On a friend's recommendation, I watched Peter Bogdanovich's wonderful documentary on the early years of Tom Petty & the Heartbreakers (called 'Runnin' Down the Dream') which just aired on the Sundance cable channel. [I'm a huge Petty fan, as it happens - a good deal of his stuff ranks up there with the truly great masterpieces of rock and roll, imho]. It turns out that Petty played a not-insignificant role in a rather important legal development in the mid 80s.
Petty, like a LOT of musicians, had been so happy to get any recording contract at all, when the band was just getting started, that he didn't think much about what it was that he was doing. He had signed a "publishing" contract — as Petty describes it in the film, he really didn't know, when he signed the contract, exactly what "publishing" meant, assuming that it had something to do with the distribution of sheet music; little did he know that the "publishing" contract he signed had basically transferred his future royalty payments for all public performance of his songs (include their "performance" on the radio, where the really big bucks are) forever.
It's an old story, of course, and we've all heard it a million times. But Petty fought back in an interesting, and somewhat novel (at the time) way: he declared bankruptcy. A bankrupt is allowed to void all "executory" contracts — contracts to be performed in the future — so as to allow the "fresh start" that bankruptcy is supposed to provide. Petty had to get the court to declare that his publishing contract was an executory contract. It's a nice little legal issue. If he had "transferred his copyright" to the publishers, then it's clearly not an "executory contract" that the court can declare void; if you sell you house in 2007 and declare bankruptcy in 2008, you don't get your house back. But if the contract is treated as an "assignment of his ongoing royalties" to the publisher, that's a different story — that's a contract to be performed in the future, and he can get out of that one.
Petty (and a number of other artists at around the same time) were successful in persuading the courts to void these publishing deals (allowing them, of course, to renegotiate them on far better terms).
What I find particularly interesting about the episode is the way Petty talks about it in the film - which he does, at length, and quite eloquently. To Petty, the significant thing about the fight was that he had signed the publishing contract "under duress" — forced to swallow outrageous and onerous terms by a greedy corporate monster — and he clearly feels vindicated by his victory in court. He may be right that he had been forced to swallow outrageous and onerous terms by a greedy corporate monster. But that's not why he won — it had nothing to do, in fact, with why he won. He won because the contracts were executory and therefore voidable — duress and the rest of it had nothing to do with that. Except, of course, that it was the "duress," and the perceived unfairness of it all, that helped strengthen his cojones to fight it in the first place.
Features
Stuff from us
Academic Legal Writing: personalized bookplates
In Search of Jefferson's Moose
Sources on the Second Amendment
Can someone explain why things like this bother me? What is wrong with me?
If everybody understands what they're signing, it would likely still be a good deal for the artist, as long as the contract doesn't cover too many albums.
There might be the more colloquial kind of duress - the duress from stress, but that is not going to be legally actionable. The bankruptcy gambit (wonder if it would work under the new more restrictive bankruptcy laws) was a brilliant choice by his lawyer to get Petty where he needed to go and more power to that lawyer. Sometimes it is great to not being willing to back down!
The revenue stream at the heart of the contract suggests more than what an executed contract could be said to do. Payment for future performances that have not been booked yet would appear to say the contract has not yet been fully performed and therefore must be executory.
Fun stuff! I am not freefalling!
Best,
Ben
It's easy to be critical of such onerous contracts when looked at in isolation, but in reality the record companies have to sign an awful lot of contracts in order to stumble upon a few Tom Petty &the Heartbreakers. Like any venture capitalist, the record companies are advancing capital to undercapitalized businesses (in this case, a music act). The early investors who do that always get the right to a hefty cut of future profits, in return for the very substantial risks of loss they take, having to invest in a bunch of losers for every winner they find.
Also, this after-the-fact whining by people in Petty's position is unseemly at best. At the time he entered into the contract, he wanted THEIR money and support more than he wanted some hypothetical future profits from his performances. Yeah, artists are on the whole notoriously bad businessmen, but that's their problem. As long as the record company didn't hide anything, didn't lie, then as far as I'm concerned, Petty has nobody to blame for that contract other than himself.
Now, if the sophisicated record companies and their lawyers could get screwed because their high-priced lawyers writing the contracts and structuring the business deals overlooked what would happen in bankruptcy, well that may indeed be a bit of poetic justice.
Fool me once, shame on you. Fool me twice, shame on me.
So the earnings of those with real talent are taken from them to make up for the weakness of the many talentless drones the recording companies were stupid enough to sign. Such redistribution of earned income sounds like socialism to me.
From a capitalistic perspective, a band is just another business like a bakery or a retail store. It starts very modestly, with an idea and some capital. Most bands, like most new restaurants and businesses, fail. Others do ok, with modest growth and a life span of 5 or 10 or 20 years. A few succeed outrageously and become McDonalds or Walmart. The capitalist took a chance on the new businesses before anybody knew what the end result would be. It's the farthest POSSIBLE thing from socialism that they get a high return on their investment when the business succeeds.
Socialism would be begging for money when you don't have any, and then asking for the government to intervene to get you out of the obligations you agreed to when you got that money.
Generally true, but the documentary (I have it on DVR right now and will watch it again) showed that the members weren't exactly thrilled about FMF.
I like the story about (I think it was the drummer) who kept complaining about how dumb one of the songs was, and that he didn't want to play on it anyway. the song? Free Falling. lol
Disclaimer: I played in bands in high school and college. All singers are egotistical dorks and the true geniuses are the guitarists!! :)
I have to agree with Tony Tutins on your question as to why this isn't specific performance ala the actor's contract. Tom Petty has already "performed" this in the studio, and the contract would still actually apply (as I understand it) even if Tom Petty hadn't been the one to make the song famous, but rather it was covered by the Rolling Stones or whoever.
I KNEW there must be something explaining your moral bankruptcy besides just you being a cop. You're a guitarist!!! Everyone knows the true backbone of the band is the bassist and drummer. They are the clasped hands that boost the guitarist, lead singer, whoever, over the wall of being yet another mindlessly soloing egotistical freak and put everything in perspective.
Michigan had the doctrine, but our State Supreme Court canceled it at the request of insurance companies.
In an unrelated fact, those same companies are major major donors to our state supreme court races.
Labels might even be better than VC, because at least you have multiple labels competing. VC's tend to move as a herd of sheep.
Wikipedia mention a Federal case:
"The leading case on unconscionability in the United States is Williams v. Walker-Thomas Furniture Co., 350 F.2d 445 (D.C. Cir. 1965). In this case, the plaintiff, a retail furniture store, sold multiple items to a single mother on a pro rata credit basis."
(That's the full extent of what they write about US law.)
The missing pat of this is that due to the specific nature of this business the Record Companies were able to pass "high levels" of return, and depending on who you talk to border on unconscionable ones. They were able to continually do this because they controlled the sole means of accessing the market among a small number of large record companies. (at least under the old model, the internet has substantially changed things)
Let's say a given business owner has two possible sources of revenue derived from a common source. Maybe one stream from selling products, and another from maintaining those products that have been sold.
An investor contacts this businessman and says he's willing to pay to build a factory and provide the businessman with 1 years worth of operating capital.
But in exchange he wants 100% of the profit from each unit sold until he's recouped his investment and 50% of each unit thereafter, and 100% of the profit from the service revenues into perpetuity. He also wants a guarantee that the factory will run for at least 8 years, and a clause fixing damages if the businessman stops prior to that date, but allows the investor to back out at any time.
What sane businessman would sign such a deal? Probably not one that has better options, but for a long time because the only way of "making it huge" was to go through these record companies.
that's why the internet has been a miraculous invention for the music industry, because it has substantially reduced the cost of entry into the business.
Whit: as a guitarist, keyboard player and sometimes bassist, I can't resist an old joke.
Q: How do you get the lead guitarist to turn down the volume?
A: Put some sheet music in front of him.
Oh, give me a break. It's the circumstances of 'duress' that led the bankruptcy court to hold that the law concerning executory contracts controlled a set of facts that only arguably fell under that rule. Saying the 'duress' had nothing to do with it is like saying [insert recent 5-4 SCOTUS decision here] came out the way it did because the majority's neutral application of the law, and not because of any personal feelings or political beliefs.
The difficulty, when you have an oligarchically-controlled industry like music has been, is when a court tries to come along after the fact and decide what a "fair" return on investment would be. It's probably less than that 100%/50% profit scenario you outline, but greater than a simple 10 or 20% profit, given the high level of risk in figuring out which acts are going to succeed and which won't.
Interesting that there was never sufficient competition, until the internet brought entry barrier costs down to almost zero, to give the bands much leverage. I suspect that's in part because the number of garage bands who THINK they can be the next Stones vastly outnumber the number of garage bands who can ACTUALLY be the next Stones.
Michigan has a three year statute for bringing personal injury actions. Guy got hurt in an accident, and his insurance compnay jerked him around for a year asking for more info but never quite being able to pay. He filed suit and the company claimed a one year contract limit.
The trial court said it was unfair because you must have auto insurance in Michigan to drive and all the companies had the same limit periods as a 'take it, or leave it and don't drive' rule.
The insurers didn't like the doctrine, so they had canceled for all contracts.
Rory, 473 Mich 457:
***In this case, the trial court refused to enforce the one-year contractual limitations period contained in the insurance policy issued to plaintiffs. The trial court did so because it concluded that the one-year limitations provision was "unfair," unreasonable, and an unenforceable adhesion clause.***
We hold, first, that insurance policies are subject to the same contract construction principles that apply to any other species of contract. Second, unless a contract provision violates law or one of the traditional defenses to the enforceability of a contract applies, a court must construe and apply unambiguous contract provisions as written. We reiterate that the judiciary is without authority to modify unambiguous contracts or rebalance the contractual equities struck by the contracting parties because fundamental principles of contract law preclude such subjective post hoc judicial determinations of "reasonableness" as a basis upon which courts may refuse to enforce unambiguous contractual provisions.***
Well it could be worse. You could be like that dude who wrote about 10 comments on whether Obama is a "professor". As far as what's wrong with you, a shrink would probably say it's some kind of borderline autistic spectrum disorder. I'm a bit like that too. My wife finds it endearing.
Q: How do you get him to stop playing entirely?
A: Put notes on the sheet.
I know quite a few professional musicians who absolutely know they'll never be the next Stones. Some actually have contracts with producers and distributors (but not sleazeball RIAA majors). They would much rather perform in relative obscurity making modest money, and even keep day jobs, than sell their firstborn into chattel slavery for a big advance or potentially empty promises of ongoing promotion.
The gift that internet distribution and promotion gives is that they can get a much better return for about the same effort than they could previously. That's where the lower entry costs really count.
Typical comment I've heard: "I made dozens of dollars today".
Hope that helps,
Dana
Hope that helps,
Dana
Record companies do not get performance royalties because there are no performance royalties from sound recordings (except for very limited digital performance royalties from webcasting and satellite radio). When a song gets played on the radio or at a concert, only the writer and publisher get paid.
So for the commenters out there who are criticizing record companies, it's the music publishers who are to blame, at least with respect to the conduct described in David's post.
Did you hear about the drummer who got locked in the bass player's car? He had to break the windows to get out!
I'm a bass player too.
BTW, what did the drummer get on his IQ test???
Drool.
How about personal responsibility? How about honoring the contracts people sign? Why does Petty get a pass? Seems to me that he just had the money to hire a good enough lawyer to get him out of the contract.
Face it, if this was about some middle class schmuck stuck with a huge mortgage he couldn't afford, you'd all be lambasting him as living above his means, and telling us how much he should suffer so as to avoid moral hazard.
Without the internet, I doubt Kimya Dawson would have ever wound up being the featured soundtrack artist on Juno.
If you consider the existence of a "valid contract" to be of some import, then you must admit the legal loophole was also valid.
Your anti-drummer bigotry is misguided. Drummers are almost indispensable to musicians.
"Yes; they're extremely useful as ballast to balance and adjust the trim of small planes and boats, and equally useful as barriers to block the more annoying attentions of fans..."
rfgs wannabe/kibitzer percussionist
That's misleading. Public performance royalties are divided equally between a so-called "publisher's share" and a so-called "songwriter's share," both of which initially belong to the songwriter. Under no circumstances would the contract have divested Petty of more than 100% of the publisher's share, i.e., 50% of the total. The songwriter's share is customarily exempt from even the most onerous contracts with the sleaziest publishers.
Really, how many bluegrass bands have a drummer? And no, DGQ does not count.
And I thought that there were no arguments against the existence of the Internet . . .