Music Law 101

Top Legal Tips for Musicians and Bands

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The history of modern music is built on stories of musicians who signed a bad deal because they were taken advantage of by greedy labels or overzealous managers. It may be hard to resist signing the first deal you are offered, but you should ensure the deal you are about to sign is fair. The tips below can give you some leverage when negotiating with a record label.

Form a business entity.

If your band has not registered as a particular business entity, such as an LLC, you are treated as a general partnership by default. That means that each member of the band is personally liable for any debts of the band, any contracts signed by the band, or any litigation brought against the band. You may limit your personal liability if the band incorporates as another type of business entity.

For more on business entities for musicians, see this blog post.

Draft a band partnership agreement.

If your band involves more than one person, you should have a signed band partnership agreement which explains the responsibilities of each band member. The agreement should address how tips, payment for shows, and royalties earned by the band will be paid out. It should also address how management decisions are made by the group.

For more on band partnership agreements, see this blog post.

Keep 'em separated. (Personal and band funds, that is.)

You should strive to keep personal and business assets separate. You should open a business account in the band's name. You can deposit income the band makes and make payments for band-related items and expenses from this account. You do not want a creditor seizing band assets because they were paid with your personal funds.

Register your music.

If you write your own songs, you should register them with a performing rights organization (PRO) so you can receive royalties when songs are played in various mediums (radio, TV, live concerts, etc.). The three most popular organizations are ASCAP, BMI, and SESAC. You should also register with SoundExchange, a site that collects digital royalties from service providers like Pandora, SiriusXM, and other streaming services.

For more on performance rights organizations and publishing, see this blog post.

Get advice from experienced professionals.

Your friend may able to get you a few shows when you are starting out, but you can gain a lot more from relying on experienced professionals. Seek out management that has an established reputation in the locations where you wish to perform. If you don’t understand a contract, consult an experienced entrainment attorney who can explain the it to you. An experienced attorney may also be able to negotiate better terms./P>

For more on hiring professionals, see this blog post.

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Start Your Own Independent Label

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So you want to start your own record label? Have you thought through the advantages and disadvantages of running an independent label?

Advantages


• A good way to promote your band and other artists
• Need to sell fewer records to make a profit. Selling 5,000 records is considered "indie gold" as compared to 500,000 records for one of the major labels
• Low overhead costs
• Discover new talent and be on the cutting edge of new music
• Satisfaction of getting music out to the public that would otherwise go unheard
• More artistic control

Disadvantages


• Good chance of losing money
• Limited access to traditional distribution and retail outlets
• Frustrating to be in competition with larger labels
• Doing everything yourself

Questions to Ponder


• Can you afford to lose a few thousand dollars (or more)?
• Do you have access to additional money if needed?
• A hit record could sink you. If a record is a hit and you get a large order, you need to be able to meet the demand. Otherwise your label will lose credibility.
• How will you get your product to your customers?
• Do you have physical space available to store records and supplies?
• How will people become familiar with your artists? Live performances? Internet? Radio?
• How will you market and promote your records?
• Do you want the label to be an ongoing enterprise, or is it just for only you, the artist?
• Do you want to be picked up by a larger label or remain independent?

Creating a Business Plan


One of the best ways to tell if you are ready to start your own label is to create a business plan. The business plan serves several purposes: it serves as a guide as you start and run your business; it introduces you to key players, such as lawyers, accountants and artists; and it provides investors with pertinent information. Sources that can help you create an effective business plan can be found at any public library or online. One good resource is the U.S. Small Business Administration.

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Recording

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It seems like everyone is recording and releasing an album. That has become the easy part. The hard part is putting together a quality product that will be taken seriously by the industry and your fans. Begin with a realistic production schedule and budget. Then be prepared to attend to many details that having nothing to do with making music.

Studios


Home recording studios are convenient. They allow you to gain valuable hands-on experience. But home studios take a lot of time and money to set up. Is this how you really want to invest your valuable resources?

Commercial recording studios are as different as night and day. Call several studios and request rate cards. Visit the studios to get a feel for them. Think about size, ambience, choice of engineer, lounge and/or kitchen, number of tracks, mixing and editing capabilities, end product (DAT, CD) and reputation.

• What does the hourly rental rate include?
• Is there a better rate for booking hours in bulk?
• Are there after-hours rates?
• Can you/must you use the studio's engineer?
• Is the engineer paid separately?
• Is payment required up front? Can you get a refund?
• Can you use/rent the studio's instruments?
• Is your set-up and tear-down time included in the hour?
• Is there a penalty for going over time?
• At what time do you perform best?
• Can the environment support your preference?
• Do you need an environment free of external distractions?
• Are temperature and humidity adequately regulated?
• Can the various spaces accommodate your musicians and equipment comfortably?
• Overall, what is your impression of the facility and its employees?

Recording-Related Agreements


Most studios use a form agreement. Be sure you read and understand the agreement before you sign it. Be careful. Some agreements contain language that gives the studio an interest in the master recording. Don't sign away your rights! If the studio does not have a form, or you are not satisfied with the terms of the form, put the details that are important to you in writing. Note: studio forms typically include an indemnification clause, which says that you'll be responsible if anyone sues the studio for copyright infringement.

Group Members: If the band does not have a band partnership agreement, a simple written agreement outlining how the finances of the recording project will be handled is highly recommended.

Producers: Some unsigned bands hire a producer to work on the album or on one or more songs. The producer agreement should spell out the fee and/or the percentage that the producer will receive from sales and how the ownership of the songs contained on the masters will be divided.

Work-For-Hire Agreements: These agreements are used for studio musicians, background singers, engineers or anyone else who is in the room while the songs are being recorded. They stipulate - up front - that the party has no ownership interest in the song(s) and will not receive royalties. A customary practice is to pay sidemen union scale as set by the American Federation of Musicians. Work-For-Hire agreements also are a useful reference when preparing album credits. The agreement should state whether or not the party is waiving the right to credit. If the party will be credited, be sure to get the correct spelling of the person's name.

Permission and Licensing


Make sure you have the right to record and distribute the songs you are going to record BEFORE you go into the studio. When you cover a song, you must obtain a license. The license can be a compulsory mechanical license or a negotiated mechanical license.

Because the notice and accounting requirements of the compulsory mechanical license are so cumbersome, most mechanical licenses are negotiated. If you take this route, you should start with the Harry Fox Agency, which is authorized to issue mechanical licenses on behalf of more than 22,000 music publishers. The Harry Fox Agency issues a standard mechanical license. In addition to relaxing the notice and accounting requirements, this license mirrors the compulsory mechanical license, meaning you will pay the statutory rate and have authorization to make a new musical arrangement.

For songs not handled by Harry Fox, contact the publisher directly. Usually the easiest way to do so is to obtain the publisher's contact information from the "song indexing" departments at ASCAP and BMI.

If you are including any samples on your record you must obtain sample clearances from the publisher of the musical composition being sampled AND the record label that owns the master being sampled.

CD Budgets


Preparing a budget is the best way to avoid financial problems in the studio or when releasing your own album. To determine expenses, make a list of hourly costs and the corresponding hourly rate. Then multiply by a realistic estimate of the number of hours needed. Add fixed costs, such as supplies and manufacturing. Be sure to think about how the album will be promoted and budget accordingly. A tip from a recent VLAA client: make a budget, double it, and stick to it! Of course, you also need to think about how to cover your expenses, including a realistic estimate of album sales.

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A new revenue stream for songwriters: the marketplace for lyrics.

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What do you do when you do not know the lyrics to a song? Google it. The results are full of lyric sites that give you access to the lyrics of almost any song, many sporting a boarder of advertisements.

David Lowery, frontman and songwriter for Cracker and Camper van Beethoven, is taking action against the sites he alleges profit from song lyrics but do not pay royalties. After evaluating is primary sources of revenue on the Internet, he came to an interesting conclusion. More people were searching his lyrics than searching to illegally download his music. And he was not receiving any of that revenue. Last year, Lowery released The Undesirable Lyric Website List.

The National Music Publishers Association took notice, and announced that it would send take-down notices to the names on the list. Rap Genius sat at the top of that list.

In an interview with NPR's Planet Money, Rap Genius' founder, Ilan Zechory, said the site should not be on Lowery's list. Zechory argues that the site is more than transcribed lyrics. He says it is a social network: a discussion board for musicians and music nerds. He says artists love the site. Some notable musicians, like Nas and Rick Ross, comment on their own lyrics on the site.

Rap Genius recently announced that, despite its opinion that the site is fair use, it is going to pay rights owners. Zechory noted that it was easier than fighting with music publishers, who have been very successful in suits against other lyric sites.

Source: NPR's Planet Money: Ep. 537 - Hold the Music; Just the Lyrics, Please

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Band Names

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Your band name is your brand. It is a valuable asset that deserves careful consideration. If you are selecting a new name, do your research so you do not select a name already in use. Once you have a name selected, It is important that you determine who owns the name and put the agreement in writing. In some circumstances you may want to protect the name by documenting its use and registering the name as a federal trademark.

Find Out If Your Band Name Is Being Used


• Do a Google search.
• Check industry resources, including Billboard's Talent Directory.
• Search the Band Register, which has a growing database of more than 310,000 bands and artists.
• Check with BMI and ASCAP, the two major music licensing organizations. They can do a search of their rosters for conflicting names.
• Do a database search of the U.S. Patent and Trademark Office.
• Call the main public library in your region and ask if it has a Federal Trademark Register CD-ROM. Search for your full band name, then each word individually.
• Hire a search firm.
• Don't forget to check out domain names. If your band's desired domain name is available, be sure to register it ASAP.

Determine Who Owns The Name


Your band name could be owned by anyone or everyone, even someone outside the band, so it is best to create a written agreement resolving the matter. A band partnership agreement should outline who owns the band name. If band members change, the agreement should be updated to assure complete understanding and clarity regarding ownership of the name. In any agreements with third parties (such as record companies, manager, agents, etc.) there should be an express written provision indicating that such third parties have neither interest in nor right to the name.

Protecting The Name


Name protection is the subject of two common misconceptions:
• Band names are not protected by copyright law. They are covered by trademark law.
• The filing of a Fictitious Business or Assumed Business Name (DBA/Doing Business As) with the Secretary of State does not guarantee exclusive use of that name. Name registration simply provides a vehicle for checking the ownership of a business. Essentially, it notifies the public that you are "doing business as" someone other than yourself (or as a "nickname" for your corporation or partnership) and allows creditors to know who is responsible for the activities of the business.

Trademarks


Rights in a group name are usually created by use of the name, not by trademark registration. To establish rights, a band must actively perform under its name, advertise under its name, and/or sell products bearing its name. It is important that you keep records of your commercial activities. If no other band is already using that name in your area, you will establish rights in the name and can prevent other bands from using it in your region.

A trademark is a word, phrase, design or symbol, or a combination of words, phrases, designs or symbols, that identifies and differentiates one set of goods from another. Band names are actually considered "service marks" because they help distinguish between providers of entertainment services.

To protect the name beyond your local area, registration with the U.S. Patent and Trademark Office is recommended. Besides giving notice to other bands that you have pre-existing rights to a name, registration allows you to sue in federal court for trademark infringement. More importantly, the threat of a lawsuit is usually enough to deter other bands from using your name.

The federal trademark application procedure involves submitting the appropriate application form, proof that the name was used in "interstate" commerce (through public performances, advertising or sales of merchandise) and a filing fee of about $325.

Although trademark rights are generally granted to whoever can establish prior commercial use, it is possible to reserve a name by filing an "intent to use" (ITU) registration. You can reserve the name with the Trademark Office by showing a bona fide intent to use your "mark" on specific goods or services (such as records or a concert tour) in the near future. For the registration to be granted, you must also file subsequent proof that you in fact used the name on a commercial basis.

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Performance Rights Organizations and Publishing

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Publishing can be a major source of income for songwriters. A song is considered published whenever it is available for public sale. This applies to any medium — sheet music, vinyl, CDs, digital files, etc. A songwriter may sign with an established publishing company or may form his or her own music publishing company. Songwriters should also have a basic understanding of how the three major performance rights societies, ASCAP, BMI, and SESAC work.

Performing Rights Organizations
• They are not music publishers.
• They negotiate blanket license agreements on behalf of songwriters and publishers for all public performances (in clubs, at live concerts, on the radio, and on television).
• They collect money from these licenses and distribute performance royalties to their members.
• Distribution of royalties is based on the frequency of play.
• Membership is open to both writers and publishers.
ASCAP, BMI, and SESAC are the two major agencies. Each has its own eligibility requirements and each uses different formulas to calculate royalty payments.

Publishing Companies
• A music publisher is a company that owns or administers song copyrights.
• Publishing companies find artists, record companies, film and television producers, and advertisers to make use of a song.
• They negotiate royalties and makes sure the royalties are paid.
• They monitor a song's public usage to make sure it is accurately reported to the performance rights society.

If you sign with an established publishing company:
• You may earn considerably more royalties.
• You may increase your contacts within the industry.
• You do not have deal with the administrative matters.

Do not sign with a publishing company without seeking the assistance of an attorney.

Starting your own publishing company
• Makes the most sense when a record is released on an independent label that is financed by the composer.
• Performance royalties are paid to both the composer and publisher.
• By forming your own company, you will receive all of the royalties.
• May provide leverage in negotiations with record, film and TV producers.

If you decide to start your own publishing company you will need to:
• Prepare publishing agreements for songwriters.
• Affiliate with ASCAP, BMI, or SESAC. Because these organizations will not let you register a duplicate name, you must provide three potential names for your publishing company. If you are a songwriter and have not yet affiliated, you should affiliate with one of these at the same time (you cannot affiliate with more than one). You will have to affiliate as a publisher with the same organization that you affiliate with as a songwriter. Once your company has registered its name, put it on everything you publish. This signals to others that you have established your rights as a publisher and writer.
• Create a business entity
and/or file a DBA registration.
• Register your songs with the Copyright Office in the name of your publishing company. If you have previously copyrighted the songs in your name, you will need to file an assignment transferring them to the publisher's name.
• Register your songs with your performing rights organizations.

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Album Packaging

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Album Name

Names, titles, and short phrases or expressions are not subject to copyright protection, so you can use a title that has been used before, but you should stay away from trademarked names. They are the exclusive property of trademark owners who may sue.

Credits

You should credit the performances, the master recording, artwork, photographs, and music. Although not required, it is common courtesy and may help avoid legal problems.

Performances - All performances on the album should be credited. An exception to this rule occurs when a performer has waived his or her credit line in a work-for-hire agreement. Producer or sideman agreements may contain specific wording or placement requirements that should be followed.

Master Recording - Who owns the copyright in the master recording? Copyright in a sound recording protects the particular series of sounds fixed in the recording against unauthorized reproduction or distribution. This copyright is distinct from copyright in the actual songs and is usually owned by the record company. A copyright notice is not technically required, but is recommended. It is common practice to include the following statement after the notice: "This work is protected under the copyright laws and any unauthorized duplication or distribution is prohibited by law." Registration with the U.S. Copyright Office is not required. But, like notice, it is recommended.

Artwork - Artwork is copyrighted separately, and you must secure permission to use any artwork not owned by the band. When obtaining permission, the terms of the license or assignment should be put in writing. Putting the copyright notice on both the jewel case and the tray card is recommended. When the owner of the sound recording also owns the copyright in the artwork, the copyright notice for the two properties can be combined.

Music - A single copyright notice may be used if all the compositions are written by the artist (controlled by one publisher.) For compositions written by other writers, a separate copyright notice should be provided for each song. Writing credits should appear below the title of each song whether original or cover. Each writer's name should be provided. A first initial and last name is sufficient.

Song Lyrics

Rights to record a cover song do not include the rights to print the lyrics. Those rights must be obtained separately from the copyright owner (the publisher or the publisher's agent.)

Notice of Trademark and Service Marks

Do you have the right to use the name of your band and the name of your label? Prior to registration, the designation TM should be placed on the right hand shoulder of the name or logo. Once a federal trademark is registered, the mark should be changed to ®.

Photo Releases

Any recognizable person appearing on your album has a right to publicity. Photos and any other images of people should be cleared in advance.

Bar Code

For retail sales, the product must have a UPC Code or bar code. Most album duplicators will provide a barcode at no additional cost. If you plan to register with SoundScan, a company that tracks music retail sales, be sure that the barcode is specifically for your album. For more information about barcodes, talk to your manufacturer or check out the Uniform Code Council.

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Hiring Professionals

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Like most things, you cannot make it alone. You will likely have to turn to others for their knowledge and expertise. You may benefit by consulting professionals like attorneys, accountants, managers, and agents.
 

Managers and Agents

A manager is the person who advises you or your band in every aspect of your career from what you wear on stage to choosing a producer. On the other hand, agents in the music business seek out and negotiate agreements for your live appearances.

Managers serve a variety of functions. They direct, advise, counsel, and develop your career. The managerial role is often considered the most important member of a band's professional team. It can also be the most frustrating, particularly when your career is not progressing as you would like and you feel locked in for a long term with the wrong manager.

- Fees vary, but usually paid on commission.
- Verbal deals with managers can be an invitation for trouble.
- You should have a written agreement with your manager which covers the manager's responsibilities, term, compensation, and authority on behalf of the artist or band.

Agents get you signed for live appearances. In short, they are the ones in charge of getting gigs that you can't get by yourself.

- If the agent has too many clients, you may not get the attention you need.
- Payment is usually based on gigs booked.
- Agents should not get a portion of your income from record sales or publishing.
 

Attorneys

Entertainment attorneys can:
- Draft band partnership agreements.
- Find a record or publishing deal if you are unsigned by shopping your demo tape (most record companies only accept unsolicited material from established entertainment attorneys).
- Negotiate deals for your services.
- Negotiate merchandising deals.
- Make sure you understand all the deals negotiated on your behalf.
- Help find a personal manager, booking agent, and/or business manager.
- Locate copyright owners.
- Draft licensing agreements.
- Help you get out of bad deals.
- Offer advice on your legal problems by telling you what to do or not to do.
- May be able to settle disputes for you out of court, saving you trouble and expense.
- Represent you in the civil courts.
- Render innumerable other services because of training and experience in the law.
 

The best time to consult with a lawyer is before, not after, you have a legal problem. Look for:
- Experience in the entertainment industry.
- Excellent reputation; references from other musicians.
- Fees (hourly, flat rates, retainer).
- Someone that understands your goals and who will help you achieve them.

Accountants

If your band is making money you may want to consult with an accountant. They can help set up a simple bookkeeping system and prepare your tax return. Before you hire someone else to prepare your taxes or assist with other financial matters, ask the following questions
- Are you a CPA (certified public accountant)?
- Are you familiar with the music business?
- What is your fee structure (hourly, by number of forms completed, or fixed price)? Beware of accountants who base their fees on a percentage of your refund or those who guarantee a refund or refuse to sign your return.
- What is your billing procedure?
- Who will be preparing my return?
- By what date will my return be completed?
- Will you reimburse me for mistakes that result in penalties or interest charges?
- If my return is audited, will you represent me before the IRS?

Most importantly, as in choosing all professionals, choose someone with whom you feel comfortable.

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Business Entities for Musicians

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If you make money by playing music or performing, you are conducting a business. Although you do not have to file as a business entity to conduct business, there are several entity types which could be beneficial for your band or group. Below is a list and explanation of the most common entities. You should consult with an attorney if you are considering establishing a business entity.

If you are performing or recording under a name that is different from your legal name, you may be required to register the fictitious name with your Secretary of State.

Sole Proprietorship

This type of entity is formed when a business is owned by an individual and is not incorporated. The owner has total control over decisions, receives all the profits and pays everyone's salaries. The owner is liable for all debts and legal liabilities personally, meaning all personal assets and property are subject to these liabilities. The income generated by the business is considered personal income and is taxed as such.
 

- No legal steps are required, so no lawyer is needed
- Easy to create and operate
- Few costs involved
- Relatively simple tax compliance
- Good choice for solo artists or band leaders

Partnership

Most bands operate as partnerships. A partnership is defined as two or more person in business together. Profits, losses, and decision-making responsibilities are split among the partners equally. There is a potential risk to partnerships. Each partner is personally liable for debts and liabilities of the business partnership, regardless of which partner incurred the liability. Each individual share of income is taxed as personal income.

Again, there are no formalities to creating a partnership. When two or more people do business together and share in profits without having any other agreement, the business is automatically classified as a partnership

Although a general partnership can be formed informally, it is strongly recommended that an attorney prepare a written partnership agreement. The most important reason for this is to guarantee the continued existence of the partnership in the event of a member leaving. Without an agreement, the departure automatically ends the band partnership.

- You should get a lawyer to help with this
- Easy to create and operate
- Low cost
- Relatively simple tax compliance
- A legal partnership is not the same thing as a band partnership agreement
- May be required to file fictitious name registration

Limited Liability Corporation

A limited liability corporation (LLC) is a partnership-corporation hybrid that provides corporate-like liability protection for the owners and partnership-like flexibility in management structure. The LLC structure is commonly used by professional performers and may offer more favorable tax benefits.

- A lawyer is necessary. Filing fees range from $100 - $500
- If you are expecting a large income, this is a good choice for your band
- Band members have limited personal liability for business debts
- More expensive to create and operate
- Requires compliance with IRS rules and regulations
- More formalities involved, likely to require a lawyer
- Written agreement is strongly recommended

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Band Partnership Agreements

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If you band plans on making a profit or selling tickets, CDs, or merchandise at shows, you have to treat your band or act as a business.

If your band plans on making a profit or selling tickets, CDs, or merchandise at shows, you have to treat your band or act as a business. If you are a singer/songwriter, this topic may not apply to you. However, this can be useful even for solo artists who routinely perform or record with other artists. It is smart to discuss business and clarify responsibilities while everyone is getting along. Such agreements can help prevent conflicts or at least protect everyone involved in case a conflict is not solvable. This agreement should be in writing, which reduces the risk of a misunderstanding.

If your band or group sells tickets, your music, or merchandise, you almost certainly need a Band Partnership Agreement. Below is a list of issues these agreements typically address. (This is list is not exclusive and you should consult an attorney for the best protection.)

Money

- How will profits/debts be distributed?
- Who keeps track of the books and how?
- How are performance fees and royalties distributed?

Business Decisions

- How will decisions be made?
- Who will make the decisions?
- How will disputes be resolved?
- What type of legal structure will the band have?
- What are the tax liabilities for band members?

Band Name

- Who owns rights in the band name or logo?
- Should the name or logo be trademarked?
- What happens if the band breaks up? What if a member quits? What happens to the name?

Band Property

- How will the band purchase equipment?
- How will it be stored and transported?
- Is there a need for insurance?

Creative Decisions

- Who owns the songs?
- Who decides which songs to perform or record?
- How is songwriting credit determined and given?
- Who owns the master of the recordings?

Touring/Performances

- Who decides which shows to play?

Band Members

-How are new members added or existing members expelled?

A simple Band Partnership Agreement can be written by one of the members of the group and signed by all members. You can sometimes find free templates in books and online. If you find these forms do not fit your needs or you have questions, you should contact an attorney familiar with entertainment law matters.

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