Copyright: A New Approach to Artist Financing in the African Music Industry
By: Ubani Obinna
INTRODUCTION
In 2019, former Universal Music executives Mattias Tengblad and Emil Angervall co-founded a brand called ‘Corite’ which provided a platform for music fans to directly invest in their favorite artist brand and receive monetary returns on investments[i]. This idea conforms with that of ‘Global Rockstar,’ another platform created earlier (2014) for fans and other investors to finance an artist’s brand and music. These brands are trying to lay the foundations for alternative funding sources for an artist brand (using the fans-to-artist direct model) that is different and away from the traditional model.
All over the world, music business execs are creating models to ensure that their creatives have a better platform to explore financially without losing all they have built. The purpose of this paper is to propose a new model available to artists to generate funds through the commercial exploitation of their copyright.
TRADITIONAL MODEL OF ARTIST FINANCING IN NIGERIA
The traditional model of financing an artist in Africa generally is that of the record label. Under this model, a record label provides the funds, structure, and personnel that renders certain services to boost the artist brand, and they include (a) Production of records, (b) Manufacturing of such records, (c) Distribution of records (d) Marketing (e) Promotion and (f) Revenue Generation. These services are executed or implemented by the label through a partnership with other brands, and in exchange for such services, the artist gives the record label: (a) Exclusivity of service and (b) Masters records. In addition to this, both parties agree on the sharing formula for revenue derived both from direct commercial exploitation of such records and the third party licensing the duration of the contract/commercial exploitation of the master records by the record label, and other vital elements like renegotiation procedures and conditions, and conditions for termination of the contract.
This model has been extensively used in the continent and has led to amazing artists with formidable brands. It has also presented some record labels with opportunities to attract more investment. However, most industry stakeholders believe that it is long overdue for a change, considering the negative stories from most artists that have passed through such a model. Even though there have been criticisms, controversies, and arguments about the structure of the model vis-a-viz ownership of the Masters, sharing formulae for revenues, and lengthy duration of some record labels contracts, the question has always been: Is there any alternative to the model?
LABEL SERVICES
Most music business scholars proposed Do-It-Yourself (DIY) and for the artist to work towards building an independent brand. Some of these proposed arrangements include 100 percent ownership of copyright and the ability to make an independent decision on your brand. It has been proposed that brands could render label services without having a similar structure as traditionally recognized record labels. Thus under this arrangement, the artist builds a personal team that works with him, and for commercial exploitation of an album, he pays such brand to render the above-stated label services to them. In other words, the label services brand does not own any percentage of the Masters nor the copyright of the artist but renders administration service through the use of their established structure and partnership, and the artist pays administration fees too.
This model has been applauded, with most indigenous brands already building content to implement its concepts, but financing has not still been settled. This is because even under this model, artists still need artists to pay for services, and there is always the issue of financing for most artists in Africa.
THE NEW MODEL (C-Model)
The C-model entails that an artist can utilize his intellectual property (copyright) in a record as collateral to request or apply for a loan from a financial institution (specially structured for such purpose) to utilize such loan to boost the value of his brand. The C-model is built on three basic concepts and include Copyright, IP Valuation, Finance, and Structure.
Copyright
The Copyright Act clearly defined works that can be protected under such umbrellas. They include literary works, artistic works, musical works, sound recordings, and broadcasts.[ii] For this paper’s purpose, the focus would be on the musical works as subject to copyright protection. Musical works are defined as ” any musical work, irrespective of musical quality and include works composed for musical accompaniment.”[iii] Hence, musical works are protected by copyright, and only the holder of such a right can authorize, license, or give consent for the use of such work.[iv]
In addition, this legislation provided that the copyright can be transferred to another individual or entity by the holder of such right as movable property.[v] Thus, a holder of copyright can make testamentary dispositions, assignment, or carry out any other transaction that requires the transfer of his interest with such copyright through a written agreement (mainly in the case of exclusive transfer) or orally (applicable only for non-exclusive transfer of rights).[vi] However, a copyright holder can only transfer or assign copyright to the extent of his right in such musical work.[vii]. For instance, if Mr. A and Mr. B co-wrote a song (musical work), they are referred to as co-holders of the copyright to such song, and Mr. A can only transfer his part of the right in such work only to another entity.
In light of the C- model, copyright to a musical work would serve as collateral or the artist’s consideration to an entity to obtain funds to build his brand. Specific clauses are required to be clear as to the issuance of such copyright, and they include: (a) The duration of such assignment, transfer, or license (b) The territory to which such license can be commercially exploited (c) The extent of right being given to the entity.
IP (Intellectual Property) Valuation
IP Valuation refers to the process of determining the future value of IP assets.[viii]. It can also be defined ‘as a process to determine the subject IP’s monetary value.[ix]. The primary purpose of an IP Valuation from a business perspective is to ensure that the IP asset would yield more income in the future to supersede the amount utilized to purchase it. There exist various transactions that require IP valuation of IP assets, and they include: (a)Mergers & Acquisitions (b) Litigation & Dispute Resolution in IP infringement cases (c) Account Reporting (d) Financing.
However, for an IP asset to be fit to undergo this process, specific requirements need to be satisfied, such as: (i) Legally recognized as being transferrable: Here, the IP assets (in this case copyright to a musical work) must have been cleared of all third-party infringements and legal obligations (ii) It must be in a tangible form of identification, etc.
There exist various methods of carrying out an IP valuation, (i) The cost method focuses on the cost of purchasing such IP assets and try to consider the various expenses that have been accrued during the process of building such assets to the current value and try to balance it with the cost of developing similar IP assets internally. In such a situation, the IP value would be based on the total costs computed relating to such asset. (ii) The market-based method reduces an IP asset’s value by comparing it with similar transactions for similar or identical IP rights. For example, the price paid in the purchase of an identical or similar IP right[x]. (iii) The income-based approach, which is the most popular ‘measures the potential future benefits of the subject IP to determine its worth.[xi]
For the C- model, IP valuation is vital to determine the level of funds given to holders of such copyright. Thus, the musical work’s future potentials are assessed and validated before such fund is released to the artist. Hence, there is a need for investment in an establishment that would specialize in IP valuation of assets for investors in the music industry.
Streaming Power-Audience Base Method
In addition to the above IP valuation methods, this proposed new method would focus on the streaming power and audience base to determine the value of such musical work. This method can be utilized where there exists a lack of data, structure, and platform to ensure the effective utilization of the above-stated methods.[xii] or where the investors prefer to use them.
Under this method, there would be consideration of the total streams associated with the artist and his musical work, the fan base of the artist, how possible it would be in the future to increase such streams, fan base, and income if additional investment is injected.
However, the demerit of utilizing this method would be the issue of ‘judging a book by its cover.’ This assertion’s rationale lies in the fact that an upcoming artist might be well talented and have excellent musical work but no substantial numbers due to low marketing budgets.
Finance
This is a fundamental part of the C-Model and involves either pure government intervention, Private Public Partnership (PPP), or an equity discussion. No matter the initiative accepted and implemented, the primary objective should be to make funds available to be released to such artists that meet the C-model’s standard requirement. In other words, there is clear ownership of copyright to such musical work, successful IP valuation, and fair terms of the agreement.[xiii].
Structure
(a)A Regulatory body: There should be the existence of an institution that is saddled with the responsibility of monitoring and supervising the administration of such funds given to the artist. To ensure that this is efficient, every artist applying the C-model must be mandated to prepare a detailed career plan showing the stage-to-stage use of such funds. Quarterly Performance and Financial Report must be issued to the artist team’s body and make its account books available for audit by an independent auditor contracted by the body.
Legal Framework: Laws and policies are required to be enacted and initiated to guide or regulate the model’s use. This legal framework should postulate the following:
- The procedure for investments into this model by private investors (venture capitals) or public enterprise
- Create the regulatory bodies and spell out their powers, duties, and functions.
- Provide strict penal measures in the case of breach of its provisions.
- Conducive Environment: Government plays a pivotal role in this model by creating an enabling atmosphere that would persuade investors to implement this model. Formulation of effective policies to determine revenue calculation in digital platforms and an update of the copyright legislation to ensure it encompasses the new music business trends is essential. The rationale behind this is to ensure that the investors can generate the maximum revenue from the commercial exploitation of such copyright acquired during the agreement’s duration. Also, there should be an introduction of a tax incentive to investors in this model to relieve the burden and encourage participation.
Conclusion
This model would be vital in creating an
alternative for artist financing if supported and efficiently implemented. To
actualize this, [xiv], and the need to collaborate and partner in
creating the right structures, regulations, and conducive environment.
[i] https://www.musicbusinessworldwide.com/fan-funding-platform-corite-raises-over-24000-and-closes-10-campaigns-in-first-month/
[ii] See Section 1(1) Copyright Act of Nigeria LFN 2004.
[iii] See Section 39 of the Copyright Act of Nigeria.
[iv] See section 5(1)(a) Copyright Act of Nigeria, where the various rights were outlined and the exemptions spelled out in the Second Schedule to the Act.
[v] Section 10(1) of the Copyright Act.
[vi] However, under other legislation, there are explicit provisions that ‘all transfer of rights must be by writing.’ See Section 9(4) of the Copyright Act of Ghana,2004.
[vii] Section 10(2) Copyright Act of Nigeria, LFN 2004.
[viii] Note: IP assets described here refers to trademarks, service marks, patent, and also copyrights
[ix] https://www.wipo.int/export/sites/www/sme/en/document/pdf/ip_panorama_11_learning_points.pdf
[x] https://www.iccgermany.de/fileadmin/user_upload/Content/IP/icc-handbook-valuation-ip-assets-we.pdf
[xi] http://www.ipcentar.uns.ac.rs/pdf/IP.pdf
[xii] There exist other IP Valuation methods, but the above are the most popular
[xiii] The terms of an agreement are subjective to individual transactions, but the common notion of the c-model must be present, as mentioned in the paper.
[xiv]stakeholders include the government and its relevant agencies, music business experts, private investors, and the creatives
This is a good opportunity for music artists in the African music industry. Your post is well written with mentioned important thoughts in the Music business.