Uber Hires Googler Rachel Whetstone to Bully Teamsters

Originally posted on MUSIC • TECHNOLOGY • POLICY:

‘Did you torture him?’

Captain Segura laughed. ‘No. He doesn’t belong to the torturable class.’

‘I didn’t know there were class-distinctions in torture.’

‘Dear Mr Wormold, surely you realize there are people who expect to be tortured and others who would be outraged by the idea. One never tortures except by a kind of mutual agreement.’
‘There’s torture and torture.’

Our Man in Havana, by Graham Greene

Remember Rachel Whetstone?  She was the Senior Vice President of Communications and Public Policy at Google until this week when she took a comparable job at Uber, replacing former Obama 2008 campaign manager, David Plouffe.  She also coined the “crying baby” gif for a now-forgotten post she wrote excoriating Rupert Murdoch.

Another fun fact–it typical Google style, influence peddling begins at home.  Rachel Whetstone is married to Steve Hilton, a close advisor of recently reelected UK Prime Minister David Cameron.  According to Wikipedia…

View original 108 more words

5 Seriously Dumb Myths About Copyright the Media Should Stop Repeating | John Degen @ Medium

Please read John Degen’s 5 Seriously Dumb Myths About Copyright the Media Should Stop Repeating at the link below.

There you have it. I hope this quick list has helped my friends and colleagues in the media who may be hurrying to file a story on World Book and Copyright Day. Here’s a final, simple, rule of thumb for writing about copyright.

If you want to understand how a working artist feels about copyright, talk to an actual working artist.

The last time I checked, ivory-tower legal-theory departments and digital-utopian advocacy groups were not the best places to look for actual working artists.

READ THE FULL POST AT MEDIUM:
https://medium.com/@jkdegen/5-seriously-dumb-myths-about-copyright-the-media-should-stop-repeating-a92e934f12a4

Return of the $50 Handshake: My FCC Comments on Proposed Payola Waiver and “Steering” Agreements PT 2

You think internet “fast lanes” were problematic? How about “payola lanes”  on terrestrial radio and webcasting? Payola is back! And it wants to go Legit this time.  That’s right, broadcasters are proposing a payola waiver from the FCC.  Here is the document they filed with the FCC.  Read it for yourself. It is freaking unbelievable.  PDF below or you can read it on the FCC website here

 DA-15-325A2

As a member of the public you can make an “express” comment to FCC.  It doesn’t have to be as long and as detailed as my comment.   It can simply be a couple sentences.   Proceeding number is 15-52.  Deadline is today!  Link here:

http://apps.fcc.gov/ecfs/upload/display

 

BEFORE THE FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554

MB Docket No.15-52

Comments of David Lowery In the Matter of Media Bureau Seeks Comments on Petition for Class Waiver of the Commission’s Sponsorship Identification Requirements Filed by the Radio Broadcasters Coalition – March 20, 2015….. (Continued).

 

Examples of Steering Agreements by Pandora and iHeartMedia

I wish to call the Commission’s attention to two categories of steering agreements. The first is the type of agreement between Pandora Media and Merlin[1] that Pandora may have replicated with Naxos Records.[2] The second is the type between iHeartMedia and Big Machine Label Group[3] that iHeart Media has stated that it has replicated with dozens of record companies including Warner Music.

Because these agreements are in large part secret and subject to confidential treatment, I can only point to press reports and some public disclosures in the Webcasting IV proceeding currently underway before the Copyright Royalty Judges.[4]

I respectfully suggest that steering deals should be of concern to the Commission in considering the payola waiver requested. As Billboard Magazine reported[5], these deals can be used to mask commercial shenanigans and Pandora hired an expert in these matters:
Back in 2007-2010, when ASCAP and BMI rate court judges were involved in litigation between DMX and performance rights societies, the judges examined the direct licensing deals DMX cut with publishers. During that process, judges did not review the advances or any of the other aspects of the deal, and only looked at the reduced per-store royalty rate. Consequently, in the case of BMI, this resulted in the per-store negotiated rate falling from $36.36 to a per-location fee of $18.91, much to the chagrin of the publishers, who stayed a part of the PROs’ blanket licenses. The ASCAP rate court returned a similar finding.

(Did we mention that Pandora VP of business affairs and assistant general counsel Chris Harrison was DMX’s vp of business affairs at the time of the rate court ruling in a lower per-location blanket fee?)

 

Pandora’s Steering Agreement with Merlin
The payola waiver offers the Commission an opportunity to consider the legality of steering agreements for both the Radio Broadcasters Coalition but also for Internet radio operated by an FCC licensee. Pandora is a great example.

As Pandora has sought the Commission’s approval and indicated its intention to become an FCC licensed broadcaster, I can infer that Pandora intends to comply with the payola rules over all of its businesses, both terrestrial broadcast and webcasting. If this were not the case, it would be a strange result that a broadcaster with an Internet radio offering could violate the spirit of the payola rules as an Internet radio operator but not as a terrestrial broadcaster. That would be quite a loophole.[6]

As National Public Radio reporter Laura Sydell wrote in the NPR Article about the Merlin deal (in which I am quoted):

“Pandora recently signed a deal with a company called Merlin, a consortium of independent record labels that’s adding another factor to the [Pandora music genome] algorithm: money.

Performers get paid a small royalty each time one of their songs is played on Internet radio, at a rate set by a Royalty Court at the Library of Congress. But Internet radio and labels can strike individual deals, as Pandora did with Merlin. The Internet service will recommend Merlin artists over those not affiliated with the consortium in exchange for paying Merlin’s musicians a lower royalty rate.

Merlin artists get more spins, and Pandora winds up paying less in royalties than it would if were giving those same spins to non-Merlin artists. Plus, consortium labels will get to suggest favorite tracks.”

 

There is no way for an artist like me to find out what the terms of these agreements are, even if the terms are being used to benchmark my royalty rates in Web IV.

I respectfully suggest that if the FCC grants this class payola waiver, the Commission should do so with specific guidance for how steering agreements are to be addressed by the payola rules. This is particularly true for Pandora. The lines between FCC licensees and Internet radio are rapidly blurring as companies like Pandora compete directly with broadcast radio and manipulate loopholes.

As CNN reported[7]:

Pandora is angry about the royalties it’s paying to [songwriters and] music publishers, so the company is making a bold move: It’s buying a terrestrial radio station in South Dakota mainly to score lower rates.

For reasons that are not obvious, Pandora has devoted itself to spending large sums to litigate royalty payments to artists and songwriters, to lobby in Congress against artist and songwriters, and to conduct public relations campaigns against us. Respectfully, the Commission should not allow them to also manipulate the public through steering agreements that skirt at best or may violate the payola rules and get away with it through an FCC loophole.

As Ms. Sydell reported in the NPR Article, Pandora’s CEO has an odd idea about what the payola rules require:

Jim Burger, a copyright lawyer and adjunct professor at Georgetown University, says this kind of deal would receive legal scrutiny if it were taking place on old-fashioned radio.

“If they were a terrestrial radio station and they were getting a discount on certain music as long as they played it more than other music, that would be considered illegal,” Burger says, adding that stations would have to announce such an arrangement upfront….

Pandora CEO Brian McAndrews says there’s no comparison between that and what his company is doing.

“Payola is where record labels pay radio stations to get airplay,” McAndrews says, “and the opposite is what happens today. As Pandora, we pay the record labels and the artist to allow airplay. So it’s completely different.”

 

Mr. McAndrews clearly never read Hit Men.[8] He may be confusing the $50 handshake with a liquidation preference. This is troubling because Pandora is going to great effort to become an FCC licensee and their CEO evidently has a poor understanding of the payola laws.

As Mr. Burger told National Public Radio (arguably concurring with Mr. Oxenford’s prescient 2008 article), if Pandora were a terrestrial station, the “discount” from the steering agreement would be considered illegal—and Pandora is trying hard to become one. As Mr. McAndrews is eager to tell investors, “Pandora is Radio”.[9]

Respectfully, I do not see how the FCC can ignore Pandora’s efforts at skirting the payola laws either in the current waiver proceeding or in Pandora’s assignment application for KXMZ.

 

iHeartMedia Steering Agreements
The iHeartMedia “steering agreements” were described in a heavily redacted statement filed under a protective order in Web IV by Mr. Steven Cutler, Executive Vice President of Business Development and Corporate Strategy at iHeartMedia.[10] In the unredacted part of his statement, Mr. Cutler confirms that iHeartMedia has 26 similar deals with independent labels and another with Warner Music Group.

Mr. Cutler states:

Although listener demand for iHeartRadio had more than doubled in the past year, iHeartMedia recognized that the cost of licensing music for the services was so high relative to the revenues these services could generate that it constrained the company’s ability and incentive to grow the services.   [REDACTED]

To address this problem, iHeartMedia developed a multi-pronged approach to reducing its music licensing costs. It began a campaign to negotiate performance licenses directly with individual record labels. These licenses were designed to promote the growth of iHeartRadio and increase overall digital promotion of the participating labels’ music. [REDACTED] [Emphasis added.]

Mr. Cutler clearly identifies the purpose of these direct agreements as being to (1) “promote the growth of iHeartRadio” and to (2) “increase overall digital promotion of the participating labels’ music.” I would add that there may well have been was a third purpose—to manufacture benchmarks for use in Web IV to influence the royalty rates to be paid to artists like me who are not party to one of these iHeartMedia agreements.

Ben Sisario of the New York Times reported[11] on iHeartMedia’s steering deal with Warner Music:

…that would for the first time allow the label and its acts to collect royalties when their songs were played on Clear Channel’s 850 broadcast stations. In exchange, Clear Channel will receive a favorable rate in the growing but expensive world of online streaming.

 

This quotation from the iHeartMedia press release also suggests that the labels are participating in iHeartMedia’s broadcasting revenues, further highlighting the quid pro quo:

“Focusing that same creativity on how best to grow the music business, [Big Machine] has developed this new model with [iHeartMedia] to let [Big Machine’s distributed] labels and artists participate in the revenue of broadcast radio immediately and in digital radio as it builds.”

 

Mr. Cutler’s testimony includes this statement regarding what I suspect are “steering” payments:

Prior to the [Warner agreement] being signed, my staff and I prepared a set of projections for iHeartMedia’s Board of Directors that demonstrated what iHeartMedia would pay Warner for the use of its sound recordings absent a deal, as well as what it would pay [the quid] – and the additional performances it would receive [the pro quo] – if the deal were signed. [Emphasis added.]

This reference raises the question of what the form of iHeartMedia label agreements said regarding steering payments and the method by which those payments are triggered and then calculated. If the purpose of the agreement was in part to lower royalty payments as stated by Mr. Cutler and if Mr. Cutler prepared projections for the approval of iHeartMedia’s board showing what iHeartMedia would pay without the agreement (presumably more) than with the agreement (presumably less), then the reference to “additional performances” would again seem to be the quid pro quo for the lower royalty payments. In other words—arguably the exact type of transaction that the payola statutes address.

I am also more persuaded that this quid pro quo was the very purpose of the agreement because there is a section of Mr. Cutler’s testimony entitled “iHeartMedia’s Efforts to Use Lower Royalty Music” that is entirely redacted.

In other words—the agreements that iHeartMedia negotiated and its board of directors approved are for consideration for airplay that seems to me would require disclosure under the payola rules. As Mr. Cutler stated in his sworn testimony, this was the purpose of the deals.

I would respectfully suggest to the Commission that these steering agreements are of vital importance to the public interest because of the vast number of recordings that we know are involved and that likely will be covered in the future. Over time, steered recordings could easily crowd out recordings by artists who were not party to a steering agreement—and the public would be none the wiser absent the FCC’s robust sponsorship identification requirements.

Other Steering Agreements

I am not aware of other steering agreements, but the Commission is in a position to ask members of the Radio Broadcasters Coalition to present any such agreements in evidence as part of the waiver hearing and is also in a position to ask Pandora to present their steering agreements as part of the evidentiary record for the KXMZ license assignment.

Pandora’s direct agreement with Naxos Records might be just such a candidate. The agreement was announced after the NPR Article and others raised questions about the payola implications of “steering agreements.” As the Radio and Internet Newsletter explained[12]:

[Pandora’s p]rivate licensing deals are significant for another reason. The CRB process of setting government-mandated rates has been distorted, some audio publishers believe, by a lack of real-world deal-making examples which could establish a value of licensed music that isn’t theoretical. Pandora used its Merlin [steering] deal as an anchor example in its initial argument brief. Presumably, the Naxos agreement could bolster Pandora’s case during this year-long lead-up to new rates….We reached out to Pandora to ask whether the Naxos licensing agreement includes similar “steering” as with Merlin, and received a polite “no comment.”

Why “no comment” and why all the secrecy regarding “steering agreements”?

  1. Conclusion

I would respectfully suggest that the Radio Broadcasters Coalition appears to be seeking to create a “payola lane” on their stations by further obfuscating from artists, songwriters, and the public the kinds of disclosure that would make them remind their listeners about steering deals.

Not only would the proposed class payola waiver potentially deceive the public, iHeartMedia and Pandora appear to be using steering agreements as benchmarks in rate proceedings that affect the rates paid to all artists. The FCC has the opportunity to address the legality of steering agreements in this proceeding and the Commission’s decision to act or refrain from acting could have far reaching effects.

From my perspective as an artist and songwriter, I see no reason why any broadcaster should be relieved of its obligations under the payola rules further to blur a quid pro quo that is exactly what the payola rules were designed to prevent.

Respectfully submitted.

 

David C. Lowery /s/

[1] Laura Sydell, “Pandora’s New Deal, Different Pay, Different Play” (Nov. 26, 2014) available at http://www.npr.org/2014/11/26/366339553/pandoras-new-deal-different-pay-different-play (hereinafter, “NPR Article”)

[2] “The Return of the $50 Handshake: Naxos Says “No Comment” About Steering Payola In Pandora Deal” available at http://thetrichordist.com/2015/02/17/the-return-of-the-50-handshake-pandora-says-no-comment-about-steering-payola-in-direct-deal-with-naxosrecords/

[3] Press Release, “Big Machine Label Group and Clear Channel Announce Groundbreaking Agreement to Enable Record Company and Its Artists to Participate in All Radio Revenue Streams and Accelerate Growth of Digital Radio” (June 5, 2012) available at http://www.iheartmedia.com/Pages/Big-Machine-Label-Group-and-Clear-Channel-Announce-Groundbreaking-Agreement-to-Enable-Record-Company-and-Its-Artists-to-Par.aspx

[4] In the Matter of Determination of Royalty Rates for Digital Performance in Sound Recordings and Ephemeral Recordings ) (2016–2020) (Web IV) Docket No. 14–CRB–0001–WR (hereinafter “Web IV”).

[5] Ed Christman, “Less Could Mean More: Why Merlin’s Deal With Pandora May Pay Off” (Billboard, Dec. 11, 2014) available at http://www.billboard.com/articles/business/6405575/analysis-merlin-deal-pandora (emphasis added).

[6] As Mr. Oxenford persuasively argues, the Internet radio provider might well be subject to prosecution for commercial bribery.

[7] “Pandora buys South Dakota radio station in bid for lower fees” (June 11, 2013) available at http://money.cnn.com/2013/06/11/technology/pandora-buys-radio-station/index.html

[8] Fredric Dannen, Hit Men: Power Brokers and Fast Money Inside the Music Business (1990).

[9] Pandora Media’s CEO Discusses Q1 2014 Results – Earnings Call Transcript http://seekingalpha.com/article/2164393-pandora-medias-ceo-discusses-q1-2014-results-earnings-call-transcript?page=2

[10] Testimony of Steven Cutler, Webcasting IV Proceeding, available at http://www.loc.gov/crb/rate/14-CRB-0001-WR/statements/iHeartMedia/Vol%203_02%20Testimony%20of%20S%20Cutler/2014_10_07_Testimony_of_S_Cutler (“Re_PUBLIC.pdf (“Redacted Cutler Testimony”).

[11] Ben Sisario, “Clear Channel-Warner Music Deal Rewrites the Rules on Royalties” New York Times (Sept. 13, 2013) available at http://www.nytimes.com/2013/09/13/business/media/clear-channel-warner-music-deal-rewrites-the-rules-on-royalties.html?_r=0 (emphasis added)

[12] Brad Hill, “Pandora closes direct licensing deal with leading classical label Naxos”, Radio and Internet Newsletter (Feb. 12, 2015) available at http://rainnews.com/pandora-closes-direct-licensing-deal-with-leading-classical-label-naxos/.

Return of the $50 Handshake: My FCC Comments on Proposed Payola Waiver and “Steering” Agreements PT 1

You think internet “fast lanes” were problematic? How about “payola lanes”  on terrestrial radio and webcasting? Payola is back! And it wants to go Legit this time.  That’s right, broadcasters are proposing a payola waiver from the FCC.  Here is the document they filed with the FCC.  Read it for yourself. It is freaking unbelievable.  PDF below or you can read it on the FCC website here.

 DA-15-325A2

As a member of the public you can make an “express” comment to FCC.  It doesn’t have to be as long and as detailed as my comment.   It can simply be a couple sentences.   Proceeding number is 15-52.  Deadline is tomorrow May 12.  Link here:

http://apps.fcc.gov/ecfs/upload/display

 

BEFORE THE FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554

MB Docket No.15-52

Comments of David Lowery In the Matter of Media Bureau Seeks Comments on Petition for Class Waiver of the Commission’s Sponsorship Identification Requirements Filed by the Radio Broadcasters Coalition – March 20, 2015

My name is David Lowery. I am a founding member of the groups Cracker and Camper Van Beethoven and a lecturer at the Terry School of Business at the University of Georgia at Athens. I have written or co-written and recorded the songs performed by my bands for many years. I also write The Trichordist blog devoted to issues of importance to independent artists and songwriters. I am filing this comment on my own behalf from the perspective of an independent artist and songwriter.

 

I appreciate the opportunity to comment on the Radio Broadcaster Coalition payola waiver, and appreciate the FCC’s interest in hearing from the public on this critical matter of public interest. I respectfully oppose the Commission’s grant of the payola class waiver because I think at least iHeartMedia and Pandora have entered into many “steering agreements” that demonstrate a desire to find a loophole in the payola laws. I suggest that the Commission should make it no easier for these massive media companies to circumvent the law than it already is. I also respectfully suggest that granting the waiver will make steering agreements the 21st century version of the notorious “$50 handshake.”

 

Are Steering Agreements the New $50 Handshake?

While I concur with many of the comments that have been already filed objecting to the class payola waiver on public interest grounds, “steering agreements” are a problem with the waiver that I have not seen made by others. “Steering agreements” implicate the “other valuable consideration” and “indirect payment” prongs of the payola rules.[1]

I respectfully suggest that “steering agreements” are already creating a “payola lane” on both terrestrial and Internet radio to which the listener is none the wiser as it is. If the Commission grants the class waiver to the Radio Broadcasters Coalition, the Commission will make it even easier for a “payola lane” to form which I respectfully suggest is not in the public interest.

This payola lane is not only a creature of at least iHeartMedia’s “steering agreements” with record companies, it is also a factor in Pandora’s direct licenses. While Pandora is not part of the Radio Broadcast Coalition, the “class waiver” sought will benefit Pandora when the Commission approves Pandora’s acquisition of KXMZ, which appears to be imminent given the Commission’s recent ruling in Pandora’s favor on foreign ownership.[2]

 

Steering Agreement Background

The direct licenses between record companies and iHeartMedia and Pandora are reported to contain “steering agreements.” “Steering agreements” relate to situations where the broadcaster or webcaster pays a performance royalty and wishes to reduce the cost to the broadcaster or webcaster of those royalty payments. The broadcaster or webcaster negotiates a “steering agreement” directly with a record company (outside of any statutory license) pursuant to which the broadcaster or webcaster pays less if they play more of the record company’s catalog. This arrangement sounds counterintuitive because if the station plays more of the label’s music, one would expect that the station would pay a higher royalty—because more is…well, more.

However, “steering agreements” allow the broadcaster or webcaster to pay a lower royalty payment (the quid) if the broadcaster or webcaster plays more of the record company’s recordings (the pro quo). The broadcaster or webcaster then “steers” more of the record company’s recordings to the listener in order to qualify for the lower royalty payment. (I suspect that there is a contractual formula to give effect to the quid pro quo, but the specific contract terms of the iHeartMedia and Pandora deals are confidential.)

At this point, I can guess that the artists whose recordings were “steered” are paid less and the lower rate could apply on a catalog-wide basis even to artists whose recordings were owned by the record company concerned but were not “steered.” We just don’t know because the deals are secret.

The listener is none the wiser and neither are artists not “lucky” enough to be included in one of these agreements—absent the sponsorship identification required by the payola statute that the FCC is required to oversee. I can easily understand why the Radio Broadcaster Coalition would want a class waiver to further obfuscate this quid pro quo.

Is Less More?

This whole arrangement may seem counterintuitive because we are accustomed to payola being a cash payment or other valuable consideration paid to a broadcaster to incent them to do something they do not disclose to the public at all—a mistake that even Pandora’s CEO made in public[3]. The popular conception of payola predates the payment of public performance royalties for sound recordings in the U.S.[4]

 

I suggest that an undisclosed payment under a “steering agreement” is the identical transaction to more traditional payola, it just takes the “$50 handshake” into the digital age. The benefit still flows from the record company to the broadcaster or webcaster, it’s just in the form of paying less rather than palming a bill. Broadcasters did not want to disclose the $50 handshake, so perhaps it is not surprising that they are seeking a waiver to further obfuscate the benefits from their “steering agreements.”

 

If anything, these steering transactions are even more insidious than the $50 handshake as they are only detectable if you have access to the relevant contracts or the Commission requires that broadcasters disclose them under the payola statutes. iHeartMedia announced their deals but not much in the way of specifics. Pandora likewise disclosed some terms of their Merlin deal but became more circumspect with their Naxos agreement.

It is also important to point out that “steering agreements” ostensibly apply to entire catalogs of music and not just to the “Top 40” hits.

I initially thought that Pandora would not be subject to the payola laws as an Internet radio station, but I have become persuaded by a 2008 article[5] about the applicability of the payola laws to Internet radio written by Pandora’s well-known Washington, DC counsel, David Oxenford. I think this passage by Attorney Oxenford applies particularly well by analogy to Pandora’s steering agreements:

“The payola statute, 47 USC Section 508, applies to radio stations and their employees, so by its terms it does not apply to Internet radio (at least to the extent that Internet Radio is not transmitted by radio waves – we’ll ignore questions of whether Internet radio transmitted by wi-fi, WiMax or cellular technology might be considered a “radio” service for purposes of this statute).  But that does not end the inquiry.  Note that neither the prosecutions brought by Eliot Spitzer in New York state a few years ago nor the prosecution of legendary disc jockey Alan Fried in the 1950s were brought under the payola statute.  Instead, both were based on state law commercial bribery statutes on the theory that improper payments were being received for a commercial advantage.  Such statutes are in no way limited to radio, but can apply to any business.  Thus, Internet radio stations would need to be concerned.”

 

While Mr. Oxenford’s excellent and thorough analysis raises the question of whether Internet radio stations ought to be subject to commercial bribery rules regardless of whether the station is an FCC licensee, in Pandora’s case the Internet radio station will be an FCC licensee if the Commission approves the KXMZ transfer.[6] I have to believe this additional fact could change his analysis.

His point seems to be that the behavior is bad, even if Pandora can find a loophole to hide in for purposes of the payola statute.

 

Goose and Gander: The Payola Lane and Pandora’s Planned Acquisition of KXMZ

The payola lane and steering agreements are of particular concern to artists and songwriters in light of the pending application to assign FM broadcast station KXMZ(FM), Box Elder, South Dakota, from Connoisseur Media Licenses, LLC to Pandora Radio.[7] As the Commission’s recent ruling[8] suggests that the FCC may approve the assignment without regard for Pandora’s motivation, I respectfully believe that artists and songwriters will expect the FCC to address the payola implications of “steering agreements.”

I would assume that approving the assignment of the KXMZ license to Pandora will require the FCC to enforce the law against Pandora as it would any other licensed broadcaster. This presents the question: How should the FCC address payola in Pandora’s existing online business if Pandora becomes an FCC licensed broadcaster? Will the FCC treat Pandora differently in its existing webcasting business than its newly acquired broadcasting business? For that matter, will the FCC require iHeartMedia to comply with the payola statutes in its online business following the same logic?

Will all broadcasters subject to the statutory webcasting license be able to take what would otherwise be payola as Attorney Oxenford suggested in 2008? Will Pandora or other licensees not currently before the FCC be able to benefit from the requested payola waiver from the FCC?

Is what’s good for the goose also good for the gander? Is there a principled reason why there should be a “payola lane” on the Internet where the substance of the rules do not apply, even once Pandora becomes an FCC licensed broadcaster? If so, then why should Internet radio receive special treatment?

 As Pandora will be the only “pureplay” webcaster that is also an FCC licensee once the Commission approves the assignment of KXMZ, I respectfully suggest that it is incumbent on the FCC to clarify whether the payola rules apply to all aspects of Pandora’s business, including its webcasting business. That would certainly seem to be the public policy intent of the payola statutes as I follow Attorney Oxenford’s argument.

As Pandora will be the only “pureplay” webcaster that is also an FCC licensee once the Commission approves the assignment of KXMZ, I respectfully suggest that it is incumbent on the FCC to clarify whether the payola rules apply to all aspects of Pandora’s business, including its webcasting business. That would certainly seem to be the public policy intent of the payola statutes as I follow Attorney Oxenford’s argument.

Pandora’s motives for buying KXMZ are well known[9]—Pandora has no connection to South Dakota and has shown little interest in the public welfare of the citizens of Box Elder. Pandora is buying the station for one reason only—Pandora wants to align itself against songwriters for a commercial advantage in its webcasting business otherwise unrelated to its KXMZ broadcasting business.

As the FCC has made it clear to songwriters that Pandora’s motives for buying KXMZ are of no concern in approving the license assignment, I respectfully suggest that the FCC should also make it clear to songwriters, artists and indeed to the citizens of South Dakota, whether the quid pro quo in steering agreements are subject to the payola statutes and if the same rules will apply to Pandora.

CONTINUED IN PART II

 NOTES

[1] 47 C.F.R. § 73.1212(a): Sponsorship identification; list retention; related requirements.

(a) When a broadcast station transmits any matter for which money, service, or other valuable consideration is either directly or indirectly paid or promised to, or charged or accepted by such station, the station, at the time of the broadcast, shall announce:

(1) That such matter is sponsored, paid for, or furnished, either in whole or in part, and

(2) By whom or on whose behalf such consideration was supplied: Provided, however, That “service or other valuable consideration” shall not include any service or property furnished either without or at a nominal charge for use on, or in connection with, a broadcast unless it is so furnished in consideration for an identification of any person, product, service, trademark, or brand name beyond an identification reasonably related to the use of such service or property on the broadcast….
[2] In re Pandora Radio LLC, Petition for Declaratory Ruling Under Section 310(b)(4) of the Communications Act of 1934, as Amended (Adopted May 1, 2015).

[3] See NPR Article, note 9 below.

[4] See Digital Performance Right in Sound Recordings Act of 1995, Pub.L. No. 104-39, 109 Stat. 336, codified as 17 U.S.C. §106.

[5] David Oxenford, “Payola on Internet Radio – Legal?” (Sept. 10, 2008) available at http://www.broadcastlawblog.com/2008/09/articles/payola-on-internet-radio-legal/

[7] Id. and note 2 above.

[8] See note 2 above.

[9] See CNN report in note 15 below.

BREAKING–Leaked internal email from NPR’s Policy and Representation Division Explaining NPR Membership on McCoalition

We were sent this internal email from inside National Public Radio by a whistleblower.  The internal email was apparently in response to the criticism of NPR coming from independent artists online.  As we suspected, it appears that NPR’s participation in the controversial “Mic Coalition” (or as we call it the “McCoalition”) was a decision taken by NPR’s Policy and Representation division (aka “suits”) without consulting with any of the music or news workers or any of the NPR member stations.

NPR is participating in the Music, Innovation & Consumers (MIC) Coalition to ensure that public radio’s voice is heard in future policy decisions involving copyright law. Changes to copyright law may have a direct impact on public radio stations’ abilities to bring music to listeners nationwide.

Our participation in this coalition is not an endorsement of the business plans or activities of other members.

The coalition has not yet made specific legislative or regulatory proposals. We will reassess our participation in the coalition as such proposals are drafted.

We have joined the MIC Coalition through NPR’s Policy and Representation division, which is charged with representing the needs and interests of NPR Member Stations before federal legislative and regulatory bodies. This role is stipulated in NPR’s charter which provides that it is part of NPR’s mission to represent our members in matters of mutual interest.

Our participation in the coalition is completely separate from NPR’s newsroom. NPR journalists and music curators have absolutely no role or involvement in the coalition.

Who Did NPR Get Into Bed With?

What’s different about the McCoalition is that we now see who our enemies are.  Not only does the McCoalition include the NAB–an extraordinarily powerful special interest group long devoted to protecting crony capitalism and the broadcaster loophole–it also includes Google, Amazon, Pandora, the Digital Media Association (of which Google/YouTube, Amazon and Pandora are members), the Computer & Communications Industry Association (of which Google, Amazon, Pandora are members) Cox Media Group, iHeartMedia (formerly Clear Channel), Salem Media Group, the National Association of Broadcasters (of which Cox, iHeart, Salem and Pandora are members), the Music Licensing Committee (of which Cox and Clear Channel are members), the Consumer Electronics Association (of which Amazon, Google and Pandora are members), the National Restaurant Association (which fought the performance royalty for songwriters whose music is performed in restaurants), the American Hotel and Lodging Association (which also fought the performance royalty for songwriters).  And then there are the human shields at the Educational Media Foundation and, as David has pointed out, National Public Radio.

Crony capitalists with a combined market cap in excess of $2 trillion seeking protection for the special interests and aligned against artists and songwriters.

The restaurants have a particularly unsavory history on this point–their last effort to screw songwriters was with the highly controversial 1998 special interest legislation, the Fairness in Music Licensing Act.  That debacle ended in a ruling against the United States in arbitration at the WTO that ruled that the restaurant special interest legislation violated a number of international laws as was predicted by then-Register of Copyright Marybeth Peters but ignored by the lobbyists and the Congress.  The U.S. taxpayer has to pay $3.3 million in fines ordered by the tribunal and paid to European rights holders.  So thanks to the restaurants, the Congress passed an illegal law requiring U.S. taxpayers to pay for foreign songwriters–millions and millions of taxpayer dollars.  Would you like fries with that?

And if that dark history wasn’t enough, the whole group is organized by the Washington, DC shillery, Twin Logic Strategies–the brainpower behind the Internet Radio Fairness Act.  This is “astroturf” in every sense of the word–a manufactured alliance to taint the Congress no doubt with threats and intimidation for anyone who would dare consider supporting the Fair Play Fair Pay Act.  The Act accomplishes two main goals:  pay artists in line with the rest of the world and stop Pandora and SiriusXM from screwing legacy artists with the pre-72 loophole.  In other words, doing what all these companies and their lobbyists stand for–screwing artists and especially songwriters.

So we understand exactly what the unifying principle is behind this McCoalition–they don’t want to pay for music.  And neither do the NPR stations that ask us to play for free as David has pointed out.  Unfortunately, NPR’s “Policy and Representation division” doesn’t understand that when our friends at NPR ask us for freebies we’re happy to help because it is NPR doing the asking.  Now that NPR has aligned itself with millionaires and billionaires, not to mention companies with trillions in market cap, NPR has made anyone who gives the freebies into a chump.

We all know that our friends at NPR are better than that.  That’s why whistleblowers come to us.  But as long as our friends at NPR aren’t allowed to publicly reject the suits, it does make you wonder what’s going on.

But now that the suits forced NPR to join the McCoalition–how much does that McCoaltion membership cost?  And who paid it?

Bad Things Happen When Lawyers Stop Representing Clients, and Start Representing Causes – John Blaha Ordered to Pay Rightscorp Attorney’s Fees

davidclowery:

This may be a little far down in the weeds for some of you. But this ruling is good. If this lawyer Pietz had won it would have totally gutted what’s left of the DMCA act. This would have made unworkable the only mechanism there is left to stop unrepentant pirates when the cable companies refuse to cooperate with rights holders. The Blaha suit always seemed to me that it was really about protecting the bad business practices of cable companies not defending John Blaha’s rights. Too bad John Blaha got stuck with the bill (well maybe not).

Originally posted on Philly Law Blog:

An interesting development in the world of copyright litigation, as rights holders secured a major victory in California on Friday. A court has ordered Morgan Pietz’s client in JohnBlaha v. Rightscorpto pay attorney’s fees due to a successful anti-SLAPP motion filed by the defendants. It raises ethical issues about using actual clients to try and further an anti-copyright law agenda, and drum up business.

A little bit of background…

Rightscorp is an anti-piracy corporation. It monitors BitTorrent usage, and then sends out notices to pirates who are stealing and distributing copyrighted content. From there, the company requests that pirates stop stealing the content, and pay the rights holder a reasonable fee of about $20. In this instance, Rightscorp was contacting people who stole and distributed films like The Shawshank Redemption and The Lord of The Rings: The Fellowship of the Ring, two of my favorite movies. Notably, Lord of…

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Congratulations to David Byrne for Appointment to Board of SoundExchange

This is truly good news for performers. David Byrne is not only a tireless and eloquent advocate for all artists, he is a classy guy. We could not be more pleased by this announcement.

http://www.hypebot.com/hypebot/2015/05/david-byrne-joins-soundexchange-board-of-directors.html

SoundExchange is the independent non-profit collective management organization representing the entire recorded music industry. The organization collects statutory royalties on behalf of over 100,000 recording artists and master rights owners for the use of their content on satellite radio, Internet radio, cable TV music channels and other services that stream sound recordings. The Copyright Royalty Board, created by Congress, has entrusted SoundExchange as the sole entity in the United States to collect and distribute statutory digital performance royalties from more than 2,500 services. SoundExchange has paid out more than $2 billion in royalties since its inception. For more information, visit http://www.SoundExchange.com or http://www.facebook.com/soundexchange.

 

Pandora Is in a Rate Class By Itself: The Near Interactive Rate

If you’ve followed the history of Pandora in the webcasting rate setting proceedings, you will remember the extraordinary sanctimony with which they approached artists.  We were told, you have to save our business, you’re too greedy, etc.  Sound familiar?

The one aspect of Pandora’s functionality we were always steered away from was its interactivity.  Why?  Two reasons.

If Pandora were found to be interactive, the Copyright Act would require Pandora to negotiate direct licenses with copyright owners large and small.  That would be a real headache for Pandora compared to the ease of the statutory webcasting license. Imagine the savings in transaction costs conferred on Pandora through the statutory license.  Not to mention the fact that Pandora would have to pay advances, which they don’t have to pay under the statutory license, and Pandora would also probably be faced with some of the same demands that Spotify and YouTube saw with demands for equity from major labels and the Merlin group of labels.  (Although strangely enough, this was never an issue with Apple…gee, would that be?)

The other reason is that artists get paid directly by SoundExchange regardless of whether they are recouped under their record deals.  This is a big damn deal, because it keeps the record companies’ paws off of the artist share of statutory licensing revenue.  SoundExchange fights hard to keep this structure and we should all be grateful for it.  In this way, SoundExchange is very much like ASCAP, BMI and SESAC.

Not only does SoundExchange pay the artist’s share directly to the artists, there are other benefits of collective licensing such as the right to conduct a royalty examination of companies like Pandora that we get from the statutory license as administered by SoundExchange.  In fact, SoundExchange announced it is conducting an “audit” of Pandora right now.  Any recovery under those audits will also get paid to the artists based on their share of the recovery.  (And if you believe Pandora has accounted perfectly to artists and songwriters, surely you jest.)

Yet as David has shown, Pandora is pretty close to being interactive, which would take them out of the statute, but Pandora clearly is not truly interactive, or “on demand” the same way Spotify is.  On the other hand, Pandora is not really a “webcaster” either because of their thumbs–not the thumb of the nose they give to artists and songwriters, but the ones they use to create their “near interactive” service.

So what do do about this?  There is no way on earth that artists should give up their right to be paid through SoundExchange and there’s no reason to encourage direct deals.  Pandora would be more than happy to do more direct deals because those only weaken collective licensing which is at least Chris Harrison’s apparent motivation in life dating back nearly 10 years from his time at DMX.  (Harrison is Pandora’s lawyer who has taken point on destroying collective licensing for ASCAP and BMI songwriters.  See Billboard’s expose on Harrison’s anti-creator shenanigans at DMX, now Mood Music that he brought with him to Pandora.)

On the other hand, it seems to be a historical loophole that sustains the perception of Pandora as a non-interactive service.  It also shows what happens when you cut these Silicon Valley companies a break as we did years ago by looking the other way on the issue of interactivity with Pandora.  Not to mention a very questionable ruling in the Launchcast case that cherry picked law and facts as David has demonstrated.

We think that Pandora should get to keep the statutory license, not be encouraged to do direct deals, but pay more to artists (and to songwriters, for that matter).  This could be accomplished by establishing a “near interactive” tier of royalties for companies like Pandora that purposefully dance around the interactive threshold but don’t cross it, or at least don’t cross it all the time.

A “near interactive” tier is something akin to the “near video on demand” concept in the movie world–something that is almost a functionality requiring a higher royalty but with a nod to the fact that it’s not quite that higher priced thing, or isn’t quite yet.

Because if there is one thing we have learned from Silicon Valley companies it is that as soon as they give their word in an agreement they start backsliding to find a way around it while they pretend not to be doing that exact thing.  This is what you call the “near asshole” tier.

Pandora will no doubt bitch about this idea and will also no doubt spend more money on legal fees and lobbyists than it would ever cost them if they just paid the damn royalty–just like they’re doing on pre-72.  But as David’s research has shown, it’s clearly the right way to go.  A “near interactive” tier lets us avoid direct licensing like the plague, support collective licensing through SoundExchange as our best defense against efforts like the McCoalition, audit all these services early and often, and make Pandora pay for the real value we confer on them.

And then we can talk about the use of artists names to build channels–a practice their business is built on that is totally uncompensated.

FCC Clears Way for Pandora to Buy Terrestrial Radio Station: Are Lower Rates Ahead For Artists?

Pandora’s actual business and technological innovations are behind them.  They seem to now be concentrating exclusively on “innovative” legal tricks, loopholes and gotchas.   The latest one is that Pandora is not only “non-interactive” it is now a “terrestrial” broadcaster.  Why? They have been more or less cleared by FCC to buy a single terrestrial radio station in Box Elder South Dakota (Population 9,083).

And <sigh> anything seems to go these days…

This will not end well.

http://www.allaccess.com/net-news/archive/story/141115/fcc-grants-pandora-declaratory-ruling-allowing-it-

 

Blake Morgan Takes the NAB to School: Why the McCoalition Should Say #irespectmusic

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The U.S. Copyright Office recently released its comprehensive Music Licensing Study, a roadmap for potential revisions to the Copyright Act.  The Copyright Office hosted a series of invitation-only roundtables to hear testimony from a variety of stakeholders.  The New York roundtable was held on June 23, 2014 and included Paul Fakler representing the National Association of Broadcasters and Blake Morgan, an artist, songwriter and label owner involved with the #irespectmusic movement.

The National Association of Broadcasters (“NAB”) is the principle lobbying group representing largely the commercial radio stations in the United States.  Broadcasters are an extremely powerful lobbying group that has stopped artists  from being paid a broadcast royalty in the U.S. for nearly 100 years–even though artists are paid for broadcasting in every other democracy and major economy around the world except for countries like North Korea, Iran and Rwanda.

The Copyright Office released transcripts of these hearings that are readily available but the transcripts are like open secrets–read by those in the know, but most journalists don’t bother reading them.

The Artist Rights Watch team read them–of course–and remembered an exchange between Blake and the NAB representative which we excepted below.  Two events happened last week that make this particularly relevant.  First was Congressional testimony last week by the head of the Copyright Office, Register of Copyright Maria Pallante where she gave her unequivocal support to the Fair Play Fair Pay Act introduced in Congress by Rep. Jerry Nadler (D-NY).

The other was the formation of the “Mic Coalition” (or as a commenter said, the “McCoalition”) with it’s announced goal of making a happy meal of the Fair Play Fair Pay Act and artist pay for radio play.

What’s different about the McCoalition is that we now see who our enemies are.  Not only does the McCoalition include the NAB–an extraordinarily powerful special interest group long devoted to protecting crony capitalism and the broadcaster loophole–it also includes Google, Amazon, Pandora, the Digital Media Association (of which Google/YouTube, Amazon and Pandora are members), the Computer & Communications Industry Association (of which Google, Amazon, Pandora are members) Cox Media Group, iHeartMedia (formerly Clear Channel), Salem Media Group, the National Association of Broadcasters (of which Cox, iHeart, Salem and Pandora are members), the Music Licensing Committee (of which Cox and Clear Channel are members), the Consumer Electronics Association (of which Amazon, Google and Pandora are members), the National Restaurant Association (which fought the performance royalty for songwriters whose music is performed in restaurants), the American Hotel and Lodging Association (which also fought the performance royalty for songwriters).  And then there are the human shields at the Educational Media Foundation and, as David has pointed out, National Public Radio.

A combined market cap in excess of $2 trillion aligned against artists and songwriters.

And if that wasn’t enough, the whole group is organized by the Washington, DC shillery, Twin Logic Strategies–the brainpower behind the Internet Radio Fairness Act.  This is “astroturf” in every sense of the word–a manufactured alliance to taint the Congress no doubt with threats and intimidation for anyone who would dare consider supporting the Fair Play Fair Pay Act.  The Act accomplishes two main goals:  pay artists in line with the rest of the world and stop Pandora and SiriusXM from screwing legacy artists with the pre-72 loophole.  That’s what all these companies and their lobbyists stand for.

While the McCoalition has so far come up with platitudes and glittering generalities about their motives, make no mistake–these people are out to stop artist pay for radio play and probably go much, much farther to roll back other artist rights–or else why are the restaurants and hotels in the group?  Why is NPR in the group?

In other words–if you ever doubted before, the McCoalition should provide you with all the evidence you need.  Companies with trillions of dollars of market cap and hundreds of millions of lobbying power and political contributions are out to nail artists and songwriters to the wall.

And at the roundtables, the goals of this group were articulated by Mr. Fakler in this exchange with Blake, moderated by Jacqueline Charlesworth, General Counsel and Associate Register of Copyrights, U.S. Copyright Office.

MR. MORGAN: My name is Blake Morgan, I’m a recording artist, and a songwriter, and a label owner here in New York City––in fact––right up the block. And in January, I started something called “I Respect Music,” which began as a petition to Congress, urging Congress to support artists pay for radio play. And many, many thousands of signatures later, it’s grown into a grass roots movement with people holding up signs on Twitter, and Facebook, and Instagram, and covered by major national press, and all sorts of terrific things. It’s about a simple idea: that artists should be paid for their work. When it comes to radio air play, we are the only democratic country in the world that does not pay artists for radio play….

MR. FAKLER: Between the pre-existing service issue, and the radio issue––since I’m the one at the table with everybody’s arrows in my back––it may take me a little bit longer to respond to all of the various things. Let me start out with some general points here, because this has been a problem endemic to this discussion….

You know with respect to radio, and the promotional value of terrestrial radio, all I can say is that all of the studies still always showed radio as the number one discovery vehicle for sound recordings, and driver purchases. That hasn’t changed….

MR. MORGAN: With all due respect––and I can imagine how you feel here––but these aren’t arrows in your back, they are questions to your face. And the question for artists and musicians is: how is it possible that anyone can agree with a group of countries that don’t pay artists for radio play. A small group of countries that includes North Korea, Iran, and Rwanda. And to hear––you are actually the first person I have ever met face to face who I presume believes that we should not have this performance right in this country. And Kim Jong Un agrees with you, and it’s hard to believe. This —

MR. FAKLER: Really?

MR. MORGAN: Really, sir. There are many, many complicated issues here, but this part of it isn’t. This country is an idea. It is one that has lit the world for two centuries. And the idea is: we can do better. We’re here to form a more perfect union. We fix injustices, large and small. Sometimes it takes us a lot longer than it should, but we do it. And in the last century alone we’ve been able to split the atom. And put a man on the moon. And splice the gene. And I think artists and musicians are saying, “Can we please––can we pay Aretha Franklin when ‘Respect’ is on the radio?” That is the question.

MS. CHARLESWORTH: You have 30 seconds to respond and then we will continue, since there is a direct question.

MR. FAKLER: Well, I mean, I don’t know how one responds to these ad hominem. You know, the Kim Jong Un thing, it is––that is not, you know, an ad hominem is a great substitute for a policy argument. It is, sort of like the MPAA with the VCR and the Boston Strangler, and all of that. It makes for a good sound bite. But the point is, the promotional value is received. It’s something that has been a mutually beneficial arrangement for many years. It has been recognized by Congress. And to ignore that promotional value, and to minimize it, we just have a disagreement. But I don’t have to call you, you know, a name, or —

MR. MORGAN: I’m not calling you a name, sir. I’m simply reminding you that the rest of the democratic world sees value, and awareness, and promotion on the radio, and also says our work should be paid for. The only group of countries that does not agree with that is a “bad” group of countries. And it’s embarrassing I think––as the United States of America––when blues, and rock-n-roll, and hip hop, and Jazz, etcetera, are American innovations and American birthrights, and we don’t show the same amount of respect––pardon the overuse of the word––to those artists. So I’m not attacking you personally, or in any way. I’m really asking what is a very reasonable question to the music maker and music lover public. Which is: it is incomprehensible that we don’t have this right in this country when we are the ones, together, who came up with these art forms. And Belgium is able to do this, but we are not?

MR. FAKLER: And yet the American recorded music industry is the biggest, best, and envied throughout the world. And it has lived with this system for close to 100 years.

MR. MORGAN: We live with a lot of things for a long time–

MR. FAKLER: Not to mention the fact––

MR. MORGAN: — until we fix them.

MR. FAKLER: — that all of these other countries that you are discussing have very different legal regimes as relating to sound recordings in particular.

MS. CHARLESWORTH: Okay. I think both sides have made their points, and we are going to move on…I think Mr. Morgan is going to bring us home.

MR.MORGAN: Just very quickly. So this is-–you’re conducting a music licensing study about these issues, and in some of this stuff we do get lost in the tall weeds because it’s complicated. And, Mr. Fakler, you do have a tough gig here today, and I appreciate you coming here and being the standard bearer for that particular position. I guess as part of the study what did seem very simple to me––I didn’t hear anybody else and I’m just curious––is there anyone else at this roundtable that’s against a performance royalty at terrestrial radio?

[NO ONE RAISES THEIR HANDS]

So everyone here at this table except Mr. Fakler believes that there should be a performance royalty at terrestrial radio? Okay, thanks.

MR. FAKLER: Would anybody else’s clients actually have to pay the royalty?

[LAUGHTER]

MR. MORGAN: And actually, with a little comedy we can end with a little comedy. I appreciate that wherever I go, when I travel and I talk about this issue, I say that I understand the NAB’s position. It’s legitimate, and it’s one that we should pay attention to because it is serious, and it is valid. And the valid position is, “We don’t want it.” “We don’t want to pay for it.” And I get it. But, other than, “We don’t want to pay for it,” I have yet to hear an argument that is solid.

MS. CHARLESWORTH: Okay. Well, thank you, I’m glad we had a little bit of humor at the end….

The head of the Copyright Office echoed Blake’s feelings when she told Congress last week “it’s indefensible as a matter of law and frankly embarrassing as a matter of policy that the United States does not pay public performance royalties to the creators of music.  We are out of step with the rest of the world.”

And that’s a good place to leave it with the McCoalition:  They are frankly an embarrassment.

Blake will be taking the #irespectmusic message to Canadian Music Week in Toronto on Friday along with Zoë Keating.