A Single Picture Explains Why the NMPA/HFA/Spotify Settlement is Deeply Flawed

 

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You’re kidding me right?  What is this for? No accounting? No cover letter.  Is this some sort of “bait” check?  How can NMPA/HFA/Spotify settlement possibly be “fair” with this sort of nonsense going on? 

For those not familiar with the nuances of the music licensing business  Harry Fox Agency (HFA)  is s former subsidiary of the National Music Publishers Association (NMPA).  HFA acts as a clearing house for those wishing to  obtain mechanical licenses (copy AND distribute) a songwriters work.  So for instance streaming services like Spotify can come to HFA and obtain licenses for many songs, but not all.  It is important to note that HFA can only issue licenses for songwriters/publishers that opt into their service.

So how do streaming services get the licenses from the remaining writers?  Normally they hire a third party to track down the remaining writers and send what are called “Notices of Intent” to exercise a compulsory license.

In the case of Spotify they hired Harry Fox Agency to  perform this task.  Are you following me here?  This means that Harry Fox is on one hand representing songwriters and publishers,  but on the other hand they are also representing Spotify.   Does this seem like a conflict of interest to anyone?

Now in my case (and virtually every independent songwriter/publisher I surveyed),  they never bothered to send valid “notices of intent” to obtain the licenses for Spotify to use my songs until after the fact (hence the class action against Spotify).  In the vernacular: they totally fucked up.

But Harry Fox Agency was also apparently hired to pay royalties and account to songwriters on behalf of Spotify.   Have they also fucked this up as well?   Yes.  Just look at the check above.   Here are just some of the things wrong with this check

  1. What is the check for?   Songwriter royalties?   Is it for just being a cool band?    Or is it a super sleazy legal trick  (cashing a check is sometimes viewed as an implicit license)?
  2. Are they sending out checks like this to other independent publishers? To whom and why?
  3. If it is for songwriting royalties,  which tracks? How many spins?
  4. What accounting period does it cover?
  5. How did they arrive at this amount?  If there is no license in effect, there is no royalty rate with which to calculate a royalty?
  6. As they are acting as an agent of Spotify isn’t this an improper Ex-parte communication?
  7. They don’t have a taxpayer ID from me, because there is no contract or license. How do they even know they are paying the proper party?
  8. Where does the 28% withholding tax go?  I’m not a tax expert but this doesn’t seem like the  proper procedure.

So HFA is clearly fucked up. But why does this matter?  Because the NMPA/HFA and Spotify all have an interest in stopping the songwriter class action.

  1. The NMPA owned HFA when they began working (and fucking up) on behalf of Spotify . NMPA owned HFA until July of 2015.   It is likely that NMPA had to indemnify the new owners of HFA private equity firm Rizvi Traverse.  In turn it’s highly likely that HFA had to indemnify Spotify for services (poorly) performed.   Thus it’s in NMPAs interest to make this all go away.  This is not the same as being in the interest of NMPA’s constituent publishers. Why are constituent publishers being dragged into this?
  2. NMPA/HFA/Spotify settlement leaves HFA in place.   Look at the check above!  How can any publisher or songwriter ever have any confidence that they will ever receive a proper accounting? One of the reasons we filed a class action against Spotify was to bring in an independent third party auditor and bring some much needed transparency to the process.

The choice is clear for songwriters and publishers.  A backroom deal between related parties or a transparent court supervised process?

 

 

 

 

 

 

 

 

 

About David C Lowery

Platinum selling singer songwriter for the bands Cracker and Camper Van Beethoven; platinum selling producer; founder of pitch-a-tent records; founder Sound of Music Studios; platinum selling music publisher; angel investor; digital skeptic; college lecturer and founder of the University of Georgia Terry College Artists' Rights Symposium.

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