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A Matter Of Trust

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I remember going to my first ATV annual corporate get together in Los Angeles in 1979. It was soon after I was appointed Managing Director of the Australian division of the music company.

Sam Trust, the President of the US division, gave a visionary speech to the small group of executives present at the confab. In it he posited a not-too-distant future point in time when there would only be three record companies and the implications of this for an “independent” publisher such as ATV.

Now, a little more than thirty years later Sam’s vision has become a reality. Subject to a couple of anti-trust watch-dogs giving approval, that same company, ATV, albeit with a new parent, is set to add EMI’s publishing catalogues to its already massive catalogue of songs and become the biggest music publishing enterprise on the planet. No mean feat and almost certainly good news for the shareholders.

But what about the stakeholders: those who enable the ‘starmaker machinery behind the popular song’ to have their jobs and their limos and their expense accounts: the songwriters who write the songs, and the punters who pay for their music? How will massive market dominance by only a few corporations play out – so as to serve the interests not only of shareholders but also the public good. (Full disclosure: I am currently advising a songwriter who is in a legal dispute with Sony at present relevant to issues that are discussed in this article. The writer was the first songwriter I signed to ATV/Northern Songs in 1978).

Songwriters may very well be happy with a merger as they might assume that productivity gains from one company owning so many songs could lead to increased royalty accountings for creators. However, I would suggest that they should think again. So too should those businesses that sell products and services to the end users who casually and easily step across IP boundaries.

We all should have figured out by now that copyrights are property and infringement is copyright theft. However, unlike physical goods intellectual property is a ‘good’ whose core value increases the more that demand for it grows, and the ability to supply infinite copies digitally has no incremental cost to the owner. And that is why in spite of all the rumours of declining revenues, giant entertainment corporations still pay a premium for good IP.

Consider this piece of information gleaned from the APRA AGM last week in Sydney: Last year the performing rights revenues in Australia collected by APRA from Apple alone were more than the performing rights revenue collected by APRA from the public broadcaster, the ABC. The CEO of APRA, Brett Cottle, announced this at the AGM, so I assume that it is now in the public domain. He then went on to say that he expected that within two years performing rights income paid by Apple will be greater than the combined total collected from Broadcast TV and Radio in Australia. Apple is on track to be the biggest provider of performing rights income for songwriters. It was a shock to me – particularly since the only performances of music that Apple is involved in are associated with music available through iTunes – which I wouldn’t have thought constituted a public performance.

Meanwhile in the US copyright owners are pushing hard for Congress to pass a new law called the Stop Online Piracy Act. Because Australia is now a signatory to various trade and copyright agreements this has relevance for Australia regardless of the fact that it is to all intents and purposes purely an American piece of legislation.

The legislation is apparently drafted so broadly that it may allow a copyright owner to take action against anyone who may be construed to have played a part in a copyright infringement, however unwitting or unwilling that action. Some commentators have said that this law, if enacted, would not be dissimilar to a law that would make the people who built the freeways guilty of aiding and abetting bank robbers by enabling their quick getaway. Maybe Apple could be in the firing line if this legislation gets up because they provided someone with a computer and a modem. SOPA gives publishers a very big stick, which may be a reasonable thing in a world where copying zeroes and ones is so easy.

But this approach has the danger of creating a massive imbalance and a denial of natural justice, particularly to songwriters.

Let’s say that there are broadly three kinds of infringement. One is when obvious piracy is the driving force – replication of songs for financial gain that deprives writers, artists and companies of income. Then there is the instance of what I would call casual use – a song being replicated in a way that probably should be paid for (but often isn’t) and in any event doesn’t lead to any financial gain. This is when someone synchronizes a song to their holiday movies for instance, or makes a compilation CD of their favorite songs. The third, which is much more obscure but, in my opinion, the most invidious, is when a song is plagiarized and there is a resulting financial gain to the legitimate businesses that license it, replicate it and sell it.

Let’s examine this last example. Consider what will inevitably happen when paganization ‘in house’ takes place as a result of the aggregation of catalogues and copyrights. Not by design, but purely by accident. Imagine: two songs that have the same tune. One was copyrighted before the other. It doesn’t matter whether they were both hits or they weren’t. One is a derivative work and the original writer should be paid. But how is the original writer to be protected in this scenario?

What used to happen when there were many publishers is this: If it seemed like a song was a rip off and the parties couldn’t agree on a commercial settlement, the publisher of the infringed song would take legal action against the publisher and writer(s) of the infringing song. There are plenty of well-documented cases, such as the recent case brought against Men At Work by the publishers of “A Kookaburra Sits In the Old Gum Tree”.

When one publisher controls both songs life gets a lot more complicated.

Most assignments between writers and publishers provide that the writer assigns not only the song copyright itself to the publisher, but a number of other rights. These typically would include the responsibility for determining whether to take legal action with regard to a copyright infringement action. What this means is that it is the publisher who has the final say as to whether to sue. The songwriter can’t demand it, and remarkably, the songwriter who wrote the original song can’t sue the infringing publisher himself, since he or she isn’t the owner of the song anymore. Infringement action is about the protection of the owner’s property interest.

If the same publisher publishes both songs, they are not going to be able to sue themselves. In fact the publisher wouldn’t even be able to get a lawyer to handle the case. All the lawyers that represent the company would axiomatically have a conflict of interest.

By way of personal experience of lawyers and conflict: In a life before becoming a publisher, I was a songwriter. In the 1960’s I was offered a songwriting contract by Peter Phillips, who later on became the British MD of ATV Music – there is that name again. Prior to signing the agreement, I had to tell him that several years previously I had signed a contract with Mervyn Music, Mervyn Conn’s company. Mervyn had let all the other members of my band terminate their publishing agreements with his publishing company when CBS Records decided to not pick up the option on our record deal, a year earlier. At the time Mervyn told me that he wanted to keep me under contract because I had “lip” and he thought that because of that I would be successful.

Peter Phillips groaned when I told him the story, and asked to see my publishing contract, which he sent to his lawyer for review. A couple of days later I was sitting in a meeting with him and he was telling me that everything was ok, that his lawyer had provided advice that the contract with Mervyn wasn’t worth the paper it was printed on, etc. Literally, while we were sitting in his office Peter received an urgent phone call – from his lawyer. He told Peter that he had to withdraw his formal advice on the agreement, because one of his law partners from the same firm had drafted the Mervyn Music agreement and that therefore they had a conflict of interest. After Peter explained all this to me he told me that he would ignore the new advice if I would. I signed the new contract.

What I took away from the experience was that apparently lawyers can be wrong from time to time. So can law makers. I believe that the law makers who allow changes to laws that enable greater powers to be given to copyright owners must balance any changes with a requirement of greater fiduciary responsibility on copyright owners. The fundamental obligations of a publisher to a writer must be re-examined. It is, after all, a matter of trust.

Writers tend to assume a lot of things about the relationship that they have with their publishers. Unfortunately, even small publishers who used to argue for greater power and responsibility for the little guy seem to have it so good that they just want to sit back and take it easy.

While I was at the APRA AGM I bumped into a few publishers who I knew and asked them the music business was treating them. Their answers were all the same: “No stress… an easy life… everything automated… we just sit back and collect the money these days…”

The problem is not just that of giant publishing houses that may fail to act in the best interests of their songwriters. Now we also have complacent small publishers who find life is easy. They don’t want complications. Innovation is by its very nature complicated. And clearly there is no innovation required now in publishing. That does not bode well for the songwriter.

Publishers and IP owners are working assiduously to get new laws enacted that will increase their power, authority and through that their profitability. Songwriters should resist support for any laws that do not regulate the duty of care that publishers have with regard to songwriters.

It really is a matter of trust.

 

Chris Gilbey is a serial entrepreneur, published author and music industry veteran. He was a publishing and record company executive in Australia who was involved in the early careers of AC/DC, John Paul Young, The Angels, InXs, Keith Urban, Tommy Emmanuel and others. He started one of the first Internet radio stations, was CEO of an ASX listed Digital Signal Processing company (Lake Technology), consulted on global marketing to Dolby Laboratories, is the co-founder and non-exec director of company that provides metrics on social video (Vquence). He now consults on IP commercialization and business formation, and lectures on Media and Communications at the University of Wollongong.

 

 

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