Licensing vs. Sales (Counting Crows litigation)
GatorToof
582 Posts
I noticed this article this morning and thought it might be of some interest here.
http://www.billboard.com/biz/articles/news/5869726/counting-crows-latest-to-go-to-court-over-digital-royalties
What is the difference between sales and licensing?
http://www.billboard.com/biz/articles/news/5869726/counting-crows-latest-to-go-to-court-over-digital-royalties
What is the difference between sales and licensing?
Comments
Without wanting to go into too much detail, the most obvious difference is that a sale involves the exchange of money for a physical product of some description and it's generally final. In the majority of cases, nobody's going to ask for their money back unless the product is faulty or substandard in some way.
A license usually comes with very specific conditions attached. A synch license, for example, will cover the synchronisation of a piece of music with a moving image in a movie, TV show, advertisment or some other kind of audio-visual presentation, and there'll be strict limits to the rights conveyed upon the grant of that license. For instance, if you license a song for [movie X] and you want to use it in the sequel, you'll need a new license. If you use a song in an ad campaign, and you want to extend the usage period or decide to run the campaign in territories that aren't covered by the existing agreement, that's a new license too.
How I think this relates to the Billboard story is that ringtones and digital downloads are like sales in one sense, but they're also often subject to the conditions and restrictions of a license. If you pay for a digital download from a vendor that uses DRM, there are going to be limits placed upon how you can use that music. As a consumer, you might think, "Well, I've paid [x] for this, so I should be able to do whatever I want with it", and that's perfectly reasonable. So, if there are limits and restrictions and conditions similar to those of a synch license or some other form of third-party license, it follows that any royalties or fees should be payable on the same basis as those kinds of licenses. Invariably there will be a contract provision for those royalty rates and, as the piece states, it'll be higher than the standard mechanical or performance rates. Also, they won't be subject to the onerous controlled composition clause that comes as standard in any worldwide major-label recording contract (even though it's only applicable in the US), and which is basically a royalty rate cap that favours the record company.
I think the artists taking this kind of action have a rock-solid case here, and the fact that so many record companies are choosing to settle would suggest that they know it too. I'm reminded of that period at the end of the 80s/beginning of the 90s, when CD sales were taking off in a big way and a lot of record companies weren't paying royalties on catalogue sales of CDs because their contractual obligations only extended to "gramophone recordings and cassette tapes". Once artists cottoned on to what was happening, there were threats of litigation, demands that contracts be renegotiated and so on. A lot of the time, artists get it in the neck for having signed bad deals that they were under no pressure to sign. But this story, like the CD story, is another example of record companies exploiting loopholes and grey areas in an otherwise legally sound contract in order to get away with behaviour that is, at the very least, unethical.
And with pandora and spotify (both non-profits) increasing in popularity, the labels are going to benefit much more than the bands.
I think laches would prevent you from winning.
I remember having these conversations years ago (1999?) negotiating catalogue for a download site.
"So when users buy a song it's more like a license than a straight purchase?"
"No, it's a sale but with certain reasonable conditions attached."
"So...kind of like a licence."
"Umm, kinda. But it's actually a sale."
Hoisted with their own petard. All the early paranoia about single device use and limited sharing has come back to bite them on the arse. They've had years to sort it and really don't have a leg to stand on unless industry lobbying buys them some kind of historical limitation on how much they have to pay out or they manage to cook up a new definition of a sale which gets ratified by a friendly judge. Unlikely.
Suddenly Spotify's streaming model must be looking like the majors' new best friend.