Music Licensing Update

“The public’s perception is that the music business is falling apart,” Gerald Weiner, a former musician who is now a music industry attorney, told an audience of more than 200 attendess at the Licensing Executive Society's Winter Meeting in Pasadena, California. “But it’s not true.”

In analyzing the segments of the industry, he observed that the live performance business is alive and well, generating significant revenue for musicians. “Music publishers, who own musical compositions, are also in good shape because the licensing of music into films and television and performance royalties have brought in a lot of money” Weiner added. “Whatever loss music publishers have incurred from fewer royalties from records has been more than made up by licensing in these areas.” Many commercials are now also using popular songs.

However, Weiner explained that “the record business is having a really rough time.” He noted that outside the United States, large numbers of bootleg CDs manufactured illegally in Eastern Europe and China are circumventing licensing and royalty agreements. This, plus extensive downloading and copying of songs by teenagers and other music fans, has hurt CD sales significantly. “In my opinion, illegal ripping of CDs is a bigger problem than illegal downloads,” Weiner said. “One kid buys the CD and 100 kids copy it.”

The music business is increasingly segmented today into different markets such as rock, country, rap, rhythm and blues, and others that appeal to distinctly different demographics. As a result, Weiner believes that record companies can now sell a maximum of about 7-8 million CDs. “The days of selling 15 million CDs are probably gone,” he declared.

Apple IPODs and podcasting are also further complicating the licensing and copyright picture in the music business. Weiner observed that the success of IPODs proved that people want to listen to music everywhere. “The problem is, where does the music that goes into these devices come from?,” he asked. Currently, record companies are granting licenses to companies such as Apple, and the record companies take care of paying royalties to music publishers, a situation that publishers are not happy about because they don’t believe they are receiving the appropriate, timely, royalties. In addition, Weiner explained that of the 99 cents a consumer might pay to download a music track, 70 cents goes to the record company and only about 5 cents go to the artist.

“The artists are just now starting to see royalty reports coming from record companies,” he said. “Many of their agreements call for artists to receive a 50-50 split on third-party sales, which these are. It’s an issue we are going to see in the next six months.”
Weiner concluded by predicting, “Everything we know about the music industry today is going to be different in 10 years. There will be new ways to use music and new ways to license music. The music industry is going to have to come up with some standards.”

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