Cloud Computing vs. File Sharing
By Lauren Mack
This year’s CMJ CLE event kicked off with a discussion of two of the biggest topics in the music industry right now: piracy and cloud computing. Although cloud music services have been hyped as the music industry’s solution to piracy, there are still many questions about the legality of the cloud music services themselves. Mark Eisenberg, Co-Founder and Principal of Latticeworks Media, explained that this uncertainty stems from the existing laws not fitting new paradigms. The more innovative companies are, the more uncertainty there is and the more likely the issue is to be caught up in years of litigation.
Moderator Michael Poster, Partner at Vandenberg & Feliu LLP, questioned the panel on what impact they thought the recent decision in the copyright infringement suit against cloud music provider MP3tunes would have. The panelists agreed that it did little to create certainty for cloud music providers because it was a lower court decision, and the case is likely at the beginning of a long appeal process. Adam Parness, Senior Director of Music Licensing at Rhapsody International, noted that one immediate effect it did have was to change the leverage points of parties currently in negotiations for cloud music services.
Perhaps the safest route for a startup wanting to include music in its service is to allow the users to upload their own content. Michael Elkin, Managing Partner of Winston & Strawn LLP New York’s office, explained that several courts have ruled that general knowledge of infringing content uploaded by a user is not enough to hold a service provider liable for copyright infringement under Section 512 of the Digital Millennium Copyright Act. This creates more certainty for a cloud service provider that a YouTube-like model will shield it from suit, rather than a model untested by the courts.
Unlocking Revenue Streams
By Stella Goldstein
Over coffee and croissants, attorneys, artists and other industry big-wigs gathered in NYU’s Rosenthal Pavilion to talk about how to recover revenue streams in the shrinking music economy. Moderator Jason Boyarski’s (Chief Operating Officer, HeadOverHealsCollective) introductory reference to Cuba Gooding, Jr.’s “show me the money” quip from Jerry McGuire was met with laughter, but all sides recognized the serious undercurrent in that lighthearted statement. “At the end of the day…there is an inherent need to maintain and track the money that is coming in from a lot of new media sources,” Boyarski explained.
The panel went on to discuss the nuts and bolts of the audit process, and the importance of working closely with clients’ attorneys and management teams to ensure that they understand the issues. Christopher Hull, CPA and Partner at Prager & Fenton, pointed out that audit issues vary, but they generally derive from six sources: non-conforming contract language, increased human error due to understaffing, calculation based on company policy rather than royalty agreements, migration to digital business, company consolidation and, of course, good ol’ difference of opinion. Hull recommended trying to stratify these issues as much as possible so that interested parties can have a meaningful discussion, resolve disagreements and proceed to the settlement phase. That being said, he acknowledged that there are occasions when settlements don’t work, and you have to litigate to press your rights.
Yes, the music economy is shrinking. Yes, pennies are important. And now, more than ever, we need to start paying attention to them and using them effectively. But it isn’t hopeless. The sources for new revenue streams are there. It’s about focus energy in new areas, spotting the opportunities early and taking advantage. It’s not one step forward, two steps back. It’s about thinking more creatively.
Getting in Synch with Section 115
By David Collado
This panel took a deep dive into the past, present and future of music licensing with an eye towards answering two fundamental questions: Is music licensing broken and, if so, how can we fix it? Foreshadowing the technical level of the conversation, one panelist gave a crash course in music licensing terminology, clarifying that “musical work” refers to the traditional composition of a musical piece, and that “sound recording” is a derivative work of a composition that requires a separate license to be sold, rented or otherwise distributed.
Next came a brief introduction to statutory licenses, and how they work. In a nutshell, a statutory license (also known as a compulsory license), mandates that rights holders must license their previously released content to anyone who adheres to the guidelines spelled out in the statute. Section 115 of the Copyright Act attempts to mandate a compulsory license to digital reproductions, such as those used by online subscription services like Rhapsody and Pandora. But the current statute is still unclear, and many interpret it to implicitly require rights clearances for individual songs.
Rights holders want to be able to leverage the market’s supply and demand forces to get the most value out their content. This counterbalances consumers’ desire for increased access and better user experiences which statutory licenses can deliver. And so the debate goes on…
Real World Entertainment Ethics
By David Collado
The “Real World Entertainment Ethics” panel was like a law class, complete with hypotheticals and issue spotting, accompanied by ‘80s music interludes. The hypotheticals placed the audience in the shoes of a junior partner at a law firm having to deal with a friend and his band Struggles. The purpose of the hypotheticals was to help lawyers simulate some of the ethical considerations that are unique to entertainment law.
After walking through these exercises, hindsight taught the entertainment lawyers to work with advanced conflict waivers. Properly crafted, not too broad or narrow, these clauses can help an entertainment lawyer avoid difficult situations as relationships with artists evolve. A few key issues to address in a waiver are detailed informed consent, zealousness of representation if there are multiple clients in the same group, and the risk of confidential information exposure.
One final point the panel made clear was that there is no privacy or privilege when negotiating with multiple clients jointly. In other words, entertainment lawyers dealing with bands should let each member know that there is no individual attorney-client privilege between them. Each band member is privy to communications between the attorney and all other band members.
Alternative Distribution, Major Success
By Caroline Camp
The content of media is not the only thing that matters to consumers. As new modes of distribution become available, new markets begin to emerge. Steven R. Masur, Esq., Senior Partner at Masur Law, opened the panel by suggesting that they should first determine what the market actually is, and then consider the legal issues surrounding distribution.
Licensors only want to license what they know they have today, but licensees want to create a new model, and they want rights to any media now known or developed hereafter. With music, things can get quite tricky. If a song is licensed for TV, does that license cover broadcast of the program on a mobile device? Licensees should make sure that all of their releases are in check so that the content can be cut up and distributed as needed.
There are many markets out there, including mobile ones as well as foreign ones, which are ripe for discovery and further development. The growth in these markets is on an upward rise, and distribution licenses need to be upward and forward thinking.
The Next Level in Gamification:
Deal Points for Developing Casual and Social Games
By Lauren Mack
Margaret Wallace, CEO of Playmatics, introduced the panel topic by crediting Jesse Schell of Schell Games as the first to use the now ubiquitous term “gamification.” But what exactly does gamification mean? In broad terms, gamification simply means using game-like elements to engage audiences.
There are three basic models that companies can use to gamify their businesses. The first, and most expensive, is to engage a developer to build the game as a work-for-hire. To keep players interested, the company may have the developer continue to develop and maintain the game. The second model involves the company providing the intellectual property, such as characters and storylines, to a developer who creates the code for the game. Both parties work together and the profits are split. The third and least expensive model is one where the company licenses its intellectual property to the developer, who creates the game and gives the company a share of the revenue.
Previously, the subscription model was popular for games, but the industry has now shifted to a dual currency model where some elements are free, while others require real money for in-game currency. Because the contractual norms for game deals differ substantially from those of film and music, it is essential that attorneys be aware of the unique standards and issues that come with game agreements.
Hypothetical Reality: Rights Clearances in Unscripted Television
By Jason Rindenau
Moderator Marc S. Reisler, Esq., Partner at Holland & Knight, brought an interesting spin to the “Hypothetical Reality” panel, setting the scene with a story all those in attendance could follow, regardless of their familiarity with the subject matter. “I want to tell you a story,” he began, “about the next hot, young reality TV stars: John, Paul, George and…Rupert.” Tom Cavanaugh, Senior Vice-President of Business and Legal Affairs at Fox Music, couldn’t help but smile at this reference to his beleaguered boss, and the audience settled in for what was a creative explanation of how to best protect fledgling reality series from the many clearance hazards facing them.
The discussion largely focused on copyright and trademark matters, offering such basic rules as what protection titles and expressions are afforded under the law. The speakers also kept their fictional reality stars at the center of the conversation, raising hypothetical questions like what if the show were to borrow a title from a song originally written by Paul McCartney?
Featuring lawyers and attorneys who’ve represented shows like American Idol, Jersey Shore, Cops and Dog The Bounty Hunter, the panel still could not offer any foolproof methods for following the letter of the law. It’s all too new. What they did share was sage advice for maximizing the success of John, Paul, George (and Rupert) while staying on the right side of it.