estimated Tax Payments
3. Tax Preparer
102. 1. Adequate Tax Withholding a) if your employer doesn't withhold at least 90% of the total tax due at the
end of the year, the IRS can assess a penalty on the tax payer
b) you don't want to over withhold, but do decent estimations so that you
aren't under-withheld by more than 10%
103. 2. Estimated Tax Payments a) If you are not subject to withholding (self employed, indep contractor etc),
make estimated tax payments on form 1040 -ES
b) Filing dates are April 15, June 15, September 15 and Jan 15
c) Based on a projection of your annual income, and must total at least 90%
of what you ultimately owe for the given year, penalty if estimated payments
don't equal the 90%
104. 3. Tax Preparer -select a good, qualified, experienced tax preparer
- try to find one with experience in music business
105. Audits: 1. Correspondance Audit
Types of Audits 2. Field Audit
3. Office Audit
106. 1. Correspondence a) written notice from IRS of proposed changes to the return after IRS review
Audit b) great majority of audits are resolved at this level, because most tax payers agree to the proposed
changes (often, changes are error correction or signature issues)
107. 2. Field Audit a) IRS agent will come to residence or place of business to verify the accuracy of the tax payer's return
b) usually occurs only if the return is complicated and involves business operations
c) if the tax payer's records are complete, consistent, and in order the taxpayer is likely to do pretty well in
these audits
108. 3. Office Audit a) IRS requires the tax payer physically appear at an IRS facility and bring relevant documentation
b) taxpayers may make audio recordings of the audit interview, provided they give the IRS prior notice
109. Purpose of Audits 1. statutory purpose is to verify that the tax reported is correct
2. the audit is specifically NOT an attempt to increase the tax
3. Scheduling of an audit is NOT a suggestion that the tax payer has made a mistake or has been dishonest
4. Accordingly, substantiation and documentation are the keys to "surviving" and audit
110. Entertainment Audits 1. IRS Audit Guide states that the key to successful audit with persons in the entertainment industry is
"developing a solid background and history of the individual's activities and responsibilities"
a) determine what exactly the tax payer did for the compensation in question
b) determine what exactly the tax payer did in connection with the claimed expenses/deductions
111. Entertainment Audits: a) copies of all K, project documents, deal memos, and working proposals
the auditor will likely b) taxpayer's resume
solicit c) allocation of personal expenses
d) chronological background of the tax year
e) dates worked, requirements of employment/engagement, specific activities
112. How Returns are 1. no longer a purely "random audit" process
selected for Audit 2. certain types of activities, tax returns, deductions, etc are more likely scrutinized more carefulllu
a)professionals (ex: lawyers, entertainers, doctors, those running own businesses)
b) business with cash sales
c)"red flag" return issues
-anything above or below industry norms
-specific types of deductions or claims for instance the "home office" deduction (these red flag deductions
often change over time, and IRS publications indicate the current "flags")
3. Surprisingly common causes for audits
a)math errors- check your math
b) incomplete signatures
113. How to Deal with An 1. don't say too much
Audit a)be direct and honest, but don't volunteer info that isn't requested
b) if you don't have all the records you need, don't be afraid to so state, and ask for time to acquire them,
don't bluff
2. bring organized records
3. keep complete and clear records and make sure to bring them
4. don't be rude or defensive
5. remember you are entitled to appeal the audit determination
114. How Long to Keep 1. general rule us: as long as they may be needed for the administration of any provision of the IRC
Records a) in general this means records that support an item of income or deduction on a return should be kept
until the period of limitations for that return runs out
b) statutes of limitation vary
115. Typical Statutes of a) employment taxes: 4 years after the later of the ate the tax becomes due or tax is paid
Limitations (how long b) assets: keep records relating to assets or property until the period of limitations expires for the year in
to keep records) which you dispose of the property in a taxable disposition (you will need these records to
calculate/establish/support things such as depreciation, amortization, or depletion
116. Even if the reason to keep records for tax purposes no longer -there may be other reasons to keep the records (ex:
exists... insurance reasons, creditor concerns)
117. How often are mechanical royalties paid? Quarterly
118. How often are the Record Royalty Accountings reviewed? Twice a Year
119. True or False: Even after rights of termination, a third party can True
continue to exploit the composition