Dunitz Brings The Venture Capitalist Perspective to the 100% Licensing Debate

The venture capitalist Jody Dunitz recently posted a defense of the Department of Justice’s consent decree review.  Not surprisingly, in order to come to a rosy conclusion that songwriters should embrace the DOJ’s positions, a large chunk of reality must be suspended.

The Sky is Falling Motif:  The title itself starts with condescension.   Addressing herself to songwriters, the angel investor begins by vilifying “the publishers. press machine” that has been critical of the Obama Justice Department’s proposed ruling on 100% licensing.  What does “the publishers press machine” even mean?  Probably that songwriters so lack the ability to think critically that they are taken in by “the publishers’ press machine.”  Maybe she didn’t read Kay Hanley’s post The Justice Department Hates Songwriters“?  That’s not “the publishers press machine” any more than Ms. Dunitz is part of the Google press machine…

Then Ms. Dunitz says this–let’s give tip of the hat to George Orwell while we’re at it:

The DOJ rejected the publishers’ plea for direct licensing of digital rights.  This is excellent news for songwriters.

On its face, this is bunk.  Ms. Dunitz clearly does not read the Trichordist or other artist rights blogs or talk to songwriter organizations both new and established.  If anything, “the publishers’ press machine” was late to the story and didn’t go far enough.

The DOJ didn’t just reject the “publishers’ plea”, the DOJ also rejected the direct pleas of songwriters and songwriter organizations–ask DOJ official David C. Cully how his invitation-only conference calls went with songwriter groups and he might tell you.  Unless its all a secret because why should the public know what public servants actually said to songwriters (aka taxpayers and voters)?

If songwriters seem agitated and concerned about the future under the Obama Administration’s new rules, it’s because their already fragile livelihood is threatened yet again.  Why?

Because songwriters are also asked to invest in companies like Spotify or Pandora by giving low rates, but songwriters don’t get a share of stock.  In fact, many songwriters don’t ever get paid or even licensed.  Forgive us if we lack Ms. Dunitz sanguinity–nobody ever gave songwriters a full ratchet or a liquidation preference in return for their investment in startups that can attract a $1 billion convertible note.

So it’s not “excellent news for songwriters” any more than war is peace or ignorance is strength.

Accepting the Premise:  Another rhetorical technique Ms. Dunitz employs (consciously or not) is “accepting the premise”.  Songwriters want to get rid of consent decrees.  Big Tech represented by the MIC Coalition, DIMA, the National Association of Broadcasters, and a host of other front groups like Public Knowledge support the consent decrees when they are applied to songwriters, but bitterly fight antitrust regulation when applied to themselves.

MIC Coaltion 8-15

Members of the MIC Coalition

No danger of that happening in the U.S., though, as Google has the U.S. government bought and paid for.  Ms. Dunitz seems to accept the legacy consent decrees as a good thing, although it’s hard to tell as she never brings up her major premise–the consent decrees themselves are a good thing.

rv-door-visulizatnoi-susan-molinari-1024x507

The Pot is Only So Big:  Another old major label/major publisher negotiating ploy (aka threat) is to convince you that the “pot is only so big”…so stop asking for what you think you’re worth and accept what they tell you they’re worth.  (This is usually closely followed by another threat, “Some [songwriters/artists/authors] are more trouble than they are worth”, but at least she didn’t say that.)

And we quote:

There is a finite pot of money that any streaming service can pay out in royalties — after paying label payments, enormous overhead costs in technology and maintenance, and profits to the investors.

Imagine Ms. Dunitz hearing a venture capital pitch–is the winning business plan the one that says “Well, you know there’s a finite pot of money out there that investors can be paid in liquidation preferences and dividends….”

Doubtful.

Do you think Spotify’s bankers at Goldman Sachs are telling investors, don’t get your hopes up because there’s only a finite pot of money for you?

Probably not.

Do you think Mel Karamzin told his investors not to expect that billion dollars of free cash flow because, you know, the pot is only so big?

Nope.  But those songwriters, now they have to keep their expectations in line.

What Ms. Dunitz doesn’t address is that streaming services often tell artists that the services need lower royalties in order to survive, so take less than you otherwise would to make our service successful.  That’s called an investment.  Investing is what Ms. Dunitz does.  Do songwriters get shares of stock in return for lower royalties?  Isn’t stock what you normally give an investor like Ms. Dunitz?

Gatekeepers are Evil:  Ms. Dunitz turns the page in the MIC Coalition hymnal with this nasty little barb that does not naturally flow from her “pot’s only so big” premise:

Direct licensing would not increase the pot.  [That’s why Pandora and Sirius are falling over themselves to get direct licenses?] But it would have opened the door for publishers to extract label-size huge advances (that would not be shared with songwriters) and structure deals with the streaming services that would minimize the flow-through of writers’ share of these royalties.  

First of all, direct licensing is the right to say “no”, a right that the government takes away with consent decrees.  Having the right to step away from a negotiation usually does increase the “pot”.  Even if you accept pot-ism, the terms of the consent decrees have always weakened the negotiating power of songwriters and Ms. Dunitz appears to argue that keeping it that way is a good thing.

What publishers do with advances is between publishers and their songwriters.   That’s the job of songwriters and publishers, not venture capitalists like Ms. Dunitz.  What is the job of venture capitalists is to keep the biggest share of the pot they can for themselves and not “open the door” for “label-size huge advances”.

The National Association of Broadcasters/MIC Coalition Prayer:  It is this sentence that Ms. Dunitz uses to restate the long standing argument of the NAB’s battle to deny artists a performance right and of the Pandora’s and Spotifys to deny songwriters fair compensation:

The only way for songs to achieve royalty parity with recordings is for the labels to give back part of the royalty pool.

Not true–one way for songs to achieve royalty parity with recordings is for music services to pay lower salaries and get cheaper office space.  Or increase the pot.

The NAB has used this against songwriters every time artists push for a performance royalty–it’s we pay $x for music (the pittance that broadcasters pay to PROs in the U.S.) so how you divide that up is between you two.  You’ll see this with Fair Play Fair Pay right now.

This also sets songwriters arguing with artists and divides our community at a time of extraordinary unity.

Administration Rights:  Ms. Dunitz adds to the confusion about 100% licensing with this:

A sole administrator of a co-written song currently has the right to collect 100% of the publisher’s share of the song; however, to currently do so, that administrator must register a publisher affiliate with each of the PROs to which each co-writer is affiliated – to enable each co-writer to be paid by his designated PRO.

We’re not even sure what Ms. Dunitz means by “sole administrator”.  The problem doesn’t arise when there is a single administrator, it arises when there are multiple administrators.  To say that a “sole administrator currently has the right to collect 100% of the publisher’s share of the song” is like saying we’re here because we’re here because we’re here.  This is straight outa Minitrue.

Except that it leaves out one important step–even the sole administrator appointed to administer a song written by multiple writers can’t issue 100% licenses if the administrator is prohibited from doing so by the administration appointment instructions (or admin agreement).

Ms. Dunitz goes on to say:

The DOJ ruling eliminates the need for such multiple publisher affiliations.

That’s right–the DOJ ruling decreases competition, very much in line with Silicon Valley’s monopoly worship.  But isn’t the DOJ supposed to foster competition, not eliminate it?  Yet Ms. Dunitz goes on:

The DOJ ruling does not grant administration rights where they don’t otherwise exist. [Another tautological trueism.]

The DOJ ruling means only that the non-controlling writer will be paid his writer’s share from the “other” PRO. [What is a non-controlling writer?  What does that even mean?  All the writers who agreed to song splits and registered with their own PRO control their share, just like always.]

What About the Crony Capitalism?  Ms. Dunitz also fails to mention even once the inherent conflict of interest from having a lawyer who formerly represented Google in charge of an antitrust investigation that benefits her former client–much less any violation of the Obama Administrations own Ethics Commitments for appointees.  Given the broad based criticism of the Obama Administration for being in bed with Google, you would think that this would come up at least once, even if only so Ms. Dunitz could dismiss that cronyism somehow.

Now why would a venture capitalist not confront the Google conflict head on?

johannashelton-google-140x300

While it’s what we expect from the venture community, our view is that Ms. Dunitz post is a good example of just how difficult it is to make her arguments without ignoring a good chunk of the facts.  And we could all do without the condescending attitude, thanks very much.

2 thoughts on “Dunitz Brings The Venture Capitalist Perspective to the 100% Licensing Debate

  1. Saw an old Jack Benny TV show from 1964 with Nat “King” Cole on You Tube. Jack: “How much money do you make on your songs?” Nat: “Oh about 5 cents a record.” What was the payment rate in 1964?

    • This is from Dunitz:

      Hi. I would like to post a reply to your comments about my DigitalMusicNews piece.

      I am unable to get it to post in the Reply section on your site.

      If you are willing to include it, here it is below.

      Thanks,
      Jody Dunitz

      1. Songwriters’ interests are not aligned with publishers’ interests
      in the matters of direct licensing to streaming services.
      I have been explaining the differences in my many
      posts on: https://plus.google.com/113591812955409965978/posts

      Songwriters will be far worse off if publishers direct license these rights. You dismiss the weakened position that awaits songwriters in the event of direct licensing with the vainglory phrase: “What publishers do with advances is between publishers and songwriters.” Taking advances that are not required to be shared with writers – and impossibly difficult to accomplish even if tried – is the crux of matter, the most facile weapon to diminish revenue flow to writers.

      The right to say “no” is not the motivation behind the publishers demand for direct licensing. They will never say “no.” Individual songwriters who seek to withhold their songs from the streaming services will not be served by endorsing the publishers’ demand here.

      2. I have consistently endorsed and supported ASCAP and BMI as
      the best and most responsible advocates for songwriters.
      There are many ways the consent decrees should be amended to strengthen the negotiating tools for the PROs. Direct licensing is not one. [see https://plus.google.com/113591812955409965978/posts%5D

      Getting “rid of the consent decrees” has never been on the table. It is not under discussion. The DOJ review and the industry input was wholly focused on amending the decrees.

      3. I have consistently and adamantly advocated that songs and
      songwriters are undervalued and underpaid in the current royalty schemes of the streaming services. The content deals are structured as percentages. Such deals have the immutable limitation that there is never more than 100% to give away. Since the labels already take 50%, and the song side currently gets around 15%, there is little room left (after overhead, technology costs, and yes, profit to the owners of these private entities) to find more money for songs. That is what is meant by a finite pot in this situation. The gross dollar amount in the pot can increase (e.g., more paid subscribers, higher subscriber rates), but the percentage allocated to songs will be forever capped by the disproportionate share captured by the labels.

      There is already “extraordinary unity” between the labels and publishers. The 3 majors who collectively control 60-70% of revenue-producing U.S. music assets have record companies and publishing companies that are owned by the same corporate parent. It is that unity that songwriters should be wary of.

      4. I have no idea why the DOJ declared an opinion on the 100%
      licensing issue that was not otherwise on any agenda. There is no pressing need to change that protocol. But, if changed, the impact will not trigger the parade of horribles that have been suggested.

      5. Finally, for the record, I have no investment in any streaming
      service, company affiliated with the NAB, or venture capital fund.

Comments are closed.