Author: trichordist

trichordist

Guest Post: MLC Black Box Invasion: Transparency for the “Interim Application of Accrued Royalties”

This post is a version of Chris Castle’s comment in the current Copyright Office rulemaking on the transparency of the MLC

By Chris Castle

Just when you think you understand Title I of the Music Modernization Act, another toad runs out from under a rock.  My nickname for the toad we’re going to talk about today is the “Hoffa Clause,” in honor of the Teamster leader and well-known pension fund raider (played by Al Pacino in The Irishman).

Here it is:

INTERIM APPLICATION OF ACCRUED ROYALTIES.—In the event that the administrative assessment, together with any funding from voluntary contributions as provided in subparagraphs (A) and (B), is inadequate to cover current collective total costs, the collective, with approval of its board of directors, may apply unclaimed accrued royalties on an interim basis to defray such costs, subject to future reimbursement of such royalties from future collections of the assessment.[1]

The Office has a serious public education issue about the hygienically titled “Interim Application” clause.  I have yet to meet a songwriter who is aware of this clause in Title I and it was never publicized in the run up to passing MMA. Many publishers have been so taken aback[2] that they deny the clause is there.  Despite the provision’s rather metaphysical properties, it is there and it says what it says.  How it came to be there is only known to the insiders.  But it’s very specific, so must have been placed there for a reason.

Title I gives The MLC tremendous power over affording itself the benefit of administering other people’s money.[5]  The plain language of this clause essentially says that The MLC can invade the black box and make interest free, nonrecourse loans to itself to apply against certain shortfalls in “collective total costs” when the administrative assessment approved by the Copyright Royalty Judges is “inadequate to cover total collective costs.” Under Title I as drafted, The MLC is solely in a position to control that shortfall and to invade the black box.

Anytime anointed people handle other people’s money, stringent rules apply to that duty.  Or ought to.  Strangely enough, this “Interim Application” provision is not addressed at all in the legislative history or the Conference Report.   So we can only look at the words and try to divine the intention of the lobbyists who wrote the bill.

Plain Meaning

The new rule announces itself as relating to the “application” of “accrued royalties” on an “interim” basis.  The Cambridge Dictionary tells us that “interim” means temporary, such as a temporary solution:  “temporary and intended to be used or accepted until something permanent exists”.  That “something permanent” is the “administrative assessment”–which of course will already exist at the moment of “application”.  So there is a chicken and egg issue with this entire concept from the beginning.

(Remember that the “administrative assessment” is the operating budget and startup costs paid for by the users of the Title I blanket license who may also be the beneficiaries of the Title I safe harbor.  The administrative assessment always exists once it has been set in motion by the Copyright Royalty Judges, which is now in place for the foreseeable future.  The CRJs essentially recently rubber stamped the agreement between The MLC (the biggest publishers, having single-mindedly gotten rid of the independents through legal maneuvering) and the DLC (i.e., the biggest services).)

So what money is available to be tapped through this “interim application”?  “Unclaimed accrued royalties”, which sounds like the black box.  Which is why I call it a “black box invasion.”

It is worth noting that Title I uses the terms “unmatched” and “unclaimed” somewhat interchangeably.  I would point out that it is possible for royalties to be both matched and unclaimed, matched and disputed and unilaterally held by The MLC, as well as unmatched and therefore unclaimed. And remember that just because money is unclaimed does not mean that there was any method in place for it to be claimed.

Realize that the entire Hoffa clause is based on an assumption–that there was a meaningful process in place for songwriters (1) to know that The MLC had decided that their money should be held as accrued but unclaimed and (2) to claim their money.  There is neither present today and there is unlikely to be either available any time soon based on public statements of executives of The MLC.  Without both these processes in place, it seems that it should be important, if not crucial, to preserve the status quo until they are and that the public interest would be served by doing so.

Holding Periods Maketh the Black Box

I suggest that the common interpretation of black box is that it includes a series of royalty payments that may be disputed, matched, unmatched and unclaimed and has been so for a holding period of at least a few years, in this case three years.[3]  That suggests that no invasion may occur under this clause before the passing of three years, and the holding period should run on an item-by-item contributory share basis for each rolling accrual.

But that isn’t really the whole story on the holding periods in the first black box distribution from the DLC to The MLC.  The first distribution is going to be all the black box money ever held by all the DLC members (and any other users of the blanket).  Because the security surrounding this amount is tighter than the nuclear football, it is impossible to say how much will be in the black box.  The Songwriters Guild and Society of Composers and Lyricists (the ones who were maneuvered out of the assessment hearing) have been asking this question for months and no one has responded.

The relevant holding period for the black box is not only the three years that The MLC can hold the money, but the entire holding period from when the black box first “accrued”.  That could be many years longer than the Title I holding period.  There’s a question as to the three-year rule should apply or whether the DLC should be allowed to ignore all those holding periods on top of the three years.  You can see this is a story for another post, but keep that in mind for this post.  I don’t think that sentient beings with the ability to think sequentially can just accept that the relevant holding period is three years–after the black box is transferred to The MLC as though the money had been there all the time.  I don’t think songwriters need a court to tell them that’s just wrong.

What Does Accrued but Unclaimed Even Mean?

The fact that royalties are “accrued but unclaimed” for all or part of a song does not tell the whole story, because “unclaimed” standing alone doesn’t tell the whole story.  The “Interim Application” clause applies to “unclaimed accrued royalties” which could be royalties payable for unmatched contributory shares of songs that The MLC doesn’t know who to pay (therefore unclaimed) as well as matched royalties that have yet to be claimed but for which a payee might be identified with subsequent research.

Which contributory shares of a song that are or are not claimed is a fact determined by a snapshot in a moment of time that could easily change in the next moment.  In fact, accrued royalties being held on disputed songs may also find their way into the black box.[4]  Unfortunately, Title I has yet another drafting glitch because it does not identify that moment in time for purposes of the black box invasion.

Borrowing from Frankie to Pay Big Paulie

There could easily be a situation where the black box is invaded but the future assessment is not made for a year or more, or the future assessment is insufficient to repay Peter for the loan to Paul.  Because an expenditure may be an item of “collective total cost” but may not be reimbursed by “future collections of the assessment” rather than the next collection of the assessment occurring after the interest-free nonrecourse black box invasion, the statutory drafting is glitchy.

Plus, while the CRJs approve the administrative assessments, they have no direct approval right over a black box invasion—although approval over one does imply approval over both to the extent the invasion takes money from an assessment in a proceeding before the CRJs (which would be all assessments).  I’ve almost talked myself into believing that the CRJs actually were intended to approve any black box invasions, at least to the extent the sums are to be included in future assessments or offset prior assessments.  I think we all would be grateful if the Copyright Office could clarify this point.

In any event, it is clear that The MLC is allowed to write itself what amount to limitless[6] interest-free nonrecourse loans against the black box that can only be repaid from the assessment if the DLC approves (or perhaps the CRJs could be persuaded to approve).

The DLC would then be put in a position of declining to approve an increase to cover a black box invasion in the assessment that the DLC had nothing to do with incurring and will not have been informed of based on the plain language of Title I.  Since the current assessment seems to be on a fixed trajectory based on the last assessment settlement, it is likely that any invasion amount might exceed the stipulated assessment.  What happens if the assessment is not available to repay the invasion amount is unclear, even though The MLC is allowed to make the decision before knowing how the loan will be treated?

Required Transparency

The first issue in this cluster must be transparency on the board vote at a minimum.  Because the statute refers to approval by The MLC’s  “board of directors” and because the nonvoting members are part of the board, I have always assumed that such a board vote requires both voting board members and at least the assent of nonvoting members.  Neither does the glitchy language require any particular majority, so the new regulations may be an opportunity for the Copyright Office to require a majority, supermajority or unanimous board vote in regulations.

My preference would be for unanimous because I think taking other people’s money is a controversial act and they should lock arms and all go together.  Unanimity would also require both publishers and songwriters to vote for the loan (as publishers already have a supermajority representation written into the law).  As far as I can tell, we can only go by the plain language of the statute as I have found no legislative history on this provision.

Notice to Songwriters

I also think that regulations should provide that there be some written public statement by The MLC’s chief financial officer to the Copyright Office (or the CRJs) that these funds are being approved by the board for disbursement before the taking.  The CFO should also provide a justification statement.  The MLC board should have to sign up to that statement with full transparency of (1) why there is this compelling need and (2) why that need can only be met this way.  Frankly, it would be best if the funds could not be disbursed until the Register or the Librarian approved the disbursement in all respects.  One would think that the board members would want this sharing of responsibility.

Another option, if possible, would be to require The MLC and the DLC to return to the CRJs and request an increase in the applicable assessment or amendment to The MLC’s budget to cover the black box invasion.

What’s in Your Wallet?  Explain Why There is a Shortfall

There yet another drafting glitch in this section.  The statute fails to ask why a quango like The MLC is in a position that the millions in the Administrative Assessment doesn’t cover the relevant costs in the first place.  The assumption seems to be that there was a spike in the defined “collective total costs”.  As The MLC is in control of how the Administrative Assessment is spent, there may need to be some true up between the authorized budget approved by the CRJs and what was actual spent on a line item basis.

This raises, of course, the question of what kind of items should never be covered by the Administrative Assessment (which, if violated, could cause a shortfall requiring the black box invasion).  Such items might include loans to executives, performance bonuses, excessive travel reimbursements (such as first-class travel or reimbursement for tips in transit), expensive restaurant tabs and alcohol bills, but also items like settlements of harassment claims or related court costs.  Since harassment claims often are subject to nondisclosure agreements, it does not seem appropriate for The MLC to be able to recover such payments from black box invasion.  None of those items should be deductible from the Administrative Assessment and should never be the cause of a black box invasion.

It must also be said that “collective total costs” includes “bad debt.”  This caught my eye.  “Bad debt” is generally defined as a contingency or credit extended (such as to a customer) that is determined to be uncollectable.  Why would a pass-through quango like The MLC which has all of its costs covered by a third party need to be extending credit or loaning money to anyone, certainly not to any employee, board member, or vendor?  Under these circumstances, how would the bad debt be matched according to GAAP?  What controls are there within The MLC to disclose bad debt?  And why should bad debt be able to cause a black box invasion?

A corollary to bad debt is the indebtedness of The MLC itself as a borrower.  Again, given that the collective total costs are underwritten by a third party, why would The MLC need to borrow any money at all?  One could imagine that The MLC might properly have a modest bank credit line for cash flow purposes, but servicing any credit line should not result in a black box invasion, nor should the black box be used as collateral for any loan.

Paying Songwriters Who Claim or Are Matched After the Loan

The other drafting glitch I spotted that I would recommend needs closing up has to do with subsequent matching and paymenting.  What happens if there is a call on the black box invasion funds loaned to The MLC after the loan is made but before it is repaid.  These black box invasion loans should not delay matching and should also not delay payment of royalties matched after the loan is disbursed.

The easiest solution for a call on these loaned funds is to require the board members (or their companies) to cover the required funds, but I really think the Copyright Office needs to address the potential to abuse this tempting power.  Abuse of this power is exactly the kind of thing that could give rise to the very “waste, fraud and abuse” Congress wants the Copyright Office to take into account in the quinquennial review and potential redesignation (discussed above).

Yield Not Unto Temptation:  Detection Leads to Correction

This comment is not intended to be a knock on The MLC.  I am simply noting that any MLC may face the temptations that have certainly been irresistible for many smart people similarly situated in other contexts.  This kind of loan might well be a breach of a fiduciary duty by board members, and certainly would be in other similar situations.

It also must be said anecdotally that there are many songwriters who, perhaps unfairly, think that publishers use black box payments as a slush fund to run their operations with interest-free loans as the hygienically named “interim applications” would be.

The problem is that without the disinfectant of sunlight, there may be no detection to lead to correction.  Who would not prefer to avoid that problem who was able to avoid it?

* * * * * * * * * * * * *

[1] 17 U.S.C. § 115 (d)(7)(C).

[2] I have also discussed this clause off the record in the context of the Dispute Resolution Committee and Unmatched liability safe harbor for The MLC with friends at CMOs outside of the U.S.  When the laughter subsided, they all said that if they did anything like this they’d be fired long before they hit the gross negligence threshold.  “Heads on pikes” was the description.  We must then wonder what the CMOs think of this clause and what in the world they think the Americans are up to.  The Office might want to ask them.

[3] 17 U.S.C. §115 (d)(3)(H)(i).

[4] It appears that royalties held by the Dispute Resolution Committee for disputed works will also be kept in the black box account and presumably would be subject to invasion.  “The dispute resolution committee established under subparagraph (D)(vi) shall establish policies and procedures…that shall include a mechanism to hold disputed funds in accordance with the requirements described in subparagraph (H)(ii) pending resolution of the dispute.”  17 U.S.C. § 115 (d)(3)(K)(ii).  Subparagraph (H)(ii) provides for an “Interest-bearing account.—Accrued royalties for unmatched works (and shares thereof) shall be maintained by the mechanical licensing collective in an interest-bearing account that earns monthly interest….”

[5] Presumably this issue will be addressed in the Copyright Office Unclaimed Royalties Study of best practices on both matched but unclaimed and unmatched royalties.  Even so, this may be a good place to insert a true escrow account for the mandated interest-bearing account for the black box so that the account is held by a third-party bank unrelated to The MLC, the DLC, their board members or their vendors.  There should be specific withdrawal instructions to that third-party bank.  I find it difficult to understand why anyone would oppose such an ethical separation.

[6] The loans are limitless because there is no limitation on the amount in Title I.  The loan could theoretically even exceed the amount of the then-existing black box and be taken from a future accrual.

by trichordist

Why So Secretive? Copyright Office’s Public Consultation on Setting Rules for MLC’s Operation: Future of Music Coalition

[The Copyright Office is bravely trying to regulate The MLC to keep the MMA from becoming a feeding frenzy for the data lords.  As Chris Castle said in his comment on what should be stamped “Confidential” and kept away from songwriters: “The premise of confidential information under Title I is that there is in rock and roll certain information deserving of government-mandated secrecy.”  Or as Otis said, too hot to handle.  Keep that in mind–when they say “confidential information” they mean information they can keep away from you.

We are going to excerpt some of the good comments that support independents in the other Copyright Office “rulemaking” consultation that just closed devoted to confidential treatment of data by The MLC and the DLC.  You can read them all here.]

The Future of Music Coalition made some great points in their filing, read the whole thing here.

Restrictions on use by MLC and DLC Vendors and Consultants FMC shares concerns expressed by other commenters about the possibility of vendors using confidential data for competitive advantage or purposes beyond what the MLC was created to do. There should be no provision for HFA to use confidential data for “general use”, even on an opt-in basis. The risk of anti-competitive harm is too great.

by trichordist

LEADING MUSIC AND FILM ORGANIZATIONS CALL ON CONGRESS TO FIX SAFETY NET IN NEW CARES ACT

[Editor Charlie sez:  Artist Rights Watch, Music Tech Policy and The Trichordist are pleased to support this effort.  Please let your representatives in Washington know that you do, too!]

PRESS RELEASE

WASHINGTON, D.C. (May 8, 2020) – Leading music and film organizations today sent a new letter to leaders of Congress that highlights the ways implementation of the CARES Act has fallen short in assisting workers in need in the entertainment community and requests that these flaws in implementation be remedied in a new CARES Act COVID relief package.

The organizations said in a joint statement: “While we appreciate the efforts of lawmakers to meet the challenges of this pandemic, we need to ensure that our community is getting the aid they need to survive. Musicians are struggling to access the basic financial resources available due to conflicting and burdensome requirements in relief programs. Simply, there is a hole in this safety net that Congress must fix in the next version of the CARES Act.”

The letter lays out in stark terms the crisis that the live entertainment industry is facing due to the pandemic.

“We need help that only [Congress] can provide, in a way that recognizes the particulars of our industry. On behalf of the hundreds of thousands of us across the country, thank you for your understanding and your action.”

In the letter, the organizations point out the implementation of the Pandemic Unemployment Assistance program (PUA) has overlooked workers who have mixed income and report it on W-2 and 1099 forms. “In almost all cases that we see in every state, a minimum amount of W-2 income disqualifies a self-employed individual for PUA and significantly lowers the amount of assistance they receive,” the letter states. “PUA must be updated to recognize these different income streams and allow individuals to show their mixed sources of revenue for a full accounting of their annual income.”

The letter also describes concerns about the Paycheck Protection Program and the Economic Injury Disaster Loan program that were included in the first CARES Act.

The organizations who signed include the Artist Rights Alliance (ARA), American Association of Independent Music (A2IM), American Society of Composers, Authors, and Publishers (ASCAP), Broadcast Music Inc. (BMI), the Future of Music Coalition, Global Music Rights (GMR), the Music Artists Coalition (MAC), the Music Business Association, National Music Publishers’ Association (NMPA), Nashville Songwriters Association International (NSAI), the Recording Academy, the Recording Industry Association of America (RIAA), the Screen Actors Guild-the American Federation of Television and Radio Artists (SAG-AFTRA), the Society of European Stage Authors and Composers (SESAC), the Songwriters Guild of America, the Songwriters of North America (SONA), SoundExchange and many more.

 The full text of the letter follows:

Honorable Nancy Pelosi                                                     Honorable Kevin McCarthy
Speaker                                                                                  Republican Leader
U.S. House of Representatives                                          U.S. House of Representatives
Washington, DC  20515                                                      Washington, DC  20515

Honorable Mitch McConnell                                             Honorable Charles Schumer
Majority Leader                                                                   Democratic Leader
U.S. Senate                                                                             U.S. Senate
Washington, DC  20510                                                       Washington, DC  20510

Dear Speaker Pelosi, Leader McConnell, Leader McCarthy, and Leader Schumer:

The broad and diverse American entertainment community would like to thank you for your continued efforts to provide assistance to those affected by the COVID-19 pandemic.  The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and the subsequent “Paycheck Protection Program and Health Care Enhancement Act” were sincerely welcomed programs, particularly their essential coverage of independent contractors, sole proprietors, and other self-employed individuals who make up so much of the live entertainment workforce.

As you know, many of our jobs have not only vanished, they will be gone for quite some time.  From on-set production to public performance, our work in the entertainment industry naturally requires close personal interaction and public gatherings.  Even when business restrictions are eased, it will take much longer to restore the social interaction inherently necessary for the creative industries to operate.

For those of us in the creative field to survive – and recover – after this crisis, we must be able to access the full support intended by Congress.  Thus, we would like to highlight a few ways that the CARES Act has fallen short in assisting those of us most in need and hope that it will be instructive in your continued discussions on any further federal funding assistance.

First, given the unique nature of our industry, many in our profession work from project to project and gig to gig, not only in multiple jobs but in various capacities.  As a result, creators often find themselves working as employees receiving W-2 wages and as independent contractors (or otherwise self-employed) receiving 1099 income for performances, royalties, and other services.  Unfortunately, implementation of the Pandemic Unemployment Assistance program (PUA) has overlooked workers with mixed income.  In almost all cases that we see in every state, a minimum amount of W-2 income disqualifies a self-employed individual for PUA and significantly lowers the amount of assistance they receive.  PUA must be updated to recognize these different income streams and allow individuals to show their mixed sources of revenue for a full accounting of their annual income.

In addition, those who work on location or perform on tour earn freelance income in multiple states, some of which does not come with a 1099.  While some state agencies allow for this type of reporting, some do not.  Congress’s intent is that such workers should be fully eligible for at least the minimum PUA amount, but state implementation does not fully reflect this intention.  PUA must be updated to recognize these unique circumstances.

Second, the CARES Act does not recognize the full scope of small business arrangements prevalent within our industry.  As the PUA mixed income issue and the actual operation of our industry make clear, the Paycheck Protection Program (PPP) should be sure to allow payments to self-employed individuals, including independent contractors.  The workers in our industry cannot afford to be shut out of federal assistance on such a technicality and any future plan should recognize self-employed individuals as eligible payroll participants.

Third, SBA’s PPP guidelines on eligibility criteria and requirements for the self-employed are overly burdensome and restrictive.  SBA requires a 2019 Schedule C as the principal document to determine eligibility and loan size, even though the IRS delayed the 2019 tax year filing deadline to July 15, 2020.  This puts a burden on smaller, independent creators who must now scramble to secure professional accounting services so they can supply a 2019 Schedule C.  More importantly, the SBA restricts self-employed applicants to loans that are sized according solely to net business income as reflected on a Schedule C.  Net business income does not reflect the fact that professionals have significant overhead costs – mortgages, studio rentals, equipment costs, health insurance premiums, and other expenses.

The SBA should allow the use of 1099-MISC forms and consideration of health insurance costs in the calculation of loan amounts, as well as the 2018 Schedule C when a 2019 form is not readily available. SBA should calculate loans consistent with the intent of the CARES Act, which allows for consideration of any compensation to a sole proprietor or independent contractor.

Finally, the SBA has limited the Economic Injury Disaster Loan (EIDL) grant of up to $10,000 to only $1,000 per employee.  This means self-employed individuals who do not have employees are unfairly penalized, even though they need immediate relief just as much as any other small business.  Congress clearly lays out in the CARES Act that funds from the EIDL advance may be used for many purposes other than payroll.

And when it’s time to once again open the doors to live music venues and recording studios, music will continue to need help.  The government must commit to provide adequate testing, contact tracing, viral treatments and a vaccine to ensure safety and restore public trust.  We will also need clear national guidelines to facilitate touring and live performances from musicians and entertainers in venues of all sizes.

There is no sugarcoating this: the entire live entertainment industry has been decimated.  We trade in imagination, but the reality of our situation is dire.  Today, we eagerly share our craft when we can – through video streams, on social media, or from apartment balconies.  But it is not a viable “work from home” solution and it will not sustain us.  We need help that only you can provide, in a way that recognizes the particulars of our industry.  On behalf of the hundreds of thousands of us across the country, thank you for your understanding and your action.

Sincerely,

Academy of Country Music (ACM)

Actors’ Equity Association

Alliance for Recorded Music (ARM)

American Association of Independent Music (A2IM)

American Federation of Musicians (AFM)

Americana Music Association

Artist Rights Alliance (ARA)

Artist Rights Watch

ASCAP

Association of Independent Music Publishers (AIMP)

BMI

California Arts Advocates

Christian Music Trade Association (CMTA)

Church Music Publishers Association (CMPA)

Country Music Association (CMA)

CreativeFuture

Digital Media Association (DiMA)

Folk Alliance International

Future of Music Coalition

Guild of Italian American Actors

Global Music Rights (GMR)

Gospel Music Association

The Harper Agency

International Bluegrass Music Association (IBMA)

Music Artists Coalition (MAC)

MusicAnswers

Music Business Association (MusicBiz)

Music Managers Forum – US

Musicians On Call

Music Technology Policy Blog

National Independent Venue Association

National Music Publishers’ Association (NMPA)

National Songwriters Association International

On Board Experiential

Paradigm Talent Agency

Recording Academy

Recording Industry Association of America (RIAA)

Reel Muzik Werks, LLC

Screen Actors Guild – American Federation of Television and Radio Artists (SAG-AFTRA)

SESAC

Songwriters Guild of America

Songwriters of North America (SONA)

SoundExchange

Southern Gospel Music Guild

Trichordist

Writers’ Guild of America, East

 

by trichordist

Guest Post: Superpowers In River City: Anti-Artist Activist Brewster Kahle’s Revealing “National Emergency Library,” the Faux Triumph of Privilege

by Chris Castle

[This post first appeared on ArtistRightsWatch]

If you’ve ever seen the classic musical The Music Man, you will remember the stereotypical character of “Marian the Librarian” who was romanced by the grifter Harold Hill.  When it comes to the Internet Archive, we’re way past Marian but we have a whole new character in the role of grifter.

Brewster Kahle is not likely a name you recognize.  But he is definitely well-known to the digital elites–which we know because his picture shows up in the 2000 version of the Billionaire’s Dinner rubbing elbows with the cognoscenti including fellow diners Nicholas Negroponte of MIT and MIT patron the late Jeffrey Epstein. Somewhere along the line Mr. Kahle seems to have gotten very rich or perhaps richer still.  And he also founded Alexa and the Internet Archive which is our focus in this post because of the Archive’s announced “National Emergency Library.”  We’ll come to that effort presently, but first let’s consider Mr. Kahle’s history in the copyright context.

A Man With A Mission Meets A Dandy on the White Horse

Mr. Kahle was and is a man with a mission in the mold of his fellow pirate utopian and EFF founder, John Perry Barlow.  Less flamboyant to be sure, but cut from the same anti-copyright cloth, Mr. Kahle has attracted literally the same crew of Lost Cause dead enders.  These dots will be very familiar.  It’s all rather Googlely and Mr. Kahle has shown himself to be as close to Google’s mission as one is to two.  Whether revolutionary leader or useful idiot, Mr. Kahle has proven his value to Google again and again over some two decades.

Copyright students may remember Mr. Kahle from 2006 as the plaintiff in Kahle v. Gonzales, one of the cases where Lessig did a brilliant job of making the predictably losing argument as an extension of yet another losing argument from Lessig’s cherished Eldred case.  (Has Lessig ever won anything that Google didn’t pay for?)

Mr. Kahle challenged the Copyright Renewal Act of 1992 that eliminated once and for all the renewal requirement from the U.S. 1909 Copyright Act that was held over in the 1976 Copyright Act for certain registrations.  (Lessig was joined as co-counsel in the Kahle case by his protege Professor Christopher Sprigman; Sprigman is a leading anti-artist zealot.  He currently represents Spotify in the Nashville cases and is leading the American Law Institute’s embarrassing and scandalous “Restatement of Copyright” trojan horse campaign that has been thoroughly discredited.)

Kahle, Lessig and Sprigman essentially argued then and now for a renewal requirement to make copyright renewals an opt-in system rather than an opt-out system.  That meant that authors would have to take an affirmative act to renew their copyrights after an initial term.  As Lessig writes back in 2003, “The revival of a registration requirement would move content into a public domain quickly….There are many who have written brilliantly about what is right in this context….But the hard problem is how to make the right real. That is what this movement needs now.”

You get the idea.  The Lost Cause is born.  And Kahle was apparently only too happy to finance “the movement” with a younger Lessig imagining himself on a white horse leading the mob.  Younger but just as much the tiresomely self-righteous Google fan boy and thin-skinned ideological dandy.  Because the Lost Cause was “right”.  Beware men on white horses waiving the privilege of “what is right” backed by the superpower billionaire boys club.  And it worked for a while, but the problem with leading a mob is that you have to give the mob somewhere to go but most of all success.  Lessig provided neither.  Instead, he provided failure after failure.

It must be said that a creator’s failure to comply with Mr. Kahle’s sought after formalities of registration and renewal (unique to America, by the way) would allow the Big Tech superpower benefactors of Lessig, Sprigman and Kahle to get lots of free stuff.  Like superpower privilege that induced a mass taking by the National Emergency Library, Big Tech superpowers could exploit those unrenewed copyrights without a license or payment to the authors, also known as the public domain, public knowledge, or any of the other shibboleths that mask the very traps for the unwary that Congress wanted to prevent in the 1992 legislation.  (In another proof of the Lost Cause, Kahle’s lawyer Professor Sprigman was  later a member of Pamela Samuelson’s “Copyright Principles” project and co-authored its paper that also advocated for the very registration requirement that they resoundingly lost in the Kahle case (see Sec. IIIA of paper, “Reinvigorating Copyright Registration”.)

For those reading along at home, procedurally the odd and rather desperate signpost of the Kahle case was that Lessig largely based Kahle on Eldred which he lost in the Supreme Court.  When Kahle got to the 9th Circuit, this oddity was not lost on the judges who held–in possibly the least suspenseful ruling of the decade–that “[Lessig, Sprigman and Kahle] make essentially the same argument [in Kahle], in different form, that the Supreme Court rejected in Eldred. It fails here as well.”

Kaboom.

So Kahle got into trouble at 9th Circuit.  As Harold Hill might warble, that’s trouble with a T that rhymes with P and that stands for “phool.”

Kahle’s Lost Cause and the National Emergency Library’s Fair Use Superpower Privilege

Yet despite continued losses, re-imposing a copyright registration requirement has become the Lost Cause of the anti-artist crowd.  Not only has Lessig pushed this hustle, but its proponents include Pamela Samuelson and Christopher Sprigman, so we can only assume that the controversial “Restatement of Copyright” promoted by Samuelson and written by Sprigman will no doubt devote some ink to this topic.  Indeed, we saw Samuelson raise registration in her most recent testimony in a bizarre hearing before the Senate IP Subcommittee.

And we also see a version of it in the Internet Archive’s absurdly transparent lawlessness masquerading as fair use with its “National Emergency Library” which takes post-disaster profiteering to a whole new level.

In a nutshell, the Internet Archive is seizing upon the COVID19 global crisis to make digital copies of books of dubious provenance available for free and without their flimsy “waitlist” requirement.  They managed to get a bunch of libraries to sign a letter saying how groovy the Internet Archive is for graciously aiding the world–if this sounds familiar, it is very reminiscent of the Google Books messaging as the “digital library of Alexandria” and other drivel.  (See the timeless Google and the Myth of Universal Knowledge:  A view from Europe by Jean-Noël Jeanneney, then president of France’s Bibliothèque Nationale.)

As someone who grew up with both hurricanes and earthquakes, I have a viscerally embedded disgust for those grifters who exploit human misery for their own private agenda, be it profiting in cash or distorting the fair use defense beyond recognition to confer a cash equivalent benefit.  Both are equally loathsome forms of looting and under the circumstances may well be a form of price gouging.  If proven, that’s a crime in most states.  Indeed, if imposed by state authority, such as a state library, it may well be found to be an impermissible form of eminent domain, or a taking.  There’s that word again.

The National Emergency Library:  Leap of Faith or Superpower Privilege?

What makes a casual interest into a full-blown negationist Lost Cause ideology is the leap of faith that the dead ender’s ill conceived campaign was actually “right” all along.  “Right” as in “self-righteous.”  (A healthy rasher of narcissism is also a nice-to-have.)  You know, defending consumer rights against the aggression of copyright maximalists.  You see, it was only the privileged Bad People conspiring against them that gypped the righteous Good People of the victory to which they were entitled.  In fact, Mr. Kahle says as much in the Internet Archive blog announcing the “National Emergency Library”:

“The library system, because of our national emergency, is coming to aid those that are forced to learn at home, ” said Brewster Kahle, Digital Librarian of the Internet Archive. “This was our dream for the original Internet coming to life: the Library at everyone’s fingertips.”

And there it is, the Lost Cause defined.  The indefinite “our”.  Who exactly is “our” or “us”?  The Good People.  The Right People.  The movement people.  Whose superpowers you oppose at  your peril you others.  You authors.  Because “our” national emergency justifies “our” fulfillment of “our dream.”

The Good People share that “dream” of “ours” as we are told in the Archive’s blog post cum press release:

“Ubiquitous access to open digital content has long been an important goal for MIT and MIT Libraries. Learning and research depend on it,” said Chris Bourg, Director of MIT Libraries.

Ah yes, MIT’s goal must be extra groovy, right?  I’m sure Joi Ito (of Creative Commons fame among other rewards) thought so when he was taking Jeffrey Epstein’s money with MIT’s blessings.

What bunk.

The Googley Expansion of the Fair Use Superpower as Eminent Domain Taking

And of course the central rationale for why the Archive could rip off over a million books is…wait for it…fair use.  But a very super duper version of fair use that you may not have encountered before.  This is a super duper opinion shared by 300 or so librarians, many of whom appear to be employed by state-owned libraries.  They signed a letter promoted by the Internet Archive that puts their taxpayer subsidized employment right on the line.

You have to take a step back and look at the National Emergency Library in the larger context of the continued distortion of fair use by Google and its cronies as we recently argued in an amicus brief supporting Oracle in Google v. Oracle, the long-running copyright case now pending before the Supreme Court that is straight out of Bleak House.

Unfortunately, like the DMCA, Section 230 and so many other grotesquely unfair benefits that Big Tech superpowers grasp for themselves, the only way to fight back in the chaos of the current pandemic is to literally fight back.  Big Tech’s superpower billionaires are doing just fine as authors struggle even more than before the time of the virus.  But these people are more than willing to capitalize on the current crisis to distort copyright exceptions like fair use, just like Google is forcing users of its Verily coronavirus test to open a Google account and give up their health data.

I for one find it very odd that 300 or so librarians could all agree in a matter of hours on a complex legal opinion regarding expanding the contours of fair use–unless that opinion were written for them by someone they already knew.  Such as their lobbyist, for example.   Maybe not, but it does seem it’s something that state Attorneys General should look into as it applies to their librarians.  Assuming that signing up for the scheme is not simply aspirational and they are all actually participating in the cabal, these librarians are incurring liabilities for their employers and quite possibly the taxpayer.  If state libraries are indemnifying the Internet Archive, that indemnity may well be impermissible under their respective state laws–and that’s something that ought to interest attorneys general, as would the converse failure to obtain indemnity.

On the other hand, one of the legal arguments used as encouragement to librarians to sign onto the legal opinion was offered by one Kyle Cortney (securely employed by Harvard University) based on the privilege of “superpowers.”  Yes, that’s right:

[L]ibraries and archives have “superpowers” under the copyright law that allows us to supply our communities with access to materials for research, scholarship, and study….Before I get to the TEACH Act, Section 108, or any other superpower – first and foremost, we must talk about fair use. While this isn’t a library superpower – fair use is for everyone! – it certainly falls to the libraries and archives, in many circumstances, to be the champions of fair use on campus (and bust any fair use myths!)

See?  “Our dream”, “our national emergency”, “our superpowers.”  And “our” powers are so “super” that “we” will shove those superpowers where the sun doesn’t shine in the middle of the Harvard Yard.  All based on a superpower of blatant distortions of fair use subsidized by the endowment of the richest university in the history of the world.  But understand this, you will win this argument about the same time that Harvard refunds tuition in the time of the virus.  Unless you are willing to go to the mattresses.  And if you’re thinking these superpowers are on their knees begging to be sued, you very well may be correct.

That “superpower” privilege may be how they roll at Harvard, but what I’d like to know is how many state AGs have signed up for the superpower theory?  Such as the Attorneys General of Illinois, Kansas, Michigan, Virginia, North Carolina, Ohio, Pennsylvania, California, Washington, New York, Indiana, Massachusetts, Florida, Minnesota, Texas, and Idaho.

Maybe the next sound they hear will be sad trombones, all 76 of them.

by trichordist

2019-2020 Streaming Price Bible : YouTube is STILL The #1 Problem To Solve

Here we go with the current year update.

This data set is isolated to the calendar year 2019 and represents a mid-sized indie label with an approximately 350+ album catalog now generating over 1.5b streams annually. Streaming is now a fully mature format, and it is also the number one source of revenue for recorded music. Streaming in all configurations now accounts for 64% of all recorded music revenues. Head on over to the RIAA US sales database [here] to check out the numbers. Pro Tip: Remember to adjust for inflation!

We are keeping a simplified chart again this year. We’ve extended to the top 30 streamers which represent 99.87% of all streaming dollars. The Top 10 streamers account for over 93% of all music streaming revenues (down from 97% last year). The Top 5 account for over 83% of all streaming dollars (down from 88% last year). The drop in overall revenues in the Top 5 and Top 10 are the result of YouTube’s Content ID pulling down the overall revenues / per stream.

The biggest takeaway by far is that YouTube’s Content ID, shows a whopping 51% of all streams generate only 6.4% of revenue. Read that again. This is your value gap. Over 50% of all music streams generate less than 7% of revenue.

 

This is the first time we have not seen the Spotify per stream rate drop since the service launched a decade ago. The Spotify per stream rate has stabilized moving up just slightly to .00348 from .00331.  In other words Spotify is paying out about $3,300 – $3,500 per million plays. We’re working with a very large sample that has aggregated all streams and revenue against both subscription and ad supported revenues for a single per stream average. This overall average is helpful for anyone who wants to calculate gross revenues by simply looking at the numbers on Spotify itself. For those who may not know, there is a simple “trick” to see the streams of any song on Spotify. On the desk top app, go to the album view and hover your mouse/cursor over the ||||||| at the far right side of any song, just to the right of the song length. Once there the plays for the song will materialize just below the song length.

 

Using our average, the song above has earned between $4,026 – $4,270.78 (gross before distribution fees) on Spotify at 1,220,224 plays.

Apple Music is again the best value per stream accounting for nearly 25% of all streaming revenue on only 6% of consumption. Spotify generates the most overall revenue of any streamer (no surprise) at 44% of all streaming revenue on 22% of consumption. As stated before, and which can not be overstated enough, You Tube’s Content ID is the major issue limiting growth contributing only 6% of revenues on over half of all streams, at 51% of total consumption. That’s a staggering statistic.

Apple’s per stream rate also stabilizes this year hitting a per stream rate of .0675 which is much closer to where it was two years ago at .00783. Our numbers from 2018 showed a dramatic drop in Apple’s rate at .00495 which we attribute to an expansion into new territories and a large number of 90 day free accounts that had not matured to fully paid subscribers.

In looking at the per stream rates for song and album equivalents, you might want to read this article by Billboard (as of 2018) on the current calculation of how many streams equal an album for the purposes of charting. 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).” Our numbers suggest however it would be more fair to average all revenues, against all streams (including content ID), and that actually lands at about 3,516 streams per album across the board.

 

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]

by trichordist

Must read by @SenThomTillis: ALI’s proposed Restatement of Copyrights has the potential to harm the creative industries — Artist Rights Watch

[Welcome Senator Tillis to shining sunlight on the astroturf “Restatement of Copyright”, which in our view is a epitoma suprema of Silicon Valley shillery.  The letter that Senator Tillis refers to is the December 3 letter his colleagues and he sent to the American Law Institute asking some questions about the proposed Restatement (which isn’t all that proposed anymore as the drafting is moving along briskly).  I gather from Senator Tillis’s op ed that he hasn’t gotten a reply yet.  Which must mean that the mumbletank in the Silicon Valley policy laundry hasn’t quite figured out how to reply.  But here’s the question that no one seems to have asked yet:  Who is paying for the Restatement of Copyright?  I don’t mean which non-profit accountability blocker wrote the check, I mean who is the ultimate donor who is the source of donor directed funds?]

With millions of jobs and over a trillion dollars at stake, as lawmakers, we must ensure copyright laws continue to protect the livelihoods of our nation’s creators.

It is for this reason that we have sent a letter questioning the effort by a well-established legal organization to “restate” and reinterpret our copyright laws for the nation’s judicial system. Last time we checked, Article I of the Constitution specifically grants Congress the authority to make laws to allow for individuals in the creative industries to be fairly compensated – not law professors.

Read the post on The Hill

You might also be interested in these MTP posts from 2018:

Shocker: Is Spotify Lawyer Leading “Scholarly” Project to Create Fake Treatise?

The American Law Institute’s Restatement Scandal: The Futility of False “Unity”

A Look at Christopher Sprigman’s Recent Record

And from 2013 about the Copyright Principles Project, the precursor of the Restatement of Copyright:

The Copyright Principles Project: Selflessness, Valley Style Amongst A Dedicated Group of Likeminded People

via Must read by @SenThomTillis: ALI’s proposed Restatement of Copyrights has the potential to harm the creative industries — Artist Rights Watch–News for the Artist Rights Advocacy Community

by trichordist

@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

by trichordist

@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.

by trichordist

@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.

by trichordist

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.

 

by trichordist