2014 Year in Review: Music & Interactive Royalty Highlights

January: Criteria to Collect Monthly from SoundExchange per Glenn Peoples in Billboard

February: Golden Oldies: How To Become A Music Publishing Mogul by Zack O. Greenburg at Forbes

Photo credit to Teri Nelson Carpenter (@TeriRMW): "Cedar Boschan's panel at SXSW is ROCKIN' it!! Fair royalty rates are critical!!" L-R: Gerri Leonard, Leonard Business Management; Laura Merry, NKSFB; Lynise Levine, GSO Group, Cedar Boschan, Green Hasson Janks

March: #SXSWroyalties

April: Study Shows YouTube Cannibalizes Album Sales

L-R: Cheryl Hodgson, Hodson Legal; Cedar Boschan, Green Hasson Janks; Kristin Edmonds, Morgan Stanley

May: Royalty Income Meets Marital Dissolution: Dividing, Managing & Accounting (DVD) @ The Beverly Hills Bar Association (Receive 1 Hour CLE Credit, $179)

June: NMPA Releases Music Publisher Survey Results (e.g., "In 2013 $1.09 Billion, over half of all publishing income (52%) came from Performance Royalties")

L-R: Enrico D’Angelo, Activision; Gerard Fox, Law Offices of Gerard Fox, Inc.; Vanda Cristina Massa, FOX; Wayne Kazan, Weintraub, Tobin; Vincent Scheurer, Sarassin LLP (via videolink from London); Cedar Boschan, Green Hasson Janks

July: Video Game Dealmaking: Playing to Win (DVD) @ The Beverly Hills Bar Association (Receive 1 Hour CLE Credit, $179)

August: Google set to launch YouTube Music Key - Business Insider

September: "The last small music publisher left in the Brill Building..." per John Seabrook in The New Yorker

October: Music Royalties Dinner at The California Copyright Conference

"The Game Attorney" Tom Buscaglia Interviews Cedar Boschan in IGDA Webinar - #Free on YouTube

November: Royalty Audits: What You Need to Know - International Game Developers' Association (IGDA)

December: Top 3 Most Important Things a Manager Does - Q&A with Artist Manager Laurel Stearns

Listen Here

The Auditrix on music and game royalties:

Music Royalties - Audio Interview of Cedar Boschan by Kelly Castor - #Free on MusicBizCast

Royalty Audits: What You Need to Know - International Game Developers' Association (IGDA) Webinar: Distinguished Lawyer Tom Buscaglia Interviews Cedar Boschan - #Free on YouTube

Video Game Dealmaking: Playing to Win (DVD): The Beverly Hills Bar Association Panel Discussion with International Legal and Business Professionals (Receive 1 Hour CLE Credit, $179).  Cedar Boschan Moderates:

• Enrico D’Angelo, VP Product Management at Activision
• Gerard Fox, Law Offices of Gerard Fox, Inc.
• Wayne Kazan, Weintraub, Tobin, Chediak, Coleman, Grodin Law Corporation
• Vincent Scheurer, Owner, Sarassin LLP

Royalty Income Meets Marital Dissolution: Dividing, Managing & Accounting (DVD) @ The Beverly Hills Bar Association (Receive 1 Hour CLE Credit, $179), Featuring Presenters:

• Cheryl Hodgson, Hodson Legal
• Kristin Edmonds, Morgan Stanley
• Cedar Boschan, Green Hasson Janks

Business Managers Brainstorm on Royalties - SXSW and Association of Independent Music Publishers Panel Discussions (@AIMPorg video #free for #membersonly) Featuring:

• Laura Merry, Nigro Karlin Segal Feldstein & Bolno
• Lynise Levine, GSO Group
• Gerri Leonard, Leonard Business Management
• Zach Best, Provident Business Management

Q&A with Artist Manager Laurel Stearns

Laurel Stearns speaking at Scion Music(less) Music Conference 2012 about building a team.  Click to view the panel discussion.

With major experience and an independent mindset, Laurel Stearns manages artists from Red Fang to Jenny O.  Visit www.thedilettantes.net for more on her Downtown L.A. office's wonderful roster and read ahead for Ms. Stearn's insightful answers to @Auditrix' music business questions:

Cedar Boschan: What is the difference between a business manager and an artist (a.k.a. "personal") manager?

Laurel Stearns: I'm an artist manager.  There is a big difference between business management and artist management.  The artist manager is involved in every aspect of a band's/artist's life, while business management handles the money flow.  Both are hugely important.

Boschan: Legendary manager Shep Gordon said, “The three most important things a manager does is (1) get the money, (2) always remember to get the money, and (3) never forget to always remember to get the money.” What are the three most important things that you do for clients?

Stearns: I love Shep and that statement holds true today.  I would say:

1. Create infrastructure
2. Create opportunities, and 
3. Get the money!

Boschan: Can you offer any tips to collecting your clients’ fair share?  

Stearns: Make sure  your deals are clear and papered/paper trail... Get this done before any work happens

Boschan: How are you compensated?

Stearns: We get paid when the artist gets paid.  I never commission of deficits...and, please, with merch it should be a commission of the net.

Boschan: What are fair commissions for members of an artist's team?

Stearns: Booking agent = 10% and business manager = 5%, while artist management varies between 15-20%; it's an endless job.

Boschan: When should an artist fire a manager?

Stearns: If the visions are completely different.  The manager is the closest person to the band....if the vision and vibe is off, it might be time to part ways...you don't need to be best friends but both parties should have a similar path with similar goals.

Boschan: Would you be willing to share an example of a failure in your career or one of your clients’ careers and what you learned from it?

Stearns: Yes, taking on artists that I didn't have a pure gut feeling on, bringing them on because of others telling me I should, those never turn out well. You have to be 100% passionate about it otherwise it usually doesn't work.

Boschan:  What is less important now than it was five years ago?

Stearns: Getting on the radio.  While it still can impact your career immensely, there are so many ways to grab exposure now...licenses for commercials, TV, film, fashion, every area of the internet, podcasts, etc.  The combination of life steeped in music is really limitless now.

Boschan: What has grown in consequence over the past 5 years?

Stearns: The amount of competition for attention; everyone can make a record and the outlets to expose it are everywhere... keeping your fans loyal and focused is not easy, but if you are truly great at what you do, I still believe you will be found at some point.

Boschan: What are the key metrics you rely on to gauge success? (e.g., SoundScan sales, YouTube views, Facebook likes)

Stearns: All of it...SoundScan is probably the last as you can have a billboard #1 streaming song that does not equal record sales.  But all of it adds up and means your music is getting out there.

Boschan: Your clients have viral videos.  How have you leveraged audiovisual media to create income opportunities for your clients?

Stearns: Absolutely, Red Fang have built an incredible relationship based on their love of PBR [Pabst Blue Ribbon beer]... they chose that beer naturally... it entered into their video aesthetic and we have built a real relationship with PBR because of it.  For example, PBR purchased a van for the band and Red Fang played at PBR events. It's been a organic fit that is recognized by both parties.

Boschan: How do you approach a potential brand partner on behalf of an artist?

Stearns: I look for truly creative ideas that make the brand interested in the band...begging for money to sponsor something is not appealing...create the engagement by coming up with amazing ideas...don't ask the brand to do that for you. Brands will show up if you have a great idea.

Boschan: You were a label A&R person and became a manager.  What was your role at the label and how has that influenced you as a manager?

Stearns: I was actually a manager first...I was also independent...that was my single most important point of view.  Being independently minded helped me stand out in a corporate environment.

Boschan: Specifically what do you look for in a label partner?

Stearns: I love working with people that really get into the individuality of the band/artist. We work in a creative field and when I feel like I get a rubber stamp plan laid out in front on me, there is nothing more heart wrenching than that...When you work in the arts, get artistic.

Boschan: Do you have any crowdfunded projects on the horizon?

Stearns: We have a collaborations record with Linda Perhacs coming that will be crowd funded.  She has a great label, but there are so many fans out there and we wanted to engage them all in this process.

###

Laurel Stearns is a respected artist manager at Dilettante Arts/Primary Wave Music, Downtown L.A.’s creative hub for artists, managers, events, fine arts and film.

At Dilettante, Stearns oversees a roster of artists that includes folk icon Linda Perhacs (Asthmatic Kitty/Secretly Canadian), Red Fang (Relapse), Jenny O. (Thirty Tigers), Rodrigo Amarante (Easy Sounds/Vanguard), Team Spirit (Vice), Black English (Arts & Crafts), Babes (Harvest), and PPL MVR (Atlantic/Elektra). 

Stearns joined Dilettante from Prospect Park (The Firm).  Previously, Stearns  helped launch the L.A. arm of Redlight Management, where she brought into the fold the likes of The Decemberists and Alberta Cross. She also has served as an independent manager for artists such as The Dirty Dozen Brass Band (Mammoth), The Descendents, ALL (Epitaph), GWAR (Metal Blade), The Paladins (4AD) and Plastilina Mosh (Capitol).

Prior to her career in artist management, Stearns was an A&R rep at Capitol Records, where she worked with bands such as Interpol, The Decemberists, Shout Out Louds, Fischerspooner, Sparklehorse and LCD Soundsystem. While at Capitol, Stearns began noticing that many talented bands could not find a place within the major label system. Seeking to create a home for such bands, Stearns and two partners launched Cold Sweat Records/Caroline. The label would ultimately discover the likes of Wives/No Age, Battles, Devendra Banhart, and Health, releasing music using non-traditional methods.

Stearns has also served as music supervisor for acclaimed indie films, such as The Wild and Wonderful Whites of West Virginia (Johnny Knoxville) and Miss Meadows (Katie Holmes).

The Royalty Audit: A Legal & Financial Concern

A “royalty audit” is more accurately described as a contract compliance examination, or a "contract audit." Thus, in four of five cases, the call to do a contract audit is made by a client's attorney, not its finance team.

Even in the infrequent cases when the call comes from a non-attorney, we like to involve an attorney if the client is willing to pay for it because we usually need a tolling agreement and our contract audits basically seek to quantify amounts due in connection with legal issues, so it helps to have an attorney available to consult as matters arise and in order to facilitate a settlement agreement or, rarely, file a legal complaint. Accordingly, our royalty and other contract audit work is actually expert consulting work that is a subset of our “forensic accounting” practice, all of which is for a legal purpose.

On the other hand, some attorneys see us as pure bean counters and if a client’s motivation for auditing a business partner is purely financial and it isn’t interested in paying us or an attorney to identify all breaches of the contract, just the accounting provisions, our work focuses as much as possible solely on the financial aspects of their contract.

Even in this case, a contract audit is unlike a financial audit that audits compliance with GAAP (aka an “assurance audit”), which Green Hasson Janks also performs.

One fundamental difference between an “assurance audit” and the contract audits we do: the client.  For example, if we perform a financial audit of a game publisher, the game publisher is our client. If we perform a contract audit of a game publisher, our client is typically a developer or other creator or licensor, not the game publisher, and the publisher is a counterparty to whom we are adverse.

#Thanksgiving Weekend Edition

The top items I shared last week among my Linkedin and Twitter followers:

Buffy Sainte-Marie said #NO:

"Elvis just recorded your song and we want some of that publishing $, honey."

GameStop CEO: "what we are seeing is a tremendous amount of free giveaways on full game downloads ..." 

#Giveback: holiday shopping on YouHambo

News from The Wall Street Journal:

• EU’s Planned Copyright Overhaul May Be Out of Time, But Not Out of Mind - Real Time Brussels
• Former Bertelsmann Chief Gets Three-Year Prison Sentence
• Cox Communications Sued by Music Publishers

***Litigation Update*** "...contracts will keep Run DMC's now-indigent lyricist in hot water over his lawsuit for royalties, a... judge ruled." - Courthouse News Service

Other Links of Interest:

• Apple Beats Music Vs. Spotify: What Apple could offer artists | BGR 
• Best of Last Week - The Auditrix
• HBO Has Hired 160 Lawyers In Anticipation Of Its New Scientology Documentary - Business Insider
• How MERLIN's PANDOLA Deal Could Give Labels Access to Your Share of SoundExchange Royalties | The Trichordist

Chic Turkish Beach Sheets @YouHambo

Fresh #Gifts: #Travel #Journey #Fair #Trade

• How Sega's Mega Drive Made Modern Gaming What It Is Today - VICE
• Study from Pandora Touts the 'Pandora Effect' on Music Sales | Billboard #promotionaleffect
• Warner Music Group Signs First-Ever Major Label Deal With SoundCloud - CIMA
• Xbox One/PS4 Significantly Outpacing Xbox 360/PS3 So Far, GameStop Says - GameSpot

From http://jezebel.com/

# # #

For more music news, follow me @Auditrix.  For interactive games and other IP royalty, business and litigation news, you should follow me @RoyaltyExpert.

Best of Last Week

@jimmybuffett does ask terrestrial stations to pay royalties; he is part if the @musicFIRST coalition.

9 Spotify tools for hardcore music fans

Why Apple has a good shot at killing the freemium streaming music model @jillkrasny via @Inc

Need MCLE credit? Check my panel: "Royalty Income Meets Marital Dissolution Dividing, Managing and Accounting"

Molly Neuman: From Riot Grrrl Founder to Indie Label Advocate - Digital Music News

Lady Gaga's Parsippany #producer loses $7.3M suit to #songwriter

Taylor Swift's Extreme Measures to Keep "1989" From Leaking via @YouTube

Study from Pandora Touts the 'Pandora Effect' on Music Sales | Billboard #promotionaleffect

Don Henley: Record Companies 'Not Going to Roll Over' on Copyright Issue | Rolling Stone

RT @musicregistry: The Million Dollar Record Label Theft, & How It Came Crashing Down

Fortune: Pandora's plans for growth

An #iTunes #contract

SiriusXM Slammed Yet Again As New York Judge Rules in Turtles Lawsuit - Hollywood Reporter

# # #

For more music news, follow me @Auditrix.  For interactive games and other IP royalty, business and litigation news, you should follow me @RoyaltyExpert.

Last Week's Top Links

Several popular items I posted last week on Linkedin and Twitter shared a theme named Irving Azoff:

• "If you're looking for money, you're better off selling one of your planes." - Irving Azoff to Jimmy Buffett when Buffett asked Spotify for a "raise"
• Azoff's New Global Music Rights Venture Seeks Higher Royalties for Songwriters, New York Times article by Ben Sisario
• Hollywood Reporter Exclusive by Eriq Gardner: Irving Azoff Says That YouTube Lacks Licensing Rights to 20,000 Songs 

The big news in the music business last week was YouTube's announced launch of its Music Key service. In addition to the above-linked Hollywood Reporter/Irving Azoff piece, most of the inquiries spurred by my "What is Content ID?" blog post last week were regarding YouTube Music Key subscriber revenue.

However, another popular YouTube tidbit that I shared with my LinkedIn connections had to do with good ol' advertising revenue: Per Jason Calacanis, "YOUTUBE has grabbed about 10% of television revenue"

More music items that engaged my connections on LinkedIn include:

• "Performers & master rights owners..make about 14 times..[that of] songwriters & publishers..for..digital platforms" 
• Auditrix: Highlights from The California Copyright Conference's October 2014 Music Royalties Dinner
• "Spotify’s ties to peer-to-peer—a huge catalog, an on-demand interface, and a free, ad-supported version—means it threatens profits more than any other platform."
• “For a big hit today, there are about 700,000 #royalty #streams, just for one song,” Los Angeles Times quotes Willard Ahdritz

My Twitter followers @Auditrix were most engaged in the following items:

• Due to "court rulings, the royalty rate Pandora pays Sony/ATV reverted to the 1.85%...from the 5%" it negotiated.
• "There are no mutual funds for music royalties yet."
• EU Court rules content embedding is not copyright infringement | Music Week
• Will Half of Terrestrial Radio Stations Disappear? | Mark Ramsey Media LLC
• Spotify's Twitter campaign got hijacked by people demanding fair pay | Death and Taxes

On the copyright front, there was movement last week in one of the most interesting cases that I am following, between Smokey Robinson and his ex-wife, Claudette. Everyone I know who knows them both think it is too bad that they are litigating, so even though the issue of whether state community property laws or Federal copyright laws apply to royalties for terminated copyright grants is very interesting, I was nevertheless happy to read that the parties dropped their suit (see http://t.co/8pt5xyFxnQ) ...but, upon sharing this news in my @Auditrix Twitter feed, the reporter who has had the best coverage of this case - Eriq Gardner at the Hollywood Reporter - suggested that we have not seen the end of this dispute (see the link Mr. Gardner shared here and follow him on Twitter here).  In any event, if you are an attorney or business manager, keep an eye on this case - the outcome could impact your clients!

Tencent was another company in the news last week due to its partnership with Warner Music Group in China (see this, this, this and this), but the most popular bit that I shared about Tencent last week was via my @RoyaltyExpert Twitter feed, which focuses more on games than music: Tencent said that titles on its games portal QQ are better at making money than games on WeChat

Other top games items I shared last week:

• Game industry growing four times faster than US economy - ESA
• "Zynga may have stopped the bleeding for now: daily active user loss slows"
• Video Game Audits: What You Need to Know International Game Developers' Association's Business and Legal Webinar

# # #

For more music news, follow me @Auditrix.  For interactive games and other IP royalty, business and litigation news, you should follow me @RoyaltyExpert.

What is Content ID?

Content ID is a YouTube-owned tool that IDs copyrights embedded in content.

Copyright owners (i.e., record companies, publishers and, I assume, film and TV rightsholders) use Content ID to identify, tag, control and monetize content on YouTube.

The Content ID identification process starts when content owners provide Google with metadata and copies of their works. Content ID then uses digital fingerprinting technology to match these works to uses in certain categories of content on YouTube (e.g., matches to user generated videos, but not multichannel networks, which assume responsibility to pay rightsholders).

Not only can the © owner control (with other owners, if applicable) whether to leave the use up or take it down, but also it can choose to monetize (via advertising and/or subscriber revenue).  Some record companies get 35% and music publishers get 15% of ad revenue for user generated content.  (Big © owners can negotiate directly with YouTube, so those minimums and splits are confidential, but the some rates for indies are public, though they do not include the advances or minimums that major rights holders negotiate.)

Since > 1 billion users are on YouTube every day, it can generate thousands and even millions in earnings for well-managed content.  

Top Items Shared - Past Two Weeks

Here are the most popular news items in the world of music and interactive royalties that I shared publicly over the past couple of weeks:

• "Video Game Audits: What You Need to Know"@IGDA #WednesdayWebinar with "The Game Attorney" Tom Buscaglia
• EU Court rules content embedding is not copyright infringement | Music Week 

• Tricks to negotiating #screenplay prices: Q&A With Dinah Perez, Esq.

• "Sixty-one percent of people who buy CDs are 36 and older, according to MusicWatch's estimate."

• "More than 70% of the music consumed in the first six months of the year in the US was either downloaded or streamed"
• "The history of the Laugh Track" by Stephen Herrera

• Disney Wants to Build a New "Authentic" Search Engine... - Digital Music NewsDigital Music News

• Female PC gamers outnumber males - PC Gamer

• @bwerde The latter.  I think as video ad budgets rise, more artists will start to appreciate how much money can be made via YouTube though.

Recap of Last Week

Top items shared last week on LinkedIn and Twitter by Cedar Boschan:

L-R: Cedar Boschan, Austin Lucas & Kyla Akasha at The Observatory in Santa Ana

• Great post on music publishing valuation by Derek C. Crownover @dickinsonwright via @nekstbiz

• Association For Electronic Music highlights £100 million missing performance royalties | Complete Music Update

Auditrix:

Best of Last Week

• The California Copyright Conference's #Streaming for Dollars Panel @cacopyright #irespectmusic

• I just published "You Need a Better YouTube Strategy"

• @musicbizcast: Ep. #7: Chris Opperman's journey from the basement of UMPG to Record Label Ownership @chris_opperman

• Spotify curation startup gets bought by WMG  via @guardian

• Ford Seeks To Dodge Class Action Over Music Royalties - Law360

• The music industry: "What used to be a question of persuasion has become a problem of prediction."

• Americans are mad for music festivals, Eventbrite's study finds - NY Daily News

• The New Yorker: "Crooner in Rights Spat"

# # #

All the Ways One Can "Buy a Record"

My favorite octogenarian attorney recently asked me:

"Please give me a list of all the ways someone can buy a record."

I came up with the following and included uses that may not strictly constitute sales or phonorecords under the U.S. Copyright Act:

1 – Consumers can purchase permanent copies of recordings in various configurations, such as:

a.      From retailers (online like Amazon.com or brick and mortar like Target and Walmart) or directly from an artists’ website or at a concert (e.g., together with merchandise):

i.      Vinyl Record

ii.     Compact Disc

iii.    DVD

iv.    Embodied on video games

b.     Permanent downloads from music services (e.g., from iTunes and Amazon.com) and video game console manufacturers (e.g., Sony’s PlayStation network and Microsoft’s Xbox store)

2 – Also, consumers pay for access to listen to recordings by subscribing to a music service such as the following:

a.   Interactive services like Spotify and Beats (where users can stream on demand)

b.  So-called "non-interactive" services like Pandora and Sirius XM (which offer users less control over programming)

3 – Alternately, companies pay to advertise to listeners or viewers of free programming on services like YouTube, Vevo, MTV and the services mentioned in #2 above.  In this case, access to the recording is “free” to the consumer because the advertiser subsidizes the cost, but the consumer must watch or listen to ads in exchange for such free access.

4 – Finally, consumers who purchase electronics devices such as a Samsung phone or iPhone may find that music has been bundled with the device by the hardware seller, which pays the music rights holders for the right to do this (and thusly must build in the music cost in the device's price).

What ways to buy a record did I forget?

Please tell me what I failed to mention below!

Best of Last Week from The Auditrix

• 7 qualities of addictive games
• California Copyright Conference's "Are You Getting Paid? Best Practices for Unmatched Royalties" panel discussion, which I recapped here.

#IRespectMusic at the California Copyright Conference

• Why most people aren’t downloading apps anymore - Quartz

• UMG earns a "‘listener hour guarantee,’ which they know is going to up their compensation by about 40% — since it’s per listener hour, not per track, the artist gets screwed because it’s not attributable to a track, so the artist doesn't get a royalty." - Per Rich Bengloff of A2IM
• 30 years of the #music #industry in 30 seconds | Geek-Cetera
• Per @schuylermmoore 506 offerings are outside of #state #laws
  #crowdfunding @BHBA_EntLaw 

• Your Music #crowdfunding article by omarshamout (featuring quotes from me) - @LABJcommunity

• Six Strikes plan to eliminate piracy finally operating at ‘full capacity’
• What I spoke about last week to #business #managers:

Highlights from The California Copyright Conference's October 2014 Music Royalties Dinner

Last week, the California Copyright Conference presented a panel discussion entitled, "Are You Getting Paid? Best Practices for Unmatched Royalties"

October 2014 California Copyright Conference: L-R: Scott Berenson – Director, Claims Department at SoundExchange; Jake Wisely - President The Bicycle Music Company; Diane Snyder Ramirez – Vice President Royalty Accounting & Administration, Royalty Review Council; Chris Castle – Founder, Christian L. Castle, Attorneys, Austin; Anne Cecere – BMI, California Copyright Conference President; Not Pictured: Eric Palmquist - Vice President, Audit & Income Tracking, BMG Chrysalis

I tweeted a few insights from the panelists, such as:

One highlight was when panelist Chris Castle called on Henry Gradstein to speak on state copyright protection of pre-1972 sound recordings:

Henry Gradstein at the California Copyright Conference: Section 980 in California was amended to allow for common law (c) protection

But, a few tweets can't impart all of the valuable information that the panelists shared. To view the complete discussion, click here to join the California Copyright Conference.

#IRespectMusic

Eventually materials from the program will be uploaded here for anyone to access free-of-charge.