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The Changing Location of Intellectual Property Rights in Music: A Study of Music Publishers, Collecting Societies and Media Conglomerates
Abstract
This article reports the results of a major study, conducted between 1996 and 1999, examining the impact of de-regulation and digital technologies on the global music industry. We analyse four negotiations in the process of bringing music to the world market: commodification, globalisation, delivery, and royalty management. We show that the location of intellectual property rights in this process depends on the mutual bargaining power of the parties involved, within a statutory frame vesting music copyright initially in the author. We describe the forces which have led to the appropriation of rights accounting for 80% of global publishing and recording revenues by only five companies: EMI (UK), Bertelsmann (Germany), Warner (US), Sony (Japan) and Universal (Canada). We predict that this regime will not last and consider the likely future location of intellectual property rights in music.
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Notes and References
We acknowledge financial assistance from the Economic and Social Research Council in the UK, grant nos. L126251003 (‘Globalisation, technology and creativity’) and L325253009 (‘Intellectual property and knowledge transfer’). Many thanks to Anne Barron, Peter Drahos and Simon Frith for helpful comments.
On the implications of linking intellectual property to trade issues, see Peter Drahos, ‘Global property rights in information: the story of TRIPS at the GATT’, Prometheus, 13, 1, 1995, pp. 6-19; Peter Drahos (ed.), Special Issue: Trade and Intellectual Property, Prometheus, 16, 3, 1998.
In many markets, new acts first sign with a record company before contracting to a publisher.
The figure of 20–30% was given by the CFO of one multinational company. We have been unable to verify this claim. Universal's offer for Polygram was reduced to $10.4 billion in June 1998. The deal was completed in December 1998. On the author as functional principle, compare Michel Foucault's notorious diagnosis: “… the author is not an indefinite source of significations which fill a work; the author does not precede the works; he is a certain functional principle by which, in our culture, one limits, excludes, and chooses; in short by which one impedes the free circulation, the free manipulation, the free composition, decomposition, and recomposition of fiction’. Michel Foucault, ‘What is an author?’, in Paul Rabinow (ed.), The Foucault Reader, Pantheon, New York, 1984, p. 101.
Simon Frith, ‘The industrialisation of popular music’, in J. Lull (ed.), Popular Music and Communication (2nd ed.), Sage, Beverley Hills, 1993, pp. 49–74.
Michael Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors, Free Press, New York, 1980.
Financial Times Newsletter, Music & Copyright, 17 July 1996.
The role of network effects for the fashion dynamics of cultural markets is examined in Martin Kretschmer, George M. Klimis and Chong Ju Choi, ‘Increasing returns and social contagion in cultural industries’, British Journal of Management, 1999 (BAM special issue, forthcoming). The income distribution of the British Copyright Society PRS is analysed in Monopolies and Mergers Commission, Performing Rights, HMSO, London, Cm 3147, pp. 65–6.
Nigel Williamson, Times Saturday Magazine, 6 February 1999, p. 37.
Marcus Breen, ‘The end of the world as we know it: popular music's cultural mobility’, Cultural Studies, 9, 1995, pp. 486–504.
Harold L. Vogel, Entertainment Industry Economics, Cambridge University Press, Cambridge, 1994, pp. 31ff. Since 1995, Dreamworks (led by Spielberg, Katzenberg and Geffen) has had some success in establishing a new major studio.
Martin Kretschmer, ‘Intellectual property in music: A historical analysis of rhetoric and institutional practices’, Studies in Cultures, Organizations and Societies 1999 (special issue: Arts Management and Cultural Industry, forthcoming). Ferdinand Melichar, Die Wahmehmung von Urheberrechten durch Verwertungsgesellschaften, Munich, 1983.
William Boosey (heir to the publishing dynasty), Fifty Years of Music, London, 1931, p. 175.
Mihály Ficsor, ‘Copyright for the digital era: The WIPO ‘internet’ treaties’, Columbia—VLA Journal of Law and the Arts, 21, 3-4, 1998, pp. 197-223. The US congress implemented these terms with the Digital Millennium Copyright Act, passed on 8 October 1998. The European Parliament adopted a directive to the same effect on 10 February 1999.
The Future of Copyright in a Digital EnvironmentInternational UNESCO Symposium on the Effects of New Technology on Cultural Information, Transmission and Dissemination, the Protection of Authors’ Rights and Other Holders of Rights, Cultural Developments and Trends in Social Lifehttp://negocios.com/tendencias/artic1.htm
John Kay, ‘The economics of intellectual property rights’, International Review of Law and Economics, 13, 1993, pp. 337-48 (p. 340); Ruth Towse, ‘Copyright as an economic incentive’, in Hector L. MacQueen (ed.), Special Issue: Innovation, Incentive and Reward: Intellectual Property Law and Policy, David Hume Papers on Public Policy, 5, 1, 1997, pp. 31-45 (p. 39).
Financial Times Newsletter, Music & Copyright, 17 July 1996.
Gunnar Petri, ‘Copyright: The right to ownership’, in Roger Wallis (ed.), The Big Picture: The Global Entertainment and Telecommunications Forecast, American Chamber of Commerce, London, 1997, pp. 106-7; quoted in Roger Wallis, Charles Baden-Fuller, Martin Kretschmer and George M. Klimis, ‘Contested collective administration of intellectual property rights in music: the challenge to the principles of reciprocity and solidarity’, European Journal of Communication, 14, 1, 1999, pp. 5-35. For a conflicting analysis, accusing the collecting societies of charging excessive rates and handling fees, see John Temple Lang, Media, Multimedia and European Community Antitrust Law, Competition Directorate of the European Commission (DGIV) working paper, 1997, pp. 51ff.
This ‘inalienability’ is prominent in civil law conceptions of a creator's droit moral, the right to claim authorship of a work, and to protect its integrity. Raymond Sarraute, ‘Current theory on the moral right of authors and artists under French law’, American Journal of Comparative Law, 16, 1968, pp. 465-86; Robyn Durie, ‘Moral rights and the English business community’, Entertainment Law Review, 2, 1991, pp. 40–9.
W. Landes and R. Posner, ‘An economic analysis of copyright law’, Journal of Legal Studies, 18, 1989, pp. 325-66. For a critique, see R. Towse, op. cit., p. 34, who casts the relationship of author to publisher as a principal-agent problem.
Contract terms are never officially revealed by the industry. The above figures are regarded as reliable, and are often repeated in the trade press (Rolling Stone, Hollywood Reporter, Billboard, Music Week).
George Michael's original deal with CBS (as part of the group Wham!) was signed in 1983 and was to last until 2005. After the battle won in the UK High Court, Michael's record company (now Sony) agreed to release the artist from his contract only against a 3% royalty on Michael's next two albums (with Dreamworks and Virgin), while retaining the rights to his valuable back catalogue and a Greatest Hit compilation (MBI, August 1995).
Instructive material on this decade can be found in Paul M. Hirsch (ed.), Globalization of Mass Media Ownership, Communication Research, 19, 6, 1992; Krister Malm and Roger Wallis, Media Policy and Music Activity, Routledge, London, 1992; Roger Wallis, Internationalisation, Localisation and Integration: The Changing Structure of the Music Industry, University of Gothenburg, Department of Mass Communication, working paper, 1990.
J. Qualen, The Music Industry: The End of Vinyl, Comedia, London, 1985; K. Roe and R. Wallis, ‘One planet—one music: The development of music television in Europe’, Nordicom Review, 1989, pp. 35-41; Paul Rutten, ‘Local popular music on the national and international markets’, Cultural Studies, 5, 1991, pp. 294-305. According to one multinational record company, one-eighth of revenues are now royalty earnings.
Intellectual Properly and the National Information Infrastructure. The Report of the Working Group on Intellectual PropertyThe Emerging Digital EconomyEurope and the Global Information SocietyConvergence of the Telecommunications, Media and Information Technology Sectors, and the Implications for Regulation: ‘Towards an Information Society Approachhttp://www.ispo.cec.be/infosoc/backg/bangeman.html
Alice Rawsthorn, ‘Big five shudder at digital jukeboxes’, Financial Times, 13 January 1999.
In 1997, David Bowie issued bonds secured against future royalties from his back catalogue of rights, raising $55m. Rod Steward and heavy metal band Iron Maiden have followed suit (‘Superstars give you their bond’, Financial Times, 7 Februaiy 1998; ‘Iron Maiden to tune in with bond package’, Evening Standard, 26 January 1999). Twenty years ago, Frank Zappa proved the income potential of mail order operations controlled by the artist. The internet is increasingly used for this purpose.