It is January 2020, and a singer, a songwriter and a producer walk into a Hollywood recording studio. What happens next is anyone’s guess.
California’s music industry is in turmoil over legislation Gov. Gavin Newsom signed last month to clamp down on the “gig economy.” The law seeks to turn a broad swath of freelancers and independent contractors into employees who are entitled to minimum wage, overtime, Social Security contributions, workers’ compensation and a host of other benefits from their newly defined employers.
The primary targets of the law, known as Assembly Bill 5 or AB-5, are mobile enterprises such as ride-hailing services Uber and Lyft and food-delivery specialist Door Dash. These companies strenuously opposed the legislation and have vowed to fund a ballot initiative to overturn it. Lawmakers exempted many industries, ranging from accountants to barbers to real estate agents, as well as many freelance journalists. But they did not exempt the music industry. The legislation makes the industry’s collaborative creative practices legally questionable and financially dangerous, especially for independents who cannot afford to take on such risk.
As Bill Berrol, an attorney representing top producers, mixers and recording artists, said of the new law, “Either it’s going to drive the music economy underground so that people are going to bend the rules even more than they already do, or its going to encourage record producers not to hire musicians and either to play the stuff themselves or use [computerization] to generate music, because you don’t need to pay a machine workers’ comp, health insurance, and all the rest.” Berrol also suggested that musicians touring in California may be tempted to rely on prerecorded tracks rather than hiring backing musicians who they will have to treat as employees in the state.
There is some optimistic talk in the business about a quick amendment to the law to add the music industry to the list of exemptions. This may or may not happen, and such a change may not be retroactive even if it does happen. There is also a lot of pessimistic talk about an exodus of musicians from the state. This is possible to some extent, although moving far from the town where most entertainment projects are greenlit – meaning where most talent gets hired – and where many of them are produced could set back or even derail careers. The most likely alternative destinations, New York City or Nashville, Tennessee, would mean cross-country moves and rebuilding professional networks from the ground up.
Let’s go back to the studio. Instead of the hypothetical meeting in 2020, we will consider a real session I witnessed a few weeks ago that illustrates how music professionals in California do things now. Three talented people (really four, because one participant had an assistant) gathered in a room for five hours. The singer, the songwriter and the producer wrote a song, created a melody, and recorded the vocals and some of the instruments. There was still some work to do on the recording, which the producer would complete later, but the song itself was finished by the time the session ended.
Ownership of the song will be governed by copyright law. This means the writers own the composition equally unless they agree to a different split. If any of the writers happens to have a publishing contract, the publisher may actually control that writer’s share of the copyright. The writers and publishers are entitled to future royalties any time the song is streamed, performed in public or mechanically reproduced.
Ownership of the recorded track, which is a completely different animal from the song itself, depends on whatever deal the producer and the singer (or their management) work out. These days, if a recording artist is signed to a label, the contract typically makes the artist responsible for hiring the producer and delivering the finished recording that the label will distribute. Money to pay the producer often comes out of the artist’s advance, if there is one. Sometimes the label will agree to pay the producer and recoup the money later from any royalties the song generates. The producer’s final mix might go to another producer later for “mastering,” a sort of final electronic polish, before the artist sends it to the label. An album with 10 tracks by a single artist could involve 10 producers or more, although in practice many artists stick with a smaller set of people with whom they are comfortable working.
Sometimes the record label makes a deal with the producer, rather than the artist, and the artist may sign a deal with a producer instead of the label. From the artist’s standpoint, in that case, the producer functionally is the label.
The artist might pay the producer for the track if she wants to release it herself. The producer might release it under his name, with the singer “featured,” in exchange for a fixed payment or a percentage. They might decide, along with the songwriter, to simply use the recording as a demo and pitch the song to some other artist for possible release.
Now consider how much more complicated all this will become in 2020. In our example, if the singer has a deal with her record label, and the producer has a deal with another record label, who is employing whom when they walk into that studio together? As I said, it is anybody’s guess, especially if they have not consulted their lawyers or managers in advance about who will own the resulting track.
What about the songwriter in the room? She thinks of herself as a self-employed composer who depends on royalties. But she could conceivably be an employee of someone (the singer? the producer?) if she collaborates on the song as a “work for hire.” Or she might get a producing credit on the track. In that case, is her service in the room as a producer employed by the singer, or as the singer’s employer, or as a writer for hire?
Maybe the professionals in that studio will decide to do nothing at all with the song and recording right now. In that case, under the new law, an employee would still be entitled to at least minimum wage for the time spent in session. But we have no idea who is the employee and who is the employer in this scenario.
All we know for certain is that if all three are enjoying successful careers, chances are very good that the day after they create this song, they will each be working with – or under California's new law possibly working for – somebody else.
This all sounds crazy because it is crazy. But that does not mean it is unimportant. California expects to collect an additional $7 billion in payroll taxes as a result of the new legislation. Ignoring the new rules could expose anybody in that studio to claims for back pay and other damages if relations with a collaborator turn sour in the future.
So what are people in the music business in California supposed to do when New Year’s Day rolls around?
They should be turning to their professional advisers for guidance, and the advisers need to have an answer that is more useful than “move to Nevada” or “we don’t know.” Hollywood and its environs has no shortage of entertainment lawyers. My colleagues and I are not lawyers, but we serve as business managers for a growing number of musicians. We need to help them try to protect themselves, too.
I have a suggestion that I believe can work, at least better than doing nothing. Each creative could be employed by their own company (a long-standing arrangement in Hollywood known as a loan-out company). Each participant’s company would then enter into a joint venture or partnership arrangement for every song, or track, or session, to either pay fixed fees or split profits among themselves. This arrangement would work best if lawyers developed a standardized fill-in-the-blank format that musicians or their managers could complete on the spot, because it is not practical to have lawyers negotiate these deals ahead of each studio session.
The new law addresses independent contractor relationships; it does not seem to affect business-to-business partnerships. If such partnerships are what we need to create, then we’ll just have to create them.
For valid reasons, lawyers don’t like clients using do-it-yourself blank forms. So I assume this idea will not be universally loved, or even widely endorsed, by the entertainment law community. If they can suggest a better way to help musicians navigate the new environment, I am all ears.
We need to be practical, even if we can’t be elegant. Ignoring the new law is not a sensible option. Dispersing a large and productive creative community across the country, and taking people and families away from their homes en masse, would be a dreadful outcome. If singers never missed a note, auto-tune would not exist. California’s Legislature dropped a real stinker on the music industry, but it’s amazing how good something pretty bad can look and sound if you apply the proper talent.
This is a rare moment when advisers need to be in the spotlight. Come on, suits: It’s our time to shine.