The Digital Royalty Fight: A Primer for Business Journalists Part Two

How Thom Yorke And Nigel Godrich Pulled Their Solo Recordings From Spotify.

Thom Yorke and Nigel Godrich blew up the Internets last week when they abruptly pulled some of their catalogue from Spotify.  I’ve been getting many inquiries as to how they managed to do this, when other artists and songwriters can’t.  Short answer: they were able to do this because they controlled all or most of the rights to their recordings.  They actually pulled their recordings but not their songs.   Confused?  Let’s dive in.

#1.  I covered this in part 1 but let’s reiterate.  The copyrights for songs and recordings are two separate copyrights.  Sometimes they are owned by the same individuals or companies.  But most of the time they are not.  However the songwriting copyright is contained within every recording of the song.   For this reason any service using a recording needs TWO licenses.  One from the songwriter and another from the owner of the recording.  This is also why as explained in part 1 there are two kinds of royalties.  Songwriter royalties and Performer royalties.

#2.  Copyrights for songs and copyrights for recordings are treated differently under the law.   Different rules, rates and uses are mandated (or not mandated) by the government for songs and recordings.  (Again why in 2013 the government is involved in setting prices for different uses of songs and recordings makes no sense to me either.)

#3 Different rules and rates are mandated (or not mandated) for different kinds of digital services. Webcasting has different rules and rates than streaming.

#4 Webcasting and Streaming are two totally different kinds of digital services.  Pandora is webcasting.  Among other things you can’t play a song on demand. Spotify is Streaming. You can play a song on demand.   Spotify is like virtually owning a song and is purely “consumption” not promotion.  Pandora allows you to play a particular artist on demand but not the exact song.   Pandora is a combination of promotion and consumption (See part 1 #4 and #5 for explanation.)

#5. A compulsory license is a use that is essentially mandated by the government. It is a use for which a songwriter or performer cannot “opt out”.   It also generally mandates a price that the songwriter and performer must sell the right to use that song or recording. However companies and individuals may privately negotiate that rate lower.

#6.  A consent decree is similar to a compulsory license but it’s even weirder.  It essentially allows a service to use a song while negotiating prices and use of song. Again it’s virtually impossible for an individual songwriter to “opt out”.   The consent decree only covers songs not recordings.

Still with me?  Cause here comes the interesting part.

#7  A streaming services like Spotify uses a compulsory license and the consent decree to allow it access to songs.  But there is no compulsory license for the recordings.  Therefore Spotify had to go around and cut private deals with all the major record labels and a large alliance of independent labels.   Independent artists often get their recordings on Spotify through services called aggregators.  These aggregators also cut deals with Spotify.  So for recordings these are all private agreements.  No one is compelled by the government to let the Spotify play their recordings.

#8  Since Yorke and Godrich likely control all or most of their rights to their solo recordings they could pull their recordings from Spotify.  Remember there is no compulsory license for recordings when it comes to Streaming services.  Yorke and Godrich are not mandated to let Spotify use their recordings.

#9.  But Radiohead is still on Spotify?   Yes. Yorke and Godrich are unlikely to control these recordings.  These recordings are likely controlled by their record label or perhaps Yorke simply decided to leave his “back catalogue” on Spotify.

#10. On the other hand Spotify has a government mandated compulsory license to use any songs. (Also the Consent Decree comes into play, but it’s too complicated to explain here).  No songwriter can prevent the use of their songs on a commercial service like Spotify as long as they pay the government mandated royalty.   This is true for any streaming service. So strangely Someone could record covers of Yorke and Godrich’s songs and put them back on Spotify.

11.  Pandora and webcasters are in an even stronger position.  They enjoy government mandated access and rates for both the song copyrights and the recording copyrights.    Technically there is a consent decree for the songs and then a compulsory license for the recordings. Songwriters nor performers can “opt out” of webcasting no matter how terrible the rates.  Hence Yorke and Goodrich are still on Pandora.

12.  I sort of lied about #11.   You can opt out but it’s a sort of a “Nuclear Option”. I don’t quite understand how this works yet but it goes something like this:  If you as a songwriter also happen to be what is known as a publisher. AND you are represented by the Non-profit-member-owned American Society of Composers Authors and Publishers apparently you can withdraw your digital rights from ASCAP and cut or rather choose NOT to cut a direct deal with Pandora and other webcasters.  It appears the band Tool somehow managed to do this.  The downside is, if you want to be on some digital services but not others, you have to go around and individually negotiate deals and collect monies. Essentially you throw away your right to be part of any collective-like bargaining.  Also good luck getting paid.  Not a very good position to be in.   It’s still unclear to me if you can do this if you are a member of BMI instead of ASCAP.

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Now allow me to editorialize for a moment.   The United States Congress has started a periodic review of the copyright laws.  IMHO I think that congress should consider doing less,  when it amends the copyright act. In particular it should rethink the compulsory licenses for webcasting and streaming. In particular it should get rid of them.   There may have once been a rationale for compulsory licenses and rates  when these industries were in their infancy. But now these compulsory licenses have essentially become subsidies to some of the richest companies on earth (Google and Apple are now in the streaming game!)

These one price fits all compulsory licenses commoditize music and limit the kind of monetization models available to musicians. They limit innovation on the artists side.  They are anti market and prevent the market from discovering the true prices of songs and recordings.

Further I believe these licenses limit innovation on the tech side by specifying the exact model for streaming and webcasting businesses.  Finally they are just plain unnecessary.  Terrestrial radio does not have the luxury of a compulsory license for songs yet BMI/ASCAP/SESAC and the broadcast industry seem to manage to come to agreement on prices and uses without government interference.   Webcasters and Streaming services should be expected to do the same.