The European Union is expected to agree to new rules this week that will clamp down on movie and music pirates following a long legislative battle, according to the E.U. sources last Friday. <br clea




Breaking News

Virgin, Fox Studio Drop Lawsuit, Settle Dispute Over Bill Payments

By Samantha Chang

NEW YORK--Twentieth Century Fox and Virgin Entertainment Group have settled a legal dispute over alleged bill non-payment.

The move came March 2, only a day after Fox had filed a lawsuit against Virgin in Los Angeles Superior Court.

In its complaint, Fox alleged that Virgin did not pay $400,000 for shipments of Fox film DVDs and videocassettes that had been shipped since last October. The merchandise was to be sold through the Virgin Megastores retail outlets.

In a joint statement last Tuesday, the companies said they have "amicably resolved the issue and the lawsuit will be dismissed." Specific terms of the settlement weren't disclosed.

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Billboard Music & Money Event Draws Industry 'Power Players'

By Paul Resnikoff

BOSTON--Last Thursday's Music & Money Symposium at the St. Regis Hotel in New York was undoubtedly the power player's conference.

Scott SperlingTop industry names like Edgar Bronfman, Jr. (chairman and CEO of Warner Music Group), Lyor Cohen (chairman and CEO of U.S. Recorded Music at WMG), Brian Becker (CEO of Clear Channel Entertainment), Scott Sperling (managing director of Thomas H. Lee Partners) and Martin Bandier (CEO of EMI Music Publishing Worldwide) were all in attendance.

Overall, the event attracted about 250 people, mostly on the label, legal, financial and publishing side, with very few pure-play digital music companies in the crowd. But that did not alter the fact that almost every panel had some involved discussion of the digital space, reflecting the massive changes the industry is undergoing.

The overall focus of the conference was investment and dollars for the industry at large, with particular emphasis on how the recent purchase of Warner Music will change the game going forward.

The mood of the conference was cautiously optimistic for the future, and quite an improvement over last year's doom-and-gloom sentiment. Perhaps the most startling change involved the industry's new relation to increased digitization of music, with almost all adopting a strategy of enabling new technologies instead of inhibiting them.

Paul Resnikoff is the editor of Digitalmusicnews.com.

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WMG Crew Get In Gear For Industry Turnaround

By Ed Christman

NEW YORK--Just days after the $2.6 billion acquisition of Warner Music Group closed, a key member of the buyout team valued the music company's assets at healthy $3.5 billion.

Scott Sperling, managing director of Thomas H. Lee Partners, made that assessment in a keynote address last Thursday at the 3rd annual Billboard Music & Money Symposium, held at the St. Regis Hotel in New York.

Despite the problems facing the business in recent years, Sperling says things have begun turning around recently for the music industry, and now people are complimenting his firm for "making a pretty smart buy."

Sperling note that the firm was attracted to WMG by its strong asset coverage for its investment. The firm "saw significant asset valuation" for the music-publishing unit, which separately could be valued at $2 billion-plus. The recorded-music business is valued at $1.5 billion-plus, according to Sperling.

He praised the company's "deep existing management team" while citing the important additions of Edgar Bronfman Jr. as chairman and CEO and Lyor Cohen as chairman/CEO of U.S. Recorded Music.

IPO ON HORIZON?
In an interview with after the speech, Sperling stressed that Thomas H. Lee usually holds onto assets and exit strategies. "When we look at a business, we usually have a five-year horizon," he says.

In this case, if at that time the music industry's "uncertainties have been resolved," and if it appeared to be the right move, taking the company public would be an option to consider, Sperling added.

Sperling noted that one of those uncertainties, piracy, has been negating the industry's growth for the past three years. Still, despite the music industry's problems, the "cashflow stream is very robust" for catalog and music-publishing assets, and music itself still has "strong fundamental demand."

What's more, the industry will benefit from other new revenue streams, including the cell-phone and video game market.

Sperling noted that digital photography was the latest driver for the cellphone market. Digital music, he said, could be the next growth vehicle.

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321 Studios Gets Another Court Smack-Down

By Jill Kipnis

LOS ANGELES--Software company 321 Studios has been ordered for the second time in three weeks to stop selling products that directly helps users make copies of DVDs.

On March 3, New York federal judge Richard Owen entered a preliminary injunction against 321 Studios and ruled that the company's "DVD X Copy" software violates the Digital Millennium Copyright Act in a case brought by Paramount Pictures and Twentieth-Century Fox Film Corp.

A similar ruling was made Feb. 20 by Judge Susan Illston of the U.S. District Court for the Northern District of California in a case brought by film studios MGM, Sony, Warner, Disney and Universal. In that case, 321 was ordered to stop distributing products with the "ripper" function-which enables consumers to bypass DVD encryption codes-by Feb. 27.

The company has complied with the order, though continues to sell "DVD X Copy" without the rippers. 321 has filed an appeal in the California case.

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Music Attys Increasingly Take On Biz Consultant Roles

By Susanne Ault

LOS ANGELES--As more bands veer onto a do-it-yourself path, their music attorneys are morphing into business consultants.

Dwindling label revenues has made the road to getting signed treacherous for many bands. As more acts record and sell albums themselves, lawyers are taking on more non-traditional duties, such as assisting with online distribution, royalty collection and tour routing.

During better times in the record industry, lawyers say their traditional responsibility was to assess label deals. Now, they are becoming more immersed in their clients' livelihoods.

Chris CastleChris Castle, an attorney with Akin Gump Strauss Hauer & Feld in Los Angeles, describes himself as more "consigliere" than lawyer.

"Bands are more reluctant to jump to a major label. A&R could leave and the band would be stranded," says Castle of labels' recent financial difficulties.

"What you now have to do is advise bands more on the business side of things...keep track of them, work with them and try to make people aware of them."

Nikki Rowling, executive director of the Austin Music Foundation, regularly holds seminars for upstart acts. She agrees that many DIY bands are asking more of their attorneys as they give up or hold off on finding label homes. The Foundation also spends a lot of time, she says, referring people to legal contacts.

"Indie artists are relying on legal advice, business advice and strategic decision-making. Don't know if that always used to be the case," Rowling says.

"The channels that (many) bands are coming from are outside the label system. Everyday there are more examples of indies forgoing the label option to build their own team. Lawyers can become a critical point," Rowling adds.

Famously, she notes, Pearl Jam decided to self-distribute its albums after fulfilling its contract with Epic. Its last Epic album, "Lost Dogs," was released Nov. 11.

Castle is currently helping clients like Austin-based Endochine on a wide range of deal points. For the band's latest recording "Day Two," Castle first negotiated consignment arrangements at local record stores in October 2003. Castle also eventually won the album a regional distributor, Crystal Clear, in January 2004.

Oftentimes not part of major retail chains, online distribution is especially attractive to DIY bands. Castle says this means he makes sure his clients sign up for royalty disbursement society Sound Exchange, which accounts for Web-based royalties not currently covered by BMI or ASCAP.

Wofford Denius, a L.A.-based attorney who works with indie acts, says "You have to educate yourself with online distributors. I have been negotiating things with iTunes, Listen.com-we're seeing more of these contracts cross our desks."
touring liaison
Besides staying active in distribution decisions, Castle has become more closely involved with the band's touring operations.

"What you find when you're working in this (indie) part of the food chain, you're more geared towards things like live events. You introduce them to booking agents. You act as the liaison," says Castle. Granted, a number of these responsibilities might be picked up by the band's manager, he admits.

However, Castle adds, "Either there isn't a manager because they don't make enough money, or the manager needs some help too."

Trevor Hance, manager for Castle client Endochine, agrees that lawyers play a key role in DIY bands surviving without traditional label support.
"We've asked (Castle) to do everything: Get a show in a certain market, look at an online distribution agreement. It's not just: 'Shop us to a label,' " says Hance.

Endochine is also looking at licensing music to films. Castle has come in handy, says Hance, in assessing what royalty payments should be due the band.

"He has laughed at how much money (some filmmakers have wanted to pay). But there is one that will be distributed by Miramax in pre-production with recognizable stars. Gave that to Chris, and he said, 'Wow, that's a great opportunity,'" says Hance.

But signing with a label is still the ultimate goal for most bands, notes David Stein, who runs his own N.Y. based law firm. But in order for bands to build up the fan base to catch the label's attention, lawyers must step up their involvement.

"I think (DIY acts) are looking for more advice, because they are covering more bases. They want to know about a certain CD replicator. They need help with a copyright form," says Stein of tasks normally performed by a label.

A couple of DIY bands under Stein's wing include Straylight Run, which recently toured with pop/punk band Brand New.

THE NAME GAME
One issue that he finds himself resolving for young DIY bands is disputes over band names. "Almost every band name that comes up, someone else has," Stein says. He suggests that all bands register quickly with the U.S. patent and trademark office.

"Sometimes bands agree that they are in such different markets that it's a non-issue," says Stein. "But I suggest that my bands deal with the issue immediately. Once you start building a fan base, you don't want to start changing your name. That's very difficult."

Castle adds: "Four to six years ago, a band would play three gigs and get signed. There wouldn't be these questions. (On a major label), they would have money and have a manager that would take care of all of this stuff. That just doesn't happen very much."

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Heavy Metal Band Urges Bush To Acknowledge Armenian Genocide

By Ray Waddell

System Of A DownNASHVILLE--Heavy metal band System of a Down is urging the Bush administration to acknowledge Armenian genocide.

The band is asking the U.S. Congress and House of Representatives to schedule votes for SR 164 and HR 193, measures which would do just that.

Members of the band: Serj Tankian/vocals; Daron Malakian/guitars; bassist Shavo Odadjian, and drummer John Dolmayan, are all of Armenian descent, and have been very active in supporting this cause.

The group will headline Souls 2004, a benefit concert in Los Angeles on April 24 at the Greek Theatre. Proceeds will benefit organizations that work to eradicate the atrocities of genocide, including the Armenian National Committee of America (ANCA), an organization that supports legislation in the U.S. Congress to recognize the Armenian Genocide that was perpetrated by the Ottoman Empire during World War I.

April 24 was chosen as the date for the concert as this year because it commemorates the 89th anniversary of the Armenian Genocide.

Tickets for the concert are $45 and go on sale March 12. Nederlander Concerts will promote.

The band has been writing and rehearsing material for a new record, and hope to beging recording for a new American/Columbia record this May, with a tentative fall release. They have no finalized plans to tour this year as of yet.

System of a Down is managed by David Benvenista at Velvet Hammer Management, and booked by Don Muller at Creative Artists Agency.

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Washington Report

Calif. Senator Backs Artist Fraud-Protection Measure

By Margo Whitmire

Kevin MurrayLOS ANGELES--California Senator Kevin Murray, D-Los Angeles, has introduced a bill in the state legislature designed to protect aspiring artists from financial fraud.

SB 1687 follows on the heels of 1999's Advance Fee Talent Service Act (AFTS), which prevents entertainment representation from asking for upfront payments for job applications or placement.

"Once you have a list of things you can't do, people always find their way around it," Murray, who is co-sponsoring the bill with Los Angeles City Attorney Rocky Delgadillo, tells Entertainment Law Weekly. "[SB 1687] is supposed to close those loopholes."


Certain casting directors and agents have found their way around AFTS by instead charging upfront for things like pictures, make-up and talent lessons.

"It's not that they shouldn't charge you," says Murray. "It's just that they shouldn't charge you in advance in order to represent you."

SB 1687 will amend the AFTS by specifying that the term "advance fee" includes any charges for a service in order to obtain representation, counseling or promotion.

"Money shouldn't be made on people's dreams and hopes," says Murray.

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U.S. Music Shipments Fell 7% In 2003

By Tamara Conniff

LOS ANGELES (Hollywood Reporter)--The value of total U.S. music shipments fell 7.2% in 2003, according to figures released last Thursday from the Recording Industry Assn of America.

Last year, 798.4 million units where shipped versus 859.7 million units in 2002. According to the report, fourth-quarter unit shipments to retail helped offset the 10% decline suffered by the music industry in the first half of 2003.

Shipments to retail rose 5.5% during the fourth quarter. The value of U.S. music shipments from record companies to retail outlets slid 4.3% in 2003, versus a 6.8% drop in 2002, while unit shipments dipped 2.7% versus a 7.8% drop in 2002.

"While the music industry continues to face serious challenges, we are pleased that trends appear to be going in a more positive direction," RIAA chairman and CEO Mitch Bainwol said.

The report shows that newer music formats are gaining in popularity. All formats of music video climbed in value by 38.7%. The DVD format alone skyrocketed 56%.

Shipments of CD singles also climbed, up 85.5% from 2002. The 2003 statistics are supplied to the RIAA by PricewaterhouseCoopers.

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Clear Channel Pays Record Fine for 'Love Sponge' Broadcast

By Brooks Boliek

WASHINGTON--Clear Channel Communications paid the largest-ever single fine for an indecent broadcast last Thursday when it wrote a $755,000 check to the U.S. Treasury for a broadcast of the "Bubba the Love Sponge."

The Federal Communications Commission had accused CCC of violating the nation's broadcast indecency rules when it aired the show on 26 stations in 2001. The FCC fined Clear Channel $715,000 for violating the indecency regulations and $45,000 for record-keeping violations.

"We fully accept our responsibility for airing inappropriate content, and our company will accept the consequences," said John Hogan, president and CEO of Clear Channel Radio, in a statement.

IMPLICIT ADMISSION OF GUILT
By paying the fine, the company implicitly admits that it is guilty of violating the indecency laws. Clear Channel has been engaged in a high-profile campaign to prove that it is a "corporate good citizen."

The company has already canned Bubba (a.k.a. Todd Clem) and has pulled shock-jock Howard Stern off the six Clear Channel stations that carried his show.

"Our company simply does not want to be associated with indecency," Hogan said. "We know we can deliver great radio without compromising our integrity as broadcasters."

The move comes as the debate over indecency on the airwaves has reached a fever pitch. Last Wednesday, the House Commerce Committee overwhelmingly approved legislation that would increase the maximum fine for an indecent broadcast from $27,500 per incident to $500,000 per incident.

The same legislation would also levy the same fine against individuals who spew smut on the air. Acts like Bubba, the increasing use of expletives on TV and radio and the breast-bearing incident during the Super Bowl halftime show this year have all increased the desire of policy makers to do something to combat what they see as a growing cultural ill.

While Clear Channel's payment is the largest ever made, Infinity Radio, a subsidiary of Viacom, settled an indecency complaint with the government in 1995, paying $1.7 million for several broadcasts of "The Howard Stern Show." In thatsettlement, the company did not have to admit that the broadcasts were indecent.

Brooks Boliek is a reporter with Billboard sister publication The Hollywood Reporter.

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International Section

E.U. Set To Act On New Rules To Halt Piracy

By Leo Cendrowicz

BRUSSELS--The European Union is expected to agree to new rules this week that will clamp down on movie and music pirates following a long legislative battle, according to E.U. sources last Friday.

The European Parliament, the EU's elected assembly, is expected to vote in Strasbourg, France on Tuesday for new laws that call on national governments to introduce "effective, proportionate and dissuasive" measures against such counterfeiters and Internet pirates.

The text represents a compromise for the Parliament, however, after it had sought much tougher language. The author of the Parliament's draft law, French conservative Euro MP Janelly Fourtou, had originally asked for "criminal sanctions, including imprisonment" for people found guilty of breaching intellectual property rights.

But when it came to negotiations with national governments, Fourtou was told that the issue of criminal sanctions fell outside the EU's jurisdiction. The law will now leave it up to national governments alone to decide how to punish pirates and counterfeiters.

The compromise is said to also drop Fourtou's proposal to let copyright holders seek damages worth double the royalties or fees that would normally have been charged. The text now sets claims at the actual economic harm suffered by the rights holder.

The draft law is to cover movies, music, software, toys, and pharmaceuticals as well as patents, copyrights, trademarks and registered designs. If the law is voted for on Tuesday, it could be rubber-stamped within days by E.U. ministers.

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China Rocker Jian Sues Audio-Visual Groups On Piracy Grounds

By Steven Schwankert

BEIJING--Cui Jian, widely acknowledged as China's biggest rock act, sued undisclosed audio-visual companies in Beijing on Feb. 26, seeking 330,000 Chinese yuan ($40,000) in damages from piracy and copyright violations.

The suit included undisclosed manufacturers/distributors in Beijing and Tianjin, and the Henan province. Court documents in China are not open to public scrutiny, and disclosure of plaintiffs can serve as grounds for defamation litigation. Cui was not available for comment.

Cui's fifth studio album, "The Village Attacks the City," has been completed, but a distribution deal has not yet been signed.

Cui took the stage in a Beijing arena in January for the first time in over a decade, having been banned from staging concerts in the capital and in Shanghai since 1993. He opened for Taiwan Rock Records act Wu Bai. Cui's five-song set included his controversial hit "Nothing to My Name," a youth anthem that contributed to his disfavor among China's cultural authorities.

He is now slated to open for four dates by Sanctuary Records' Deep Purple when the veteran metal outfit arrives in March and April for dates in China.

Cui was scheduled to open for the ill-fated Rolling Stones concerts in spring 2003, until the outbreak of SARS led to their cancellation.

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Universal Digitizes Entire European Catalog

By Paul Resnikoff

BOSTON--If you build it, they will download and stream: Universal Music International has announced that it has digitized its entire catalog of 300,000 tracks.

The move enables the major to readily deploy tracks to download and subscription services, including OD2. Universal also noted that it "has deals with other online music retailers, including Apple's iTunes and Roxio's Napster, although those companies have yet to launch their services in Europe."

Though EMI was the first to convert their catalog, Universal now eclipses that total number of digitized EMI tracks by about 2 times.

The digitized Universal catalog contains top-selling artists, but includes rarities, outtakes and generally forgotten material.

Structurally, the 20-terrabyte catalog is format-agnostic, essentially master digital files equipped to encode into any format required. The move indicates that European major labels are becoming very serious about making digital sales work.

Paul Resnikoff is the editor of DigitalMusicnews.com.

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Aussie Judge Rejects Kazaa Claim

By Christie Eliezer

SYDNEY--The Federal Court in Sydney has rejected an application by P2P service Kazaa's parent Sharman Networks to have evidence collected during February raids in three Australian states declared invalid.

Sharman's lawyers had asked the Federal Court in Sydney Feb. 10 to rule that evidence collected in Feb. 6 raids by the Music Industry Piracy Investigation (MIPI) unit be ruled inadmissible.

Sharman argued that MIPI had obtained the order from Justice Murray Wilcox by portraying the company as a "fly by night" operator, and had not disclosed that Sharman had been cooperating by providing 4,000 documents in an appeal case being heard in California.

The Court of Appeals in Pasadena, Calif., is currently considering arguments from music publishers and film studios who want to reverse a 2003 Los Angeles federal court ruling on file-sharing liability. Sharman was a co-defendant in the original case which led to that ruling.

A NECESSARY EVIL
On March 4, Justice Wilcox dismissed Sharman's application to have the evidence from the raids ruled inadmissable. He ruled that the search orders were necessary for the six record labels which fund MIPI to collect evidence of possible copyright infringement.

"It is obviously an essential part of the applicants' case to put evidence before the court about the dynamic operation of the Kazaa system," Justice Wilcox said.

He also said the non-disclosure by MIPI of Sharman's cooperation with the Pasadena court was "not material."

The two parties in the potential civil case over copyright infringement will return to court for another hearing on March 23, when the evidence siezed in the raids will be handed over to MIPI.

At the direction of the court, this evidence has been held by a lawyer nominated by Sharman since the raids. The premises involvedin the Feb. 6 raids included the offices and homes of Sharman executives.

'FACING THE MUSIC'
Judge Wilcox also dismissed an application by Sharman to have all proceedings delayed until judgment was handed down on the Californian appeal.

The judge had previously indicated that he would reserve judgement over whether proceedings should go ahead until the Californian case was resolved. No date has yet been set for Justice Wilcox to rule on whether the Australian case will proceed.

MIPI general manager Michael Speck calls the Court's latest decision latest ruling "a win for copyright owners." He adds: "It's time for Kazaa to stop these delaying tactics and get ready to face the music."

MIPI is owned by Universal Music, Festival Mushroom Records, EMI Music, Sony Music Entertainment Australia, Warner Music Australia and BMG Australia.

Sharman executives could not be reached.

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U.K. Atty Glick Launches Legal/Financial 'One-Stop'

By Lars Brandle

LONDON-Leading U.K. music industry attorney David Glick has exited as senior partner at London-based law firm Mishcon de Reya to set up a "one-stop" legal and financial services company for the entertainment, media, sports and fashion industries.

The new firm, called the Edge Group, will open for business at the end of March in the Central London district of Marylebone. It will initially have eight staffers.

Edge Group will have three main components: legal services business Edge Legal; management consultancy/corporate finance house Edge Media; and Edge Media Services, which will provide strategic career and professional advice, particularly tailored to entertainment and fashion industry executives.

"I wanted to provide a 'one stop shop' because I felt I could provide not just good advice, but actually help people with their aspirations and achieve their aims," says Glick.

"The management consultancy and corporate finance arm is important as it will allow us to provide a seamless service in accessing funding for clients, enabling them to make the right deals, not just the obvious deals," he adds.

Glick says the Edge Media finance arm plans to offer access to investment funding for deals in the $5-$75 million range through joint ventures with private equity and venture capital partners. "One of the skills we bring," says Glick, "is the ability to help entrepreneurs who built a business to understand how to structure their business for eventual exit. And how to exit."

Glick, who qualified as a solicitor in 1989, trained at London law firm Eaton & Burley, where he worked with a number of music industry clients.

Eaton & Burley co-founder Michael Eaton, a long-time business partner of Glick, takes a non-executive director role at Edge Legal. Until recently, Eaton was a consulant to Mishcon de Reya.

In 2000, Eaton and Glick's own law firm Eaton's merged with the established firm of Mishcon de Reya, where Glick subsequently headed the Entertainment & Media division. Key staff from that division have now moved to Edge Legal. They include assistant solicitor Richard Baskind, who becomes a director of the new firm, and fellow assistant solicitor Kirsty Williams, described as "a star of the future" by Glick. "We're not having job titles at Edge," he adds.

Mishcon de Reya's Entertainment & Media division will concentrate on non-music related general entertainment work following Glick's departure.

CROSS-DISCIPLINE
Although much of Glick's own background lies within the music sector, the new company's client base will not be restricted to that area. "As a result of just being asked to do it, we've done a lot of work in other entertainment areas, including fashion, of late," explains Glick. "The businesses are very similar. With what we're doing, there is a certain amount of cross-discipline, taking interesting ideas and concepts from one area and using them in another."

Glick says he sees such cross-industry traits in the structure of major labels Sony Music and Bertelsmann Music Group, where the respective chairmen/CEOs Andrew Lack and Rolf Schmidt Holtz have extensive backgrounds in the TV industry.

Glick will continue to represent his existing clients within the new group. They include the European operations of Azoff Management and artists Sarah Brightman, Nick Cave, Craig David, Fatboy Slim, Gabrielle and the Kinks. He will maintain ties with Mishcon de Reya for work outside the media and entertainment fields.

Additional reporting by Tom Ferguson

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U.K. Copyright Body Taps Policeman As New Director-General

By Sam Andrews

LONDON--U.K. anti-piracy body FACT (Federation Against Copyright Theft) has named as its new director-general a high-ranking policeman with specialist knowledge of copyright crime.

Raymond Leinster, who is currently a detective superintendent in the police service of Northern Ireland, will take up his role on April 26 on his retirement from the police, FACT said last Friday.

Leinster's police career includes a pioneering role in establishing the Organized Crime Task Force Expert Group, the law enforcement and private sector partnership that tackles organized crime's involvement with intellectual property theft in Northern Ireland.

This initiative could well be developed nationally according to FACT chairman Marek Antoniak. "Although this has only applied to Northern Ireland, already government is looking at this template for the rest of the U.K.," Antoniak said.

"His experience and awareness in this area will prove to be an extreme advantage to the industry in the future. Raymond Leinster has acquired defined links with Interpol and therefore has knowledge of the EU perspective on intellectual property crime," Antoniak added.

Sam Andrews is a writer for Billboard sister publication The Hollywood Reporter.

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Dream Makers & Deal Breakers

Compendia Music Names Loper Biz Development Head

By Ray Waddell

NASHVILLE--Compendia Music Group has named Jeff Loper director of business development.

He will manage new-media initiatives and oversee new-business procedures.

Loper reports to president/CEO Michael Olsen. He previously was in charge of specialty marketing for Light Records.

In addition, Ric Pepin was named vice president and general manager for Compendia Records and Intersound Records, overseeing promotions, marketing, publicity, creative services and A& R for both labels.

He reports to president/CEO Michael Olsen. Pepin was previously vice president of marketing and promotions of Compendia Records.

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J Records Names Jackson VP of A&R

By Carla Hay

NEW YORK--J Records in New York promotes Larry Jackson to VP of A&R. He was director of A&R.

RADIO: Radio Disney in Burbank, Calif., names Michael Peterson director of synergy and marketing. He was director of brand management at ABC Cable Networks Group.

Oldies WWMG in Charlotte, N.C. appoints Nick Allen PD. He adds those duties to his title of PD of AC station WLYT Charlotte.

Modern rock KCPX in Salt Lake City names Ellen Flaherty PD. She was PD of modern rock KTEG Albuquerque, N.M.

Country KBQI and adult R&B KSYU in Albuquerque appoint Steve Giutarri assistant PD/music director. He was assistant PD/music director at country KILT Houston.

MUSIC VIDEO: VH1 in New York promotes Mark McIntire to senior VP of sponsorship, development and integrated marketing. He was VP of marketing.

NEW MEDIA: Insound in New York names Steve Kleinberg CEO. He was senior VP of marketing at WEA.

Apple Computer Inc. in Cupertino, Calif., promotes Chris Bell to director of iTunes product marketing. He was iTunes product line manager.

PRO AUDIO: Shure Inc. in Niles, Ill., ups Christine Schyvinck to executive VP of operations. She was VP of operations.

Digidesign in Los Angeles appoints Rich Nevens to director of worldwide console sales. He was executive VP of sales for the Americas at Euphonix.

CONCERT PROMOTION: Jazz at Lincoln Center in New York appoints Nancy Wolff VP of marketing. She was a principal at independent consulting firm Wolff Den.

Oregon Arena Corp. in Portland, Ore., promotes Chris Oxley to executive director of event sales and management, and Howard Zuckerman to director of event sales and management. Oxley was executive director of event management, and Zuckerman was event manager.

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Sony Taps Ellis As Urban Music GM

By Samantha Chang

NEW YORK--Sony Urban Music has named Lisa Ellis general manager.

In the newly-created position, Ellis will SUM's oversee day-to-day operations. She also will work with Sony's U.S. labels on urban music, including the Columbia Records Group and Epic Records.

Ellis previously was senior VP of strategic marketing and music licensing at Sony Music. Ellis will report to Sony Music U.S. president Don Ienner.

Separately, Sony Music confirmed last Thursday that David McPherson, executive VP of Sony Urban Music, had stepped down.

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NARM Names Donio Acting Prez

By Samantha Chang

NEW YORK--The National Association of Recording Merchandisers (NARM) has named Jim Donio acting president.

Donio had been overseeing the organization since former NARM president Pam Horovitz left in mid-2003.

Donio joined NARM in 1988 as director of creative services and was named executive VP in 2000.

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Commentary

Royalties: An Auditor's Perspective (Part 1 of 2)

By Perry Resnick

Perry ResnickNEW YORK--Most royalty auditors come into the artist/manager/attorney loop well after a recording or publishing contract is negotiated and signed.

Although the main function of an auditor is to determine whether royalties are being paid in accordance with an agreement, there are certain areas where a knowledgeable auditor can assist an artist's other professionals during contractual negotiations by identifying potential areas of abuse or where future "contractual interpretation" differences may arise during audits.

One of the prevalent differences in "contractual interpretation" during audits is the party with whom an artist contracts. Although artists generally sign with a label, such as Interscope Records or Capitol Records, the deals are always worldwide, with the label's affiliates handling all non-USNRC (U.S. normal retail channel) sales, such as foreign sales, foreign record club sales, compilations and special market sales.

A QUESTION OF ROYALTY
The issue of who is defined as "company" in the agreement is not a problem for normal retail channel sales, where royalties are paid on a percentage of the wholesale or retail price. However, when royalties are paid on a percentage of "company's" net receipts, it can be a problem.

A record label's affiliates generally retain from 15%-33% of receipts from non-NRC sales and remit the balance to the U.S. label. Artists then generally receive 50% of the label's net receipts, which have been reduced by the "fees" of its affiliates.

When artists are paid royalties on a percentage of net receipts, it is calculated on what the U.S. label has received. Income retained by foreign and special market affiliates within the same corporation is not included in "company's" net receipts.

This problem can be circumvented by bringing the publishing concept of "at source" into recording contracts. It's puzzling that most publishing contracts calculate royalties "at source," but record contracts rarely do. The first place where an affiliated company receives income is where an artist's percentage of net receipts should be calculated.

DEFINING 'NET SALES'
Another area where problems arise is when "net sales" are defined as less than 100% of actual sales less returns. I have seen numerous instances where "net sales" were defined as 85% of sales less returns, and record club or foreign royalties were calculated on 90% of "net sales." In such instances, an artist will receive royalties on 76.5% of net sales (i.e. 90% of 85%), when the intention was for the artist to receive 90% on 100% of net sales.

Although "net sales" should not be defined as less than 100% of sales less returns, some record company royalty systems are geared towards "net sales" being defined as 85% of sales less returns (where standard free goods are factored into the net sales percentage).

In these cases, you need to ensure that the contractual definition of "net sales" does not unintentionally reduce the royalty basis for non-NRC sales, as detailed above unless there is explicit language in the agreement. Even then, it is generally not paid without having to first conduct an audit.

It's a simple calculation to allocate unidentified income to specific artists, as long as the appropriate information is made available.

Without an explicit right to this type of income in the contract, information required for the calculation will be denied during an audit, and any claims of this type will be strongly disputed.

Perry Resnick is a senior manager with RZO LLC.

(Part 2 of this commentary will appear in next week's issue of ELW.)

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Case Analyses

Tom Waits Adds To Money Flood From Licensing Suit Series

By Chris Morris

LOS ANGELES--A Spanish court decision in favor of Tom Waits marks the fourth time the gravel-larynxed singer-songwriter has won a court victory in his ongoing campaign to protect his unique vocal style and compositions.

Few musicians have sought legal remedies to perceived violations of their rights as often as Waits, who has enjoyed a much-lauded 30-year recording career with Asylum, Island and, most recently, Anti/Epitaph.

Since 1980, when he amended his 1977 publishing agreement, Waits has maintained a policy of not licensing his songs for commercial use, and he has frequently taken to the courts to defend his contractual rights.

He has also repeatedly litigated against companies that have attempted to replicate his distinctive throaty rasp in advertising campaigns.

In each case in which Waits gone to court, he has prevailed, and he has frequently scored significant punitive awards.

In late February, a Barcelona court ruled that the Spanish production company, Tandem Campmany Guash, had misappropriated Waits' style in a "sound-alike" 2000 TV ad for Audi cars, and ordered the firm to pay unspecified compensation to Hans Kusters Music, Waits' Spanish publisher.

The court-which cleared co-defendant Volkswagen-Audi Espa–a, the carmaker-agreed that music in the spot had followed the structure of Waits' 1987 song "Innocent When You Dream."

Waits' attorneys had noted during the trial that the musician had rejected Tandem Campany Guash's request to license the song for use in the commercial.

Waits learned about the TV ad from postings on fan Web sites, and was alarmed to learn that many believed it was Waits performing the song.

IN FULL SWING
The musician's court battles date back to the late '80s.

In May 1990, a federal jury in Los Angeles awarded Waits $2.5 million in a suit he lodged against chip maker Frito-Lay Inc. and the company's ad agency, Dallas-based Tracy-Locke Inc.

In that case, it was found that a jingle in a 1988 ad for Salsa Rio Doritos has lifted Waits' song "Step Right Up," and that the agency had hired a local Waits impersonator, Steven Carter, to perform the song, even though it knew a lawsuit was a possibility.

Frito-Lay and Tracy-Locke were ordered to pay $500,000 and $1 million, respectively.

In September 1994, Los Angeles Superior Court Judge Harvey A. Schneider awarded Waits $20,000 in damages in a suit the singer filed against his former publisher, Third Story Music, over unauthorized use of his songs in foreign commercials.

Waits had maintained that the 1980 clause in his publishing contract prohibiting commercial exploitation of his songs was violated by the use of the song "Heartattack and Vine" in a Levi's jeans commercial in the U.K. and the composition "Ruby's Arms" for French ads for Williams' Gel shaving cream.

Schneider also ruled that Waits was entitled to recover any monies received by Third Story for the use of the songs in the spots.

In December 1996, Third Story lost another round to Waits, when L.A. Superior Court Judge John P. Shook prohibited the firm from licensing any of Waits' songs from Francis Ford Coppola's 1982 film "One From the Heart" for national or multinational commercial use.

The decision came in a trial that combined a suit filed by third Story against Waits in May 1995 and a counterclaim lodged the following month by Waits against the publisher and Herb Cohen, a principal in Third Story and the singer's former manager.

In late 1993, Third Story had licensed a medley from the movie for use in a Suchard Chocolate commercial in Argentina, for a fee of $100,000.

Waits cited the 1994 decision against Third Story and depicted the company's Argentinian license as another violation of his publishing agreement.

Waits' interest in artists' rights extends beyond his own cases.

In November 1989, he was in an L.A. courtroom offering support to Bette Midler when the singer won a $400,000 award from the Ford Motor Co., which had used a Midler sound-alike in one of its ads.

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Lord Of The Rings DVD Triggers Copyright Suit

By Samantha Chang

NEW YORK--The companies that own the rights to J.R.R. Tolkien's "Lord of the Rings" books are suing a New Jersey company for publishing a four-volume DVD compilation on the books.

Saul Zaentz Co., which owns the trademarks and related intellectual property rights for the LOTR books, films and merchandise, and New Line Cinema contend that Kultur has infringed the Tolkien copyrights by making and selling the DVD set "Inside Tolkien's The Lord of the Rings."

J.R.R. Tolkien wrote "The Hobbit" and "The Lord of the Rings" trilogy. The book's characters are featured in the recent "Lord of the Rings" films and merchandise.

Each of the defendants' four DVDs focuses on an individual volume of the Tolkien books, according to the complaint.

The plaintiffs are seeking an injunction to halt the alleged infringement as well as an unspecified amount in damages.

Anthony Keats of Keats McFarland & Wilson in Beverly Hills is representing the plaintiffs.

Case Name: Saul Zaentz Co. d/b/a Tolkien Enterprises and New Line Cinema v. Kultur International Films

Cite: U.S. CD California CV04-0340

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Trial Begins In Ruben Blades Royalty Dispute With Record Labels

By Leila Cobo

MIAMI--The trial involving Ruben Blades' lawsuit against his former record and publishing companies begins Monday in New York federal court.

Blades says the companies failed to pay recording royalties and publishing royalties. He also accuses the companies of infringing copyrights in several musical compositions he owns.

The singer/songwriter/actor/producer initially filed the action in September 2002 in the U.S. District Court for the Southern District of New York, naming as defendants Fania Records, Vaya Records, Musica Latin Internacional, Vaya Publishing Co., Fania Publishing, Vev Plub and Sonido Inc.

The companies are or were part of the Latin music enterprise owned by the late Gerald Massuci, who recorded some of the biggest names in the genre. In the 1970s, Blades was signed to Fania Records, and released some of his most famous recordings through the label.

This isn't the first time Blades and his former companies have clashed. In 1984, Blades filed a similar complaint but reached a settlement with all parties the following year. Blades claims the defendants have not adhered to the court-ordered terms of the settlement. Blades' publishing has been administered by Sony/ATV since 2000.

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TV Composer's Wife Gets $2M Jury Award

By Samantha Chang

LOS ANGELES--May-Loo Music, a music publishing group owned by the widow of music composer Bill Loose, won a $1.9 million jury award.

In court, Irma Loose alleged that a business partner had mismanaged residuals, taken control of her husband's songs and entered into business dealings without her knowledge.

Best known for creating the theme songs for popular TV shows such as "Dennis the Menace" and "The Donna Reed Show," Loose left his music and publishing company, May-Loo Music, to his wife after he died in 1991.

"Bill Loose's treasury of songs has been restored to its rightful owners at May-Loo Music," says lead attorney George Belfield, a litigator in Greenberg Traurig's Los Angeles office. "Mrs. Loose was clearly taken advantage of by a business partner she entrusted with her husband's music, and the jury quickly recognized that fraud had occurred."

Loose's music library had languished for many years after his death and royalties were minimal. His wife Irma had no real experience in music publishing and had not been involved with her husband's work.

In 1997, music publisher Don Great had approached Irma as a former "friend" of her husband's, convincing her to enter him into a contract with May-Loo Music that allowed Great to act as a co-publisher for Loose's music.

Great had agreed to pay her 50% of what he earned from his management of her husband's songs. In subsequent weeks, he also convinced Irma to sign four amendments to the original contract, each more restrictive than the last.

By 1999, when May-Loo's royalties had not increased significantly, Irma complained to Great, who hired a lawyer and ceased all communication with May-Loo Music.
Then, in early 2002, Great settled alleged claims by six composers who said they had an ownership interest in Loose's music but allegedly never told May-Loo Music about the settlements. May-Loo Music sued Great in June 2002 in state court, to which Great filed a cross-complaint for fraud and related claims against May-Loo Music and Irma personally.

The case was removed to federal court in Santa Ana in 2003, and trial began on Jan. 27, 2004, before the Honorable James V. Selna.Two weeks later, the jury returned a verdict for $1.9 million ($1.8 million for breach of fiduciary duty and $100,000 for fraud) for May-Loo Music and Irma Loose, each receiving $950,000.

The defendant received nothing on his cross-complaint and also was ordered by the judge to pay the full amount of May-Loo Music's attorney's fees.

"It's a victory all around," says Belfield, "especially when we are able to quickly provide closure for our client May-Loo Music. We are pleased to have helped return Bill Loose's songwriting legacy to his family."

Greenberg Traurig attorney Jordan Grotzinger was co-counsel.

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Jury: On-Demand Book Printing Infringed Patent

ST. LOUIS (Associated Press)--A federal jury has awarded a Missouri company $15 million in damages, agreeing with its claim that the nation's leading provider of on-demand book printing infringed on its patent for the technology.

The verdict could mean that consumers who follow certain steps to order a book printed-on-demand also may be infringing on the patent, a lawyer for the plaintiff said.

The three defendants: Lightning Source of La Vergne, Tenn., its parent company, Ingram Industries, of Nashville, Tenn., and Seattle-based Amazon.com, said they would appeal the judgment, returned last Wednesday. The trial began Feb. 9.

The defendants had argued the patent wasn't valid and that there was no infringement.

The case was filed in October 2001 by On Demand Machine Corp., a St. Louis company founded by systems engineer Harvey Ross. Ross died in January 2002, three months after the lawsuit was filed.

Ross was 68 years old in 1990 when he developed the concept of on-demand book printing, said William Cunningham, his attorney.

Ross' idea was that a customer could enter a bookstore kiosk, key a book title into a computer and access a synopsis, sales and other consumer information before clicking on a command that would produce a printed, bound and covered book within minutes.

Ross took his prototype to book expos in New York, but his idea never became a commercial reality.

Wednesday's $15 million judgment is "considerably" more than the parties would have had to pay in royalties, Cunningham said.

"He'd be pleased," Cunningham said of his late client. "It's vindication for 12 years of work."

Ingram spokesman Keel Hunt said "we certainly disagree with this decision," and that the company expects to win on appeal. Amazon.com declined to comment.

In the early 1990s, Xerox Corp. demonstrated that Ross' technology produced a book whose quality matched an offset-printed version. But Xerox wanted $2.2 million to build a prototype, forcing him to drop plans for a partnership.

Ross won his patent in 1995, and later--when Xerox challenged parts of it--he returned to the U.S. Patent Office in 1997 to have its critical parts affirmed.

In the mid 1990s, Ross approached Ingram Industries, whose book division is the leading wholesaler and distributor of books. He figured Ingram stood to gain a lot by using his method by eliminating huge inventory, storage and shipping costs.

Offset printers print books in large batches, forcing publishers and retailers to gamble on whether they'll all sell or sit in storage.

In 1996, Ingram told Ross it would not partner with him. The next year, Ingram announced the launch of Lightning Source, which began printing books on demand in January 1998 in a large production facility, rather than in a bookstore, as Ross had envisioned. Its customers are publishers and retail book sellers.

Ross and his company filed the patent-infringement lawsuit in October 2001, after Lightning Source refused to license his technology and pay royalties, Cunningham said. The suit sought damages amounting to no less than what would have been a reasonable royalty.

Immediately after Wednesday's verdict, ODMC asked U.S. District Judge Mary Ann Medler to halt the defendants' on-demand-book-printing operations. A decision on that request is expected within weeks.

The judge also must decide whether to triple the damages, which the law allows in cases of "willful" patent infringement.

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