As CD sales plummet, downloading surges and music retailers close their doors faster than you can say, "You've got mail," the four major record companies are scrambling to come up with a workable musi
Owen J. Sloane is an entertainment attorney with Berger, Kahn in Los Angeles.
As CD sales plummet, downloading surges and music retailers close their doors faster than you can say, "You've got mail," the four major record companies are scrambling to come up with a workable music strategy.
Their response? Exploit and expand their traditional areas of exclusivity to include such media as ringtones, voicetones, mobile wallpaper, videogames, film and TV, and other formats that carry music.
Just a few years ago, major-label recording deals required that artists agree to make phonograph records exclusively for the label. In other words, during the term of the agreement, artists could not make records for anyone else.
Any recordings made for broadcast or exhibition -- TV, webcasting or film, for example -- were for the most part left unaffected, and the artist was free to record in those media, owing the record company nothing as long as no soundtrack album was made. Such non-musical performances as speaking and reading and dramatic performances also were not part of the exclusive agreement.
Today, record companies are reinventing themselves as music companies, with some claiming exclusivity over new media, including voicetones without music. Under today's music deals, a downloadable personalized recorded message of an artist saying, "Hi, you have a voice-mail message," may be subject to the record company's exclusive rights. The artist does not have to sing a lick for the record company to make money off his or her voice.
Under such terms, the artist also may not -- without record company consent and presumably financial involvement -- do a TV show, webcast or motion picture unless the role is strictly dramatic and does not involve any music. If an artist sings "Happy Birthday" on TV, the record company would have to approve and may demand a portion of the artist's compensation.
How can these encroachments on areas traditionally outside a recording agreement be justified?
Record companies argue that they are not trying to control other media, but only control or share in the artist's activities in those other media.
Using such reasoning, how far away is the day when labels once again share in merchandising and publishing (as was often the case several decades ago) or when dramatic acting and touring come within the ambit of record contracts as a matter of course instead of exception, as in the EMI/Robbie Williams and Hollywood/Polyphonic Spree agreements? Were record companies willing to compensate artists fairly in those areas, as EMI and Hollywood have apparently done, such involvement might not be unconscionable.
What is unconscionable now is that record companies are trying to secure a bigger piece of the artist's pie without paying or adding anything extra.
Labels also justify expansion of exclusivity outside of traditional records by arguing that broadcast TV, motion pictures and webcasts compete with records. To the extent a consumer has a choice between spending money on prerecorded music or spending the same money on other forms of entertainment, it is true that competition exists.
However, the answer is not to try to control or participate in the income derived from all other consumer choices, but to listen to what consumers really want: pricing consistent with perceived value, talented artists that stand the test of time and download services that offer variety and cross-platform compatibility. If record companies do not improve their offerings, the strategy of leveraging their power in recording contracts to encompass other media will ultimately fail. Unless the core business is strong, the tail will end up trying to wag the dog.
The same holds true for such emerging markets as voicetones. Labels are trying to muscle their way into the market by adding non-negotiable provisions to existing artist contracts requiring artists to accept unfavorable terms from in-house affiliates that often are inferior to dedicated wireless companies. Even worse, in some cases the record company licenses the rights it acquired from its artists to the same third parties that previously would have been able to deal directly with the artists.
If record companies want to enter new businesses, they should focus on providing superior services. Rather than bludgeoning artists, they should offer better terms than competitors. This will ultimately attract artists voluntarily. And the new businesses would then be viable competitors, not makeshift operations, as most are today.