The music business headlines are touting
the story that Prince has returned to Warner Brothers Records after 18 years
with a deal that will see him regain ownership of his back catalog of
recordings. This deal marks a new era as the ability to terminate master
recording copyright after 35 years was granted in the Copyright Revision Act of
1976 and became effective in 1978, the year that Prince's debut album came
out.
Just as the record business has been
staggering back to its feet after the digital assault started by Napster over a
decade ago, another hard blow to the record industry business model is starting
to have ripple effects. Recording artists and songwriters from 1978 and after
are now entitled to start terminating their contractual transfers and demanding
back their copyrights. The 1976 Copyright Act, in a provision that has
generally been overlooked until now, provides for the termination of copyright
transfers. Even if an artist or songwriter signed a contract with a record
company or music publisher that purports to transfer all rights in a work in
perpetuity, the Copyright Act provides that the author can terminate that grant
and demand that the rights revert to the author in a shorter period of time. This
is a great opportunity for artists and songwriters to get a second bite at the apple, so to speak, and get a better share of the income earned from
their creative works.
Generally speaking, for copyright grants
made on or after January 1, 1978 (the effective date of the 1976 Copyright Act)
the termination period is 35 years under Section 203 of the Copyright Act. For
pre-1978 works the termination period is 56 years after copyright was
originally secured under Section 304. For grants on or after 1978, termination
may be exercised anytime during a 5 year period beginning at the end of 35
years from the execution of the grant or, if the grant concerns the right of
publication of the work, then the period begins on the sooner of 35 years after
publication or 40 years after execution of the grant. Although there are
certain formalities which must be complied with to effectuate transfer, this essentially
means that recording artists and songwriters can start exercising their right
of termination as soon as 2013 – which may effectively decimate many record
company and music publishing catalogs.
Back when the 1976 Copyright Act was
drafted few could envision a world where the artists might not need the record
companies to finance, manufacture, promote, store and distribute their records.
Back then the expectation was that, although any particular artist could
exercise the termination right, what would effectively happen is that the label
and artist would simply be forced to renegotiate a deal to continue working
together. Now in the digital age, however, this is no longer true. Any artist can
demand back their masters and then simply offer them on their own website or
license the rights to an online aggregator with little or no expense. This is
particularly true in the case of catalog recordings since the artist would not
even need the record company to finance the recording costs. The more digital the
music business becomes the more obsolete the large record labels become for
established artists. High profile artists with already established fan bases
and large catalogs such as Blondie, the Cars, Bruce Springsteen and others probably
have no need for much in the way of advertising and marketing of their
recordings, and certainly no need for manufacturing, distributing or
warehousing of the product. Simple ownership and possession of the digitized masters
would be sufficient.
There is one scenario that does bode well
for record companies in that it may steer even established artists to follow
the renegotiation route as Prince has done. Those familiar with record
contracts know that, unlike song publishing contracts which generally provide
for the assignment and transfer of a song copyright to the publisher, most record
contracts provide that the sound recording is created as a “work for hire” for
the record label. Under the 1976 Copyright Act the termination provision is not
applicable to a genuine work for hire grant. However, this does not preclude
recording artists from exercising their right of termination. Just a few years
ago I litigated a case where the Court held that a sound recording does not
qualify as a work for hire. Without getting into all the applicable legal
employer/employee issues involved, there is a great deal of case law which addresses
the subject of “work for hire” and holds that whether a work created by an
employee is a work for hire or not depends on various factors other than just
the language of the contract. This area of law is ripe for litigation by
recording artists who want to exercise their termination rights where the facts
suggest that no genuine work for hire relationship ever existed. Although the
landmark case has yet to be fought, from what I have seen it appears that in
most cases the artist would prevail over the record company on this point. However,
artist like Prince as well as label executives have also realized that the
wiser course may be to negotiate the reversions and retain control of issuing
artists' catalog eligible for copyright terminations.
The termination rights of an artist or
songwriter are generally subject to a 5 year window. Termination must be made effective
within the termination window or the right to terminate the grant is forfeited.
To be effective, the artist or songwriter must serve a written notice of
termination on the original record company or publisher (or its successor) no
more than 10 and no less than 2 years prior to the effective date stated in the
notice. The notice of termination must state the effective date of termination.
Perfection of the termination requires that a copy of the written notice also
be filed with the U.S. Copyright Office prior to the effective date of termination
Although the termination rights of an
artist under the 1976 Copyright Act would only be effective for the U.S. territory, the size of the U.S. consumer
market for recorded music still makes this a valuable right to reclaim.
However, what is good for the artist might further erode the influence of the
major record labels and prove detrimental to the industry in the future, so
labels would be well advised to start planning for the onslaught and try to
forge deals like Prince has done with Warner Brothers.
Wallace Collins is a New York
lawyer specializing in entertainment, copyright, trademark and internet law. He
was a recording artist for Epic Records before attending Fordham Law
School
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