United Colours of Africa

Know How in the Knowledge Economy


Nick Matzukis Interview: Record labels have had to change because it used to be that artists would tour so that they could sell records where the money was and that dynamic has changed because of piracy and the internet decline of sales and physical projects to downloads and streaming. Because of all those changes, now, the artist makes records so that he can tour where the real money is. The whole thing has done a complete turn-around. This change has been going on for well over 74 years.

In the 70s the record label was king because that is where the money was in the music industry despite the home taping and CDR's. That never killed the music industry what has had a dramatic effect is the internet. Because there was peer to peer file sharing – napster. All of a sudden you could get music for free, maybe in a weaker compressed MP3 format. Even the MP3 is dead now. Now it is flac and acc and new formats that give you high quality downloads and streaming off the internet. That is what has really changed the industry. The labels that fought the internet and refused to accept that it was the way of the future, ended up dying like EMI. Those that embraced it, even the notion of free music have survived but have had to change the way they do business completely.

We were one of the last markets to get rid of the cassette tape in the world. South Africans love stuff. The cassette tape was big in the township and the urban markets and then the CD took over and still at last count 52% of recorded music purchases in South Africa are still physical. 2016, the year before it was 70%. It is declining rapidly but weirdly we are still a market where physical is important. In the US and UK, four years ago, digital overtook physical. Physical is still important in SA even though Look and Listen is closing down, Musica are consolidating branches left right and centre. We still like physical product in SA even though the internet is taking over. When I say the internet in the rest of the world when the anti-piracy campaigns started, the king became itunes, it became the biggest reseller of legal downloads in the world. The anti-piracy campaigns were very strong in America. There was the Joel Tannenbaum case and the Jeremy Rassick case where the recording industry in America took a single mother of two kids in Minnesota to court and she ended up with a judgement of $700k against her. And the same thing for Joel Tannenbaum. They made examples of these people but it made the recording industry look bad. It gave bad PR. A whole lot of other approaches, graduated response was sending letters to people who were downloading, giving the problem over to the digital service providers rather than the publishers. The problem with that is that it hasn't been entirely effective because in America they have ‘safe-harbour' rules. That means that somebody like youtube can say if we don't know about the infringement we are not liable, which in fact is technically correct. It is a problem for the industry as a whole. Where internet is a huge threat to artists, it is also a huge opportunity because for the first time in history the artist doesn't have to go through a label to get his recordings to a consumer. The composer doesn't have to go through a publisher to get his compositions exposed to artists who might want to record. He doesn't even need a manager anymore. There are online artist management tools, there are introductory services like taxi.com which get you in touch with artists who might want to record your music or people who might want to book you. You can do everything yourself with the internet, including self-management. It means for the first time in history the artist has a choice. He has another route he can go, the DIY route. This has been the biggest change that the internet has made to the music industry."

The whole thing has come full circle where the labels don't look at artists who don't have significant internet presence, how many likes on facebook, twitter followers and soundcloud. The labels have embraced the internet as a distribution tool. It is an interesting time. The internet is an enemy because of piracy but it is also our greatest friend. If artists understand that and how to use it, they don't ever need to sign to a label, publisher or manager. But, once they get a gravitas and followers they will need an infrastructure to handle the various copyrights and the touring and management. Either they set up their own label or sign to a label from a position of strength because now they have bargaining power with success under their belt. They are coming with knowledge, experience, achievement and income. The DIY thing can and does work. Everything the label did for you, including financing you can do it yourself. Because on internet, now you have crowd funding.

Started in 1997 by the band Marillion, Mark Kelly. He already had 50k email addresses of fans. When they were dumped by their label he asked his fans to pre-purchase Marillion's next album. 13k fans pre-purchased the album 18 months in advance. Now we have Thundafund, Kickstarter, Indigogo and Pledge music and all of that. Marillion started that. Their latest album, Fear was crowd-funded again on Pledge music. Since then that band has never looked back. Even financing you can go to the internet for if you have enough followers. Everything, PR, marketing, distribution – you can get CD's distributed by CD baby.

So, I am not saying it is the death of the record labels. Record labels have had to change in terms of their attitude to the internet. They are tending towards 360 degree deals where they are not only your label but they control your compositions which means they are your publisher and they also are your manager which means they control your touring as well. It can be good for some artists and extremely bad for others. It depends on the competency of the artist and whether that label understands management and publishing and recordings.

At the end of the day it all comes down to what is in your contract. It is not actually the labels fault if you sign the wrong contract. It is your fault because you didn't take the time to seek legal advice or try and understand the stuff. Educate yourself. And if you do that you know what you are negotiating and if you are getting screwed at least you know it. I am not anti-label. I am anti bad record contract. I have seen label contracts slowly morphing over the years because guys that I teach here are signing contracts and not just signing the first thing that is put in front of them. They are saying take out the cross-collateralisation clause which means they can pay themselves back off any album even if successful. But, you can negotiate that if you understand the swings and the roundabouts. You can look at the retention clause, you can ask for your copyrights back – anything is negotiable.

There is no such thing as standard anymore – this industry has changed too much. If any industry has been subject to metamorphosis it is the music business. Not even travel has been affected as much as music. You can physically see the change in the music industry – record stores are going, except for the resurgence of vinyl which is an anomalie. The music entertainment and film business have been dramatically affected by the internet.

The industry is changing every day. We have gone from physical product sales which had a massive jump because of the CD to downloads worldwide largely itunes. Downloads are declining and streaming is taking over. For the first time in 14 years the recording industry has shown growth for two years in a row. Last year 5.9% according to the IFPI report. 2016 and 17 because streaming is taking over and people are prepared to pay their 9 dollars a month to have access to 30 million copyrights. But, South Africa is slightly different because internet is expensive, data is expensive, the cellphone companies have ripped the backside out of it. We have some of the most expensive data charges in the world. But we are starting to see them come down. That as much as the laws has stopped us keeping up with the rest of the world. And that is why physical product was held on for so long. Because data is expensive. Not everyone can be online all the time. Pipes are getting thicker and costs are coming down. Now we are starting to see fibre to the homes everywhere. But in the townships not so much. That needs to be fixed. Various municipalities are making noises but is it good enough. Only when everyone has internet as in the case of America, only then will we absolutely follow those American trends."

This essentially is the music industry. There is a copyright in the composition when the song is written. There is a copyright in the recording when it is recorded. And these are the various income streams that come from the sources of copyright. Composition copyright gives you performance royalties from SAMRO every time your composition is performed in public. Mechanical royalties from CAPASSO every time your composition is copied in any form. Synch royalties when it is put onto a movie. Reprographic when the music or lyrics are put onto a score-sheet or screen for someone to sing. And then there is the copyright in the recording. Recording and artists royalties when you signed to a label and you get your 15% ppd wholesale or whatever it is. Needletime is the most contentious issue in the music industry. Basically it is the right to earn every time your recording is used. The composer and the record label both have a right to be paid. In our law the labels had to do a deal with the performers to share the royalty with them and there was a big fight in court about that because the labels didn't want to share the money with the performers. What you need is one collecting society with the label chamber and performers chamber sharing the money. This law was brought in in 2002, the regulations in 2006 and the collecting society set up in 2007. This is potentially as big an income stream as SAMRO which is half a billion rand a year performance royalties. SAMPRA should be anything between 300 and 400 million per year, if they all pay. Some broadcasters, retailors, clubs and pubs have paid but the big one the SABC have not paid yet.

Producers royalties where they take 4% of sales and he is either hired by the label or the artists depending on what the contract looks like. Synchronisation royalties are on an already recorded work where the two copyright holders need to give permission. Many publishers re-record so they keep the money. But it is considered bad form.

And then there is everything else that is not copyrighted, performance fees, touring, merchandising, sessions and appearances, corporate sponsorship and endorsement and once off producers fees.

Either way you need to understand the industry and the business. And if you do you might succeed and if you don't you absolutely won't succeed.

One of the most respected executives in the collecting societies is Nothando Mogogo in charge of Capasso. She is one of the most powerful people in the music industry. Abe Sibiya and Sibongile Khumalo in charge of SAMRO. RISA the big labels association is headed up by Nhlanhla Sibisi. There has been transformation. AIRCO would say that transformation hasn't been fast enough, run by Dola Malamane and Mandla Maseko. They are champions of the rural artist. Many major labels are run by white people. Some of the major publishing houses are not. In terms of racial transformation it is happening. More important than who is at the top is who is succeeding at the bottom? Are those rural artists. No because they don't understand this stuff. Who is giving them this information? CASO Concorde Nkabinde is a good example. They run a yearly series of workshops in the heart of the townships. SAMRO runs a series of workshops, CAPASSO has done pretty well giving free information to attendees."

We have possibly the most fragmented music industry in the world. I interviewed Patrick Shamley from the IFPI. The IFPI is the International Federation Phonogram Institute. They are the labels assocciations, we have RISA, America has RIAA, England has BPI. All label assocciations report into an international body called IFPI. They are a powerful organisation. They were out here for a WIPO conference. He said we have the most fragmented record industry with people fighting here left right and center. Airco fighting with RISA. There are various collecting societies being set up for the same right. You should have one society for one right and not two or three as we have had at some points. We used to have SARREL, NORM and SAMRO mechanicals all fighting it out for the mechanical right. Why because SARREL were dishonest and eventually liquidated by one of their members, Colin Shapiro. Thankfully sanity prevailed and they merged to form CAPASSO which is now a legitimate and properly run mechanical rights society. Now with needletime we have SAMPRA and IMPRO which has been set up by the independent labels. There should be one collecting society. It is right to have a major label association like RISA and independent association like AIRCO but it is not right that they should be at loggerheads with each other.

We haven't had a proper musicians union in South Africa for a long time. We had CWUSA the Creative Workers Union of South Africa which included musicians. We are almost 2% of the world's music market. We should have a musicians union. Thankfully that was rectified last year when MASA was formed, the musicians association of South Africa. And they are present. And that is good.

IMPRA should have a seat on the labels chamber at SAMPRA – that is my opinion. If you print that they will phone me up and attack me but that is what I believe.

This issue of labels and publishers robbing their composers and artists was exemplified by the Solomon Linda song, Mbube. He wrote it but sold it to Gallo for 10 shillings. At the time our law as a colony was governed by English British Imperial Copyright act which had a thing called the Dickens clause, because Dickens died a pauper. When he died his family was left homeless. The Dickens clause was introduced to address that. Copyright in SA lasts until 50 years after the composers death and in England 70 years. The British Parliament introduced a clause that said all assignments of copyright, those contracts will be reversed 25 years after the authors' death, those copyrights revert back to the family and the family can then enjoy the benefits for the remainder of the 70 years. That was applied in SA during the Solomon Linda case. He died in 1962 and in 1987 those copyrights reverted to the Linda family despite the fact he had sold them to Gallo. That is why the Linda family under the tutelage of Professor Owen Dean our greatest copyright lawyer ever, they could sue Disney and a big settlement was released.

It is cheaper to make recording than ever before, because of Protools. This is what we do at the school. In my class I teach them how to do it yourself in marketing and copyright and the business side of things. It is cheaper and easier if you understand the various royalty streams, the various copyrights, the various licencing options – then you have a choice to DIY.

VPL is needletime for music videos. I am motivating to DTI for a law to be brought in that will automatically recompense performers.

South Africa operates by its own rules and the problem is our copyright act has been out of date for many years. For example performance royalties which is any time your composition is performed to the public. You would think that that includes internet streaming. No, our copyright act is out of date. The new copyright bill attends to that problem. But actually the industry has already attended to it because the industry knowing that all these DSP's are used to paying performance royalties, the industry dealt with them under the mechanical. Capasso did all the digital licencing to Spotify, Apple, Deezer and the digital but they did it under mechanical and shared it with SAMRO.

The copyright act needs to do a whole lot of other things to bring us in line with the rest of the world. We have not yet ratified all the World Intellectual Property Organisation WIPO internet treaties and bring into our laws. But there are many problems with the bill. It is not right yet and it has already gone to parliament. We are not in line with the rest of the world and even when we are fixing it we are not fixing it right in many cases. No country does anything exactly the same. For example in the US, FM radio airplay is not regarded as a public performance for recordings – needletime. It is for compositions. ASCAP, BMI and SESAC will go and get their money from the radio stations. But even though the radio stations are playing recordings they don't recognise performance rights. In American law, FM airplay means that you are getting exposure which is good for sales. In South Africa we have a law which says you pay for it. They are the opposite. They recognise it for internet streaming that is non interactive. And they have got an organisation Sound Exchange which is like our SAMPRA, but they don't recognise it for radio. Here in South Africa we are doing the opposite. There is an umbrella body called SCARPO to which all these needletime societies belong. And our performance chamber as part of SAMPRA is a member of SCARPO. POSA our performers chamber wants to do an international reciprocal agreement with Sound Exchange, but it is a hard exchange to do because they recognise internet streaming as a public performance but not FM radio. We recognise FM radio but not internet streaming. The problem is the laws are different. WIPO is trying to get every country to sign all the conventions and that is why the copyright bill that is going to parliament and the performers protection amendment bill are so important. There is a lot of stuff that should be in the bill that is not there. There is a lot of stuff that shouldn't be in that bill that is there. There is a lot of stuff that has been drafted wrong. It has been a long arduous painful process. DTI have listened to some submissions and haven't listened to others."

Our students here are young urban black kids straight out of school looking to make a name for themselves in music production – but it is hard. You need three things. Talent, production knowledge, business knowledge.

More needs to be done to educate especially with the new copyright laws coming. Once they are in place somebody has to be there telling the previously and still disadvantaged artists what his rights are now.

In America there are only 4 universities that teach music and entertainment law – UCLA, Berkely, NYU and Middlestate Tennesee University. Here in SA the only place is here at the academy because I force it. How did I learn it and write this book? By getting ripped off. I had to research this. No university will teach you this stuff. I know I have just gone and given guest lectures at Wits. At Wits you study patent and trademark, you will do a little bit of music copyright but mostly you will do copyright in general.

If you do not know how to make sure that the copyright on the composition and recording are in your name, you are finished from the beginning. If you put your stuff on soundcloud and youtube and you haven't got your copyright ducks in a row, you are going to get robbed.

There are certain American producers that have stolen South African copyrights blatantly and sold them as their own. We are very strong with house music. There seems to be this ethos that it is OK to sample each others work but not if you speak to Coffee. He owns his copyrights and has everything in place. Other less known artists put their stuff on the internet on data file host and it gets stolen. Piracy is a problem for musical artists. It is a choice whether your music should be on the internet and whether it should be given away for free, or not. But the last thing anyone wants is for music to be stolen and the internet enables that; if you don't have your copyright ducks in a row. The only way is to be able to prove that you composed that work in original form on a certain date before somebody else. The act says put it in material form which means write it down or put it on a CD and be able to prove that you did so first, such as the ‘poor mans' copyright' of posting it to yourself! At least email it to yourself, so you can prove that it is yours! The copyright for the recording is the person who made the arrangements for that recording is the person who owns the copyright, but make sure it is written down that you paid for the master recording.

When somebody who owns a recording studio invites you to come and record there for free, and you do it – he owns that master and not you. Even though he might have performing rights on that master to get some of the needletime, you don't own that master – he does.

You have got to get the ownership of the masters and the various copyrights in line. If you don't you will get screwed. Become a member of SAMRO, send them a notification of works. Become a member of SAMPRA if you own your own masters. Become a label member and make sure you have International Standard Recording Code ISRC codes embedded on your masters so you can register those masters as yours. You get them from RISA if you are a RISA member. And if you own your own label you should become a RISA member.

We would love to see the Dickens clause in our law. It is coming back in the new copyright law. The new bill also has provision for orphan works. Orphan works are when we don't know who the composer is. They will set up in Pretoria under the DTI a commission which will be the Companies and Intellectual Property Commission CIPC. And if you want to use the copyright in an orphan work you must write an application to the commission and pay the money to them. And now government becomes the custodian of copyright. This is wrong. It should be the collecting societies because all collecting societies with this new bill are going to be regulated. But the collecting societies should be administering orphan works not government. In this new bill it says government may own copyright – I can't agree with that. It also says government will administer orphan works. I can't agree with that.


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