Do you think all brick and motor music retail stores are dead? Think again. While mass-music retailers might have gone the way of the dinosaur in recent years, independent record stores are thriving, in part due to the increase in vinyl sales. While the music industry has fallen into a slump with overall sales dropping by 13% in 2010 both the Nielsen Company and Billboard report that vinyl has seen a 14% surge since 2009 and that’s good news for independent record stores.
Saturday marks the fourth annual Record Store Day. What started as a celebration of in-person commerce with 250 participating stores in the United States in 2008 has now grown to a national event celebrating independent record stores with more than 1500 participants. Michael Kurtz, co-founder of Record Store Day as well as president of the independent music store coalition Music Monitor Network, says that Record Store Day “started as a response to all the negative media coverage of record stores closing”. The first official Record Store Day was kicked off in San Francisco on April 19, 2008 by Metallica and since then has been celebrated on the third Saturday of April.
Of course, a big part of Record Store Day is the music – because where would these retailers be without them. Every year Record Store Day offers special editions not sold online or at stores such as Best Buy. This year’s special releases include a covers album by the Foo Fighters, two unreleased soundcheck jams from Phish, Rolling Stones’ “Brown Shugar” 7-inch and a re-release of the 1992 Nirvana EP “Hormoaning”. However the quantities are limited and there’s no guarantee of finding them at all independents either. For hard-core enthusiasts' that’s half the fun, traveling from store to store, taking in events and looking for that special release they’ve been hoping to get their hands on. While not all stores will offer the one-day specials they will celebrate by discounting current merchandise, offering giveaways and even live performances.
Sweat Records in Miami Florida is going all out by throwing a block party – doors open at 10am for Record Store Day exclusives followed by DJ sets at noon and then live performances by indie favorites ArtOfficial, Deaf Poets, Juan Basshead, Lil Daggers and Teepee. The best part for music lovers – the event is free.
So what does your local independent record store do to celebrate the day? Even if it’s nothing extravagant, remember that independent record stores always hide some true gems inside, and the people who work there are always willing to suggest some new music for you.
References
The Record Stores Are All Right
Record Store Day Celebrates the Independent Retailer
Independent Record Stores Gear Up For Anything Goes Record Store Day
Sweatstock and Record Store Day at Sweat Records
4.14.2011
3.31.2011
Eminem Victory - Industry Changing? Only Time Will Tell.
Within the next 60 days a lawsuit that has been circulating for a few years will finally draw to a close, but only after the Supreme Court refused to hear an appeal. The dispute at the center is based on the rate of royalties Marshall Mathers (Eminem) and his producers are entitled to for the sale of online music. The original producers who discovered Eminem (F.B.T. Productions) sued Universal Music Group (UMG) after an audit of accounting records that FBT and Eminem conducted back in 2005. The question at the center of the debate – is a song sold online considered a sale or a license?
Sale or License? Is it really such a big deal? You bet it is – for contracts that predated the digital era; they spelled out smaller royalty payments for music sold in physical form than music licensed. Eminem’s contract for example stipulates that he receive 50% of the royalties for a license, but only 12% for a sale. A federal jury originally ruled in favor of Universal in 2009, but that decision was overturned by the 9th Circuit Court of Appeals in San Francisco last year. Refusal to be heard by the Supreme Court means the decision by the Appeals court stands. In the lawsuit FBT argued that a record companies’ arrangement with digital retailers resembled much more of a license than it did a sale. The appeals court agreed and ruled that downloads from iTunes weren’t purchased, but rather ‘licensed’ to the buyer, stating that, “iTunes downloads (even the DRM-free variety) are encumbered by enough restrictions that they can’t be considered sales at all”.
So what does this mean for the industry? Currently not much. UMG issued a statement in regards to the matter. “The case has always been about one agreement with very unique language. As it has been made clear during this case, the ruling has no bearing on any other recording agreement and does not create any legal precedent”. While that might be true, record labels might find themselves having a harder time tying to renegotiate older contracts, as artists will demand higher royalties or might find themselves fighting similar cases in court. Industry observer’s think that as many as 90% of all contracts signed before 2000 predated the digital era and therefore didn’t incorporate digital downloads as ‘sales’. Only time will tell if this case will have a dramatic impact on the industry. In the meantime, both parties are due back in court within 60 days to discuss damages.
It’s important to note that Eminem himself wasn’t a party to the suit, but the way his contract with FBT was written he stands to earn millions from it.
For those of you interested in reading the original court opinion from the 9th Circuit Court of Appeals you can do so here.
References
Federal Court Sides With Eminem in Royalty Dispute; Record Business Does Not Impode
Eminem Lawsuit May Raise Pay for Older Artists
U.S. Supreme Court Denies Appeal on Eminem’s Music Royalty Dispute
Eminem’s Court Case May Set Music Standard
Sale or License? Is it really such a big deal? You bet it is – for contracts that predated the digital era; they spelled out smaller royalty payments for music sold in physical form than music licensed. Eminem’s contract for example stipulates that he receive 50% of the royalties for a license, but only 12% for a sale. A federal jury originally ruled in favor of Universal in 2009, but that decision was overturned by the 9th Circuit Court of Appeals in San Francisco last year. Refusal to be heard by the Supreme Court means the decision by the Appeals court stands. In the lawsuit FBT argued that a record companies’ arrangement with digital retailers resembled much more of a license than it did a sale. The appeals court agreed and ruled that downloads from iTunes weren’t purchased, but rather ‘licensed’ to the buyer, stating that, “iTunes downloads (even the DRM-free variety) are encumbered by enough restrictions that they can’t be considered sales at all”.
So what does this mean for the industry? Currently not much. UMG issued a statement in regards to the matter. “The case has always been about one agreement with very unique language. As it has been made clear during this case, the ruling has no bearing on any other recording agreement and does not create any legal precedent”. While that might be true, record labels might find themselves having a harder time tying to renegotiate older contracts, as artists will demand higher royalties or might find themselves fighting similar cases in court. Industry observer’s think that as many as 90% of all contracts signed before 2000 predated the digital era and therefore didn’t incorporate digital downloads as ‘sales’. Only time will tell if this case will have a dramatic impact on the industry. In the meantime, both parties are due back in court within 60 days to discuss damages.
It’s important to note that Eminem himself wasn’t a party to the suit, but the way his contract with FBT was written he stands to earn millions from it.
For those of you interested in reading the original court opinion from the 9th Circuit Court of Appeals you can do so here.
References
Federal Court Sides With Eminem in Royalty Dispute; Record Business Does Not Impode
Eminem Lawsuit May Raise Pay for Older Artists
U.S. Supreme Court Denies Appeal on Eminem’s Music Royalty Dispute
Eminem’s Court Case May Set Music Standard
3.23.2011
National Music Publishers Association & Net Neutrality
There are over 86,000 registered trade and professional associations – and for a young professional it is important to network and perhaps join, if not follow, the associations that work on your topic of interest. For me, my passion is in licensing and royalties – the backbone of the music publishing industry, and there’s a trade associate for that.
The National Music Publisher’s Association (NMPA) is the leading trade association in the United States for music publishers. According to the association’s mission statement, “the goal of NMPA is to protect its members’ property rights on the legislative, litigation, and regulatory fronts”. The NMPA also owns and controls the Harry Fox Agency, which is the largest mechanical rights collecting society in the United States.
According to the most recent newsletter sent out by NMPA, one of the initiatives that NMPA is working with is that for ‘net neutrality’. Net Neutrality is the principle that all Internet traffic should be treated equally and that all Internet users should be able to use the Internet without any restrictions by the Internet Service Providers (ISP). The NMPA filed reply comments that stressed that the Federal Communications Commission (FCC) should make it clear that ISPs can use management practices in order to address abuse that is occurring on their networks. They went on to say that ISPs must have the ability to create a warning system and penalties for those violators in order to prevent unlawful activity. The NMPA also believes that any forthcoming regulations should not prohibit the development of new technologies to fight digital theft. The NMPA signed on to a letter written RIAA on what Net Neutrality as it stands today was doing – “The current legal and regulatory regime is not working for America’s creators. Our businesses are being undermined, as are the dreams and careers of songwriters, artists, musicians, studio technicians, and other professionals. That’s why we look forward to working with you . . . to make the distinction between lawful and unlawful relevant in the marketplace…”.
I think it’s important that NMPA has voiced its concerns on this issue. ISP’s should be able to take measures in order to discourage unlawful activity such as copyright infringement. I think it is important that the NMPA align itself with different initiatives and legal matters that affect music publishers. Copyright infringement not only affects songwriters and musicians, but publishers as well because it dwindles down the royalties that publishers are received as well as the amount of licensing opportunities that present itself.
So where do you stand on net neutrality today? Should there be some amendments to the principle? I think so. And in case you’re wondering what kicked off this whole net neutrality debate – well Comcast was accused of blocking BitTorrent, a site that holds a plethora of pirated content, back in 2007.
3.09.2011
TED - Robert Gupta: Music Is Medicine, Music Is Sanity
Can music really be sanity? Robert Gupta believes so as he gives his presentation on TED.
Robert Gupta begins his presentation by telling a story that many are already aware of - that of Nathaniel Anthony Ayers, the Julliard trained basset who's career was cut short due to a battle with schizophrenia, and who's story was portrayed on the big screen in the movie 'The Soloist'. Robert Gupta himself had a chance to meet Nathaniel at Walt Disney concert hall. Shortly after meeting him, he heard word that Nathaniel wanted a violin lesson with him.
Gupta describes the day in which Nathaniel and himself started their first lesson, and the way Nathaniel was acting that day in a way that allows you to visualize the event in your mind. On that day, Gupta describes Nathaniel as having a "manic, glint in his eyes, he was lost". All the while Nathaniel talked about "invisible demons, and smoke, and how someone was poisoning him in his sleep". Gupta admitted that he was scared, yet not for himself. He explained how he was more afraid that if he began speaking to Nathaniel about scales and arpeggios he might ruin Nathaniel's relationship with the violin due to this 'episode'. How do you overcome such an obstacle, during what is supposed to be a violin lesson? The wrong step could send Nathaniel into a raging episode that could cause him to disappear for days, as he was prone to do. Instead of saying a word, Gupta decided to simply pick up the violin and begin playing. Gupta described how as he played, he could see a change in Nathaniel's eyes, how the rage disappeared and transformed into "understanding, curiosity, and grace". Soon afterwards they began talking about music, both with extreme passion. Gupta explained how Nathaniel transformed, almost as if there was two different people in front of him. Nathaniel went from "the paranoid, disturbed man" that had originally stepped in front of him, to a "charming, brilliant Julliard musician".
Gupta's passion in telling his story inspires everyone to believe that music really is medicine. To many people music provides a busy mind with calm. He strives to deliver his message that music gives you an escape form your reality, that it is the reason we make music in the first place. The reality of the expression created is what moves everyone and inspires him or her. He ends his presentation by stating that Nathaniel reminds him why he became a musician in the first place. That escape from our problems is the 'sanity' to which Gupta refers too.
So can music really be mental medicine? After listening to Robert Gupta's passionate encounter with Nathaniel Ayers, I believe it truly can.
If you would like to see the presentation in it's entirety, here's the video:
Robert Gupta begins his presentation by telling a story that many are already aware of - that of Nathaniel Anthony Ayers, the Julliard trained basset who's career was cut short due to a battle with schizophrenia, and who's story was portrayed on the big screen in the movie 'The Soloist'. Robert Gupta himself had a chance to meet Nathaniel at Walt Disney concert hall. Shortly after meeting him, he heard word that Nathaniel wanted a violin lesson with him.
Gupta describes the day in which Nathaniel and himself started their first lesson, and the way Nathaniel was acting that day in a way that allows you to visualize the event in your mind. On that day, Gupta describes Nathaniel as having a "manic, glint in his eyes, he was lost". All the while Nathaniel talked about "invisible demons, and smoke, and how someone was poisoning him in his sleep". Gupta admitted that he was scared, yet not for himself. He explained how he was more afraid that if he began speaking to Nathaniel about scales and arpeggios he might ruin Nathaniel's relationship with the violin due to this 'episode'. How do you overcome such an obstacle, during what is supposed to be a violin lesson? The wrong step could send Nathaniel into a raging episode that could cause him to disappear for days, as he was prone to do. Instead of saying a word, Gupta decided to simply pick up the violin and begin playing. Gupta described how as he played, he could see a change in Nathaniel's eyes, how the rage disappeared and transformed into "understanding, curiosity, and grace". Soon afterwards they began talking about music, both with extreme passion. Gupta explained how Nathaniel transformed, almost as if there was two different people in front of him. Nathaniel went from "the paranoid, disturbed man" that had originally stepped in front of him, to a "charming, brilliant Julliard musician".
Gupta's passion in telling his story inspires everyone to believe that music really is medicine. To many people music provides a busy mind with calm. He strives to deliver his message that music gives you an escape form your reality, that it is the reason we make music in the first place. The reality of the expression created is what moves everyone and inspires him or her. He ends his presentation by stating that Nathaniel reminds him why he became a musician in the first place. That escape from our problems is the 'sanity' to which Gupta refers too.
So can music really be mental medicine? After listening to Robert Gupta's passionate encounter with Nathaniel Ayers, I believe it truly can.
If you would like to see the presentation in it's entirety, here's the video:
2.19.2011
Website Review: Audimated.com
'Love Music. Make Money.’ That’s the slogan behind Audimated.com, a social platform that provides independent musicians and their fans the tools to share, discover, and monetize music. The Audimated model is simple enough – artists create products, fans promote those products and then fans earn commissions on sales. (You can view their marketing video at the end of this post.) The online community and marketplace is a free service. Artists can create profiles on the site so fans can discover their music and help spread the word to others. Artists can share their music and sell albums, singles, ringtones, concert tickets, or just about anything else they can think of that someone would shell out money for. The artist sets the price for everything they offer – and can even offer downloads of their music for free. Fans can create profiles as well and set up a personal “store” promoting their favorite artists. If other users buy an artist’s tunes, concert tickets, or memorabilia from a fan’s store, the artist and the fan can get paid. Artists get to choose whether or not they want to offer commission to the fans that promote their content though, and can set the commission rate to whatever they please. However the commission levels are set up in tiers – and commission is paid up to 5 tiers. It might sound confusing but here’s an example straight from the Audimated website. Let’s assume an artist has set a commission percentage of 10%. If fan 5 were referred by fan 4 who was referred by fan 3 who was referred by fan 2 who was referred by fan 1 then fan 4, 3, 2, and 1 would earn 10%, 5%, 2.5% and 1.25% respectively. In total the artist would pay out a total commission amount of 18.75%. Audimated themselves take a 10% cut of all sales on the site. I thought I’d run the numbers to see how much of a monetary advantage Audimated provides to artists. Assuming you sell a $0.99 single – Audimated takes $0.099 (which I assume they’d round up to $0.10), leaving you with roughly $0.89. If the single was sold to a tier 5 fan, you now have to pay roughly 18.75% in commission, which off of $0.99 single is equivalent to roughly $0.19 cents. That means the artist takes home roughly $0.70 – on a free account! Sounds like a good deal, especially considering that iTunes does not accept music from independent artists unless they go through a distributor, such as TuneCore. However all distributers will charge you a fee, while Audimated is completely free.
That pretty much covers the logistics of the operation – now for the website itself – it’s actually quite simple to navigate your way around. Audimated cuts out all that flashy design that clutters the page and keeps it simple. Sign-up was a breeze, taking me all of 2 minutes to accomplish and in addition to the main service they also offer an Audimated radio where you can hear tracks from artists who are registered as well as a blog that highlights featured artists, and articles that are can help any artist navigate their way in the music industry. My only complaint? Once you get to the blog, you have to look around for a link that’ll take you back to Audimated website. Audimated is still in the Beta version, having launched last summer, so we’ll just have to wait to see what the future holds for them as a company.
Here's the marketing video that also appears on the Audimated home page.
That pretty much covers the logistics of the operation – now for the website itself – it’s actually quite simple to navigate your way around. Audimated cuts out all that flashy design that clutters the page and keeps it simple. Sign-up was a breeze, taking me all of 2 minutes to accomplish and in addition to the main service they also offer an Audimated radio where you can hear tracks from artists who are registered as well as a blog that highlights featured artists, and articles that are can help any artist navigate their way in the music industry. My only complaint? Once you get to the blog, you have to look around for a link that’ll take you back to Audimated website. Audimated is still in the Beta version, having launched last summer, so we’ll just have to wait to see what the future holds for them as a company.
Here's the marketing video that also appears on the Audimated home page.
Save Independent Music: Audimated Tour from Audimated on Vimeo.
2.06.2011
It's Official: Citigroup Takes Control of EMI
After months of speculation about whether EMI could stay afloat on it’s own, would be sold off, or would be seized by Citigroup (Citi), we now have a definite answer.
Citi, which provided £2.6 billion of debt for the 2007 buyout by Guy Hands’ Terra Firma, wrote off most of EMI’s loans after the investment vehicle set up by Terra Firma defaulted. In a debt-for-equity swap, Citi wrote off 65% of EMI’s debt in exchange for full ownership of the company. Citi completed a recapitalization EMI – reducing debt by 63% from £3.4 billion to £1.2 billion, and providing more than £300 million of cash now available to EMI. The new capital structure provides EMI with a strong balance sheet and the ability to invest in and grow its business. Before the restructure EMI was operationally profitable and able to pay the interest on its loan, but struggled to make a dent in the principle. Citi reported that although it retains ownership of the company, it would not interfere with EMI’s operations, which generated $2.64 billion in revenue in its last fiscal year, and posted a $534.9 million profit before interest, taxes, depreciation and amortization.
So what does it mean for EMI? Currently Roger Faxon, EMI’s chief executive, has a bright outlook recently saying, “The recapitalization of EMI by Citi is an extremely positive step for the company. It has given us one of the most robust balance sheets in the industry with a modest level of debt and substantial liquidity.” EMI further released a statement that said it would “continue delivering on its strategy to maximize value for the artists and songwriters it is dedicated to servicing.” EMI might be continuing operations as usual for the foreseeable future but for how long? The latest acquisition by Citi tees up EMI to be sold again as the US. Bank will more than likely not want to hold the music company for the long term.
The question now is what does the future hold for EMI? It most certainly will be sold off again but it remains to be seen to whom. At this moment all signs point to Warner Music Group. Yet EMI’s remaining debt is large enough that it would still complicate a potential merger with Warner Music Group (WMG), who carries $2.4 billion in debt, including interest payments. The challenge of servicing such a massive debt burden would be further complicated by the question of which debt would be considered senior. Not to mention that Warner Music Group is publicly owned and would have to answer to stockholders. It is possible that WMG could sell its Warner/Chappell publishing catalog and put the proceeds toward a purchase of EMI, either as a whole or for one of it’s arms. A deal involving two of the world’s four largest record companies could face regulatory hurdles, much like those that Universal Music Publishing faced when they acquired BMG publishing. WMG does have it’s mind on some sort of restructure, the company has employed investment bank Goldman Sachs to explore the option of either a sale of Warner or a purchase of EMI.
But if WMG doesn't buy EMI as a whole, it is unlikely that any other media company or private equity firm would do so, inevitably splitting up the fourth largest record company in the world.
References:
Citi, which provided £2.6 billion of debt for the 2007 buyout by Guy Hands’ Terra Firma, wrote off most of EMI’s loans after the investment vehicle set up by Terra Firma defaulted. In a debt-for-equity swap, Citi wrote off 65% of EMI’s debt in exchange for full ownership of the company. Citi completed a recapitalization EMI – reducing debt by 63% from £3.4 billion to £1.2 billion, and providing more than £300 million of cash now available to EMI. The new capital structure provides EMI with a strong balance sheet and the ability to invest in and grow its business. Before the restructure EMI was operationally profitable and able to pay the interest on its loan, but struggled to make a dent in the principle. Citi reported that although it retains ownership of the company, it would not interfere with EMI’s operations, which generated $2.64 billion in revenue in its last fiscal year, and posted a $534.9 million profit before interest, taxes, depreciation and amortization.
So what does it mean for EMI? Currently Roger Faxon, EMI’s chief executive, has a bright outlook recently saying, “The recapitalization of EMI by Citi is an extremely positive step for the company. It has given us one of the most robust balance sheets in the industry with a modest level of debt and substantial liquidity.” EMI further released a statement that said it would “continue delivering on its strategy to maximize value for the artists and songwriters it is dedicated to servicing.” EMI might be continuing operations as usual for the foreseeable future but for how long? The latest acquisition by Citi tees up EMI to be sold again as the US. Bank will more than likely not want to hold the music company for the long term.
The question now is what does the future hold for EMI? It most certainly will be sold off again but it remains to be seen to whom. At this moment all signs point to Warner Music Group. Yet EMI’s remaining debt is large enough that it would still complicate a potential merger with Warner Music Group (WMG), who carries $2.4 billion in debt, including interest payments. The challenge of servicing such a massive debt burden would be further complicated by the question of which debt would be considered senior. Not to mention that Warner Music Group is publicly owned and would have to answer to stockholders. It is possible that WMG could sell its Warner/Chappell publishing catalog and put the proceeds toward a purchase of EMI, either as a whole or for one of it’s arms. A deal involving two of the world’s four largest record companies could face regulatory hurdles, much like those that Universal Music Publishing faced when they acquired BMG publishing. WMG does have it’s mind on some sort of restructure, the company has employed investment bank Goldman Sachs to explore the option of either a sale of Warner or a purchase of EMI.
But if WMG doesn't buy EMI as a whole, it is unlikely that any other media company or private equity firm would do so, inevitably splitting up the fourth largest record company in the world.
References:
1.14.2011
First Sale Doctrine: Valid for Promo CDs
Over the years I've managed to pick up my fair share of promo CD's - all with the same minuscule notice printed on the back of the case that stated "This compact disc is the property of the applicable record label and is being provided for promotional use only. Resale is unlawful and may be punishable under federal and state laws." While it never crossed my mind to sell these discs on eBay or by any other means, other people were doing just that. In fact, notably one person, Troy August was making a living by reselling promo CDs online.
The case, which closed a few days ago, originally dates back to 2007 when Troy Augusto was sued by Universal Music Group (UMG) for offering promo CD's for sale on eBay. UMG claimed that it had merely licensed the CDs for Augusto. The label insisted that it had never officially transferred ownership, and therefore Augusto did not "own" the CDs. Augusto on the other hand, had not received these CD's directly from record labels but rather had purchased them from used music stores. He claimed he owned the CDs and under the First Sale Doctrine was entitled to resell them. The First Sale Doctrine restricts a copyright owner from restricting further sales or uses of a work once title has passed. In other words, buyers of CDs (and books and DVDs for that matter), can do with the item as they please once they have purchased it. This includes lending it to a friend, selling it, or even destroying it. Note: It doesn't include making unauthorized copies of the material. In 2008, a U.S. District Court in Los Angeles sided with August, and after UMG appealed the decision as expected, the Ninth Circuit Court of Appeals upheld the lower courts decision last week.
The U.S. District Court in Los Angeles had declared in 2008 that simply because UMG claimed to retain the ownership of the CD didn't mean it virtually did. A federal judge ruled that promo CDs were gifts under federal law, and that the terms in which the promo CDs were given out in were consistent with ownership and not a license. In a license, the receiver has to agree to certain terms and restrictions, which in dealing with promo CDs was not the case. Last week the appeals court took it further, saying that UMG did not maintain control of the CDs once they mailed them out. UMG did not require recipients to agree to the "conditions" it sought to impose with its "not-for-sale" label, and they didn't require the return of the CDs if the recipient did not consent. Unlike software that forces you to agree to a certain amount of terms and conditions before using them, CDs have no such thing. UMG couldn't claim they were entering into a license agreement with the people who received their promo CDs.
Now Troy August, and others like him can continue to resell CD's on eBay and through other mediums. While certainly a victory for the end consumer - how does the music industry profit? Simple --- it doesn't.
For those of you who enjoy all the legal language, much like myself, you can read the entire opinion here.
References:
EFF Wins Landmark Ruling Freeing Promo CDs for Resale
Appeals Court Kills Universal’s Lawsuit Over Re-Selling Promo CDs
Court Tells Universal We Can Resell Our Promo CDs
Appeals court upholds first sale doctrine for promo CDs
The case, which closed a few days ago, originally dates back to 2007 when Troy Augusto was sued by Universal Music Group (UMG) for offering promo CD's for sale on eBay. UMG claimed that it had merely licensed the CDs for Augusto. The label insisted that it had never officially transferred ownership, and therefore Augusto did not "own" the CDs. Augusto on the other hand, had not received these CD's directly from record labels but rather had purchased them from used music stores. He claimed he owned the CDs and under the First Sale Doctrine was entitled to resell them. The First Sale Doctrine restricts a copyright owner from restricting further sales or uses of a work once title has passed. In other words, buyers of CDs (and books and DVDs for that matter), can do with the item as they please once they have purchased it. This includes lending it to a friend, selling it, or even destroying it. Note: It doesn't include making unauthorized copies of the material. In 2008, a U.S. District Court in Los Angeles sided with August, and after UMG appealed the decision as expected, the Ninth Circuit Court of Appeals upheld the lower courts decision last week.
The U.S. District Court in Los Angeles had declared in 2008 that simply because UMG claimed to retain the ownership of the CD didn't mean it virtually did. A federal judge ruled that promo CDs were gifts under federal law, and that the terms in which the promo CDs were given out in were consistent with ownership and not a license. In a license, the receiver has to agree to certain terms and restrictions, which in dealing with promo CDs was not the case. Last week the appeals court took it further, saying that UMG did not maintain control of the CDs once they mailed them out. UMG did not require recipients to agree to the "conditions" it sought to impose with its "not-for-sale" label, and they didn't require the return of the CDs if the recipient did not consent. Unlike software that forces you to agree to a certain amount of terms and conditions before using them, CDs have no such thing. UMG couldn't claim they were entering into a license agreement with the people who received their promo CDs.
Now Troy August, and others like him can continue to resell CD's on eBay and through other mediums. While certainly a victory for the end consumer - how does the music industry profit? Simple --- it doesn't.
For those of you who enjoy all the legal language, much like myself, you can read the entire opinion here.
References:
EFF Wins Landmark Ruling Freeing Promo CDs for Resale
Appeals Court Kills Universal’s Lawsuit Over Re-Selling Promo CDs
Court Tells Universal We Can Resell Our Promo CDs
Appeals court upholds first sale doctrine for promo CDs
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