European Copyright Extensions: More Relief for the Rich

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(Written for Digital Music News by music industry attorney Steve Gordon, with assistance from Nari Roye, Esq. and Ahmirh Fareed-Muhammad.)

When Irene locked me inside my apartment, I sifted through every detail related to termination clauses for sound recordings in the US. This could devolve into a huge legal battle, but there’s another hurricane across the Atlantic – and it’s getting settled by legislators, not lawyers.    In fact, a multi-decade extension for legacy recordings was just approved in Europe, a decision that is disproportionately beneficial to major recording labels and superstar artists, and few others.  This article delves into the termination provisions of the copyright law of European nations, including the UK, and their impact on labels, artists, and American musical recordings.

First, some background.  Basically, US copyright law provides that the duration of copyright for sound recordings is 95 years from the year of its first publication (i.e., commercial release). That is, unless the artist retained the copyright instead of transferring it to the record company.  In that case the term is potentially longer: the life of the author (that is, the artist) + 70 years.

Terms are far shorter in Europe.  The law in most European countries, including England, currently protects commercial recordings for 50 years after their release date.  The latest news is that the European Union is extending the term of copyright in sound recordings for an additional 20 years (to 70 years) from the release of the record.  EU regulators in Brussels voted to approve this measure last week and the Council of Ministers affirmed it Monday (September 12th).

The move will benefit major recording companies which own the vast bulk of commercially popular catalog recordings, as well as superstar artists who now own their recordings (such as the Rolling Stones).  Or, those who negotiated larger than normal royalties during their careers.  But it will probably offer little help to lesser-known artists.

The list of fat-cat beneficiaries includes US-based majors.  Although the terms of protection for most European countries would still be shorter than the US, an extension of 20 years will offer great benefits to the Americans.  The kicker is that under the Berne Convention to which EU countries and US are parties, the law of each country supersedes the copyright law of any other country in regards to records released in that country.  This means that even though Elvis, Bob Dylan and other great artists produced their records pursuant to contracts with US record companies, their records are still subject to the law of any country in which those records are released.

The practical result is that unless the copyright laws of European countries are amended, companies in Europe could repackage old records and sell them in their own country without paying the labels anything.  This could have a devastating effect on US labels.

And, unless the copyright laws of these countries are amended, records released in 1962 will be entering into the public domain in 2012, and each year that passes more and more records will follow them.  This could include incredibly valuable catalogue such as records by Elvis Presley, Bob Dylan, The Rolling Stones, and The Beatles.  And as I pointed out in my prior article, “legacy sales” of old albums are an absolutely crucial source of revenue for Sony, Universal, EMI and Warner who control the vast proportion of commercially valuable catalog.

Indeed, the American affiliates of major labels have pushed very hard for the proposed change in European copyright law.  And although the EU’s extension of copyright protection is unlikely to save the majors, it may help them survive a bit longer.

So why are most artists unlikely to get any benefit?  The majors have a lot to lose in this battle, but artists were hardly getting paid in the first place! Roger Daltry of the Who campaigned for this extension as a means to protect artists with “no pensions” that “rely on royalties,” a perfect emotional tug-string.  But the reality is a bit different, because labels keep most of the money that they collect from catalog sales under their deals with the artists.

It starts with age-old contracts.  Most record contracts provide that the artist receive only a 10-15 percent royalty, with the labels keeping the rest.  And many early R&B and Blues artists received even less.  In addition, there are many reductions on that royalty: for instance, there is a usually 15 – 25 percent reduction for packaging, and additional reductions for sales in foreign countries.

It gets worse: the record company doesn’t have to pay anything to the artist until they have “recouped” production and marketing costs.  So every time a record company re-masters an old record or spends money on creating a new compilation package, including hiring writers to create new liner notes or outside companies to create album artwork, those costs are deducted from the artist royalty. Reportedly, Ruth Brown, the great R&B singer actually received a bill from Atlantic records for re-mastering her old records. She became so upset, she used her influence to press for musicians’ rights regarding royalties, which led to the founding of the Rhythm and Blues Foundation.

Very rich, superstar artists are an exception to this analysis. As they rose in popularity and their records sold platinum, most superstar artists were able to re-negotiate their original deals to sharply increase their royalty – or even buy back their copyrights altogether. For instance, Michael Jackson’s last agreement with Sony was a 50-50 split. The Rolling Stones actually negotiated for the re-purchase of the rights in their recordings. Therefore the extension of the term of copyright in Europe will be a windfall for these artists and their estates as well as the major labels. As usual, the lesser known artists will not see a commensurate benefit.