“Exploit now, pay later”: music labels finally pay artists

In 2008, musicians led by the estate of famed jazz trumpeter Chet Baker filed a class-action lawsuit against the Canadian branches of the four major music labels. Universal, Warner, EMI, and Sony BMG were accused at the time of “reckless, high-handed and arrogant conduct aggravated by their clandestine disregard” for musicians even as they use a “strict compliance enforcement policy and unremitting approach to consumers in the protections of their corporate copyright interests.”

The labels have now agreed to pay CAN$45 million to make the case go away.

“Exploit now, pay later, if at all”

The dispute concerns something called “pending lists” maintained privately by the major labels. Since 1988, it has become increasingly common for the labels to simply issue CDs (often compilation albums) without actually locking down the copyright permission and pay arrangements with the music’s creators. Instead, the music is offered for sale, the labels collect the money, and they put the songwriters on the “pending list” to clear up the details later.

But in many cases, there was no “later.” The pending lists have climbed to around CAN$50 million in money that was due to artists but never paid out, something that the musicians describe as a “systematic ‘exploit now, pay later, if at all’ approach.”

So how did the music industry start grabbing recordings without permission and publishing them on CD? As music industry lobbyist Barry Sookman explained in a 2009 blog post, the major Canadian songwriter collection agencies had agreed to this arrangement with the labels.

The pending lists regime is used to help resolve unidentified or unsettled potential claims that are not automatically identified or settled. Songs can end up on the list for many reasons: for example, ownership is still being determined by the [collecting agency] CMRRA, ownership is disputed between one or more music publishers or songwriters, the owner can’t be found, a song may be in the public domain, the ownership may be unknown or in dispute. An individual song may contain numerous samples or snippets of other songs, and sorting out ownership can take years in some cases.

The money earmarked to be paid to someone is set aside in a “pending list.” The money is reserved pending the identification of the unidentified writers. In the meantime, all rights holders, including songwriters and music publishers, want to get the music out to consumers and earning royalties. As soon as owners are identified, or claims resolved, the publisher gets paid and the claim is removed.

For most music, the rights were clear, and so the pending list was never involved. But whenever the rights were difficult to determine, the labels went ahead, published the music, and said they would track down the details later. According to the lawsuit against them, however, the labels “have made insufficient or no effort to locate and compensate those copyright owners whose works appear on the Pending Lists.”

The labels today agreed to pay out CAN$45 million to compensate songwriters for their unpaid time on the pending lists, and they have agreed to “a new mechanism that will expedite future payments of mechanical royalties to music rights holders.”

Canadian law prof Michael Geist, who was instrumental in publicizing the case in Canada, said that the labels had little incentive to track down those to whom they owed money but that “the class action lawsuit clearly got their attention.”

Source: Ars Technica