Public Knowledge Policy Counsel Panjwani.  Does Google tell you exactly what to say or do you get to improvise a little? Change a word here and there, come up with the occasional pithy slogan?

Music Business WorldWide has an excellent article today noting that the Google backed Public Knowledge is crowing about “their” victory over music publisher  (songwriters).

This group despises ‘bad behavior’ by music publishers. Guess who funds it?

That’s right Public Knowledge named as a “Google shill” in the Google v Oracle case, is crowing about the fact a former Google lawyer (Renata Hesse)  now in the DOJ rammed through a change to the unconstitutional and repressive consent decrees that clearly benefits Google.

These people have become an existential threat to the livelihood of songwriters.  This is not hyperbole, the existence of a professional class of songwriters is in question, simply because one company, Google seems to want more money and power.   Doesn’t Google already have enough power and money?  How much more money and power do these assholes need?

Fortunately they may have gone too far this time.  I believe this now clearly warrants a congressional investigation of  Renata Hesse at the Department of Justice and her connections to former clients and fake public interests groups like Public Knowledge that are funded by her former clients.

This is especially important because the DOJ antitrust division has completely gone off the rails. It is not just failing to do its job it is making matters worse.  DOJ officials  are apparently too stupid (or too corrupt) to realize (or care) that the overbearing and unconscionable consent decrees are not enhancing competition but are having the opposite effect:

1.  Enriching and entrenching monopolies/monopsonies like Google.
2. Devastating songwriters revenues, which in turn is driving massive consolidation in the music publishing business.

I suggest you write your congressional representatives.  In your own words, tell them you are concerned about the appearance of corruption in the Department of Justice antitrust division.  Note that a former Google lawyer now DOJ official Renata Hesse has pushed through a change to the rules that restricts the rights of songwriters while benefitting Google.

http://www.house.gov/representatives/find/

“We find it troubling that you are asking for exemptions to the rules we apply to all developers and are publicly resorting to rumors and half-truths about our service,”-Bruce Sewell General Counsel Apple Inc in letter to Spotify.

Since the launch of Apple Music Spotify has been on a not so secret “lawfare” campaign against Apple by trying get federal, state and EU authorities to investigate Apple for antitrust violations.

As performers and songwriters you should be concerned about this for two reasons:

1. Apple Music as an all subscription service pays more than Spotify.
2. But more importantly, antitrust rules and laws as interpreted by the Department of Justice are now being routinely used to further entrench dominant companies like Amazon and to force creators to accept ridiculously low payments for their works.

The faulty logic is anything that results in lower prices to consumers is good.  This is not good, as it simply turns a monopoly into a “monopsony.”  And monopsonies can produce the same lack of competition by putting suppliers/producers out of business.  Apparently most DOJ antitrust attorneys are planning on being in private practice when the chickens come home to roost on this.  The perfect example of the latter is the recent DOJ rule change which would force songwriters to accept 100% licensing of their songs.   This creates a race to the bottom which benefits monopolies like YouTube but essentially creates a “maximum” wage for songwriters.

If Apple can put a dent in the use of antitrust as “lawfare” we should cheer them on.

Read more here:

https://www.buzzfeed.com/johnpaczkowski/apple-fires-back-at-spotify-for-asking-for-preferential-trea?utm_term=.jl0jNyV3yJ#.cqadz0VK0g

This is an open letter to songwriters from Warner/Chappell CEO Big Jon Platt on the unconstitutional Google DOJ ruling and unfunded mandate from former Google lawyer and Department of Justice official Renata B. Hesse:

Dear Songwriters,

As you may be aware, for the last two years, ASCAP and BMI have been in discussions with U.S. DEPARTMENT OF JUSTICE (DOJ) regarding the decades-old consent decrees that govern ASCAP’s and BMI’s licensing practices. The objective was to have the consent decrees amended and updated in order to make them more responsive to today’s fast-moving, and increasingly digital, music business. However, in a hugely disappointing decision, the DOJ has declined to implement any of the changes requested by ASCAP and BMI.

But what’s more, the DOJ has determined that the consent decrees require ASCAP and BMI to license their repertoire on a 100% basis. This means that any licensee would be able to obtain a license for 100% of any song from ASCAP or from BMI, even if that society only controls a small portion of the song. This determination is completely inconsistent with the manner in which ASCAP and BMI have issued public performance licenses and threatens to undermine the very system by which songwriters have, for many years, been compensated for the public performance of their songs. It is especially alarming that the DOJ has come to this determination despite the overwhelming concerns expressed by ASCAP, BMI, NMPA, publishers, songwriters and even the U.S. COPYRIGHT OFFICE. In JANUARY, the COPYRIGHT OFFICE advised that: “Such an approach would seemingly vitiate important principles of copyright law, interfere with creative collaborations among songwriters, negate private contracts, and impermissibly expand the reach of the consent decrees.”

Our loyalty – first and foremost – is always to you, our songwriters. Our understanding is that, because there are so many unanswered questions and implementation challenges, the DOJ is providing a one-year grace period for the industry to adapt to the DOJ’s new interpretation of the consent decrees. We are and will be working on your behalf, independently and with ASCAP, BMI and NMPA, to explore all available strategies to preserve and grow your public performance revenue in the face of the DOJ’s unfortunate determination.

At WARNER/CHAPPELL, the DOJ’s actions have only strengthened our resolve to find new revenue opportunities for our songwriters. As we move forward, we will keep you informed and we may ask you to lend your support to our efforts.

Yours sincerely,

JON PLATT
Chairman/CEO, WARNER/CHAPPELL

We can neither confirm nor deny a pinky ring was airbrushed from this photo

Rdio execs personally facing fraud allegations from Sony over the “prepackaged” bankruptcy and sale to Pandora, have filed an antitrust claim against Sony.  While we take no position on the merit of their charges, it certainly looks like another streaming company trying to use antitrust law to avoid scrutiny of their bad business practices.  At issue are the so-called  MFN (“Most Favored Nations”) agreements that create equal royalties for artists across streaming platforms and labels. These are tricky agreements and in some cases could be abused, but we’d have more sympathy for Rdio if they didn’t owe performers and songwriters millions when they went bankrupt.

Read the full story here:

http://www.hollywoodreporter.com/thr-esq/sony-music-investigated-by-rdio-908771

Kettle meet pot. Pot meet kettle.  Doesn’t Sen Warren know songwriters are the small businesses and middle class of the streaming world, not Spotify? Who’s given Warren the bad advice?

The current wave of “progressives” continue to demonstrate that they are not populist in any sense of the word, especially when it comes to protecting the rights of songwriters.  It seems rather than representing the people, they simply represent a different set of crony capitalists than the politicians they rail against.

As an example, “progressive” Sen Elizabeth Warren speaking last week at The New America Foundation (Chairman of board is the robber baron and Google CEO Eric Schmidt)  lashed out at Apple for perceived mistreatment of  Spotify in the IOS store.

Odd.

Shouldn’t a politician who has staked her entire career on the notion that she looks out for the little guy over Wall Street-backed crony capitalists shy away from Spotify? After all Spotify is backed by Goldman Sachs aka Satan AND they failed to pay songwriters.  Remember this speech?

If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business – you didn’t build that.

Well–somebody invested in those songs.  Spotify didn’t write them.

Senator Warren criticizes Donald Trump for not paying contractors and working people.

Neither does Spotify.

Warren’s own website notes her interest in antitrust issues stems from the fact that market concentration harms small businesses and hurts the middle class.  Songwriting is the ultimate small businesses and songwriters are the middle class of the music business.  Spotify has over 50% of the worldwide streaming business according to its own economist, Will Page.  It has 7 times the users that it’s nearest competitor Apple Music has. That’s pretty concentrated.  If it weren’t for Apple Music, you might even say Spotify is a monopolist and it certainly acts like one.

The bitter irony of all of this is that while Apple isn’t perfect, it manages to pay songwriters and at a much higher royalty rate than Spotify.  Songwriters would have been much happier to see Warren lash out at Spotify.   I think the whole speech was more about posturing, burnishing pseudo populist credentials and playing favorites with potential Democratic Party leaning campaign donors.  IMHO Warren is to progressives what major label pop-punk is to punk rock.  The former house flipper turned anti-Wall Street politician is the campaign money generating sellout of a genuine populist movement. If you will, “the great rock and roll swindle.”

And right on cue after Warren’s speech,  Spotify’s head of global communications (and former Clinton speech writer) Jonathan Prince chimed in:

“Apple has long used its control of iOS to squash competition in music, driving up the prices of its competitors, inappropriately forbidding us from telling our customers about lower prices, and giving itself unfair advantages across its platform through everything from the lock screen to Siri. You know there’s something wrong when Apple makes more off a Spotify subscription than it does off an Apple Music subscription and doesn’t share any of that with the music industry. They want to have their cake and eat everyone else’s too.”

Let’s stop right here for a second. Actually dude,  while there may be some truth to what you are saying, you wanna know something that’s really, really, wrong?  Using millions of songwriters songs without licensing them or bothering to pay the writers.

Personally, I don’t really want to hear how poor little Spotify is being mistreated by big bad Apple.  In the pantheon of unlikeable movie characters, the least sympathetic is  “the bully that cries.”  Or perhaps a new archetype?  “The dominant service that runs to the FTC.”  (Which reminds me, thousands of songwriters not being paid, millions of unlicensed songs, mass copyright infringement, fraudulent NOIs being sent by US mail, shouldn’t the feds be investigating this?)

And maybe some of you have heard that name Jonathan Prince before?    Last year a Washington Post story listed Prince as one of a small group of Hillary Clinton’s State Department staffers that had been granted a special status that allowed them to “work” for other companies and foundations while working at the State Department.   As the Washington Post reported:

“Aside from Abedin, Clinton political allies who were granted the special status included Maggie Williams, Clinton’s 2008 campaign manager; Jeremy Rosner, a former Clinton aide; Jonathan Prince, a speechwriter for Bill and Hillary Clinton…”

I think the technical term for all of this is “skeevy.”

But back to Elizabeth Warren. Should we really be surprised that she ignores the  plight of songwriters?  Look who endorsed her: Lawrence “In Defense of Piracy” Lessig.

Go recuse yourself! Renata Hess worked for Google apparently defending them against DOJ antitrust scrutiny brought on by the proposed Google/Yahoo search advertising linkup. 

I’m not sure whether to laugh or cry.  The DOJ anti-trust  lawyer that we are told pushed the “100% licensing” rule on songwriters and their performance rights organizations (PRO), in private practice defended Google against anti-trust concerns in the Google/Yahoo search advertising linkup.  Sheer hypocrisy.

From an interview on Adrian Bye’s website meetinnovators Dec 18 2008

Renata Hesse: Typically when we do counseling, people come to us and say, “Hey, I really would like to do this. Is that okay?” and sometimes you get some pretty interesting questions that way. Usually, the business people are the ones who are thinking of the clever ways of making sure that their products succeed and not the lawyers.

Adrian Bye: Right.

There’re been obviously antitrust issues between Google and Yahoo! Are you able to comment on any of those?

Renata Hesse: I’m not, really, I’m afraid since I did a lot of work for Google on it.

Adrian Bye: Okay.

Step back.  So Ms. Hesse apparently defended Google against anti-trust concerns in a search advertising partnership that would have allowed Google to control 99% of the search advertising market. But she finds the fact that a tiny songwriter PRO like GMR (represents less than 1% of all songs by popularity) can refuse to license a song to a 1/2 a trillion dollar company like Google/YouTube a mortal threat to competition in the music licensing marketplace?  WTF?  Seriously, what would happen if YouTube or Clear Channel couldn’t license the song?   Would planes fall from the sky?   Would the economy collapse?  Would plague and pestilence sweep the land?

No.

YouTube or Clear Channel  etc would not be able to play the song.  That’s all.  At least until the two parties had come to a mutually beneficial agreement.  But that sounds an awful lot like free markets, capitalism and robust intellectual property rights.  We don’t want any of that in the US. Not if the DOJ can help it!

Meanwhile has the DOJ managed to do anything about real anti-competitive issues going on the broader economy?  Consolidation in the airline industry? Mobile phone market?  Search advertising?  You know issues that effect the people they are supposed to be protecting.

No? Didn’t think so.

Welcome to the new and improved pay-to-play DOJ!  Now using the antitrust laws to protect trusts!  Don’t tell Teddy Roosevelt!

Go recuse yourself.  Renata Hesse former Google lawyer and Principle Deputy Assistant Attorney General for Criminal and Civil Operations reportedly rammed through the 100% licensing change to BMI/ASCAP consent decrees. 

Last week the Department of Justice Anti-Trust division announced a further tightening of the antiquated and likely unconstitutional consent decrees that govern songwriter organizations.  Never mind that the 1941 consent decrees were put in place when most radio stations were owned by individuals and ASCAP was pretty much the only game in town.  Now we have massive media consolidation in the broadcast industry, previously unimagined monopolies like Google/YouTube and at least 5 PROs.   Yet the consent decrees are backwards now. They are still pointed at songwriters but benefit dominant firms like Google/YouTube,  Clear Channel, Pandora and Spotify. It’s insane.

For this reason recent talk had been of loosening or even eliminating the 70+ year old consent decrees.  That is why the entire songwriting community was shocked when the DOJ led by former Google lawyer Renata Hesse rammed through a tightening of the consent decrees that govern songwriters. In particular the DOJ has made a change to the consent decrees that would allow a single PRO to license an entire song on behalf of other co-writers even if they are represented by a different PRO which is not under the consent decree.  While this is a seemingly small change the unintended consequences are huge.  Among the many problems with this:

1. May void thousands of private co-administration contracts that cover millions of songs.
2. May void international agreements between US PROs and foreign government chartered PROs.
3. May violate due process of thousands of songwriters not subject to the consent decrees.
4. Creates an effective statutory license without action by legislative branch.
5. Makes a sham of separate proceedings and  rate courts for BMI and ASCAP.
6. Makes music licensing process less efficient likely increasing costs to consumers, songwriters or both.
7. Creates appearance of impropriety for DOJ as this favors Google.
8. Reinforces Google/YouTube monopsony.

We will go further into each of these later this week, but for now we want to just concentrate on the very last one, the Google YouTube monopsony.

If you aren’t familiar with the term monopsony, a monopsony exists when a  dominant market player like Wal-Mart or YouTube is able to reduce payments to suppliers below the price required to produce a good.  Eventually this harms consumers because it creates a race to the bottom eliminating all but a few suppliers.  Unfortunately it is often seen as a “neat trick” by monopolists because the way our antitrust laws have been interpreted for the last couple decades,  anti-competitive behavior is okay if it results in lower prices to consumers. No need to “bust a trust” in this case. 

 I’m pretty sure this is not what Teddy Roosevelt had in mind. 

Under this interpretation of antitrust law the Department of Justice absurdly favors music consumers over music producers.  They invent a “consumer right” to cheap music and favor that over a songwriter’s right to participate in a free market and earn a fair return on songs they create.  You see how that doesn’t really hold up? What happens to consumers when absurdly low royalties discourage songwriters from writing new songs?  Doesnt fewer songwriters and fewer songs mean less competition? 

In order to save the market the DOJ has decided to destroy it. Welcome to the dumbed-down American dystopia envisioned by Mike Judge in Idiocracy.

So specifically how does this 100% licensing change benefit a monopsony like Google? Let’s create a hypothetical example.

Say you are a big time artist manager.  As a manager you grow tired of the lousy performance royalties that your artist/songwriters are receiving from YouTube and other digital services.   When you find out that it’s not possible to withhold music from the lousy paying services because your songwriters’ PROs (ASCAP and BMI) are under antiquated 70 year old  DOJ consent decrees, you decide to start a new PRO called Worldwide Music Rights (WMR).

Now WMR  is not under the DOJ consent decrees, so you go ahead and start negotiating a new deal with service like YouTube.   Obviously YouTube is not happy about paying a potentially higher price, so they invoke the DOJ 100% licensing deal,  which forces ASCAP and BMI to issue licenses for all the songs that your writers have co-written with ASCAP and BMI writers.  Since most big hits are co-written by songwriting teams, inevitably these teams include BMI and ASCAP writers.  Bam! You’re back under the consent decrees. Further since the consent decrees set BMI and ASCAP royalties below market rates this effectively sets the WMR royalty rate.  Even though WMR is not bound by the consent decree.  You see how beneficial this would be to a company like YouTube.  They really don’t have to negotiate with WMR.  Mission accomplished anti-trust division! Market pricing eliminated!

Of course this is all hypothet-,,, Excuse me?… Sorry say that again?… What? This actually happened? Super manager Irving Azoff started a new PRO  called GMR and tried to negotiate better rates for his songwriters with YouTube?!  Wow!  I did not know this!  What a funny coincidence!

Gee I hope that Renata Hesse didn’t know this either! Or communicate with her former client.  I mean cause you could get in a lot of trouble for doing something like that.   I have to say it is pretty weird that she even went ahead with this 100% licensing proposal.  I mean it’s not like anyone on either side of the song licensing market was clamoring for 100% licensing.   The DOJ conducted a public consultation and even the US Copyright Office came out against this proposal. Members of the house of representatives weighed in against this proposal as well.

Well, I guess Renata Hesse is really smart and knows what is best for all of us.  Smarter than anyone that works in the music business or the Copyright Office.   After all she has a J.D. from U.C. Berkeley.  People like me we are just dumb songwriters.  What do we know?  I’m sure this elite super educated lawyer will take real good care of us.  We’ll just go back to shucking  this corn.

The new 100% licensing rule from the DOJ would force any ASCAP or BMI co-writers to license Pharrell’s work to YouTube.

As  a result I find it extremely curious that the DOJ official that has  apparently spearheaded the drive to change the rules once worked for Google.   And why the fuck is the DOJ even involved in music licensing anyway?  Shouldn’t they be investigating ISIS or something?

If I were Pharrell Williams I’d ask Michael Horowitz the Inspector General of the Department of Justice to look into this matter. Not saying there’s necessarily anything there but it’s not a good look for an already embattled DOJ.  Think of it as a confidence building measure. 

https://oig.justice.gov/about/meet-ig.htm

“The American Sugar Refining Company” one of the many 1890s themed Department of Justice Antitrust Division employee bands.  Sociologists have attributed the phenomenon to “proxy parental juvenile rebellion” whereby staff lawyers “rebel” against the “parental” tenets of antitrust law by embracing the 1890s when trusts like American Sugar Company were untouchable. 

An 1890’s craze has been sweeping the Department of Justice antitrust division.  Employees of the formerly respected part of the executive branch have recently taken to growing enormous mustaches, riding bicycles with large front wheels and using antitrust law to enrich and further entrench existing trusts like Google.

“It was a really cool time.  The Supreme Court in 1895 used a law intended to bust trusts (The Sherman Act) to actually go after labor unions” said a lawyer in litigation section III.  “I mean this is exactly what we are doing with songwriter performing rights organizations.”

“This is like the golden age of antitrust law, before The Clayton Act made the law work as intended” offered another lawyer from section II. “If these disgusting songwriters didn’t want the boot of the Department of Justice on their throats they should have done something different with their lives.”

When this reporter asked for clarification on what other things songwriters could have done with their lives, the lawyers suggested alternative careers like  “click fraud,” “mass copyright infringement” or “start a monopolist search engine/search advertising firm.”

“Yeah we never go after that kind of stuff” a young staffer offered.

The craze traces it roots back to the rehiring of Renata Hesse at the DOJ in 2011.  During a brief revolving door sabbatical from DOJ Hesse apparently worked in private practice (Ka-ching!) to defend Google from DOJ concerns that the Google-Yahoo search advertising lockup was anti-competitive.  Hesse omits this detail from her DOJ bio.

Hesse refused to comment on the record but another DOJ staffer told us “We are elite lawyers from the most elite institutions in the world, Harvard, Yale, UC Berkeley.  No one should expect us to relate to the little guy, those we are charged with protecting. No one should expect us to have morals, ethics, humility or common sense.”