Tomorrow! Live stream 3rd Artist Rights Symposium at @TerryCollege with @MMercuriadis David Lowery, @MusicTechPolicy @richardjburgess @helienne @northmusicgroup Samantha Schilling @crispinhunt @smalldrinkofh20 David Turner @jkdegen Steve Carlisle, Janice Pilch Mary Rassenberger
Livestream tomorrow (Nov 15) at 9am ET at this link https://www.facebook.com/ugambus
The CRB should sanction capricious delays that keep songwriters from getting paid.
When Did Noah Build the Ark? Will there be sanctions for absurd delays at the Copyright Royalty Board? — Music Technology Policy
We’ve all been predicting that Google will get broken up by government for any one of a host of reasons. It’s not just songwriters watching the overlawyered lawfare in the Copyright Royalty Board that produces the insulting trickledown royalty structure that you need a team of accountants to understand. Big Tech lawfare is everywhere and it’s even more insidious than you might think. Big Tech spreads their gold around the world to control politicians and conflict lobbyists and lawyers so their combined headlock on laws and markets is hard to comprehend. And then there’s the academics. We’ve been screaming from the rooftops about the censorious Google for years and Google still leads the charge against creators in particular and human decency in general.
Lots of politicians will tell you they want to break up Google and Facebook but will Google and Facebook tell them “I”m sorry Dave, I’m afraid I can’t do that.”
Eamon Javers at CNBC has a story that shows the most recent example of just how difficult it will be to get Google out of the government. Mr. Javers reports “How Google’s former CEO Eric Schmidt helped write A.I. laws in Washington without publicly disclosing investments in A.I. startups”.
Yes, that’s right: Shady Uncle Sugar is back in the news, this time with added corruption and even less transparency than a Google royalty audit. Mr. Javers reports that the crux of Uncle Sugar’s latest grift is that he was appointed by former House Armed Services Committee Chair and Club Raytheon plankowner Mac Thornberry to something called the National Security Commission on Artificial Intelligence. This “commission” is one of those “independent commission” thingys, but this one on AI didn’t exist before Uncle Sugar arrived.
Where the hell did that commission come from? Smells like astroturf to us. A complete fabrication Truman Show-style designed to push Eric Schmidt and Google even deeper into the AI business and the Washington swamp. Remember, Google acknowledges it ran AI research in cooperation with the Chinese government–in China–for years under the leadership of Stanford/Google University Professor Fei Fei Li. Keep an eye on that one.
According to the Commission’s website:
Section 1051 of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (P.L. 115-232) established the National Security Commission on Artificial Intelligence as an independent Commission “to consider the methods and means necessary to advance the development of artificial intelligence, machine learning, and associated technologies to comprehensively address the national security and defense needs of the United States.
And of course, you won’t be surprised to know that China has taken the lead on developing model AI regulations and business practices. Which brings us to Mr. Javers reporting and the National Security Commission on Artificial Intelligence.
We’ll keep poking around on this “commission”, but this entire commission thing smells like a Washington lobbyist (perhaps Shady Uncle Sugar himself) got the government to pay for a study and put the US government’s stamp of approval on its work product. With Sugar running the whole show. Full on astroturf. And remember–the very best astroturf constructs an alternate reality that is controlled by the special interests. Interests don’t get more special than Shady Uncle Sugar who is too special for his shirt and is so special it hurts.
Curiously, right about the time that Uncle Sugar started touting the Commission’s work product, China has some work product of its own along similar lines:
On September 6, 2022, the Shenzhen government passed China’s first local regulation dedicated to boost AI development – Regulations on Promoting artificial Intelligence Industry in Shenzhen Special Economic Zone (the Shenzhen AI Regulation), which will take effect on November 1, 2022.
The Shenzhen AI Regulation aims to promote the AI industry by encouraging governmental organizations to be the forerunners in utilizing related technology and increasing financial support for AI research in the city. It also establishes guidelines for public data sharing to organizations and businesses involved in the sector.
But of course the kicker with the ex-Googler Schmidt brought his own Sugar to the party as Javers tells us:
In short, the commission, which Schmidt soon took charge of as chairman, was tasked with coming up with recommendations for almost every aspect of a vital and emerging [AI] industry. The panel did far more under his leadership. It wrote proposed legislation that later became law and steered billions of dollars of taxpayer funds to industry he helped build — and that he was actively investing in while running the group.
That’s right–if you think the government is going to break up Google, just realize that Google doesn’t want to get broken up because it is all working so well with zero oversight whether they are bamboozling government oversight in Congress or ravaging songwriters at the Copyright Royalty Board. It’s hard to get them out of the government when they are the government. If the Oracle case showed us anything, it showed us that Google’s reach is far and wide. Their special brand of evil knows no boundaries. And we never have gotten an explanation for why Eric Schmidt suddenly left Google.
“Open the pod bay doors” is not going to get it done. We must have an answer when they say “I’m sorry, Dave, I’m afraid I can’t do that.”
[Well, here it is. Two years ago we warned everyone who would listen that TikTok were apparatchiks for the Chinese Communist Party–by law in China because of the CCP’s civil-military fusion–“If Google is the Joe Camel of data, then TikTok is the Joe Camel of intelligence.” We did panels warning about TikTok including the CEO’s struggle session and the CCP constitution–facts, you know. Tim Ingham warned that on top of everything else, the deals suck. And then there’s Twinkletoes, who is in our view a walking, talking Foreign Agent Registration Act violation.
Emily Baker White warns of the harms from TIkTok we identified 2 years ago coming home to roost.
[According to Emily Baker White writing in Forbes:]
China-based team at TikTok’s parent company, ByteDance, planned to use the TikTok app to monitor the personal location of some specific American citizens, according to materials reviewed by Forbes.
The team behind the monitoring project — ByteDance’s Internal Audit and Risk Control department — is led by Beijing-based executive Song Ye, who reports to ByteDance cofounder and CEO Rubo Liang.
The team primarily conducts investigations into potential misconduct by current and former ByteDance employees. But in at least two cases, the Internal Audit team also planned to collect TikTok data about the location of a U.S. citizen who had never had an employment relationship with the company, the materials show. It is unclear from the materials whether data about these Americans was actually collected; however, the plan was for a Beijing-based ByteDance team to obtain location data from U.S. users’ devices.
By Chris Castle
[from MusicTech.Solutions]
Streamers Lack of Local Cultural Contribution
Look at Spotify’s “Global Top 50” playlist on any day and the world’s biggest music service will show all or nearly all English language songs. With few exceptions these songs are performed by Anglo-American artists released by major record companies.
These “enterprise” playlists largely take the place of broadcast radio for many users where Spotify operates and Spotify competes with local radio for advertising revenue on the free version of Spotify.
Spotify’s now former general counsel told the recent inquiry into the music streaming economy conducted by the UK Parliament’s Digital, Culture, Media and Sport Committee, “Our job is sucking users away from radio”[2] and Spotify uses its market power to do just that.
However, Spotify has not been subject to any local content protections that would be in place for local radio broadcasters. Enterprise playlists that exclude local music contributes to the destruction of music economies, including performers. Local performers struggle even more to compete with Anglo-American repertoire, even in their own countries.
Due to this phenomenon, local artists are forced to compete for “shelf space” with everyone in their local language and then the Anglo-American artists and their record companies. This also means that local artists compete for a diminishing share of the payable royalties. The “big pool” revenue share method of royalty compensation is designed to overcompensate the English-language big names and reduce payments to artists performing in other languages in their own country.
Local Content Rules
Many countries implement local content broadcast rules that require broadcasters to play a certain number of recordings performed by local artists or indigenous people, songs written by local songwriters in local languages, or recordings that are released by locally-owned record companies.
Because streaming playlists, especially Spotify enterprise playlists or algorithmically selected recordings, are an equivalent to broadcast radio, there is a question as to whether national governments should regulate streaming services operating in their countries to require local content rules. Implementing such rules could benefit local performers and songwriters in an otherwise unsustainable enviornment.
The Fallacy of Infinite Shelf Space
Because Spotify adds recordings at a rate of 60,000 tracks daily (now reports of 100,000 tracks daily) and never deletes recordings, there is a marked competitive difference between a record store and Spotify. In the record store model, artists had to compete with recordings that were in current release; in the Spotify model, artists have to compete will all recordings ever released.
Adding the dominant influence of Anglo-American recordings on Spotify, the “infinite shelf space” simply compounds the competitive problems for non-English recordings.
Streaming Remuneration Helps Solve the Sustainability Crisis
The streaming remuneration model requires streaming services—not record companies—to pay additional compensation to nonfeatured and featured performers. Streaming remuneration would be created under national law and is compensatory in nature, not monies in exchange for a license. Existing licenses (statutory or contractual) would not be affected and remuneration payments could not be offset by streamers against label payments or by labels against artist payments.
Each country would determine the amount to be paid to performers by streaming services and the payment periods. Payments would be made to local CMOs or the equivalent depending on the infrastructure in the particular country.
European Corporate Dominance
It must also be said that the two founders of Spotify hold a 10:1 voting control over the company through special stock issued only to them. This means that these two Caucasian Europeans control 100% of the dominant music streaming company in the world. For comparison, Google and Facebook have a similar model, while Apple has a 1 share 1 vote structure as does Amazon (although Jeff Bezos owns a controlling interest in Amazon).
The net effect is that the entire global streaming music industry is controlled by six Caucasian males of European descent. This demography also argues for local content rules to protect local performers from these influences that have produced an English-only Global Top 50 playlist.
Local governments could consider whether companies with the 10:1 voting stock (so-called “dual class” or “supervoting” shares) should be allowed to operate locally.
Countries Can Respond to Streaming’s Homogenized Algorithmic Playlist Culture
Many national cultural protection laws have a history of sustaining local culture and musicians in the face of the Anglo-American Top 40 juggernaut. There is no reason to think that these agencies are not up for the task of protecting their citizens in the face of algorithms and neuromarketing.
By Chris Castle
[This MusicTechPolicy post appeared on Hypebot]
There’s an old saying among sailors that water always wins. Sunlight does, too. It may take a while, but time reveals all things in the cold light of dawn. So when you are free riding on huge blocks of aged government cheese like the digital music services do with the compulsory mechanical license, the question you should ask yourself is why hide from the sunlight? It just makes songwriters even more suspicious.
This melodrama just played out at the Copyright Royalty Board with the frozen mechanicals proceeding. Right on cue, the digital services and their legions of lawyers proved they hadn’t learned a damn thing from that exercise. They turned right around and tried to jam a secret deal through the Copyright Royalty Board on the streaming mechanicals piece of Phonorecords IV.
To their great credit, the labels handled frozen physical mechanicals quite differently. They voluntarily disclosed the side deal they made with virtually no redactions and certainly didn’t try to file it “under seal” like the services did. Filing “under seal” hides the major moving parts of a voluntary settlement from the world’s songwriters. Songwriters, of course, are the ones most affected by the settlement–which the services want the CRB to approve–some might say “rubber stamp”–and make law.
To fully appreciate the absolute lunacy of the services attempt at filing the purported settlement document under seal, you have to remember that the Copyright Royalty Judges spilled considerable ink in the frozen mechanicals piece of Phonorecords IV telling those participants how important transparency was when they rejected the initial Subpart B settlement.
This happened mere weeks ago in the SAME PHONORECORDS IV PROCEEDING.
Were the services expecting the Judges to say “Just kidding”? What in the world were they thinking? Realize that filing the settlement–which IF ACCEPTED is then published by the Judges for public comment under the applicable rules established long ago by Congress–is quite different than filing confidential commercial information. You might expect redactions or filings under seal, “attorneys eyes only,” etc., in direct written statements, expert testimony or the other reams of paper all designed to help the Judges guess what rate a willing buyer would pay a willing seller. That rate to be applied to the world under a compulsory license which precludes willing buyers and willing sellers, thank you Franz Kafka.
When you file the settlement, that document is the end product of all those tens of millions of dollars in legal fees that buy houses in the Hamptons and Martha’s Vinyard as well as send children to prep school, college and graduate school. Not the songwriters’ children, mind you, oh no.
The final settlement is, in fact, the one document that should NEVER be redacted or secret. How else will the public–who may not get a vote but does get their say–even know what it is the law is based on assuming the Judges approve the otherwise secret deal. It’s asking the Judges to tell the public, the Copyright Office, their colleagues in the appeals courts and ultimately the Congress, sorry, our version of the law is based on secret information.
Does that even scan? I mean, seriously, what kind of buffoons come up with this stuff? Of course the Judges will question the bona fides and provenance of the settlement. Do you think any other federal agency could get away with actually doing this? The lawlessness of the very idea is breathtaking and demonstrates conclusively in my view that these services like Google are the most dangerous corporations in the world. The one thing that gives solace after this display of arrogance is that some of them may get broken up before they render too many mechanical royalty accounting statements.
To their credit, after receiving the very thin initial filing the Judges instructed the services to do better–to be kind. The Judges issued an order that stated:
The Judges now ORDER the Settling Parties to certify, no later than five days from the date of this order, that the Motion and the Proposed Regulations annexed to the Motion represent the full agreement of the Settling Parties, i.e., that there are no other related agrements and no other clauses. If such other agreements or clauses exist, the Settling Parties shall file them no later than five days from the date of this order.
Just a tip to any younger lawyers reading this post–you really, really, really do not want to be on the receiving end of this kind of order.
Reading between the lines (and not very far) the Judges are telling the parties to come clean. Either “certify” to the Judges “that there are no other related agreements and no other clauses” or produce them. This use of the term “certify” means all the lawyers promise to the Judges as officers of the court that their clients have come clean, or alternatively file the actual documents.
That produced the absurd filing under seal, and that then produced the blowback that led to the filing of the unsealed and unreacted documents. But–wait, there’s more.
Take a close look at what the Judges asked for and what they received. The Judges asked for certification “that there are no other related agrements and no other clauses. If such other agreements or clauses exist, the Settling Parties shall file them no later than five days from the date of this order.”
What the Judges received is described in the purportedly responsive filing by the services:
The Settling Participants [aka the insiders] have provided all of the settlement documentsand, with this public filing, every interested party can fully evaluate and comment upon the settlement. The Settling Participants thus believe that the Judges have everything necessary to “publish the settlement in the Federal Register for notice and comment from those bound by the terms, rates, or other determination set by the” Settlement Agreement, as required under 37 C.F.R. 351.2(b)(2). The Settling Participants respectfully request that the Judges inform them if there is any further information that they require.
Notice that the Judges asked for evidence of the “full agreement of the Settling Parties”, meaning all side deals or other vigorish exchanged between the parties including the DSPs that control vast riches larger than most countries and are super-conflicted with the publishers due to their joint venture investment in the MLC quango.
The response is limited to “the settlement documents” and then cites to what the services no doubt think they can argue limits their disclosure obligations to what is necessary to “publish the settlement”. And then the services have the brass to add “The Settling Participants respectfully request that the Judges inform them if there is any further information that they require.” Just how are the Judges supposed to know if the services complied with the order? Is this candor?
It must also be noted that Google and the NMPA have “lodged” certain documents relating to YouTube’s direct agreements which they claim are not related to the settlement to be published for public comment. These documents are, of course, secret:
[And] are not part of the settlement agreement or understanding of the settling participants concerning the subject matter of the settlement agreement, and do not supersede any part of the settlement agreement with respect to the settling participants’ proposed Phonorecords IV rates and terms. Further, the letter agreements do not change or modify application of the terms to be codified at 37 C.F.R. 385 Subparts C and D, including as they apply to any participant. Rather, the letter agreements simply concern Google’s current allocation practices to avoid the double payment of royalties arising from YouTube’s having entered into direct agreements with certain music publishers while simultaneously operating under the Section 115 statutory license.
You’ll note that there are a number of declarative statements that lets the hoi polloi know that the Data Lords and Kings of the Internet Realms have determined some information involving their royalties is none of their concern. How do you know that you shouldn’t worry your pretty little head about some things? Because the Data Lords tell you so. And now, back to sleep you Epsilons.
So you see that despite the statements in the group filing to the CRB that the “Settling Participants” (i.e., the insiders) claim to have provided all of the settlement documents required by the Judges, Google turns right around and “lodges” this separate filing of still other documents that they think might be related documents with some bearing on the settlement that should be disclosed to the public but they apparently will not be disclosing without a fight. How do we know this? Because they pretty much say so:
Because the letter agreements are subject to confidentiality restrictions and have each only been disclosed to their individual signatories, each such music publisher having an extant direct license agreement with Google, Google and NMPA are lodging the letter agreements directly with the Copyright Royalty Judges, who may then make a determination as to whether the letter agreements are relevant and what, if anything, should be disclosed notwithstanding the confidentiality restrictions in each of the letter agreements.
Ah yes, the old “nondisclosure” clause. You couldn’t ask for a better example of how NDAs are used to hide information from songwriters about their own money.
The Judges noted when rejecting the similar initial frozen mechanical regulations that:
Parties have an undeniable right of contract. The Judges, however, are not required to adopt the terms of any contract, particularly when the contract at issue relates in part, albeit by reference, to additional unknown terms that indicate additional unrevealed consideration passing between the parties, which consideration might have an impact on effective royalty rates.
So there’s that.
What this all boils down to is that the richest and most dangerous corporations in commercial history are accustomed to algorithmically duping consumers, vendors and even governments in the dark and getting away with it. The question is, if you believe that sunlight always wins, do they still want to hide as long as they can and then look stupid, or do they want to come clean to begin with and be honest brokers.
As Willie Stark famously said in All the King’s Men, “Time reveals all things, I trust it so.”
By Chris Castle
[This post first appeared in MusicTech.Solutions]
Emmanuel Legrand prepared an excellent and important study for the European Grouping of Societies of Authors and Composers (GESAC) that identifies crucial effects of streaming on culture, creatives and especially songwriters. The study highlights the cultural effects of streaming on the European markets, but it would be easy to extend these harms globally as Emmanuel observes.
For example, consider the core pitch of streaming services that started long ago with the commercial Napster 2.0 pitch of “Own Nothing, Have Everything”. This call-to-serfdom slogan may sound good but having infinite shelf space with no cutouts or localized offering creates its own cultural imperative. And that’s even if you accept the premise the algorithmically programed enterprise playlists on streaming services should not be subject to the same cultural protections for performers and songwriters as broadcast radio–its main competitor.
[This] massive availability of content on [streaming] platforms is overshadowed by the fact that these services are under no positive obligations to ensure visibility and discoverability of more diverse repertoires, particularly European works….[plus] the initial individual subscription fee of 9.99 (in Euros, US dollars, or British pound) set in 2006, has never increased, despite the exponential growth in the quality, amount of songs, and user-friendliness of music streaming services.
Artists working new recordings, especially in a language other than English, are forced to fight for “shelf space” and “mindshare”–that is, recognition–against every recording ever released. While this was always true theoretically; you never had that same fight the same way at Tower Records.
This is not theoretically true on streaming platforms–it is actually true because these tens of millions of historical recordings are the competition on streaming services. When you look at the global 100 charts for streaming services, almost all of the titles are in English and are largely Anglo-American releases. Yes, we know–Bad Bunny. But this year’s exception proves the rule.
And then Emmanuel notes that it is the back room algorithms–the terribly modern version of the $50 handshake–that support various payola schemes:
The use of algorithms, as well as bottleneck represented by the most popular playlists, exacerbates this. Furthermore, long-standing flaws in the operations of music streaming platforms, such as “streaming fraud”, “ghost/fake artists”, “payola schemes”, “royalty free content” and other coercive practices [not to mention YouTube withholding access to Content ID] worsen the impact on many professional creators….
This report suggests solutions to bring greater transparency in the use of algorithms and invites stakeholders to undertake a review of the economic models of streaming services and evaluate how they currently affect cultural diversity which should be promoted in its various forms — music genres, languages, origin of performers and songwriters, in particular through policy actions.
Trichordist readers will recall my extensive dives into the hyperefficient market share distribution of streaming royalties known as the “big pool” compared to my “ethical pool” proposal and the “user centric” alternative. As Emmanuel points out, the big pool royalty model belies a cultural imperative–if you are counting streams on a market share basis that results in the rich getting richer based on “stream share” that same stream share almost guarantees that Anglo American repertoire will dominate in every market the big streamers operate.
Emmanuel uses French-Canadian repertoire as an example (a subject I know a fair amount about since I performed and recorded with many vedettes before Quebecoise was cool).
A lot of research has been made in Canada with regards to discoverability, in particular in the context of French-Canadian music, which is subject to quotas for over the air broadcasters which however do not apply to music streaming services. The research shows that while the lists of new releases from Québec studied are present in a large proportion on streaming platforms, they are “not very visible and very little recommended.”
It further shows that the situation is even worse when it is not about new releases, including hit music, when the presence of titles “drops radically.” It is not very difficult to imagine that if we were to swap Québec in the above sentence with the name of any country from the European Union [or any non-Anglo American country], and even with music from the European Union as a whole, we could find similar results.
In other words, there may be aggregators with repertoire in languages other than English that deliver tracks to streamers in their countries, but–absent localized airplay rules–a Spotify user might never know the tracks were there unless the user already knew about the recording, artist or songwriter. (Speaking of Canada, check the MAPL system.)
This is a prime example of why Professor Feijoo and I proposed streaming remuneration in our WIPO study to allow performers to capture the uncompensated capital markets value to the enterprise driven by these performers. Because of the market share royalty system, revenues and royalties do not compensate all performers, particularly regional or non-featured performers (i.e., session players and singers) who essentially get zero compensation for streaming.
Emmanuel also comments on the imbalance in song royalty payments and invites a re-look at how the streaming system biases against songwriters. I would encourage everyone to stop thinking of a pie to be shared or that Johnny has more apples–when the services refuse to raise prices in order to tell a growth story to Wall Street or The City, measuring royalties by a share of some mythical royalty pie is not ever going to get it done. It will just perpetuate a discriminatory system that fails to value the very people on whose backs it was built be they songwriters or session players.
We must think outside the pie.
[Introducing AMFA in the Senate is a huge thing and a major win by MusicFirst over the evil NAB and their $50 handshake. The bipartisan legislation has to pass both Senate and House to become law.]
Since the dawn of radio, the United States has been and remains the only major country in the world where terrestrial radio pays no royalties to performers or recorded-music copyright owners of the songs it plays — a situation that is largely due to the powerful radio lobby’s influence in Congress. While the more than 8,300 AM and FM stations across the country pay royalties to songwriters and publishers, they have never paid performers or copyright holders, although streaming services and satellite radio do.
On Thursday morning, Senators Alex Padilla (D-Calif.) and Marsha Blackburn (R-Tenn.) introduced the bipartisan American Music Fairness Act, which aims to rectify that situation by “ensur[ing] artists and music creators receive fair compensation for the use of their songs on AM/FM radio. This legislation will bring corporate radio broadcasters up-to-speed with all other music streaming platforms, which already pay artists for their music.”
Continued from Part 1 and Part 2
By Chris Castle
The American Association of Independent Music, the independent label trade association, filed comments with the Copyright Royalty Board opposing increasing the mechanical royalty to songwriters from the “frozen rates” to the 12¢ (plus cost of living adjustment) settlement rate of the participating record companies with the NMPA and NSAI. I wrote a reply to the A2IM comment that was timely filed with the CRB–barely. I will repost that comment in a few parts here on MTP. As I had about 10 minutes to write the comment due to the lateness of the A2IM filing, I will add some bracketed language to make it a bit less inside baseball.
The A2IM comment starts out claiming that the organization supports songwriters making more money, but then rejects the settlement that would demonstrably pay songwriters a higher rate because they don’t like the per-unit penny rate. That argument sounds a lot like “make it up on volume” which we’ve heard before.
Unfortunately, A2IM chose not to participate in the Phonorecords IV proceeding and came in a bit late to the party complaining of the check. Nobody stopped them from participating; it appears they put it all on red and it came up black. This is important because unlike independent songwriters who cannot afford the cost of participating at the CRB hearings, A2IM could have participated but evidently chose not to.
As I told the Judges in my comment, I will focus on a few issues raised by A2IM regarding the CRB settlement process in general, the penny rate structure of the mechanical royalty system in the United States, and their proposal that mechanical licensing for physical configurations be handed over to the Mechanical Licensing Collective.
A2IM raises an interesting point that mechanical rates should be different for new releases than for catalog titles. It sounds like they are asking for songwriters on new releases to take an even greater haircut than they already do given the effect of controlled composition clauses–which are justified by the same “investment” (largely recouped from artist royalties) that would be used to justify a further reduction in rates.
I agree that it is rather insane to expect the Judges to come up with a single rate that treats every song as the same when we all know that’s not true and never has been true.
Accordingly, the copyright law should make it easier for a hit songwriter to charge a higher rate for new releases because after all, the statutory rate is the “minimum”. Why shouldn’t a hit songwriter (or really any songwriter) be able to charge, say, double statutory for new releases, particularly if they are being courted to provide an unproven artist with a song for a single (often already produced). So while there may well be support for rejecting what A2IM describes as a one-size-fits-all approach, it may not come with the result they are looking for.
It must also be understood that when A2IM asks the Copyright Royalty Board to change the entire century-old mechanical royalty rate from an inflation-adjusted fixed penny rate to a percentage of wholesale is a vast undertaking. That’s why I made the following general comment to the judges:
As a general comment, all of these ideas must be examined under the authority delegated to the CRB by Congress, particularly in light of the Supreme Court’s recent ruling in West Virginia et al v. Environmental Protection Agency et al. [This case radically cut back the authority of administrative agencies like the CRB to vastly alter their Congressional mandate. Otherewise, the administrative state become effectively a fourth–and unaccountable–branch of government. At first blush, it appears to me that all of these ideas, whatever one thinks of the merits, will require Congress to act.
Mechanical Licensing Collective
The idea that the MLC will just take over the mechanical licensing process for configurations that Congress specifically held back from their portfolio [a few years ago] supports the idea that Congress would need to act in order to accomplish what A2IM wants to do.
I would respectfully point out to the Judges that the MLC has been sitting on top of at least $500,000,000 of other people’s money on the streaming side for a year or more and still can’t manage to get it matched and most importantly paid. There is also a growing anecdotal belief in the indie publisher community who actually deal with the MLC that there is no musical works database constructed as instructed by Congress—that database appears to be entirely resident at HFA, an MLC vendor. That seems odd and would be a good question for the Judges to ask of the MLC at the next administrative assessment. [I’ve found that people who are fans of a central planning approach to create a static database for a dynamic dataset like songs are usually people who themselves have never built one from the ground up.]
Plus, the MLC will not be able to do this additional work on physical accounting for free. I simply cannot imagine that the DLC will welcome the opportunity to provide free accounting services for access to the compulsory license when their own members pay up front a share of the millions that have vanished into the MLC in return for what I cannot say.
We must ask that if the A2IM members cannot afford the modest increase in mechanical royalties for their own songwriters—many of whom are their own artists—how will they afford a share of the administrative assessment plus the transaction costs of switching over to an entirely new accounting system plus what will almost certainly be frequent audits by the MLC.
Conclusion
In short, while A2IM’s comments are well-intentioned and I understand that they feel overlooked in the process, believe me they are not alone. There are a lot of people in the community who take their objections to heart and are willing to parlay about all these ideas in the future. Unfortunately, I don’t think there is support for derailing the process at the 11th hour which should come as no surprise to anyone.
By Chris Castle
This post first appeared on MusicTechPolicy, continued from Part 1
The American Association of Independent Music, the independent label trade association, filed comments with the Copyright Royalty Board opposing increasing the mechanical royalty to songwriters from the “frozen rates” to the 12¢ (plus cost of living adjustment) settlement rate of the participating record companies with the NMPA and NSAI. I wrote a reply to the A2IM comment that was timely filed with the CRB–barely. I will repost that comment in a few parts here on MTP. As I had about 10 minutes to write the comment due to the lateness of the A2IM filing, I will add some bracketed language to make it a bit less inside baseball.
Unfortunately, A2IM chose not to participate in the Phonorecords IV proceeding and came in a bit late to the party complaining of the check. Nobody stopped them from participating; it appears they put it all on red and it came up black. This is important because unlike independent songwriters who cannot afford the cost of participating at the CRB hearings, A2IM could have participated but chose not to.
As I told the Judges in my comment, I will focus on a few issues raised by A2IM regarding the CRB settlement process in general, the penny rate structure of the mechanical royalty system in the United States, and their proposal that mechanical licensing for physical configurations be handed over to the Mechanical Licensing Collective.
The Longer Table
I actually was pleased to join A2IM at their annual Indie Week conference recently in New York on a panel devoted to this very topic. I am well aware that they believe their members will be disproportionately affected by the increase in cost although I have not seen the data. After many years in the music business, I will take on faith for purposes of this letter that they are correct.
I completely concur that the negotiation process for CRB needs a relook if not an overhaul. I made the point on the A2IM panel that David Lowery and I intend to host a conference devoted largely to this subject [on November 15] at the University of Georgia at Athens. Dr. Lowery and I are both of a mind that this issue needs to be vetted by the Copyright Office in their roundtable format.
However, I do not concur that the Subpart B resolution should be derailed at the 11th hour because of these structural issues that lawmakers no doubt will need to resolve. The time for A2IM to have made their views known in Phonorecords IV has long passed. They had the opportunity to participate in the proceeding, which individual songwriters could not afford to do, and they did not. They had the opportunity to comment on the first and second comment periods for what became the rejected settlement and they did not. They had the opportunity to insert themselves in the second settlement and appear not to have done so until filing a comment on the last day at the 11thhour.
Derailing the settlement for this purpose at the 11th hour is inappropriate. Whether the Judges can even accomplish what is asked of them, I respectfully leave to Your Honors to decide, but I do think there’s a question of authority here. I do support including all these topics being on the table for Phonorecords V as do many other commenters.
What is the Actual Cost to Labels of the New Rates?
While I am prepared to take disproportionate impact on faith, I am less prepared to take disproportionate financial impact without more data. There is an assumption that A2IM labels all will have a one-to-one increase in costs because of the new rates, whatever they end up being. I’m not so sure about that and would want to know a few things including the following.
Many indie labels operate on a revenue share basis with their artists (or licensors). In those revenue share deals, the artist or licensor is paid a percentage of revenue that includes all mechanical royalties. In that structure, the new rates have arguably zero impact on the [independent] label.
Because of rate fixing dates in deals [with controlled compositions clauses] where the label does pay the mechanicals, the new rates would only apply to records delivered during the rate period, i.e., after January 1, 2023. Term recording artist agreements would typically include a controlled compositions clause as the Judges have noted in the Withdrawal Notice. In such an arrangement, the label would be paying a modest increase and could easily tell the artist that unless the artist-songwriter agreed to take still lower rates based on the previously frozen rates, the label would be unable to release their records.
A2IM does make a good point about the bull-headedness of the DSPs on permanent download rates. Perhaps the Judges could refer this issue to the Register for subsequent referral to the Department of Justice Antitrust Division to investigate these pricing practices. Congress seems focused on these kinds of issues at the moment.
[It is unfair for A2IM to complain of being excluded from settlement negotiations by the labels who did participate in the proceedings and who did negotiate a settlement with the NMPA publishers who also participated in the proceedings. Participating in the proceedings is a threshold condition for participating in a settlement of the proceedings. It’s hardly the case that the major labels conspired against the indies this time. If A2IM labels were concerned about being included in these negotiations there are a number of steps they could have taken, starting with participating in the bifurcated Subpart B proceeding–a much less expensive proposition than the streaming side.
There is also a threshold question–that A2IM does not really address–as to whether the CRB has the authority to unilaterally change U.S. mechanical licensing structure that Congress initiated in 1909 and has been based on a penny rate ever since, not to mention hundreds of thousands of term recording artist agreements and licenses incorporating those statutory rates. The entire US recording industry is built on statutory rates and controlled compositions clauses, not to mention the valuations of music publishing catalogs.
That change requested by A2IM is a question of such “magnitude and consequence” that it should require Congress to act based on both the CRB’s statutory authority, the U.S. Supreme Court’s recent holding in West Virginia vs. EPA as well as common sense. Not to mention there are other reasons why getting a CRB case before the Supreme Court could backfire and disrupt a process that in other important ways is working quite well.]
The Trichordist 
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