Friday, January 20, 2017

McCartney Sues Sony To Get Back His Publishing Rights

According to multiple news sources, Paul McCartney is attempting to get back his publishing rights to the Beatles catalog via certain termination provisions U.S. copyright law. An update to the law in 1976 increased the period that works are under copyright protection, and, in recognition of authors who had signed over their rights to publishers and studios without much bargaining power, allowed such authors 35 years hence to reclaim rights in the latter stages of a copyright term. McCartney has been serving Sony/ATV, the current owner of the catalog, termination notices for the last decade. Sony/ATV have been ignoring them. Now, McCartney seeks a declaration that his termination notices are valid under the provisions provided in the 1976 Copyright Act.

In my own opinion, Paul is going to lose this case big time. Paul is citing Section 304(c) of the 1976 Copyright Act which gives authors who transferred their copyright interests to third parties before January 1, 1978 the right to terminate those transfers and reclaim their copyright interests. Problem is, John Lennon and Paul McCartney didn't transfer their rights to a third party. They created a company called Northern Songs and transferred their copyright interests to it. In hindsight, the deal that created Northern Songs looks like a bad one. After all, John and Paul only owned 40% of the company collectively. Brian Epstein, the manager of The Beatles, got 10 percent. The remaining 50 percent went to Dick James and Charles Silver, experienced music publishers. Considering that James and Silver were taking the bulk of the risk, they got the bulk of the company.

In 1965, it was decided to make Northern Songs a public company in order to save on the capital gains tax. To that end, 1,250,000 shares were traded on the London Stock Exchange, and, after the offering was closed, Lennon and McCartney owned 15% each, NEMS (Brian Epstein's company) held 7.5%, Harrison and Starr shared 1.6%, and James and Silver (Northern Songs' chairmen), held a controlling 37.5% interest. The remaining shares were owned by various financial institutions. After Epstein's death in 1967, Lennon and McCartney summoned Dick James to a meeting in order to renegotiate their deal. They treated James rather poorly, which made him wonder why he was bothering to deal with them in the wake of Epstein's death. Early in 1969, James and Silver their shares of Northern Songs to ATV Music. Upon hearing the news, John and Paul attempted to gain control of Northern Songs, but couldn't match the financial power of ATV. The Beatles' new manager, Allen Klein then made a bid for their company, Apple, to purchase ATV. That deal was quickly squashed by McCartney's lawyer who wrote a letter to ATV informing them that Allen Klein, while manager of the Beatles, had no authority to act on Paul's behalf because Paul had not signed the management agreement. Thus, ATV pulled out of the deal. In a last ditch effort to gain control, Lennon and McCartney called a meeting with a block of investors who owned a significant percentage of ownership in Northern Songs in the hopes that they'd sell their shares to them or help them take control of Northern Songs. Lennon sabotaged the meeting by insulting the investors, declaring, "I'm sick to death of being fucked about by men in suits sitting on their fat arses in the City!", which pushed any offended investors to ATV's side. Having lost the battle, Lennon and McCartney were offered shares of ATV in exchange for their shares of Northern Songs, but they chose instead to sell their shares outright.

In 1981, Paul McCartney and Lennon's widow, Yoko Ono, had an opportunity to buy the ATV catalog for 20 million pounds. McCartney and Ono couldn't come to an agreement as, according to McCartney, Ono insisted that the catalog was over valued. A change to acquire the catalog surfaced again in 1984 when ATV itself went up for sale. McCartney was given the opportunity to buy it, but refused. Michael Jackson ended up buying ATV in 1985. In 1995, Jackson merged the catalog with Sony music publishing as part of a financial deal where Jackson have Sony 50% ownership in exchange for a sizable loan. Subsequent re-negotiations of the deal left Jackson with 25% interest in the catalog.

The point I'm making here is that McCartney wasn't the victim of a greedy record company who snatched his publishing rights away under his nose. He knowingly transferred his rights to a company that he was an owner of and then lost those rights when the company got taken over. He then washed his hands of the catalog by selling his stock and turned down several subsequent opportunities to re-acquire his rights. This isn't the type of situation that the cited provision in the 1976 Copyright Act was written to accommodate. This case is a loser, and Paul is most likely aware of it. He's almost certainly using the threat of termination to leverage his position against Sony in order to get an increase in his songwriting royalty rate, which would be the fist time he's gotten an increase in decades. And, even without that,  I can see why Paul is making the attempt. Paul had once said that he wrote the songs for free, so he doesn't see why he should pay to get them back. So, this lawsuit is his last chance to get his rights back for relatively little cost.

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