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By Ben Challis

The title of this article is from the Bible, from the story of a woman who is caught committing adultery, then a mortal sin. The sinner is brought before Jesus by the less than unblemished Scribes and Pharisees: In the lesson, Jesus refuses to condemn the woman, because of the hypocrisy of those who brought the charges, and whilst he tells the woman to ‘sin no more’ he also tells her accusers to repent their sins. Now why does this remind me of what’s happening with copyright law reform at the moment? Well, let me explain.

 

Pontificating Pirates

Reading The Pirate Bay co-founder Peter Sunde’s rather pathetic excuses and whinging repudiation of the quite proper conviction he was given by the Swedish Courts, laden with conspiracy theories and self pity, I couldn’t but think that in my heart of hearts, I do feel that copyright theft is wrong because it steals from the very people who create beauty and enjoyment in our lives. Where would we be without music, art, books, films, plays, poetry and the other marvellous fruits of human creativity? But there again, are those doing the accusing and taking the moral high ground in the ‘fight against piracy’ quite as unblemished as they would like us to think?

I believe that theft is morally wrong. Unfortunately it sometimes seems that those who spend their lives creating music, art, literature, drama and those who perform in the cultural sphere are stolen from – or put more simply, they are roundly ‘ripped off’  – by the very industries that are meant to support and champion culture.  Don’t get me wrong – business such as MegaUpload, RnBXclusive.com, TVShack and The Pirate Bay are based on profiting from copyright infringement, whether directly or indirectly, or even more simply, profiting from other’s efforts and rights. The vast amount of money MegaUpload boss Kim “Dotcom” Schmitz seemingly paid himself in the twelve months before his arrest is testament to this. Historically physical piracy – bootleg and counterfeit vinyl, then cassettes, then VHS and CDs and finally DVDs – in the music, TV, software, games and film industries have all been testament to the potential of vast returns from copyright infringement.

“Bootlegging” sounded quite glamorous when I was younger. So did ‘pirate’ radio. Now we call the modern version “digital piracy” and we have somehow glamourised what is at best a selfish free for all, or the grubby little basis of a flawed business model. Pirates may have been dashing heroes in books and films like Treasure Island and Pirates of the Caribbean, but it was a nasty brutish murderous business carried out by thieving thugs. If Mr Sunde and his colleagues – and indeed the Pirate Party – wish to be associated with what now happens on the high seas of the East Coast of Africa or across parts of South East Asia so be it. But let’s not forget what piracy really is ….. nasty. There again, copyright theft is a little more complex than that.

 

Turning water into wine

Some businesses, Apple in particular, have been absolutely brilliant at legally taking content and turning it into a business at very very little real cost. Apple is now the second most valuable company in the World, in no small part due to its association with music. And Apple even managed to beat the record labels at their own game and ended up being the main distributor of legal music. But the real gain from iTunes was selling iPlayers and other gadgets and the association with what is just the coolest of content – music. YouTube, Spotify and Facebook have all been riding on the coat tails of music …. and now they are worth billions! I always wonder why the music industry didn’t focus on this, rather than chasing invisible pirate sites and suing their own customers. Maybe the music industry completely missed the plot – it’s hard to say, even with hindsight.

When Sunde said that the entertainment industries ‘refuse to evolve’ and says that “the problem here is that we’re allowing this dying industry to dictate the terms of our democracy. We allow them to dictate new laws that forbid evolution” I do have a little more sympathy.  I also have some understanding of this plea “Today I urge everyone to make sure that the entertainment industry does not profit from them anymore. Stop seeing their movies. Stop listening to their music. Make sure that you find alternative ways to culture. Spread and participate in culture. Remix, reuse, use, abuse. Make sure no one controls your mind. Create new systems and technology that circumvent the corruption. Start a religion. Start your own nation, or buy one. Buy a bus. Crush it to pieces. The internet is being controlled by a corrupt industry. We need to stop it”. But my sympathy is very limited – and has more to do with a perception of a corrupt industry that rips of the very creative people who feed it, rather than consumers and business like Sunde’s who want a free ride. Google chairman Eric Schmidt says this “History shows that in the face of new technology, those who adapt their business models don’t just survive, they prosper. Technology advances, and no laws can preserve markets that have been passed by.”  And with sales of recorded music declining by 31% between 2004 and 2010 and with nineteen out of every music download illegal (IFPI), it is clear the music industry needs to do something. But should this extend to copyright reform to protect the record industry’s preferred business models?

Before anyone talks about reforming copyright law, blocking access to websites, three strikes, cutting of broadband, SOPA, PIPA, ACTA, Hadopi or Sinde, I would urge any legislator with even a passing interest in copyright reform and the creative industries to look at some of the more unsavoury practices of the creative industries. They need urgent reform too – and the need might be more urgent than copyright law reform.  Let’s look at the music industry first.

 

The escape from bondage?

What a ‘typical’ recording agreement with a major label will do is exclusively tie the recording artist (all band members, including band members who leave and new joining members) to the label so they can only record music tracks for that record label. The label will assume ownership of all recordings and will exploit these, and from the revenues from sales will pay the artist a royalty. In many cases the label will pay an ‘advance’ to the artist. This is an ‘advance’ against those future royalties – and is paid back or ‘recouped’ from future royalties. So the label may make a cash advance to the band to secure their services and pay advances to pay for things like recordings and promotion videos, but they will always look to recoup all or some of those advances from the artist’s future earnings. If a significant investment is made then the label will seek to tie the recording artist for a substantial period of time – in the past ten album deals (potentially lasting twenty plus years) were not unusual. Now, a typical deal with a record label would be for one album then with the label having the option to require the recording artist to deliver up to five or six more albums. This type of long term agreement prompted Prince to write the word ‘Slave’ across his forehead as a reference to his then long term contract with Warner Music and George Michael took his label, Sony, to court in an epic battle [see Panayiotou -v- Sony Music Entertainment (UK) Ltd 1994 EMLR 229 following the earlier ‘Frankie Goes to Hollywood case  ZTT -v- Johnson 1990 EIRP 175]. Imagine if when you brought a house with mortgage funding borrowed from a bank, the bank still owned the house when you paid the mortgage off. Scandal! And this is what George Michael said this at the time:

I have no right to resign.  In fact there is no such thing as resignation for an artist in the music industry.  Effectively, you sign a piece of paper at the beginning of your career and you are expected to live with that decision, good or bad, for the rest of your professional life”

Wham!’s co-manager, Simon Napier-Bell, had this to say about record industry contracts “imagine the outcry if people working in a factory were told that the cost of the products they were making would be deducted from their wages which anyway would only be paid if the company managed to see the products. Or they would have to work for the company for a minimum of 10 years and at the company’s discretion, could be transferred to another company at any time” (The Life & Crimes of the Music Biz, OMM, January 2008).

And Alison Moyet ended up in a (legal) battle with major record label Warner Music, having been told she was free to move to rival major Sony “I became agoraphobic and quite ill …. I literally stayed indoors for a year. I couldn’t even listen to music. Music had been something that I did every day since I was 15 and here I was, 22 or something like that, and I wasn’t allowed to work …. [and]  I couldn’t even listen to records, it would make me physically sick”.

The potential length of these exclusive agreements has shocked many musicians and performers when it finally dawns on them what they have signed up to. When Mike Oldfield (and lest we not forget, the vast revenues from the sale of his Tubular Bells album set up Richard Branson’s Virgin empire way back in the 70s) signed to Virgin Records he said “I can still remember being in the kitchen of the manor at Shipton-on-Chernwell  [then owned by Branson] about to sign this two page contract … “someone pointed out that it was for 35 years but I couldn’t get my head around that. I was just 19”. Under the terms of the agreement Branson became Oldfield’s record label, music publisher and manager and the deal covered 10 albums. And these often lengthy and factious relationships result in artistes bringing actions not only to challenge the length of what they consider nothing more than servitude, but also the under or even non-payment of royalties. The Wall Street Journal described the music industry contracts as “distinctly medieval in character: the last form of indentured servitude”.

 

Back in 2002 California state senator Kevin Murray had this to say about US recording industry practices:

Much like the public generally dislikes politicians, but love their individual representatives, Artists have respect for their record company handlers, but distrust the companies themselves and the system they operate under. They see themselves as victims of an indentured servitude system designed to keep them perpetually indebted to the companies who also own the product of their labor. Some artists expressed gratitude for the initial investments made by the record companies in their talent, but feel cheated by their meagre share of the proceeds when the gamble pays off. One artist’s representative went so far as to accuse the record companies of running a continuing criminal enterprise.

And

When confronted by the accusations from auditors that all royalty statements under reported royalties due to the artists, representatives from all five major record conglomerates denied any wrongdoing. I was reminded of the tobacco executives standing in front of Congress and swearing that they did not believe tobacco was harmful to one’s health.

And

In our legislative hearings it was clear that artists feel they are being systematically cheated out of their royalties. They feel that after they are forced to sign contracts that favor the record company, they are not even paid the royalties they are due under the contract (Recording Industry Practices. State of California: Select Committee on the Entertainment Industry. 2002).

 

Gold, frankincense and more

Whilst the quantum of the royalty is important – so is the ‘royalty base’ – what your royalty is paid ON. For example a royalty of 20% paid on 50% of all sales is the same as a royalty of 10% on 100% of all sales – it just sounds better. I make this point because record labels have traditionally used ‘royalty reducers’ to reduce the royalty that the artiste would otherwise get. Typical reducers would include e.g. a 25% reducer for new technologies, a 30% reducer for packaging and a 10% reducer for breakages. Amazingly some labels have applied both packaging and breakages reducers (which come from the historical fact that some vinyl and shellac LPs used to break in transit) to digital downloads. There is no ‘packaging’ on downloads and they don’t shatter in transit!  George Michael was incensed that by 1994 he was still suffering a 25% reduction in his royalty for CD sales as they were deemed a “new technology “ as by 1994 CDs were by far the most common form of physical product and hardly new.

More recently a number of artistes have raised the issue of whether downloads of digital singles and albums are a “sale” or a “license in court in the USA.” This distinction is significant because under the standard recording agreement artists receive 50% of net income from “licenses” after the songwriter is paid, but for “sale” the artist will get a royalty – usually at best between 10% to 15% of the retail price (after royalty reducers), or alternatively, a royalty based on dealer price.

In 2006 the Allman Brothers and a number of other recording artists including Cheap Trick and the Youngbloods brought a case against Sony BMG Music Entertainment in the United States District Court Southern District of New York and it was fascinating to see how the different parties calculated how the (same) artist’s royalty should be paid. On the sale of 1000 downloads at 0.70c per unit (total income of $700) Sony BMG thought the appropriate payment would be a royalty payment on 85% of all downloads sold after deducting mechanical royalties to the songwriters, a container charge of 20% and an audiophile reducer for new technology of a further 50%. This gave a total royalty payment of just $45.05. The Allman brothers felt they should be paid one half of the income from 100% of all units sold, less just the mechanical royalty payable to songwriters.  This gave a royalty due of by Sony BMG to the Allman Brothers of $315.50 with attorney Brian Caplan saying at the time Sony Music is presently engaged in a widespread attempt to underpay its recording artists“.

Whilst the Allman Brothers’ class action has now been settled with a proposed $7.95 million payment and improved rates for artistes increasing the digital royalty by just 3% (subject to court approval), Toto and Weird Al Jankovic have launched new actions against Sony and other artistes including Chuck D, Sister Sledge, Whitesnake, the estate of Rick James and Rob Zombie have brought similar actions against other major labels. Most successfully Eminem producers FBT Productions won a case against Universal Music Group’s Aftermath Records, with FBT’s auditor saying the amount owed may run into millions of dollars  (although one website suggested that UMG might charge their legal costs for their failed legal defence against FBT’s account!) but damages are yet to be assessed. The Future of Music Coalition estimates the majors may have to hand over $2 billion in extra royalties to heritage acts if they lose ongoing cases. The Dixie Chicks put it more simply in their claim against Sony– “systematic thievery” ; “Intentionally fraudulent” said US attorney Don Engel and music journalist David Marsh said “makes Enron look like amateur hour”.

Whilst digital royalties have captured the headlines recently, numerous artistes have taken their record labels to court to get even basic royalty payments. In 2002,  a  Los  Angeles  court approved  a  $4.75  million settlement  in  a  class-action  suit  brought  by  the  late  singer  Peggy  Lee. Before  her  death,  Peggy  Lee  led  the suit  against  Decca  Records,  accusing the  record  label  of using  questionable  accounting  practices  to  cheat  artists out  of their  royalties  for  more  than  four  decades. Other  members  of the class,  most of whom  are  now  dead, included  the  estates  Louis Armstrong, Billie  Holiday,  Patsy  Cline,  Ella Fitzgerald,  Bill Haley,  Mary  Martin,  and Pearl Bailey, in total more than  300  artists,  all  of whom recorded  for  Decca Records  before  January  1, 1962.

Amongst the claims made against EMI’s Capitol Records by country star Kenny Rogers in his 2012 claim was that the label diverted substantial sums of his royalty income to a ‘suspense’ account, that he received no royalties on records sold through record clubs, that 100% of the costs of promotional videos were allocated against Roger’s videos (rather than the 50% agreed), that $50,000 was deducted as unexplained ‘expenses’, that whilst he suffered international tax deductions he never received the benefit of tax credits  Capitol received on the same income, and that Rogers never received any share of performance royalties from his sound recordings (so called PPL income). Both Rogers and FBT Productions in the ‘Eminen’ case, and a more recent claim by Word Al Jankovic  all claim that the record labels never accounted to them for one cent of the substantial damages won by the labels against services such as Kazaa, Napster. Audiogalaxy and Grokster.

Even the Beatles have had to take legal action to get paid, and in1979 they also sued Capitol, alleging  breach  of contract and fraud. The Beatles  claimed they were  not  paid  all  the royalties  due  for records  sold  in  the United  States. The  suit  accused  Capitol  of a  “pervasive  practice  of lining  their own  pockets  at  the  expense  of  [the  Beatles]  through  improper  and fraudulent  accounting  practices” and  subsequently,  for  withholding royalties  on  as  many  as  nineteen  million  records. The  case  was dismissed,  but  the  Beatles  appealed,  and  the  New  York  State  Supreme Court  upheld  the  appeal  in  1988 (from Clover, C (2003) Accounting Accountability: Should Record Labels Have a Fiduciary Duty to Report Accurate Royalties to Recording Artists: Loyola Marymount University and Loyola Law School. Los Angeles)

More recently rapper Ras Kass (real name John Austin) filed a suit against Priority Records, Capitol Record and EMI Music claiming breach of contract, unfair competition, restraint of trade and other abuses. The suit, filed in the California Superior Court in Los Angeles seeks a recession of the musician’s contract and compensatory and punitive damages. According to the suit, Austin had signed to Patchwerk Records in 1995 as a 22 year old in a contract that required delivery of one album with an option for five more albums. Apart from claiming the label failed to properly market his albums such as Soul on Ice and Rassassination the suit further alleged that owing to “fraudulent accounting practices” Austin had received only $100,000 over a nine year period, an average of $11,000 per year.

Legendary record label boss Morris Levy once said “if you want royalties, go to Buckingham Palace”. Makes sense now doesn’t it!

 

David and Goliath

One might ask why these artistes would have signed such unreasonable agreements: Well the answer is quite simple – historically record label agreements (from majors) were pretty similar and were ‘take it or leave it’.  Simon Napier-Bell was once told by the Yardbird’s lawyer that “if I told my clients not to sign unfair contracts they would never get a deal”.

And remember, these accusations and law suits are against the very same record label who recently used Cliff Richard and older other musicians to successfully promote the ‘extend the term’ campaign to extend the copyright term in sound recordings from 50 years to 70 years in the Europe Community, saying the extension would benefit musicians and recording artistes. In response to the campaign the Music Managers Forum, a body that represents the managers of artistes, and indirectly artistes and performers, called for two new provisions in copyright law, suggesting that any assignment to a record label should be for a limited period of time and that labels should be subject to a ‘use it or lose it’ policy whereby copyright holders who did not make a work available for public access for a period of (say) 2 years would see the copyright automatically reverted to the creators and performers who created it. The MMF says that these changes (amongst others) would enhance competition and cultural diversity and bring great benefit to creators, performers and consumers.

In the UK there have been relatively few cases before the courts looking at music publishing contracts, but the first major music industry case in 1974 was about music publishing. The case of A Schroeder Music Publishing Company Limited –v- Macaulay (1974) 1WLR involved a young and unknown song writer who entered into an agreement for his exclusive services with a publishing company for five years. It was the publisher’s standard form agreement. The song writer assigned over his entire worldwide copyright for each of the original songs written at any time during the agreement. The publisher paid £50.00 as a general advance against royalties and when the first £50.00 was recouped from royalties they would advance a further £50.00 to be recouped from royalties. If the total royalties advanced equalled or exceeded £5,000.00 then the agreement was automatically extended for a further five year period. Other terms included the provision that the publisher could terminate the agreement by giving one months written notice but the song writer was unable to terminate in such a way.  Of particular importance was the fact that the publishers were under no obligation to publish any of the songs and were merely obliged to pay royalties and to make modest advances against them. When the courts finally looked at the Agreement they found that it was contrary to public policy as an “unreasonable restraint of trade”.  The restrictions on the songwriter contained in the agreement were not fair and reasonable, there was a lack of obligation on the part of the publishers with total commitment from the song writer. The publishers were not required to publish any compositions and the song writer could earn nothing if the works were not published. One of the judges, Lord Justice Diplock said that the agreement was “a take it or leave it” contract. It had not been the subject of negotiation between the parties or approved over the years by way of negotiation.  The contract was found to be void and in the aftermath of this decision, music publishing contracts rapidly improved, as did royalty rates!

In fact, much as the UK courts progressed progressive doctrines such as negligence and employer’s liability to employees between the two World Wars (replaced decades later by legislation such as the Occupiers Liability Act of1957 and the Health & Safety at Work Act 1974), it has been the courts, and mostly only the courts, who have put a check on the more rapacious practices of the content industries in their relationship with creators, by using doctrines such as duress and restraint of trade. In reality these doctrines have been the only brakes on the recorded music sector’s business practices, and I personally find many of them highly unsavoury. And this begs the question, should these very same record labels and their representative bodies really be the ones taking the moral high ground and lecturing us about digital ‘theft’ and digital ‘piracy’ ?  It’s perhaps unsurprising that in the USA under copyright law that allows artistes to ‘reclaim’ ownership of sound recordings and songs after 35 years, an ever growing list of acts including Bruce Springsteen, Billy Joel and the Doobie Brothers are seeking to reclaim their copyrights from record labels and music publishers: The label’s response to the threat of such termination rights? That the artistes were employed under ‘work for hire’ contracts meaning the termination rights do not apply. A bit much where the artistes paid for the recordings with advances against their own royalties! With term extension now agreed in Europe, if we are going to have reform, why can’t we have legislation protecting artists as well as ‘their’ copyrights?

 

Daniel and the lion’s den

Am I being unfair to the music industry? Well maybe I am, but only by ignoring dubious business practices in other cultural sectors, whose business leaders are also actively pursuing the reform of copyright law to protect their failing business models. So let’s have a look at the TV and film industries as well, and where better to start but with those classics of British humour, the ‘Carry On’ films, a hugely successful franchise of 29 films made in the 20 years between 1958 and 1978 that made oodles of money for the producers – and the films are still screened, sold, streamed and exploited today.

Let’s be frank. The cast were comparatively poorly paid — well, poorly paid in relation to the success of the films. The male stars earned around £5,000 per film for a principal performer. The women got around half as much: £3,000 for Barbara Windsor, £2,500 for Joan Sims. By way of comparison a police constable would earn around £1,000 per annum in 1966 (plus free accommodation); so Carry On stars got a good salary, but hardly in the same league of even a moderately successful TV ‘soap’ actor in 2012, let alone a the millions paid to major film star. In his diaries, the legendary Kenneth Williams lamented this and criticised several of the movies despite his declared fondness for the series as a whole. Peter Rogers, the series’ producer, acknowledged: “Kenneth was worth taking care of, because while he cost very little […] he made a very great deal of money for the franchise” and Rogers is also on record as saying that he would “do anything for my actors except pay them“. To make matters worse, they were one-off payments with no share of royalties. Rogers and Gerald Thomas, by contrast, did well out of the series, picking up £15,000 for each a film, plus a reported one-third of profits, out of which Rogers treated himself to a new Rolls-Royce every year.  In his defence, Rogers claimed that after the success of Carry On Nurse he had offered his stars the opportunity to take lower fees in exchange for a percentage of the profits, but they or their agents had declined (Obituary of Peter Rogers, The Telegraph, April 2009).

The Carry On stars never got a share of profits but they did get paid: And that’s not always the case – sometimes even when investors, stars, actors, directors and other creators do agree a potential share of what can be vast revenues, they don’t receive a penny.

 

The Destruction of Sodom and Gomorrah

The Transformer films (Robots in Disguise!) have been huge successes, grossing $2.7 billion at the global box office. But Melrose 2, a private equity fund who invested in the films filed a suit against Paramount Pictures and DreamWorks claiming that investors have not been paid their share of profits from a slate of films. Melrose invested in including all three Transformer films and according to the suit, beginning in 2006 Melrose invested $375 million to help fund 29 films. The investment gave the fund a 25% stake in the copyrights of each film. The group claims it has not seen any money from profits on the films. The suit accuses Paramount of a practice of “understating gross receipts, delaying payments to Melrose 2, overstating production and distribution costs and hindering Melrose 2′s ability to exercise its audit rights and verify the revenues and costs associated with the films it funded.” Paramount (which is part of Viacom) claims for its part that it has “complied with its obligations to Melrose 2.” A spokeswoman said in a statement: “These kinds of lawsuits are nothing new in Hollywood. Studios are renowned for the most opaque kind of accounting where even the biggest blockbusters somehow fail to turn a profit. Part of the investors’ complaint centers on attempted audits which have become routine among outside financiers hoping to recoup their shares of film profits. (http://www.forbes.com/sites/dorothypomerantz/2011/11/29/investor-suit-against-paramount-foreshadows-actor-suits-to-come/).  Viacom is currently conducting widespread litigation against those it accuses of copyright infringement, including a high profile case against YouTube.

Another recent horror story comes from the production of Stone, starring Robert DeNiro and Ed Norton. According to a complaint filed by Mimran Schur Pictures in Los Angeles Superior Court, the plaintiff had put up nearly $6 million for Film only to discover they had lost their entire investment and had been ‘duped’ by Nu Image and Millennium Films  when the film sold for a less-than-expected sum to distributors and bombed at the box office in 2010 (http://www.hollywoodreporter.com/thr-esq/investors-robert-de-niro-film-173521).

The tales of under payment, non payment, failed recoupment, over stated budgets and other various “Hollywood Accounting” practices is (almost) a never ending story – here’s just some of the subjects of these claims  – the Harry Potter Franchise, Lord of the Rings trilogy, the Spider-Man movies, Forrest Gump, Coming to America, JFK, Farenheit 9/11 and the TV series Babylon 5 – and these are just some of the productions that have ended up in litigation over money.

Hollywood has developed its own opaque accounting methods which can be used by the film, video and television industry to budget and record profits for film projects and it is clearly very tempting to inflate expenditure to reduce or eliminate the reported profits (thereby reducing the amount which the corporation must pay out in royalties or other profit-sharing agreements) or artificially reduce revenues from a film –  which will have the same effect on the ‘back end’ shares of investors, directors, producers and the ‘talent – principally the actors and writers.  Novellist Winston Groom never received a cent in profit shares from the screenplay to Forrest Gump as the film’s commercial success was ‘converted into a net loss’. Stan Lee filed and won a lawsuit after the producers of the movie Spider-Man did not give him a portion of the gross revenue. In a case concerning the Eddie Murphy starring Coming to America (Buchwald v Paramount) humourist and writer Art Buchwald received an undisclosed settlement from Paramount’s to avoid an investigation of the latter’s accounting practices. The court found Paramount’s actions “unconscionable”, noting that it was impossible to believe that the movie which grossed US$350 million failed to make a profit, especially since the actual production costs were less than a tenth of that (1990, Cal App Lexis 634: U.S.P.Q 2D[BNA]1497).

 

The Money Changers

Hollywood’s creative accounting practices are not limited to movies. An example from the world of television is the Warner Bros’ series Babylon 5, created by J Michael Straczynski, who wrote 90% of the episodes and who also produced the show – and who thought he would share in a generous cut of profits. That ended up being a dream and a wilder fantasy than the show itself! Whilst the series generated more than US$1 billion for Warner Bros, most recently US$500 million in DVD sales alone, Straczynski revealed that in the last profit statement he was given Warner Bros. claimed the property was $80 million in debt. “Basically”, says Straczynski, “by the terms of my contract, if a set on a WB movie burns down in Botswana, they can charge it against B5’s profits.”  And let me try and dispel any anti-Western leanings here – Bollywood accounting is just as ‘interesting’ as Hollywood accounting (just ask Javed Akhtar or Lata Mangeshkar!).

Even some of the biggest franchises in the history of film have been subject to claims: Peter Jackson, director of Lord of the Rings brought a lawsuit against New Line Cinema after “an audit… on part of the income of The Fellowship of the Ring. And fifteen actors are also reportedly suing New Line Cinema, claiming that they have never received their 5% of revenue from merchandise sold in relation to the movie, which contains their likeness. Similarly, the Tolkien estate has sued New Line, claiming that while their contract entitled them to 7.5% of the gross receipts, the film studio has refused to pay them any share of the $6 billion hit. Jackson will not be directing the Hobbit. Warner Bros have also seemingly posted a $167 million paper loss for the hugely successful Harry Potter and the Order of the Phoenix.

Amusingly, even the legendary and awful epic science fiction film Battlefield Earth was the subject of protracted litigation after producer Franchise Pictures overstated profits by $31 million and was sued by its investors including star John Travolta: you would have thought they might have realised someone might notice the lack of on-screen spending in what has come to be thought of as one of the worst movies ever made

Equally amusingly, the major record label’s trade associations, the Recording Industry Association of America (RIAA) and The International Federation of Photographic Industries (IFPI) have threatened Google with  new antitrust action if the search engine doesn’t change the way it finds and displays search results, relegating sites offering illegal searches. Again, I do have some sympathy  with the record industry’s position – one website notes that “searching ‘Adele download’ on Google returns only two legitimate links with the rest being links to The Pirate Bay, filestube and other free MP3 sites”, but the hypocrisy is staggering! Let’s not forget in January 2010 the New York U.S. Court of Appeals for the Second Circuit reinstated previously dismissed claims that major record labels engaged in monopolistic restriction of the online music In an action brought by online music consumers against the terms and pricing used by the MusicNet and Pressplay joint ventures set up by the majors at the start of the millennium. The major record labels might also like to remind themselves of Judge D Brock Hornby’s 2002 approval of the antitrust settlement against the then five major labels (EMI, Sony, BMG, Universal and Warner Music) and three major US CD retailers, for agreeing to fix the price of CDs and the resulting $143 million anti-trust penalty levied; or the payola scandals? Or the fact that if Universal and EMI merge, UMG will control 40% plus of the global recorded music market and a merged Sony ATV and EMI’s music publishing division 30% market share for songs. Chutzpah would be an understatement!

Sometimes there really are no happy endings. One of the saddest (and most damning) stories is the tale of the late Solomon Linda who wrote Wimoweh, which formed the melody of The Lion Sleeps Tonight, which itself featured in Disney’s blockbuster The Lion Ling. Linda died so poor that his family could not even afford a headstone for his grave. On a happier note, after his death, Linda’s family did eventually regain control of the song and ongoing royalties, but only after a court action.

 

Genesis

Reform copyright law? I have no complaint there. But at who’s behest? And who will it really benefit? Consumers? Artistes? Performers? Actors? Writers? Directors? Or the very business models and business practices that are blatantly unfair to so many, and that benefit so few. It’s clear that the very same labels and film companies who are lobbying in Europe for term extension and other copyright protections, for new copyright reforms such as ACTA, for SOPA and RIPA in the USA, for the Digital Economy Act in the UK, for three strikes laws such as Hadopi, and for website blocking laws such as the law Sinde, have simultaneously been indulging in some very dubious practices and indulging in these for a very long time – as well as simultaneously putting their heads in the sand  when it comes to adapting the business models for the digital age. The loudest voices in copyright reform have, until now, been those in the middle of the food chain – those who profit from copyright, with actors,  performing and recording artistes, songwriters and other creators marginalised at one end, and consumers ignored (or sued!) at the other. Perhaps now BOTH sides of the copyright coin should be examined – not just one.

William Patry, senior copyright counsel for Google, said at the recent IBIL seminar that good copyright policy focuses on introducing and shaping laws that most people want to obey.  Where, as in copyright law, most infringement occurs in private it is especially important that laws are created that people will obey.  Strong copyright leadership will therefore focus on creating these types of laws from the societal perspective, and not from the “top down” perspective. And here’s where the content industry lobbyists have got it so wrong. Despite some successes in influencing copyright reform in terms of public opinion the content industries are seen in the main as money-grabbing power-hungry monoliths, screwing over artists and blocking digital innovation in a bid to protect their dying business models. That’s a grossly unfair depiction, but one nurtured by unwise litigation and DRM obsessions ten years ago, and a total failure to engage with the public at large on copyright issues to this day.”

With ‘rights’ come “obligations” but the whole debate about copyright reform and indeed the future of copyright seems very unbalanced. Why no debate about a fiduciary obligation on rights owners to account to those who created those very rights? Why does it take record labels and movie studios months if not years to account – and why can’t they add up? In the age of the computer it seems extraordinary that many record companies, TV producers and film companies seem incapable of accounting properly or even accounting at all. Why not criminal penalties for those who fail to account or account wrongly? Why not an immediate and automatic right of reversion in the event of a default? Or an automatic reversion of copyright after a fixed period of time to recording artistes or songwriters? Or an automatic reversion if the entity assigned or licensed copyrights goes bankrupt? Or why not have as the default position ‘at source’ accounting to remove the effect of royalty reducers? When the EU brought in the term extension for sound recordings in 2011 they left it up to individual EU nations to passes in appropriate protection and revenue shares for the recording artistes in whose name the extension was so successfully lobbied for. But will those companies who lobbied for the extension now implement some real changes to benefit those performers? I doubt it without comparable legislation – then and only then will we see if the content industries can tear themselves away from their traditional, ‘unfair’ and even some suggest ‘criminal’ business models.

On that note, and if I may, I will end with a quote from the Bible. I am not particularly religious, but it sort of rings true in places!

“Blessed are they that do his Commandments, that they may have right to the tree of life, and may enter in through the gates into the city. For without are dogs, and sorcerers, and whoremongers, and murderers, and idolaters, and whosoever loveth and maketh a lie.” (Revelation 22:14-15 KJV)

 

RELEVANT LINKS

This Alison Moyet interview can be found on the Quietus at http://thequietus.com/articles/06189-alison-moyet-interview-yazoo

The results of FBT Productions’ audit in the ‘Eminen’ case can be found here http://www.hollywoodreporter.com/thr-esq/eminem-royalty-lawsuit-aftermath-records-fbt-productions-293881 and the case reference is F.B.T. Productions, LLC, et al. v. Aftermath Records, et al. 621 F.3d 958

And more on Kenny Roger’s claim against Capitol Records can be found here http://digitalmusicnews.com/permalink/2012/120219rogers and herehttp://digitalmusicnews.com/uploads/9e/10/9e10378440391c98359fa86752250637/kennyrogersvcapitolrecords.pdf  :  Kenneth Ray Rogers P/K.A Kenny Rogers v Capitol Records LLC f/k/a Capitol Records, Inc., a division of EMI Music North America LLC  Case 3:12-cv-00180  filed  on the13th February 2012,  US District Court Middle district of Tennessee, Nashville

And more on the claim brought by the Allman Brothers, Cheap Trick and others against Sony, including a very interesting comparison of royalty rates calculated  by Sony and recalculated by the artistes here http://www.caplanross.com/sony_bmg_music.pdf?renderforprint=1 : Gregg Allman et all v Sony BMG Music Entertainment (2006) Case Civ No 1:06-cv-03252-GBD , US District Court  Southern District of New York

More on term extension here: http://www.guardian.co.uk/media/organgrinder/2011/sep/25/copyright-term-extended-music-recordings

And a look at Hollywood Accounting – you can find more stories and tales here http://en.wikipedia.org/wiki/Hollywood_accounting