RightsFlow: What Kind of Racket Are These Guys Running?

Background on the “Notice of Intention to Obtain Compulsory Mechanical License”

Every recording of a song has two copyrights.  One for the recording and one for the composition (the song in abstract).   Because the composition is embedded in the recording anyone that wishes to use a recording of a song must ALSO obtain a license from the owner of the composition which is generally the songwriter.    So when a streaming service like Google Play ingests a recording  into their computers to distribute they must also obtain a license from the songwriter or the songwriter’s appointed agent.  This is a relatively easy thing to do. The service can either get a direct license or in the U.S. a compulsory mechanical license.

To get the compulsory license, by law all Google Play need do is send a notice to the songwriter, their publisher or licensing agent within 30 days of distribution. This is called a “Notice of Intention to Obtain a Compulsory Mechanical License.”  Or NOI for short.

The US government has limited the intellectual property rights of songwriters in a couple of important ways.  First, they allow anyone to “cover” a songwriter’s song.  Second they set the set a price for the various uses of the song.  For instance on a digital download the songwriter must be paid $0.091 per download.  For streaming services it is much more complex calculation, but essentially it’s 10.5% of the revenue generated by the service monthly, pro-rated by the number of spins the songwriter’s compositions generated.   This compulsory mechanical license is a good deal for streaming services and record labels.  All they have to do to take advantage of this license is send an NOI.  And those NOIs can list every single song in the songwriters catalogue.  In my case a service like Google Play could send an NOI for the 300 or so songs that I have in my catalogue.  All my songs and contact information are listed in an easily searchable Copyright Office database. 

Despite the ease of finding the BMI registrations for all of my songs, streaming services often whine that it is hard to send NOIs to all the songwriters.  Poor billion dollar babies.

However consider the following:

  1. I’m the one who has had my rights limited by the US government. At the very least I deserve to know who is using my songs. That way I know when I’m due money and from whom. I deserve to be directly accounted to and paid for the use of my songs.  That’s the point of sending the NOIs. Establish contact between licensor and licensee.
  2. Songwriters are forced by the US Government through the compulsory license to go into the music streaming business.  But the venture capitalists and technology companies that back and operate these services were not forced to go into the streaming business.  They chose to go into this business.  They knew the rules before they started.  If they really didn’t know the rules? I don’t know, maybe the venture capital firms that poured billions into these services should fire the executives running these firms and replace them with competent executives.
  3. If these services really can’t find the songwriters, they are allowed to send the NOIs to the Copyright Office.  Of course the Copyright Office charges a fee for processing these NOIs to cover their costs.
  4. Licenses for around 60% of the songs (by popularity) can be obtained by cutting deals with the three major music publishers. Additionally a large number of songs (sometimes the same songs) can be obtained through licenses with the Harry Fox Agency.
  5. No one is forcing the streaming services to make available every single song ever published. Too hard to find ALL the writers?  Don’t use ALL the songs. Simple.

Music Rights, RightsFlow, Harry Fox Agency and Medianet and Fake Compulsory Mechanical Licenses. 

In order to help these services obtain the statutory compulsory mechanical licenses market incentives have produced a number of companies that provide this service.  Harry Fox Agency  in New York; Music Rights and RightsFlow now in California; and MediaNet in Washington. Over the last few months I’ve received invalid NOIs via the USPS from these services.  In particular if the NOI is late then the compulsory license is no longer available for those compositions. Instead a direct license is required. Further the rate is no longer set by government statute, instead it must be negotiated between the writer and the service.

And perhaps more importantly, since the notice is invalid the writer now has the ability to say no to these services.  Why would a writer want to say no?   Well consider that 10,000 monetized spins on a service like YouTube sometimes is the financial equivalent of a single 10 song album sale for a songwriter.  It’s entirely possible the songwriter would prefer to have a smaller audience or market share but generate more revenue!  This is not uncommon in business, profit is more important than market share.  For instance Apple has a smaller share of the smartphone market but will make more profit than all the Android smartphone makers combined!

For a songwriter losing the ability to say no to a streaming service that undercuts higher margin sales is a loss of something that has a measurable monetary value.  But regardless the right to say no once the compulsory license window has closed is a legal right. 

So that is why it is highly problematic that these services, RightsFlow, MRI, HFA and MediaNet are sending NOIs that are essentially fake NOIs to songwriters via the USPS.  As a result it is highly likely that even sophisticated songwriters are effectively being duped and deprived of their legal right to negotiate a direct license. The fact that these services purport to be experts on the licensing of songs we can assume they aware of the requirements of the law.   Thus it is not unreasonable to say they may be deliberately and willfully wording these notices in a confusing manner.  Further the NOI below indicates some coordination between RightsFlow and Harry Fox Agency who are ostensibly competitors.  The fact that I have fake NOIs from ALL of the services suggests a form of mass hysteria (or mass stupidity) on the part of all music licensing experts.  Either that  or someone somewhere suggested they ALL could get away with it. The end result is that thousands of songwriters may be deprived of their legal rights.   Why hasn’t the Copyright office weighed in on this issue?

The Mother of All Bad NOIs

With that said I’d like to post here what I consider to be the mother of all bad NOIs.   The language in this letter is so tortured, it can’t simply be bad writing.  Right?  I mean surely this letter was run by the legal department. RightsFlow is part of Google. Google is the largest or second largest company by market cap in the world (depending on the stock market). I’m pretty sure they have some good legal staff.   Anyway have a look. What do you think?

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