Changing Contractual Agreements With Music Consumers in the New Music Industry, Complex Copyright Issues Notwithstanding – Lorelei Loveridge
Once upon a time, the world’s greatest music lover walked into a music store (let’s call it the arty independent Blackbyrd Myoozik, which still exists today in Edmonton, AB, Canada), browsed the shelves in search of something inviting, found a CD marked at ‘half price’, walked up to the counter and with last-minute ‘consideration’ of the deal at hand gave the cashier (store owner/retailer as well as artist intermediary/music distributor) a crisp ten-dollar bill in exchange for a beaut of an album called Bakhoor. This is called a bilateral contract where the offeror – in this case, the buyer – promises to give money or consideration in exchange for the offeree’s or seller’s product (Kraus, 2006). Insofar as most music consumers are concerned, this type of contract is a dying entity, on its way to extinction.
According to contract law, the legal agreement here is between consumer and retailer; the consumer makes the offer to buy and the retailer provides the product – a piece of art with a legal copyright belonging to someone, presumably the creator, but possibly an investor such as a record label – in exchange for ‘consideration’ or payment (Gibson and Fraser, 2009;). Gillhams Solicitors LLP (2008) gives a proper definition to this, citing Section 2(1) of the Sale of Goods Act. It is the “sale of goods” otherwise known as a “contract by which the seller transfers or agrees to transfer the property in goods to the buyer for money consideration called the price”.
Because this exchange does not take place off the stage at the end of a night of performance, this contract exists according to the rules of consumer law; the agreement isn’t in writing except by way of a receipt that typically might outline “terms of the sale contract, such as the time of delivery, the price, standard of goods, whether they have been sold subject to a description, whether they may be returned” (Gillhams Solicitors LLP, 2008).
Typically, until it became possible to sample and buy music over the internet from iTunes, Amazon and CD Baby, fans were at the mercy of various “gatekeepers” and music tasters such as “radio DJs/pluggers, music weeklies, in store promotions, and friends’ recommendations” to help them learn about new music (Jennings, 2004). Fans could not easily sample the music they were thinking to buy, and this became and is the focal point of anger directed against record labels and other gatekeepers in the music industry including retailers. Scibora (n.d.) states the problem:
Today, most traditional music stores serve a single-purpose: to make them convenient for the music shopper to find a specific CD and purchase it. They are not designed to cultivate “shopping.” In fact, once music shoppers are inside a traditional music store, they see thousands of music CDs but they cannot experience them. Only being able to sample a few newly released CDs that they have most likely already heard further discourages shoppers. Also, they are subjected to overhead music without knowing what CD is playing. This environment does not facilitate shopping.
Furthermore, fans were bound by the terms of the contract, in accordance with the limitations, rights and responsibilities afforded to consumers under the Trade Practices Act applicable in their jurisdiction or country. In Canada, it is the Trade Practices Act, R.S.N.L. 1990, c. T-7 (Queen’s Printer, 2005). The contractual condition often was that music could not be returned once the packaging was removed because listeners could copy the music, return it, and the sale could be lost. There was no other warranty or guarantee for music consumers to get their money back if they didn’t like the album.
So, essentially, the legal idea of “caveat emptor” or “Let the buyer beware” (Cornell University Law School) was and has been the standard of care applied to music purchasers. Gibson and Fraser (2009) highlight the two circumstances proving this application of common law unjust: (1) when there is no reasonable opportunity for inspection, which has arguably been the case for music consumers when it comes to sampling the contents inside the jewel case, and (2) reliance upon an expert or someone with special knowledge was needed, which is irrelevant here. These are the contractual conditions of sale that music fans as consumers have had to live with for a long time.
Until the advent of the peer to peer (P2P) file-sharing network Napster, which began to reverse the roles in 1999 (Reidel, 2006). Then it became, for many artists and content owners who are losing income through sales and performances, “caveat venditor” or “seller beware”. Fans adept with computers today trade digitized music over the internet en masse and ‘for free’, and it is done in defiance of copyright laws worldwide that, through common and statutory law, give legal protection to “the authors of ‘original works of authorship,’ including literary, dramatic, musical, artistic, and certain other intellectual works” (Gordon, 2005, p. 1). Not the intent of this paper to dwell solely on the issues of copyright law, it is nevertheless important to state that copyright laws were established to give the owner of a copyright the exclusive right to do and authorize others to copy; create from; distribute by sale or other transfer of ownership, or by renting, lending, or leasing; and perform the work publicly by means of a digital audio transmission – according to Section 106 of the 1976 Copyright Act in the U.S.
Cutler’s legal classic on copyright law (1905) encapsulates the lack of consideration of copyright and its worth to the artist by those who today could fall into the category of illegally downloading music in the current statutory climate:
“There is a certain class of persons, who look upon the protection which the law throws around the offspring of a man’s brain as an unjust monopoly, an invasion of the liberty of the subject. These would-be lavish givers of other people’s property are more numerous and in some cases more influential, than one would suppose in an enlightened age…The attacks of…assailants of the rights of property are suicidal and would result in the slaughter of the bird which lays the golden eggs. Instead of getting cheap music of a good class, the abettors of the pirates will end by stopping production of all works of genius and even of popular ones…This argument is too familiar to need development” (p. 1).
Cutler speaks, perhaps, to what Lahore (n.d.) describes as the moral rights of the copyright holder: “Only individuals who are ‘authors’ have moral rights and these rights cannot be assigned” (p. 48,099). But this has mattered not for a good number of music lovers.
Illegal downloading – where there is no attempt to create a legally enforceable agreement or contract between the fan and owner or rights-imbued distributor of the music – has disrupted the flow of revenues, badly and in all facets of the music industry (Burkart, 2009). And this has prompted record industry associations like the RIAA in the US, IFPA internationally and CRIA in Canada to sue downloaders for theft of copyright protected music. Reidel states: “Starting in 2000, the Recording Industry Association of America (RIAA) spearheaded a series of lawsuits…Their legal ground seemed unshakeable, their argument unquestionable: facilitating the free trade of “illicit” music files amounted to a violation of copyright law. In fact, at Napster’s peak in February 2001, it amounted to over 2.79 billion violations, the approximate number of files traded during that month” (Reidel, 2006; pcmag.com, 2009). The genie was out of the bottle and several lawsuits later, two of the biggest to draw attention on the world stage are the case involving Pirate Bay and a single woman in the US fighting the RIAA and Capitol Records.
In brief and steering towards the argument of the outcomes of such cases on the terms of agreement and contract (or lack of/changing terms and contract) between fans and content providers and artist creators, the Stockholm District Court in Sweden judged in favor of upholding the rights of “content providers and copyright owners whose material is on the site” Barraclough, 2009). The four owners of Pirate Bay have been sentenced to a year in prison for “complicity in breach of the Copyright Act” (TT/The Local, 2009) while $7.6 million in cash and newly issued shares in Global Gaming Factory X, the company purchasing Pirate Bay, will pay for the damages owed for copyright infringement in this case (Barraclough, 2009). The new company’s CEO has stated that the company will be forced by law to change its business model to satisfy “the requirements and needs of all parties, content providers, broadband operators, end users and the judiciary. Content providers and creators need to control their own content and get paid for it. File downloaders need faster downloads and better quality” (Barraclough, 2009). Sweden’s Court of Appeal has ruled that the case cannot be reheard at the Stockholm District Court, but a newly elected member of the European Parliament, a member of the newly established Pirate Party in Sweden, has stated that the appeals will continue through legislation (TT/The Local, 2009).
Not surprisingly, fans are outraged by this. In an attempt to comfort or appease, though there is no contract here either because it is not an offer and there is no legally enforceable contract with any kind of consideration or payment in exchange for this promise, the founders of Pirate Bay have stated: “Everyone indeed can be the owner of Pirate Bay now” (Barraclough, 2009). It is an empty promise, thus far, at least until fans can purchase shares of the company; and that would be payment in consideration for the ownership of an undefined product – will it be music or more? – and/or rights to a particular service music fans do not yet understand the conditions of. It’s not hard to see why the anger exists.
The other case that has recently highlighted the intensity of the conflict over downloading and the protection of copyright is the case between the Record Industry Association of America (RIAA) and Capitol Records against Jamie Thomas-Rassett. The judgement was for the plaintiff and the defendant has been ordered to pay $1.92 million in damages for downloading 24 songs, then making those songs available through P2P provider Kazaa to “millions on the Internet”, according to the prosecuting lawyer (AFP, 2009). While the judgement is logical on the one hand, based on the facts of the case (and the woman had been convicted of the same copyright crime and let off from what was deemed a severe sentence then (AFP), according to lovers of the free download, the conviction and severity of sentence both stink.
Kusek and Leonhard (2005) are two music futurists who have put forth the idea of treating music like water, like a utility – that it should be freely downloadable and paid for by the consumer through ISP providers who charge a fee for unlimited downloads. The Songwriters Association of Canada (SAC) has explicitly outlined a similar view in “A Proposal for the Monetization for the File Sharing of Music From the Songwriters and Recording Artists of Canada” and in this living, evolving document first established in 2007 states in rough the terms for a new agreement among the ISP’s, consumers, and creators of music (2009).
Specifically, the SAC Proposal is for “an amendment to the Copyright Act which would establish a new right: The Right to Remuneration for Music File Sharing”, and the most recent amendments to the proposal itself indicate debate among participant communities as to whether they would choose to opt in or out of the idea that consumers pay a voluntary licensing fee to ISP users for the right to freely download music made available by content providers who opt into the system. The terms for exclusion are made clear and, no doubt, this is a proposal engaged in a process of dialogue with various bodies as evidenced by the SAC’s statement: “[W]e’ve received a great deal of input from consumer advocates, music industry colleagues, legal experts, MPs, Government officials etc. (2009)”.
The question is: will fans agree to contract with ISP’s for the provision of a service (the means to download) and product (music provided for distribution), and will all the other parties feel compelled by the list of benefits listed by the SAC? There are compelling arguments for the consumer: “[g]uilt free low-cost access” to tens of millions of songs, minus the hassle of worrying about viruses. The creator obviously gets paid via a low-cost distribution system, and that bodes well for sustainability in the future of art-making. The rights owner’s value of catalogue increases and this enables continued support in the development of the artist/s affiliated with the rights owner, if separate entities. ISP would stand to reduce costs and make more money through the streamlining of services, sharing of income with artists, and other business models involving advertising to be determined.
It would seem to be a good solution for all, a win-win. But artists have already discovered that it’s not necessarily on the artists’ terms that contracts with fans are to be won, as is evidenced in one case by the reaction of many to an Iron Maiden album cover: “Shortly after revealing what the band claims to be the cover art for its new album, Dance Of Death, fans flooded the official Iron Maiden message board with complaints” because they didn’t believe the artwork was by the original artist, as expected, and this was a condition they were going to have to accept before purchasing the album upon its release (Johnson, 2003). Now, if the legalities of the terms in contract law could be put aside for a moment…
Perhaps within the spirit of the legal definition of the word ‘breach’, referring to the failure of a party “to perform their obligations as agreed” (Gibson and Fraser, 2009, p. 403), these fans considered it a breach of trust by the band because it was believed the artwork was not up to standard. A ‘warranty’ or guarantee as a condition of the future sale was breached (ie. a different artist had created a sub-standard design). Or perhaps only a ‘partial performance’ was delivered, and this was a ‘variation from the unwritten terms of the contract’ with the band. Whatever the case, fans could but were unlikely to choose to refrain from purchasing the CD. In essence, they felt damaged, and Iron Maiden refused to do anything to ‘mitigate’ or minimize/control the ‘damage’. Fans were without recourse for ‘damages’ – though possibly the insistence upon a lower price could be construed as bargaining on behalf of the band for the mitigation of its future ‘damages’ or loss of fan support and income, in a sense.
It is but one scenario that serves only to highlight the fact that a band that chooses to give its fans input into the creative process actually could be seen as engaging its fans in the right to an ‘equitable remedy’. Posting artwork up for a fan to vote upon is akin to allowing a fan to help determine the terms for the final contract or purchase. Take it one step further and companies like Slice the Pie (slicethepie.com) engage fans in a legally binding contract with terms (certainly the delivery of a CD at the end of the production process, and within a specified time frame) that gives both parties more value. The fans invest in the album and, if they choose, have input into its creative development in return for pre-purchased right to the product and input into the product.
This appears to be a slightly better solution in the short term than suing fans for loving music while ignoring the demands of the marketplace. While the efforts of the Songwriters Association of Canada and the like are likely to lead to changing legislation, improving a situation where there is a significant lack of agreement and ongoing theft or, at the minimum, ‘breach of contract’ between the artist and consumers in the digital domain (and hopefully that will provide a positive economic spinoff to a suffering industry as a whole), the final may well rest in the voices of experienced music managers:
“Almost all cases concerning the enforceability of music-industry agreements are fought on the basis of reasonableness between the parties…It’s in the public interest that contracts containing restrictions which are reasonable between the parties should thus be enforceable (Music Managers Forum, 2003, p. 149).
“…keep an open mind, investigate the alternatives and figure out how…artists receive payment for their work from the population of the world. It’s not music that’s in trouble – there’s no alternative, everyone will still listen; it’s just the business model that is changing” (p. 14).
While there are many alternative ideas regarding the monetization of music, which involve everything from allowing music to be ‘freely’ distributed according to certain terms under Creative Commons licenses (Flew, 2005) that “mark creative work with the freedom the creator wants it to carry, so others can share, remix, use commercially, or any combination thereof” (CreativeCommons.org, 2009), in the end it is the goal of artists and the creative music industry to continue to foster the relationship with fans most especially to ensure sustainability through changing times.
Changing the terms of agreement in contracts by word or deed isn’t a choice. It’s a necessity. Changing the means by which to view ‘contractual’ breaches in the course of copyright reform isn’t a choice. Both of these approaches are needed, across society and one fan at a time, to change hearts and minds regarding the value of music and its place in our world today. Copyright protection, while critical to slowing down the chaos that has ensued since the advent of the digital musical file and its ability to be downloaded and shared without tracking, is not enough to stop the millions if not billions of music fans worldwide who share files illegally, and nor are legislators and various facets of the entertainment industry in agreement as to how best to approach copyright reform. What has happened in Sweden with Pirate Bay exemplifies the fact that even the fans are preparing for the battle of copyright reform at the legislative level, and that signals the need to look at alternatives to a market that is speaking and has spoken.
Essentially, sustainability in the future for artists and those in the music industry living from the creations of artists is about moving beyond the argument of copyright to embracing new contracts and agreements with fans. The relationship is about the artist and the fan, and that relationship has become more direct than ever. It is up to artists and content providers – ie. the new record labels – to engage with fans and change the terms of agreement. This will ultimately result in the security of contract that artists are looking for. This is what will invoke the exchange of money for music or merchandise or a live concert experience.
References
References
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