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Archive for March, 2009

By guest author, Cory Greenwell, Esquire*

“The customer is always right” has long been a mantra of the business world. Over the last ten years, consumers within the entertainment and software industries have begun to demand instant access to products off all types. Products such as the Apple iPod®, Sony PSP® and the Amazon Kindle® among countless similar products have created an ever-increasing demand for instant access to media content. As a result, the increase of digital distribution of media content has grown, with iTunes alone accounting for more than $5 billion dollars in the US and the industry continues to grow. As a direct result of the increase in volume of the digital distribution of media content, the distribution of physical media, such as compact discs that are customarily subject to sales tax fell sharply in 2007. The paradigm shift has resulted in a major sector of the entertainment industry acquiring virtually tax-freConstitution2e status or consumers.

In the 1992 landmark decision in Quill v. North Dakota, 504 U.S. 298 (1992), the court found that states cannot require out-of-state retailers to collect taxes from customers who live in states where the retailer does not have a related physical presence or “substantial nexus”. The basis for the decision was to give a “safe harbor” for businesses wishing to avoid the burdens of complying with the numerous state tax laws by transacting business online.

Seventeen states, including Tennessee, have updated their tax code and now impose a tax on digital downloads. The legality regarding the taxation of digital media appears to have been resolved in favor of taxation. After Quill, the responsibility rests on the individual consumer to report the transaction on their annual tax return and pay the appropriate amount of sales tax. Some reports indicate that nationwide state and local governments will have lost more than $500,000,000 in uncollected taxes by 2011.

The court in Quill recognized the importance of the emerging e-commerce sector and declared that alternative means to require retailers to collect sales tax, namely that 1) Congress may require retailers to collect sales tax or 2) States may require retailers to collect taxes provided that Congress has provided a mechanism by which to reduce the burden of retailers to comply with the tax laws of the several states.

Since the Quill decision, twenty-two states including Tennessee have joined together under the “Streamlined Sales Tax Agreement” to create a uniform tax code to reduce the burden of complying with the law of the several states. Among other things, the SSTA have created uniform rules regarding digital media. The National Conference of State Legislatures has called for Congress in its next session to review the Sales Tax Fairness and Simplification Act (H.R. 3396) which gives those states that have complied with the Streamlined Sales Tax Agreement the authority to require out-of-state retailers to collect sales tax for online purchases.

Rather than waiting on Congressional action, New York has attempted to circumvent the requirement of a physical location within the state by interpreting their law to include any “affiliate”. In the case of Amazon, affiliates include anyone who advertises on the website. This interpretation, if adopted by the several states, would negate the benefit of the safe harbor by exposing the online retailer to liability throughout the nation.

In conclusion, as the law presently stands, states may tax digital media, however it cannot require out of state retailers to collect taxes. If Congress adopts the legislation proposed by the members of the Streamlined Sales Tax Agreement as anticipated, the Quill case no longer prevents states from requiring retailers to collect sales tax.

Cory Greenwell *Jonathan “Cory” Greenwell is an intellectual property lawyer who practices in Louisville, Kentucky at the firm of Greenebaum Doll & McDonald.  Cory is the co-founder of the website Backseat SandBar and was featured on the WFPK 91.9 feature, “Off the Record.”

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Link to Politico Interview

As a follow up to my previous post on the subject, the radio widget above should play Politico’s interview with Smashing Pumpkin’s founder and frontman Billy Corgan following his testimony in front of the House Judiciary Committee in support of HR 848, the Performance Rights Act.

Corgan testified on Capitol Hill on behalf of the musicFIRST Coalition yesterday.  Corgan testified that the current sytems is “hurting the music business” because of radio stations’ failure to compensate musicians for performing their music.

My readers know my thoughts on this subject.  While I agree with Corgan’s overall sentiment, I stand by my emphasis yesterday that the legislation as it is written may be drafted in favor of the record labels more so than the performing artists. 

HR 848 should have a provision that provides for direct payment of royalties to the artists who performed on the sound recording and which specifically does NOT rely on the record labels to distribute these royalties “in accordance with the terms of the artist’s contract.”  (See my previous post).  This kind of language contained in the House version of the legislation at Section 6 only assures that the record labels would receive all the performance royalties and that performing artists would have to overcome numerous obstacles to ever see any of the additional income, inevitably leading to more disputes with the record label.   The current artists agreements with record labels simply do not contain provisions addressing payment of these types of royalties and, even if they did, the artists who have unrecouped balances on their ledger sheets would never see a dime. 

My proposal is that the current system for collection and distribution of performance royalties for musical compositions be utilized.  Specifically, why not allow BMI, SESAC and ASCAP to collect and distribute the performance royalties for sound recording copyrights on behalf of member artists, allowing these organizations to pay 50% of the income directly to the artists (the original owners of the sound recordings) and 50% to the record labels (the assignee owners of the sound recordings).  This structure is identical to the distribution of performance royalties for owners of the musical composition copyright.  It’s a systems that has functioned well since the turn of the 20th century and it is a systems that, overall, works fairly well. 

In general, members of the performance rights organizations have fewer royalty disputes with these entities over  than artists do with record labels, since these entities, for the most part, do not function as profit generators.  There is no doubt that this idea has some flaws as well, but in comparing the alternative, it seems to me that this would benefit the artists and musicians much more than giving the money to the record labels.

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The House Judiciary Committee will hold hearings on H.R. 848 (this year’s version of HR 4789) tomorrow morning at 10:00 a.m.  Although the Committee’s website does not identify any witnesses at this time, I am informed by musicFIRST that Smashing Pumpkins’ founder Billy Corgan and Mitch Bainwol, chairman and CEO of the RIAA will be speaking on their behalf at the hearing.

Billy Corgan H.R. 848 was introduced to the 111th Congress by Rep. John Conyers on February 4, 2009 then referred to committee on the same day.  It was co-sponsored by Tennessee representative, Marsha Blackburn.  If passed, HR 848 would amend The Copyright Act (specifically Title 17) to provide “parity in radio performance rights” under the Copyright Act.  In other words, the Bill would grant a performance rights in sound recordings performed over terrestrial broadcasts (i.e., traditional radio broadcasts, not satellite).   S. 379 is the Senate’s complimentary bill, introduced by Senator Patrick Leahy.

The act has certain provisions to accommodate concerns by the broadcast industry, such as the provision which establishes a flat annual fee in lieu of payment of royalties for individual terrestrial broadcast stations with gross revenues of less than $1.25 million and for non-commercial, public broadcast stations; the provision which grants an exemption from royalty payments for broadcasts of religious services and for incidental uses of musical sound recordings; and the provision which grants terrestrial broadcast stations that make limited feature uses of sound recordings the option to obtain per program licenses. 

The Act specifically states that it will not adversely affect the public performance rights or royalties payable to songwriters or copyright owners of musical works.   In particular, the Act prohibits taking into account the rates established by the Copyright Royalty Judges in any proceeding to reduce or adversely affect the license fees payable for public performances by terrestrial broadcast stations. Requires that such license fees for the public performance of musical works be independent of license fees paid for the public performance of sound recordings.

The full text of the bill can be found at govtrack.us.

One provision I found interesting was Section 6, (1)(A), regarding payment of certain royalties, that states, in full:

A featured recording artist who performs on a sound recording that has been licensed for public performance by means of a digital audio transmission shall be entitled to receive payments from the copyright owner of the sound recording in accordance with the terms of the artist’s contract.

Emphasis added.  This last clause intrigues me.  What I find interesting about it is that under the current structure, the record labels own most, if not all, of the commercial sound recording masters, i.e., they are the “copyright owner of the sound recording.”  This clause entitles the “featured recording artist,” e.g., Madonna, Michael Jackson, etc., to receive payments from the owner “in accordance with the terms of the artist’s contract.” 

In most artists’ contracts, payments are based on a percentage of the gross revenues from sales of physical units – current artist contracts do not have provision for payment of performance royalties on the sound recording.  It would seem that under the Act as written, there is silence as to what happens in this instance where these specific payments of performance royalties are not addressed in the artist’s contract.  One possible remedy would be for the legislators to draft language that would apply, such as what they have done with regard to the “non-featured artists in subsection (B) of the same Section 6.   This Section 6 is not found in the Senate’s version of the legislation.

All of this makes me curious about what will happen to performance royalties that are paid under this Act to the owners of the sound recording copyrights, i.e. the record labels if there is no language in the artists’ recording agreements to specify as to what percentage the artist is entitled?  One thing is certain:  an artist who is not recouped under his artist recording agreement will never see any of these performance royalties under such time as his balance is recouped.

One proposal you might suggest to your representatives is that they consider a payment structure similar to that of the current performance rights organizations that collect and pay performance royalties for musical compositions, wherein one half of the royalties go directly to the songwriter and the other half directly to the publisher.  If this were the case under the new Act, half of the royalty payments would filter directly to the artist and the other half would go to the record labels.  If there truly is a concern about the recording artists not getting paid for his or her performances, this is the only method that would assure this happens.

If you are a recording artist whose performances are being playing on local FM and AM radios, you should investigate the impact this legislation will have on you.  Call you Senators and Representatives and ask them to keep you updated.

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Country Radio Broadcasters, Inc. today announced that country legend Randy Owens was the recipient of this year’s Artist Humanitarian Award

Together with his cousins Jeff Cook and Teddy Gentry, Owens was the front man for the one of the best selling country acts of all time, Alabama.  The band, which peaked in the 80’s, racked up over thirty No. 1’s on Billboard’s Country Singles Charts, with memorable hits such as “Love in the First Degree,” “Feels So Right,” “Close Enough to Perfect” and “Take Me Down.”  They also sang backup vocals on Lionel Richie’s 1987 single “Deep River Woman,” which peaked at No. 10.  The group has won two Grammy Awards for "Best Country Performance By A Duo Or Group With Vocal", in 1982 for Mountain Music and in 1983 for The Closer You Get.

Owen co-founded Country Cares for St. Jude Kids® in 1989 after meetingRandy Owen St. Jude Children’s Research Hospital founder Danny Thomas the year before.  To date, Country Cares has raised more than $345 million to fund research in the fight against childhood cancer.  Earlier this year, more than 800 members of the country music industry gathered at the annual seminar in Memphis to celebrate 20 years of support for the children of St. Jude.  In 2008, Broken Bow Records released the Grammy Award-winner’s debut solo album, One On One, and HarperOne published his memoir, titled "Born Country." 

Country Radio Broadcasters, Inc. leads the music industry in recognizing the humanitarian achievements of country artists.  In 1990, CRB instituted the Artist Humanitarian Award, which was first presented during the CRS-21.  Past honorees include Brad Paisley, Brooks & Dunn, Garth Brooks, Charlie Daniels and Kenny Rogers.  For a complete list of past winners, click here.

Last year’s recipient, Clay Walker, presented Owen with the award Wednesday morning during the award ceremonies in the Convention Center. 

The Radio Humanitarian Awards for 2009 went to 97.3 WGH, Norfolk-Virginia (Large Market), 107.7 WIVK, Knoxville, Tennessee (Medium Market) and 93.3 WFLS, Fredericksburg, Virginia (Small Market).  The CRB Radio Humanitarian Awards are presented to full-time country radio stations for their efforts to improve the quality of life for communities they serve. 

This year’s Tom Rivers Humanitarian Award was given to CBS Minneapolis VP Market Manager Mick Anselmo, Sr.  During his tenure at KEEY-FM, Anselmo organized and created a radiothon which has helped raise more than $12 million for St. Jude Children’s Research Hospital.  His partnership with Sharing and Caring Hands of Minneapolis during a run of Garth Brooks concerts in 1998 set a Minneapolis-St. Paul food drive record.  The former Clear Channel radio executive also created Project Northern Lights, an effort that collected calling cards for troops stationed in Baghdad.

The intent of the Tom Rivers Humanitarian Award, given at the discretion of the Country Radio Broadcasters Board of Directors, is to recognize an individual in the Country Radio industry who has displayed a magnanimous spirit of caring and generosity in service to their community.  The award is given when the board feels an individual, through outstanding service, warrants the recognition. 

Congratulations to Randy and the other winners.

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As a Beatles fan, I thought I’d share this interesting little film, which animates an interview which Jerry Levitan conducted with John Lennon in 1969 when Levitan was only 14.

 

 

Just to give a little historical perspective, 1969 was the year that Abby Road was released, the Beatles performed together for the last time, and was the year that Lennon and Yono conducted their famous “Bed-In” in Montreal Quebec.  A lot happened in 1969:  it was a time wApollo11patchhen the space race was in full force, with Russia and the U.S. leap-frogging each other into the great frontier, culminating in the U.S. landing the first man on the moon, Apollo 11, with Neil Armstrong’s famous “one small step for mankind”  proclamation.  The Cold War with Russia was at a boiling point.  It was a tumultuous time:  Nixon was president, the Vietnam war was in full force, the draft lottery was held for the first time since WWII, and Nixon proclaim the “Nixon Doctrine” that he expected Asian allies to be responsible for their own military defense.  Antiwar demonstrations were at their peak, so much so that Nixon asks for the “silent majority” to join in solidarity in support of the troops.  Some events that changed our lives forever that year include: a little Arkansas corporation called Wal-mart is formed, the first GAP store opens in San Francisco, the AIDS virus first spread to the US, the first automatic teller machine was installed in the US in Rockville Centre, New York and the first ARPANET link, the ancestor of the Internet, was established.  CultuArpanetrally, Monty Python’s Flying Circus debuts in the UK, Sesame Street premieres,  and the New York Jets defeated the Baltimore Colts in Superbowl III.  Notable births that year included Brett Favre, Catherine Zeta-Jones, Matthew McConaughey, and Jennifer Lopez.  Notable deaths include Dwight D. Eisenhower, King Saud (Saudi Arabia), Judy Garland, Boris Karloff and Rocky Marciano.

Levitan was producer for I Met the Walrus.  In 2007, he hired Josh Raskin to direct and animate the short film on behalf of his production company.  It was illustrated by James Braithwaite, who Levitan described as “brilliant.”  It has won numerous awards, including the Best Animated Short awards from the American Film Institute, the Middle East International Film Festival, the Manhattan Short Film Festival, the Cleveland Film Festival, RiverRun International Film Festival and the Coup de Coeur award from the Regard-Saguenay International Sort Film Festival.  It was nominated for an Academy Award (Oscar) in 2008 by the Academy of Motion Picture Arts & Sciences.

Jerry Levitan informs me that he written a book by the same, I Met the Walrus, which comes out in May under the Harper Collins imprint.  You can find out more about Mr. Levitan at www.sir-jerry.com

Thanks to my good friend Gray for turning me on to this film and thanks to Jerry Levitan for the kind words about my humble blog!

See these related links:

Film company website.

Read more about the film here.

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As a Beatles fan, I thought I’d share this interesting little film, which animates an interview which Jerry Levitan conducted with John Lennon in 1969 when Levitan was only 14. 

Just to give a little historical perspective, 1969 was the year that Abby Road was released, the Beatles performed together for the last time, and was the year that Lennon and Yono conducted their famous “Bed-In” in Montreal Quebec.  A lot happened in 1969:  it was a time wApollo11patchhen the space race was in full force, with Russia and the U.S. leap-frogging each other into the great frontier, culminating in the U.S. landing the first man on the moon, Apollo 11, with Neil Armstrong’s famous “one small step for mankind”  proclamation.  The Cold War with Russia was at a boiling point.  It was a tumultuous time:  Nixon was president, the Vietnam war was in full force, the draft lottery was held for the first time since WWII, and Nixon proclaim the “Nixon Doctrine” that he expected Asian allies to be responsible for their own military defense.  Antiwar demonstrations were at their peak, so much so that Nixon asks for the “silent majority” to join in solidarity in support of the troops.  Some events that changed our lives forever that year include: a little Arkansas corporation called Wal-mart is formed, the first GAP store opens in San Francisco, the AIDS virus first spread to the US, the first automatic teller machine was installed in the US in Rockville Centre, New York and the first ARPANET link, the ancestor of the Internet, was established.  Culturally, Monty Python’s Flying Circus debuts in the UK, Sesame Street premieres, Arpanet and the New York Jets defeated the Baltimore Colts in Superbowl III.  Notable births that year included Brett Favre, Catherine Zeta-Jones, Matthew McConaughey, and Jennifer Lopez.  Notable deaths include Dwight D. Eisenhower, King Saud (Saudi Arabia), Judy Garland, Boris Karloff and Rocky Marciano.

Levitan produced the short, which was directed and animated by Josh Raskin for the Electric Company, a Toronto animation company in 2007.  It has won numerous awards, including the Best Animated Short awards from the American Film Institute, the Middle East International Film Festival, the Manhattan Short Film Festival, the Cleveland Film Festival, RiverRun International Film Festival and the Coup de Coeur award from the Regard-Saguenay International Sort Film Festival.  It was nominated for an Academy Award (Oscar) in 2008 by the Academy of Motion Picture Arts & Sciences.

Thanks to my good friend Gray for turning me on to this film.

See these related links:

Film company website.

Read more about the film here.

Read Full Post »

As a Beatles fan, I thought I’d share this interesting little film, which animates an interview which Jerry Levitan conducted with John Lennon in 1969 when Levitan was only 14. 

Just to give a little historical perspective, 1969 was the year that Abby Road was released, the Beatles performed together for the last time, and was the year that Lennon and Yono conducted their famous “Bed-In” in Montreal Quebec.  A lot happened in 1969:  it was a time wApollo11patchhen the space race was in full force, with Russia and the U.S. leap-frogging each other into the great frontier, culminating in the U.S. landing the first man on the moon, Apollo 11, with Neil Armstrong’s famous “one small step for mankind”  proclamation.  The Cold War with Russia was at a boiling point.  It was a tumultuous time:  Nixon was president, the Vietnam war was in full force, the draft lottery was held for the first time since WWII, and Nixon proclaim the “Nixon Doctrine” that he expected Asian allies to be responsible for their own military defense.  Antiwar demonstrations were at their peak, so much so that Nixon asks for the “silent majority” to join in solidarity in support of the troops.  Some events that changed our lives forever that year include: a little Arkansas corporation called Wal-mart is formed, the first GAP store opens in San Francisco, the AIDS virus first spread to the US, the first automatic teller machine was installed in the US in Rockville Centre, New York and the first ARPANET link, the ancestor of the Internet, was established.  Culturally, Monty Python’s Flying Circus debuts in the UK, Sesame Street premieres, Arpanet and the New York Jets defeated the Baltimore Colts in Superbowl III.  Notable births that year included Brett Favre, Catherine Zeta-Jones, Matthew McConaughey, and Jennifer Lopez.  Notable deaths include Dwight D. Eisenhower, King Saud (Saudi Arabia), Judy Garland, Boris Karloff and Rocky Marciano.

Levitan produced the short, which was directed and animated by Josh Raskin for the Electric Company, a Toronto animation company in 2007.  It has won numerous awards, including the Best Animated Short awards from the American Film Institute, the Middle East International Film Festival, the Manhattan Short Film Festival, the Cleveland Film Festival, RiverRun International Film Festival and the Coup de Coeur award from the Regard-Saguenay International Sort Film Festival.  It was nominated for an Academy Award (Oscar) in 2008 by the Academy of Motion Picture Arts & Sciences.

Thanks to my good friend Gray for turning me on to this film.

See these related links:

Film company website.

Read more about the film here.

Read Full Post »

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