Monday, October 12, 2009

More Bad News for Major Labels

Posted By on 10.12.09 at 06:19 PM

Conventional wisdom has it that major labels are propped up by their back catalogs—perennial sellers that provide capital to blow on the current batch of Next Big Things. In a commercial climate where the platinum record has become an endangered species and tent-pole megasmashes have apparently already gone extinct, the majors are more reliant than ever on these older releases, which not so coincidentally tend to appeal to demographics who didn't grow up with file sharing. This reliance could turn out to be a fatal weakness, though because, some of the majors' back-catalog artists may soon be able to reclaim control of their material.

Starting in 2013 the creators of musical works copyrighted between (for now) 1978 and 1984—this includes anyone with a potential stake in ownership, from songwriters to producers—will be able to challenge labels for ownership of their recordings. The issue at hand is whether given songs can be legally defined as "works for hire." The distinction is by and large a contract-law technicality, but it's vital because if a court rules that they're not works for hire, their creators may be able to exercise termination rights designed to protect artists from unfair contracts involving copyright ownership. Though RIAA lobbyists got Congress to define recordings as works for hire across the board in 1999 (by tacking it onto an unrelated bill), the provision pissed off so many prominent artists that it was quickly repealed.

A Techdirt post on the subject notes that these termination rights were designed to "protect artists who signed bad deals." Given that, at the major-label level, it's commonplace for artists (especially new ones) to be saddled with deals that bury them in debt and deny them royalties till they're back in the black, it's no wonder the RIAA tried to get Congress to give it a legal fig leaf to hide behind.

The Butthole Surfers' successful lawsuit to regain control of their records from Touch and Go illustrates the potential consequences of termination for labels, albeit on a much, much smaller scale. Touch and Go lost what had been a steady, reliable income stream at about the same time that overall revenues started to drop. The label has had some successes since then, but many people hold the Butthole Surfers responsible for the shuttering of the label's distribution arm earlier this year.

Now replace "the Butthole Surfers" with "the Eagles, Barbra Streisand, Journey, and the guy who wrote 'Funkytown'"—all of whom have at least made noises about exercising termination rights—and replace "Touch and Go" with "every major label and many large indies," and you start to get the idea. If enough of these lawsuits get filed and the artists win enough of the time, the record industry's going to do something like this:

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