Music Attorney Lee Phillips: 'Labels Made a Mistake by Not Doing a Deal With Napster'

1:36 PM PST 04/15/2014 by Roy Trakin
Courtesy Manatt, Phelps & Phillips, LL

Senior partner at leading entertainment law firm Manatt, Phelps & Phillips navigates a music business stung by technology.

With almost a half-century under his belt since starting in private practice, music and entertainment attorney Lee Phillips has seen it all, but even he is amazed at the transformation in the record industry over the past decade and a half. As senior partner at Manatt, Phelps & Phillips, boasting a client roster that includes Barbra Streisand, Neil Young, Brian Wilson, Burt Bacharach, the Eagles, Kenny Loggins, Steve Perry and Tracy Chapman, among others, he’s certainly not hurting, and in fact, the impact of technology and evolving copyright law makes him more valuable than ever.

On Wednesday, April 16, the Entertainment Law Section of the Beverly Hills Bar Association will honor Phillips for his contributions as 2014 Entertainment Lawyer of the Year during its annual dinner at the Beverly Hills Hotel, with client Randy Jackson and Jeff Barry co-hosting the ceremonies, which promises several musical performances. Proceeds will go to support the association’s education and community outreach programs.

Phillips was in an expansive mood during a recent lunch at the Grill on the Alley, where he held forth on a variety of issues facing the music business.

And while he insists the music industry can survive the “digital revolution,” he is also just as adamant when he reveals “the record companies didn’t see this coming, and that’s typical for them.”

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“There are always changes in the record industry,” he continues. “Piracy has been around since the cassette, but when labels didn’t embrace digital right away, it was too late. I was there at the beginning, representing Real Audio, who hired me to acquire content from the labels, and the negotiations dragged on for almost a year. But music has always been important and will continue to be.”

As for record labels, Phillips isn’t anywhere near as sanguine. “Suddenly, the bonanza of selling 3 million to 5 million copies of an album is gone. As a result, companies have cut their overheads and are trying to find out what their place is.”

Phillips claims his practice is flourishing despite the labels’ difficulties, because, among other things,  well-known artists are choosing not to sign with record companies, but set up their own deals to release new product. “The labels will pay anything to keep prestige acts,” he says, pointing to his recent handling of negotiations on behalf of Barbra Streisand to re-sign with Columbia Records. “But there are only a handful of artists in that category. In signing new acts, it’s not only about talent, but what kind of following you bring to the table. That’s why labels have started signing these 360 deals. Since they’re not making money from albums sales, they want a piece of touring, publishing, merchandising and endorsements.”

The veteran barrister continues to believe that artists can make money in an all-streaming economy. “We will eventually get to an economic place where it’s possible to be profitable,” he says. “The amount of money you get per stream will drop, but the amount of people listening will go up, especially worldwide.”

Phillips points to corporate sponsorship as one avenue, pointing to his own 26-year-old daughter who works for Filter magazine, where she connects “brands to bands,” booking acts at festivals paid for by corporate sponsors. “They’re taking on the role that record companies used to have.”

Perhaps the next challenge to the music industry is the concept of “termination,” which involves the reversion of copyrights, meaning, for example, publishing rights for compositions written in 1958 are now coming up for renewal, giving writers yet another chance to regain their songs.

“Every two weeks, I’m terminating more copyrights,” says Phillips, who also points to “work for hire,” where record companies claim ownership of masters, as another possible area for litigation, depending on “which artist dares to step forward.”

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“I don’t think it means the destruction of the record business, since it only applies to the U.S.,” says Phillips. “The important catalogs will be negotiated.”

At any rate, with foreign markets like India, Russia and China proving more lucrative, Phillips is confident there will be plenty of work for lawyers in the future, even as the record industry continues to pay for its lack of foresight.

“The labels made a mistake not doing a deal with the original Napster,” he agrees. “I think they should’ve realized this was another revolution. They should have threatened to shut it down, and did, but offering to make a deal might have made more sense. Since then, they’ve lost control of their distribution, and they’ve been trying to get it back ever since. The album era is over, but I think that’s good for everybody. The artists don’t have to write 12 or 13 great songs; they only have to write two or three.”

And lawyers like Lee Phillips will continue to be around to represent them no matter how many songs they come up with. 

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