The Absurd CRB Rates: Wage Stagnation Exposed Kafka Style

“The nine most terrifying words in the English language are, ‘I’m from the government and I’m here to help.'”

Ronald Reagan

This week we all got a glimpse of what the government thinks we’re all worth compared to Silicon Valley:  Not much.  Run along little artists and be glad that Washington allows you to keep any of the value of your work.

How do we know this?  The Copyright Royalty Board handed down its decision on what music is worth for a variety of the compulsory license rates that benefit Pandora, Clear Channel (iHeart), the National Association of Broadcasters, and other multinational corporate members of the trillion dollar lobbying group known as the MIC Coalition.  The rates  only apply to services that are not “interactive” like Pandora and iHeart most prominently.

The rates were set in some relationship to Pandora’s direct deal with Merlin and iHeart’s deal with Warner Music–that’s the main reason the 2016 rates are so low.  Of course Merlin and Warner Music got other goodies like steering payola that nobody else gets (in fact, we’d be very surprised if any Merlin or Warner artist has any idea what the royalty rate is under either of these deals).

That must be why the CRB asked the Register of Copyright if the CRB could set two different rates, one for the indies that were part of Merlin and who got the non-cash goodies and steering payola and the other for everyone else.  It would be entirely logical that the Merlin and Warner rates would be lower and maybe a lot lower than the rate the CRB set for everyone else (because Merlin and Warner artists will still get paid under the direct steering payola deals but using those rates as a benchmark dragged down everyone else in the world).

Since the Register of Copyrights ruled that two rates are not permitted the CRB had a choice–refer the direct deals with Pandora and iHeart to the FCC for a ruling on whether steering payola is illegal, ignore the direct deals with Merlin and iHeart (which may be illegal contracts based on the steering payola pending a determination by the FCC in the payola waiver petition filed by members of the MIC Coalition) because the rates are not good benchmarks and set their own rates, or pretend that the steering payola rates should be applied to everyone else.  (Note that A2IM, AFM and SAG-AFTRA had a heart attack objecting to indie rates compared to other label rates, with at least A2IM probably knowing all along that this would drag everyone down toward the Merlin rates to which many of their members were parties.)

This is what’s become known as the “Chris Harrison special” (named for the former lawyer for DMX and Pandora, now at SiriusXM, who makes a career out of screwing artists and songwriters).  The trick is that the company does a deal for a low royalty rate plus non-cash goodies with big companies and then shoves the low royalty with NO non-cash goodies on everyone else.  We know he did this.  Billboard reported that he did this and that the same dance could happen with Web IV.  With all the brain power at Merlin and Warner, don’t you think that they could have seen this coming?  They got theirs and left us to fight over the scraps.

It’s actually pretty fair to say that these two deals totally screwed the entire music business.  Thanks Merlin and Warner.  Merry fucking dumbass Christmas to you, too.

We’ll have more to say about this, but let’s talk about the other bunch of fools, the Copyright Royalty Board.  Not only did they buy into the Chris Harrison bullshit, they also added some of their own–they indexed the royalty rate so that it only increases based on what is essentially increases in the rate of inflation applied to the Chris Harrison-era 2016 rate.

FOR FIVE YEARS!

Think about that–what that means is that the 2016 rate essentially stays the same for the full five years of the CRB decision.  This is called “wage stagnation”–a classic case of it in fact.  It’s one thing when wage stagnation happens in the market place.  This isn’t that.  This is government mandated wage stagnation for the benefit of Pandora, Clear Channel/iHeart, Google and the rest of the MIC Coalition.

Maybe the bully boys from Washington thought we should be happy that inflation doesn’t eat into our measly royalty rate?  Did they think there would be dancing in the streets that the government only put their boot on our necks and didn’t cut our guts out, too?

Or maybe they thought we’d be too dumb to notice that they are giving us a flat rate for five years regardless of the value of music.  It’s not implausible to believe that it was their intention to devalue music–at least if you’re not getting the non-cash goodies given to Merlin and Warner.

Here’s the language that applies to royalty rates after 2016 using the CPI (which doesn’t stand for “Create Pandora Income” but you wouldn’t know it):

(c) Annual royalty fee adjustment. The Copyright Royalty Judges shall adjust the royalty fees each year to reflect any changes occurring in the cost of living as determined by the most recent Consumer Price Index (for all consumers and for all items) (CPI-U) published by the Secretary of Labor before December 1 of the preceding year. The adjusted rate shall be rounded to the nearest fourth decimal place. The Judges shall publish notice of the adjusted fees in the Federal Register at least 25 days before January 1. The adjusted fees shall be effective on January 1.

This is just ridiculous.  Let’s leave aside whether the CPI arithmetic mean formula (the “Laspeyres formula”) used by the Bureau of Labor Statistics even makes sense applied to music, let’s leave aside the fact that the entire federal government starting with the Federal Reserve is doing everything humanly possible to keep inflation as low as possible for largely political reasons, and let’s leave aside the fact that the Federal Reserve (and other central banks) has been in lala land with quantitative easing and other indirect forms of printing money to keep the 99% economy from collapsing since 2008.

Let’s also leave aside that the “CPI-U” rate that the CRB chose for us is for urban consumers only and never has included an “expenditure category” for music, entertainment or even “leisure” activities.  (Neither has the producer price index.)  The only connection between CPI-U and artists is what it costs everyone in the economy to live, not to produce music–and will necessarily underweight certain costs to artists like oh, say, GASOLINE.  Everyone uses gasoline, but artists probably use a lot more of it because we have to tour because record sales are in the toilet right next to webcasting rates thanks to the little intellectual elite in a far-away Eastern city.  We use gasoline to produce a product–music–not to drive to work like judges at the CRB.

Out of touch and mean-spirited.

And by the way–indexing everyone’s royalty rate to the CPI-U means that artists who live outside the U.S. will have their U.S. royalty rates pegged to U.S. inflation.  Can we expect to get the same treatment for royalties earned by U.S. artists overseas that SoundExchange collects?

This whole indexing idea is just stupid and it’s insulting.  Not only does it freeze our royalty rates for five years, it also guarantees that any increase in the value of music through the government licenses goes 100% to the services.  It is not shared by the services with featured artists, labels, musicians and vocalists.  The CRB just rewarded what economists call “rent seeking behavior” and what we call being a scumbag.

The geniuses in Washington just told us that they’re going to freeze our royalties and that they think we’re too stupid to know the difference.

Remember–the federal government froze the mechanical royalty rate paid to songwriters at two cents from 1909-1977.  Sixty eight years baby.

If you adjusted for inflation that two cents would be worth over 50¢ today–but it still would have the same buying power as two cents in 1909.  If they did it to the songwriters, they’ll do it to the artists, too.

If we don’t stop the runaway CRB, we may have to live with the consequences for a long time to come.  If you think this is wrong, let the Copyright Office know.  You can write to the Register of Copyrights directly at their public communication page:

http://copyright.gov/help/index.html

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