by Mark A. Pearson, Esq.
The following is the first in a series of articles that will try and explain some of the pros and cons of entering into a licensing agreement in today’s entertainment industry.
As the various business models of the entertainment industry continue to reinvent themselves almost on a daily basis, one prevailing trend is the growing use of licensing. More entertainment product is now self-produced by artists than ever before. The “Studio System” and “Major Label” business models are quickly becoming obsolete. It’s beyond the scope of this article to make any grand sweeping speculation as to why the industry models are changing. Are these changes the result of the economy, backlash against the ‘old systems’, or technology changes? The answer probably lies somewhere in the murky gray area known as “a combination of all of the above”. The point is that change is here, and change means an influx in the use of licensing throughout the entrainment industry as the shift continues toward independent production.
Take the music industry, for example. Under the old model, record labels hired talent evaluators to find artists, signed those artists to a recording contract, paid for the artist to record an album, created and distributed the album, and then profited off the sale of the album. The label owned the copyright to master recordings that made up the album, and shared in the copyright of the song publishing with the songwriter. The artist made money off of royalties paid by the label (including their advance) based on sales of the album, and on royalties paid to the songwriter by a performing rights organization (ASCAP/BMI) for use of the song.