Land of the "Free"

While rummaging through the National Public Radio (NPR) archives (yes I spend some of my free time listening to old NPR pieces -- don't judge), I ran across a three part series from August of 2009 focusing on the trend of free goods and services in the digital economy. No one sector of our economy is more acutely aware of this trend and the resulting outcomes than those of us who have made a living in the music industry. Well before the housing crises or the near-collapse of the banking system, the digitization of music content destroyed the music industry's longstanding business model.

Listening to the NPR coverage of the free-economy and thinking about my post from last week furthered my contemplation of the broader long-term legal, economic, and cultural ramifications of such an economy.

According to the first segment in the NPR series, many Internet businesses are attempting to follow the Google model of monetizing their service through add revenue. Yet, ask any journalist from any newspaper on the planet, this is not a viable solution for the vast number of online businesses. There are only so many advertising dollars available.

Others are offering many different levels of services or products. Usually a free basic service or product and a fee based premium service or product. Yet this business model has not been as successful as the free model. As many of my colleagues in the music industry like to ask: "How do you compete with Free?"

The difficulty of designing fee-based business models in the new digital online economy is redefining intellectual property law and maybe America. This developing "social norm" of free access to other persons' intellectual property is and will continue to influence how we view tangible property such as personal property and real property.

Could this developing social norm shift the culture of America? There have been many commentators who have examined whether, in the wake of our current economic crisis, the "rugged American individualism" has given way to a socialistic culture more identified with Europe. A while ago a Reuters columnist, Bernd Debusmann, had a very compelling blog entry on this topic, which can be found by clicking here.

I wonder, however, if the new social norm of the digital world's free economy set the stage for such a shift of the American culture well before the housing crash and the credit crunch? Could the communal view of intellectual property advocated by such corporate giants as Google be pushing America from a heavily individualistic ownership culture to a more communal "Europeanized" culture? 

Songwriter Contracts

This is a reposting of an original 2009 blog post. This post was the start of a project exploring songwriter contracts. I never finished the project and am reposting this original post to kick start the project anew.

Today I had the pleasure to meet with a few Nashville Songwriters at the Country Music Hall of Fame. I was there to offer my services in a pro bono clinic as part of the For All campaign of the Tennessee Bar Association (TBA). This clinic was co-sponsored by the TBA's Entertainment and Sports Law Committee and the Arts & Business Council of Greater Nashville's Volunteer Lawyers and Professionals for the Arts (formerly the Tennessee Volunteer Lawyers for the Arts).

One of the questions I received regarded the distinctions between the types of songwriter contracts. That got me thinking that I should post a quick outline regarding the the different types of songwriter contracts. This just scraches the surface. But I plan on building on this post in the weeks to come.

When a person speaks of a “songwriter agreement” or “songwriter contract” they are referring to a contract entered into between a songwriter and a music publisher. Music publishers, as many of you know, act on behalf of songwriters to get their written songs “cut” (i.e., recorded on an album). This is known as “plugging.” Publishers also take care of all the administrative work related to plugging. This can include registering songs with the U.S. Copyright Office, issuing licenses, and accounting for royalties.

There are several types of songwriter agreements. Generally they are
1. Single Song Agreements
2. Exclusive Songwriting Agreements
3. Co-Publishing Agreements and
4. Administration Agreements

Single Song Agreements
Under a Single-Song Agreement, the songwriter transfers copyright ownership of specifically identified song(s) to the publisher. These are “non-exclusive” agreements because there is no term. In other words, these agreements are simply a one-time “sale” where the copyright is transferred from the Songwriter to the Publisher. The songs must already be in existence and are specifically identified in the contract.

Exclusive Songwriter Agreements
The main difference between exclusive songwriter agreements and single song agreements is that in an exclusive songwriter agreement the songwriter is transferring to the publisher copyright ownership of all songs written during the duration of the contract. Further distinguishing these types of agreements from single song agreements is that under an exclusive songwriter agreement the songwriter usually receives an advance that is recoupable from future royalties.

Co-Publishing Agreements
Under a co-publishing agreement, two or more parties (usually the songwriter and their publisher) share ownership of songs. In the typical co-publishing agreement, the songwriter transfers partial copyright ownership to the publisher and retain part ownership either in themselves or in their own publishing company. The songwriter’s independent publisher will have administration duties under this type of contract. The provisions of co-publishing agreements are usually very similar to those of exclusive songwriting agreements.
The main difference is that the songwriter will receive both the songwriter’s share of royalties (usually 50% of net royalties) and a cut of the publisher’s share the royalties (usually 25% of the net royalties).

Administration Agreements
Administration agreements are service contracts between the songwriter (or writer’s publishing company) and a publisher or administrator. These type of agreements are usually, although not always, reserved for established songwriters. In an administrative agreement a songwriter will pay up to 25% of net royalties for the administrative services of a music publisher. The important distinction between this type of agreement and the other types above is that the songwriter does not transfer any copyright ownership to the publisher.

On and off over the next few months I will be highlighting issues and pitfalls regarding these songwriter contracts. For those of you who are unfamiliar with songwriters and music publishers I suggest you check out the Nashville Songwriters Association International.

The Shifting Social Norms of Creative Expression

Mike Masnick's techdirt article "No Copyright Intended: The Coming Generation Who Intrinsically Assumes Remix & Sharing Makes Sense" points directly at the tsunami that we have all been watching repeatedly crash on the shores of the creative industries and begs the question "o.k., so what are we going to do"? 

His article rightly concludes that the new normal (i.e., social norms) is the remix of content. He argues that "no amount of 'education' ... can fool people into believing that nonsense is reasonable." But what he fails to address is that no amount of ignorance can suspend the laws of economics. Indeed this is the storm that has created the Tsunami in the first place. 

For those who are not impacted by the economic realities of infringement, it is understandable to disregard the economic consequences (harm) of such behavior. Their behavior can be analyzed through the egalitarian social norms so recently created by the free content ideal (e.g., the democratization of knowledge). Are there benefits to the free flow of information, knowledge, and culture? Absolutely! This ideal may well be worth pursuing for the advancement of humanity. But human nature and economic realities must be understood and dealt with, least we go down the road of Utopian Marxism.  

Are these new social norms moving us toward alternative systems to copyright? What could those alternatives be? Is there enough advertising to support all of the creation digitization has catalyzed? Are we at the dawn of a new patronage system? After all, the patronage system was the system that copyright replaced -- wouldn't that be interesting? Or, more likely and reasonable, are we going to see the evolution of another system altogether? 

What this all boils down to is one simple question: How do we provide an incentive to create quality creative content without copyright? I'm not saying that copyright is the answer. It is becoming increasingly apparent that there are problems with the current state of technology and social norms when governed by copyright law. The friction and failures are undeniable. But necessity -- human nature and economics -- will demand a solution eventually. 

Don't agree? Malcolm Gladwell in his book Outliers explores the "10,000-Hour Rule," which is a theory based on the work of Dr. K. Anders Ericsson. Ericcson, one of the world's leading experts on the cognitive precursors of how expert performers acquire their superior performance in fields such as music and the arts, has found that it takes about 10,000 hours of extended deliberate practice to become an expert superior performer. Broken down to its simplest form, Ericsson's theory posits that what creates true greatness is extraordinary effort. In "Outliers" Gladwell gives many compelling examples and arguments in support of this theory. 

Will anyone have the time and resources to devote such effort toward an endeavor, if such efforts result in no rewards? I'm sure some will ... but how many? Will those willing to devote such time now require a patron? What are the costs of a patronage system on creativity and the common good? What system could save us from the costs of patronage or the failures of copyright?  

In essence I am asking: (1) what are the benefits of this shift in social norms, (2) what are the costs, and (3) are we as a society willing and able to pay such costs for such benefits? If the answer to number 3 is no, we need to start creatively exploring alternatives.