@SGAWrites Suggestions to Copyright Office on MLC Operations Part 3

The US Copyright Office solicited comments from the public about the operations of the Mechanical Licensing Collective.  Those first round of those comments (called “initial comments”) were due in November and the second round of those comments (which are called “reply comments” because they essentially comment on the initial comments) were due December 20.

The Songwriters Guild of America filed initial comments and also filed reply comments.  We’re going to post SGA’s reply comments in three parts and then we’ll post other commenters who we think made really good points (like CISAC and BIEM among others).  This is Part 3 and you can read Part 1 here and Part 2 here.  Note that SGA’s comment includes a post by Chris Castle, but we are going to link to that post rather than reproduce it as you may have already read it.

All the comments focus on some central themes that seem to be on everyone’s mind which can be boiled down to oversight, oversight and more oversight.  While the DLC controls the MLC’s purse strings, the MLC has been given largely uncontrolled power over songwriters that needs to be checked by the government on behalf of the governed.  SGA’s comment can be boiled down to its motto:  Protect Songwriters.

Reply Comments of the Songwriters Guild of America, Inc.
Re: Notice of Inquiry Issued by the United States Copyright Office Concerning the Orrin
G. Hatch-Bob Goodlatte Music Modernization Act of 2018 Titled “Blanket License
Implementation Regulations”

III. The Imperative of the Librarian of Congress Acting Quickly to Appoint A New and Experienced Register of Copyrights

SGA was disappointed by the news on December 9, 2019 that Register of Copyrights Karyn Temple had made the decision to step down from her position as head of the USCO, effective immediately. However, the SGA was pleased that Dr. Hayden acted quickly and appointed Maria Strong as Acting Register. Given Ms. Strong’s breadth of experience in the Copyright Office and knowledge of copyright law, the SGA firmly believes she will adeptly lead the Copyright Office through this transition. Both Dr. Hayden and Karyn Temple shared this confidence in Ms. Strong’s ability in the press release announcing her appointment as Acting Register of Copyrights.

The Copyright Office sits at a crucial time in the MLC oversight and MMA implementation process. It is therefore imperative that the Office act quickly and appoint a permanent register.

The SGA was gratified when Senators Tillis and Coons, the chair and ranking member of the Senate Intellectual Property subcommittee, wrote to Dr. Hayden urging her to promptly appoint the next permanent register and offered to assist the Librarian of Congress in selecting an appropriate replacement for Ms. Temple. (See Attachment F).
In light of the many sensitive issues outlined in its Initial and Reply comments, however, SGA would like to take this opportunity to respectfully urge that any candidates selected as permanent Register be especially knowledgeable about and sympathetic to the needs and Constitutionally based rights of the creator and author community. Such person should also, quite naturally, be without conflicts of interest in regard to prior service on behalf of digital distributors, big tech, and/or corporate copyright owners, and all of their respective trade associations. We are confident that Dr. Hayden and her Library of Congress staff, in coordination with Congress, will be enabled to find a number of qualified candidates who satisfy these criteria, and who will lead the USCO forward into a future in which the implementation of the MMA will prove a resounding positive for all US and global music creators.

IV. Conclusion

SGA thanks the US Copyright Office and the Librarian of Congress for their careful concern regarding protection of the rights and interests of songwriters and composers under the MMA, and for the opportunity to respectfully submit these Reply Comments. SGA further looks forward to providing more of its insights and suggestions in its future submissions, and will gladly respond to any further questions regarding MMA implementation and proceedings.

Respectfully submitted,

Rick Carnes
President, Songwriters Guild of America

@SGAWrites Suggestions to @CopyrightOffice on MLC Operations Part 2

The US Copyright Office solicited comments from the public about the operations of the Mechanical Licensing Collective.  Those first round of those comments (called “initial comments”) were due in November and the second round of those comments (which are called “reply comments” because they essentially comment on the initial comments) were due December 20.

The Songwriters Guild of America filed initial comments and also filed reply comments.  We’re going to post SGA’s reply comments in three parts and then we’ll post other commenters who we think made really good points (like CISAC and BIEM among others).  This is Part 2 and you can read Part 1 here.  Note that SGA’s comment includes a post by Chris Castle, but we are going to link to that post rather than reproduce it as you may have already read it.

All the comments focus on some central themes that seem to be on everyone’s mind which can be boiled down to oversight, oversight and more oversight.  While the DLC controls the MLC’s purse strings, the MLC has been given largely uncontrolled power over songwriters that needs to be checked by the government on behalf of the governed.  SGA’s comment can be boiled down to its motto:  Protect Songwriters.

Reply Comments of the Songwriters Guild of America, Inc.
Re: Notice of Inquiry Issued by the United States Copyright Office Concerning the Orrin
G. Hatch-Bob Goodlatte Music Modernization Act of 2018 Titled “Blanket License
Implementation Regulations”

B. Copyright Office Review and Oversight of Controversial Activities By the MLC As
Denoted By David Lowery and Others

It is well beyond the scope of these comments to delve into the details and individual
administrative issues with which the MLC must deal, such as formulating contractual
arrangements with outside vendors in order to effectively accomplish its statutory duties.

Nevertheless, as noted above, according to independent press reports recently published by sources including former MLC Committee Member David Lowery (“MLC Selects As Digital Services Provider the Company That Sent Fraudulent License Notices to Songwriters”), certain activities of the MLC have aroused legitimate concerns in the independent music creator community that conflicts of interest are already influencing MLC decision-making (see article citations below). As SGA has urged in prior submissions, the USCO and the Librarian of Congress have been empowered under the MMA to monitor, oversee and review MLC activities, and should utilize such authority at the very least to question on an ongoing basis whether the MLC is being managed by its board members in ways consistent with such members’ fiduciary and other duties and responsibilities.

In that regard, SGA believes it is imperative to include for the record citations to three such recent publications concerning MLC activities, in order to call specific attention to the need for robust USCO oversight of issues that rise to the level of potential conflicts of interest such as self-dealing. It is, of course, up to the USCO and the Librarian of Congress to determine the criteria for its active intervention in such potentially problematic MLC matters, consistent with the statutory authority assigned to them under the law. Again, however, SGA urges that strict scrutiny of such issues, once brought to their attention by interested and informed members of the press and public, should at the very least be carefully reviewed and if necessary, investigated and acted upon. Moreover, as some commentators have suggested, the mandating of adoption by the MLC of conflict of interest policies in coordination with the USCO and the Librarian of Congress would likewise be a wise and welcome development.

The three recent, independent articles electronically appended to these Reply Comments for the review and records of the USCO and the Librarian of Congress are as follows (see Attachments C-E):

https://thetrichordist.com/2019/11/27/mlc-selects-as-digital-services-provider-thecompany-that-sent-fraudulent-license-notices-to-songwriters/

https://www.digitalmusicnews.com/2019/11/27/hfa-mechanical-licensing-collectivecontract/

https://www.hypebot.com/hypebot/2019/12/copyright-office-should-establishconflict-
of-interest-policy-for-the-mma-musical-works-database-op-ed.html

C. Failure to Disclose Amounts of Unmatched Royalties Being Held By Digital Distributors

On December 6, 2019, the USCO held a full day MMA symposium in Washington, DC billed as the “Unclaimed Royalties Study Kickoff.” The event was attended by several dozen copyright experts and other interested parties, some of whom represented the MLC and the DLC, and many of whom participated on one or more of several organized discussion panels. At the end of the event, a representative of SGA took the opportunity to note from the podium that in the approximately seven hours of discussion, not one panelist or participant had raised a single question concerning the aggregate size of the unmatched royalty pool being held by the major digital distributors of music (the very subject of the event). The answer to that question, SGA noted, is certainly a key factor in determining the best practices for scoping the size of the problem, and for identifying and distributing such monies to their proper owners. Or it is concerning why this question was not proactively addressed during any of the day’s panels, otherwise asked, SGA asserted, let alone not answered.

SGA has time and again over the past several years posed this same question to representatives of both digital distributors and music publishers (including in private discussions that took place at the Kickoff event), and even to the USCO. Not once has the question of aggregate unmatched amounts been answered, generally because the information appears to be either willfully undetermined or is purposely being withheld by the digital distributors. Estimates have ranged from several hundred million dollars (based upon extrapolations derived from the past experiences of organizations such as SoundExchange) to a high of $1.6 billion discussed at an Austin, Texas SXSW panel in 2017 that featured representatives of NMPA and a legal representative of one of its affiliated creator groups, who appeared to quote that number.

As the MLC and DLC are well aware, the MMA requires demonstrative actions by each that will “ensure that the policies and practices of the collective are transparent and accountable.” See, Section 102(d)(3)(D)(ix)(I)(aa). SGA suggests that consistent with this requirement, the time has come to at last address the issue of how much money in unmatched royalties is being held by the digital distributors, so that the scope of this daunting problem is publicly disclosed and can be fully and effectively addressed. The community of songwriters and composers has the right to know this information, and a USCO regulation requiring its public disclosure by a date certain in the very near future is clearly warranted. SGA respectfully requests that the USCO issue such a regulation as soon as possible concerning this most basic issue of transparency and accountability as required under the MMA, regarding disclosure of unmatched withholdings both now and in the future.

D. Budgetary Earmarks in Support of Bona Fide Efforts to Identify Unmatched Royalties by the MLC

In its Initial Comments, SGA described in some detail its experience as a participant before the United States Copyright Royalty Judges of the Library of Congress’ Copyright Royalty Board (“CRB”) regarding the Determination and Allocation of Initial Administrative Assessment to Fund Mechanical Licensing Collective, CRB Docket No. 19-CRB-0009–AA. Following both SGA’s withdrawal as a participant in those proceedings, and its subsequent submission of its Initial Comments to the USCO, on December 12, 2019 the CRB issued an order (“Order”) approving the settlement negotiated between the MLC and the DLC concerning the issue of Administrative Assessments.

In that Order, the CRB judges interestingly took note of their receipt and rejection of several comments concerning the proceedings submitted by non-parties:

The Judges have been advised by their staff that some members of the public sent emails to the Copyright Royalty Board seeking to comment on the proposed settlement agreement. Neither the Copyright Act, nor the regulations adopted thereunder, provide for submission or consideration of comments on a proposed settlement by nonparticipants in an administrative assessment proceeding. Consequently, as a matter of law, the Judges could not, and did not, consider these ex parte communications in deciding whether to approve the proposed settlement. Additionally, the Judges’ non-consideration of these exparte communications does not: (i) imply any opinion by the Judges as to the substantive merits of any statements contained in such communications; or (ii) reflect any inability of the Judges to question, sua sponte, whether good cause exists to adopt a settlement and to then utilize all express or reasonably implied statutory authority granted to them to make a determination as to the existence, vel non, of good cause.

The above CRB statement omits, quite unfortunately, the fact that while still a participant in the proceeding, SGA (despite its withdrawal) did indeed file a motion with the CRB that included specific comments applicable to any proposed settlement negotiated between the MLC and the DLC. The September 12, 2019, SGA filing included the following clear statement by SGA on behalf of US and global independent music creators, concerning their desire to ensure justice in the eventual distribution of currently unmatched royalties:

[E]ven as it seeks to withdraw its Petition to Participate in this Proceeding, SGA respectfully implores the Judges…to make the proper funding for MLC activities specifically designed to identify the proper owners of unmatched musical compositions [and royalties] wherever they may reside in the world… one of the highest priorities of these Proceedings…. It further, respectfully requests that the Judges undertake whenever appropriate, to emphasize their intention and expectation that certain resources have been specifically provided for and must therefore be devoted to use in identifying the proper owners of such unmatched compositions and royalties by the MLC…. The clear articulation of such judicial intent, if the Judges deem it appropriate, will be enormously helpful in ensuring transparency, fairness and hopefully success in the carrying out by the MLC of its duties, a result that will be appreciated by every music creator not only in the United States, but throughout the world.” Motion to Withdraw Petition to Participate filed by SGA with CRB, September 12, 2019, Docket No. 19-CRB-0009–AA.

The decision by the CRB judges to put aside SGA’s requests, presumably on the grounds that SGA’s withdrawal (the reasons for which are explained in SGA’s Initial Comments) negated the ability of the CRB to consider such comments, is disappointing at best. SGA, however, is appreciative for being enabled to make the same requests of the USCO, for the same reasons articulated in its motion to the CRB and in its Initial Comments. As SGA stated:

[I]n a situation in which those who control the MLC will likely benefit from not identifying the proper owners of unmatched works (by reason of the fact that potentially hundreds of millions of dollars in royalties pertaining to ‘permanently’ unmatched works will eventually be distributed on a market share basis), every effort must be made to ensure that the search process for those rightful owners be a bona fide and sufficiently financed global effort. (emphasis added)…. Moreover, despite contrary assertions by the MLC, SGA remains unconvinced that the presence on the MLC board of a small minority of music creators (no matter how diligent and well-meaning they may be) will be able to prevent the major music publishing corporations from attempting to successfully exert undue influence. SGA is highly concerned that such multi-national conglomerates may already be seeking to diminish the MLC’s ability to secure proper financing specifically earmarked for designing and carrying out a global program to identify the proper owners of the musical compositions connected to the huge, above-referenced cache of unmatched royalties. SGA similarly doubts that the independent music publishers on the MLC board, many of whom are contractually and/or commercially tied to the major music publishers, will be sufficiently motivated to join with those few MLC songwriter board members to ensure that the rights and interests of such yet-to-be identified music creators and small publishers are properly respected.

In consideration of the foregoing, SGA once again respectfully requests that the USCO and the Librarian of Congress promulgate regulations that make clear to the MLC the expectation that a certain, adequate percentage of the MLC’s Administrative Assessment shall be devoted to undertaking a bona fide and reasonably exhaustive, global search for the rightful owners of currently unmatched royalties, as explicitly intended by Congress under the MMA.

To be continued in Part 3.

@SGAWrites Suggestions to @CopyrightOffice on MLC Operations Part 1

The US Copyright Office solicited comments from the public about the operations of the Mechanical Licensing Collective.  Those first round of those comments (called “initial comments”) were due in November and the second round of those comments (which are called “reply comments” because they essentially comment on the initial comments) were due December 20.

The Songwriters Guild of America filed initial comments and also filed reply comments.  We’re going to post SGA’s reply comments in three parts and then we’ll post other commenters who we think made really good points (like CISAC and BIEM among others).  Note that SGA’s comment includes a post by Chris Castle, but we are going to link to that post rather than reproduce it as you may have already read it.

All the comments focus on some central themes that seem to be on everyone’s mind which can be boiled down to oversight, oversight and more oversight.  While the DLC controls the MLC’s purse strings, the MLC has been given largely uncontrolled power over songwriters that needs to be checked by the government on behalf of the governed.  SGA’s comment can be boiled down to its motto:  Protect Songwriters.

Reply Comments of the Songwriters Guild of America, Inc.
Re: Notice of Inquiry Issued by the United States Copyright Office Concerning the Orrin
G. Hatch-Bob Goodlatte Music Modernization Act of 2018 Titled “Blanket License
Implementation Regulations”

I. Introduction and Statement of Interest

These Reply Comments are respectfully submitted by the Songwriters Guild of America, Inc. (“SGA”), the longest established and largest music creator advocacy and copyright
administrative organization in the United States run solely by and for songwriters, composers, and their heirs. Its positions are reasoned and formulated solely in the interests of music creators, without financial influence or other undue interference from parties whose interests vary from or are in conflict with those of songwriters, composers, and other authors of creative works.

Established in 1931, SGA has for 88 years successfully operated with a two-word
mission statement: “Protect Songwriters,” and continues to do so throughout the United States and the world.

SGA’s organizational membership stands at approximately 4500 members, and through its affiliations with both Music Creators North America, Inc. (MCNA) (of which it is a founding member) and the International Council of Music Creators (CIAM) (of which MCNA is a key Continental Alliance Member), SGA is part of a global coalition of music creators and heirs numbering in the millions. Of particular relevance to these comments, SGA is also a founding member of the international organization Fair Trade Music, which is the leading US and international advocacy group for the principles of transparency, equitable treatment, and financial sustainability for all songwriters and composers.

These Reply Comments are meant to supplement the initial comments (“Initial Comments”) filed by SGA in its submission dated November 8, 2019 (see Attachment A), the full content of which is hereby repeated and reconfirmed.

The two most important points stressed by SGA in those Initial Comments were as follows:

1. The obvious and overwhelming necessity for inclusion of music creator information in
the Mechanical Licensing Collective’s (“MLC”) musical works database; and,

2. The equally imperative necessity for robust US Copyright Office oversight of the MLC’s
carrying out of its statutory duties, commitments and activities, especially regarding the
identification of unmatched works and royalties.

It was originally anticipated that SGA’s Reply Comments would focus chiefly on the recommendations submitted by other individuals and organizations as part of the initial round of inquiry. Intervening events concerning the activities of the Mechanical Licensing Collective (MLC) since SGA’s initial submission, however, have caused SGA to recalibrate its focus. Due to the importance of conveying to the US Copyright Office (“USCO”) and the Librarian of Congress some of the very concerning information that has come to light over the past several weeks, SGA believes its Reply Comments must now of necessity deal principally and forthrightly with those issues rather than with the critiquing of submissions filed by its colleagues.

II. Additional, Recent Developments Illustrating the Necessity for Close Scrutiny and Oversight of the MLC by the USCO and the Library of Congress

A. The Resignation of Recording Artist/Songwriter/Music Creator Activist David Lowery from the MLC, and the Process of Replacing Music Creator Members on the MLC Board and Committees Prior to its designation by the USCO and the Librarian of Congress as the organization that would serve as the MLC, the entity established principally by the major music publishing conglomerates and known as the NMPA/MLC conducted an extensive campaign aimed at gaining industry support for its MLC candidacy.

As part of that campaign, it and its affiliated music creator and publisher organizations frequently raised the participation of recording artist/songwriter/music creator activist David Lowery on the Unclaimed Royalties Oversight Committee (“URO Committee”) as potentially the most compelling proof of the entity’s commitment to ensuring that the voice of the independent music creator would always be heard.

Throughout his career, Mr. Lowery has been an outspoken advocate for the rights and interests of musical artists and creators. His mere presence within the NMPA/MLC’s proposed Committee structure legitimized for many the group’s candidacy among independent songwriter and composer groups. Those organizations might otherwise have objected more strenuously to an entity controlled in large part by the multi-national music publishing conglomerates being designated to serve as the MLC.

On July 5, 2019, the NMPA/MLC was indeed selected as the official MLC, and Mr. Lowery was simultaneously approved to serve on its URO Committee. Within a few short weeks after that announcement, however, Mr. Lowery resigned from the URO Committee and disassociated himself from the MLC with the statement that he “lacked the bandwidth” to carry out the watchdog role he had hoped to fill. Shortly thereafter, Mr. Lowery began to publish commentaries highly critical of certain decisions and activities being carried out by the MLC (and highly revealing of his apparent reasons for resigning), the gravity of which issues will be discussed further, below.

Mr. Lowery’s sudden and unexpected departure from the MLC and the URO Committee,
however, has raised even more immediate concerns within the independent music creator community, not only as to the reasons why he might have resigned, but also over the process by which he will be replaced. It is the position of SGA that a system which would allow the MLC board of directors (consisting of ten music publisher representatives and just four music creators) to select and/or approve replacement directors and committee members on behalf of the creative community, without meaningful input from creators or approval by the Librarian of Congress and the Register of Copyrights, is an absurdity. Such an unbalanced, unchecked process would virtually guarantee the removal of what little influence actual music creators have over future MLC activities and decision-making—a result wholly inconsistent with Congressional and Executive intent (especially as regards the crucial work of the URO Committee).

As SGA pointed out in its comments to the US Copyright Office dated April 22, 2019 concerning the original designation of the MLC (see Attachment B):
With the knowledge that ‘permanently’ unmatched royalties will eventually be
distributed on a market share basis to them, [the] largest music publishers will almost certainly do all they can to influence, hamstring and obscure the search process…. It will take highly experienced, non-conflicted and strongly independent-minded board members of the Mechanical [Licensing] Collective to resist this pressure, and to act in ways that fulfill their duties up to the mandated standards of fairness, transparency and accountability set forth in the Act.

The necessity for those characteristics in board members is amplified by the fact that the Mechanical Collective board may even override the recommendations of its own, statutorily established Unclaimed Royalties Oversight Committee if it sees fit to do so. It thus falls to the Register of Copyrights to serve as investigator, analyst and arbiter concerning this crucial, threshold issue of appropriate board and committee member selection as part of its evaluation of the competing candidates for designation as Mechanical Collective.

In honing in on its concerns regarding that specialized duty of the Register, members of Congress took the opportunity in both the Senate and House Reports to elaborate on their expectations regarding the qualifications of board and committee members proposed for service by any Mechanical Collective candidate, and the obligation of the Copyright Office under the direction of the Register to use its own, appropriate judgement in independently evaluating and verifying the credentials of those directors and committee members proposed. That Congressional posture was undoubtedly taken to ensure that all board and committee members of the Mechanical Collective possess the proper background and abilities to execute their duties to protect the rights of creators and other interested parties without conflict, pursuant to the terms of the Act.

Specifically, the applicable section of the Senate Report reads:

The Board of Directors of the new collective is required to be composed of individuals matching specific criteria. The detailed requirements concerning the overall framework of the Board of Directors of the collective and its three committees, the criteria used to select individuals to serve on them, and the advance publication of their names and affiliations all highlight the importance of selecting the appropriate individuals. Service on the Board or its committees is not a reward for past actions, but is instead a serious responsibility that must not be underestimated. With the advance notification requirement, the Register is expected to allow the public to submit comments on whether the individuals and their affiliations meet the criteria specified in the legislation; make some effort of its own as it deems appropriate to verify that the individuals and their affiliations actually meet the criteria specified in the legislation; and allow the public to submit comments on whether they support such individuals being appointed for these positions. It has been agreed to by all parties that songwriters should be responsible for identifying and choosing representatives that faithfully reflect the entire songwriting community on the Board.” (emphasis added) S. Rept. 115-339 at 4-5.

The otherwise identical section of the House Report concludes on the following note:

During the entire discussion of the legislation, it has been agreed to by all parties that songwriters should be responsible for identifying and choosing the songwriter representatives on the Board. The Committee strongly agrees with such an approach. (emphasis added) H. Rept 115-651 at 5.

Further, it seems of particular importance that the Executive Branch also regards the careful, post-designation oversight of the Mechanical Collective board and committee members by the Librarian of Congress and the Register as a crucial prerequisite to ensuring that conflicts of interest and bias among such members not poison the ability of the Collective to fulfill its statutory obligations for fairness, transparency and accountability. The Presidential Signing Statement, in fact, asserts unequivocally that ‘I expect that the Register of Copyrights will work with the collective, once it has been designated, to ensure that the Librarian retains the ultimate authority, as required by the Constitution, to appoint and remove all directors.’ (emphasis added)

Pursuant to such clear guidance from both Congress and the White House concerning the selection and replacement of music creator board and committee members, SGA urges the adoption by the USCO of regulations mandating inclusion in the MLC by-laws of a process that includes meaningful music creator participation in the selection process without music publisher interference, with further review and approval by the USCO and the Librarian of Congress of all music creator candidates for MLC board and committee service. To do otherwise would be akin to empowering the wolves to select the watchdogs that purportedly guard the sheep. And that is a result that is not only emphatically in conflict with Congressional intent, but one that is also guaranteed to produce exactly the opposite, long-term results Congress and the Executive Branchwere seeking by passage of the Music Modernization Act (“MMA”): remunerative fairness and justice for creators consistent with the principles set down in Article I, Section 8 of the US Constitution.

To be continued in Part 2.

Google Exec’s Called YouTube “A Pirate Site”. There’s Your Value Gap.

Sometimes we just have to look at a little bit of history to put things into perspective. It’s hard for us to believe that there is even a debate about The Value Gap for recorded music. Check this out as reported by AOL News in 2010.

Google had an internal meeting on competing with YouTube, and its executives were highly critical of YouTube: “A large part of their traffic is pirated content.” YouTube is a “rogue enabler of content theft.” “YouTube’s business model is completely sustained by pirated content.” “… it’s a video Grokster.” “I can’t believe you’re recommending buying YouTube . . . they’re 80% illegal pirated content.”

The whole damning article is right here, titled “Viacom vs. YouTube/Google: A Piracy Case in Their Own Words” and it’s well worth the full read.

In the end, it’s the DMCA that protected Google and it’s the DMCA that needs to be fixed. It’s that type of fix that the EU’s Article 13 sought to address. It would be nice to address those issues here, in the USA, where Google and YouTube are based.

 

No, Streaming Is Not Saving Us. Revenues still down by Half.

We’ve been hearing an alarming narrative that “record labels are making more money than ever from streaming, but they’re just not paying musicians”. To be clear, we certainly have our issues with major labels, however we also need facts and to be truthful.

The truth is, that a decade after losing half of it’s revenues due to piracy as reported by CNN (click here), record labels are now only getting back up to half of what the peak business was in 1999. Half of where we were in 1999, twenty years later. Let that sink in. As unpopular as he was twenty years ago, Lars Ulrich was right.

Twenty years later, and we’re still only half of where we were in 1999.

There are only three numbers that matter when looking at the record industry post-piracy and here they are:

1999 : $14.6b = $22.01 in 2018 Dollars
2009 : $6.3b = $7.37 in 2018 Dollars
2018 : $9.8b = $9.8b in 2018 Dollars

This is clearly illustrated in the chart below provided by the RIAA, the trade group responsible for tracking these figures. At their lowest point in 2014, revenues from record sales were less than one third of their peak.

What this chart also shows is a decade long loss of $10b or more annually, which is over $100b in lost revenues to labels and artists. That’s $100b in lost revenues to labels and artists in just the past decade.

If we track total lost revenue to labels and artists since the launch of Napster in 1999 it totals just under $200 Billion Dollars in the USA alone.

The fundamental problem remains the same. There’s a hole in our bucket and all that revenue falling out though the bottom leads more or less to advertising funded piracy and YouTube. Many have suggested that YouTube is effectively the largest ad supported piracy platform. As we reported earlier this year in our updated Streaming Price Bible, the YouTube Value Gap is very, very real.

In future posts we’ll offer solutions and suggestions that should be under consideration at every major label. Not the least of which is transitioning subscription streaming models to incorporate a per stream transactional baseline, or a minimum wholesale price per stream.

In streaming, consumption does not grow revenues. More consumption and more streams do not generate more money. Revenue can only be generated by charging more for subscriptions, generating more advertising revenue (ad supported only, obviously) and expanding into more markets (gaining new subscribers). But eventually, everything flattens.

So the biggest question remains. What happens to overall revenues as streaming matures and cannibalizes the remaining revenue sources into purely niche markets. Digital Downloads will account for less than 10% of recorded music revenues by the end of the year, if not already. The CD market continues drop, and vinyl also declined slightly from 2017 (4.4%) to 2018 (4.3%).

Will streaming compensate for the lost revenues in other formats and continue to grow revenues towards a true recovery? It’s possible, but there will have to be some changes to address the economics presented to consumers despite what Goldman Sachs says. For the year of 2018 the industry reported $9.8b in revenues. To make that $37.2b by 2030 the industry needs to add nearly $3b a year for the next 10 years!

We don’t know what else they’ve got in that crystal ball that can predict revenues over a decade into the future but even by their bullish estimate of $37.2b in 2030, that is only $28b in 2019 dollars. Right now we’re still about $20b short.

 

 

 

@musictechpolicy: Wixen Music Publishing Files Lyric Infringement Lawsuit Against Pandora And Raises Questions About Lyric Licensing

Guest post by Chris Castle

In the “it was only a matter of time” department, Wixen Music Publishing has sued Pandora over infringing reproductions of the lyrics in songs it represents.  (For those reading along at home, Wixen is represented by badass David Steinberg, so good luck Pandora.)

All these cases against tech companies start with very similar facts–they were given a chance to fix the problem and they either entirely ignored the copyright owner (like David Lowery and Bluewater) or they obfuscated and tried to deflect blame, or did both.

Here’s the key fact from this Wixen case:

Plaintiff’s representatives put Pandora on actual notice of its infringing conduct in early 2018, yet Pandora did not even attempt to address its infringing conduct until May 2019, when it first purported to cease displaying some of the lyrics to the Musical Compositions on its service….Pandora’s infringement is therefore willful and deliberate.

In other words–Pandora apparently blew off its responsibilities for over a year and still didn’t fix the problem.  Here’s a practice point–when Wixen or someone like Wixen calls, you need to fix your problem.  Right. Now.

But this case raises an interesting side point that may indicate a likely waypoint down the trail.  There is a company called LyricFind that licenses lyrics for many publishers according to their advertising.  Wixen notes in the complaint:

Pandora may claim that it had obtained licenses to display the lyrics to the Musical Compositions from one or more sources, including an entity called LyricFind, the self-proclaimed “largest lyric licensing service” in the world, which claims that it “has licensing from over 4,000 music publishers, including all majors.” However, as Pandora knows, and has known, LyricFind did not have the authority to grant licenses to Pandora for the display of any of the lyrics to the Musical Compositions on its service.

How does Pandora know this?  Probably because Wixen (and possibly other publishers) told them so.  It’s entirely possible that Pandora has a license with LyricFind for the songs it represents, but if Wixen hasn’t authorized LyricFind to represent them for lyric licensing (which they evidently have not), then this is an irrelevant fact.

I have to believe until shown otherwise that LyricFind would be the first to tell their licensees that LyricFind does not purport to license all the lyrics for every song ever written or that ever may be written in any language from any songwriter or publisher in any country on the face of the Earth.

The problem seems to be the same problem that Big Tech has had with music from the beginning–the tech companies don’t want to have to confirm their rights because that involves human beings and human beings cost money.  It’s this dismally poor administration of licenses by the licensees that seems to be the stumbling block.

However, it does make for interesting viewing to see exactly what was said by whom when about what, and what assurances were given.  My bet is that the next step will be like the Music Modernization Act–a retroactive safe harbor with a blanket license and a statutory monopoly.

Read the Wixen complaint here.

2018 Streaming Price Bible! Per Stream Rates Drop as Streaming Volume Grows. YouTube’s Value Gap is Very Real.

Here we go again. To see previous years, click [here].

This data set is isolated to the calendar year 2018 and represents a mid-sized indie label with an approximately 250+ album catalog now generating almost 1b streams annually. 2018 is the year we saw streaming truly mature as the dominant source of recorded music revenues.

In parsing the data provided we find that digital revenues are 86% of all recorded music revenues globally (RIAA Reports Digital Revenues as 90% of Total). Streaming is 80% (or more) of Digital Music Revenues. Downloads are about 20% of digital music revenues for the year, however if we isolate Q4, it would appear download revenues could be less than 15% of digital revenues. The transition from downloads to streaming is well beyond the tipping point and we wonder how long the major services (Apple, Amazon, Google) will continue to support the format.

As we dig down into the physical revenues much of the gross is eroded by manufacturing, shipping and inventory costs of both CDs and Vinyl. In short, the recorded music business is now the streaming music business. Whatever charm there is to vinyl, it is at best still a truly niche business in terms of meaningful net revenues.

Every year there are surprises in the data and this year is no exception. As always we present this data as a single sample, but one we feel is fairly representative of the state of the business. As such, we welcome comments from others with access to similar data to report on their findings. Some of the percentages may vary dependent upon the genre of music and the size of the label or artist. However, we generally don’t find trends that are completely contradictory to our sample where it matters most, in reporting on stream rates and relative marketshare.

We’ve also simplified the chart this year. Just one chart, and only the Top 20 streamers which represent  99.35% of all streaming dollars. The Top 10 streamers account for over 97% of all music streaming revenues. The Top 5 account for over 88% of all streaming dollars. What we see below is a maturing marketplace with a small number of dominant players. Anyone who thought the digital revolution would remove so called “gate keepers” are painfully wrong.

If you want to compare these numbers against the RIAA’s official report for the first half of 2018, click [here]. That data is for the USA and only through June of 2018. It’s hard to get “apples to apples” reporting, so everything should be taken as different perspectives on the overall business. If you are an artist or label, see how your own data compares.

The biggest takeaway by far is that YouTube’s Content ID, (in our first truly comprehensive data set) shows a whopping 48% of all streams generate only 7% of revenue. Read that again. This is your value gap. Nearly 50% of all recorded music streams only generate 7% of revenue.

 

The Spotify per stream rate drops again from .00397 to .00331 a decrease of 16%. Apple Music gains almost 3% for an total global marketshare of about just under 25% of all revenue.

Apple’s per stream rate drops from .00783 to .00495 a decrease of 36%. We need to state again, that 2018 saw a massive shift of revenues from downloads to streaming and no doubt this expansion of scale, combined with more aggressive bundling (free trials) as well as launching into more territories was bound to bring down the overall net per stream.

Apple Music still lead in the sweet spot with about 10% of overall streams generating 25% of all revenue (despite the per stream rate drop). Spotify by comparison has nearly triple the marketshare in streams than Apple Music but generates less than double the revenues on that volume.

The biggest takeaway by far is that YouTube’s Content ID, (in our first truly comprehensive data set) shows a whopping 48% of all streams and only 7% of revenue. Read that again. This is your value gap. Nearly 50% of all recorded music streams only generate 7% of revenue. Apple Music and Spotify combined account for just short of 40% of all streams and 74% of all revenue.

We don’t know how the powers that be at the major labels can continue to allow for this gross inequity. It will be interesting to see how YouTube Red numbers evolve over this year. YouTube Red, the newly rebranded version of the disastrous “Music Key” is off to a slow start in a competitive subscription music marketplace. One has to ask, what incentive is there really for Google/YouTube with the Red subscription service when they already benefit from service 48% of all streams while paying only 7% of the overall revenue?

In looking at the per stream rates for song and album, you might want to read this article by Billboard on the current calculation of how many streams equal and album for the purposes of charting. We don’t know if YouTube Content ID streams count towards charting, but they absolutely should not. The report states that, “The Billboard 200 will now include two tiers of on-demand audio streams. TIER 1: paid subscription audio streams (equating 1,250 streams to 1 album unit) and TIER 2: ad-supported audio streams (equating 3,750 streams to 1 album unit).”

In the coming year Amazon’s Unlimited Music service shows promise. We also wonder about Google Play. The payouts on Google Play are fair, but when bundled into the YouTube ecosystem is largely inconsequential in terms of both streams served and revenue. As smart home assistants grow there could be a larger market segment for paying subscribers to have streaming music catalogs available and on demand.


These numbers are from one set of confidentially supplied data for global sales. If you have access to other data sources that you can share, we’d love to see it.

  • HOW WE CALCULATED THE STREAMS PER SONG / ALBUM RATE:
  • As streaming services only pay master royalties (to labels) and not publishing, the publishing has to be deducted from the master share to arrive at the comparable cost per song/album.
  • $.99 Song is $.70 wholesale after 30% fee. Deduct 1 full stat mechanical at $.091 = $.609 per song.
  • Multiply the above by 10x’s and you get the album equivalent of $6.09 per album
[EDITORS NOTE: All of the data above is aggregated. In all cases the total amount of revenue is divided by the total number of the streams per service  (ex: $5,210 / 1,000,000 = .00521 per stream). In cases where there are multiple tiers and pricing structures (like Spotify), these are all summed together and divided to create an averaged, single rate per play.]

[royalties][streaming royalties][music royalties][royalty rates]

Spotify’s Big Lie, Streaming Habits Mirror Purchasing Habits

One of the biggest lies told by Spotify is that streaming will provide more revenue over the life of a record because every play will be monetized. This as opposed to the one time payment earned from a transactional purchase where all the revenue from the purchase of the record is paid at once. There is however, a very big problem with this theory, which is that the consumption curves of streaming match the consumption curves of transactional sales.

So, what about that so called long tail? Well, it doesn’t exist. Not for music consumption. Or we should say, it doesn’t exist any different for streaming than it did has for transactional sales. What do you think is more profitable in generating revenue? Is it the album sales of artists catalogs, or is streams?

Keep in mind, streaming is a fixed cap market. So it does not matter how much the market grows in actual consumption, the revenue is capped by the amount of revenue earned by the hosting provider. If consumption doubles, but revenues stay flat, every stream is worth half of what it was previously.

We’re already seeing this trend as we noted earlier this year that Spotify per stream rates appear to be dropping steadily by about 8% per year. This is likely a combination of both the growth of consumption and the slowing of revenue across both subscriptions and advertising.

If anyone truly believes streaming is going to generate more revenues than transactional sales, we have a bridge in Brooklyn to sell you cheap. The fix is simple. The industry must move towards adopting an industry standard streaming penny rates. Only by setting fixed per stream rates will compensation scale with consumption.

[NOTE:] Chart from a mid size indie label showing revenues from Downloads and Streaming. The Spikes indicate new release activity / hits which reveals that revenue tails off for streaming the same way it does for transactional downloads.

2017 Streaming Price Bible! Spotify per Stream Rates Drop 9%, Apple Music Gains Marketshare of Both Plays and Overall Revenue

We first did this back in 2014, and then again last year, so here we are again.

As we predicted as streaming consumption grows, the per stream rate will continue to drop, every year, year to year.

This data set is isolated to the calendar year 2017 and represents a mid-sized indie label with an approximately 200+ album catalog now generating over 200m+ streams annually. That’s a pretty good sample size. All rates are gross before distribution fees.

Spotify was paying .00521 back in 2014, two years later the aggregate net average per play rate dropped to .00437 in 2016, a reduction of 16%.

The current effective per stream rate at Spotify has now dropped to 0.00397, a reduction of 9% since last year. This a cumulative reduction of 24% since 2014, which is an average decrease of 8% a year of the per stream rate.

If the music business could set a per stream rate that allowed revenue growth, proportionate to consumption growth that would be a much better model. Looking at the stats below we can actually see that working for Apple Music!

An interesting change from last year is that Pandora replaces YouTube with the greatest value gap of streams at 21.56% volume with only 7.86% of revenue. YouTube drops to 8.38% of volume with only 1.70% of revenue. Again, this is just music delivered to YouTube via the distributor for the automated song generation and it does not include Content ID or Artist Channel revenues.

For the second year in a row Apple Music Streaming sits in the sweet spot generating the second largest amount of streaming revenue.  The current per stream rate seems to have actually modestly increased from .00735 last year to .0783 this year. A nominal increase but worth noting. Apple’s current effective rate of .00783 is pretty close to double the Spotify effective rate of .00397.

There’s more good news for Apple as their market share has risen from 7.18% last year to almost 11% this year. But the bigger story is that Apple Music is now accounting for over 22%+ of music streaming revenues up nearly 11% from last year. This is good news and shows the power of both Apple’s commitment to streaming, and the value of a paid only platform. Apple Music is actively taking marketshare away from Spotify.

To put this list in the context of our previous reports and numbers we’re adding the chart below with the data sorted by the quantity of streaming plays required to match the revenue of a single song or album download. This is important as we work towards defining and setting a fair per stream rate and also setting an accurate economic equivalent of streams to songs and albums for the purposes of charting.

Billboard currently calculates 1,500 streams to one album for the purposes of charting, which at current streaming rates (at Spotify) actually sorta matches an economic equivalent. But that’s just backing out of an arbitrary rate set by Spotify, it doesn’t actually define what the cost of a stream should be.

Keep in mind every streaming service has a key piece of data that would allow artists and labels to set a fair per stream rate. Every on demand streaming service, Apple, Spotify, Tidal, Google Play all know how many times a song is played (per person) on average over time. This is the data that is key to setting fair streaming rates. Who will share this information? Apple, Jimmy Iovine, we’re looking at you.

 

These numbers are from one set of confidentially supplied data. If you have access to other data sources that you can share, we’d love to see it.

  • HOW WE CALCULATED THE STREAMS PER SONG / ALBUM RATE:
  • As streaming services only pay master royalties (to labels) and not publishing, the publishing has to be deducted from the master share to arrive at the comparable cost per song/album.
  • $.99 Song is $.70 wholesale after 30% fee. Deduct 1 full stat mechanical at $.091 = $.609 per song.
  • Multiply the above by 10x’s and you get the album equivalent of $6.09 per album
[EDITORS NOTE: All of the data above is aggregated. In all cases the total amount of revenue is divided by the total number of the streams per service  (ex: $5,210 / 1,000,000 = .00521 per stream). In cases where there are multiple tiers and pricing structures (like Spotify), these are all summed together and divided to create an averaged, single rate per play.]

[royalties][streaming royalties][music royalties][royalty rates]

 

If Only Artists and Managers Had Listened To Us : Spotify Per Stream Rates Keep Dropping

We hate to say we told ya so, but… Below is our post from September 2015. Two years ago we predicted the inevitable truth of the all you can eat Spotify subcription model. Like many of our predictions and proposals (example; windowing titles) we’ve had to wait for the industry to catch up to us. Today, two years later, Digital Music News confirms our prediction.

Read the report from Digital Music News by clicking the headline link here.

Exclusive Report: Spotify Artist Payments Are Declining In 2017, Data Shows | Digital Music News

Our original post from 2015 is below…


Spotify Per Play Rates Continue to Drop (.00408) … More Free Users = Less Money Per Stream #gettherateright

Down, down, down it goes, where it stops nobody knows… The monthly average rate per play on Spotify is currently .00408 for master rights holders.

PerStreamAvg_Jun11_July15

48 Months of Spotify Streaming Rates from Jun 2011 thru May 2015 on an indie label catalog of over 1,500 songs with over 10m plays.

Spotify rates per spin appear to have peaked and are now on a steady decline over time.

Per stream rates are dropping because the amount of revenue is not keeping pace with the  number of streams. There are several possible causes:

1) Advertising rates are falling as more “supply” (the number of streams) come on line and the market saturates.

2) The proportion of  lower paying “free streams”  is growing faster than the proportion of higher paying “paid streams.”

3) All of the above.

This confirms our long held suspicion that as a flat price “freemium” subscription service  scales the price per stream will drop.  As the service reaches “scale” the pool of streaming revenue becomes a fixed amount.  The pie can’t get any larger and adding more streams only cuts the pie into smaller pieces!

The data above is aggregated. In all cases the total amount of revenue is divided by the total number of the streams per service  (ex: $4,080 / 1,000,000 = .00408 per stream). Multiple tiers and pricing structures are all summed together and divided to create an averaged, single rate per play.