Understanding the New Platforms from a Legal Perspective (Part I)
[Legal]
One of the core areas of my business is licensing music for concert programs and music-based documentaries for television and DVD. Examples of recent projects include “On Stage At World Café Live!” (HDNet), “Elvis by the Presleys” (CBS & DVD), “And You Don’t Stop: 30 Years of Hip Hop” (VH1), and “Punk: Attitude” (IFC and DVD)”. But now every producer of music-based programming should start thinking about new digital “windows” for their shows. The time has come for long-form music video programs on digital media platforms including:
- Internet streaming
- Web downloading
- Cable VOD
- Mobile
- High-definition television (HDTV)
Since MTV style short-form music videos are now widely available on multiple platforms, digital and mobile providers perceive concert footage as a key to setting their services apart.
If a concert or music-based documentary producer is producing for a network, PBS, or a cable service, they should also be thinking of digital platforms as secondary windows in addition, or instead, of DVD. Furthermore, revenue streams from concert footage can be multiplied across multiple platforms. For instance, Network Live is an online venture consisting of AOL Music, the promoter AEG Live and XM Satellite Radio. Led by CEO Kevin Wall, executive producer of the Live 8 concerts, Network Live produces live programming from various AEG-owned venues and provides the footage to its partners AOL Music and XM Satellite Radio.
In this blog, I will discuss how producers of long form music programs can exploit their shows on streaming formats and pertinent legal issues. This will be the first of several blogs in a series. The future blogs in the series will deal with the other platforms listed above.
STREAMING PLATFORMS
As early as 2000, Sony Music was streaming live concerts online of “Live by Request” programs produced for A&E. I cleared the music rights, as well as making the deal with the streaming backend service. In the current landscape, AOLmusic.com recently streamed the Live 8 concerts and attracted a huge audience, offering huge momentum for the Network Live initiative. Elsewhere, Yahoo acquired the rights to former TV show “Pepsi Smash,” a WB summer concert series that was canceled on TV in 2005 in its second season. Yahoo integrated the show into its Yahoo Music portal, providing users with on-demand access to exclusive live performances. Both services invite artists to perform in their studios and offer the resulting footage as exclusive content. Others, including Clear Channel Radio, are also pushing in-studio performances online.
LEGAL ISSUES
So how does a producers of long form music programs deal with new digital platforms? The answer is by negotiating deals with artists for their performance, and music publishers for their songs that include digital video windows. These issues are same notwithstanding the particular digital platform. But the balance of this blog deals with principal legal issues in regard to streaming platforms.
Artists
Contracts between artists and independent producers (check last paragraph below when a record company is the producer) for long form concerts or music based documentaries should include streaming rights. (Short form music videos are generally produced by labels under a standard recording agreement which these days almost always will include broad electronic rights including streaming.) A comprehensive definition should be included that makes it clear that services such as Cinema Now are included. Although Cinema Now offers mostly movies, they also offer a wide diversity of concert videos (e.g., “English Bach Festival” to “U.K. Subs – Punk Can Take It”). Cinema Now's business model is to allow a consumer to download a program for a period of 24 hours for a fee from $3.99 for new arrivals and $2.99 for other titles. After the 24 hours the program disappears from your hard drive. This is sometimes referred to as a tethered download, which is really a form of streaming because you can't permanently download or own the program.
Producers will wish to get these potentially valuable rights on a buyout basis offering as little as possible up front. Their argument is that the concert is "promotional" for the artists CDs or live tours. This argument increasingly lacks force in comparison with the artist's prior success. Stars will want a royalty based on per-play fees or advertising revenues including "floors" that will preclude streaming unless the artists get paid certain minimum amounts. Of course the permutations are only limited by the imaginations of the lawyers and the client's tolerance for legal fees.
Artists should ask for Most Favored Nations treatment (the contract concept that you cannot provide more favorable terms to any other artist) if other artists appear in the concert. The producer if faced with this request should "carve out" platinum artists who may justifiably demand better terms than others.
Music Publishers
In negotiating rates for the right to use the songs in streaming services producers should emphasize the experimental nature of these new platforms and that audiences for streaming still generally have no where near TV Network popularity. They should be aiming to secure the use of the songs at the same rates that typically apply to cable TV. Those rates can be less than $1,000 per song for three to five years. If the stream emanates in a foreign country the producer may also ask to take advantage of foreign rates applicable to streaming which may be lower than U.S. rates. For instance certain territories may be subject to pre-negotiated fees payable to the owners of songs for streaming, downloading and mobile. Of course these distinctions are subtle and should be negotiated by an experienced professional.
Record Companies
When I was at Sony Music we would often produce concert shows for our artists (J Lo, Springsteen, Tony Bennett, etc.) Generally the record contract contains terms applicable to the artists' royalties for long form programs including broadcast and home video so a new negotiation of these terms is not necessary unless the artist demands a better deal than when they originally entered into the recording agreement. Standard agreements now include comprehensive provisions for income from digital distribution of the artist's music, including long form programming. The record companies have been trying to apply the artists normal royalty rate which may vary from 10% to 20% to sales and licenses of digital music and generally these will be even less for audiovisual programs. The Record companies also try secure discounted rates for use of songs that the artist has written. This is known as the "Controlled Composition" clause. Usually the label acquires a free license for short form videos containing songs that the artist has written. The labels will generally try to acquire in the recording agreement a free license for use of the artist's songs in long form music video programs as well, but more established artists will generally able to avoid this.
Blocking rights
Almost every record agreement requires that the artist make "records" exclusively for the label and the word "records" is defined very broadly as any recording of music including audiovisual recordings for distribution for home use. This covers CDs and DVDs. These exclusive rights are sometimes referred to as "blocking" rights because they block the artist and any third party from making and distributing that artist's CDs or DVDs. Standard recording contracts also generally include a clause that the artist cannot record more than two songs for TV show without its consent. But this provision is generally not enforced by the label because they generally perceive concert TV shows as promoting the artist and not interfering with record or DVD sales. For instance, when I was at Sony we would never complain if MTV produced an "Unplugged" concert with one of our artists, and the neither the artist nor MTV would ask for our consent. On the other hand, the labels would not accept any third party putting out a CD or DVD without their permission. They would send cease and desist letter against any thrid party distributor arguing that such distribution constituted "interference with contract." Streaming is in-between TV and DVD. The new standard recording agreement gives the label exclusive rights in any electronic delivery of their music including streaming. But since there are no permanent copies, it can be argued that streaming is like TV and neither the artist or streaming service should have to clear the labels' blocking rights. But the labels may perceive streaming as similar to home video because the consumer can access the program any time they wish thus displacing sales of their artist's DVDs.
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Please anticipate the second blog in this series next week on mobile platforms for concert footage.
Posted by Steve Gordon, Attorney
