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Under New Copyright Law, Jukebox Music Providers May Do More Negotiating Directly With Artists

Posted On: 8/31/2011

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NEW YORK CITY -- A provision in U.S. copyright law that goes into effect next year may give some artists control of their original master recordings in a gradual transfer of ownership from the labels.

If important artists eventually do gain control of commercially significant master recordings, then manufacturers of digital jukeboxes such as AMI Entertainment Network Inc., Ecast Inc. and TouchTunes Interactive Networks may be required to renegotiate directly with a handful of artists to retain the public performance rights to certain recordings.

In a widely noted story, The New York Times reported that Bob Dylan has already filed claims to reacquire control of certain music. Tom Petty, Bryan Adams, Loretta Lynn, Kris Kristofferson, Tom Waits and Charlie Daniels, among other musicians, are also positioning for control, according to documents filed with the U.S. Copyright Office.

While significant for the recording industry, this change in copyright law is likely to have a minimal impact on the jukebox segment, according to AMI president and chief executive Mike Maas and Ecast vice-president of operations Scott Walker.

In an interview with VT, Maas said there are several reasons why any potential impact will be nominal. To begin with, he said, jukebox music networks already negotiate directly with some major artists.

Bruce Springsteen is among a few major artists who until recently would not authorize play on downloading digital jukeboxes -- if not for direct negotiations. In 2009, TouchTunes broke down the Springsteen barrier following discussions with the artist. AMI soon after made its agreement for the Boss's catalog. (Both firms reportedly paid a large amount for rights.)

In addition, jukebox companies already negotiate directly with many independent artists and local bands. So the prospect of negotiating directly with artists is neither novel nor worrisome, Maas said.

The AMI chief executive also said that the copyright law provision which deals with rights reversion for masters applies only one year at a time. That is, 1978 masters revert to artists in 2013; 1979 masters revert to artists in 2014; and so on.

Only 20 to 30 albums a year on average are commercially important for jukebox play, Maas noted. And he added that many artists will probably be willing to allow labels to maintain control of the affected master recordings for two reasons.

First, some artists are probably not interested in assuming the burdens of legal paperwork and technical responsibilities that go with managing the rights to their music and maintaining the physical recording assets, he said.

Second, some artists may find it more attractive to use the masters copyright issue as a bargaining chip for better leverage in negotiations over current contracts. These artists might initially demand rights to their old masters, then enter into negotiations and eventually cede control of old masters to labels in order to win lucrative new deals for their latest music.

What's more, many hit songs are included both in original album releases and several years later in "best of" compilations. So even if artists gain control of one set of masters, the studios may nevertheless retain rights to hit songs through their ownership of later masters. (Such was the case with Radiohead, another major band that did not authorize music for jukebox network play and iTunes sales -- and one that fervently opposed compilations of its songs. But when the group severed its relationship with EMI, the record label assembled and released a two-disc compilation that went on sale on iTunes, which helped digital jukebox companies secure rights to Radiohead's full back catalog.)

The result of all this, said Maas, is that in all likelihood only a handful of significant albums for jukebox play will revert to artists' control in the next few years.

Even if these rights did revert, clearly and completely, to certain artists, and if those artists decided to withhold all public performance rights from jukebox operators, the impact would be minimal due to the sheer volume of other music that is available for jukebox play, the AMI chief said.

"Our network has three million songs on it and would not be dramatically impacted even if those albums got pulled," he said.

Making any potential impact on jukeboxes of masters ownership reversion more problematic is that the effect and scope of the law in question remains unclear in many respects, The New York Times reported.

To cite just one example, the law does not spell out whether backup musicians who participated in master recordings are also due some measure of ownership or residuals when rights revert.

Lastly, almost all music industry observers and legal experts have strong expectations that artists and labels will sue each other over control of certain masters.

Some early lawsuits of this type have already been filed and one case litigated. The only ruling so far, in a case filed over the estate of Bob Marley, resulted in a victory for the label. But the contract in question was probably not typical of most music artists' contracts.

Thus, valuable masters are almost certain to become the focus of lengthy litigation between artists who want to claim control of old masters, and studios that wish to keep ownership and the lucrative licensing rights that go with them.

Such cases could take 10 years to wind their way through the courts before a clear and widely applicable set of precedents is developed.

"Over the next 12 to 18 months, there will be all kinds of lawsuits and other actions filed as artists and labels fight for ownership and control of the more valuable master recordings from 35 years ago," Maas said. "One article I did see said labels are trying to use the argument that these masters are works for hire, so they [the labels] own them forever. I don't think that argument will hold up. Artists are in a good position, but labels will fight hard anyway because it's very important to them financially -- even if it's not very important, ultimately, to consumers or to the jukebox industry."

Long before the dust on this controversy settles in courtrooms, there is the distinct possibility that the Copyright Office might issue "clarifying" regulations to head off even more lawsuits, or that Congress could even pass a revision to the 1976 Copyright Act in order to clarify the law and reduce further time-consuming and costly litigation.

Maas strongly agreed with this possibility: "It's very likely all kinds of clarifying [judgments and new regulations] could come in," he said.

"Bottom line, I don't think it will be a particularly big deal for us," Maas said, adding that he was "pretty well versed" on the issues involved.

Ecast's Scott Walker appeared to agree with Maas that the impact of the new copyright provisions on the jukebox industry would probably be minimal. "Short term [it will have] no effect on our business," he said. "Long term, it could change who we are dealing with, but knowing the way the labels operate, this will be a strung-out battle."

TouchTunes had no comment on the matter.