In the last two editions of this blog, Digital Jukebox Music Licensing 101 and 102, I covered the three main kinds of licensing required for a digital jukebox, as well as the specialty licenses required for Karaoke and Video Jukeboxes.  I also delved into digital jukebox MFN’s and the JLO.  If it’s been awhile since you read those posts, or you are new to this blog, I encourage you to go back and read those now, so this next piece makes more sense.  Now we get to answer one of the most common questions about digital jukeboxes: why are some artists not available?

With digital jukeboxes excepted out of compulsory licenses for mechanical rights and the Jukebox License Agreement, digital jukebox companies are left having to manually clear all their music manually.  This means contracts with major and independent record labels, PRO’s and thousands of publishers. And with no laws or rules governing these business arrangements, each entity can hold out for whatever they believe is a fair deal. 

Significant Holdouts

Most music is licensed from the labels and the publishers.  There is efficiency in a model that allows a network to license thousands of artists and hundreds of thousands of songs under a single agreement.  While the deals tend to require large up-front advances, many times these advance payments are recoupable, meaning that the “per-play” license fees are set off against the advance.  So if a network pays $X million to Label “A” no more payments would be made to Label “A” until the per-play fees exceeded the amount of the advance.  This arrangement guarantees the label and publisher that they will get a minimum amount in license fees over the term of the contract, making the deal worth their while. 

However, some bands retain the rights to their recordings or publishing, and band management can negotiate their deals directly.  Sometimes these bands demand advances that are nowhere close to recoupable.  Since royalties are often based upon a per-play rate, large advances for small catalogues are unlikely to be recouped.  Which means it can be economically unfeasible to do these types of deals in the nascent days of a network’s growth. As networks grow, these deals become more feasible.  This is why you see new artists added to networks over time.  And why only Touchtunes has The Beatles.  They are the only network large enough to justify what had to be a significant advance. 

Reclaiming Their Copyrights

A little known impact of the 1978 Copyright Law is that under certain instances, beginning in 2012, performers will be able to reclaim the rights to their recordings from record labels, and songwriters will be able to reclaim ownership of their songs from publishers.  According to the New York Times:

When copyright law was revised in the mid-1970s, musicians, like creators of other works of art, were granted “termination rights,” which allow them to regain control of their work after 35 years, so long as they apply at least two years in advance. Recordings from 1978 are the first to fall under the purview of the law, but in a matter of months, hits from 1979, like “The Long Run” by the Eagles and “Bad Girls” by Donna Summer, will be in the same situation — and then, as the calendar advances, every other master recording once it reaches the 35-year mark.

The provision also permits songwriters to reclaim ownership of qualifying songs. Bob Dylan has already filed to regain some of his compositions, as have other rock, pop and country performers like Tom Petty, Bryan Adams, Loretta Lynn, Kris Kristofferson, Tom Waits and Charlie Daniels, according to records on file at the United States Copyright Office.

This stands to have a significant impact on the digital jukebox providers, as more and more artists potentially reclaim the ownership of their works, more and more individual deals will need to be struck.  As noted above, sometimes these deals are not economically feasible from an advance payment perspective.  And they are always burdensome from a time and effort perspective.  So as hard as licensing music for jukeboxes is today, it looks like it’s only going to get harder. 

Read More:

Record Industry Braces for Artists’ Battles Over Song Rights – NY Times

Echos, Insights for Independent Artists – Music Publishing 101

History of the Jukebox Licensing Office (JLO)

Rightsflow – Compulsory Licensing