The Rules of the Game

3

Many young artists and creative people just do not understand the essential elements of creativity and the rules of the game of business. We often think that “rules” get in the way of creation and imagination, and stifle the free flow of ideas. Ironically, when it comes to “creative works,” the “rules” of the copyright law provide authorship and ownership to you, because you created it and it’s original in a tangible, physical form (see Figure 3.1). Because of the copyright law, you own what you’ve created, and, shazaam, you can usually profit from your efforts if somebody will pay for it or for the use of it.

In its own way, the stability of the law makes it possible for artists to be more confident they’ll be paid for their creativity and efforts. At least that’s what it is supposed to do, so let’s start there. You’ll need to understand some of the basic copyright laws in order to work in the industry. Accordingly, you’ll see segments of the copyright law in this chapter to illustrate the main reason we have and care about the copyright laws. Reading the laws themselves can be really boring, yet it’s also extremely important you know the essentials if you want to succeed in the industry (see Table 3.1).

Table 3.1 First Unique Copyright Registrations. As technology has changed over the last couple of hundred years the copyright law has been able to expand its definition of what is copyrightable. As examples, copyrights went from covering only maps and simple book publication in 1790 to sound recordings in 1972.¹

Registration	Year	Creative Work
First federal registration of a work	1790	John Barry’s book The Philadelphia Spelling Book
Registration of the Statue of Liberty	1876	Henry de Stuckle and Auguste F. Bartholdi secured registration number 9939-G for the “Statue of American Independence”
First motion picture registrations	1894	The Edison Kinetoscopic Record of a Sneeze, also known as Fred Ott’s Sneeze
First television show registration	1947	“Unexpected Guest” by Hopalong Cassidy
First computer program registration	1964	John F. Banzhaf’s computer program to compute automobile distances
First sound recording registration	1972	Bob and Dorothy Roberts’s “Color Photo Processing Cassette, An Accurate Sound Signal and Oral Instruction System for Processing”

Not Quite 20 Questions, But Let’s Explore

Think about this for a moment: When more than one songwriter composes a new song, who owns it? Who is the legal author? What rights does the owner have and how can they be used to monetize your song, film, or whatever? How do you get your song placed with a major recording artist or film? How does a film company get the rights to use the song or the recording? Why would a recording artist want to record your song, and a label spend the money to produce a recording of it, and then spend more money for the marketing, promotion, publicity, and sale of each unit on different platforms? If you write a script or film a movie or video, do you own it? Who owns the song or the script, and the song when it is on a recording? How many copyrights are involved in a recording, video, or film? How can you get paid for the movie you shot? Why is a script important to a movie production company? Why would an actor want to be in a movie of a script you’ve written?

The industry is the “establishment” with the power, money, distribution, and connections that can mass-produce your script and so forth into an entertainment product consumers might want to buy or use. The song, script, play, or whatever is yours, right? What you’ve created you own because it’s your property and that’s the law. Now, how can you get it to the right people and the industry-related companies interested in using it? Why is it important for us to know the answers to legal and industry questions before trying to place whatever we’ve created with industry executives? Here we go again with more questions that might be asked once a contract has been offered. What rights should you sell? What rights are yours to sell? What’s an option? Let’s assume the industry executives find the song or script, movie, recording, or whatever is a wow! Now what? What’s the wow worth? What does that mean or, even better, why do they consider it a wow? Why would Brad Pitt want to be in a movie script you’ve written? How does a theater company acquire the rights to stage (they say “stand it up”) the play The Music Man? How much is it going to cost and to whom do you send the check? And the question you never want to ask, why can’t they just do it and pay me what I am owed?

A Brief History of Copyrights

Our copyright law is related to the invention of the printing press in 15th-century England. Moveable print was the technology of the time that allowed mass distribution of printed information just as the Internet and digital downloading are transforming the entertainment industry.² The invention of the printing press freaked out the politicians and religious leaders, who controlled citizens politically by restricting the flow of information to the public. They thought the technology of the printing press would allow citizens to share ideas and communicate with each other. Of course, just as politicians in some countries today shut down the Internet and cell phones when they’re having political problems, they wanted to do the same thing about 260 years ago in merry old England.

Instead of banning the printing press technology, the English government decided to allow the use of the printing press technology but to censor what was printed. Control freaks, don’t you just love them? Their stated reason was to manage the distribution of “Protestant religious heresy and political upheaval.” In effect, the government forced authors and book publishers to obtain a license to publish from the Stationers’ Company, which was established and controlled by the government in 1557.³ Of course, this still allowed the top dogs to control what people knew by controlling the distribution of information.

When the licensing requirement was about to end in 1710, the English Parliament did something very unexpected. With courage and honor they passed the Statute of Anne, which is often considered the first copyright law. It changed things to clearly state that a book manuscript is legally defined as property, owned by the author. Second, it empowered authors with several ownership property rights, including control of copies and distribution. The statute’s design was to “encourage learning by vesting the copies of printed books in the author or purchasers of such copies.”⁴ And as a consumer, if you didn’t pay for the book, you’d be fined and the book illegally copied would be destroyed. According to the Avalon Project of the Yale Law School, Lillian Goldman Law Library (2008), the statute established the following fines or penalties:

The Statute of Anne supported the methods of financial livelihood of the authors and publishers and required a fine and destruction of illegal copies. The one cent per page fine would be about 38 cents per page today and as an example, a $3.00 fine for a 300-page book in 1710 would be a fine of $114.79 now. Plus, the book you ripped off would be destroyed.

Article 1, Section 8 of the U.S. Constitution

The authors of the U.S. Constitution did not miss the Statute of Anne’s inference in Article 1, Section 8 (2015), which

Let’s break it down.

“Promoting the progress of science and useful arts” is accomplished by providing legal ownership and, therefore, potential financial rewards to the individuals who invest their time and money into scientific discoveries (e.g., inventions and medicines) and useful arts (e.g., performing and creative arts), including songs, scripts, recordings, movies, and other entertainment products. Interestingly, the word “useful” has not been challenged as removing it would lead to censorship. The Compendium states (2014),

Copyright protection exists from the time the work is created in a fixed form. The copyright immediately becomes the property of the author who created the work. The copyright is instantaneous, and in reality, when you register your claim of a copyright all you are doing is registering your “claim” that you own it. The government registers the time and date of your claim.

The “exclusive rights” bestowed are as follows (see Figure 3.2):

1. Reproduction or copies
2. Distribution
3. Preparing derivative works
4. Public performance
5. Public display
6. Public performance by means of digital transmission

The phrase “by securing for limited times” means ownership rights do not last forever—only for a stated period of time before the copyright (ownership) falls into public domain. Then it’s owned by the public and can be used by anyone without payment. This “duration of ownership” has changed over the years from 14 years (renewable) to the life of the author plus 70 years. Indeed, almost everything about copyrights, the Copyright Office, and the registration process has changed over time. The Compendium, Chapter 100 of the U.S. Copyright Office and Copyright Law: General Background, provides us with the following (2014):

Major Copyright Acts

You can see the legal underpinnings that are the foundation of the entertainment industry. Like the industry itself, the copyright laws are changing and adapting as new modes of production, innovation, technology, and consumer experiences evolve. The law remains a constant to which artists and creators should be able turn to for protection of what they have created. So, as Sue Greenberg (2011) reminds you, “If you are performing, selling artwork or otherwise making money as an artist, you’re engaged in business.”⁹ We need the law to protect our business as the creative works are our investments at several levels and, certainly, they are investments for studios and labels. We need to advocate for creative works to be protected in a timely manner as the industry changes around us. Look at Table 3.2 to see how the legal system has responded to changes in creative production. Can you say it is doing enough?

The Digital Marketplace

Now that we understand the concept of copyrights, the trick is trying to find someone who’d want to buy or use (listen to) what you’ve created instead of ripping it off. Consumers of entertainment products may understand the meaning of copyrights better by rearranging the roots, from “copyright” to “right to copy.” Sadly, we are learning it’s more difficult now to make money due to the advancement in digital technology and the appalling naive consumer behavior regarding copyrights and property right laws. Let’s assume you turn “your great idea” into a song, a recording, and then a video. There may even be a movie in it!

Table 3.2 Major Copyright Acts. The majority of the copyright acts (laws) pertain to the duration of the copyright, registration, and what is copyrightable.¹⁰

Date	Purpose	Time	Entertainment Industry
1790	This law provided a term of 14 years with the option of renewing the registration for another 14-year term.	28 years	Map, chart, and book ownership to authors and proprietors.
1831	Music added to works protected against unauthorized printing and vending.	42 years	The business of music and entertainment is now legal.
1865	Congress enacts “An Act to Amend the Several Acts respecting Copyright.”	42 years	Added protections for photographs and photographic negatives.
1870	The law added “works of art” to the list of protected works and reserved to authors the right to create certain derivative works, including translations and dramatizations.	42 years	Allowed derivative works to be created and owned.
1895	Congress mandates that U.S. government works be not subject to copyright protection.	Zero	All government documents are non-copyrightable.
1897	Congress enacts a law to protect music against unauthorized public performance.	N/A	Legal foundation for collection of performance royalties for songwriters and music publishers.
1909	Certain class of unpublished works now eligible for registration. Term of statutory protection for a work copyrighted in published form measured from the date of publication of the work. Renewal term extended from 14 to 28 years.	56 years	Widened the definition of unpublished works that could be registered. Duration for “published works” started with the date of publication not creation. Extended the duration of a copyright.
1912	Motion pictures, previously allowed to be registered only as a series of still photographs, now protected works.	56 years	Motion pictures, film, and so forth are copyrightable.
1914	U.S. adherence to the Buenos Aires Copyright Convention of 1910.	56 years	Established copyright protection between the United States and certain Latin American nations.
1953	Recording and performing rights extended to nondramatic literary works.	56 years
1955	United States becomes party to the 1952 Universal Copyright Convention as revised in Geneva, Switzerland.	56 years	U.S. copyrights extended to other agreeing nations and theirs to our country.
1972	Effective date of the act extending limited copyright protection to sound recordings fixed and first published on or after this date.	56 years	Sound recordings provided limited copyright protection.
1974	United States becomes party to the 1971 revision of the Universal Copyright Convention at Paris, France.	56 years	Extended world copyright protection in agreeing nations.
1976	The 1976 Act replaced the 1909 Copyright Act and changed much of how copyright law operates, including as follows:
	Duration of most works	Life, plus 50 years	Replaced the 56-year duration with duration of life of the author plus 70 years.
	Anonymous, pseudonymous, and works made for hire	95 years from publication
	Copyright at the moment of fixation	N/A	Copyright instantaneous at time creative work is placed into a tangible medium of expression. Duration no longer based on date of registration or publication.
	Author may terminate previous grants of copyright	N/A	Author may request in writing “recapture of copyright” within a 35–40-year window.
	Added protection for additional types of work	Life plus 50 to 95 years based on type of registration	Pantomime, choreography, architectural, mass works, and vessel designs
	Fair use rights	N/A	Congress added exceptions and limitations to the exclusive rights.
	Date of activity January 1, 1978	N/A	Listed as the 1976 Act but date of rule was January 1, 1978.
1980	Copyright law amended to include computer programs.	Life plus 50 to 95 years based on type of registration	Software copyrightable
1982	Willful infringement of copyrights for commercial/private financial gain subject to criminal laws.	N/A	Intentionally selling or using someone else’s creative property (recordings, etc.) for money is a crime. Consider sampling as example.
1984	Record Rental Amendment of 1984 grants copyright in a sound recording the right to authorize or prohibit the rental, lease, or lending of phonorecords for direct or indirect commercial purposes.	N/A	As an example, the use of streaming (rental, lease, or lending) of recordings is not legal without the license from the copyright owner. Spotify and others have to pay labels licensing fees to use their recordings.
1989	The effective date of United States’ adherence to the Berne Convention for the Protection of Literary and Artistic Works, as revised in Paris, France, in 1971.	N/A	United States joins agreement at Berne (Switzerland) Convention to expend copyright protections in world territories. U.S. required to drop mandatory use of copyright notice (©).
1990	The Visual Artists Rights Act allows authors of certain types of visual works of art certain moral rights of attribution and integrity.	Life of author	The authors of visual works have the right to not have their name or demand to have their name associated with their works. Also, the right to prevent the distortion, mutilation, destruction, or modification of the visual work.
1990	Effective date of the Computer Software Rental Amendments Act	N/A	Grants the owner of copyright in computer programs the exclusive right to authorize or prohibit the rental, lease, or lending of a program for direct or indirect commercial purposes.
1992	Renewal registration becomes optional on a prospective basis. Any work in its twenty-eighth year of copyright protection no longer requires a renewal application with the U.S. Copyright Office in order for the copyright to extend into and through the renewal term.	Additional duration to 75 years	As such, all works initially copyrighted between January 1, 1964, and December 31, 1977, were renewed automatically, even if the party entitled to claim the renewal copyright failed to file a timely renewal with the Office.
1992	Effective date of the Audio Home Recording Act	N/A	The Act requires the placement of serial copy management systems in digital audio recorders and imposes royalties (DART royalties) on the sale of digital audio recording devices and media that are distributed to the copyright owners.
1993	Copyright Royalty Tribunal Reform Act of 1993	N/A	Eliminates the existing Copyright Royalty Tribunal and replaces it with the Copyright Arbitration Royalty Panel (CARP) to recommend to Congress statutory license rates.
1997	The No Electronic Theft (NET) Act	N/A	Defines “financial gain” in relation to copyright infringement, sets penalties for willfully infringing a copyright either for the purposes of commercial advantage or private financial gain or by reproducing or distributing (including by electronic means) phonorecords of a certain value.
1998	The Sonny Bono Copyright Term Extension Act	Life plus 70 years for 1978 and later copyrights and 95 years for current valid pre-1978 copyrights	Extends the term of copyright for most works by 20 years.
1928, 1998	The Digital Millennium Copyright Act of 1998 (DMCA) adds provisions to the Copyright Act, including the following:	At least 50 years of duration for any kind of work	World digital copyright rights and protections
	It provides for the implementation of the World Intellectual Property Organization (WIPO) performances and the World Copyright Treaty (WCT).		The right of distribution and rental, and a broader right of communication to the public. The WCT provides a “three-step” test to determine limitations and exceptions.
	Phonograms Treaty (WPPT)		Prohibitions against circumventing technological measures protecting copyrighted works
	Section 512 safe harbors from liability for Internet service providers		Safe harbors allow digital providers to exist as long as they follow certain guidelines of operation. Basically, it is an attempt by governments to strike a balance between innovation and copyright owners’ rights. What it really does is provide a way for individuals who upload copyrighted songs and recordings to do it illegally and then not get a lawsuit filed against them, as they don’t have enough money to make it worth hiring the attorneys. In the long term, the safe harbor foundations could be removed as subscription providers catch on.
	An exemption in Section 117 of the Act		Permits the temporary reproduction of computer programs made in the course of maintenance or repair; clarifies the policy role of the U.S. Copyright Office; and creates a new form of protection for vessel designs.
2004	The Copyright Royalty and Distribution Reform Act	N/A	Phases out the Copyright Arbitration Royalty Panel (CARP) and replaces it with the Copyright Royalty Board.
2008	The Prioritizing Resources and Organization for Intellectual Property Act	N/A	Creates the new government position of the Intellectual Property Enforcement Coordinator and prohibits the export and import of infringing copies.

Do you own an idea? No! According to Circular 92 of the Copyright Law of the United States (2011),

Nobody owns an idea (no matter how original), unless it is converted into what the industry calls intellectual property. What in the world is that? If you want to make a living in the industry as a creative writer, musician, artist, or producer, you better find that out fast. The truth is that almost everything from recordings to sports teams’ logos are considered intellectual property owned by an individual or a company. The key words are owned by, which relates to entrepreneurship and business. Forget about the brain rush you had when you came up with the great idea and start thinking about “How can I turn my idea into a piece of legal property?” Property, something you can own and sell! What a concept! After all, that’s what this industry is really about, selling and licensing products (allowing companies and consumers to use/enjoy creative products) for a profit. So, in the eyes of the law, even though your idea comes from inspiration, it is as real as your car, or the mortgage on a house once it’s placed into a tangible form as defined by copyright law. As you will see, once the idea has a concrete delivery mode involving teams of people working to make the idea a reality, it can be bought and sold for profit. Different types of “properties” may be protected through the process of intellectual properties, of which copyrights are one.

Converting “Ideas” Into Intellectual Property

How do you turn a great idea into a form of intellectual property you own? I know you will remember from Chapter 1 that if it’s written down, sung into an iPhone, or recorded, then it’s yours as long as it meets the legal definition. In other words, the songwriter who came up with an idea and turned it into a physical, tangible form of expression (magnetic or tangible) now owns the song he or she created and the recording stored in some type of device, called a phonorecord (see Figure 3.4).

Fixation Requirements

To be considered as a copyrightable creative work what you’ve created must be “fixed” into a tangible medium of expression. According Chapter 300 of the Compendium of the U.S. Copyright Office Practices (2014),

Now you know why, how, and when a creative work is copyrighted. The instant it is “fixed” into the physical form, you’re protected. Not when it’s registered, but when it’s created. Most will say it’s the paper received from the Library of Congress when registering your creative work. Wrong. The U.S. government does not issue a “copyright” to you. It’s actually your claim of ownership of what you’ve created, such as a song, recording, photograph, film, or video, as long as it fits the legal definition. The certificate of registration (and the registration number on the certification) represents your claim of creation backed by the government.

The writers who wrote the song now equally own it, as it’s a legal piece of property. How can you prove you own the copyright (song)? Easy—register a claim that you created it with the U.S. Copyright Office.

If you create a song or recording, then the song in most of the free world is legally yours and defined as property. Is it worth anything? That depends on how many people want to buy it or listen to it. In the free world, you have the right to do it, so read on to discover how easy it is to register your claim of ownership on songs and other creative products you create (see Figure 3.5).

Legal Foundation

In the music and entertainment business, copyrights are the legal foundation of the industry. Why? Because entertainment products are property owned by the individuals and companies that create or buy them, and that can be worth a few pennies to billions, depending on how much consumers enjoy them. Yeah! And it’s a great life, making money doing something you love. According to the Compendium of the U.S. Copyright Office Practices, third edition, the purpose of registration is as follows (2014):

The purpose of the copyright law has been challenged in courts; however, according to the Compendium (2014),

Property

Let’s dive in a little deeper. What is property? The definition of personal property depends on where you were born and where you now live. There are different laws in different countries, depending on their form of government. As an example, property rights in the United States and most of the free or western world are defined as ownership. Ownership is connected to a perceived value tied to economics. According to BusinessDirectory.com (2015) property is a

Types of Intellectual Properties

Intellectual property rights (ideas turned into products and devices) become something of “value” as determined by consumers’ “wants and needs” to be entertained. And the way we value something is by negotiating how many cows (only kidding) or how much money we’ll pay for the experience. Ideas, remember, are not protected. However, the corresponding products “created” from an “expression of an idea in a physical form” may be copyrightable if they meet certain legal definitions. The recordings, films, TV shows, videos, computer games, performances, and other products sold, performed, or used by businesses and the public in exchange for money, licenses, and royalties are paid to the copyright owners. In most capitalist countries these industry processes and products usually fall into three legal areas—copyrights, trademarks, and patents. All three protect different types of intellectual property ownership rights.

Copyrights (©)

Copyrights provided by the laws of the United States (Title 17 U.S. Code) and similar laws in other countries provide protection (ownership of their creative properties) to the authors of original works of authorship, including literary, dramatic, musical, artistic, and other intellectual works.¹⁵ Copyrights encourage artistic and creative people (often using the inventions and discoveries) to make, among other things, musical recordings, paintings, photographs, literary works, choreographic works, computer-enhanced artwork, and films. So what is a “copyright”?

Trademarks (TM, SM, and ®)

Trademarks protect the name and iconic symbols of products of their manufactory company marketed to the consumer market. Examples include business icons and logos, such as Coke, Coca-Cola, and Pepsi for soft drinks, and artist and band names, labels, and even the Rolling Stones red licking tongue logo to the corresponding acts, merchandise, branding, endorsement, corporate sponsorships, and other revenue-generating products and services. According to the U.S. Patent and Trademark Office release, “Protecting Your Trademark: Enhancing Your Rights Through Federal Registration” (2015),

Patents

Patents are issued by the government to protect ownership (property) in an original invention by preventing others from making, using, or selling the invention. The U.S. Patent and Trademark Office (2014) defines a patent as

The Value of Creativity

Enough! In spite of the laws we probably should understand better (most of us are not lawyers, including me), at least we can start to understand the mind-set of the creators and business executives who have invested their careers and money into creative products and now see them melting away because of technology and consumer behavior. Frustrating to say the least, but that ship has left the port and will probably not return. So what about you? The value of entertainment products has always been tied to the ownership laws of copyrights and consumer demand. Now things may be changing to a newer business model for generating profits. Nevertheless, according to the current laws whenever someone wants to use your property (e.g., songs, film, scripts, books) without notice and payment they are probably violating laws. That’s the purpose of licenses used in the professional industry to keep everything legal and to make sure the copyright owners are receiving royalty payments (see Figure 3.6).

Is it becoming clear to you why there are very few entertainment superstars in countries without property rights? Now that you’ve read some of the laws, can you see the financial situation the industry is facing as consumers download entertainment products without paying for them? Remember, according to the Copyright Office Circular 1 (2012), “It is illegal for anyone to violate any of the rights provided by the copyright law to the owner of copyright.”¹⁸

A Snake in the Grass

Sadly, among those in entertainment professions, recording artists are often the least informed because they don’t learn how the business actually works. Egos are important but they seem to sometimes clutter the clarity of a superstar’s understanding of the business of entertainment. Similarly, many of the creative people who act, direct, promote, fund, and market entertainment products do not understand the fundamental elements of the business as a system. They are the creators of products that generate billions of dollars, yet due to the complexity of the business they often trust others to take care of what they see as “details.” As a result, you need to know how all the parts and roles associated with creative productions and business administration operate or you may become a victim of an unscrupulous manager, label, or entertainment company desperate for profits at your expense. Be careful also with the entertainment accountants and lawyers who might mismanage your contracts and royalties for the same reason. Most of the industry is highly respected and honest, but where there is money, you may also find a few rats. You want a career in the entertainment industry, not a life of mistakes that lead to lawsuits and bankruptcy. Let’s not go there! By the way, most consumers don’t care what happens to their favorite artists or their careers; consumers just enjoy the creative products and often want them to be free. The invention of the printing press scared the heck out of people who controlled the government and writings in the 15th century. The results of today’s digital technology and the Internet have flipped the heck out of the entertainment industry’s old business models. However, very smart and talented people in the industry are making more money than ever. How are they doing it?

Don’t Be a Starving Artist

The industry and laws will change with the times. The entertainment industry, which is based on capitalism, creative efforts, hard work, financial investments, and profits, now has to compete with the idea that these very things should be free. The fact that we, as consumers, can acquire recordings and other entertainment products without paying for them does not make it right or legal. If you figured out how to steal a car or other property and get caught, you know what happens. But not in this business—now free is often expected. That’s why Congress is looking at the laws and labels and other industry-related businesses are morphing into new profitable business models that provide a reasonable financial return on their investment.

After all, listening to music on the radio has been free since the invention of radio; you just had to wait for the DJ to play the song/recording you wanted to hear. But a key difference here is no consumers could control when or how much of a song they might hear again. Now, thanks to technology, you and all consumers have that access and power!

Cloud Servers

That’s why the industry is headed quickly toward the streaming of entertainment model where consumers can enjoy any product they want, when they want it, in a millisecond by pushing a button or clicking a mouse. Recordings and other entertainment products are also available free as in the past or provided through new forms of distribution, such as Netflix, Amazon, and Spotify. With a subscription service you’re not buying a copy of the product you want to listen to, use, or watch.

Selling Access

All you are receiving is access to it digitally through a monthly subscription payment. Some of the services are still free, and you still have to watch or listen to the commercials, just as we’ve done since the invention of media. Even if you buy a CD or DVD you do not own the entertainment embedded in it—you own just the plastic disc. Same for a book because you are not legally allowed to make copies of an entire book, recording, movie, or most other forms of entertainment. Why? You know the reason! Besides, you can find just about everything on the Internet, including Google books. However, lawsuits have been filed against them in many countries and their services have been banned in some for violations of privacy and copyright issues. The authors of the thousands of books scanned by Google have not been paid a dime, so it’s restricted to show only short views of content, and they are not allowed to show entire publications. They may use the search to sell data about you to companies, but the original authors have received zip.

Perceptions of Free

Even with the new models of distribution, many creative people and businesses are not being paid much money. The problem has been to find an economic solution that will infuse the use of digital technologies into consumers’ perception of value and expectations and still reward the entertainment product creators fairly. In spite of this weird situation, the music and entertainment industry is quickly changing its business models to adapt to the situation. Finding revenues in a free product market is difficult. By understanding: creativity, business principles, entrepreneurship, intellectual properties, consumer behavior, demographics, psychographics, metadata analysis and how the industry works, we can better understand how and why the industry is developing its new business models based on interactive streaming, branding, management of digital content, digital access distribution, rights management, and other sources of revenue. Just when we thought we knew it, here’s another wrench in the system to consider.

Safe Harbor

Question: If we understand the law, how can YouTube and other services exist? A couple of reasons: first, they are “allowed” to operate as long as they pay a major percentage of their income to copyright holders, such as labels. Second, they are currently considered a legal safe harbor. Think of it this way. If you are out on the water in your boat and a huge storm starts whipping the waves out of control, you’d probably want to find a “safe harbor” to anchor until after the storm. The Internet, Napster, and most of the other services are the “storm” that opened innovative distribution of entertainment products for sale or purchase, except most users wanted it free. Why are safe harbors allowed?

What’s legal and illegal regarding the distribution of digital copies of creative products through businesses modeled on unknown innovation and technology is difficult to define. Most of the time, these types of issues are decided in court. That’s what has happened in this situation as the courts have tried to strike a balance between copyright holders’ legal rights and the development of business using the new technologies, and that is why we have some website providers legally designated as “safe harbors.” As an example, a court case in Scotland between the Shetland Times and the Shetland News (1997) left the court trying to define the balance between copyright holders and new technology innovators:

The World Intellectual Treaty and the WCT

As you probably guessed by now, copyright holders are trying to figure out a way to monetize their entertainment products, especially in light of the changing landscape of consumer technology devices. What’s legal and what’s not? Because of the technology, consumers now have control over the distribution and want any and all kinds of entertainment free. And at the same time, the providers were granted a legal “safe harbor,” claiming the people stealing the creative works through their sites were the copyright infringers and not they. As we know, most people are very decent and do not understand that free downloads of entertainment products shaft the copyright owners. That is a serious problem! How can we solve that problem? Over the years, the World Intellectual Property Organization (WIPO) and the World Copyright Treaty (WCT) have provided some of the answers. In a short nine-page document many free countries of the world have together demanded copyright protection under 25 short articles related to the Berne Convention. Cory Janssen in Techopedia (2015) outlines the WCT as

Fair Use Rights

Fair use rights allow for free use of copyrighted works in criticism or commentary, news reporting, teaching, academic scholarship, and research. No payment for the use of the materials is required. Specific standards to determine what, how, where, and when copyright works may be used as a fair use right are based on factors including purpose, character, and the nature of the work, plus the amount used and its effect on the value of the original work. According to the U.S. Copyright Office Fair Use Index (2015),

Of course this is great as it provides a valuable service and source for people to learn stuff. That’s part of the rules of the game: you create it, you own it (for limited times), but people can use small sections of it for research, criticism, and education. Sadly, some musicians, songwriters, or producers who like to use “samples” don’t understand that using the part of one recorded musical note is a violation. Just get permission by acquiring a license from the copyright holders and you’re fine. However, we’re back to asking questions and we need to know what to ask to receive a correct answer. As an example, what types of licenses are required? Where can I file for one, and how much will it cost? I hope you’re starting to understand why you need a basic knowledge of copyrights to work at almost any level in the entertainment and music industry. So if you’re a song, script, or book author, a movie producer, label, or huge entertainment company, how can you register your products with the Copyright Office in Washington, DC?

Types of Registration

There are several ways of registering creative works of authorship for a claim of copyright. The word authorship is now associated with the word ownership (of what you created), which is defined as your personal property. How valuable is it? That is determined later by public demand and usage if you can get the industry or potential consumers to just discover it. However, at this point it is important to remember what you’re claiming. If you created it yourself, you claim authorship. And since you’re the only one who created it, you should also claim ownership of the copyright. If two people wrote a script or song, then both are considered authors and share ownership. Chapter 2 of the Compendium of the U.S. Copyright Office Practices, third edition, describes the types of registration (2014):

Types of Registration

The two most popular ways to register your claim of copyright with the Library of Congress Copyright are the electronic (eCO) upload and the old snail mail paper forms, including TX, VA, PA, SR, SE, and CON.²³

Table 3.3 details the snail mail registration process.²⁴ Claiming a copyright of a creative work is really a two-stage process, listing the author(s) of the work (section 1 in the attached SR form) and who owns the work (section 4 under CERTIFICATION of the attached SR form). According to 202.3 of the Compendium (2015),

Certificate of Registration

At the end of an evaluation process, the Copyright Office either refuses or provides a certificate of registration containing a registration number. The process is described in the Compendium as follows (2014):

Table 3.3 Forms. The old snail mail registration process is still used today by the Copyright Office. You may want to consider the eCO process, which is quicker and costs less money.²⁶

Type	Use of Paper Forms	Link to Website
TX Literary Works	Registration of published or unpublished nondramatic literary works, excluding periodicals or serial issues. This class includes a wide variety of works: fiction, nonfiction, poetry, textbooks, reference works, directories, catalogs, advertising copy, compilations of information, and computer programs.	http://copyright.gov/forms/formtx.pdf
CON Continuation Application	The Continuation Sheet is used in conjunction with Forms CA, PA, SE, SR, TX, and VA when you need to continue the registration process.	http://copyright.gov/forms/formcon.pdf
VA Visual Arts	Registration of published or unpublished works of the visual arts. This category consists of “pictorial, graphic, or sculptural works,” including two-dimensional and three-dimensional works of fine, graphic, and applied art, photographs, prints and art reproductions, maps, globes, charts, technical drawings, diagrams, and models.	http://copyright.gov/forms/formva.pdf
PA Performance Arts	Registration of published or unpublished works of the performing arts. This class includes works prepared for the purpose of being “performed” directly before an audience or indirectly “by means of any device or process.” Works of the performing arts include: (1) musical works, including any accompanying words; (2) dramatic works, including any accompanying music; (3) pantomimes and choreographic works; and (4) motion pictures and other audiovisual works.	http://copyright.gov/forms/formpa.pdf
SR Sound Recordings	Registration of published or unpublished sound recordings. Form SR should be used when the copyright claim is limited to the sound recording itself, and it may also be used where the same copyright claimant is seeking simultaneous registration of the underlying musical, dramatic, or literary work embodied in the phonorecord. With one exception, “sound recordings” are works that result from the fixation of a series of musical, spoken, or other sounds. The exception is for the audio portions of audiovisual works, such as a motion picture soundtrack or an audiocassette accompanying a filmstrip. These are considered a part of the audiovisual work as a whole.	http://copyright.gov/forms/formsr.pdf
SE Serial	Registration of each individual issue of a serial. A serial is defined as a work issued or intended to be issued in successive parts bearing numerical or chronological designations and intended to be continued indefinitely. This class includes a variety of works, such as periodicals; newspapers; annuals; and the journals, proceedings, and transactions of societies. Do not use Form SE to register an individual contribution to a serial. Go to www.copyright.gov to register such contributions.	http://copyright.gov/forms/formse.pdf

The eCO filing takes up to 8 months and paper forms about 13 months for processing. For the mail-in forms select the type of work you’d like to register a claim on and then follow the links to download the instructions and forms. Complete the form fully and then add a check and a copy of the creative work.

Certificate of Recordation

What happens when you sell your copyright (ownership) in the entertainment product (work) you’ve created? Usually, the new owners request a change of the name of the “owners” of the copyright registration at the Copyright Office, and they will then receive back under the same registration number a certificate of recordation (section 4 under TRANSFER of the attached SR sample). The Compendium states (2014),

Deposit Copies

To complete the registration process, a copy or copies of your work must also be submitted at the time of application. Also, detailed in the Compendium (2015) is the following:

Electronic Registration

The eCO registration process is quicker and less expensive for you to file. It allows for digital uploading of files. You have to register once, and then every time after you’ll be greeted with a friendly “hello” and a simple step-by-step menu to follow. Easy. Get started by completing the application and following all of the screen prompts.³⁰

According to the Copyright Office official website (2015), the eCO electronic process may be used to register the following types of claims: literary works, works of the visual arts, sound recordings, work of the performing arts, motion picture/audiovisual work, and single-issue serials.³¹

The Business of Entertainment

Once we own a creative product then we have the right to sell it, which is the purpose of the entertainment industry. You can’t stop at writing the clever books, songs, and scripts, producing the music, playing the instruments, producing the shows, and lighting the sets. Your creative work has to have quality, interest, and market value to reach the level of a true entertainment product. However, every so often God gives a few of us the talent and ability to create (and, therefore, own) wow books, scripts, musical recordings, and so forth, and then the industry steps in to finance the creative individuals making the recordings, movies, books, and computer games, and the corresponding businesses that distribute, promote, and market the products to consumers. And somewhere in that process, we hope the people (you) who create the products are paid for the brilliant work and the businesses that invest millions make a profit on their investments.

The Mob Pirates

In the history of book publishing, printers and booksellers who reprinted copyrighted works without securing the manuscript rights for new printings were called pirates and the illegal publications were called pirated copies. In the 18th century in England, the copyright laws, derived from the Statute of Anne, as seen earlier, were strictly enforced. Offending printers and booksellers, anyone they used to sell the publications, called street hawkers or mercuries, and any members of all those people’s families could be thrown in jail for the illegal printing, and they all would have to pay large fines to be released. Nothing like Johnny Depp jumping around in a Disney movie! This kind of syndicate was organized crime, and we have the same system operating today, though the look of the products and how we access them have changed.

In the mid-1950s, using the same equipment and processes as the label, pirates would record the album into a new matrix and then make a mother (that’s what it was called) and press a few hundred thousand new copies. Then they’d also use the same printing company equipment as the real guys, slide the new illegal album off the presses and into the jacket, seal it with shrink-wrap, and bingo, free albums they’d sell at discounted prices to bar owners, clubs, and even legal retail stores. All that money went directly into the mob’s pockets and the labels, writers, publishers, and artists got zip. The same situation took place with cassettes and CDs in the record business and in the film business with videotapes and later DVDs. Ouch! The FBI was chasing a few bad guys ripping off the labels and movie companies for millions. And don’t forget the markets overseas where the local officials and cops were sometimes ignoring the problem and the FBI was not allowed to operate. It was a constant battle as the mob just kept moving the equipment to different sites, yet every so often someone would get caught. There were also the small operators or pirates, but they had the problem of not only the FBI but also the mob if they got too big.

Today’s Pirates

As we’ve already stated the pirates of today are the people sitting all around us. They are not the Blackbeards or even Johnny Depps of yesterday, pointing their swords toward the movie companies and labels, laughing with a patch over an eye, making hundreds of millions of illegal copies and then laundering the money in a foreign country. Today, we have the tools necessary to commit the crime ourselves. Of course, when any of us downloads a favorite movie, computer game, or recording we’re not trying to make copies and sell them for a buck. Most of the billion or so modern pirates simply want to use the entertainment products free or become the local “hero against the establishment” by uploading the stuff on a bit.net site. However, as you can now see, there’s not any need for the mafia as consumers simply do it themselves. But the damage is far more devastating than the mob could ever accomplish. Wow, and that really is a wow.

Why should the industry stay in the game, when consumers can obtain entertainment products free or at a cost that is too low to support the creators and copyright owners? Why would anyone want to learn how to become a great writer, singer, actor, production expert, investor, and so forth if the odds of making a living and having a great career are zero? That’s what is starting to take place in the business. If you spend millions making a great recording, developing an act, or producing a wow film, as it is released and in some cases before it’s distributed for sale or use, it’s already available online free through bit.net. Sucks @+!@! So, if we want some form of entertaining product that we’d want to take the time to enjoy, then let’s figure out how to make the systems founded in capitalism, currently struggling with the realities of wonderful technological advances, profitable. Let’s explore some of the game players and their positions by looking at the copyright law.

The Decision Makers

Congress is stuck in the middle between the laws it has created by the authority provided in the Constitution and the potential new products and services innovative technology may provide in the future. This is a difficult marriage with historical ties to the adaptive uses of any new “thing” created, as we have already learned about with the Statute of Anne and the invention and use of the printing press in merry old England in the 1700s. As the late President Harry S. Truman used to say, “the buck stops here,” and that’s what is now happening in Congress. As most of us already know Article 1, Section 8, of the U.S. Constitution states very clearly that Congress shall have the right “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” Here are a few other interesting parts of Section 8 that we may want to address. Notice the differences between what Congress, the president, and the Supreme Court are allowed or not allowed to do. Thus, when the president does something as an executive act in an area that Congress is supposed to control, it is questionable if it is legal. Another tough job and position to be in. Welcome to politics; the questions about intellectual property rights fall squarely into the political discussion. There are also conflicts between creators, owners, users, and requests for new laws that may uphold the Founding Fathers’ writings. Here is Section 8 of the U.S. Copyright Law:

Article 1, Section 8

• The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defense and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;
• To borrow Money on the credit of the United States;
• To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;
• To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States;
• To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
• To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;
• To establish Post Offices and post Roads;
• To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;
• To constitute Tribunals inferior to the Supreme Court;
• To define and punish Piracies and Felonies committed on the high Seas, and Offences against the Law of Nations;
• To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water;
• To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years;
• To provide and maintain a Navy;
• To make Rules for the Government and Regulation of the land and naval Forces;
• To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions;
• To provide for organizing, arming, and disciplining, the Militia, and for governing such Part of them as may be employed in the Service of the United States, reserving to the States respectively, the Appointment of the Officers, and the Authority of training the Militia according to the discipline prescribed by Congress;
• To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the Acceptance of Congress, become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings;—And
• To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.³²

The Fork in the Road

Do we have property rights or don’t we? That is the question. It would be a different story if we lived in Castro’s Cuba, where everyone is supposed to share equally, yet we know that system is a joke unless you want to live a very restricted life. There is very little motive to create or do much of anything, as there’s no reward, so what you get is what the government allows you to have. Boring! I have more faith in the individual and believe if given the freedom, protection of rights, and motivation many of us will work hard to contribute to the quality of life of everyone. In a free society, we have the right to profit from our hard work and intellectual gifts if we want to pursue, create, and develop something that may positively contribute to our society. And if we actually do it, it’s the people who decide if they want or need it through the commercial free market system. The more consumers want something, the more money the owners make, if they are smart, understand the law, and don’t give it away, as many are doing with their music on the Internet. In other words, a free market does not mean free products. It means the freedom to develop and create goods and services, and sell them for something of value, such as cows (remember this from our discussion of money?) or greenbacks. Where does Congress draw the line? That is a very difficult question to answer; however, let’s take a peek at the possibilities.

“Property Owners” and the Google Books Lawsuit

The way I read Article 1, Section 8 and the whole law makes me want to acknowledge that the people who create copyrightable products (art/entertainment) own them as long as they meet the legal definition of useful arts. Songwriters own their songs, novelists own their manuscripts, scriptwriters own their scripts, and arrangers own their musical arrangements until they fall into public domain. Record labels own the recordings they finance by great artists, and movie companies own the films, TV shows, and movies they financed, marketed, and sold.

Let’s take a look at the Google lawsuit to which I allude in some other chapters. Here is the summary of the lawsuit and its major parties:

It will come as no surprise to you that it takes very hard work, talent, and usually significant capital to create books, movies, and computer games. The outcome of the Google lawsuit, which was handed down in October 2015, has set a legal foundation for the end of all creative arts and the entertainment industry, as we know it, as the presiding judge has also overruled the foundation of intellectual property rights.

A Legal Argument

Let’s take a closer look at this real problem caused by the technical advances in digital communication and software. To understand the potential significance of the Google decision, let’s recap what the U.S. Constitution provides us as protections for our physical, personal, and intellectual properties,

Notice the words we the people, establish justice, promote the general welfare, and posterity.

“We the people” means “by the authority of the people”—yes, citizens of the United States—that members of Congress (as our elected representatives) have the authority and responsibility to protect our fundamental rights.

Also notice the U.S. Constitution is the source of all government powers, with important limitations on the government. Article 1, Section 8, also states that Congress shall have the right “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries” (emphasis added). Okay, so Congress gave us the right to own what we’ve created for a limited time, which is currently the creator’s life plus 70 years. In addition, the Constitution also defined our ownership rights as exclusive rights. In the context of creative works, the word “exclusive” provides the copyright creator or owner 100% control of the rights granted by the Constitution, currently defined as six exclusive rights:

Fair Use Right

We are not finished yet as there are some exceptions to copyright owner exclusive rights, titled “fair use” rights. They are usually very positive for the education of society and a meaningful tool to be used to improve the public welfare, knowledge, and quality of life. The fair use exceptions as defined by Congress and by the ways stated in the USCO Mass Digitization Letter from the Office of the Register of Copyrights (2011) are as follows:

Why?

The key questions the Google lawsuit appears to raise and the questions that should matter to you are as follows:

• Does Google have the right to scan full books and offer segments to help citizens?
• Does it have the right to do it for free without licenses from the copyright holders? Google grossed $55 billion in 2013 with all the other revenue sources and $66 billion in 2014.
• Why not just buy the books?

Misunderstanding the © and ℗

Google gained the right to copy “branding features,” such as logos and illustrations, without the copyright holder’s permission. Money, under the ruling, will be exchanging hands between the two parties even though the copyright holders are not receiving any monies or royalties. The authors usually give up their copyright in exchange for a percentage of each unit sold; thus the book publishers are not receiving any money, so the authors who wrote the books will not be paid as their deals are with the book publishers. If the publisher isn’t paid, neither will the author be paid. In the music business, there is a different situation as Congress has approved ASCAP, BMI, and SESAC to collect public performance royalties (©) for music publishers and songwriters and SoundExchange to collect digital transmission royalties (℗) for the labels, and digital royalties for the royalty artists and recording session musicians on non-interactive digital streams. Why are royalties owed? Because radio, media, digital streaming, nightclub owners, and businesses who use the songs to set an atmosphere to increase business are making money off someone else’s property-—namely, the songwriters and publishers who own the rights to the songs (©). ASCAP, BMI, and SESAC in the United States and hundreds of PROs in other countries collect these royalties for songwriters and music publishers residing in their home countries. The labels are paid digital streaming royalties, as they own the recording of the songs (℗) used by businesses. Many recording artists are concerned as the rates for streaming are low $.0002 per play and as the acts’ deals are signed directly with the label, which may or may not pay them any royalties.

The Google lawsuit and digital innovations are forks in the road. The transformations they bring should not be seen as a deterrent to the entertainment and music industry. You will be part of the decisions that will shape the industry, which starts with a carefully crafted business plan and understanding of not only your target markets but also how the business of entertainment is monetized. What follows will enable you to develop your entrepreneurial and leadership skills in ways that may contribute to the overall growth and transformation of the industry.