The document discusses changes in music consumption and artist agreements from the early 1990s to 2015. In the early 1990s, agreements focused on traditional record sales and sales-based royalties. In the mid-1990s, agreements added provisions for new media and licenses. By 2005, agreements covered digital downloads, treating them as licenses. In 2015, agreements granted broad rights for digital streaming and set streaming royalties based on revenue rather than sales. The Worldwide Independent Network advocates accounting to artists for a share of any non-attributed streaming revenues.

1. A Fair Deal for Artists:
Non-Attributable Income and the
Streaming Royalty Controversy
I Fórum Internacional - Direito Do Entretenimento
October 1, 2015
Susan H. Abramovitch, Partner
Gowling Lafleur Henderson LLP
Phone: (416) 814-5673
susan.abramovitch@gowlings.com

2. Overview
• Artist Agreements – Rights and Royalties
• Early 1990s: Traditional Record Sales
• Mid-1990s: “New Media”
• 2005: Digital Downloads
• 2015: Digital Streaming
• Non-Attributable Income
• Worldwide Independent Network (WIN)
2

3. Changes in Music Consumption
• Artist agreements have
traditionally focused on the
sales of albums
• How do digital downloads
and streaming fit?
• Many provisions could apply
• It will come down to the
language of each particular
contract
3

4. Changes in Music Consumption
4
Traditional
Record Sales
“New Media”
Digital
Downloads
Digital
StreamingEarly 1990s
Mid-1990s
2005
2015

5. Changes in Music Consumption
5
Traditional
Record Sales
“New Media”
Digital
Downloads
Digital
StreamingEarly 1990s 2005
2015Mid-1990s

6. Early 1990s: Traditional Record Sales - Rights
“All Master recordings... and all Records made
therefrom... shall... be exclusively and perpetually
[the Label’s] property...”
6
Excerpt from 1990 artist recording agreement:

7. Early 1990s: Traditional Record Sales - Rights
Record
“Means any reproduction of a Master recording in any form
now known or later developed in which sounds, with or
without visual images, are fixed by any method now
known or later developed...”
7
Excerpt from 1990 artist recording agreement:

8. Early 1990s: Traditional Record Sales - Rights
“[The Label has] the sole exclusive and unlimited right
throughout the universe to:
...manufacture Records, by any methods now or
hereafter known...
...to repackage, sell, transfer, deal in, exploit or otherwise
dispose of such Master recordings and Record... in any
and all media and manner...”
“[The Label]... may license Master recordings to third parties
on a flat fee basis”
8
Excerpt from 1990 artist recording agreement:

9. Early 1990s: Traditional Record Sales - Royalties
“… with respect to Records sold…
[the Label] shall accrue hereunder a royalty
at the rate… of thirteen percent (13%) in
respect of the First LP… computed on a
royalty base of the “suggested retail list price”
or “list category” (“SRLP”) of Records (less
Container deductions and any taxes) in the
country of sale…”
9
Excerpt from 1990 artist recording agreement:

10. Early 1990s: Traditional Record Sales - Royalties
Audiophile Record
“means a Record embodying sound without visual images,
which is made for digital playback and includes,
without limitation, compact discs.”
10
Excerpt from 1990 artist recording agreement:

11. Early 1990s: Traditional Record Sales - Royalties
11
“With respect to sales hereunder of Audiophile Records, the
royalty shall be the same dollars-and-cents royalty
which accrues hereunder with respect to vinyl disc
Records…
Excerpt from 1990 artist recording agreement:

12. Changes in Music Consumption
12
Traditional
Record Sales
“New Media”
Digital
Downloads
Digital
StreamingEarly 1990s
Mid-1990s
2005
2015

13. Mid-1990s: New Media - Rights
“[The Label] and any Person authorized by [the label] shall have
the unlimited and exclusive rights to manufacture
Records by any method(s) now or hereafter
known...”
13
Excerpt from 1994 artist recording agreement:

14. Mid-1990s: New Media - Royalties
“[The Label] agrees to pay you in
connection with the Net Sale of
Records consisting entirely of Masters
hereunder and sold by [the Label] or its
licensees, a royalty computed at the
applicable percentage…”
14
Excerpt from 1994 artist recording agreement:

15. Mid-1990s: New Media - Royalties
“With respect to new Record configurations (i.e.,
Record configurations other than vinyl disc, analog-tape
cassette, or compact disc, e.g., digital compact disc (‘DCC’),
digital tape and audiophile Records), the royalty rate shall
be eighty percent (80%) of the otherwise applicable
rate”
15
Excerpt from 1994 artist recording agreement:

16. “The royalty shall be... fifty percent (50%) of [the
Label’s] net receipts with respect to... licenses of
Masters recorded hereunder for distribution other than through
Normal Retail Channels”
16
Mid-1990s: New Media - Royalties
Excerpt from 1994 artist recording agreement:

17. Net receipts
...shall mean royalties or flat payments received by [the Label]...
which are solely attributable to the Masters
hereunder”
17
Mid-1990s: New Media - Royalties
Excerpt from 1994 artist recording agreement:

18. Record Sale vs License?
18
Are digital downloads a record sale or a license?
Eminem (2010)1
• Contract contained separate royalty
provision for licensing Masters to
3rd parties
• Agreement with iTunes to sell
permanent downloads was a license
to use a Master
• This resulted in a 50% royalty instead
of 12%
[1] FBT Productions v Aftermath Music, 621 F (3d) 958 (9th Cir 2010).

19. Changes in Music Consumption
19
Traditional
Record Sales
“New Media”
Digital
Downloads
Digital
StreamingEarly 1990s 2005
2015Mid-1990s

20. 2005: Digital Downloads - Rights
“[The Label] and any person authorized by [the Label] has the
unlimited and exclusive rights to manufacture Records by any
and all methods now or hereafter known embodying
any portion or all of the performances embodied on the Licensed
Masters...”
20
Excerpt from 2006 artist recording agreement:

21. 2005: Digital Downloads - Rights
Record
“all forms of reproduction, now or hereafter known,
manufactured and/or distributed... including but not limited
to sound-alone Recordings, audiovisual Recordings,
interactive media... and Electronic Transmissions”
21
Excerpt from 2006 artist recording agreement:

22. 2005: Digital Downloads - Rights
Electronic Transmission
“Any transmission to the consumer, whether sound alone, sound
coupled with an image, or sound coupled with data, in any form,
analog or digital, now known or later developed (including but
not limited to, Limited Downloads, Permanent
Downloads, Streams, “cybercasts,” “webcasts,” “streaming
audio,” “streaming audio/video,” “digital downloads,”… and any
other forms of transmission no known or hereafter
devised)…”
22
Excerpt from 2006 artist recording agreement:

23. 2005: Digital Downloads - Rights
Electronic Transmission
“…whether or not such transmission is made on-
demand or near on-demand, whether or not a direct or
indirect charge is made to receive the transmission and whether
or not such transmission results in a specifically identifiable
reproduction by or for any transmission recipient…”
23
Excerpt from 2006 artist recording agreement:

24. 2005: Digital Downloads - Royalties
“...[The Label] agrees to pay you in connection with the
Net Sale of Records consisting entirely of Licensed Masters
and sold by [the Label] or its licensees, a royalty computed at the
applicable percentage... of the applicable Royalty Base
Price...”
24
Excerpt from 2006 artist recording agreement:

25. 2005: Digital Downloads - Royalties
“All references in this agreement to the “sale” of Records...
shall include the license... for third parties to sell
Permanent Downloads, Limited Downloads, Streams, or other
Electronic Transmissions hereunder to users (directly or
indirectly)”
25
Excerpt from 2006 artist recording agreement:

26. 2005: Digital Downloads - Royalties
26
Excerpt from 2006 artist recording agreement:
Royalty Base Price
“The Suggested Retail List Price less all excise, sales and
similar taxes and less the applicable Container Charge.”

27. 2005: Digital Downloads - Royalties
27
Excerpt from 2006 artist recording agreement:
If [the Label] sells the applicable Record other than on a
wholesale basis (e.g., [The Label] licenses the right to
stream or download Masters hereunder via Electronic
Transmissions): the SRLP will be equal to one hundred and
thirty percent (130%) of that portion of [the Label’s] Net Receipts
which is directly and identifiably attributable to the
sale of such Record.

28. Changes in Music Consumption
28
Traditional
Record Sales
“New Media”
Digital
StreamingEarly 1990s
2015Digital
Downloads
2005
Mid-1990s

29. 2015: Digital Streaming - Rights
“[The Label] and its licensees each has... the exclusive rights to:
(i) reproduce, adapt, transmit, manufacture and distribute
Records embodying the Basic Works in any medium
now or hereafter known or developed (including,
without limitation, in connection with products, services or
media, such as Storage/Playback Devices;
personal computers; ...and the Internet, wireless
communication technologies and other digital
media platforms...”
29
Excerpt from 2015 artist recording agreement:

30. 2015: Digital Streaming - Rights
Basic Works
“All such Masters, Videos, [Label] Artist Websites, [Label] Artist
Website Material, Artist Domain Names, Enhanced Material,
Mobile Material, Artist Applications, Artwork, other works and
individual elements thereof”
30
Excerpt from 2015 artist recording agreement:

31. 2015: Digital Streaming - Rights
Records
All forms of reproduction, transmission or communication, now or
hereafter known... including but not limited to sound-alone
Recordings, audiovisual Recordings, interactive media (e.g.,
video games), and Permanent Downloads, Limited
Downloads, Streams, Recording Tones,
Subscription Records and other Electronic
Transmissions.”
31
Excerpt from 2015 artist recording agreement:

32. 2015: Digital Streaming - Royalties
“... on Net Sales of Records and Non-Record Basic
Works hereunder sold by [the Label]... [The Label] will
pay you a royalty equal to the royalty rate... Multiplied
by the applicable Wholesale Price for such a work...”
32
Excerpt from 2015 artist recording agreement:

33. 2015: Digital Streaming - Royalties
Wholesale Price
If [the Label] sells the Record concerned:
(1) On a wholesale basis... the Wholesale Price will be equal to the [Label] Revenues on sales of
that record.
(2) On the basis of a retail equivalent price (e.g. ... directly to a consumer via Electronic
Transmission...) the Wholesale Price will be deemed to be equal to seventy percent (70%) of
such trail equivalent price...
(3) On any other basis (e.g. [Label] grants the right to distribute
the Record concerned as a stream via Electronic
Transmissions), the Wholesale Price will be deemed
to be equal to that portion of the [Label]
Revenues which is solely attributed to the sale
of such Record.
33
Excerpt from 2015 artist recording agreement:

34. 2015: Digital Streaming
• Value to customer and streaming services is the
size of the collection, not necessarily individual
albums
34
• Compensation is given
for access to the
catalogue
• Equity
• Marketing
• Catalogue advances
• Payments

35. Worldwide Independent Network (WIN)
• A network of independent industry trade bodies
representing sound recording rights holders
35

36. WIN Fair Digital Deals Declaration
36

37. WIN Fair Digital Deals Declaration
We will:
…
2. Account to artists a good faith pro-rata share of
any revenues and other compensation from digital
services that stem from the monetization of
recordings but are not attributed to specific
recordings or performance.
…
37

38. Thank You
montréal  ottawa  toronto  hamilton  waterloo region  calgary  vancouver  beijing  moscow  london
Susan H. Abramovitch, Partner
Tel: (416) 814-5673
Email: susan.abramovitch@gowlings.com