loop

As David noted in his recent post (“Zoë Keating vs YouTube: The End of an Artist’s Right to Choose Where Their Music Appears on The Internet“), Google started a whisper campaign to journalists against Zoë Keating as soon–if not even before–the story first broke on Digital Music News.  What is a “whisper campaign”?  It’s an anonymous effort by a usually skilled corporate PR department to discredit someone who is criticizing the corporation, an effort directed at journalists with whom the corporate flacks have a relationship and who are willing to publish unattributed statements that contradict the whistleblower who spoke on the record.

Aside from the first exchange with Digital Music News that was probably unintentionally on the record, this is exactly what YouTube is doing to Zoë, and it is exactly what Google does all the time.  Aside from very carefully scripted statements by Google executives, almost all of Google’s press statements are either on background (“…persons with knowledge of the case said…)  or unattributed (“a Google spokesperson said…”).   (See “Did YouTube Twist @sisario Article in NYT?“)

Google has spent a good deal of effort last week trying to destroy Zoë’s credibility, and they did so just this way.  If you read the stories, especially YouTube’s Music Key Terms for Artists, Clarified in Billboard, all Google’s statements are unattributed.  This means that the journalist knows who the Google source is but has agreed not to mention that person by name in their reporting–usually when everyone else in the article is mentioned by name.

Jane Hamsher Shows Billboard How It Is Done

Before we get to the substance, let’s point out how one journalist refused to be complicit in Google’s spinning.

Jane Hamsher writing in the Firedoglake blog broke the story of Google permitting the distribution of the Utoopi escort app in Google Play over the objections of Members of the U.S. House of Representatives Marsha Blackburn and Carolyn Maloney (Bytegeist Exclusive: Rep. Maloney Letter Blasting Google’s Larry Page Over Android Sex App Marketed to Students).  Google tried to get Ms. Hamsher to collude with them by printing a response attributed to an unidentified Google spokesperson.  Ms. Hamsher refused–and this is exactly what all publications should do with Google when requested to publish unattributed statements.

And guess what?  Google went on the record.  What Ms. Hamsher showed us all is that when journalists call Google on their BS, Google pretty much has to cave.

So why do journalists play along?  Aside from being spineless, that is.

UPDATE: In a comment to this post, Kidsleepy from Adland made this point:

One of the biggest reasons media outlets are keeping their mouth shut is because they don’t want to lose the ad revenue. We hear at Adland are all too aware of this. One critical article too many and all of a sudden our site was rejected from the adsense program because of so-called explicit material, which was nothing more than an advert. This is the real issue with google. They hold the purse strings on all of us. Musicians, content creators, bloggers and journalists. Since moving online we’re now at the mercy of one boss. Scary indeed.

Another reason might be because journalists are afraid of being blackballed by Google in the future and being cut out of the loop.  The idea that Billboard–the so-called “Bible of the music business”–would play along with this loathsome practice in a story about the very artists whose work pays their salaries and gives them something to put between their advertising and ever more meaningless streaming charts (that benefit Google, by the way), is particularly galling.  Not only does it make a mockery of the First Amendment and question Billboard’s entitlement to these protections as a mere shill mill, Billboard has seriously shaken any confidence that artists should have in their work product.

And we hasten to point out–they did this all by themselves.  They’ve had plenty of time to retract or correct the story and they haven’t.  We assume that there’s not going to be a correction.

Fortunately, we have other Billboard coverage of the situation by Glenn Peoples  (“Cellist Zoe Keating Opens Up on Her YouTube Battle: ‘There’s a Lot of Fear Out There’) who went to the source and did an objective interview with Zoë that actually named names of Google employees involved with the smear.  There are some shreds of objectivity in the offensive Billboard story.  But it’s really thanks to Glenn Peoples that we don’t simply stop reading the magazine.

But they came close.  Because, as you will see, there is enough language in Billboard that appears to have allowed the Google flacks to then push out these quotes to other publications that did not take the time to interview anyone and who simply reported about the reporting.  This should not be a shock to anyone–this is the way the game is played and we have to believe that everyone knows it.  Including Billboard.

https://twitter.com/TessaMakesLove/status/562358919209959425

The Fear and the Smear

This entire story has to be viewed in the context of artists being more fearful to speak against Google than they ever were to speak against their labels–artist’s complain about their labels all the time.  As Glenn Peoples’ interview with Zoë concluded:

[Billboard] You say Google has so much power that people would rather not cause any problems?

[Zoë] Yeah, I think so. Nobody’s said that to me, but that’s my impression.

But the torch has definitely passed from Spotify to Google for mishandling of artist relations.  As we saw with the boneheaded way Spotify handled Taylor Swift, these big tech companies immediately think of attacking the artist–which is why “there’s a lot of fear out there.”  Apple is a notable exception–they’ve never done it once.  At least Spotify’s CEO had the good graces and courage to make his statements on the record and for that we commend him.

The smear of Zoë Keating started with Google telling Digital Music News that Zoë’s account of her dealings with YouTube was “patently false.”  That’s like calling Zoë a liar.  While we think Daniel Ek approached that level of offensiveness with the Spotify debacle, he never said anything that blatant.

Google did.  Now they are doubling down as the suits take over.  You know that’s happened because they are releasing no names of “Google spokespersons.”  The only names we have of Google employees who are involved in this matter are Matt McLernon who actually sent an email to Digital Music News that was republished, and thanks to Glenn Peoples we know that at least Dan Abel (formerly of the Creative Artists Agency) and Vivien Lewit called Zoë to try to hondle her into agreeing to terms she didn’t want.

This isn’t surprising as we remember Ms. Lewit from a SXSW panel last year where she struggled to defend YouTube’s absurdly low royalty rates but yet seemed to somehow referred to her past work as an artist lawyer as qualifying her to understand how low the royalties really were.  Her LinkedIn bio says this about her background relating to artists: “As an associate at Rudolph & Beer, LLP, followed by years as partner (and, later, of counsel) at Davis Shapiro & Lewit, LLP, I provided counsel for my clients on countless business dealings ranging from traditional recording agreements to complicated and lucrative touring, branding, sponsorship, endorsement and merchandising deals.”  We’re not quite sure what having experience in “lucrative” anything has to do with artist royalties at YouTube, but we’re looking forward to finding out some day.

The way Google is conducting their current smear campaign is to attack the artist’s credibility and truthfulness.  Saying that Zoë’s account of the situation is “patently false” goes beyond the typical condescending tone of the new boss elites that artists can’t possibly read or understand their contract.  “Patently false” usually means a conscious disregard for the truth a/k/a a lie.

If there’s anything that is patently false in this saga it is Google’s position that Zoë didn’t understand what was being said to her or what promises were made.  She clearly not only understood what was said but took extensive notes.  What is not patently false is that threats were made and Google is doing the same thing to Zoë that Google tried to do to the UK songwriters as well as indie labels labels last year and for which the indie labels will hold Google to account before the European Commission antitrust authorities.

Why would Google make such fools of themselves in this dust up?  We think it may have had something to do with a “most favored nations” clause that quite possibly was in Google’s licenses with Merlin and the major labels.  Why?  Because of statements attributed to Google’s representatives that they “would not enforce” certain terms in Zoë’s agreement with YouTube but needed the objectionable words to stay in the contract.  This is exactly what people say when they have an MFN problem.  They want to be able to tell the people that they have given MFN to that all their contracts have the same language, whether the contracts exist on the day they grant MFN or come into existence after that MFN date.  But they need to be able to convince late comers to sign the same contracts they have given MFN in previously, so they try to overcome the objection by saying they want the words but won’t enforce the promise.

As MusicAlly said in their recent podcast on the subject, this is not something anyone should agree whether you’re signing with YouTube or buying a house.

What Google evidently was counting on was that they’d be able to keep all of this secret under their pervasive non-disclosure agreement.  But then as Google’s Eric Schmidt tells us, “If you have something that you don’t want anyone to know, maybe you shouldn’t be doing it in the first place.”

The smear continued in a variety of sources with Zoë alternatively being referred to as a “crappy edge case”, or somehow YouTube being forced to treat Zoë this way because of the major labels.  (Huh?)

But then came a second Billboard article that has some objectivity but misses some huge issues, particularly about the use of YouTube’s ContentID.  Being able to use ContentID to block is very important because it is one of the automated tools that allow artists at all levels to automate the process.  If YouTube takes away access to ContentID, then the artist has to search for each instance of infringing content and send a DMCA notice on a whack a mole basis.

Here’s the objective part in Billboard’s coverage:

Keating told Billboard that she came away from her many talks with YouTube representatives (which she transcribed in order to keep straight, portions from which she shared with Billboard) with the understanding that, regardless of whether or not she signed the Music Key contract, her music would end up on Music Key, via users uploading their own videos featuring her music.

This is essentially the exact same thing that the indies were threatened with last year.  The artist’s own videos would not be on Music Key, but YouTube would let the UGC videos of the artist flow onto Music Key–which could be identical copies of the artist’s own videos copied from another source.  And that was the threat that YouTube used to get you to sign up to Music Key.

Read this next part very carefully, because it all depends on what your definition of “is” is (we’ll add some emphasis and commentary).

This, YouTube tells Billboard, is not true. [“This” presumably is what Zoë’s contract actually said, so does that mean Zoë can’t read?]  Essentially, as YouTube now explains it — following a public debate following Keating’s blog post — Keating has a relatively simple choice. She can sign the contract and allow YouTube and Music Key access to her entire catalog [presumably the catalog that is currently on YouTube], along with the contract’s other provisions, allowing her to make money from its presence on the site. [Which site?  Presumably YouTube, but it’s unclear.] Or she can refuse the contract and leave her music unmonetized on YouTube.

Now watch this next part:

She will still retain control over her Content ID account, and can allow or block her music as she likes, YouTube explained [to Billboard, not to Zoë].

See what they just did there?  Zoë could have control over her ContentID account but as we understand it, the account’s functionality would be changed to not allow her to monetize or block, while the disabled account might still be available.  Zoë could “allow or block” as she chooses–just that she’d have to do it by the “whack a mole” method and not using ContentID.

But see what else they did?  If ContentID can locate and block infringing works, then why doesn’t YouTube use it to block everything that the artist has not already authorized and allow the artist to decide what should be made available to the public?  In other words an “opt in” system versus and “opt out” system.  And YouTube has gotten us all arguing about who has access to ContentID as opposed to why there’s a need for ContentID in the first place.  The answer to that is what David referred to as the “bad acts window” during which YouTube infringes to its profit, distributes human trafficking videos, jihadi recruitment, the lot.

So how do they sleep at night?

Timing is Everything

The Billboard story goes on to clearly identify Zoe’s position that YouTube is changing its position from what they told her during the extensive contract discussions that prompted this episode.

YouTube also addressed Keating’s concerns over the “exclusivity” agreement in the contract she saw, that her music was required to appear on YouTube in tandem with any other service, cutting her off from releasing new music to Bandcamp first, where, she told us, she makes most of her money. YouTube tells Billboard that the contract asks for the same music that’s available on similar services, but that artists are also allowed to do exclusives and promotions with other services. This was news to Keating, who responded that she was “very happy to hear Youtube has changed that language in the contract, and I look forward to seeing it, since mine does not say that.”  

These responses go against descriptions of the agreement presented to Keating (and transcribed by her) by YouTube previously, and presumably represent an update to the contract’s terms.

That is the story here.  YouTube changed its position and is trying to confuse people into thinking that it hasn’t, rather that the position now stated was the position all along.  Or what the definition of “is” is.  Why would it be “presumably” an “update to the contract’s terms”?  How about bald faced spin or…gasp..patently false?

And by the way, so far no one has seen a revised contract that says what YouTube told Billboard their deal was.  And evidently Billboard didn’t ask Google why that revised agreement had not been produced.

It all depends on what your definition of “is” is.  Google would probably say that they can’t provide a copy of either the before or after to Billboard because it’s under NDA.  So time won’t tell because time is under NDA.

But here is the part of the Billboard story that is pure spin:

While YouTube’s negotiations and contracts may have been hard-line, or even unacceptable, to some participants — they were acceptable to the 30,000-plus labels that have agreements with Merlin — they are now, at least for Zoe Keating, not (as) confusing. Hopefully.

See what he did?  YouTube’s deal might have been “unacceptable to some participants” like Zoë.  Sounds like the “crappy edge case” again, right?  But the next bit is really off.  “they were acceptable”–“they” meaning the terms offered to Zoë–“to the 30,000 plus labels that have agreement with Merlin”.

This guy has presented no evidence of whether Zoë’s terms were identical to the Merlin deal, which they almost certainly were not.  Merlin is under NDA so can’t talk about it without getting at least threatened if not sued by Google.  As Merlin CEO Charle Caldas said “I tend to get myself in trouble when I talk about that company.”  So what is the factual basis for Billboard’s claim?  Maybe Google told them the deals were the same or suggested that Billboard use that example?

First of all, we find it hard to believe that Merlin didn’t get an advance from YouTube or at least a fee for administering the deals with their labels.  So MONEY might be one major factor that’s different.  Also, as we understand it, all the Merlin licensing arrangements are done on an opt in basis.  So just because Merlin has a large number of labels doesn’t mean that any particular number of labels has opted in to the Music Key deal.  And even if they did, IMPALA is still pursuing their claim against YouTube in the European Commission arising out of the same transaction.   Does that sound like the terms were “acceptable” to the Merlin labels?  Or is that what Google told Billboard to say?

We’d also like to see a source for the number of labels licensed through Merlin.  We can’t find anyplace on the Merlin site that they actually give a total number of labels that Merlin represents.  While Merlin provides a valuable service to the independent community and is run by people who are committed to artist rights, 30,000 is an awful lot of labels.  It sounds like it’s being presented to show how out of step Zoë is with other indies.  Maybe that’s why IMPALA included a reference to Zoë in their 10 point plan to level the playing field recently filed with the European Parliament.  Because they’re all singing Kumba-freaking-yah with YouTube?  We don’t think so.

But the clear implication of the Billboard quote is that all these people made the same deal, so why should YouTube bend for one independent artist who creates a stink?  And that is very likely patently false.

The Propagation of the False Conclusion

So why does this matter?  Because people who write about the story but do no independent investigation regurgitate the conclusion.  Here’s two examples, one from Stereogum and the other from Business Insider.

Stereogum’s “update”:

UPDATE: Billboard reports that YouTube claims the terms of the contracts aren’t quite what Keating was claiming. According to YouTube, artists who don’t sign Music Key deals will still control their Content ID accounts, which means they can block people from uploading videos with their music. They just won’t be able to monetize their music being on YouTube if they don’t sign. They also claim that artists will be able to grant exclusives to other services before those pieces of music go up on Music Key.

No mention of the fact that both Billboard and Zoë questioned when YouTube changed their deal and that Zoë had yet to see anything in writing that confirmed what YouTube was spinning to Billboard.

Business Insider draws the conclusion that Google wants put out there and does not add the timeline showing that Google changed its story:

There’s obviously a question of mixed messages here — Keating was under the impression that she’d be blocked by failing to agree [because that’s what her contract said], while YouTube is insisting that’s not the case [now that Google is offering new terms, supposedly]. But an article in Billboard has prompted a response from YouTube clarifying certain matters, including that if Keating doesn’t opt in, her material will not be included in Music Key. It’d previously been a worry that it’d be added whether she agreed or not.

And there still is because nobody has seen a new contract and this is exactly one of the issues that came up with the indie label negotiations.   But you see how Business Insider treated the Billboard article–as a response from Google.  It’s not Billboard’s fault that Google manipulates their pals in the press to use a Billboard article in a way that helps Google, but it would help everyone if Billboard didn’t write it as an article that helps Google in the first place.  This is particularly irritating when the publication is supposed to be about the music business.  We expect the suits to take the side of corporate America at Business Insider, but we expect more of Billboard.

Full disclosure:  The Business Insider post also said this:

[A] Google representative has confirmed to Business Insider that Keating (or other content creators) who choose not to opt the new terms will still have access to Content ID, allowing them to police the site for infringing material easily.  [And Business Insider confirmed to Google that Business Insider wouldn’t do anything to undermine the cause like ask for statements to be on the record or perhaps grow a pair.]

It’s a significant detail: If it weren’t the case “artists would have to manually find videos using their music, and file individuals takedown requests with YouTube to get them removed, the Guardian’s Stuart Dredge writes — an “onerous” process that would be “a bigger threat than blocking her channel.”

It also disproves what The Trichordist wrote in an article fiercely critical of YouTube and Google — that “artists who reject the Music Key deal would no longer be able to block unauthorised uploads of their music on YouTube — unless the artists track each upload and send a separate DMCA notice.”

“It” meaning the unknown Google representative’s statement to Business Insider was certainly not the deal at the time David wrote his Trichordist post, any more than it was the deal at the time the indie labels filed their claim in Brussels against YouTube before Merlin licensed Music Key.  And now that Google has been called out for copyright misuse in its notice and shakedown business model and complaints about monopoly behavior made to the Federal Trade Commission (which Business Insider also failed to mention for some unknown reason), they naturally are trying to cover it up.  But Business Insider doesn’t bother to ask these questions and just accepts the unknown Google representative.

So YouTube didn’t “disprove” anything.  Rather they proved that they are slippery characters and they are not above a whisper campaign to undermine the credibility of any artist with the courage to stand up to them.

We Stand With the Cellist

Here’s why what happens to Zoë is important to all of us:  There is no trade group or licensing body for independent artists.  We are on our own and what is done to Zoë could easily be done to all of us.  We need to understand the negotiation tactics of these “new boss” multinational digital services who somehow are managing to get rich off of our backs.  Thanks to Zoë, we have much clearer insight into exactly what Google and their legion of lawyers are willing to stoop to in order to crush artists.  They can trot out Vivien Lewit or whoever they want to spin, but it comes down to the same thing:  They are not on our side, they will sick their PR flacks onto anyone who fights back and in the end–YouTube will say they’ll change their deal, but does anyone really believe that they actually will?

 

Another must-read exposé from Andrew Orlowski at The Register on Google’s desperate attempt to deflect attention from potentially criminal acts by their senior executives–it’s just plain vanilla astroturfing by another multinational in the worst traditions of British Petroleum, Enron, Halliburton, Reynold’s Tobacco and United Fruit.  Just another day at the white collar no-honor farm.

Blind justice: Google lawsuit silences elected state prosecutor

Mountain View moneybags tip the scales

Google’s success in “assassinating” a democratically-elected legal opponent last week raises troubling questions about corporate power and accountability. The feisty attorney for the USA’s poorest state is now trying to make peace, after being on the receiving end of a highly unusual lawsuit from Google.

Even if you will have no truck with the pigopolists of Hollywood, you should know the facts. A global corporation which is expected to bank $60bn in revenue this year and which is worth $382bn, has silenced an elected prosecutor.

Google’s income is 30 times that of the General Fund in Mississippi; its market valuation is four times the entire state’s GDP. What did Jim Hood do to make himself Google’s enemy? You may be surprised by the answer, which, it turns out, has nothing to do with Hollywood.

Let’s examine what happened to him – and what questions it raises.

Read it on The Register

“Do not turn to mediums or necromancers; do not seek them out, and so make yourselves unclean by them.”

Leviticus 19:31

National Public Radio reporter Laura Sydell has raised a very interesting question about the “new boss” direct license agreements that Pandora is making with record companies: the return of payola (“Pandora’s New Deal: Different Pay, Different Play“).  She notes correctly that at least one direct license contains a “steering” clause that promotes airplay in consideration of a lower royalty payment.

It’s not too much of a stretch to think that the timing of Pandora’s desire to make these deals did not just happen by accident or through market forces.  Our bet is that Pandora makes these direct deals to manufacture evidence of “willing buyer willing seller” royalty rates for the rate setting proceeding currently underway before the Copyright Royalty Board in Washington, DC (“CRB”).

Ms. Sydell calls out a serious question that goes to the heart of the very direct licenses that Pandora is trying to use as evidence to lower webcasting rates for everyone.  We have to ask if these licenses ought to be considered for rate setting before they are determined to be lawful in the first place.  As Ms. Sydell reports, there’s every possibility that “steering” clauses are illegal.

Here’s the point:  If anyone says they know whether steering clauses are legal, they have as much claim on predicting the future as a medium has of talking to souls in the afterlife.  And you know why they say about that.

Steering or Payola?

Under its steering clause, at least as far as we can tell, Pandora promises to play more of the artists licensed to a label if the label does the direct deal.  And that’s where the payola issue comes up.  (An interesting question is whether the artists who are not featured take a royalty cut regardless, subsidizing those who are featured.)

As Ms. Sydell reports:

An Uneven Playing Field

Pandora recently signed a deal with a company called Merlin, a consortium of independent record labels that’s adding another factor to the algorithm: money.

Performers get paid a small royalty each time one of their songs is played on Internet radio, at a rate set by a Royalty Court at the Library of Congress. But Internet radio and labels can strike individual deals, as Pandora did with Merlin. The Internet service will recommend Merlin artists over those not affiliated with the consortium in exchange for paying Merlin’s musicians a lower royalty rate.

Merlin artists get more spins, and Pandora winds up paying less in royalties than it would if were giving those same spins to non-Merlin artists. Plus, consortium labels will get to suggest favorite tracks.

This particular deal happens to be with Merlin, the indie label licensing organization (although Pandora refuses to say how many of the Merlin labels have opted in to the deal).  Merlin has a long history of being committed to maintaining the value of music, so this payola issue should not blow back on Merlin no matter how hard Pandora tries.  (Note that Pandora refuses to clearly state how many of the “thousands” of Merlin labels have opted in to Pandora’s agreement.  On a November 28, 2014 conference call, Pandora’s CFO dodged the question by saying that Pandora had opt-in from over 90% of Merlin members who were part of the original pool that Pandora targeted with the agreement–whatever that means.  This has been misreported as 90% of all Merlin labels, which is not at all what he said.)

But Pandora is in the middle of a rate hearing before the CRB that will set the rates for all webcasters and simulcasters–and all featured artists, session players and singers and recording owners.  Pandora is using the Merlin agreement as evidence of a market rate deal–presumably to reduce the rates that Pandora pays everyone else.  Because the “steering” component is consideration that only applies to Merlin labels at the moment, Pandora will have to get the CRB to ignore what may be the payola component and only focus on the lower rates.  (This is also known as a “Chris Harrison Special” and is very similar to the screwing that Pandora lawyer Harrison did to songwriters when he worked at DMX–and he did such a good job of sticking it to songwriters, that may have commended him for the Pandora job.)

While Pandora filed a copy of their Merlin contract with the CRB, it’s so heavily blacked out FBI-style that no artist can find out what the terms are.

Is it Payola?

Here’s what the FCC says about its payola rules:

What the Rules Say 

The Communications Act and the FCC’s rules require that:

When a broadcast licensee has received or been promised payment for the airing of program material, then, at the time of the airing, the station must disclose that fact and identify who paid for or promised to pay for the material. All sponsored material must be explicitly identified at the time of broadcast as paid for and by whom, except when it is clear that the mention of a product or service constitutes sponsorship identification;

Any broadcast station employee who has accepted or agreed to accept payment for the airing of program material, and the person making or promising to make the payment, must disclose this information to the station prior to the airing of the program;

Any person involved in the supply, production or preparation of a program who receives or agrees to receive, or makes or promises to make payment for the airing of program material, or knows of such arrangements, must disclose this information prior to the airing of the program. Broadcast licensees must make reasonable efforts to obtain from their employees and others they deal with for program material the information necessary to make the required sponsorship identification announcements;

The information must be provided up the chain of production and distribution before the time of broadcast, so the station can air the required disclosure; and

These rules apply to all kinds of program material aired over broadcast radio and television stations. Some of the rules also may apply to cablecasts.

Does the payola law apply to Internet radio?  Here’s a helpful 2008 article from a very important Internet radio lawyer, David Oxenford of Washington, DC who has represented Pandora.  Mr. Oxenford is a powerful lawyer and has been a major player who influenced the current artist royalty rates in and out of the back rooms of Washington, so we should pay close attention to what he has to say on the subject:

[A] pay for play scheme would limit royalties that a digital music service would pay – as it is likely that any service that is getting paid to play songs would also get a waiver of the royalties for those songs (see our post on waivers here).  When confronted with a proposal where artist would waive royalties in exchange for airplay [including a label waiving part of their artist’s royalties?], artist groups [including the Recording Artist Coalition] complained that the waiver of royalties without disclosure, in and of itself, constituted consideration for airplay and would be “payola” if not disclosed.  We’ll save discussion of that issue for another day, but disclosure solves any issue that may exist.

Remember, the “disclosure” that Mr. Oxenford describes must occur at the time the song is played on Pandora.  This could get tricky given Pandora’s business model.  It’s hard to imagine how they would comply, but surely the Silicon Valley can produce a transparent solution to that disruption to offer a lawful consumer experience to users.

If “Pandora Is Radio,” Is “Steering” Payola?

Is the “steering” clause unlawful payola?  Until the FCC rules on the issue, we won’t know.  But until we know, how can the CRB take notice of a potentially illegal contract as evidence of anything?

As Ms. Sydell reports:

Jim Burger, a copyright lawyer and adjunct professor at Georgetown University, says [steering clauses] would receive legal scrutiny if it were taking place on old-fashioned radio.

“If they were a terrestrial radio station and they were getting a discount on certain music as long as they played it more than other music, that would be considered illegal,” Burger says, adding that stations would have to announce such an arrangement upfront….

Pandora CEO Brian McAndrews says there’s no comparison between that and what his company is doing.

“Payola is where record labels pay radio stations to get airplay,” McAndrews says, “and the opposite is what happens today. As Pandora, we pay the record labels and the artist to allow airplay. So it’s completely different.”

Wrong again, Brian.  The payola laws put the disclosure responsibility on the FCC licensed broadcasters.  Not the labels.  In fact, we have to believe that Merlin got promises from Pandora that the contract is in fact legal.  So if there’s a payola problem with the Merlin deal, it’s not Merlin’s fault or Merlin’s problem.  It’s Pandora’s problem.

Does McAndrews really want to stand in the witness box with right hand to God and try to convince a judge that Pandora didn’t get paid to play, they just paid less to play more of certain artists?  You know, less is more your honor.

You may be thinking that Internet radio doesn’t require an FCC license so how can the payola rules apply to webcasters?  A good point.  We’re not saying that the payola rules apply to all webcasters (although Mr. Oxenford mused that payola might apply to Internet radio, and we agree with Mr. Oxenford.  Given the current power of Internet radio and Pandora’s  near-obssessive desire for a level playing field, it probably should).

But–Pandora is desperately trying to acquire an FCC licensed radio station in South Dakota in an attempt to make an end run around songwriters and characterize themselves as radio station.  And as Pandora will tell you, “Pandora Is Radio”.   So if Pandora is radio, and if Pandora acquires an FCC broadcast license, why shouldn’t Pandora be subject to the same payola rules as any other radio station and on all their platforms?

As Pandora lawyer Mr. Oxenford tells us:

The payola statute, 47 USC Section 508, applies to radio stations and their employees, so by its terms it does not apply to Internet radio (at least to the extent that Internet Radio is not transmitted by radio waves – we’ll ignore questions of whether Internet radio transmitted by wi-fi, WiMax or cellular technology might be considered a “radio” service for purposes of this statute).  But that does not end the inquiry.  Note that neither the prosecutions brought by Eliot Spitzer in New York state a few years ago nor the prosecution of legendary disc jockey Alan Fried in the 1950s were brought under the payola statute.  Instead, both were based on state law commercial bribery statutes on the theory that improper payments were being received for a commercial advantage.  Such statutes are in no way limited to radio, but can apply to any business.  Thus, Internet radio stations would need to be concerned.

So as Pandora’s lawyer tells us, if the FCC can’t get  jurisdiction over pureplay webcasters, state attorneys general may be able to under applicable state law commercial bribery statutes.  That’s potentially what’s called a 51 jurisdiction issue (50 states plus federal law).

Presciently, Mr. Oxenford also warned of potential jurisdiction of the Federal Trade Commission:

[T]he FTC has in the last few years expressed concerns about viral marketing and other advertising schemes where the consumer is not aware that he or she is being subjected to advertising.  Whether it be the stranger in the bar who is paid to brag about the taste of some brand of beer or the chain email that endorses some product without revealing that the testimonial was bought and paid for, the FTC has been concerned that these techniques are false and deceptive trade practices.  Again, an all-payola channel would seem to trigger these concerns.

But of course the real question is whether an FCC licensee like Pandora wants to be would have to comply with the payola statutes on its Pureplay webcasting affiliate.  We agree with Mr. Oxenford that there definitely seems to be an issue.

It’s such a big issue that it’s hard to understand how the CRB should accept a “steering” deal as evidence of anything for Pandora’s rates.  It seems that the CRB would be well-advised to at least delay consideration of the agreement until the FCC rules on the sale of KXMZ to Pandora and if the license is granted, also wait until the FCC further rules on whether Pandora is subject to the payola statutes as an FCC licensed broadcaster.  Not even a necromancer can predict how that ruling would turn out.

That ruling would answer the question of whether and why an Internet radio company like Pandora should be treated differently than a broadcaster, especially if Pandora turns out to be both.

You know–platform parity and all.