How stakeholders make and lose money in the music business
The music industry has produced both millionaires and persons who can barely make ends meet. Some, unfortunately, are not very talented and never make a lot of money, while others, unfortunately, are very talented and never make a lot of money. Success in the music business depends on several factors, and not just whether an item of music benefits from adequate marketing and is attractive to consumers. Among the factors that make or break a musician and other parties in the business, are the decisions made by each party including in relation to contracts, oral or written, with terms that may be favourable to one party but devastating to another. The sad reality is that sometimes persons fail to realize just how devastating the consequences of their decisions can be until it is too late.
Based on the Copyright Act, the authors of a protected work are the first owners of any copyright in the work. Persons in the music industry such as songwriters, musicians and producers are often the authors of literary works, musical works, and sound recordings respectively, from which they may receive royalties. Performers are not regarded as copyright owners, but they too are generally entitled to royalties when a substantial part of a qualifying performance is shown in public.
In Jamaica, the duration of a copyright interest in literary work, musical work and a sound recording is currently ninety-five (95) years, and copyright owners or their estates may receive royalties for their work for the duration of that period. Copyright owners may become members of Collective Management Organizations (CMOs) which grant licenses to persons who play music in public, including party promoters, radio stations, hotels, supermarkets, and audio streaming and media services providers like Spotify. Such licenses are subject to a fee which CMOs collect and, after deducting expenses such as administration fees, distribute to their members based on how often their work is played. This is the simplified version of the much more complex process for the purpose of explaining how stakeholders may contract out of their rights.
Musicians and studio engineers, for example, may be employees at a studio and may enter into a contract granting to their employer, the copyright owned by them in any work they produce on the job. As such, they would only be entitled to their salary and any other payment their employer may be minded to give. A work created by said employees may become a big hit producing much in royalties, but they would not be entitled to any of that.
Songwriters may hire publishers to find singers to perform their songs and give to the publishers 50% or even 100% of their copyright interest in the songs, and/or split all gains arising therefrom between them and their publishers.
Artistes may pay to their personal managers a percentage of their gross income as commission. If the percentage is very much in favour of the managers, the artistes may have very little for themselves after paying expenses. If artistes are in a group, for example, based on the commission paid to a manager, the manager may earn more than any one member of the group after their earnings are divided amongst themselves. Managers may even continue to earn from work done while they were hired by artistes decades after their employment contract is terminated, simply because that is what the parties agreed to. If record companies are in the picture, the artistes’ income will generally need to account for the record companies’ share of amounts earned from the companies’ marketing and distribution of the artistes’ music. A contract between an artiste and a record company usually dictates how any relevant earnings will be shared between the parties. Such a contract may include that the artiste receives in advance a lump sum payment from a record deal which would then be recouped from income earned in relation to the relevant song.
An entertainer may seem like a success story with a hit song but, by the time the earnings from the song go through the hands of the many stakeholders involved in the music business, the artiste might not have much to show for that success. If an artiste has a short-lived career, as many do, if the moneys earned at the height of such career were spent on private jets and zoo animals, and if the contracts entered into by the artiste do not foster any long-term financial sustainability, the artiste may end up with very little assets and much regret. Notwithstanding, artistes are not the only players who should be careful in the music industry.
Producers, publishers, record companies and all other stakeholders in the music business should ensure that their interests are protected, and the terms of the contracts governing their operations are clear and can assist in that regard.
Kimberley Brown is an attorney at Myers, Fletcher and Gordon and a member of the firm’s Commercial Department. She may be contacted at email@example.com or through the firm’s website www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.