Guest Post Marc Ribot: The Red Ink Beneath Streaming’s “New Dawn”

 

Marc Ribot. Photo ©Barbara Rigon All Rights Reserved

Guest Post from the legendary guitarist Marc Ribot. One point that Mr. Ribot makes we would like to further emphasize at the outset: without DMCA reform there is no “market” for Copyright Royalty Judges to set rates under the MMA. This comes on the heels of a paper from Stan Liebowitz at the University of Texas.  The Liebowitz study clarifies how the safe harbor, contrary to its intended purpose, creates an inefficient and unfair advantage for UUCs when bargaining with copyright owners, meaning that UUCs either do not pay for copyright permissions or, if they pay something, they pay less than the market rate.

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The following article examines the effect of ECM’s switch to Spotify – and the larger, tectonic shifts in the industry of ECM’s move is part –on indie jazz labels and artists: and suggests a course of action.

The Red Ink Beneath Streaming’s “New Dawn”

 “structural” failure, “not viable” “we’re fucked”

The Music Modernization Act (MMA) , creates a mechanism for setting of rates and payment of royalties to publishers by streaming services,  while insulating the services from liability for  claims outside its structure. It is widely seen as clearing the way for Spotify’s long awaited IPO.

This, in turn, is seen as a harbinger of the coming of Age Of Streaming.

I don’t think there’s been so much unanimous celebration of a “new dawn” since Joseph Stalin grew a mustache.

The MMA will indeed, if adopted with the changes proposed by Music Answers and others in the indie world, hopefully expand collection and distribution of songwriter royalties for interactive streaming. But even at the most optimistic outcome, streaming is simply not viable for the majority of indie recording musicians and labels.  [1]

And it never will be viable, as long as internet giants like Google/YouTube can profit from copyright infringement with impunity by hiding behind the “safe harbor” clause of section 512 of the DMCA.[2] [see glossary of acronyms at the end of the article].

Until then, for the majority of indie artists, the MMA will at best re-arrange the deck chairs on the Titanic, and at worst, weaken the coalition that might have made a real solution possible.

In genres such as jazz, where clusters of small labels have been able to survive the already devastating effects of bit torrent/piracy and YouTube et al’s legal infringement (60% collapse of industry revenue) by creating niche markets based on physical object sales and legal downloads, the signs are already clear that this consolidation/rationalization of streaming (of which the MMA is a component) will drive many of  the current labels out of business.

What does “not viable” mean? It means that where once revenue received from the sale or licensing of a recording  amounted to more than the cost of producing it,  now, it doesn’t.

“Our issue with streaming is so much greater than just whether an organization like A2IM can double the payout from Spotify from $0.004 per stream to $0.008 per stream. The issue is more structural cause we’re fucked at either payout rate.”

(Yulun Wang, co-owner Pi Recordings).

The problem isn’t just that streaming rates aren’t viable, its that they are displacing forms—cd’s, vinyl, and legal downloads—that are (or were).

I’m an indie artist who has lost money on three of the last four cds I’ve made. What made them possible at all was the investment of record companies like Pi, whose co-owner is quoted above.

Since its founding in 2001, Pi Recordings has released important recording in and around the jazz idiom by Henry Threadgill, Steve Coleman, Muhal Richard AbramsArt Ensemble of ChicagoJames Blood UlmerVijay IyerWadada Leo Smith, and many others.

(Pi happens to specialize in jazz: the economics for indie labels in rock, classical, or other niche markets are similar).

After an initial attempt to distribute through Spotify resulted in receipts of less than $200 — for the entire catalogue!— Pi withdrew.

Pi’s experience with Spotify is typical of small labels on other streaming platforms as well.

John Zorn’s Tzadik label has been a central institution of NYC’s Downtown New Music scene since the early 90’s . Recently, the entire Tzadik catalogue  was (accidently, and against John’s specific instructions) placed on Google’s streaming network for 6 months.  When John found out about this, he immediately withdrew the catalogue: his 6 months of streaming had produced over 250,000 streams,  generating: $300 in total for the entire catalogue.

Tzadik’s total annual budget for recording is c/a $60,000usd. [3]

You don’t need a supercomputer to see what the $300 dollars in 6 months “Age Of Streaming” will do to Tzadik.

That’s what “not viable” means.

What has enabled Pi and other small Jazz labels to survive outside the streaming world thus far has been the existence of a market for CDs and downloads. What in turn kept that market viable was that other important jazz labels, notably ECM, had also withheld their catalogues  from Spotify. This meant that a significant jazz buying public participated in the CD/vinyl economy: ie: they owned cd players and turntables, and acculturated to going to stores, visiting Bandcamp, Amazon, or label websites, to order their music.

Below is the reaction from Yulun Wang, one of the two co-owners of Pi Recordings to news that ECM had finally capitulated to Spotify:

“ECM embracing streaming so wholeheartedly feels like a dagger to the heart – We had long felt that they were part of some informal bulwark of independent jazz labels who were the final holdouts from the streaming platforms. With them falling, it just makes it more difficult for us to continue hold out…

Of course this past weekend it was announced that Cuneiform, a fine jazz label that has been around for over three decades, has decided to take time off to reconsider their future.

I hate to be so dark, but it’s just looking so bleak. 

[4]

Yulun isn’t an engaged artist rights activist. In fact he tended to be fairly apolitical on these issues…until recently.

“Structural” Failure, “Not Viable”  “We’re Fucked”

This isn’t just a problem for labels.

It costs me as an artist 5-15 thousand to make a record: and months to years of work.

On a recording I released with a label other than Pi that did stream with Spotify, I made c/a $260 from Spotify for the first 18 months—the prime sales period.

When I asked what passage of the MMA would really mean, a trusted insider to MMA negotiations (and an MMA supporter) told me:  “you know those artist checks you get from Spotify? Well, now you’ll get another one for publishing.”

If the rationalization of streaming further displaces the physical object and legal download market that used to pay for my recordings and leaves me with $520 for a  $10,000 expense…?

That’s what “We’re Fucked” means.

If, for Taylor Swift, streaming was a bad deal, for indie artists and their labels, particularly those catering to emerging artists, or to niche markets like Jazz, Classical, and experimental, the damage is often terminal.

Whether the MMA will make that deal more beneficial for small songwriters rests heavily on the degree to which indie songwriters advocates like Music Answers succeed in amending it.

http://www.musicanswers.org/the-music-modernization-act-we-can-must-do-better/

But its beneficiaries will in either case not include most indie labels or non-songwriting recording musicians. [1]

The root cause of the damage is not Spotify per se. Spotify is, first of all, legal: unlike YouTube or the pirate sites, its business model is not dependent on the mass violation of artists’ copyrights.  I see no reason to disbelieve Spotify’s claim that they are charging consumers, and maybe even paying artists, as much as the market will bear.

The underlying problem is that there IS no market…nor can there possibly be one, so long as YouTube and pirate sites make our work available, without our consent or remuneration, for free.

And YouTube et al will continue to do so as long as section 512 of the DMCA  gives them a special privilege “safe harbor” protection from liability for the damage we suffer when they do.

The “grim” reality faced by Pi and other indie labels or the musicians whose recordings they finance[d] isn’t going away until YouTube et al’s special privilege “safe harbors” are made contingent on their adopting real measures[2]  for stopping mass infringement. The technology already exists for doing so—without hurting “fair uses”.[3]  The legal framework for protecting start-ups or “small business” OSPs[4], or ANY business for which adoption poses a problem is already written into the DMCA.

Section 512 reform wouldn’t “force” anyone to do anything.

But if major corporate online platforms specializing in the distribution of content (like YouTube) fail to take reasonable action to address infringement, including through the use of readily available technologies to avoid providing access to clearly infringing materials, they would lose their special privilege Safe Harbor protection from normal liability.

If section 512 reform passes, we get a market back. If it doesn’t we don’t.

All the rest is hype:  NO industry can survive in competition with an open Black Market making its products available for free.  Sadly, ours is no exception.

SO WHAT CAN WE DO?

The real practical solutions to the current market failure have already been written: The Music Community Response to the Copyright Offices inquiry on section 512 of the  DMCA.[5]

In order for there to be a market in recorded music, these solutions now need to turned into law.

And in order for that to happen, we’re going to need all the Music Community signatories to commit their full energy and resources to reforming section 512.

Make no mistake: Google, YouTube, and others making billions annually in ad-based and data mining profits on infringing content do not like 512 reform.  They’re going to fight it tooth and nail…and they have the sharpest teeth and nails that money can buy.  Any realistic chance that such powerful opposition can be overcome lies in the hope that the Music Community’s power can be expanded – for example by mobilizing the memberships of its mass organizations – not reduced.

The coalition which drafted and signed that “Music Community” document, including the  AFM, SAG-AFTRA, A2IM and, (after negotiating amendments) SGA, have stuck together to endorse the MMA,  even though their non-songwriting or small songwriting memberships will benefit only marginally, if at all, from the bill’s passage.

Its time for those “Music Community” coalition organizations whose members will benefit from MMA—NMPA, SESAC, ASCAP and BMI –to return the favor by demonstrating in some tangible form their commitment to fighting for 512 reform now.

Some trustworthy advisors have warned that failure to pass the  MMA  would kill the chance for ANY pro-artist legislation—including section 512 reform—for at least 10 years.

Others have claimed that making the MMA’s passage contingent on section 512 reform is simply not realistic.

But “realism” cannot mean participating in the rationalization of our own extinction.  Drowning under 3 feet of water instead of four is not an acceptable compromise.

If the MMA’s “Grand Bargain” being negotiated by our leaderships paves the way for streaming to kill cds and downloads,  leaves us with $500 to pay $10,000 bills,  drives labels that used to fund our records out of business, and splits the coalition that would have enabled meaningful reform,  then why should we care whether it passes?

The large majority of my union’s recording members are indie musicians.
What good does it do us to read from a distance of the gleaming benefits and protections of a union contract while, like the urban slum dwellers of Blade Runner, our real lives consist of scavenging to self-finance recordings in the wreckage of the recording economy (or doing sessions for equally cash starved indie labels or artists subject to the same impoverishment)?

And what good will it do any AFM or SAG AFTRA member if, as some have predicted, the Major labels – which DO pay scale – are only backing the MMA to pave the way for Spotify’s IPO, after which they can cash in their equity, write golden parachute contracts for their chief executives, downsize into distribution offices for their back catalogue,  and cease (directly[6]) funding new recording?[7]

Beneath the unanimity of the Music Community’s support for the MMA, there is deep dischord, with many quietly pushing for amendment behind the scenes; others, like noted composer/bandleader and artist rights advocate Maria Schneider calling openly for amendment; and many others (including trusted artist advocates David Lowery, and atty Chris Castle) opposing the bill outright.

My union, the AFM, supports the MMA. But my AFM Local, 802, has quietly urged the AFM to support Music Answer’s proposed amendments.

Having attended an open meeting on the MMA at local 802, I can tell you that even such conditional support was contentious among rank and file union members.

If the MMA’s backers want to keep simple narratives of unanimous musician uplift and support in the public eye,  if NMPA, ASCAP,  and BMI want to deliver the MMA’s substantial benefits to their big publisher and major songwriter members, and if their Music Community union allies want to avoid a rank and file revolt, then I would advise all the above to take immediate steps to ensure inclusion of Music Community section 512 reform in Senator Goodlatte’s proposed comprehensive reform bill.[8]

If such attempts prove impossible to achieve, the Music Community organizations—ALL OF THEM– should present tangible proof that they are willing to develop, FUND, and commit to a campaign to fix the real problem: 512 of the DMCA.

Maria Schneider and  Chris Castle’s opposition to the MMA has focused on the ways the bill’s fine print undermines some of the gains for songwriters advertised as it goals.  Other pro-artist groups—SGA, SONA, and Music Answers – have pursued the bill’s amendment, rather than its defeat, because, while acknowledging many of the same critiques as the bill’s opponents, they believe that its aggregate effect, if amended, would be beneficial for songwriters.

But while feverishly guarding the castle walls against the MMA’s hidden effects on songwriters, we may have permitted the real Trojan horse to pass through the main gate unopposed: and that  horse is strategic: the undermining of the basis for unity of the ONE coalition – the “Music  Community”[9] which up till now has included major labels, major publishers, and major songwriters– that can achieve section 512 reform.

It is my strong suspicion that if indie artists/musicians wait till after the MMA passes to try to get the Music Community to win or commit to 512 reform, we— and small songwriters– are going to be left with about as much negotiating power to achieve that goal as the Trojan women[10] after their city’s defense was breached.

I want to be clear that I consider payment of royalties to songwriters — the stated intention of the MMA–  entirely justified and fair. And I’m grateful to Hakim Jeffries, Bob Goodlatte, and the MMA’s other congressional supporters for their efforts to redress this longstanding injustice.

But the economic survival of the majority of working recording musicians[11] and the labels which finance them  is dependent on 512 reform. That statement is true today, and will be radically more true in the future streaming economy that the MMA will help create. [12]

Our representatives can address our grave concern by acting to put their budgets and political leverage where their USCO policy statements[13] are. We need an actionable plan to win section 512 DMCA reform NOW—while united action is still possible. “Call us after the MMA is passed” won’t do.

Because if the MMA means that our realistic hopes for section 512 reform are being sold,  then as far as I’m concerned: Spotify can keep its $260 spare change, and, to paraphrase Johnny Paycheck,  they, and Google, and ALL the powerful organizations which have signed on to it can ‘take this “Grand Bargain”… and shove it.’

 

A GLOSSARY OF ACRONYMS:

A2IM American Association of Independent Music: the indie label trade organization.

AFM American Federation of Musicians: the musicians union

DMCA: Digital Millenium Copyright Act of 1997-98: the US law governing copyright on the internet.

MMA: Music Modernization Act.

NMPA  National Music Publishers Association: representing large publishers

RIAA, Record Industry Association of America: the major label trade organization.

SAG-AFTRA Screen Actors Guild—American Federation of Television Radio Artists: the union representing vocalists and actors.

SGA, Songwriters Guild of America, an indie song writers organization.

SONA Songwriters of North America: an indie songwriters organization

USCO – U.S Copyright Office

Footnotes

[1] This matters for several reasons.

  1. Jobs: although the indie sector is a minority of market share, it provides the large majority of work.
  2. Culture: every single current pop genre began as a niche market. If you kill the cultural goose, no more golden omelettes.

[2] > end special privilege ‘safe harbor’ protections for corporate Online Service Providers (OSPs) with ‘red flag’ knowledge of mass infringement.

>end  the game of whac-a-mole: reform the DMCA so that  a single take-down notice effects the take-down of all identical files on a site…permanently.

> The technology to protect our rights – without harming freedom of speech or genuine ‘fair uses’ — exists now: and should be made standard (Standard Technical Measures, or STM’s) for all major hosting platforms specializing in the delivery of content. No “Safe Harbor” for for major corporate Online Service Providers (OSPs) which fail to adopt STM’s.

[3] See Audible Magic’s 2016 submission to the Copyright Offices inquiry on Section 512 of the DMCA

[4]  The figure cited by a PRO-artist advocate for defining “small” was capitalization of 30 million usd or less.

[5] The  full  report can be found by searching  for “American Association of Independent Music et al (“Music Community) first round comments https://www.regulations.gov/docketBrowser?rpp=25&so=ASC&sb=title&po=0&s=music%2Bcommunity&dct=PS&pd=ALL-07%7C01%7C16&D=COLC-2015-0013

The bullet points in footnote 6 are consistent with its recommendations.

[6] The practice, already begun, of licensing  non-union indie recordings would no doubt continue.

[7] And what good will it do our culture and economy? Back catalogue sales are great: but we didn’t become a world emulated cultural model or a major exporter of  music by funding the dead.

[8] https://www.tennessean.com/story/money/2018/02/21/goodlatte-unveil-sweeping-music-copyright-reform-package-next-month/354500002/

[9] op cit see footnote 9

[10] suffice it to say that 3000 years after the sacking of their city, the word Troia still means prostitute in Italian.

[11] including small songwriters who will receive some benefits under the MMA. Songs large and small don’t produce income if they’re not brought to market in the form of a recording.  We all rely on section 512 reform to restore a healthy market for recording.

[13] Music Community Response to the USCO Inquiry in section 512 ibid.

[1] note: although indie artists’ work accounts for a minority of market share, it represents a large majority of employment in the industry, and we represent an even larger majority of working artists.

[2] http://www.cisac.org/Newsroom/News-Releases/Copyright-safe-harbours-distort-digital-market-profit-tech-giants-and-harm-creators-new-economic-study-finds

[4] I’ve heard similar expression from other indie labels and musicians, but it rarely finds its way into the media. Then again, no major conglomerate is paying the publicists who might put it there.

Not only does the move to streaming favor the large-back- catalogue Majors against their indie competitors, but the Major Labels all have equity in Spotify, whose coming IPO would not benefit from the amplification of voices such as Yulun’s.

 

 

 

Guest Post by @schneidermaria: An Open Letter to David Israelite of the NMPA, and Anyone Interested in the Music Modernization Act

ouKatz

Dear Mr. Israelite,

I received your point-by-point response that you apparently shared with legislators and interested persons in response to my 10-point critique of the MMA. Thank you for your perspective. Perspective is important. But in my opinion, your letter contains misdirection, many important omissions, and inaccuracies. I explain this below, and in much greater detail in this downloadable PDF point-by-point response to your letter. I’m just giving my perspective, but I think it’s an opinion educated by years in the real trenches of the actual music business.

The letter below is long – I know. But THAT’S how many things are problematic with this bill in my opinion. I hope we all agree, expediency shouldn’t supersede getting things right for music creators and industry sustainability. I ask creators, industry people and lawmakers to read this entire letter with a mindset of getting this bill drafted right. I believe these points aren’t only optimal for achieving success, I believe they’re mandatory for achieving success.

Mr. Israelite, you used the word “confused” several times in referencing my open letter. I’m not confused. But, my perspective is very different than yours. I’m asking you to read my perspective which I know I share with countless musicians and songwriters in this country. I’m asking you to advocate for nine simple “fixes” that will ensure the MMA is a success for music creators, and ultimately, everyone.

We both respect and are deeply grateful for the amazing support we have received from our Congress. That’s wonderful. But the MMA, as currently written, is not yet wonderful. Congress is expecting the MMA to directly help music creators who have been severely damaged from the current streaming market, and I’m throwing out my ideas to get us to that goal.

Here’s a new sobering statistic: This recent article points out how 99% of all streaming on Spotify involves only 10% of all songs. If true, that means 90% of music is splitting only 1% of the financial pie. Who is living on molecules of pie? Musicians and composers I revere: Pulitzer Prize winners, MacArthur winners, NEA Jazz Masters, Grammy-nominees and winners (those you don’t see on the telecast), musical icons, contributors to American and world culture, masterful musicians and songwriters revered in local communities but that aren’t widely known, leaders of orchestras and bands, teachers at conservatories and colleges, and selfless mentors. We are in niche genres: jazz, classical, Latin, world music, as well as hip-hop, folk, gospel, blues, electronic, rock, indie, etc. It’s a massive and diverse group, the vast majority of songwriters in the U.S.

We, the 90%, are the collateral damage in the digital economy as presently structured. And much of it has come at the hands of the very same corporations that you trying to make sure will run this next MMA show. While the MMA has some strong ideas, it vests WAY too much power in the hands of the biggest publishers and streaming companies. Why am I so concerned? Because I and countless colleagues in these niche genres have learned painful lessons we’re not keen on repeating.

Lesson 1: The three major music companies that are locked and loaded to run the music licensing collective (let’s call it Corporation A) are the same companies that allowed themselves to be enticed by the self-serving Svengali, Daniel Ek, whose beginnings were built on infringement (uTorrent). The day Warner, Universal, and Sony bit a huge chunk of poison apple in the form of equity in Ek’s Spotify, they traded their contracted musicians’ and songwriters’ valuable creations for ads. That tectonic shift gave Ek most of the world’s music, it legitimized “free,” and it created a gaping conflict of interest for the Big 3.

Songwriters and attorneys argue if it was a “fiduciary breach.” In my opinion it is a massive breach of trust and ongoing conflict of interest. And as the 90% have suffered a huge collapse in income, inversely, we watch these companies celebrate their earnings from 10% of songs. That conflict of interest and breach of trust are very relevant to the MMA, and this history absolutely must not be ignored in writing the governance sections of the MMA. And, if that reality is painful or upsetting for industry to read, I can only answer that they themselves created it.

Lesson 2: There’s something else occurring as a result of streaming that’s critical to understanding the niche musician’s and songwriter’s perspective. It’s that many, if not the vast majority of record companies, are no longer advancing money for a lot of music on their labels. It’s now the artists and creators, in countless numbers, who are each sinking tens of thousands of dollars into making their own records. Many still go with a label despite having to front the costs themselves just to be part of a distinguished label roster. There are many fine small labels doing everything they can to make that a worthwhile trade, and some still struggle to front budgets. The point is, those niche labels and independent musicians face either a zero, or statistically insignificant, chance of a return on their investment through streaming. Many report barely paying for a sandwich with their royalties.

If one only cares about the top 10% of songs and launching superstars to the stadium echelon, and keeps the blinders on for the rest, I suppose one can claim some successes with streaming. But if one values the wide array of music our country and the world has to offer, then our biggest music corporations have failed us, and failed our culture of music as a whole, by cashing in on Ek’s unsustainable business model. Spotify’s IPO papers confirm to me the streaming model’s income and wealth inequality as well as unsustainability. The 90% knew this years ago.

Lesson 3: As I see it, those set to run the show under the current draft MMA have a terrible track record in this arena: The NMPA owned the Harry Fox Agency themselves and was already once tasked with solving the Spotify mechanical issue. In my opinion, that effort failed miserably: the feuding, in-fighting and finger-pointing that occurred between the NMPA, Spotify, and HFA, and the ugly lawsuits brought by independent songwriters and small publishers resulting from what seems to me to be a collective failure to properly handle and respect mechanical royalties, left these companies acting like the Keystone Cops. Yet ironically, it is the NMPA and the Digital Media Association (DiMA – companies like Google, Spotify and Amazon) that, in my view, are steering all power under the MMA to the same cast of characters, while conspicuously avoiding objective oversight and reasonable checks and balances.

I have no problem with the NMPA or its members and Spotify being involved in the solution. But I have a HUGE problem with them controlling the solution, and controlling the entities that will be formed under the MMA.

These three lessons frame many of our perspectives on the MMA. It’s a grim reality that explains why I don’t trust certain entities to run the show.

Below are simple, specific proposals that I think are rooted fairness and common sense that will greatly will improve the MMA’s actual chances of ongoing success for all of us.

1. Songwriter. If you’ve not yet amended the definition of “songwriter,” will you agree to advocate for a rewrite that would requires a “songwriter” to be someone with a recognized and substantial professional career based on songwriting or composition? By the current definition, even an employee of a publisher who long ago wrote part of a lyric of one song would qualify as a “songwriter.” A definition that gives songwriters and composers that assurance is necessary.

2. Equality. Imagine that Congress passed an Act that would set up a private entity to tackle the issue of “Women’s Health in the United States.” Then imagine that the board of directors was crafted to have only TWO women on the board of TEN people. Pretty outrageous, right? Now, further imagine that women were offered the prospect of the board being expanded to 14 total members, and instead of 2 out of 10 being women, it was now going to be 4 out of 14 (an 8% increase, but still a very small minority). Finally, imagine that the 10 male members were all executives at big Pharma, earning big salaries and bonuses from expensive and very controversial women’s pharmaceuticals. We’d all find that horribly outrageous, right? Now, imagine how infuriated women (and men of conscience) would be if the trade association for Big-Pharma consoled women who advocated for a balanced board, with the following catchphrase: “don’t let the perfect be the enemy of the very very good.” (your words at the end of your letter)

I hope this spot on analogy offers you and others perspective. Therefore, can we agree that the “Collective,” (I call it Corporation A) should have governance that, as between publishers and songwriters, has at VERY LEAST, 50% songwriters – songwriters chosen by songwriters themselves? Independent songwriters deserve an equal presence with publishers on a board that will control OUR works and economic future. Who wouldn’t support a 50/50 board?

3. Board Diversity. Can we agree that the Board for the “Collective” (Corporation A) would be MUCH better if it also had several “outside” totally independent voting board members, especially members who have actual experience and success in leading the development of new software, database and cloud based systems? There are countless such all-stars and experts. Corporation A is really a technology company that will be based on system design, program management, and vision in the field of data management and cloud services. To achieve success with that tall order, technology expertise must be included on the governance board itself, not relegated to some “advisory” committee, or worse yet, to some downstream subcontractor (who could be a conflicted DiMA member like Google).

What on earth are 10 publishers doing at the helm of a technology company? If our company was tasked to design and build a new artificial heart, we’d want the worlds’ best surgeons and bioengineers on the board, not 10 big insurance company representatives and 4 sick patients. Independent objective technology experts (e.g., obviously not Google or anybody else from, or related to, Corporation B due to conflicts of interest) will bring more value to this board than the songwriters and publishers combined. I am confident our elected leaders would agree that this would markedly increase the chance for this “technology company” to be a success.

4. Open Competition. Can we agree that a) the publishers should not have a veto power over who is selected to be Corporation A; and b) the members of DiMA should not have a veto power over who is selected to be Corporation B? The language in the MMA, “endorsed by, and … substantial support of,” (used for both Corporations A and B, pages 17, line 21, and page 58, line 8 of the Government PDF of the MMA) basically gives outright veto power to the big players. I am willing to bet that Congress would be more comfortable if the selection of these two entities was done in an open, competitive process, where creative and talented teams of people: small business, minority-owned, women-owned, technology-based collaborative teams could freely assemble and compete, and would be assured of a fair shot at winning this great opportunity.

The Register of Copyrights should be able to pick these two entities through an open market, not have her choice restrained by a closed back room. Replace the language, “endorsed and supported” with language requiring that each entity: “will be chosen by the CO through an open and competitive process, where selection is based on the strength and merits of each applicant, and where conflicts of interest are disclosed and addressed.” Our government mandates that same process even for choosing a vendor for toilet paper! Surely we’d expect just as much when entrusting an entity to guard the economic future of music creators. Wouldn’t we?

5. Business Continuity. Can we agree that if either Corporation A or B goes belly up, and/or the CO needs to pull the plug, the MMA should clearly state to everyone that none of the software, data analytics, or algorithms, belongs to the entity? We can all fairly agree that Spotify would not exist if not for the music, right? So then, considering that this whole investment is basically underwritten by revenue generated by the music that songwriters have written, we need to be assured of “business continuity” should things go sour.

The MMA is NOT intended as an opportunity for a private entity to build trade secret assets that could further cripple the industry. We cannot allow this huge investment in technology to be usurped by any party should Corporation A fail in living up to its expectations. It’s Business Continuity 101 stuff. So rather than assure us that somewhere downstream, there MAY be regulations that might clarify this as you suggest, let’s build that HUGE point right in the section of the MMA (page 31, line 16) that addresses the Database. Something simple, like: “All data submitted to the Collective will be owned by those parties submitting the data, and is licensed to the Collective for the sole purpose of fulfilling its duties under the MMA, and will not be assigned to any other party. All data analytics, algorithms, software, APIs, software tools, resultant data, and aggregated data developed by [the Collective] or its subcontractors will be held in trust by the U.S. Government, and will not be exploited or encumbered by [the Collective] for any purpose other than as authorized under this Act, and will not be encumbered or sold or assigned to any other party.” Should something unforeseen happen, we’ll all need to be protected.

6. Meaningful Audit Rights. Can we agree that meaningful audit rights for independent music creators are necessary? After all, the MMA IS stripping away our rights to bring a suit for infringement, so let’s look at the tradeoff: The current provisions (page 42, line 5, through page 45, line 20 of the government PDF) are great, if we’re talking about Sony, Universal, and Warner, that can afford Deloitte. But if I want to audit a $25 payment I received from Spotify, I can’t be expected to hire Deloitte for the impossibly complex multi-step process laid out in the MMA. Two simple requirements wouldn’t hurt anyone: 1) a streamlined audit right for small amounts (details could be ironed out through regulation), and 2) spot audits every six months of random independent music creators’ accounts, just so the CO is exercising some ongoing QA/QC on the Collective’s systems and performance. Both create great incentives for the Collective to do a good job, saving money in the long run, and increasing everyone’s confidence.

But there’s something else lurking in those audit rights: Today, if I sue someone for infringing my copyright, I have the right to recover attorney’s fees in certain cases. But under the MMA, not only is that absent, but I’d be required to hire a CPA and pay for my own legal and audit fees, even if I win. That’s not fair in light of what we’re giving up. We deserve the right to recover our reasonable costs if we’ve been wronged by Corporation A or B. It’s fair, and keeps entities on the up and up. That’s the purpose of the attorneys fees provision in the current copyright law. Why should we give that up?

7. Black Box. Independent creators will most likely be the ones who won’t know to sign up with the Collective, or who won’t have filed a registration with the CO. Their money, largely, will end up in the black box. I meet countless musicians and songwriters who know nothing about mechanical rights or copyright.

My opening statistic showed that 90% of the music on Spotify shares 1% of the pie. The black box money will most assuredly be out of that group. If Corporation A can’t control their budget, why should these unpaid creators unknowingly foot the bill? Shouldn’t the money be “borrowed” from those that MOST benefit from the MMA? (If it’s even legal for trustees to “borrow” money held in trust.) This bill needs to create meaningful incentives like this for the Collective to not overspend. (Not to mention this “borrowing” right of the Collective seems to be contradicted by the obligation to hold those royalties in a black box for 3 years.)

Secondly, the idea that this black box money should be distributed (after 3 years) to songwriters and publishers according to market share is absolutely abhorrent. I don’t often bet my life, but I’d bet my life that Kendrick Lamar, Taylor Swift, Bruno Mars, Lady Gaga – name any bigtime music creator – would not want to receive black box money belonging to independent music creators who haven’t received it because they didn’t yet know how to get it, or whose song had a wrong spelling, wasn’t filed at the CO, or whatever. No music creator would knowingly endorse something so skeevy. That money should be held until it is claimed, and if after many, many years, it’s still unclaimed, perhaps it could go to scholarships or something else worthy.

8. Immunity. Some legal commentators have given “just cause” to be concerned whether parts of the MMA are unconstitutional. Today, many creators don’t file copyrights: it’s expensive, and it’s not required under international laws. I have that right under the Berne Convention that the U.S. has signed. If a band of young kids in Peru, Canada, Nigeria, the UK, you name the country, records 10 of their songs, they submit them to Spotify, and it goes viral, are you telling me that they won’t get paid until they figure out that they need to first file the papers and possibly pay hundreds of dollars in fees to the U.S. CO to register the songs in the U.S.? That’s the way I read the bill. Can it be that we’d require the entire world to pay registration fees to the U.S. Copyright Office before they are allowed to get their first dime from Spotify? In addition to possibly being unconstitutional and in violation of rights under the Berne convention, it smacks of musical colonialism. I suggest the MMA be fixed so creators aren’t left with the short stick.

9. Immunity for the “Collective” (Corporation A). If you hired a financial planner for your mother, and that planner gave you a contract saying, “Even if I am negligent, sloppy or incompetent, and/or even if my services deviate from the standard of reasonable care, you and your mother can’t come after me when I lose all of your money,” you’d be shocked at their nerve. The same goes for surgeons, accountants, or anyone else in society that owes us a duty of care. So, I was shocked to read the fine print (page 93, lines 9-24) about the Collective’s lack of liability, should it screw up.

The MMA basically says that the Collective “shall not be liable to any person or entity” for negligence, sloppiness, or incompetence, but can only be liable if proven “grossly negligent.” “Gross negligence” is nearly impossible to prove. In fact, “gross negligence” basically requires conduct to be intentionally reckless – conduct so bad, and so rare, insurance companies won’t even insure against it.

As I read the MMA, the “Collective” (and its board) are basically immune from liability, even if they completely screw up the whole system through incompetence and negligence, and even if there are millions lost. In my opinion, that’s extremely irresponsible.

Let’s change the tricky phrase “in a manner that is not grossly negligent” to “in a manner that uses reasonable care, and is not otherwise negligent, or grossly negligent.” Let’s make sure Corporation A would be liable if it acted with incompetence, or negligence.
None of these points are unreasonable or illogical. Each directly reduces risk of failure. I would hope we’d all advocate for these common sense, simple language changes to the MMA.

Let’s create a new version of the bill that maximizes the chances of success, minimizes the chances of conflicts of interest and/or failure, and fulfills the fundamental goal of Congress to directly help the music creators.

And for anyone who received David Israelite’s letter and would like to read my point-by-point response, you may download it here.

You can read my original open letter, “The Music Modernization Act – The Devil is in the Details,” here.

Maria Schneider

 

@CISACNews: Copyright “safe harbours” distort digital market, profit tech giants and harm creators, new economic study finds

This study showing the negative economic effects of safe harbors is great timing as we are reviewing multiple brand new safe harbors proposed to great fanfare in the Music Modernization Act that protect Spotify.  More on this to come as we review the welcome study by economist Stan Liebowitz, Ashbel Smith Professor of Economics at the University of Texas at Dallas.

PRESS RELEASE

Paris, France –  February 27th, 2018 – Copyright “safe harbour” rules, drawn up a quarter of a century ago to help nurture early online commerce, are today distorting the digital market, profiting tech giants and leading to significant underpayment of copyright owners, a new US economic study says.

“Economic Analysis of Safe Harbour Provisions”, by Ashbel Smith Professor Stan Liebowitz of the University of Texas at Dallas, is the most detailed economic examination to date of how copyright owners have been damaged by so-called “safe harbour” rules in copyright law.

The economic study has been commissioned by CISAC, the International Confederation of Societies of Authors and Composers. CISAC is the world’s leading network of authors’ societies, with 239 member societies in 121 countries together representing over 4 million creators of music, audiovisual, drama, literature and visual art.

Commenting on the study published today, CISAC Director General Gadi Oron said: “This study shows that copyright safe harbours, designed for a 20th century internet, urgently need re-examining in the 21st century.  Instead of shielding internet companies that merely offer storage facilities, as was their original purpose, safe harbours are today being used to shield tech giants from rewarding creators for their work [like the eminent domain sections in MMA that take away rights to sue infringers retroactively]. This is not a problem that can be solved by industry alone – it is a responsibility for governments that care about the cultural and creative sector. Creators deserve 21st century laws that ensure fair payment for their work, not laws that cause the value of their works to be siphoned away to global tech companies. Technology has evolved, and the law should evolve with it”.

Professor Liebowitz is a leading author, researcher and academic in the economics of intellectual property, networks and new technologies. Among the findings of his study are the following:

  • Because of the safe harbours, User Upload Content services such as YouTube have “an inefficient and unfair advantage” when they negotiate rates for permission to use copyrighted works on their sites.
  • As a result, UUCs either do not pay for copyright permissions or, if they pay something, they pay less than the market rate.
  • Other online services (such as subscription services, e.g. Spotify and Apple Music) are at a competitive disadvantage when competing with UUC platforms. These services generate lower revenues and have a reduced user base, because of the distorting impact of safe harbours.
  • As a net result, because of the distorting knock-on effect of safe harbours on the wider market for creative content, copyright owners are seeing reduced copyright payments from both UUC and other services. These reductions would appear to be “very substantial”.

Read the one page summary of the study here.

Read the study here.

Hanlon’s Razor and the American Law Institute’s Misguided Copyright Restatement Project

Guest post from The Invisible Stagehand.

I’d like to offer an alternate theory on the foundering attempt by the American Law Institute to “restate” copyright law.  While my colleagues make good points on the lack of transparency, openness and fairness with the current ALI process; rightfully note the conflicts of interest; and excoriate Sprigman for taking money (however indirectly) from Silicon Valley while working on the project, the most obvious conclusion is that those in charge of the restatement are incompetent.  Not devious.

I refer you to Hanlon’s Razor:

Hanlon’s Razor: “Never attribute to malice that which is adequately explained by incompetence.”

Now incompetence rather than malice doesn’t mean that someone shouldn’t be fired. Someone probably should be fired. Start with Sprigman. He’s in charge of the project. If that doesn’t work fire someone else. Repeat until incompetence stops.

The case for incompetence.

Exhibit One: The fact that this is now a PR issue for the ALI is the clearest example of incompetence.  Sprigman or Director Revesz could have made some relatively small changes to the project in 2015 (as many suggested) and the acting Register of Copyrights would have never written the now infamous “pseudo version of the copyright act” letter. This of course was the basis of the Billboard story that enraged artists. In other words an easily avoidable mistake started the entire controversy. Incompetence.

Exhibit Two: Leader of the project Christopher J Sprigman.  Good lord does the man have a shred of common sense?  I assume the position as “reporter” on the ALI Copyright Restatement is a position that confers some prestige. Why screw it up by taking on Spotify as a client in the middle of the project? Or co-author papers that are directly or indirectly funded by Google at the same time? It’s not an “impartial” look. Did he need the money? I doubt it. Now, not only does his reporter position NOT impart prestige, his own reputation is in tatters. What a screw up.  Clearly not a devious mastermind.

Exhibit Three:  Sprigman’s letter proposing the project clearly indicates he had a result in mind. It reads like a police confession. He admits to everything he is accused of by his critics.  A scholarly project like this is not supposed to start with conclusions and work backwards. Yet he pretty much admits this is his intention in the letter. If I intended to do something this dishonest I wouldn’t start by writing it down in a letter that would surely one day become public. I was too dumb for law school. But this guy must be dumber. Again not a devious mastermind.

Exhibit Four:  If you choose to measure incompetence by quantity, look at some of the letters that take issue with the drafts. For instance the Author’s Guild wrote a long letter to ALI Director Revesz detailing 16 major mistakes in the draft of the first chapter.   Some of these mistakes are just bizarre, (I can’t see the draft) but apparently royalties and fees paid to creators are referred to as “taxation.”  This is either a dumb mistake, or an unnecessary provocation of copyright holders that only an incompetent person would make while trying to build consensus for a draft. Incompetence.

Exhibit Five: Just for fun, let’s take last exhibit and assign deviousness to Sprigman and Revesz.  Suppose they were attempting to pull a variation of a machiavellian committee minority strategy. A competent strategist wouldn’t needlessly antagonize the committee minority by using the term “taxation.”  The minority (pro copyright members) are not supposed to see that the game is rigged. The marks are supposed to think they were simply outvoted. That’s how the con works!! Again incompetent not devious. Maybe add arrogant.

Exhibit Six:  Sprigman took to facebook to call out his critics describing them as “hacks engaging in hackery.” I was speechless when I came across this on facebook. This is not the kind of thing that a competent leader does when faced with criticism.  The guy is clearly out of his league.  Again not a devious mastermind.

I think you get my point.

The Invisible Stage Hand works in the live music business.

 

 

@lizpelly: The Problem with Musak — Artist Rights Watch

The music world continues to be exceedingly vulnerable, and there are looming questions that desperately need to be addressed. Most important: How can artists distribute and sell their work in a digital economy beholden to ruthlessly commercial and centralized interests? Enter Spotify, a platform that is definitely not the answer.

via @lizpelly: The Problem with Musak — Artist Rights Watch

Major Defeat For Google-Era Justice Department, Huge Victory for Sanity and Songwriters — Music Technology Policy

Great news today that the appeals court upheld BMI’s ruling by the BMI rate court judge that there is no such thing as 100% licensing under the consent decrees. Although it’s like winning an appeal that the Sun really does rise in the East (attention Cal students), it’s good to put that issue to one side and to poke a stick in Google’s eye.

via Major Defeat For Google-Era Justice Department, Huge Victory for Sanity and Songwriters — Music Technology Policy

SoundExchange Scores 41% increase in SiriusXM artist royalties

Billboard reports today the government’s decision on the performance royalties SiriusXM pays to artists (effective January 1, 2018):

The Copyright Royalty Board [“CRB”] has determined that Satellite Audio Radio Services, i.e. SiriusXM will pay 15.5 percent of revenue for the next five years beginning in 2018 to 2022, although the full determination has yet to be posted on the CRB’s website while the participants scrutinize the document to make sure proprietary data is not publicly revealed.

That represents a nearly 41 percent jump from the 11 percent the service was paying in the current year, although it’s short of the 23 percent that SoundExchange was advocating to the CRB judges, who are appointed by the U.S. Librarian of Congress. But its better than the static rate that Sirius was hoping from the judges.

SoundExchange press release says:

The CRB increased the rates for Sirius XM by more than 40%, from 11% of revenue to 15.5% of revenue, effective January 1, 2018. Sirius XM is the only satellite radio service in the United States and reported revenues of $5 billion in 2016. By contrast, the CRB reduced the rates for Music Choice’s and Muzak’s services from 8.5% to 7.5% of revenue. SoundExchange advocated on behalf of its artists and rights owners in this rate litigation, which spanned 24 months.

“We thank the CRB for its work and appreciate their consideration of the case we laid out,” SoundExchange President and CEO Michael Huppe said. “SoundExchange is dedicated to our mission of ensuring that creators are properly recognized and compensated for the use of their work. And while the Copyright Royalty Board did not adopt the rates we proposed for Sirius XM, its ruling demonstrates an important step in the right direction toward valuing the contributions of the music creators represented by SoundExchange.”

Yesterday’s decision confirms the need to change the so-called Section 801(b) rate standards under which satellite radio and the “grandfathered” cable radio services operate, and which permit the CRB to adopt rates different than what the market would provide. As a result of that rate standard, Sirius XM has paid below-market rates for years, and the recording artists and rights owners SoundExchange represents have subsidized the company’s growth.

Major score for artists, musicians, vocalists, as well as major and indie labels.  More to come when the Copyright Royalty Board releases its written opinion.

@crunchdigital Announces Digital Music Sandbox for App Developers — Artist Rights Watch

LOS ANGELES, Nov. 28, 2017 /PRNewswire/ — Today Crunch Digital, a music metadata management, reporting, and licensing service that bridges music rights owners with content users, is announcing the launch of the Crunch Digital Sandbox™.

The Sandbox is a music licensing platform that enables qualified app developers to include music legally from participating major and indie record labels and music publishers under short-term developer licenses – and do it faster.

The Crunch Digital Sandbox™ directly addresses the much-publicized problems and concerns surrounding music licensing, which have stymied innovation critical to new business models and new revenue streams for the music industry.

On one side, you have innovators and startups who need licenses now – because tech moves fast.  On the other side, you have record labels and music publishers who are inundated with emails and pitches for licenses, all vying for their attention.  It’s unrealistic to expect record labels and music publishers to take time away from their core business to quickly vet and assess the viability of all the incoming license requests.  You also have investors who have been shying away from backing new music companies due to scary infringement lawsuits and high licensing transaction costs.

In making the announcement, Keith Bernstein, Founder of Crunch Digital said, “With the Crunch Digital Sandbox™, app developers can prove out their concepts and features before engaging in all-encompassing music licensing negotiations.  They will have a better opportunity to gain market traction and attract potential investment for a full product launch. For record labels and music publishers, the Sandbox helps them to focus their attention on viable opportunities.  For investors, they can invest in companies that show proof of concept and mitigate the concerns they have about music licensing.”

Getting started with the Sandbox is easy.  Interested developers submit an application to Crunch. Crunch will vet the applications.  Once an application has been approved, Crunch will work with the applicant to help present their idea to labels and publishers who are participating in the Sandbox.

Crunch will then assist developers in requesting a customized limited use license for access to catalogs, either for a period of time or until the company hits a certain success threshold.  Crunch will share growth metrics with participating labels and publishers – and standout developers can start the conversation to “graduate” from the Sandbox and move up to a long-term licensing deal.

Bernstein added, “For innovators and entrepreneurs, being a part of the Sandbox gives them an invaluable opportunity to go from having no meaningful knowledge about music licensing, no meaningful connections, and probably no awareness of who to contact at labels and publishers, to working with a team of people at Crunch who can help to put them on a path to legally launch with music that will help them find an audience.”

The Sandbox will officially launch in January 2018, and Crunch is already accepting applications at www.digitalmusicsandbox.com.  Record labels and music publishers can also visit the site to become a content participant.  View a fun video about the Sandbox here:

via @crunchdigital Announces Digital Music Sandbox for App Developers — Artist Rights Watch

The Flaw Behind Zuckerberg’s Universal Basic Income Scam — MUSIC • TECHNOLOGY • POLICY

These 21st Century Robber Barrons will expect the taxpayer to pay for those smart roads or if the beneficiaries of the infrastructurer will pay, they will expect to own the roads, no doubt. So the taxpayer will pay for the roads for the driverless cars that create the automation to creat mass firings and so that the taxpayer will pay Universal Basic Income to quiet down the clingers.

via The Flaw Behind Zuckerberg’s Universal Basic Income Scam — MUSIC • TECHNOLOGY • POLICY