Copyright Royalty Board Reopens Public Comments in Controversial #FrozenMechanicals Hearings

In an unusual–if not historic–move, the Copyright Royalty Board has decided to re-open public comments in the controversial “frozen mechanicals” rate hearing to set the government rate for mechanical royalties paid on physical records and downloads. It is absolutely crucial that the Judges have reopened the comments because it indicates that they are bending over backwards to demonstrate their interest in being fair and deliberative and not allowing themselves to be used to bootstrap an unfair freeze on mechanical royalties. (If you need to catch up, there are many posts on Trichordist about “frozen mechanicals“.)

The Board gave this reason for reopening the comments:

The Joint Submission [by the NMPA, NSAI and the major labels] included arguments that the MOU is irrelevant to the Judges’ consideration of the proposed partial [frozen mechanicals] settlement and proposed regulations and that the MOU does not call into question the reasonableness of the proposed partial settlement and proposed regulations. Because interested parties other than those who submitted the Joint Submission may have been unable to adequately view or comment upon the MOU prior to the close of the Judges’ extended comment period, the Judges are reopening the comment period. The Judges will allow 30 days for comments [from October 19] regarding the impact, if any, that the MOU should have on the Judges’ consideration of whether the proposed partial settlement and proposed regulations provide a reasonable basis for setting statutory rates and terms.

Quick recap–remember that the NMPA, NSAI and the major record companies decided to keep the freeze on mechanical royalties for physical and downloads that these same groups and companies decided to impose on the world back in 2006. If these people win this argument before the Copyright Royalty Board, the rate will be frozen at 9.1¢ for another five years–until 2027. NMPA and the major labels also made a side deal (called an “MOU”) as a quid pro quo that appeared to be additional incentive to the NMPA to accept the frozen mechanical rate that applied to every songwriter but includes undisclosed payments.

What is particularly offensive about this freeze is that the majors and a lot of indie labels have “controlled compositions” clauses in their recording agreements that give them all kinds of downside protection against rate increases. These include a “rate fixing” clause that freezes the mechanical rate for songs at the rate in effect when the recording is initially released. That’s why there are still many songwriters paid at the 2¢ rate that hasn’t been around since 1977. So giving a rate increase is not anywhere near a 1:1 cost increase for the record companies.

David joined with Helienne Lindvall and Blake Morgan to file a comment asking for the Copyright Royalty Board to give the NMPA and NSAI the deal they made but raise royalty rates for songwriters who don’t get the benefit of the MOU payments (whatever they are). Many other distinguished songwriters, songwriter advocacy groups (12 in total) and publishers filed their own comments opposing the freeze.

And then something strange happened as we reported on August 16 with a copy of the brief joined by Austin music lawyer Gwendolyn Seale:

[Chris Castle says: Here’s the context of this post. As it turns out, the CRB extended the filing deadline for comments due to what they said was a technical difficulty, although we have yet to meet anyone who couldn’t file their comment on time. This extension seems contrary to the CRB’s February revised rules for filings by participants. The CRB procedures presciently have an email filing procedure in the case of technical problems arising out of their “eCRB” document filing system. It will not surprise you to know that the NMPA, NSAI, and major labels filed what is essentially a reply comment after the close of business on the last day of the extension, after at least our if not all commenter accounts were disabled, the practical effect of which was that no one could respond to their comments through the eCRB, i.e., on the record.

We tried, and drafted a reply to the most important points raised in the majors’ comment. We emailed our comment to the CRB during business hours on the next day in line with the CRB’s own “Procedural Regulations of the Copyright Royalty Board Regarding Electronic Filing System” (see 37 CFR §303.5(m)) or so we thought. But not so fast–we were told by an email from a nameless person at the CRB that we would need to file a motion in order to get approval to file the comment less than 24 hours late for good cause–which of course, we are not able to do since we are not “participants” in the proceeding. See how that works? According to this person’s email, we’d also need to contact CRB technical support to get our accounts reopened which would make the comment later still even if we were able to file a motion. Instead, we decided to just post our reply comment on the Internet. A wider audience. Unfortunately not part of the record, but we’ll see what happens.]

We all have to be grateful to the Copyright Royalty Board for re-opening comments on the frozen mechanicals crisis. That is an indication that the Judges do not intend to be a rubber stamp and let the rich use the CRB to bootstrap their private deal onto every songwriter in the world.

We want to stongly encourage you to file your own comments in the frozen mechanicals hearing, tell your own stories and give your own point of view about how to handle the crisis. If you want to file a comment, you need to register for an account at the Copyright Royalty Board. Chris Castle has a helpful guide to setting up your account.

Why Songwriters Should Care About Inflation Protection for Mechanical Licenses

[This post first appeared on MusicTech.Solutions]

By Chris Castle

In a word: Stagflation. Maybe. In more words, classic stagflation occurs when supply side shocks lead to the costs of goods increasing while the real economy declines. We certainly have had and continue to have supply side shocks and it’s hard to tell what the real economy is doing because of distortion. Due to the COVID pandemic, the global economy has been hit with a cascading series of supply side shocks. For example, one shock is due to supply chain disruptions which look something like this:

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If you’ve ever been on one of the very large cargo ships, you will know that is a big mofo. (When a sailor looks at all those elephants churning up the water, you can’t rule out a collision which could have really big problems depending on where and how bad that collision is.)

There currently are something like 500,000 shipping containers sitting on ships off of the Port of Los Angeles that can’t unload. That means someone has ordered the goods in the containers, perhaps paid in advance all or part of the cost of those good, but can’t get the goods to sell. And that’s just Los Angeles. That’s also called a supply side shock.

A supply side shock may cause an increase in the prices of the goods that are available to sell which causes a shift in the aggregate prices in the economy as a whole.

Another supply side shock may occur when inflation causes the price of goods to increase over the level that a firm can eat to avoid passing on the cost to their customers. This causes earnings to decline and eventually share prices to decline. If the market does not re-establish equilibrium fairly quickly, right after earnings decline, the price may get passed on to the consumer which may cause demand to drop which will ultimately cause earnings to decline. This is cost-push inflation which is a bit different from what you normally hear about too many dollars chasing too few goods or demand-pull inflation.

So to recap: cost-push inflation is a decrease in the aggregate supply of goods and services caused by an increase in the cost of production, and demand-pull inflation is an increase in aggregate demand from one or more or all of households, business, governments, and foreign customers. 

Inflationary pressure is compounded by an increase in the money supply, especially a sharp increase in the money supply.

All this should be sounding familiar if you follow the news.

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The Stagflation Three Point Play

Historical examples of stagflation events in the US are particularly related to energy cost shocks and OPEC’s use of oil embargos to influence US foreign policy and support for Israel. We’ll come back to this, but remember that the crippling stagflation of the 1970s was largely due to one input–energy. The gas lines of the 1970s and heating oil price increases were particularly profound and the resulting stagflation influenced the increase in interest rates to a prime rate of 21.5% in December of 1980 after President Jimmy Carter lost reelection. It may be hard to comprehend a prime rate of 21.5% in this low interest rate environment, but don’t feel bad–it wasn’t so easy to understand then, either. The shys were jealous.

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Could it happen again? At this point, I think it’s hard for anyone to rule it out entirely, so the probability is a positive integer. What did songwriters do during the stagflation era of the 1970s? Unlike most of the rest of the peacetime economy, songwriters had mechanical royalties set by the government at a fixed price. Starting in 1909, the federal government set songwriter royalties at 2¢ per unit and never changed the price until 1978. Needless to say, the stagflation of the 1970s destroyed the government’s fixed songwriter royalties. By 1978 it’s not an overstatement to say that songwriters earned a negative royalty rate if you adjusted for inflation. This was all due to the government’s wage controls on songwriters. (You can argue that this is the primary reason songwriters get paid so little today.)

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Why did this happen? Government mandated wage and price controls were common in wartime–during World War II, military expenditures exceeded 40% of gross domestic product (GDP) so the government had an interest in controlling labor and materials costs. They accomplished this through the War Labor Board and the Office of Price Administration. If that sounds positively Soviet, it was. Unlike songwriter royalties, the government mandate was temporary.

By the time the 1976 revision to the Copyright Act rolled around, songwriters lobbied effectively for their statutory mechanical rate to be increased. However, given the rampant inflation of the time, they needed protection because even with prices reset after five year periods, inflation could easily eat away any gains. That’s one reason why after the 1976 revision, mechanical rates gradually increased and eventually were increased based on the Consumer Price Index (called “indexing”) for many years.

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If you followed the recent commentary opposing an extended freeze of the mechanical royalty rate for physical and downloads, the inflation issue is front and center once again. And if you observe the current state of the economy and the likely future, you’ll understand why indexing may be crucial to preserving the value of whatever mechanical royalty is set by the Copyright Royalty Board, the songwriter’s version of the WWII era Office of Price Administration. And who would bet against inflation?

Of course, the CRB heard absolutely no evidence on the inflation issue from the NMPA, NSAI and the major labels that essentially put their finger in the air and decided to freeze rates. That’s not the end of the story, though. The relevant information on inflation is readily available in the public domain and the CRB can take notice of it if they want.

Remember, the 1970s stagflation was a highly unusual economic condition caused by a supply side shock of one input–energy. Here’s a few examples of current supply side shocks from multiple inputs. I think it should give everyone pause before they rule out a need to index the statutory rates for songwriters.



Personal Consumption Expenditure Index (US Govt. Bureau of Economic Analysis)

The “PCE” and “Core PCE” are indexes that economists monitor (such as the economists at the Federal Reserve) to track inflation trends. So let’s see what these metrics tell us about the inflationary trends that would be an argument to support indexing mechanical royalties.

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“Core PCE” is another look at consumer prices that excludes the cost of food and energy which doesn’t make much sense to you and me, but is another way to look at underlying inflation trends for economists. This is important because it can influence decisions about interest rates at the Federal Reserve.

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For perspective, here’s a five-year look at PCE and at PCE excluding food and energy:

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The data tell us that the five year inflationary trend is up and to the right with an increasing slope. It is the sharpness of that increasing slope that gives pause–the inflationary trend has been up since 1959 per the following chart, but the steepness over the last 12 months is unusual.

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Overall US Inflation Rate

The PCE and Core PCE is confirmed by the overall U.S. inflation rate as measured by the U.S. Bureau of Labor Statistics:

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You see the trend here. Inflation has sharply increased. Consider the last twelve months–inflation has more than quadrupled.

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Do we think it will continue to increase or will it decline? Let’s consider the inputs that can cause that supply side shock we talked about above.

Residential Rent Prices

According to Zillow, “[t]ypical U.S. rents grew 9.2% year-over-year in July, according to the Zillow Observed Rent Index (ZORI) — the fastest recorded by Zillow records in data that reaches back through 2015 — to $1,843/month. Projecting forward historical ZORI values from February 2020 — the last full month before the COVID-19 pandemic hit the U.S. in earnest — we estimate that the U.S. ZORI in July was 2.9% ($52) higher than where it would have been if the last roughly 18 months had been more ‘normal.’ “

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And CBS news confirms the data:

After dipping last spring, rents around the U.S. have not only recovered but are now blasting past their pre-pandemic levels. In 44 of the nation’s 50 largest metro areas, rents have surpassed where they were before the health crisis, according to data from Realtor.com. Nationwide, the median rent reached a record high of $1,575 in June, an increase of 8% from a year ago.

Cotton

Cotton is a commodity that finds its way into many goods. The Wall Street Journal reports that cotton prices have surged to their highest level in a decade, but that Levis won’t be passing on the cost increase to consumers–yet. Remember cost-push inflation?

Levi’s commentary on the cotton-pricing issue should soften some of those fears—at least in the near term. On its earnings call Wednesday evening, the apparel company said that much of its own cotton prices have already been negotiated for the first half of 2022 and that it expects its cost of goods sold to increase 1% in the first half of 2022 compared with 2021 levels. For the second half of 2022, the company said it might be able to negotiate prices that will lead to a mid-single-digit percentage increase in costs compared with 2021 levels. Cotton accounts for about a fifth of the cost of producing Levi’s jeans.

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Food Inflation

If you’re going to just look at the core PCE without food and energy, you can’t just ignore those two key inputs if you want to know what is going on at the micro level. We’ll look at both food inflation as well as inflationary effects on a few key energy components, especially for touring bands. Consider this chart of food inflation in the US over the last twelve months which itself is slightly higher than the core PCE.

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Propane

Propane–also known as heat–is a lot more relevant to consumers particularly as we head into winter. Propane generators are of particular interest to anyone who suffered a power outage during a polar vortex–ahem–and as you can see, propane prices are already through the roof.

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Same story for natural gas and heating oil.

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Gasoline

If you’re planning a ground tour, keep an eye on the price of gasoline, also up and to the right.

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10 Year US Treasury Bonds

You may not be aware of it, but practically everything in your financial life is affected by the 10 Year US Treasury bond. The “10 Year” is used as a reference point for a multitude of financial instruments and interest rates around the world. This includes mortgage rates and credit card rates. As you can see, over the past 12 months, the yield on the 10 Year treasury note has increased or nearly doubled. And remember that the bond market is orders of magnitude larger than the stock market. The bond market is also run by sophisticated traders–I’ve never heard of day traders in the bond market.

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You want to keep a good eye on the 10 year because the Federal Reserve plans to “taper” which is one of those fancy names like “quantitative easing” that sounds like a caramel macchiato but is actually not. What that means in a nutshell is that the Federal Reserve plans on buying fewer treasury bonds than they have done–sopping up however much debt that Congress wants to take on. (Some people say this is a lot like printing money–remember that increasing the money supply is one of the causes of inflation, particularly sharp increases in the money supply.)

A cynic–certainly not me–might say that the Federal Reserve keeps the interest rates low because if the U.S. government ever had to pay anything like a market interest rate, the country would go under. But this cannot go on forever, hence “tapering”.

People may disagree with this “printing money” analogy, but the money supply has substantially increased in the last 12 months and it came from somewhere.

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Conclusion

If you stayed with me this far, thank you. I hope I’ve persuaded you that it in the current environment it is highly dubious that songwriters should ever agree to a fixed mechanical rate for any configuration that is not indexed to inflation. Even if you don’t think that stagflation is around the corner, we are certainly seeing considerable inflation in a number of inputs–the supply side shock that is the hallmark of a period of stagflation may not come solely from energy this time. Just because energy was the culprit before doesn’t mean that the economy will not succumb to stagflation by a thousand cuts in the future.

@MusicFirst: New Poll: Americans Support Bold Actions to Get Artists Paid for AM/FM Radio Airplay #IRESPECTMUSIC

TO: Interested Parties
FROM: musicFIRST Coalition
DATE: September 22, 2021
RE: NEW POLL: Americans support bold actions to get artists paid for AM/FM radio airplay

A new national poll commissioned by musicFIRST — the voice for fairness and equity for music creators — shows that the American public backs bold action to ensure that artists are treated with respect and paid when their songs are played on AM/FM radio.

For decades, dominant corporate broadcasters like iHeartRadio and Cumulus Media have refused to pay artists despite raking in billions of dollars in advertising revenue every year. While these corporations use music creators’ work to fill their airwaves, and in turn bring in advertisers, they claim they cannot afford to give compensation to the artists. 

At a time when America is focused on the plight of hard-working Americans, this is exploitation of the tens of thousands of working-class singers and musicians.

These same broadcasters then turn to their lobbyists at the National Association of Broadcasters (NAB) to do their dirty work on Capitol Hill to maintain the unjust status quo, claiming that providing fair compensation to artists for their work would harm “local radio.” The truth is that the six largest broadcast conglomerates have wiped out local jobs at the 2,000 radio stations they own across the country.

While most Americans are unaware of these injustices playing out between broadcasters and music creators, once they learn of this issue they not only agree it is unfair, and that music creators deserve to be paid when their music is played, but they support artists and advertisers taking strong action — up to and including boycotting AM/FM radio stations or supporting artists from withholding their music — to force broadcasters to do the right thing.

Hopefully, it won’t come to that. That’s why musicFIRST is supporting the American Music Fairness Act (AMFA), bipartisan legislation introduced by Reps. Ted Deutch and Darrell Issa in June of this year and backed by a majority of Americans, according to this survey. If passed, the AMFA would require broadcasters to, would finally, fairly compensate artists when they play their songs on their radio stations, while protecting truly local radio stations by exempting small and noncommercial broadcasters.

Most Americans don’t know that artists aren’t paid for radio airplay — and they side with artists when they find out

One key reason that broadcasters have been able to get away without paying artists for so long is that most Americans simply don’t know it’s happening. . 

In this survey, only 30% of Americans said they were aware that artists aren’t paid when their music is played on AM/FM radio. Meanwhile, over half reported that they knew that streaming services like Spotify and Pandora do pay artists for streams. 

The NAB is banking on the public remaining in the dark on this issue. Because once they do become aware, Americans overwhelmingly believe it’s unfair that music creators and artists are not paid when their music is played on the radio — by a 2-to-1 margin, 54%-22%. Once average people start speaking up, standing, alongside leading artists and voices in the music industry, the pressure to finally provide fair compensation may be too much for corporate broadcasters to withstand.

Americans support strong actions by artists, advertisers and Congress to overturn the unjust status quo

But American music fans don’t stop at simply finding this situation to be deeply unfair. This new survey also shows that they believe artists, Congress and even advertisers should take bold steps to upend the status quo. 

By a more than 40-point margin (60%-16%), survey respondents say that artists should be able to withhold their music and not allow radio stations to play their songs if they’re not being paid for it. And big corporations like iHeartRadio and Cumulus may have some difficulty selling ad space if they no longer have music to bring people to their stations, since nearly 3- in- 5 Americans (57%) say that music is what attracts them to listen to the radio. And one step further, roughly two-thirds (65%) of Americans say they would also support Fortune 500 companies and other major brands engaging in a boycott of advertising on traditional radio stations if they continue to refuse to play fair.

But most immediately, this is an issue that Congress can remedy by updating our outdated and unjust laws — and Americans are urging lawmakers to do so. In this survey, over half of respondents (54%) said they would support Congress passing a bill that would require radio stations to compensate artists when they play their songs, such as the AMFA, with only 20% opposed.

Most Americans are turning to streaming services and digital platforms to discover new music and artists, contradicting the NAB’s “promotional value” myth.

Since the beginning of radio, broadcast corporations and their executives have claimed they are doing artists a favor by providing “promotional value” to artists for free. This may have been the case in the 1960s when Americans mostly discovered new music through the radio, but this outdated and exaggerated myth no longer flies in 2021. 

The new survey shows the truth: Times have changed and roughly two-thirds of Americans now use digital sources, such as streaming services and digital platforms, as their primary means for finding new artists and music. Meanwhile, only 1- in- 5 (21%) of Americans say they use traditional AM/FM radio stations to discover new artists they like — and that number will only continue to drop. Of the coveted younger generation (18-29 years old), only 7% point to AM/FM radio as the most likely place to discover new music.

These days, songs and artists are much more likely to go viral on platforms like TikTok or get featured on a popular Spotify playlist, which helps them shoot to the top of the charts. In turn, these same songs are then played on the radio. These are 2021’s order of operations, not vice versa. 

This so-called “free exposure” from radio stations is merely more exploitation. Yet the NAB continues to use this argument to defend why they shouldn’t have to pay artists. However, the data is clear: their claims on this and many other issues are, at best, outdated and, at worst, intentionally misleading — and music fans have had enough.

Americans want music creators — those they already know and those they haven’t yet discovered — to be paid for their work. It’s time for the NAB and the corporate broadcasters they represent to finally listen. 

About This Poll

This poll was commissioned by musicFIRST and conducted online via SurveyMonkey from August 30-31, 2021, with a national sample of 1,455 Americans. The margin of error was +/- 2.5%.

About musicFIRST

musicFIRST works to ensure music creators get fair pay for their work on all platforms and wherever and however it is played. We rally the people and organizations who make and love music to end the broken status quo that allows AM/FM to use any song ever recorded without paying its performers a dime. And to stand up for fair pay on digital radio — and whatever comes next.

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Get Involved!

Contact your Members of Congress and tell them you stand against Big Radio. Click here to CONTACT CONGRESS

Say No to the Stockholm Syndrome: Is an Artist Strike Coming for Streaming?

We’re hearing more and more commentary like this post from John:

So how would that work? It probably couldn’t be a “strike” of the same kind as the UK Musicians Union strike against the BBC in 1980, the Writers Guild strike in 2007 or some of the handful of other famous ones. Those strikes were all related to creators who were employed by employers and that employment formed the basis of a collective bargaining agreement. Strikes are authorized by a vote of the membership and are a sign that collective bargaining has not produced a fair result.

Strikes or work actions usually produce images like this:

Another difference between collective bargaining strikes and artists against streaming is the striking workers’ well being. Strikes impose a cost on both sides and the costs are often a heavier burden for the worker.

Streaming is not that way. For most artists, streaming cannibalizes more sales that it offsets with income. David has written about this extensively. The choice for most artists is not getting streamed more–that is the false promise that Spotify tries to get you to buy into with their various payola schemes that are blatant exploitation.

Songwriters have led the way on this with the Ferrick and Lowery class action against Spotify and David’s class action against Rhapsody. The uprising against the ruling class in the frozen mechanicals protest is another example of songwriters standing together against exploitation.

Streaming presents different choices. The choice is whether to be on a streaming platform at all. YouTube can force you to participate due to their scummy manipulation of the loophole ridden DMCA, the worst nightmare that an incompetent and lard layered Congress ever imposed on creators at the behest of lobbyists, and that’s saying something. If you’re not careful, you’ll end up with another MLC to make sure you know your place.

So you have to think about what a streaming strike would actually look like. It certainly would not have great economic impact for most artists because the income they would give up starts so many decimal places to the right.

One way to get started is to maintain an “Unfair” list for services that engage in anti-artist behavior. Like this guy:

What should the criteria be to get on the “Unfair” list? What would we all do with the unfair list?

We’ll be taking suggestions and thinking about exactly how this would work.

Songwriters and Publishers Ask the MLC: Where’s my money?–MusicTechPolicy

By Chris Castle

If anyone connected to The Mechanical Licensing Collective, Inc. quango brings up the $424,000,000 black box payment that the MLC received in February as part of services claiming their safe harbor under the Music Modernization Act Title I giveaway, it’s usually in the context of claiming credit for the payment as in “Aren’t we great, we got the services to pay $424,000,000 of black box money owed to songwriters.” (Followed shortly by so where’s my bonus?)

Notice what’s not mentioned in that sentence? True, some services paid some money to the MLC which was required by Title I in order for the major infringers like Spotify to enjoy yet another safe harbor. But the payment was not made to songwriters or publishers–it was made to the MLC quango, which is where it sits today, seven months later

How could this be, you say? Very simple. Nobody made sure that the MLC was in a position to pay the money out before they took the money in. This is the kind of thing that you would make sure is tied down in the two-plus years the MLC was operational before they got the money. You know, like when did Noah build the Ark?  Before the rain.

This is the kind of thing you might expect to be mentioned in the MLC’s annual report which was due June 30 but seems to have been delayed. What should have happened, of course, is that the Copyright Office in its supposed oversight role for the MLC quango should be closely reviewing MLC’s progress with paying out a half billion of other people’s money. This is what you would expect from a bit-in-the mouth hard-driving approach to oversight of hundreds of millions that Congress tasked to the Copyright Office. 

Ask yourself (or maybe the Library of Congress Inspector General) whether you think that a pre-New Deal federal agency that has never had enforcement powers is culturally suited to the kind of rigorous prosecution that the oversight role requires? Having created the MLC self-licking ice cream cone, does anyone seriously think that the Copyright Office will rock the boat, particularly when the lawyers seem very interested in landing a job at Spotify (regulated by the Copyright Office) or the National Association of Broadcasters both of which have an ontologically hostile relationship with songwriters? Do you think anyone at the MLC is looking over their shoulder because they’re afraid of the Copyright Office? And if they don’t fear the oversight, what incentive do they have? Nobody else will be twisting their arms.

So should it come as a surprise to anyone that people are asking “where’s my money?” Or that no one is answering?

@cgartenberg: Reddit CEO says TikTok is ‘fundamentally parasitic,’ cites privacy concerns

[Editor Charlie sez: Artists and songwriters should consider how their music is used for child data exploitation and Internet addiction. Not surprising that Europeans are investigating TikTok for data protections for children under 13 and the transfer of personal data by TikTok to China military-civil authorities likely under Articles 7 and 14 of China’s National Intelligence Law.]

Reddit CEO and co-founder Steve Huffman called TikTok “fundamentally parasitic” due to concerns over privacy during an appearance at the Social 2030 venture capital conference this week (via TechCrunch). Huffman specifically called out TikTok’s practice of fingerprinting to track devices as being of particular concern. 

“Maybe I’m going to regret this, but I can’t even get to that level of thinking with [TikTok],” Huffman said at the event, “because I look at that app as so fundamentally parasitic, that it’s always listening, the fingerprinting technology they use is truly terrifying, and I could not bring myself to install an app like that on my phone.”

Read the post on The Verge

@digitalmusicnws: @Portisheadinfo Says SoundCloud’s ‘Fan-Powered’ Royalty System Has Boosted Their Payments by 500%

Back in March, SoundCloud introduced “fan-powered royalties,” or direct-to-artist payments based upon actual user engagement. Now, a track that Bristol’s Portishead released exclusively on SoundCloud in July has reportedly generated over six times the royalties that it would have made on streaming services with a pro-rata model in place.

Read the post on Digital Music News

#FrozenMechanicals Crisis: Unfiled Supplemental Comments of @helienne Lindvall, @davidclowery, @theblakemorgan and @sealeinthedeal

[Chris Castle says: Here’s the context of this post. As it turns out, the CRB extended the filing deadline for comments due to what they said was a technical difficulty, although we have yet to meet anyone who couldn’t file their comment on time. This extension seems contrary to the CRB’s February revised rules for filings by participants. The CRB procedures presciently have an email filing procedure in the case of technical problems arising out of their “eCRB” document filing system. It will not surprise you to know that the NMPA, NSAI, and major labels filed what is essentially a reply comment after the close of business on the last day of the extension, after at least our if not all commenter accounts were disabled, the practical effect of which was that no one could respond to their comments through the eCRB, i.e., on the record.

We tried, and drafted a reply to the most important points raised in the majors’ comment. We emailed our comment to the CRB during business hours on the next day in line with the CRB’s own “Procedural Regulations of the Copyright Royalty Board Regarding Electronic Filing System” (see 37 CFR §303.5(m)) or so we thought. But not so fast–we were told by an email from a nameless person at the CRB that we would need to file a motion in order to get approval to file the comment less than 24 hours late for good cause–which of course, we are not able to do since we are not “participants” in the proceeding. See how that works? According to this person’s email, we’d also need to contact CRB technical support to get our accounts reopened which would make the comment later still even if we were able to file a motion. Instead, we decided to just post our reply comment on the Internet. A wider audience. Unfortunately not part of the record, but we’ll see what happens.]

SUPPLEMENTAL COMMENTS OF HELIENNE LINDVALL, DAVID LOWERY, BLAKE MORGAN  AND GWENDOLYN SEALE OBJECTING TO PROPOSED SETTLEMENT OF SUBPART B RATES

            This comment is in reply to the comment[1] filed by the Copyright Owners and the Joint Record Company Participants (the “Majors”) time-stamped after the close of business on August 10, 2021 and made available on the CRB docket the morning of August 11, 2021, i.e., after the deadline established by the Judges in the Proposed Rule published at 86 FR 33601 that would codify the Proposed Settlement.[2] 

            We ask the Judges’ leniency in permitting our late-filed supplemental comment to be made a part of the record in hopes that our responsive discussion will be helpful to the Copyright Royalty Board in resolving the frozen mechanicals crisis.

            This comment is filed on behalf of Helienne Lindvall, David Lowery and Blake Morgan who timely filed their comment on July 26, 2021[3] in accordance with the proposed rule.  This comment is also filed by Gwendolyn Seale who timely filed her own comment[4] in accordance with the proposed rule.  Their respective biographical information may be found in their previously filed comments.

            We will briefly discuss what we think are the essential points the Judges should consider that the Majors have raised in their comment.

I. Discussion

            A.  Authority:  As multiple commenters have stated, it is unclear whether the NMPA and NSAI have been authorized by their respective memberships of over 300 music publishers and over 4,000 songwriters to propose and/or accept a settlement freezing the statutory rate for Subpart B configurations through 2027. Thus, we ask the Judges to seek out evidence demonstrating that self-published songwriters and independent publishers have authorized the NSAI and NMPA to accept this Proposed Settlement.  We do not question the integrity of the Majors, but we do have questions about the negotiation process that have yet to be answered. 

            References to a broad “consensus” must be questioned because there is both a lack of evidence of consensus and also evidence in the record that at least 12 international songwriter groups object to the Proposed Settlement.  Independent songwriters, including Ms. Lindvall, Mr. Lowery and Mr. Morgan, also object.  It seems simple enough for the Judges to require some evidence of consent to the Proposed Settlement given the awesome power of the government that the Judges are essentially asked by Congress to delegate to the Majors through a voluntary negotiation.  This seems to us to be good cause for further verification of authority to make the deal in the first place.

            B.  The Judges Predicted the Current Opposition in their Phonorecords III Determination

The Majors rely on a citation that both demonstrates the foresight of the CRB and on balance tends to support our position that the NMPA and the NSAI likely lack the requisite authority to negotiate on behalf of all the world’s songwriters.  The Majors invite the Judges to participate in a thought experiment[5] that actually serves quite well to highlight the issues we have raised in the respective comments regarding both the authority of the NMPA and NSAI and the implied below-statutory rates bootstrapped indirectly by means of the freeze:

As the Judges have noted, “NMPA and NSAI represent individual songwriters and publishers,” and would not “engage[] in anti-competitive price-fixing at below-market rates,” since they must “act[] in the interest of their constituents” lest their constituents “seek representation elsewhere.” [Phonorecords III] at 15298.[6]

Respectfully, the problem is way beyond seeking representation elsewhere—the problem is that there was likely no “representation” in the first place if you take “representation” in the legal sense (such as that of a common agent) which we gather is how the Judges intended the use of the word.  Likewise, there is a difference between an agent’s principal and a “constituent”, i.e., a difference between one who expressly authorizes an agent to represent them in certain circumstances and one who is allowed to vote on who that representative is to be.  Neither is the case for many songwriters who have commented in the record for the current proceeding.  We will leave their record to speak for themselves as to why they have sought “representation elsewhere” but it appears that it is for the same reason that they are not participants in the proceeding—they can’t afford the justice and this is why they ask the Judges to give special weight to their comments in the CRB’s deliberations.

            But the Major’s thought experiment and speculation continues in an interesting coda regarding below statutory licensing (generally not permitted as a matter of contract in likely tens of thousands of co-publishing and administration agreements):

And certainly it would not be in the interest of any major publisher to agree to extend a below-market mechanical royalty rate to the competitors of its sister record company.[7]

While the thought experiment and speculation sound innocuous, consider what is being said here.  First, the Majors identify their interest as that of “major publishers”; not all publishers, not all songwriters, but “major publishers.”  Then the Majors go on to say that it would not be in the interest of the major publishers to give a “below market” rate to their sister record company’s competitors

            Of course, there is no market rate in the U.S. and essentially never has been; the Judges have the unenviable task of divining a market rate to be made statutory.  We would therefore modify the thought experiment to include “below statutory”.  Now we are left with the assertion that major publishers use the statutory rate to protect their record company affiliates from competition—not that they fulfill their role as true blue fiduciaries for their songwriters by refusing to grant below-statutory rates (either directly or indirectly), but rather being hard on the competitors of their affiliates.   And they are using their market power to impose a rate on the world that they seem to say protects their affiliates.  Extending the frozen mechanical rate certainly doesn’t protect their songwriters—the Judges have ample evidence that many songwriters object to the extension.  But in the Majors’ own words we now know cui bono, and the benefit goes back to Phonorecords III and likely earlier.

            But let us extend the thought experiment a little bit further.  Who is an unrelated “competitor” of the three major labels and all their distributed labels, DIY operations like The Orchard, joint ventures and so on and on and on?  That must be a pretty small group of true independents who have cobbled together a distribution network for the Subpart B configurations to deal with the logistics of manufacturing, warehousing, shipments, returns, and the like—branch distribution is what makes a major label a major.  Perhaps the Majors could provide some examples of these “competitors”?  Clearly though, the citation demonstrates that the Judges sensed many years ago the very situation now unfolding on the record in the frozen mechanicals crisis.

            C.  Comparisons to Largely Unopposed Prior Rulemakings Compare Apples to Oranges:  We understand that the Majors claim to have proposed a similar settlement in Phonorecords III resulting in a freeze of the statutory rate for Subpart B configurations, and that the Judges then-adopted that settlement.  We also understand that there was little if any formal objection to that freeze in Phonorecords III at least by comparison to the number of objecting commenters in Phonorecords IV.  The Judges are now presented with a significant number of objectors who entirely reject the application of the Proposed Settlement to the world in a kind of bootstrapping move.  Respectfully, comparing the field in Phonorecords III to Phonorecords IV is comparing apples to oranges and creating a pomegranate.

            We also acknowledge the millions of dollars that the NMPA asserts that it spent litigating these rates some fifteen years ago, but this assertion perhaps proves too much.  The cost of participating in any of these proceedings is exactly the reason why objecting songwriters understandably rely entirely on the Judges to seek fairness and justice.  They cannot afford to participate in these proceedings themselves and trust the Judges to balance all the facts not just the arguments of rich people and corporations. 

Not only do the Majors gloss over the songwriters’ objections, but their reasoning is actually fallacious. Because both proceedings are called “Phonorecords” does not make them similar in regard to the frozen mechanicals crisis.  The facts on the ground are wildly different between III and IV.  Moreover, we hear a subtext in the Major’s argument that if a configuration experiences declining sales, that is a reason for the government to reduce the royalty rate.  Aside from a lack of statutory authority, this is also fallacious reasoning because the Majors have produced no evidence that the per-unit price for Subpart B configurations has declined, and if anything, we are informed that the dealer price has increased in the case of vinyl.[8] 

We respectfully ask that the Judges consider these flaws in the Majors’ positions and give them their due weight. 

            D.  The Elusive MOU:  The Majors tell the Judges that: 

The MOU entered into contemporaneously with the Settlement is irrelevant to the Judges’ consideration of the Settlement, and does not call into question the reasonableness of the Settlement.[9]

            Respectfully, if the MOU is “irrelevant” to the settlement, why did they bring it up at all?  Recall that we previously asked the Judges to question whether the MOU was additional consideration for extending the frozen mechanical rates.  While others may have, we did not concern ourselves with whether the MOU was a “sweetheart deal” as we knew nothing about it.  Rather our issue was whether the MOU was a quid pro quo of additional consideration for the frozen rates that was enjoyed by a limited group of participants in the settlement but was not enjoyed by strangers to the deal who were still subject to the frozen rate.  Indeed, it appears that this is exactly the case.  While we appreciate that the Majors have now disclosed the MOU as part of their Reply, nothing in the Majors’ comment ameliorates this fundamental concern.

            A significant reason why the concern still exists is language in the now-disclosed MOU that certainly has the ring of a quid pro quo directly related to extending the frozen Subpart B rates in Phonorecords IV:

This MOU4 is a separate, conditional agreement [the quid] that shall not go into effect until [the quo] NMPA, SME, WMG’s affiliate Warner Music Group Corp., and UMG submit a motion to adopt a proposed settlement of the Phonorecords IV Proceeding as to statutory royalty rates and terms for physical phonorecords, permanent downloads, ringtones and music bundles presently addressed in 37 C.F.R. Part 385 Subpart B (the “Subpart B Configurations”), together with (1) certain definitions applicable to Subpart B Configurations presently addressed in 37 C.F.R. § 385.2 and (2) late payment fees under Section 115 for Subpart B Configurations presently addressed in 37 C.F.R. § 385.3, together with certain definitions applicable to such late payment fees presently addressed in 37 C.F.R. § 385.2, for the rate period covered by the Phonorecords IV Proceeding, which the Parties anticipate happening promptly after this MOU4 has been signed by SME, UMG, WMG, RIAA, NMPA, Sony Music Publishing, Universal Music Publishing Group, and Warner Chappell Music, Inc. (the “Initial Signatories”).[10]

            To the contrary, a fair reading of the MOU suggests, and may even require, that the consideration for the MOU is tied directly to extending the frozen rates in the Proposed Settlement.

            Moreover, we can revisit the authority issue raised above given language in the MOU.  Consider the following post-closing condition imposed on the NMPA by the plain terms of the MOU:

It is understood that only the Initial Signatories will sign this MOU4 at the outset, and that NMPA shall use its best efforts to obtain the signatures to this MOU4 by all of the remaining Parties within two (2) weeks thereafter.[11]

            If the NMPA had the authority to bind these many publisher “Parties” to the MOU, why would there be a need to impose such a post-closing condition on the NMPA?  There may be an explanation for this structure, but it is not obvious to us.

            We also find it somewhat unusual that neither the Reply of the Majors nor the now-disclosed MOU reference a dollar figure that is changing hands as far as we can tell.  This could be a lot of cash.  In the 2009 Billboard article cited by the Majors, the MOU that was the subject of that reporting was valued at “up to $264 million.” [12] However “routine” the MOU process is, a $264 million payment in a “pennies business” is not routine.  We would appreciate a further disclosure of the amount at issue in the current MOU.  As they say, it is evidently not a secret.

            Respectfully, it does not appear that one can completely exclude the relevance of the MOU as consideration for extending the freeze on Subpart B royalties at least on the face of the documents provided.  As strangers to the deal do not have the opportunity to subject these assertions to the crucible of cross-examination, we hope the Judges can welcome the reliance on them of those who cannot afford to participate in this proceeding.

II.  Conclusion

            In conclusion, we respectfully ask the Judges to consider the foregoing comments along with the many heartfelt and well-reasoned comments by others in Phonorecords IV.  Unfortunately, as is too often the case in the music business, we think that the sum and substance of the Majors’ argument is that “we are the wealthy and therefore we win.”

            We do not have to remind the Judges that this is the antithesis of our Constitutional system of government.

                                                                         Respectfully submitted.

Christian L. Castle

Gwendolyn Seale


[1] Comments in Further Support of the Settlement of Statutory Royalty Rates and Terms for Subpart B Configurations,  Docket No. 21–CRB– 0001–PR (2023–2027) (August 10, 2021)(Reply).

[2] Motion to Adopt Settlement of Statutory Royalty Rates and Terms for Subpart B Configurations, Docket No. 21–CRB– 0001–PR (2023–2027) (May 25, 2021) (Proposed Settlement).

[3] Comment of Helienne Lindvall, David Lowery and Blake Morgan, Docket No. 21–CRB– 0001–PR (2023–2027) (July 26, 2021) available at https://app.crb.gov/document/download/25533

[4] Comment of Gwendolyn Seale, Docket No. 21–CRB– 0001–PR (2023–2027) (July 26, 2021) available at https://app.crb.gov/document/download/25534

[5] Reply at 5.

[6] Id. (emphasis added).

[7] Id.

[8] See, e.g., Samantha Handler, Copyright Panel Rethinking Song Royalties Streamers Pay, Bloomberg Law (Aug. 12, 2021) (“Royalties from downloads and CDs haven’t increased since 2006, but still make up a significant portion of income for independent songwriters.”) available at https://news.bloomberglaw.com/ip-law/copyright-panel-rethinking-song-royalties-streamers-pay

[9] Reply at 6 (emphasis added).

[10] Reply at 19, MOU-4 at 2 (emphasis added).

[11] Id. at 20, MOU-4 at 3.

[12] Ed Christman, NMPA, Major Labels Sign Terms of Agreement, Billboard (Oct. 7, 2009) available at https://www.billboard.com/articles/business/1264471/nmpa-major-%20labels-sign-on-terms-of-agreement.

#FrozenMechanical Crisis: @RosanneCash’s Must-Read Comment to Copyright Royalty Board

[Rosanne Cash brings a heartfelt and vitally important songwriter’s perspective to the Copyright Royalty Board’s public comments on the frozen mechanical rulemaking. Download and share her comment at this link.]

Rosanne Cash

New York, NY

Copyright Royalty Judge David R. Strickler
Chief Copyright Royalty Judge Jesse M. Feder
Copyright Royalty Judge Steven Ruwe

US Copyright Royalty Board
101 Independence Avenue S.E.
Washington, DC 20024

Your Honors:

Electronically Filed

Docket: 21-CRB-0001-PR (2023-2027) Filing Date: 08/02/2021 03:16:26 PM EDT

I welcome this opportunity to comment on the review of rates and terms for royalties for songwriters. Songwriting is an honorable profession, and a lifelong vocation with the same discipline, attention to detail, and devotion to craft as every other creative pursuit which elevates our humanity and expresses our deepest feelings. ‘It all begins with a song’, as a recent documentary about songwriters was titled.

I am a guest teacher in music and writing departments at various universities around the country— Yale, NYU, University of Iowa, University of Pennsylvania, and more, as well as a songwriter for forty-plus years. I’m enormously grateful for the gift of being able to weave poetry and stories into melodies, and have applied a rigorous discipline to better myself in my work over the decades. The intensity of purpose and willingness to work hard which I see in young songwriters when I hold writing workshops is heartwarming, and often heartbreaking, because I know so few of them will actually ‘make it’ in the music business.

One of the most reliable ways a songwriter can still make a minimum-to-decent wage is through mechanical royalties from sales of songs— both download and physical purchases— but the small percentage of these sales going to songwriters has not been raised or even been adjusted for inflation since the rate was set 15 years ago. Vinyl sales are increasing— which is wonderful news for creators. Young music consumers are newly enamored of vinyl records. They want something they can own, and hold in their hands. They want to read liner notes and pull out the inserts and see who the musicians are, and who wrote the songs, and read the lyrics. I am by no means a young or new artist, but even my audience is slowly turning back to vinyl, as partly evidenced by the number of vinyl records I sign after each show.

There are many things that need to be changed to support the creative class and show writers and artists that they are valued members of society, and that they deserve to be paid for their work as much as any other professional who provides service— and we are indeed a service industry, albeit one for the heart and soul.

One easy change is to release songwriters from a 20 year freeze-out (to use a term from songwriter Bruce Springsteen, who, by the way, is doing fine financially, but I assume would want young songwriters coming up behind him to also do fine), to increase the rate, and adjust for inflation.

I value the next generation of songwriters deeply, and I don’t want to see an entire population give up their passion and their chosen vocation, because they can’t pay the rent. I am also fine financially (not as fine as Bruce or Beyonce, but who is?) but there are many, many struggling songwriters who critically depend on a fair rate for physical sales.

The need for fair pay in regards mechanical royalties from sales of songs is more dire because of the lack of fairness in compensation from streaming services. Streaming services are not in the music business. They are in the tech business, and they have built multi-billion dollar profit machines on the back of songwriters and musicians whom they use as loss-leader content. Again, a modicum of equity and fairness could be created for songwriters in a place that can be controlled by setting a fair rate, adjusted for inflation. It’s only a beginning in our determination to protect and value the creative population, but it’s a very real-world, common sense step, and I hope you consider who is behind the music that sustains, nurtures, and uplifts you in your lives, and adjust this critical royalty rate.

It all begins with a song.

Respectfully,

Rosanne Cash

Songwriter
Board member, Artist Rights Alliance

New York City August 1, 2021