This article was first published in the May 3rd issue of Billboard.
The April 18 announcement that Prince had re-signed with his first label, Warner Bros. Records, where he had resided from 1978 to 1996 and produced some of his best-selling and most compelling work, came as a shock to the music industry and fans alike. For one thing, the artist’s fallout with Warners had been so acrimonious that in 1993, Prince bizarrely changed his name to an unpronounceable symbol to protest his label’s insistence that he release less music (and not flood the market).
Even more surprising to industry insiders was the label’s announcement that it had given Prince ownership of the master tapes to all of his Warners albums. In addition to giving the artist the kind of control over his work that he has always sought, it was a lucrative deal. In 2013, his Warner Music Group catalog scanned 286,000 units, according to Nielsen SoundScan. If Prince had owned the catalog then, Billboard estimates his cut would have been nearly $1.7 million instead of the estimated $657,000 in royalties he would have been paid.
But it’s a sure bet that artists, their managers and their labels were paying attention to the deal for another reason: Industry executives suggest that although WMG’s negotiations with Prince began over the label’s desire to get the artist to cooperate with plans to reissue his records, a key issue on the table -- one that the industry is watching intently -- is Prince’s desire to reclaim his master recording copyrights under the 1976 Copyright Act. Under this legislation, an artist can regain control over a master recording copyright after the first 35-year term of that copyright expires.
Despite its title, the act took effect in 1978 -- copyrights to albums released that year and onward began to expire in 2013. As a result, in recent years, dozens of acts, including the Eagles, Billy Joel, The Police, Blondie and Journey, have filed termination notices, which sets the stage for a watershed moment that one label executive says “scares us silly.”
Not surprisingly, label executives say they prefer negotiation to litigation over termination notices for fear of triggering a landmark precedent-setting case. One says that since artists can only reclaim their master-recordings rights in the United States, a label might agree to pay enhanced international royalty rates, if a termination notice is waived. Or, a label may offer the master copyright when facing an artist’s audit or lawsuit over digital royalty payments.
Smaller-selling acts may find labels less responsive to termination notices because, executives say, in most cases the high cost of litigation will outweigh the economic benefits of reclaiming the copyrights.
A major-label executive observes, “There is a ripeness to when to address the issue.”