Author: thetrichordist

Selected Comments on the Copyright Office Proposed Rule on Termination Rights and MLC Operations: Digital Licensee Coordinator

COLC-2022-0004-0089_attachment_1Download

The Copyright Office has asked for comments from the public on important issues for rulemakings under the Music Modernization Act. This will potentially affect the operations of The MLC and related rights especially because the Copyright Office recently extended the scope of that rulemaking. The proposal drew a mixed response.

We will be posting selected comments that we think might be interesting to Trichordist readers. The project is a bit wonky, but important to stay informed on. This comment by attorney Allison Stillman representing the Digital Licensee Coordinator (who controls the purse strings for The MLC) has some interesting complaints about The MLC that are food for thought in light of the MLC’s potential redesignation coming next year.

The DLC’s firm view is that any additional costs associated with a proposed rule that upends the practices of the entire industry, without actually facilitating the payment of royalties to songwriters or music publishers, as a matter of law would not be “reasonable collective total costs” that could be imposed on the DMPs, through the administrative assessment or otherwise….

As noted in the DLC’s Initial Comments…the [Copyright Office] raises important issues regarding the need for the MLC to have a fair, efficient and transparent methodology for administering corrections and adjustments to payments. These are issues that apply…more broadly to any form of payment adjustment that may be necessary….

While some other commenters echoed similar concerns, the MLC suggests that error corrections, adjustments, disputes and payee changes outside of the specific and purportedly unique termination context “do not represent a controversial topic that would require regulation of operational details” and merely constitute part of “the normal course of business, which The MLC can administer without additional regulation.”

But the DLC members’ experiences in waiting for corrections and adjustments from the MLC where the issue has arisen so far indicate otherwise, and that is before the MLC has had to operationalize the anticipated regular practice of DMPs’ over-estimating monthly royalties [or Phonorecords III retroactive adjustments]…. The same principles underlying any regulatory approach to ensuring the prompt and transparent correction of erroneous payments to one rightsholder vs another as a result of copyright termination apply equally to require the prompt and transparent correction of [other payments to DMPs or rights holders].

by thetrichordist

The Coming COLA Adjustment for Mechanical Royalties on Physical and Downloads

By Chris Castle

We’re about to experience an historical event—the U.S. government’s statutory mechanical rate for physical and permanent downloads will increase twice in 12 months.  This is because the record companies agreed in “Phonorecords IV” to raise the statutory mechanical rate from 9.1¢ to 12¢ for physical and permanent downloads (with corresponding long-song royalties) effective January 1, 2023.

This is quite a change from the frozen rate that lasted for 17 years.  Not only did the labels agree to increase the rate to 12¢, they agreed to index that increased rate to inflation annually starting in 2024.

Indexing requires increasing the 12¢ rate to current inflation based on a “COLA” or “cost of living adjustment” by applying an uplift formula to the 12¢ rate.  That formula itself is a function of the Bureau of Labor Statistics Consumer Price Index which itself comes in a number of varieties. A common version of CPI that the record companies agreed to is the “Consumer Price Index for All Urban Consumers (U.S. City Average, all items),” or “CPI-U.”   The CPI-U is weighted toward the cost of living for urban consumers.  (Compare CPI-U to the “CPI-W” or Consumer Price Index for Urban Wage Earners and Clerical Workers which is used by Social Security, for example.)

We have experienced a time of high inflation for the last few years and given the indicators, we are likely to continue to suffer with inflation for years to come.  So the labels’ agreement to a COLA protects the purchasing power of the hard-won mechanical royalty for physical and downloads and may end up being a critical deal point over the 5 year rate period covered by Phonorecords IV.

The statutory basis for the COLA is found in 37 CFR §385.11(a)(2):

Annual rate adjustment. The Copyright Royalty Judges shall adjust the royalty rates in paragraph (a)(1) of this section each year to reflect any changes occurring in the cost of living as determined by the most recent Consumer Price Index for All Urban Consumers (U.S. City Average, all items) (CPI–U) published by the Secretary of Labor before December 1 of the preceding year. The calculation of the rate for each year shall be cumulative based on a calculation of the percentage increase in the CPI–U from the CPI–U published in November, 2022 (the Base Rate) and shall be made according to the following formulas: for the per-work rate, (1 + (Cy−Base Rate)/Base Rate) × 12¢, rounded to the nearest tenth of a cent; for the per-minute rate, (1 + (Cy−Base Rate)/Base Rate) × 2.31¢, rounded to the nearest hundredth of a cent; where Cy is the CPI–U published by the Secretary of Labor before December 1 of the preceding year. The Judges shall publish notice of the adjusted fees in the Federal Register at least 25 days before January 1. The adjusted fees shall be effective on January 1.

One must have the published CPI-U in order to make the COLA calculation.  The CPI is published by Bureau of Labor Statistics (technically “by the Secretary of Labor”) on a regularly published schedule.  If the regulations require that the relevant CPI-U must be published before December 1, that will be the CPI-U for October to be published next week on November 14 because the CPI-U for November won’t be published until December 12 (which of course is after December 1).

According to the Cleveland Federal Reserve, month over month inflation for November is projected to be pretty much the same as October.  So based on the Phonorecords IV Subpart B formula, the minimum statutory rate will likely increase from 12¢ to approximately 12.41¢ starting January 1.

Keep an eye out for the October CPI-U next week when it is announced by BLS at 8:30am ET on November 14.  The Copyright Royalty Board is to publish the new COLA-adjusted mechanical rate in the Federal Register, on or about December 8.  And remember that the same calculation with then-current CPI-U will apply in December 2024, 2025, 2026 and 2027.

Remember, this COLA rate increase only applies to physical and permanent download configurations, not to streaming.  This is because the services refused to engage on the topic.  There’s really no good explanation for why the streaming services refused to give a COLA.  A COLA really should be mandatory given that the government essentially takes away the songwriters’ ability to bargain for their inflation expectations during a five year rate period.

by thetrichordist

Fakery Abounds: DLC Lawyer Caught

Read up on MusicTechPolicy. Remember the “DLC” is the Digital Licensee Coordinator who represents the services against songwriters and pays for the MLC. Talk about your interlocking boards!

by thetrichordist

@modernistwitch on @songtradr’s Bandcamp Layoff Tragedy

by thetrichordist

BMI’s Happy Talk Campaign Has Failed

By Chris Castle

According to Billboard, Complete Music Update, and the awesome MusicAlly, nobody appears to be buying what they’re selling over to the BMI. For what seems like the second time in less than 30 days, Artist Rights Alliance, Black Music Action Coalition, Music Artists Coalition, SAG-AFTRA and Songwriters of North America rejected the hummina, hummina, hummina happy talk from BMI’s comms shop which comes out to trickle down mixed with a rising tide.

It’s really a shame because it would have been so easy to provide concrete answers if for no other reason than SAG-AFTRA is on a war footing already and is likely not going to back down. And with SAG-AFTRA comes the AFL-CIO which for BMI’s benefit are unions, see, unions that have been down this path before and are…oh, yes…on strike right now. How close are we to signs like this showing up outside of BMI HQ in New York? It’s OK, Larry and Sergey didn’t think they’d get one, either. Thank goodness we have the smart people to guide us. But BMI should look closely at this picture of a Google labor action and think about what they’d do if it happened to them.

When the CEO is trying to sell the company, in a very real sense they are auditioning for continued employment. Do you think this helps or hurts? Friends don’t let friends become a closing condition.

[This post first appeared on MusicTechPolicy]

by thetrichordist

Five Points for Potential AI Framework Agreements

By Chris Castle

This post first appeared on MusicTechPolicy

When you see Big Tech start to make Newspeak noises about wanting to license creative works for artificial intelligence, it’s well to remember a couple facts about how they treat people, business practices that they don’t talk about at parties. Or to Congress.

Take their supply chain, particularly their manufacturing supply chain in China where some of all their products use slave labor. And the cobalt that goes into every battery powered device like your smartphone is obtained through the equally Newspeak “artisanal mining” otherwise known as impossibly poor children mining cobalt by clawing it out of the dirt with their bare hands. You know, “artisanal”. (Read Cobalt Red by Sid Kara for that story.). Not to mention the grotesque and parasitic waste of electricity and the resources that provide it whether they are crowding out the public investment in renewables or driving coal powered generators. They don’t talk about it because they feel entitled to all of it which is to be expected from that feeder school for the Silicon Valley elites built with blood money from the Central Pacific Railroad.

So when you sit down at the negotiating table with these people, this is who they really are. That realization tells you a few things, but it mainly tells you they simply cannot be trusted in either life choices or in business choices.

Universal has taken a real leadership role in the AI negotiations that has both respected their artists and songwriters and given teeth to the principles of the Human Artistry Campaign. First of all, the company has made it clear that they are going to support their artists and songwriters in having a meaningful seat at the table. They will not send their artists to the charnel house. The only artists who participate will be the artists who decide to participate–opt in rather than Google’s preferred “opt out” structure which relies on the abuse of various safe harbors at scale. 

It appears that until such time as both the artists and songwriters and Universal are comfortable with the integrity of the creative and business model of YouTube’s AI music suite of tools, there’s no deal. Negotiations presumably will continue so there may be at least a commercial frameworks. 

To that end, here are five points that might prove useful.

  1. Artists and songwriters need to be at the table: One takeaway from the frozen mechanicals experience is how necessary it is for the creators to be included–not through an organization but actual individuals who speak for themselves and are not influenced by lobbyists.  Universal has proven that this is possible. This is a huge advancement in label-artist relations and publisher-writer relations, particularly because it’s obvious from the creators who stepped forward that these are articulate independent thinkers who are not going to tow the party line.  That is the whole idea. If you don’t trust your artists and writers enough to give them freedom to speak their minds, then let’s face it–there’s something wrong with your business model.
  2. All AI licenses should be opt in: Most of YouTube’s many artist relations issues arise from artists not having the right and ability to withhold their work from whatever the platform is. This is particularly true with UGC and advertising supported platforms. When you have poured out your soul in a recording that ends up with ads for drugs or miracle hair replacement treatments, it’s deflating and if anyone asked for approval, you’d probably decline. Which is why you negotiate marketing restrictions that prevent your music being used in advertising.
  3. No blind check deals and no “big pool” royalties: We haven’t gotten to the royalty rates yet, but there will be riots in the streets if anyone tries to perpetuate YouTube-style accountings, the grotesquely unfair TikTok blind check deals or “big pool” market centric royalties. AI gives us all a chance to get it right and build a new system that is artist centric. It’s encouraging that Lucian Grainge’s blog post announcing the relationship with YouTube is entitled “An artist centric approach to AI innovation” which is consistent with his prior statements about making streaming royalties more fair.
  4. Ability to track and account is a precondition: It should go without saying that in order to have meaningful royalty accounting, the service must have the ability to track and account. This is especially challenging in AI given the “training” issues. I will be pleasantly shocked if Google engineers designing the music AI tools have not entirely ignored tracking and accounting which they typically have viewed as a bug, not a feature. This is what gives rise to the blind check deals and other unworkable approaches which are most definitely not “artist centric.” Accordingly, the need to issue per work reports is essential.
  5. Audits should be much more frequent: This new product is a chance to revisit the standard approaches to auditing which have unfortunately become perpetuated in digital deals and most prominently in the Music Modernization Act (Title I). There is not much difference between the MMA audit rights and the audit clause from a 30 year old record deal notwithstanding the vast difference in commerce between the two. With AI, not only have the DSPs blown up the album to a commercial singles world, they are now trying to blow up the single to mind-numbing fragmentation. Potentially, this world will be like selling stems. This ushers in a whole new need for minimum viable data laws and enforcement for using standard identifiers.

There will be many other issues to address, but I think if we don’t address these key points we’ll find ourselves to be artisanal workers scratching out a living for ChatGPT. 

by thetrichordist

I Grift Therefore I Am: Jared Polis Supports Silicon Valley’s “Speculative Tickets” Grift in Colorado

If you had a chance to watch the CLE panel that David Lowery, Mala Sharma and Chris Castle did for the University of Texas School of Law CLE last week, you’ll remember that the panel spent a good deal of time talking about “speculative tickets”. In fact, the title of the panel was “When is Ticketing Like Pork Bellies?” which was a direct reference to the similarities between speculative tickets and commodities futures contracts (like pork bellies).

The way this grift works is that somebody (or some thing in the case of bots) offers to sell a promise to sell a ticket in the future. The trick is that the ticket is not yet on sale anywhere but certain dates have been announced so it will be on sale. This could be any ticket, like a concert tour or a sporting event like the Super Bowl, the Rose Bowl, the World Series, and so on.

This is actually worse than a pork belly contract, because you know that the pork bellies exist when you buy the contract, you just don’t know the price. Market events could cause the price to fluctuate, but there will be some pork belly available somewhere. So to even call it a ticket is a misnomer. It’s a promise to sell something that may exist to get all Cartesian about it.

The grifter prices the speculative ticket promise at a premium, naturally. Some of them actually promise an actual seat, some promise a certain section or block of seats. They then list that ticket on a ticket reseller market place like Stubhub which was most definitely lobbying in force for the nonsensical Georgia ticketing bill that failed and which we assume is behind all these bills that keep popping up like syphilitic warts.

After the ticket is listed, a fan buys the speculative ticket promise and waits to get their actual tickets. And this is the really insidious part. As David noted on our panel, the grifter’s transaction is like covering on a naked short in short selling. Naked shorts are a very risky thing because unlike with speculative tickets, the market enforces the trade. You will pay on that bet unlike speculative tickets where there is no market enforcement except the occasional prosecution by a state attorney general or the FTC.

It seems impossible for the speculative ticket short seller to obtain the actual tickets without using bots. Plausible, perhaps, but seems very unlikely. Thanks to Senator Marsha Blackburn and Richard Blumenthal and their BOTS Act, federal law prohibits using bots, but again, it’s a science of getting caught. Senator Blackburn recently complained quite rightly that the FTC is not sufficiently enforcing the BOTS Act.

If the grifter cannot come up with the tickets, it is apparently very rare that the fan gets their money back. The fan will be offered all manner of things other than cash or maybe the grifter just slithers off into the night. Awful stuff, right?

The grifter is preying on the buyer’s love of the artist or the team (or the family member of the buyer) which is so great that they are willing to spend the money because they are made to believe they have a sure bet that will pay off with a real ticket. What kind of a heartless dickweed would do that to someone?

And here’s where Jared Polis comes in. If you’ve never heard of him, Jared Polis is the governor of Colorado. The Colorado legislature recently passed SB60 that would have joined other states in banning speculative tickets. But–on June 6, 2023 Jared Polis vetoed the bill.

So how did StubHub get to Jared Polis? Remember, Jared Polis is a 99er who made a fortune on the Internet before the Internet repriced itself. He also founded TechStars, so he’s a VC, too. So he knows all about grifters and could not give a rip about artists–as he has demonstrated many times. But his veto letter is worth reading because of its complete head up the ass approach to speculative tickets.

Polis goes through the “if you only had a brain” analysis saying there are some good things in SB60 which he could support but then there are the bad things which he, Polis the Lawmaker, simply cannot abide–like a prohibition on speculative tickets. Except he doesn’t call them speculative tickets like the Federal Trade Commission does, or the Attorney General of New York. Oh, no. In his veto letter, he calls them “innovative products that address existing market failures, such as online ticket waiting services“.

Wait a minute–are we talking about the same thing here?

The bill prohibits anyone that “Advertises, offers for sale, or contracts for the resale of a ticket unless the person has possession or constructive possession of the ticket and the person has an agreement with the rights holder.”

Somehow the bill language got transformed from protecting consumers against speculative ticketing to a whole new thing, an innovative product that a VC might invest in and even take that company public. Or could have in 1999.

Sure seems like Polis is in on the grift, don’t it? You can’t call it a conspiracy theory because there’s nothing theoretical about it.



by thetrichordist

@tinadaunt: Universal Music Exec Jeff Harleston Calls On Senate to Regulate AI: ‘Ensure Creators Are Respected and Protected’

 

Companies using artificial intelligence software are shamelessly ripping off artists from film and music, and it will get worse if not regulated, members of the entertainment industry told U.S. Senators at a hearing Wednesday.

“AI in the service of artists and creativity can be a very, very good thing,” executive vice president of business and legal affairs for Universal Music Group Jeffrey Harleston said. “But AI that uses or worse yet appropriates the work of these artists, their name, their image, their likeness, their voice, without authorization, without consent, simply is not a good thing. Congress needs to establish rules that ensure creators are respected and protected.”

Read the post on The Wrap

Jeff also said in his statement:

Long before an AI-generated recording imitating Drake and The Weeknd – both Universal Music artists – went viral and captured the attention of press and policymakers, UMG has been thinking about artificial intelligence. One of our companies, Ingrooves, has three patents in AI to assist with marketing independent artists. And AI has long been used as a tool in the studio: For example, Apple Logic Pro X to generate drum tracks, or Captain Plugins to generate chord progressions. We also use AI regularly as a tool to assist in creating Dolby Atmos immersive audio music. It’s a great technology when employed responsibly – and one that we and our artists use. 

However, we are before you today because generative AI is raising fundamental issues of responsibility in the creative industries and copyright space. Each day, troubling examples emerge. We know some generative AI engines have been trained on our copyrighted library of recordings and lyrics, image generators have been trained on our copyrighted cover art, and music generators have been trained on our copyrighted music, all without authorization. 

We have a robust digital music marketplace, and UMG has hundreds of legitimate partners who’ve worked with us to bring music to fans in a myriad of ways. Those companies and services properly obtained the rights they need to operate from UMG, or from the associated record labels and publishers. So, it’s unfathomable to think AI companies and developers think the rules and laws that apply to other companies and developers don’t apply to them. 

Read Jeff’s full statement here

by thetrichordist