Who Pays the Songwriter Under First Sale Defense?

by Tamera H. Bennett
August 20, 2007

Universal Music Group sued Troy Augusto for copyright infringement based upon Mr. Augusto’s offering for sale and selling of musical compact discs marked “Promo Only.” Mr. August secures promotional compact discs from various sources and then sells them on eBay.

Pursuant to 17 U.S.C. § 109(a), musical compact discs/tapes/albums can be sold or otherwise disposed of by the party in possession of the compact disc, without authority from the copyright owner. The big question raised in the lawsuit and other articles reporting the lawsuit revolves around the marking of the compact discs as Promo Only along with other legends regarding not selling the CD’s overriding the language of § 109(a).

Here is my question for the day that has yet to be addressed: Who pays the artist, producer, music publisher/songwriter and yes even the record label when “promo only” copies are sold?

Assume I am a music publisher. I will issue a license to Universal for one of their artists to record one of my songs. I will include language in the license similar to the following:

…provided, however, that no such royalty shall be payable with respect to promotional Phonorecords sent to disc jockeys, reviewers, and the like, which are clearly marked “Promotional Records Not For Sale” and which are not being distributed by Licensee for resale.

In my scenario, as the publisher I consent to a certain number of promo copies being manufactured and distributed and agree not to collect a royalty for those copies.

Suddenly, with the proliferation of online retailers such as Augusto, more and more royalty free recordings are moving in the marketplace without payment to the songwriter, publisher, artist, producer and label.

What is the solution? I am not sure. As much as I would like to see Universal prevail in this case and have a court announce Augusto’s action constitute copyright infringement, I do not think that is going to happen.

With a huge percentage of record labels providing digital content to radio stations and promoters, I wonder exactly how many promo copies are even pressed these days. Maybe this issue will resolve itself as fewer and fewer actual compact discs are made.

About Tamera Bennett

Tamera Bennett, nicknamed by her clients as the IP quarterback, develops strategies to protect and leverage each client's intellectual property. She works closely with her clients to implement customized brand management programs. Her clients range from rock star to leadership coach and financial guru to custom motorcycle designer. Prepared with an undergraduate degree in Recording Industry Studies and a law degree from Texas Wesleyan University School of Law, Tamera represents clients throughout Texas and Tennessee in entertainment, trademark and copyright law related matters View all posts by Tamera Bennett

9 responses to “Who Pays the Songwriter Under First Sale Defense?

  • Universal Music Group v. Augusto - Complaint and Answer with Counterclaim « Copywrite

    [...] the issue of first sale, Tamera H. Bennett asks Who Pays the Songwriter Under First Sale Defense? Here is my question for the day that has yet to be addressed: Who pays the artist, producer, music [...]

  • Gordon Firemark

    Tamera,

    you raise a good question, but the total number of promo copies is small relative to the number of copies sold by the label.

    In negotiating record contracts, it’s theoretically possible to place limits on the number of promo copies, but in reality, why would doing so be necessary. The label is in the business of selling records, not giving them away.

    This all strikes me as a tempest in a teapot.

  • Jonathan Bailey

    To answer the question in the topic of the article, no one. If I buy a book and then resell it to a used bookstore, that’s a legitimate usage of my book and protected under the first sale doctrine.

    The artist, publisher, no one gets paid for that sale. It’s the same as if I had sold my hairbrush, monitor, house or any other physical good. I can sell that copy, my copy, to whom I want.

    The question in this case is whether or not the person who received the promotional CD obtained the right to sell it. Does a note saying that a CD is “not for sale” effectively terminate first sale rights, that is the question here that I see.

    But the question on the table is who gets paid during a first sale defense, the answer is no one.

    It’s that simple.

  • Tamera Bennett

    Great feedback.

    I agree, the law is clear that no royalty is paid on resell of the sound recording.

    My concerns revolve around, Augusto (and others) making money off the resell when no royalty was ever paid on the first distribution.

    Where I was going with the question was focused on the fact that no one is getting paid a royalty on the promo copy.

  • Paula

    Speaking from the viewpoint of someone who used to be both a major record buyer ($25 million budget) and on the label end doing sales, I think you have to regard promos, whether it’s cd’s or memorabilia, as a gift for the recipient to do whatever they wish, as long as they do not reproduce copies and sell them, which certainly goes on, even within the labels themselves. Sometimes the labels even sanction it tacitly under the guise of street promotion, allowing an underpaid or commission-only employee to make and distribute compilations in order to spread interest. I reported one such transgression at the office I managed to the particular label whose employee was engaged in the activity, and they did nothing about it.

    From a practical standpoint, those in the buying or radio end of the business before internet received such copious amounts of promo records and tapes that it would have taken a warehouse to hold them all for each individual.

    Whether you sell them or give them away, you are still theoretically preventing a potential sale of that CD. So even not selling them but doing anything other than destroying them is technically taking food out of the mouths of recording artists and label executives. But that is the price they chose to pay by using their own product as a marketing tool.

    With internet downloads of snippets being an acceptable way to sample music, I would recommend labels severely limit giving away not only CDs but entire songs on the download. However, if you want radio to play your music or you want what few record stores have survived to play your music in the store, you MUST provide them with a hard copy.

    The main problem with promos isn’t the resale of them postrelease but the piracy of them before the release date, which has become a much greater problem postinternet. I think it’s insane to release whole product to anyone before release date. But again, this is done to create a buzz so that hopefully it comes out of the box with a bang. It’s the labels’ old-school method of choice, and they are slow to change. They will pay the consequences, occasionally finding their product for sale over the internet before its release date.

    One thing that anyone outside the industry doesn’t realize and that is very important to remember is that back when cassettes first came out, there was a huge amount of worry by the industry because now we have a reproduceable media. The happy reality was that people making copies of tapes to give their friends caused a quantum increase in the number of people buying music and the amount and variety of music they bought. Why? Because they heard many more recordings than they would have otherwise, because radio only plays a miniscule fraction of available releases. Releasing a reproduceable medium (cassettes) turned out to be the single biggest boon to the record industry, culminating in the explosion of what will probably go down as the music renaissance of all time.

    Yes, internet burning is a bit too easy, and it has cut into profits, but a certain amount is VERY good for business. And I think worrying about promos floating around that are post-release is a nonissue.

  • Jim Satcher

    I would like to reproduce a radio show that I did in Vietnam and record it on a CD to sell. The music would come from 45 rpm vinyl records that I purchased in the past. Is Tamera Bennett correct when she said on August 21, 2007, “The law is clear that no royalty is paid on resell of the sound recording? Thank you.

  • ipandentertainmentlaw

    In response to Jim’s question …. Your situation is different from the one discussed in the blog entry. The blog was discussing payment to songwriters for the resale of promotional copies of CD’s. It sounds like you would like to create your on CD and offer it for sell. This is not legal advice, but you will most likely need a license for each master recording used as well as a mechanical license for each song used.

    Tamera Bennett

    • Kyle Harris

      As a veteran musician AND record label weasel, I have a little insight on this subject. The label takes the promo copies they print OUT of the artists royalties from the label side. The discs are tagged “Promo Only” and some go so far as to have (paraphrase) “property of _______ Records and must be returned upon demand”. The actual practice of any of that last part is just unheard of in the real world.

      That said, it’s something the artist has ended up paying for and are “gifts” to the world at large. Bands even give out copies of their own records all the time. It’s part of spreading the music to people who will (not these days) potentially buy it or (these days) come see the show.

      When someone has acquired a promo only CD, they are either tied into the business and has listened to and will speak of the band or they have purchased it from someone who has. Royalties do not take place here. It’s a secondary, used, sale of an item.

      Do I wish that Promo CDs were reported as sales when they are sold? Yes. Is it ever going to happen? Nope. Does it really matter any more with the direction of music labels and CDs being more and more irrelevant? Nope.

      To counter this case, all anyone would have to do is site Radiohead, Oasis, Jamiroquai, and others, who are now GIVING AWAY their new recordings for no cost whatsoever and are seeing HUGE responses in terms of show revenue and publicity. When the artists don’t value the revenue stream of a media medium, then no one else will either.

  • Universal v. Augusto First Sale Under Copyright Act Appeal «

    [...] I blogged here about this case when the trial court ruled in favored of the defendant. [...]

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