Last September, Techdirt wrote about an extremely thorough review of the "three strikes" schemes around the world, which showed pretty conclusively that they simply don't achieve their stated goals. But that doesn't seem to worry the recording companies, which are trying again to compel the second-biggest ISP in Ireland to bring in the "three strikes" approach, as TorrentFreak reports:
The world's largest record labels have gone to court to force Ireland's second largest Internet service provider to take action against file-sharers. Following a failed bid three-and-a-half years ago, Sony, Universal and Warner are back with fresh action against UPC, demanding that the ISP implements a three-strikes-and-you're-out approach to its pirating customers.
There's quite a complicated backstory to all this, which Techdirt has been tracking for a while. In 2008, recording companies sued Ireland's largest ISP, Eircom, over alleged file sharing by its customers. As part of a settlement, Eircom agreed to bring in a "three strikes" system. The recording companies then moved on to UPC, which refused to roll over, and went on to defeat the labels in court. However, since then the legal landscape in Ireland has changed, as TorrentFreak explains:
The case, set to go before the Commercial Court, could turn on whether legislation introduced in Ireland during 2012 will allow a judgment in [the Irish Recorded Music Association]'s favor. Already the courts have shown a willingness to clamp down on illegal file-sharing, ordering ISP blockades of sites including The Pirate Bay and KickassTorrents.
It's really ridiculous to see the international recording industry expending so much money and effort trying to force ISPs to punish their customers in this way when we have evidence from around the world that the "three strikes" approach just doesn't work. It's also sad to see the Irish government aiding and abetting them in this pointless attack on its own citizens.
One of the more frustrating things in the startup world is the view that many have that the "goal" is to raise VC funding, and then everything's "done." The same sort of thing seems to happen in the music industry, whereby many musicians get so focused on being "signed" to a label, that they never step back and question if that's even necessary. In fact, they seem to think that "unsigned" has a stigma attached to it, just as many startups that haven't been funded feel as if they're somehow inferior. To correct that "impression" two of my favorite thinkers on the music industry, Andrew Dubber and Steve Lawson, have launched Any And All Records. The basics are explained:
We want you to sign to our record label.
But before you do… you should know that we will do nothing for you. That said, we also won’t cost you anything, we won’t take anything from you or own anything of yours either. No exploitation – and there is no small print.
We want to sign you simply so that you will no longer be “unsigned”. We want to sign EVERYONE so that there are no more “unsigned artists” in the world.
That’s our mission.
So go ahead and join what should quickly become the largest music label on the planet, based on the number of artists signed. And, while the label won't "release" your record, it certainly will provide a ton of useful resources for independent musicians to help create, promote, distribute and monetize their art. That page alone is a pretty good resource list. They also will provide some nice graphics if you want to show people that you're "signed."
Of course, some will argue that this is a joke, and it sort of is. But it's one that is making a really good point. Artists shouldn't be embarrassed by the fact that they aren't "signed" to a label. These days, there are so many ways that independent musicians can do things, that not every artist needs a label and "getting signed" doesn't need to be the primary goal.
One thing that's always amazed me is how the record labels ever got away with making it a standard thing that musicians hand over their copyrights to the label entirely. Sure, the labels put up some risk capital and handle part of the business side of things, but to totally give up all of your copyrights? In the tech industry, we've got lots of experience with risk capital, but venture capital deals (even as many entrepreneurs bemoan the deal terms) never go as far as record label deals in basically claiming 100% equity ownership in exchange for a piddly royalty (and only after you pay back the initial loan). But, of course, thanks to a broken system, musicians basically had little choice in the past but to sign a record label deal -- and with just a few large players in the space, giving away your entire output was considered "standard."
But, that leads to some troubling results. We've already seen how artists have complained about their own works being used in suing fans. These artists feel helpless about this legal campaign that attacks their fans, potentially creating significant problems for any attempt by those musicians to connect with fans and earn a living going forward.
Take, for example, the tragic story of the band All Shall Perish, as chronicled on TorrentFreak. Apparently, the band's German label handed over the rights to sue to a Panama-based copyright troll who is now suing people in the US, contrary to the band's own wishes. The band, of course, recognizes that suing dozens of its biggest fans is not a good idea, but seems powerless to stop things.
“The band’s attorney made it clear to the licensing people [at Nuclear Blast Records] that the band wanted no part in lawsuits against fans. The industry is changing, illegal downloading is troublesome for bands and of course, for record labels, but whatever the solution will be – streaming, subscription, Kickstarter, new ways of looking at it entirely, whatever comes about – the band and I are in agreement (as is their lawyer) that SUING MUSIC FANS SURE ISN’T IT,” Downey told TorrentFreak.
Apparently, after a lot of pressure from the band, the label claims it will tell the trolling operation, World Digital Rights, to dismiss the lawsuits. The band is now trying to regain control of its copyrights, and is saying that it would much prefer to protect its fans rather than sue them:
“The band, their attorney and myself have and will continue to take any steps to protect their fans, yes, even those who file trade,” Downey told us. “The band would prefer that their fans legally purchase, stream or otherwise enjoy their music. But they definitely have not, will not and do not wish to sue their fans.”
Last month, we posted an excellent video by entertainment attorney Martin F. Frascogna of the Fascogna Entertainment Law firm, deciphering some of the tricks of the trade in a standard recording industry contract, and showing how a band could still end up owing $500,000 even after selling a million albums. Most of that discussion was theoretical, as most record deals are kept confidential. However, due to a legal dispute involving the band Breaking Benjamin, that band's full contract was filed as part of the court documents in the case (embedded below). We asked Fascogna if he'd like to analyze the actual contract, and he did us one better, and did a full analysis of the lawsuit itself as well. He also created a new video -- embedded in the story, about the role of trademark for bands. Enjoy.
Breaking Benjamin’s internal struggle has left the group in shambles. I promise this will only get worse, but, in the interim, the dispute has me mildly wanting more. Chalk this up to the fact that I didn’t know people cared so much about the group, nor did I know they had so many albums out on the market, which is partially the cause of their internal problems to begin with.
Internal disputes are commonplace in the music industry, and honestly I’m thankful -- otherwise I would be an unemployed attorney. Call it snooping but I decided to poke around into the vast 98+ page suit/band agreement/and recording contract. It’s a fascinating soap opera. The dispute is filled with villains, heroes, bad actors, flashes of comedic relief, and loads of drama. Before breaking down the intricate legal components, it’s important to first understand the players, potential players, and the significant roles each play.
Benjamin Burnley – The group’s front man put the entire controversy in motion. Essentially, Burnley was under the impression he fired fellow band members Aaron Fincke and Mark Klepaski. Stated in their Band Agreement, any internal dispute would be handled via arbitration. If you don’t know what this means, arbitration is a method of settling disputes outside of court. This route is extremely common in the music industry because arbitration records typically remain private unlike court documents that can be publicly accessed. Burnley, via his legal counsel Brian Caplan and Jonathan Ross, requests to activate the arbitration clause in the band agreement and demands an award of $250,000. More on the amount later.
Aaron Fincke and Mark Klepaski, through counsel, James Oschal of Rosenn, Jenkins and Greenwald LLP, claim the Band Agreement is null and void therefore making an arbitration clause irrelevant. They request that the Pennsylvania state court hear the case and dismiss the validity of the arbitration clause. At this time, they are not seeking any monetary damages. Believe me that’s coming.
Hollywood Records – Currently they are a non-factor but I promise they’ll become the star of this dispute in no time. Basically all the label wants is to release the album(s) allegedly agreed upon between the label and band. Sideline this thought for a minute as it will become a significant legal stance later on.
The time frame of events will also prove to be vital in this case.
January 2009 – Burnley, Fincke, and Klepaski enter into a Band Agreement.
March 2010 – Breaking Benjamin allegedly enter into a Recording Agreement with Hollywood Records.
March 2010 – Burnley allegedly communicates to band members, Fincke and Klepaski, along with the band's attorney, Nick Farrara, that he didn’t want to proceed with the Recording Agreement.
March 2011 – Burnley dismisses Fincke and Klepaski from the band.
June 6 2011 – Burnley seeks arbitration and a remedy of $250,000 from Fincke and Klepaski.
DATE UNCLEAR ON COURT DOCUMENTATION – Fincke and Klepaski request a declaratory judgment from the Pa. State Court.
There three principal legal issues in the dispute:
Is the Band Agreement valid because the Band Agreement essentially dictates who entered into a contract with Hollywood Records? Meaning – Did Breaking Benjamin as a collective group OR as Finckle and Klepaski acting as individuals and unauthorized representatives of the band sign the Recording Agreement.
Who owns the Breaking Benjamin trademark? The trademark dictates how the band proceeds with future recordings.
What happens to the Hollywood Records Agreement?
Bonus: Because label haters probably want me to dissect the Recording Agreement into a bloody carcass, due to the cyber-bullying and arm-pulling, I’ll reluctantly do so. However, I warn you that during this time of the legal dispute, the Recording Agreement is somewhat irrelevant as the Band Agreement and the Breaking Benjamin internal drama must unravel first.
THE BAND AGREEMENT:
Every major recording artist has an internal Band Agreement (if they don’t, they should). The agreement dictates how overall band business is handled in times of dispute, fund disbursements, etc. Courts traditionally look no further than the Four Corners Rule, meaning they only look at what’s taking place in the four corners of the legal document (i.e. – Band Agreement) that the group collectively signed. Sometimes the group’s intentions allude to one conclusion but the actual language interprets otherwise. In the Breaking Benjamin Band Agreement, it’s unmistakably clear that Burnley started the group, is the creative force behind the group and essentially dictates the group’s decisions. Evident in the agreement, Burnley can dismiss a fellow band member for “just cause.” This is interesting. This type of language is fairly standard in a “Band Agreement” but not so standard in a “Partnership Agreement.” These are two different agreements entirely. Some groups operate as a partnership, meaning each active member plays an equal role. For example if the group is made up of four members, each member essentially has a 25% stake and so forth. Here, through legal arguments stated by both sides, they use the language interchangeably – Band agreement and Partnership agreement. If the document is indeed a Partnership Agreement, this entire dispute could quickly end because Fincke and Klepaski, acting as a majority vote, could enter into band decisions on behalf of the group without Burnley’s authorization. Oddly enough, this legal stance hasn’t been made nor does it appear it’s going to be. The big city attorneys must know something I don’t. Because we’re led to believe the group has entered into a Band Agreement (as opposed to a Partnership Agreement), the contract’s four corners language will run the show.
The contract clearly states that Burnley can dismiss members with “just cause,” that disputes will be addressed via “arbitration” and that any “departed member has no right to ‘ID Materials License Terms’ nor shall they have the right to utilize the group trademark” as addressed in Section 5. Lastly, “all decisions must be collectively made,” which makes it clear we’re dealing with a Band Agreement. A Partnership Agreement would allow for a majority vote, not collective. In addition, apparently back when the group was friends, there is some language anticipating Burnley’s poor health and slew of unstable disorders and how it could affect the band’s income stream. For example, the agreement would become invalid should Burnley decease or become disabled prior to any studio album completion. Personally speaking, this is where the drafter of the contract went wrong because they didn’t identify what happens if this clause is activated, rather it just states that the contract becomes null and void.
Because the agreement in place appears to be a Band Agreement (not a Partnership Agreement), (a) no departing member has rights to a trademark, (b) all band decisions must be decided upon by all three members, and (c) Burnley could dismiss members with “just cause.” Therefore, since all three members agreed to these terms it appears (1) Burnley’s request for arbitration is valid, (2) Breaking Benjamin (as a group) didn’t enter into a Recording Agreement with Hollywood Records because Burnley, allegedly, didn’t agree to the terms, and (3) the dismissed members couldn’t enter into a Recording Agreement on Breaking Benjamin’s behalf because they weren’t authorized to make this decision.
WHAT HAPPENS TO THE TRADEMARK -
Because a band isn’t worth too much money if they don’t have a trademark, who will own the Breaking Benjamin trademark after this entire ordeal? For example, should it be Burnley, he could then hire new band members and continue touring, recording, promoting, etc. under the name Breaking Benjamin. Should it be Fincke and Klepaski, they may/may not be able to hire new members and keep operating under the name Breaking Benjamin without the group founder Benjamin Burnley. Trademark ownership is no joke because depending upon who legally filed for the mark (i.e. – the name on the registration form with the USPTO) and what the agreements say about the rightful owner(s), somebody will have to stop using the mark. Trademark ownership essentially means leverage and control because whoever owns the mark has both. To explain this further, I've created this video, which breaks down why trademark is important to music professionals.
Section 5 of the Band Agreement states: “Fincke and Klepaski hereby irrevocably assign to Burnley any and all rights, title and interest that Fincke and Klepaski may have in the band name “Breaking Benjamin” as well as any and all logo(s) and/or trademarks in any manner collected thereto.” Therefore, regardless of how the court interprets the contract (i.e. – Band Agreement v. Partnership Agreement), Fincke and Klepaski have assigned their rights to the Breaking Benjamin trademark to Burnley. Further meaning Burnley can be the only surviving member of Breaking Benjamin as Fincke and Klepaski, whether rightfully dismissed from the group or not, can NOT use the name Breaking Benjamin. If future albums are to be released, Benjamin Burnley must be on the album and must authorize the use of the trademark.
WHAT HAPPENS WITH HOLLYWOOD RECORDS?
The recordings being disputed are (1) a remake of “Blow Me Away”, and (2) the “Rarities” project. In order to be granted permission on these additional projects, Hollywood Records would have to secure the authorization of all the active members of Breaking Benjamin. Under this agreement, just as the previous Hollywood Records agreements with the group, Hollywood Records would be granted universal territorial rights with the recording, along with various other legal nuances such as trademark use, etc. Universe? Hollywood Records clearly anticipates a large expansion project. Oddly enough “universal territorial” rights are somewhat standard, as this got started when some overly cautious attorney was concerned about radio signals being sent out into outer space and who would legally own the music. Yes, I’m serious. Personally, I like to protect my clients throughout the galaxy just in case there is some intergalactic distribution system established during my lifetime, but that’s neither here nor there....
The Hollywood Records contract proves pretty standard for a Recording Agreement. They scream big numbers, make grand promises, etc., all while the actual language of the contract slowly chips away at Breaking Benjamin’s potential income stream.
Just as my earlier video states, you’ll see huge reductions with recording costs (Section 5), Reserves deductions, Advances, etc..
Honestly, the amount being disputed, $250,000, could actually be $0, because Breaking Benjamin has yet to make money off the new recordings, rather than just racking up debt. Within the Recording Agreement, which was originally entered into by Burnley and Hummel (a former band member), then later amended to include Fincke and Klepaski, “Hollywood shall NOT remix, edit, or materially alter without the BANDS consent.” This clause would leave one to believe Hollywood Records illegally released the new version of Blown Away, because they didn’t have the band's consent; and because they didn’t receive authorization from Breaking Benjamin’s entire band (i.e. – Burnley, Klepaski, and Fincke), they couldn’t release the “Rarities” project. Clearly this is the end of the story, right? Wrong. I anticipate Hollywood Records is getting revved up.
Carefully drafted and tactfully scattered throughout the Recording Agreement, Hollywood has built in an insurance policy to assure they don’t get left out in the cold. Individually, these clauses may not mean a lot but you have to piece them together like a puzzle to see the major effect. The Recording Agreement, much like all major label agreements, has four really sneaky language elements that assures they’ll never get screwed over:
“In our reasonable effort”
“Unique Services”
“Notice must be mailed”
“Members will be joint and severally liable”
This doesn’t appear to be alarming on its face, right? Unfortunately all of these statements pack a heavy legal punch. “In our reasonable efforts” is what’s referred to as cautious language. Let’s decode that statement to find its real meaning - “we’ll try really really hard (subjectively speaking).” Apply this language to the Hollywood contract and they have essentially agreed to make their best efforts to agree to the terms with Breaking Benjamin. They may not have to fulfill the contract, but they’ll try really really hard. Ouch, this is getting shaky already.
How about “unique services?” Contractually speaking, Hollywood acknowledges that the band is unique (i.e. – there is nobody else in the entire universe like them). What a great stroke of ego for a band, but what this means is if the group can’t carry out their contractual obligations due to the fact that they are so “unique,” the label will be unable to recover from such damages because they can’t find a comparable group which could mitigate the damages. Oh no, this is getting worse.
Perhaps the two silent killers come with the last two clauses. “Notice must be mailed” means that if a group can’t perform their obligations, they must provide the label with a written notice. Here, based upon their previous contracts with Breaking Benjamin, Hollywood Records could take the stance that they were under the impression they could move forward on additional projects plus they were under the impression based upon Fincke and Klepaski statements that they could do so. Because no formal notice was mailed, no breach occurred. Right? It’s a legal argument, which may play out soon enough. Finally, buried in the contract Hollywood states that each member will be held jointly and severally liable. This means that if one party has done something wrong, they will all be held accountable. This alone will hang the group.
Breaking Benjamin has some tough times ahead. As the courts will likely determine Fincke and Klepaski were rightfully dismissed from the group, that’s also about the time Hollywood Records will come calling with their own suit about Breaking Benjamin. At least that’s what I would do if I worked as counsel for Hollywood. Unfortunately Burnley, Fincke, and Klepaski will have to reunite to defend the case. It’s beside the point who’s a member of Breaking Benjamin and who isn’t at that point, because in Hollywood Record’s eyes, authorization by one member means authorization by all. If Fincke and Klepaski agreed to the project, so did Breaking Benjamin. The group will be sued and then Fincke, Klepaski, and Burnley will once again turn to the Band Agreement to determine who’s paying who.
We've definitely seen plenty of confusion from record labels over the value of Spotify and similar services. But, a heavy metal/hardcore label, Century Media (which runs a variety of smaller labels: InsideOutMusic, Superballmusic, Ain't no Grave Records, Hollywood Waste and People Like You) has claimed that it's pulling all its music from Spotify to "protect artists." It's a funny way to "protect" artists by punishing fans who want to hear them. They complain that "physical sales are dropping drastically in all countries where Spotify is active." Their assumption appears to be that correlation is causation, and merely removing their works from Spotify will now shoot sales back up. But that's not how things work. If anything, it seems likely that this move will accelerate their problems with physical sales. Not only will people not want to buy CDs, they won't even know about the musicians on this label. They'll just listen to someone else instead. The way you protect artists is by helping them to better connect with fans, not making it even more difficult. If I were a band on a Century Label, I'd be pretty pissed off that the label has unilaterally decided to piss off a bunch of my fans and stop many potential fans from discovering my music.
As part of its MusicTuesdays, YouTube posted a brief plug for DFTBA Records, describing the year-old record label that supports musicians on YouTube. As you might expect, these musicians understand that sharing their music on YouTube is one of the best promotional channels on the internet. So it's not exactly shocking that DFTBA officially encourages anyone to use its music (ok, not all of its music, but most of it) in the background of other original YouTube videos -- which is similar to Moby's gratis license for independent films.
It's good to see that DFTBA Records is yet another example in the music industry of a business that has picked up on connecting with fans, and it even has a built-in reminder with its name (Don't Forget to Be Awesome) to keep its audience happy. Perhaps Warner Music can learn something from these artists: instead of going after fans to punish them, it's better to be awesome and grow a fanbase. Especially since it's becoming clearer every day that musicians can connect with fans on their own, and some artists are beginning to wonder what traditional labels really have to offer.
Yet another example of a small indie record label that actually understands the importance of giving fans a reason to buy, rather than just assuming that if they put out music, people should just buy. This example, sent in by reader Fitte Prins, involves a small heavy metal record label in Chicago that puts out a variety of limited edition vinyl records in beautiful packaging, with the idea of attracting collectors who like the vinyl artwork almost as much as the music itself. It certainly wouldn't work for all record labels, but it's a recognition that there's a lot more to offer than just the songs.
For a while now, we've been pointing out that people in both the advertising and content businesses need to recognize that they're both in the same business. All advertising is content, and all content is advertising -- whether intentional or not. The latest example of this is pointed out by reader lavi d, who points us to a clip from NPR's All Things Considered about how Procter & Gamble has teamed up with Def Jam records to create a new record label: Tag Records, which is connected to the P&G product Tag Body Spray.
Rather than bringing on a big name star to "endorse" its product, Tag Records has signed a relative unknown, and is basically promoting both this new musician, Q, and the body spray at the same time. The music doesn't necessarily directly promote the body spray, but the promotions go hand in hand, and there is no real border between the content and the advertising. If the content itself is good content, it doesn't much matter. And, it appears that other brands are following suit. The radio clip notes that the energy drink Red Bull is apparently building its own studio to do the same thing. To some extent, it's no surprise that Def Jam would recognize this as a direction to go in: we pointed out in the past how a bunch of hip hop music execs were way ahead of the curve in recognizing new business models where the music itself is part of the promotion for something else.
And here, once again, we're seeing a totally new business model for the music business. Suddenly the success of the musicians on these labels isn't as much about selling music as it is in getting the music out there to promote other products as well. This doesn't mean (as I'm sure some angry commenters will imply) that all music will soon have some sort of consumer packaged goods connection -- but it shows, once again, that new business models emerge, and those business models will ensure that plenty of good content continues to show up. Because, if the music put out by these record labels suck, then it won't do much good for anyone: the consumer goods they're connected to, the musicians or the labels.
The New York Times has an interesting profile of Fueled by Ramen, a record label that has managed to thrive at a time a lot of other labels are struggling. The label seems to be practicing several of the principles we've talked about here on Techdirt. First, they seem to understand that the secret to success for a band is to build up a core of serious fans. Fueled by Ramen encourages its bands to engage with their fans online, doing frequent blog posts and studio updates. And the label has apparently mastered the type of viral marketing that builds excitement among the most devoted fans. Second, it has kept expenses low. It produced Panic at the Disco's debut album for just $18,000, allowing it to make its money back even if the album doesn't sell hundreds of thousands of copies. Finally, it seems to understand that the real money is in using the music as a way to market the band, and to use the band's popularity to sell scarce goods related to the band. For example, the label's bands tour aggressively, and the label has "a merchandise company that sells band T-shirts at stores like Hot Topic, as well as on its Web site." As the costs of music distribution continue to drop, it will be increasingly difficult to turn a profit on music itself. But people who recognize that the music is a way to build the band's popularity in order to sell other stuff, for which marginal cost isn't dropping toward zero, will do just fine. Fueled by Ramen is still largely in the CD-selling business, so they're not all the way there yet, but their success at a time when more traditional labels are floundering suggests that they're moving in the right direction.
