@repjerrynadler: Reps. Nadler, @DarrellIssa Pre-1972 Copyright Fix with Introduction of CLASSICS Act

Breaking! Congressmen Nadler and Issa introduce bill to fix loophole on pre-1972 recordings. Legacy artists will finally get digital royalties. Also Pandora has lent their support to the bill. Thanks to all who worked so hard on this but especially Blake Morgan!

Artist Rights Watch

[PRESS RELEASE]

WASHINGTON, D.C. — Today, Ranking Member Jerrold Nadler (D-NY) and Chairman Darrell Issa (R-CA) of the House Judiciary Subcommittee for Courts, Intellectual Property and the Internet introduced bipartisan legislation to close a long-standing gap in federal copyright law. The Compensating Legacy Artists for their Songs, Service, and Important Contributions to Society Act (the CLASSICS Act), H.R. 3301, resolves uncertainty over the copyright protections afforded to sound recordings made before 1972 by bringing these recordings into the federal copyright system and ensuring that digital transmissions of both pre- and post-1972 recordings are treated uniformly.

The CLASSICS Act serves as an update to the “pre-72 treatment” of the Fair Play Fair Pay Act – a broader music licensing bill introduced by Chairman Issa and Ranking Member Nadler earlier this Congress – and represents a broad consensus from a variety of stakeholders across the music landscape.

Congressman Jerrold Nadler: “For…

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Is The Spotify “Fake Song” Scandal Really About Lowering Songwriter Royalties Across the Board?

The Spotify “fake artist” scandal that broke last week has been a real head scratcher.   Did they really save that much money?  I mean they paid billions out to rights holders,  but NYTimes puts the “savings” on fake songs at $3 million dollars?  Was it worth it? Especially considering the public relations damage it does to the brand.

Certainly the most likely explanation is that this is just a bonehead move, a crony favor for a fellow Swedish music tech company that appears to represent most of these songs.

But we should consider two alternate theories:

The lower songwriter royalties paid on these tracks may end up as evidence of “free market” rates before the Copyright Royalty Board that sets rates for songwriters. Yes,songwriter royalty rates in US are not just set, they are capped by the US government!  The CRB is bound to consider free market rates.  If they consider these rigged rates as free market ALL songwriters would get lower royalties.   While this may seem like a “bankshot” this exact scenario has played out twice before.  The most recent was when the indie label licensing group Merlin, cut a deal with non-interactive streamers. This deal guaranteed a lower rate for more spins for Merlin licensed tracks.  A kind of reverse payola.  This effectively lowered the per spin rate,  non-interactive broadcasters then took this deal to the CRB  as evidence and the CRB used it to lower rates.   This likely cost rights holders: $1 billion dollars in lost royalties.

This could be used in exactly the same way.

The second theory is a little harder to explain, but basically songwriter spin rates, vary from month to month.  They are capped by the federal government at 10.5% of streaming service revenue.   And the formula per spin is simply 10.5% of rev divided by the total number of spins, pro-rated based on popularity of a song.   So if you somehow increase the number of spins using “fake” tracks wouldn’t you reduce royalties across the board by a small but significant amount? 

Hey Alexa, Where’s My Money? Address Unknown Update Courtesy of Paperchain

Digital services have accelerated the questionable use of the “address unknown” loophole in the copyright act. Check this out. Amazon has now sent notices for 24 million tracks in a period of 15 months. Between 2010 to 2015 the copyright office was only sent 4800 such notices. Is Amazon even trying to find the composers? I’m not an attorney but I don’t understand how this isn’t fraud.

MUSIC • TECHNOLOGY • POLICY

We get an update this week on the total “address unknown” mass NOIs filed with the Copyright Office for the royalty-free windfall loophole.  This time we have to thank our our friends at Paperchain in Sydney for doing the work of decompressing the massive numbers of unsearchable compressed files posted on the Copyright Office website.  As you can see, there’s been an increase of approximately 70% since January 2017.   (For background, see my article.)

As you can see, Amazon is still far and away the leader in this latest loophole designed to stiff songwriters, followed closely by Google.  However, Spotify is moving on up.  Spotify does get extra points for starting late in March 2017, but they are catching up fast filing over 5,000,000 as of last month.

To put this in context–the Copyright Office as recently as September 2015 posted these “address unknown” NOIs in a single…

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GUEST POST: With Other Companies Wide Awake to the Problem, When is the Penny Going to Drop for Google?

This is a guest post from Volker Rieck, Managing Director of the content protection service provider FDS File Defense Service. 

WITH OTHER COMPANIES WIDE AWAKE TO THE PROBLEM NOW, WHEN IS THE PENNY GOING TO DROP FOR GOOGLE?

The ongoing debate on the accountability of internet advertising networks intensified abruptly and dramatically in the first half of 2017 after the recent terror attacks in London and Manchester.

How did this come about?

Hate speech and extremist propaganda are part of our everyday reality and can be encountered on countless websites. Journalists writing for The Guardian were aware of this. What they found surprising, however, was that websites and YouTube channels with blatantly radical, racist, anti-Semitic and extremist content not only exist, but also carry advertising served regularly by the behemoth Google that generates revenue for the site operators and content creators. The Guardian subsequently opted to discontinue its cooperation with Google as an advertising partner, presumably in order to avoid Guardian advertising appearing on such dubious sites or channels. The decision was made in full knowledge of the fact that this step could and would impact negatively on traffic to the Guardian website.

While this first move was hardly newsworthy in and of itself, other market players and advertisers soon followed the example set by the Guardian. Havas, a French marketing company handling advertising budgets of £175 million per year for clients from the United Kingdom, took the same step.

And then several British banks, the BBC and even the British government followed suit almost simultaneously. Google’s European boss Matt Brittin hurriedly supplied figures showing how many sites and publishers had already been banned after infringing Google’s terms, but his efforts were in vain: The Guardian needed a mere 15 minutes to identify a YouTube channel operated by an extremist cleric banned from entering both the UK and the US. It cannot be stated plainly enough: this man’s activities are being funded with money from Mountain View thanks to the advertising served to his channel by Google. Experts surmise – according to the reporting in the Guardian – that revenue totalling at least £250,000 has been paid out to him. Terror and hate speech as a business model. Brittin claimed that the sums involved had been “pennies not pounds”. All a question of proportion, then? The £150,000 Google is thought to have earned from its collaboration with this hate preacher is certainly small change in the context of Google’s overall turnover of billions. And perhaps the advertising budgets of the enterprises that have ceased using Google as an advertising partner are indeed only pennies to Google.

As ever, Google announced it was taking the issue seriously and promised to improve. But during Advertising Week Europe in March 2017 in London, Brittin could not or would not comment – even when asked for the third time – on whether Google now searches for dubious content itself or has simply outsourced quality assurance to the users of the relevant websites. His use of the word “community” suggests that Google is leaving it up to consumers to tackle the problem. In this view, it would simply be the “community” which has failed if Google advertising continues to appear on extremist sites. Google already applies this community principle rigidly on YouTube. Only when the volume of complaints from consumers reaches dramatic levels does Google take action. Why bother taking the initiative instead of simply waiting for consumers to identify dubious content of their own accord? But whether the “community” making up the target audience of a hate preacher with a website or a YouTube channel is likely to flag up material to Google seems rather questionable.

By now, the debate has also reached the US. Enterprises including AT&T, Verizon, PepsiCo, GM and Walmart have grown nervous about protecting their brands and intend to assign their advertising budgets without cooperating with Google in the future.

Is Google worried about its own brand being tarnished? Seemingly not; otherwise the company would hardly have verifiably displayed advertising for its Google Home product on Hezbollah’s YouTube channel . Was it simply a clever algorithm that identified Hezbollah’s readers as a target group for Google Home? One can only assume so. Any thinking human being would surely have ruled this channel ineligible for any form of monetization.

How Google intends to offer reassurance to big name clients even as it demonstrates such negligence vis-à-vis its own brand is a question only Google can answer. Apart from the major brands involved, the story also has a political dimension. After 9-11, US legislation made it unlawful for persons subject to the jurisdiction of the United States to provide designated terrorist organizations with material support or resources. This naturally includes payments such as advertising revenue paid out to website operators. If Google has made payments to designated terrorist organizations or persons close to them, it can expect the US authorities to clamp down on this sooner rather than later.

The underlying issue here is not new. It has already been recognized for several years that Google funds websites with business models based on the infringement of copyright. If it had been possible to follow the money, MPA and GVU might have managed to shut down the site Kino.to much earlier. Google repeatedly suggests using the approach of following the money to combat piracy effectively, but this cannot succeed while Google refuses to hand over data on clients it maintains an active business relationship with as an advertising marketer. And this was the case with Kino.to.

Thanks to its two-way identification process, Google has both bank details and an address for service of process for every site operator participating in the Google advertising network.

Google is often quick to point out just how many websites it has as advertising partners; creating the impression that the number is too vast for effective monitoring to be possible clearly forms part of its strategy. Meanwhile in Europe, Facebook is discovering what European governments think of such arguments.

It should never be possible to argue on the basis of size. Imagine a car manufacturer claiming that producing ten million vehicles per year made ensuring the safety of brakes and on-board electronics in every case impossible.

Accountability cannot be delegated to machines – or, in this case, to algorithms – simply because people or enterprises have become habituated to relying on them. But this is exactly what companies like Google and Facebook are currently attempting to do. Anyone operating a business without adequate control over it has two options: bring it under control, or wind it up.

The time is now ripe for a fundamental interrogation of the question of accountability in the public space that is the internet: society is suffering severe collateral damage even as enterprises like Google or Facebook continue laughing all the way to the bank. Perhaps the issue will be resolved without financial penalties such as the $500 million pay-out made by Google to the US Department of Justice in a case relating to the illegal advertising of prescription drugs by fraudulent Canadian pharmacies. Maybe this time the loss of advertising and consequent reduction in revenue and the wide discussion of the issue will be enough to persuade Google to shift its stance.

Volker Rieck

Volker Rieck is Managing Director of the content protection service provider FDS File Defense Service. His expertise in the area of Internet piracy is widely recognized. FDS regularly works on studies relating to issues around piracy. It also supports law enforcement authorities with its data.

Orlowski on Big Tech’s Day of Corporate Action #NetNeutrality

“Think about that for a second. If Pepsi Co launched a “day of protest” and wanted to enlist your help to weaken regulation, we’d give it short shrift. What if the banks, who sailed away from the financial crisis without too many scratches, had a “banking go-slow”? Literally: what if ATMs had spat out bills very, very slowly today, while the screen invited you to “show your support for open banking, and click here!” I can imagine the reaction. The fact that the giant internet platforms – Google and Facebook and Amazon – feel they can engage in it at all tells us something.”

Read More here:

https://www.theregister.co.uk/2017/07/12/when_saving_the_internet_means_saving_crony_capitalism/

Have You Been Suckered on Net Neutrality Debate by Google and Big Tech?

Tomorrow July 12th you will probably be asked by a well meaning friend  or perhaps someone that works for a progressive activist group to call or write your congressman and ask them to support “net neutrality.”  IMHO I think you will be making a mistake.

I really don’t give a shit if I get flamed on this. I’ve been flamed plenty in the last 5 years fighting for artists’ rights.  Most of the time it turned out that my instincts were correct.   I’m gonna call it as I see it again.

Inconvenient Fact #1: Rule change does not end net neutrality.

True or False?  The new rules proposed by the FCC will end net neutrality.

False.

I know this is hard to swallow based on everything you’ve read on the internet .  But just do this…

Did you look at the form letter you are being asked to send to your congressman, or the talking points script you’re supposed to use for that phone call?  It says something about “Title II regulation” right?  What is being proposed is dropping Title II regulation of the internet. Not ending net neutrality. Dropping Title II means the FTC not the FCC is now back in charge of net neutrality.  Like it was from 2007-2014.  Was your internet broken then? Remember in 2012 these exact same groups were shouting “Don’t Break the Internet” when the SOPA anti-piracy legislation was proposed.  Even they admit the internet was pretty darn good in 2012. Worst case scenario the internet goes back to 2014.

So what is this really about? 

It’s not about net neutrality that’s for sure.  This is really a skirmish between two sets of crony capitalists.   Telecoms/Cable on one side and the Google/Facebook/Silicon Valley ad-spying complex on the other.   Title II forces telecoms and cable to live under a bunch of rules that benefits Google, Facebook and their online ad/spying ecosystem.   It also gives the FCC extraordinary powers to regulate the internet.

In this case the last FCC commission used that extraordinary power to impose stringent rules to protect net neutrality.  But Title II could actually go the other way.  The FCC could also use their extraordinary power to impose all sorts of bad things on the internet as well. Think about the power the FCC has over terrestrial TV radio on foul language? It’s quite interesting that FCC chairman Ajit Pai is divesting the FCC of this power.  Meanwhile free speech advocates want  the FCC to retain this power.  It’s absolutely ass backwards. And when things are this ass backwards, when the doublespeak is this blatant it’s usually cause your individual rights are in great danger.

“It became necessary to destroy the town to save it.” 

In order to save free speech on the internet we have to put the FCC in charge of speech on the internet.

Follow the Money/Lobbyists

There are two main groups that are pushing the net neutrality issue tomorrow.   One group is Fight For The Future. The other is Free Press. Let’s start with Fight For The Future.

Fight for the Future looks like a groovy progressive internet civil rights group. They even have a transgender spokesperson! The problem is that when you look at tax documents, FOIA-ed emails and their past activity you get a totally different picture.

Inconvenient Fact 2:  Fight For The Future is run by a Google lawyer.

Marvin Ammori runs Fight For The Future.  He is a former (current?) Google lawyer.  The Google Transparency Project also lists him as a “Google Funded Academic”

Inconvenient Fact 2:  The main financial backer of Fight For The Future is a mysterious firm based in an industrial park in a small town in Michigan.

Just read our stories on Fight For The Future and its mysterious sugar daddy. This tiny tidbit here deserves its own Hollywood film treatment or Netflix series. It’s that juicy and weird.

https://thetrichordist.com/2016/05/02/astroturf-fight-for-the-future-received-almost-100k-from-company-based-in-mini-industrial-park/

https://thetrichordist.com/2016/08/23/progressive-zephyr-teachouts-financial-ties-to-pirate-party-and-bitcoin-promoters/

Main takeaway: Does a radical cyber-libertarian, bitcoin promoter, the founder of Mt Gox Live, seem like the sort of person that shares the progressive lefty values espoused by Fight For The Future? What the fuck is really going on here.

Inconvenient Fact 3:  Fight For The Future Organized a Mass Copyright Infringement Campaign Against the MLK Estate.

Yup. You read that right. Fight For The Future thinks it’s a valid and righteous civil disobedience campaign, to fuck with the King Family Estate to make some decidely first world point about not being able to post/remix the MLK I Have A Dream speech on YouTube.

“Have they no decency? At long last, have they left no sense of decency?”

https://thetrichordist.com/2016/05/12/uncivil-rights-astroturf-organization-protesting-copyright-hearings-organized-mass-copyright-infringement-campaign-against-mlk-estate/

The uncomfortable parallel here is that one of the classic tools of authoritarian regimes has been to deprive dissident authors of their copyrights.

Inconvenient  Fact 4: Ammori, Fight For The Future, and FCC staff likely manipulated the comment count on Net Neutrality in 2014 to favor pro neutrality comments. FFTF even instructed the FCC what to Tweet. And the FCC obliged. 

I don’t really know what to say. Just read the FOIA-ed emails here:

This is your democracy. This is your democracy after Google runs hog wild with it.

Inconvenient Fact #5: Venezuela

Free Press is the other organization pushing the net neutrality issue.  They are the folks in all the photo op protests outside the FCC. I’m not trying to red bait anyone but there is no other way to describe this. Free Press is led by an authoritarian Marxist. This is not your grumpy uncle Bernie Sanders democratic socialism. Bernie Sanders is a patriotic American that wants the best for his country. I completely disagree with most of his politics, but he is not trying to overthrow the government and doesn’t go around praising authoritarian dictators.

The same can not be said for Robert McChesney founder of Free Press.  McChesney is an internationalist and authoritarian Marxist.

Here is McChesney in 2007 on Hugo Chavez and the media in Venezuela:

“Aggressive unqualified political dissent is alive and well in the Venezuelan mainstream media, in a manner few other democratic nations have ever known, including our own.”  This comment was made in response to Chavez revoking the license of the main opposition TV network.

He goes on to say “If (critical of Hugo Chavez Venezuelan station) RCTV were broadcasting in the United States, its license would have been revoked years ago. In fact its owners would likely have been tried for criminal offenses, including treason.”

(Venezuela and the Media: Fact and Fiction – Common Dreams, June 1, 2007)

Around this time McChesney also said this:

“Any serious effort to reform the media system (in the US) would have to necessarily be part of a revolutionary program to overthrow the capitalist system itself.”

(The U.S. Media Reform Movement – Monthly Review, September 15, 2008)

FreePress actually is the most honest participant here. They want the government to seize control of the internet so that later when a “revolutionary socialist” government is in power they will have full control. Perfectly coherent.

Why is this important?  Because Free Press is far far outside the mainstream of US politics, yet these are the folks that dreamed up the entire Tittle II/net neutrality hoax in the first place.  It was literally part of a plan explicitly outlined by McChesney in 2009

“At the moment, the battle over network neutrality is not to completely eliminate the telephone and cable companies. We are not at that point yet. But the ultimate goal is to get rid of the media capitalists in the phone and cable companies and to divest them from control.”

(Media Capitalism, the State and 21st Century Media Democracy Struggles: An Interview with Robert McChesney – The Bullet Socialist Project, August 9, 2009)

I don’t know about you but I’d rather live in a liberal democracy than in a country like Venezuela. I think that most people in the US feel that way. McChesney has a vision that is incompatible with what most Americans want.  Be aware that when considering Title II regulation of the internet.

++++++++++++++

Here’s also an earlier piece I wrote just concerning Net Neutrality and copyright. It explains my evolution on the issue. Also good gif of FCC chairman dancing.

https://thetrichordist.com/2017/05/02/are-moves-by-fcc-chief-ajit-pai-on-net-neutrality-good-for-copyright-holders/

Also here are two center left and center right technical critiques of net neutrality that everyone should read.  Sorry they are rather technical, but this is a technical issue.  Reality is hard to accurately reduce to a slogan or meme.

http://www.aei.org/publication/net-neutrality-is-a-bad-idea-thats-run-its-course/

https://www.theregister.co.uk/2015/08/25/so_how_do_you_spot_an_arts_graduate_in_tech/

 

 

 

 

 

@GTP_updates Report on “Google Academics, Inc.”

Absolutely appalling! According to the Google Transparency Project database there are over 200+ copyright, patent and antitrust academic papers funded by Google that did not disclose funding. Many of these papers were used to set policies that ultimately harmed artists. Heads should roll.

MUSIC • TECHNOLOGY • POLICY

Ever wonder why it is that some academics seem to be as close to Google as 1 is to 2?  The Google Transparency Project has released a fascinating report and searchable database of papers written by academics funded by Google (according to the group’s methodology).  This is particularly timely given the “fake news” hot topic and the new book by Sharyl Attkisson all about manufactured information in our astroturf culture entitled The Smear: How Shady Political Operatives and Fake News Control What You See, What You Think, and How You Vote.

Because make no mistake–Google’s multimillion dollar influence peddling campaign on campus is all about influencing regulators and lawmakers.  Yes, just like Big Pharma, “Google Academics” funnels big bucks to shape authority figures in Google’s image for 329 papers that the group was able to identify.  The epitoma suprema of factiness.

Indirect Funding

Direct Funding

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Does Google Use Dominance in Search to Steer Traffic to “Unofficial” YouTube Videos?

Admittedly this is an unscientific sampling.  But it sure seems like Google search (especially in ex-USA markets) seems to return top search results for UGC (User “Generated” Content) videos instead of official videos.  Often no royalties are paid on these UGC videos, and in the cases where royalties are paid, they are paid at a substantially lower rate.   Look at the search below (I’m spoofing so Google search thinks I’m in Spain)  When you click through on the video it goes to what appears to be some random user channel.  That sucks. Cause that’s $2,654 dollars we didn’t  get from YouTube even at their usurious take it or leave it rate.

Further consider approximately what those plays worth on:

Apple Music  $28,852

Spotify $16,542

Deezer $24,620

Rhapsody and Tidal generally pay an even higher rate but I don’t have current data.

Skip down through the screenshots  and check out the George Harrison, Gypsy Kings, Chalino Sanchez  and other examples.

Now check out George Harrison.  I’m pretty sure the first Google search return is a UGC video.  And it’s ranked above the semi-official Vevo live video.  10 million views, that’s some real money that Google is saving by steering traffic to that search result.

 

Same thing with the classic Gypsy Kings track Tu quieres Volver.  UGC video is featured result.

And I’m pretty sure if Chalino Sanchez were still alive he wouldn’t put up with this shit.

And what the fuck is up with this?  When I search for the official ISIS national anthem I don’t get the official ISIS YouTube Channel?

 

A Compromise Proposal to Fix Streaming Royalties,Licensing and Notification

I have a feeling I’m about to wander off the reservation here.

I say this because what I’m about to propose is essentially a modification of a potential legislative proposal that rumor has it the NMPA is floating.  That proposal seems to be generating some negative backlash in songwriter/publisher community (whether it deserves it or not.)  Also, it will at first seem to go against some of my long held principles on market pricing,  “orphan works” type proposals and the establishment of any further federal copyright exemptions and safe harbors.  So hear me out while I make the case for a win-win compromise.

What is it that digital services want?

Digital services have two major issues with the current law and regulations on “streaming mechanicals,” those small royalties paid to songwriters and publishers on each stream of a song.

Interactive streaming services get a federal “compulsory license” to use any songwriter’s work on their services as long as they follow a relatively simple procedure (with some exclusions).   A pre-condition to services using this protocol is that the law requires them to send a “Notice of Intent” (NOI) to owner or agent for owner of the song.  The NOI is intended to make sure the songwriter knows their song is being used, and the service must demonstrate that it knows who to pay.

Implicit in the logic of the law and the related regulations is that the federal government did not want the interactive streaming services building up a black box of “unmatched” songwriter royalties.   Nor does the law necessarily require that the streaming services would have access to every single song in existence.

However, commercial pressures, coddling from music distributors and lax enforcement of songwriters’ rights (until the recent class action lawsuits), has encouraged these services to use as many songs as possible with full knowledge that they didn’t have licenses for every song and were thus committing mass copyright infringement. Streaming services literally very likely have billions of dollars in willful copyright infringement liabilities on their books whether or not they acknowledge the liability on their books or to their shareholders.

In order to extricate themselves from this situation, I hear that interactive streaming services have generally proposed three key solutions that can be generalized as follows. (See Spotify comment to Copyright Office).

  1. A global rights database with information on every song ever written.
  2. A “safe harbor” or “grace period” that allows services to use songs when they can’t find the owners of the works in this global rights database.
  3. A webcasting style NOI process (like Section 114), whereby each streaming service notifies the copyright office of their intention to stream music.  They don’t have to hunt down every single songwriter.

Does this seem reasonable? Let’s dig into the details and look at the problems.

Songwriters’ objections to these proposals

The first objection from songwriters goes something like this.  Interactive streaming services knew the law before they got into the streaming business.   Some of them (like Google) bought companies with song data (like Rightsflow) or developed their own (like YouTube’s Content Management System).

There is a real moral hazard in rewarding services’ bad behavior by forcing songwriters to do the heavy lifting on a rights database and then granting the offending party a very valuable safe harbor.  In the view of most songwriters, we are the ones being abused and are the ones deserving of concessions.

The second objection is painfully obvious to songwriters, but seems to be totally lost on the streaming services, academics and many in the music industry:  An up to date global registry of  all songs is impossible.  Last I checked 75,000 new albums were released every year in the United States.  It’s likely that hundreds of thousands if not millions of new works are created every year worldwide.  How many a day?  An hour?  It’s really great that the NMPA may “certify” the database but there’s really no need for their members to indemnify services that could easily have done the research themselves.

Consider also the spontaneous, informal and collaborative nature of all songwriting.  Many new works are created by aspiring non-professionals with little knowledge of publishing rights.  How on earth do you ever get this ownership and songwriting splits into a database in a timely fashion?  Certainly there is ownership registration software that works with music creating production programs that is beginning to capture more of this information, but it will never capture all of it.  So why would the government want to punish this creativity by making sure it is uncompensated through yet another safe harbor?

As a result of the inevitable incomplete nature of the database, it will never fix the problem it is designed to fix.  There will still be mass infringement of works by streaming services and they will be vulnerable to more lawsuits. This is especially true for new works, niche works, and works containing samples.   For this very reason there is a sneaking suspicion among songwriters that streaming services are aware of this problem and are simply using the lack of a unicorn database as a delaying tactic.  Further you don’t have to put on a tin foil hat to realize that an incomplete global database is just gonna create a bigger black box of unpaid royalties that someone other than the songwriter will get to keep.

Finally–safe harbors have been a disaster for songwriters and performers.   The biggest music streaming service in the world is YouTube.   YouTube is by a far the worst paying streaming services. This is precisely because the DMCA safe harbor allows them to operate like a mob protection racket: “Some nice songs you got there, sign this usurious contract, cause we’d hate to see our users upload your songs, and then you don’t get any royalties.”

Another safe harbor for streaming services?  No thanks.

If the management at these streaming services were truly exercising their fiduciary responsibility to their own shareholders they would be OPPOSED to YouTube/Google’s extra-legal interpretation of the DMCA safe harbor.   How will any of these streaming services achieve profitability when they have to (unfairly) compete with YouTube/Google.

This is an area where the interests of songwriters and interactive streaming services are aligned.  If streaming services took the long view, they would join songwriters in demanding congress/FTC/DOJ force YouTube/Google to end this shakedown practice. They wouldn’t demand their own safe harbor. Another safe harbor just invites a new round of lawsuits, political cronyism and abuse.

What do songwriters want? 

Songwriters wants are simple: fair pay and control of their works.  That’s pretty much what any property owner wants.

When it comes to streaming services it generally implies two things,

  1. Higher royalties; and
  2. A right for the songwriter to withdraw their songs from digital services that pay too little.

As it stands performers and labels have the right to NOT license their work to interactive services if they don’t like the terms of direct licenses.  In contrast songwriters have no right to withdraw their works from compulsory licenses.  Further the federal government caps songwriters share of streaming revenues at 10.5%.

You think the minimum wage sucks?  Try working under a maximum wage.

This is patently absurd if you think about it.   Would the federal government mandate that all bands sell their t-shirts for $5?   Would the federal government mandate that Whole Foods cap pay to their employees at 10.5%  pro-rata share of their gross revenues?  Fundamentally this is an extremely regressive practice.  I find it particularly amusing that some of the strongest supporters of the regressive status quo are Congressional Democrats.

The Known Unknowns

While higher revenue and the right to withdraw a work seem pretty simple on the surface, closer inspection reveals problems.

Raise songwriters royalties how high?  What is fair compensation when there has never been a free market for mechanicals royalties.  From 1909 to 1976 the statutory mechanical royalty for phonographs was stuck at 2 cents a copy.  This wage and price control has cast a long dark depressive shadow on all mechanical rate setting proceedings after 1976.

But it goes deeper than that. Should all songs and songwriters receive the same rate per spin? Always?   Do individual songwriters value each of their own songs the same? Do consumers place the same value on each song?  How about streaming services? Do they value songs by certain artists over others? Why are songs treated as a commodity like light Brent crude or pork bellies?

My guilty pleasure is Taylor Swift’s “Shake it Off.”  I paid $1.29 for the song. I thought my band Camper Van Beethoven should cover it. Would I have paid $5.99?  Probably not (I’d have streamed it on YouTube). Would I pay $5.99 a song for an unreleased Captain Beefheart song?  Probably. Would I pay $50 dollars for a sequel to Sleep’s Dopesmoker?  I don’t know.  Maybe.  But the compulsory license mandates flat rate pricing.

Economists generally agree that flat pricing is wasteful practice.   Flat price streaming  (both rates to songwriters and consumer) is a kind of POTS economics in an Ebay world.    Companies as diverse as Amazon and Delta Airlines employ dynamic pricing algorithms that change prices instantaneously.  Why can’t songwriters have more control over the pricing of their work? Why is the music business stuck with a 1970s Columbia House Record Club model? “Get 19 albums for a dollar, when you sign up for a year!’  I’m pretty sure we can do better than that.

Second complication,  if a songwriter wishes to withdraw their catalogue (or a work)  from a federal compulsory license, who do they notify?   Is the withdrawal immediate?  Do they need to notify every service?  Do they notify the Copyright Office?    Aren’t we back to the same impossible database problem explored in the previous section?

No. A database of songs or songwriter/publishers who have “opted out” would be smaller.  Sure it would be a dynamic database, but if the right to opt out is contingent on registration with a public database, it would by definition be 100% accurate.  Especially since songwriters recapture a valuable right by doing so.  This is a real incentive,  (unlike this proposal which seeks to “punish” rights holders by withholding puny streaming royalty checks that aren’t simply worth going to the bank to cash).

The compromise

The idea of this compromise is that we are fundamentally flummoxed by the question “What is this song worth?”  So if we are going to come out of our trenches and try to reach a compromise we must set up a mechanism that helps us discover the answer to the question.   Keep in mind there is not a positivist answer to this question.  It is constructivist by nature.  The answer is whatever the participants agree is fair.  As Ari Emmanuel once said, “Fair is where we end up.”  It is whatever the licensor and licensee deem fair on that day at that time.

Let me say right at the start that no one is gonna be completely happy with this solution.  There are elements here to which I would normally be ideologically opposed.

This compromise is largely based on something called Extended Collective Licensing that is used in some Nordic countries. Other elements are pulled from proposals the NMPA seems to be floating.  This is an extremely rough draft, and I’m making substantial concessions to streaming services, not because I necessarily want to give them concessions,  but because this is what I think an acceptable  compromise would look like

Anyone with a valid compulsory license gets to keep it (although the “address unknown” mass NOIs have to be dealt with separately). Going forward for new licenses and works:

  1. Do away with the 115 NOI system for streaming mechanicals.
  2. Establish a quasi governmental body like SoundExchange to license and administer a compulsory streaming mechanical. The CRB would continue to set rates. But this should eventually sunset. For simplicity sake let’s call this entity SongExchange.
  3. However songwriters/publishers could serve notices and opt out songs or catalogue from SongExchange and the compulsory license.
  4. In order to exercise this right all songwriters and publishers would have to agree before opting out,
  5. Substantial advance notice must be given to SongExchange and streaming services.
  6. A necessary condition of opting out of SongExchange would be to register in a machine readable public database and opt out information once registered must be kept current.
  7. This database will belong to the public and shall not be privatized.
  8. If the owner of the song fails to keep information current it reverts back to SongExchange for administration.
  9. SongExchange would administer the database and administrative fees would be split between songwriters and services.
  10. Opted out songs could be directly administered by owners or assigned to third parties for “extended” collective negotiation.
  11. Songwriters/publishers may form new non-profits or co-ops to administer these rights.
  12. Alternately songwriters/publishers may assign these rights to the existing non-profit PROs, ASCAP and BMI.  The DOJ consent decrees should be modified or dropped in order to make this possible.
  13. Songwriters/Publishers may assign these rights to private PROs like SESAC or GMR.
  14.  Like labor unions, professional sports leagues and farm co-ops, these third parties should be given explicit exemption from the Sherman act and other anti-trust restrictions.
  15. The CRB must be allowed to consider as evidence rates set by songwriters and composers that opted out of the SongExchange (“race to the middle”)
  16. SongExchange must hire an independent 3rd party to conduct a royalty compliance examination of the services and the services must accept those audits, and any group of songwriters can conduct a group audit under the same conditions.
  17. SongExchange may impose penalties on services that have excessive unmatched and unidentified compositions. These penalties may be used for overhead.
  18. SongExchange will hold unclaimed royalties for a period of three years. Song Exchange will post a list of unclaimed works.  After three years the unclaimed royalties are transferred to the applicable Secretary of State as unclaimed property to be held as other unclaimed property (like unclaimed utility deposits or bank accounts).

This proposal is obviously disruptive to the status quo.  I’m not opposed to phasing it in over a few years. Here’s what I think this proposal does that is not possible in the current system:

  1. It simplifies the licensing of songs by eliminating the per-song NOI system;
  2. Provides an accurate database to assist in licensing songs;
  3. Is pro-competitive and eliminates need for ATR supervision;
  4. Allows true price discovery;
  5. Encourages competition among rights holders and third party licensing authorities; and
  6. Allows songwriters to collectively bargain if they wish.

It should also be added, that unlike any other proposal offered so far, this is the only proposal that can achieve a 100% licensing rate by streaming services.  All other proposals  (even those floated by the streaming services themselves) would leave streaming services open to copyright infringement lawsuits.

Spotify’s $600 Million Loss, Currency Risk and What it Means for Artists

Stuart Dredge over at Music Ally is reporting Spotify’s losses widened to $600 million last year.   Read his article here.

I just wanted to point out that some significant portion of these widening losses are due to currency swings.   March 29th 2016 Spotify announced a $1 billion US denominated convertible debt deal with TPG and others.  Since that time the US dollar has risen considerably against most currencies.  A disproportionate share of Spotify’s income is NOT in US Dollars.  Therefore the vig on that convertible debt is now headed towards payday loan rates. Ouch!

This is good news and bad news for artists.

The good news is this may force Spotify to limit the free tier and convert more US subscribers to premium.  They need more US dollar income to stop the hemorrhaging from the US debt!  Remember artists’ royalties from premium subscribers are 8-10 times higher than free listeners.  More premium subscribers is a good thing for artists.

The bad news is Spotify has already indicated they want to pay lower royalties to artists because they are losing so much money.  This is completely fucked up. It’s not our fault the company is so poorly managed.

Artists and labels should stand strong and not give in to Spotify’s demands.  Make the bondholders/shareholders get the expenses and management under control. Or eat the losses.

Not our problem!