The major publishers are on the verge of a major settlement with Spotify.  Details have emerged that make it clear that everyone gets something except indie songwriters.  Well, indie songwriters may get  a few dollar IF they help build Spotify’s spiffy new database by dutifully submitting publishing information. But unlike the major publishers they won’t receive penalties or the statutory damages that may be legally due to them.  Statutory damages  can be in the thousands of dollars per unlicensed song

And why exactly are indies helping build a Spotify publishing database?  I mean Spotify built a streaming service and raised billions of dollars and they forgot to build a song royalty and licensing payment system? It’s not songwriter’s fault the company is apparently run by incompetents.  Further there were also plenty of third party vendors that could have done a halfway decent job licensing and paying royalties.  Which reminds me why does HFA get in on the deal?  They were in charge of licensing the songs that didn’t get licensed.   This literally punishes the victim while rewarding the apparent mass infringer and its enabler in chief.  This is a complete outrage.

Judging from preliminary data it appears  that the unlicensed songs (and resulting unpaid royalties) were largely indie publishers not represented by the major label publishers or the Harry Fox Agency.    So why is it that any remaining royalties will be paid out according to publisher market share?  That will only guarantee that the major publishers are paid royalties that should belong to indie songwriters.

So here we go again.  In a shortsighted cash grab the major publishers will take what most average-hardworking-play-by-the-rules Americans would call a $5 million bribe, in exchange for giving Spotify an out on the ongoing HFA audit and provide a smokescreen that misleads independent songwriters and Spotify investors into thinking that the unlicensed song problem has been fixed.  It has not.  In fact it’s worse than fixed.  It’s a $5 million dollar whitewash.

1.  It’s not a real settlement, it’s more like a bail out.   It doesn’t get rid of the real problem: infringement liabilities.   Spotify will still be loaded with an unknown number of songs (hundreds of thousands?  millions?) that were never licensed and thus Spotify will still be infringing copyrights on a mass scale.  Why?  It would require tens if not hundreds of thousands of independent songwriters who have no relationship with NMPA to opt into the NMPA’s publisher payout settlement.  How likely is that to happen?  (Not to mention songwriters who live outside the U.S.)
2. The NMPA publisher payout settlement supposes there is a royalty rate with which to calculate unpaid royalties.  But there is no royalty rate!   Why?  It is highly likely that Spotify failed in many cases to obtain compulsory licenses BEFORE they made available the songs (hence the settlement).   As a result by law Spotify is forbidden to use the compulsory licenses on a recording-by-recording basis (and song-by-song) and the associated statutory royalty rate.  This means Spotify must negotiate a direct deal with each songwriter.  Until that is done there is no way to calculate unpaid royalties.  Spotify is trying to unilaterally impose some theoretical royalty rate on all the world’s songwriters.
3. The settlement essentially forces publishers and songwriters to build Spotify’s licensing and royalty database.  Can you imagine the outrage if a record label demanded that performers and managers build the back office royalty systems before they were paid?  Why?
4. It looks like the $5 million “penalty” would be divided up among publishers by market share.  So this means the major publishers would capture most of this revenue.  Now think about it.  Who IS getting paid by Spotify?  The major publishers! So now they get paid again?  What’s the penalty for if the majors were already getting paid? The unpaid and unclaimed royalties are more likely to belong to the independents who weren’t licensed.
5.  I have a fundamental objection to the premise that Spotify and HFA have somehow learned their lesson and reformed their practices and are thus deserving of a settlement.  It appears that they continue to engage in practices that violate a host of laws (not just copyright). Allow me to demonstrate.  HFA just sent to me on behalf of Spotify (via USPS) what appears to be backdated NOIs (“notice of intent to obtain a compulsory license”).  Here’s one postmarked Feb 16 2016  that we received for a use starting in 2011–FIVE YEARS LATE!  And it’s “signed” by Ken Parks, a Spotify executive who left the company nearly a year ago.  Not only that, but it lists an address for HFA that they didn’t have until they moved in 2012!  I have to believe I’m not the only one who is getting backdated NOIs trying to trick me into accepting them.

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?

You’ve probably by now heard that Yesh Music LLC and John Emanuele have sued Tidal for Copyright infringement.   It is alleged that Tidal did not obtain the required licenses to stream the songs.  The facts in the case are similar to class actions filed against another streaming service (ahem).

Now there is a sort of salaciousness to a lawsuit against  Jay Z’s artist friendly streaming service Tidal,  thus this story has got a lot of play.   What is going unreported is that Yesh Music LLC  and the same law firm have also filed similar suits against Google Play, Slacker, Deezer, Rdio, Beats, and Microsoft.    Some of these have since been settled out of court.   But it’s clear what is happening here: streaming  services are using songs first and then going back and trying to exercise a compulsory license later.

ALL OF THEM.  

The law is absolutely clear on this matter.  You can not go back and try to obtain a compulsory license once you have already made songs available.

At the heart of all these lawsuits are deficient “Notices of Intent” like this one sent by Music Reports on behalf of Rdio.  I received this notice via the US postal service.  It is a highly misleading letter that purports to be a valid notice to execute a compulsory streaming license a full 4 months after the service made the song available! I have dozens of these deficient notices.  I’m not an attorney but the relevant section of the copyright act is incredibly clear on this matter: Rdio no longer has the right to license the song in this manner.  Music Reports  are in the business of licensing music for streaming services.  Surely they understand the law?  They reference the relevant section of the copyright act at the top of the letter!  How many thousands of these notices have they sent out via the US Postal Service  to songwriters all across the United States? 

K Street Lobbyist and Former P2P United Director Adam Eisgrau.

As we suspected, the nomination of Dr. Carla Hayden for Librarian of Congress looks troubling for writers,songwriters and other creators.  If you were not aware the Copyright Office is part of the Library of Congress, and thus the Librarian of Congress could have deep influence over copyright policy in the US.   Thus it deeply troubles us that we see the former executive director of the piracy alliance, P2P-United, endorse the nominee for Librarian of Congress.

The  experience of musicians over the last 17 years is that copyright exceptions like the DMCA “safe harbor” have been abused by companies like Google/YouTube to generate billions of dollars in income while often paying musicians nothing.   At the same time the DMCA safe harbor is creating an internet-wide market failure that has made it impossible for musicians to obtain a fair market value for their songs and recordings in the digital realm.

To be clear we do not know Dr. Hayden’s views on copyright,  but we hope she does not heed  Esgrua’s call to further “balance” copyright towards the exemptions and exceptions.   The companies that benefit from the exceptions are already some of the biggest companies on earth.   The Library of Congress needs a Librarian that understands that the books that fill the shelves are produced by copyright incentives not exceptions.

Search for “free music” in the Apple App Store.

Grab this one: Free Music -Stream Music Mp3 Video Player.

Here it is on my home screen.

Look ads!  Click on blue triangle.  Hope you didn’t pay too much for that shitty mobile ad HBO digital marketing geniuses!

“Ads by Google.” Yes the company that wants to monetize the worlds piracy.

Check for one of my songs. Looks like studio recording…

Yes, indeed this is our studio recording.

Here’s another. Stay Classy New York Times.  Who else is on here?  Studio recordings?

Dead Kennedys.

Cake.  Google is calling you “dude.”  Studio Recording!

Old 97’s.

Lessons learned:

1. Apple and Google can get along when it comes to fucking over artists.
2. Google mobile advertising is absolute horse-shit.
3. The voluntary guidelines to stop click fraud and ad supported piracy are double horse-shit.
4. They aren’t gonna stop unless someone goes to jail.

Never mind the cultural sensitivities: Canadian sci fi writer Cory Doctorow calls Dr. Hayden a “no foolin'” librarian.  

If Cory Doctorow is FOR the nominee for Librarian of Congress which oversees the Copyright Office is something seriously wrong? Cory Doctorow is one of the most dishonest and hysterical critics of copyright protections and artist’s rights. To call him a “demagogue” is putting it lightly. For example in this same article he comes up with one of his patented falsehoods seemingly designed to generate maximum hysteria from his ignorant tl/dr followers:

“Next up: watch for a move to rip the US Copyright Office (which now gets to make rules on things like whether the DMCA prohibits you from using generic insulin in your insulin pump) out of the Library of Congress…”

The Copyright Office could prohibit you from putting generic insulin in your insulin pump? I want some of the generic insulin he is smoking. This is such a wild claim I don’t even think it’s been debunked yet. It makes no sense. It is science fiction. And remember Cory Doctorow is really good at science fiction (seriously).  Maybe he got confused. He thought he was writing fiction?

Thankfully  Mr. Doctorow  encouraged me to go ahead and look into the background of the Librarian of Congress nominee, Dr. Carla Hayden.  A two minute search on my iPhone revealed  that Dr. Hayden is on the leadership council for the Open Society Institute of Baltimore. This is not in and of itself a bad thing. I’m sure they do good work. The problem is that OSI Baltimore is a part of George Soros’ Open Society Foundation. The Open Society Foundation is quite hostile to copyright protections for authors.   The Open Society Foundation is STILL calling for further exceptions and limits to copyright knowing full well author’s revenues have been devastated by lack of effective copyright protections the last 15 years.  This concerns me.  This should really concern every author.

We should really thank Mr. Doctorow for alerting us to this possible “Manchurian nominee” for Librarian of Congress.  Artists and authors should get a chance to thoroughly question her stances on copyright protections.

Canadian Sci-Fi Writer Cory Doctorow in natural habitat. By Ed Schipul from Houston, TX, US (Cory Doctorow @ eTech 2007) [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)%5D, via Wikimedia Commons

Let me apologize in advance for the rather lo-fi nature of this video, but it’s from an informal webinar I’ve created for artist’s rights activists in training.   Here I explain the basics of ad funded piracy; how Google profits from this activity; how this causes market failure drives down the price of music across the board.  And how we can turn the tables on these guys.

For more on the scammy scammy world of online advertising read article referenced in the video

http://www.bloomberg.com/features/2015-click-fraud/

 (I posted this on my facebook page 6 months ago. It continues to get shared so I’m updating and posting it here.)

It amuses me to no end when people suggest that artists can make up for recorded music revenues with live music revenues. These are people who obviously know little about the live music business. I’m sure the top 1% of touring artists can.  But for most middle tier bands this is not a reality.  The main reason lower level artists tour is that it is the most reliable way to stimulate sales of recordings!  That’s what actually supports the middle class artist.

But there are other issues to be considered before comparing live revenues and recorded music revenues.

First of all: recorded music revenues are largely “net” while live music revenues are “gross.”  You can’t equate revenues before expenses  with revenues after expenses. Apples and oranges (*ahem* NY Times Magazine).  D’oh!

Sure while most midlevel artists (like my bands)  will have about two dozen  top markets where they play for 500-1000 people a night. And we strategically place those on a weekends.  And yes you can make $500-$800 per band member on shows like these. Ultimately you have to consider that these are just a small percentage of the shows that a mid level artist plays each year.

The other 80-90% of shows occur in lower population secondary and tertiary markets Sunday through Thursday. These shows naturally have much lower attendance and challenging cost structures  So even a band like my own with multiple radio hits that  does 600 paid  in Boston, 800 paid  Washington DC and 1000 in San Francisco has totally different economics on the other 80-90% of shows that make us a full time band.  No offense but places like Wichita KS and Syracuse NY?  200 on a Monday night in a rock club is actually pretty respectable.  Don’t believe me?  Just look at pollstar.com. Check data for club capacities for your favorite midlevel band.  Or pay for an account and you can see the actual ticket sales.

I’m right.  Trust me.

Sure we could skip these lesser markets and keep going back to our top 25 markets, but eventually you saturate and kill the golden goose.   Play in NY four times a year and suddenly you’re drawing 1/3 attendance. Playing in NY  Every 12-18 months maximizes attendance.   So really bands like mine have two choices.  Play only part time (like Camper Van Beethoven and have other jobs)  or play secondary, tertiary and break even foreign markets where you eek out minimum wage the other 80-90% of the year.  Why?  To sell albums, generate airplay and sometimes a sync licenses. Cause those artist royalties, mechanical royalties, public performance royalties are what is really supporting the band.

Drill down further. 

So lets say your average middle tier band play 125 north american shows a year (That’s about saturation after that you start cannibalizing ticket sales from nearby cities).  Forget about those top 25 markets. We know those are decent shows.  What do the other 100 shows really look like? What do those Sunday through Thursday small market shows look like?  Let’s assume an average attendance of 200 at those other shows.

Since most of the “T-shirts and Touring” journalists are too fucking lazy to pick up a calculator and do the math I’ll do it for them.   Very important fact to remember:  my wife is a concert promoter and she books about 300 shows a year. And these are mostly middle tier artists!  Our house is a concert promotion facility. She is constantly in touch with other concert promoters, bands, managers and agents across North America.  We are awash in contracts and settlement sheets.  We know what most middle tier bands do in ticket sales Sunday -Thursday.  We know what most club concert deals look like.  I assure you that few music industry “experts” are this familiar with the day to day data. 

In the relatively fair North American market ( assume it’s worse everywhere else especially in UK).
ON AVERAGE
Buy ticket: $22-$30+taxes Ticket face value $20
Ticket Charge $2-$10 bucks 50% to venue/ 50% to ticketing agency 0% to artist.
$20 Face Value
$8 (40%) goes to venue (rent/security/staff/pa/lighting/promoter profit)
$12 (60%) to artist. But this is artist gross!
Then artist pays.
$1.20 (10% of 60%) to agent
$1.80 (15%of 60%) to manager
$1.20 (non-resident state withholding tax average 10%)(Grrrrrrr… total government rent-seeking activity).
$7.80 (39%) adjusted gross to artist on every ticket.
Then the artist pays crew, transportation, hotels, fuel, meals, insurance etc
Let’s look and see how that works.
Take moderately popular middle class touring band. Bare bones. 4 band members and two crew. 200 paid on a monday night in Tulsa OK. $20 face value on the ticket.
Artist adjusted gross $1560
Typical daily expenses.
$300 2 crew salaries (low ball!)
$150 van/trailer rental or depreciation (300 miles a day) + insurance
$90 fuel
$450 hotels (two star or lower)
$150 meals or per diems
$100 amortize misc/overhead (supplies, accounting costs, tax filings in 40-50 states, repairs, storage, rehearsal space etc etc).
$210 amortize day off /travel days (6 days on 1 day off)
$1,450 approximate daily expense.
Each band member (4) makes $27.50 before tax. or 0.7% of face value of each ticket.
Sure the band members might make $500-$800 bucks a show in their best markets on a friday or saturday night. But if you are very lucky that’s 25 shows a year.
The other hundred shows a year look like this.

That’s why you see stories like this:

THY ART IS MURDER Vocalist Quits Over Finances: "I Can't Live Like This Anymore"

And don’t tell me stupid shit like this (these are actually taken from Facebook comments:

1. Get a $1500 used van.  Yeah what happens when it breaks down in Bend OR?   What’s that gonna cost you to get out of that?
2. Play 7 nights a week. Uh Every notice the space on map between Kansas City and Denver?  Or Bozeman Montana and Fargo ND? Voices don’t work 21 nights in a row.   Drivers fall asleep behind the wheel and everyone dies.
3. Sell more merch.  Most bands do $3 dollars a head in merch. Anybody who tells you anything different is bad at math or lying.  If it’s t-shirts 20-35% of that goes to club.  Then you you have to pay for the cost of making the shirts.  Then if you have a dumb design or color (fuchsia  is not in this year!) you wipe out your entire profit.   The only place to reliably make money on merch IS BY SELLING YOUR CDS AT SHOWS. RECORDED MUSIC!!!
4. Get a corporate sponsor.   Yep that’s easy to do when you sell thousands of concert tickets a night and millions of CDs.  Not so much for middle tier of bands. Forget it if you are playing any music remotely controversial.
5. Play more mainstream music.   Sure let’s all be as mainstream as fucking possible. That’s what made American rock and roll so great, being as mainstream as possible to maximize popularity.
6. But <insert name> went from playing midsize clubs to arenas. Sure this happens. Just like every once in a while someone walks out of the casino $50,000 richer. But on average and over the long term most don’t. They walk out poorer. Most mid tier artists will not be playing arenas next year. 
7. <insert  fake music business expert bullshit here> submit your own. 

Face it.  Recorded music sales support the bulk of touring activity for anything that isn’t mainstream crap.

Glenn Peoples is a senior writer for Billboard Magazine.   Here he suggests a bankruptcy by a major streaming or webcasting service would mean artists “owe” money to the streaming services (and presumably their Wall Street and Silicon Valley backers.)   What do you think?