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Tough Times Ahead for Record Companies

January 8th, 2010

It looks like the major labels are in for a world of hurt in the coming years. And not just from declining CD sales.

For starters, Canadian subsidiaries are being sued for their practice of “exploit now, pay later if at all”.

The defendants in the case are Warner Music Canada, Sony BMG Music Canada, EMI Music Canada, and Universal Music Canada, the four primary members of the Canadian Recording Industry Association.

The CRIA members were hit with the lawsuit in October 2008 after artists decided to turn to the courts following decades of frustration with the rampant infringement.

The claims arise from a longstanding practice of the recording industry in Canada, described in the lawsuit as “exploit now, pay later if at all.” It involves the use of works that are often included in compilation CDs (ie. the top dance tracks of 2009) or live recordings. The record labels create, press, distribute and sell the CDs, but do not obtain the necessary copyright licences.

Instead, the names of the songs on the CDs are placed on a “pending list,” which signifies that approval and payment is pending. The pending list dates back to the late 1980s, when Canada changed its copyright law by replacing a compulsory licence with the need for specific authorization for each use. It is perhaps better characterized as a copyright infringement admission list, however, since for each use of the work, the record label openly admits that it has not obtained copyright permission and not paid any royalty or fee.

Here in the States, provisions in the Copyright Act of 1976 means that very soon artists or their heirs will have the ability to get the copyrights back on music from the major labels.

The late ’70s, when punk exploded and disco imploded, were tumultuous years for the music industry. A time bomb embedded in legislation from that era, the U.S. Copyright Act of 1976, could bring another round of tumult to the business, due to provisions that allow authors or their heirs to terminate copyright grants — or at the very least renegotiate much sweeter deals by threatening to do so.

At a time when record labels and, to a lesser extent, music publishers, find themselves in the midst of an unprecedented contraction, the last thing they need is to start losing valuable copyrights to ’50s, ’60s, ’70s and ’80s music, much of which still sells as well or better than more recently released fare.

In addition to putting a dent in the pocketbooks of EMI, Sony, and the like, bands controlling the copyrights to their own music would, I presume, be able to negotiate with online music dealers like Apple or, if they saw fit, tell the iTunes store to go suck an egg and offer the music online themselves.

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  4. Internet Radio Broadcasters Take a Sigh of Relief
  5. Best Record Store. Ever.

2 Responses to “Tough Times Ahead for Record Companies”

  1. my understanding is that Apple is mostly happy to negotiate directly with smaller labels, to the benefit of the bands. The pricing structure and limitations are largely dictated by the big labels.

    But, Emusic is also pretty easy to get into for smaller labels and bands.

    Mostly, i am not going to miss the big labels. They screwed the pooch for years and years.

  2. Palmer says:

    I honestly don't know how the iTunes store works. But, if a band owns all their own copyrights, they will get a bigger chunk of royalties, regardless of how nice Apple is.

    We'll just have to wait to see how the cookie crumbles.

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