Category: Copyright Office

Comment to Copyright Office on Termination, the Black Box and Lawlessness at MLC

MLC 2021 US Federal Tax Return 990 https://www.themlc.com/hubfs/Marketing/Website/MLC-Finance_Form990-2021_CEOSigned.pdf


January 5, 2023

By Regulations.gov

Suzanne Wilson
General Counsel and Associate Register of Copyrights
U.S. Copyright Office
101 Independence Avenue S.E.
Washington D.C. 20559

Re:   Notice of Proposed Rulemaking: Termination Rights and the Music Modernization Act’s Blanket License 
         Docket No. 2022-5 Comment

Dear General Counsel Wilson:

Thank you for the opportunity to make this comment on the docket referenced above.[i]    

I am a music lawyer in Austin, Texas and write this comment on my own behalf only and not on behalf of anyone else.  

Others will address the substantive termination issues that are well-described and assayed in the Notice, so I will focus on the procedural tension between The Mechanical Licensing Collective, Inc. (“The MLC, Inc.”) currently designated as the mechanical licensing collective (“MLC”), its officers and directors, and the law as described in the Notice.  

I argue that the need for this Notice is symptomatic of a larger problem in the relationship between Congress and The MLC, Inc. I hope the Office will consider resolving this tension as it has been authorized to do under the Music Modernization Act[ii] such as through regulations establishing the type of code of conduct that is common for other federal contractors.  

This tension is alarming.  The Notice states the MLC “does not follow the Office’s rulemaking guidance”[iii] regarding terminations, and that The MLC, Inc. “declin[es] to heed the Office’s warning….”[iv]  These disclosures are diametrically at odds with the clear intent of Congress in crafting the MLC’s role.[v]

The disclosures confirm clearly that there are governance and oversight controversies at The MLC, Inc. that in my view need to be conclusively disposed of, and quickly.[vi]  These governance issues are symptomatic of what may be much greater problems with the administrative capabilities of The MLC, Inc. that may be metastasizing but have not yet risen to the level of a public inquiry.

The recklessness that gives rise to the Notice also highlights The MLC, Inc.’s general lack of accountability and suggests a conscious disregard for the Copyright Office’s oversight role on a significant matter of law that is not capable of proper resolution through any “business rules.”[vii]  

I also note this troubling statement in the Notice:

But, having reviewed the MLC’s policy, the Office is concerned that it conflicts with the MMA, which requires that the MLC’s dispute policies ‘‘shall not affect any legal or equitable rights or remedies available to any copyright owner or songwriter concerning ownership of, and entitlement to royalties for, a musical work.’’[viii]

It seems clear that The MLC, Inc.’s conscious failure to comply with Congressional intent as well as the Office’s guidance is, or ought to be, a decision of some import that surely must have been taken by someone—that is, one or more persons—employed or appointed by the MLC.  It seems likely to be a subject that would have been reviewed both by its General Counsel and as part of the millions in outside counsel fees[ix] spent by The MLC, Inc.  

The fact that the decision-making process is not readily known is itself of concern and leads one to further consider developing a code of conduct for The MLC, Inc. to assure the Office, the Congress and the public of its administrative capabilities.

Respectfully, I request that you determine how this decision was arrived at and what internal controls The MLC, Inc. has put in place to assure the Congress, the Office and interested parties that these mistakes will not happen again.  This should not be an “oh well” moment and should be taken seriously by The MLC, Inc.

If The MLC, Inc. fails to disclose what it is doing by establishing opaque “business rules”, it is essentially creating de facto regulations that have the practical effect of law or regulations made behind closed doors unless the Office or other oversight agency happens to catch them out.  The public will never know that the business rule was established, how the “business rule” was arrived at, or have a meaningful opportunity to comment such as in response to this Notice.

For example, do the minutes of The MLC, Inc.’s board of directors or statutory committees reflect a discussion or vote on the adoption of the MLC’s policies on termination treatment? Did such a vote implicate any conflicts of interest?  Who determined that there was or was not a conflict of interest in the MLC’s decision to adopt the termination policy, however it was taken?  Were there any dissenting votes recorded?  Did an officer or director of The MLC, Inc. certify the completeness of the record in these findings in the corporate minute book?

This leads to other concerns under public discussion regarding the hundreds of millions of “black box” monies being held by The MLC, Inc. Given that the public has very little information available to it regarding the results and implications of the MLC’s operational decisions, I respectfully request that you determine what, if any, financial implications have arisen as a result of The MLC, Inc.’s reckless failure to comply with the law and the guidance of the Office in implementing its termination policy.  Such determination should likely include any funds[x] that The MLC, Inc. is apparently trading in the market for its own account.[xi]  Any curative action required by the Office should, of course, be retroactive in scope which will require considerable before-and-after accounting disclosures.

It must be asked whether the “business rule” established for terminations increases or decreases the enormous black box which was of considerable interest to Chairman Leahy at the recent Copyright Office oversight hearing at which the Register testified.[xii]  This is particularly true if the implementation of the business rule results in financial harm to interested parties who rely on The MLC, Inc. to get it right.  

The subject of black box came up in the Questions for the Record from Chairman Leahy.  The Copyright Office’s response to Chairman Leahy’s inquiry about the hundreds of millions in black box held by the MLC directed the Chairman to the MLC’s annual report for answers.  

Respectfully, I find this odd.  Chairman Leahy did not ask what the MLC told the world in its annual report; rather he asked, “What can the Copyright Office do to help ensure that the MLC is working to make sure that rightful owners of music works are identified and paid?”[xiii]The question is transitive:  We have oversight of you, you have oversight of The MLC, Inc., therefore we have oversight of the MLC.  

Surely no one is surprised by this.  The question many have is why The MLC, Inc. itself—a quasigovernmental organization operated by inferior officers[xiv] of the United States–is not the subject of an oversight hearing at Senate Judiciary regarding the hundreds of millions it is sitting on.  Maybe next time.

It must also be said that the answer to Chairman Leahy goes on:

Notably, the MLC plans to wait to process historical unmatched royalties from the Phonorecords III rate period [2018-2022] until the Copyright Royalty Judges finalize those rates in the ongoing remand proceeding and digital music providers provide adjusted reports of usage and royalty payments. It is the Office’s understanding that the bulk of historical unmatched royalties come from that period.[xv]

Without getting into the timeline of what came when, how is it exactly that The MLC, Inc. took the decision in February 2021—nearly two years ago–to sit on top of hundreds of millions of other peoples’ money that they were somehow investing under their undisclosed “Investment Policy”?  Was anyone asked?  Who gave the MLC the permission to do this?  Do they not hold the black box corpus in trust for songwriters and copyright owners yet to be identified?  Does this not compound the already painful series of failures that resulted in the black box in the first place, the delay in accounting to songwriters (or their families) under Phonorecords III remand, and still more delay while legions of lobbyists and lawyers argue over the post-remand true up accountings?

The MLC reported $2,529,910 investment income on its 2021 US Federal tax return 990

Respectfully, there is also, of course, a larger question that the Office may consider answering:  If The MLC, Inc. adopts a policy or takes some action outside of the law or its remit, is that policy binding on any future entities designated by the Office as the MLC?  

These are all questions that I would expect to have answers that are readily available to the public given that The MLC, Inc. is in a position of public trust administering a compulsory license on behalf of the United States and has been given great privileges under the MMA.[xvi]

Thank you again for the opportunity to comment.

Very truly yours,

Christian L. Castle

CLC/ko

[i] U.S. Copyright Office, Notice of Proposed Rulemaking, Termination Rights and the Music Modernization Act’s Blanket License 87 FR 64405 (Oct. 25, 2022) (Doc. No. 2022-5) (hereafter “Notice”).

[ii] Orrin G. Hatch-Bob Goodlatte Music Modernization Act, Public Law 115–264, 132 Stat. 3676 (2018) (“MMA”) and specifically Title I thereof.

[iii] Notice at 64407.

[iv] Id.

[v] See S. Rep. 115-339 (115th Cong. 2nd Sess. Sept. 17, 2018) at 7 (“Senate Report”).  (“The collective is expected to operate in a transparent and accountable manner.”) 

[vi] I would hope that this failure will be weighed and measured by the Copyright Office as part of The MLC, Inc.’s quinquennial review as is required under the legislative history.  See, e.g., Senate Report at 5 (“[E]vidence of fraud, waste, or abuse, including the failure to follow the relevant regulations adopted by the Copyright Office, over the prior five years should raise serious concerns within the Copyright Office as to whether that same entity has the administrative capabilities necessary to perform the required functions of the collective.”)(emphasis added).

[vii] It must be said that the MLC’s disregard for this particular matter may present a moral hazard (at best) for the publishers represented by at least some of its board members.

[viii] Notice at 64407 (emphasis added).

[ix] Annual Report at 16.

[x] See the MLC’s annual report stating that the MLC invests the black box according to its internal “Investment Policy” established by its board of directors but not made public.  MLC 2021 Annual Report at p. 4 available at https://www.themlc.com/hubfs/Marketing/23856%20The%20MLC%20AR2021%206-30%20REFRESH%20COMBINED.pdf(“Annual Report”) (“Investment Policy: This policy covers the investment of royalty and assessment funds, respectively, and sets forth The MLC’s goals and objectives in establishing policies to implement The MLC’s investment strategy. The anti-comingling policy required by 17 U.S.C. § 115(d)(3)(D)(ix)(I)(cc) is contained in [The MLC, Inc.’s] Investment Policy. The Investment Policy was approved by the Board in January 2021.”) (emphasis added).

[xi] Realize that every CMO is confronted with the decision about what to do with the royalty float and black box, but not every CMO decides to invest these funds in the market. If they do invest the funds, it is generally the case that any trading profits, dividends or interest goes to offset the CMO’s administrative costs that otherwise would be deducted from collected royalties.  However, the MLC, Inc.’s administrative costs are paid by the users of the blanket license (making the United States, I believe, the only country in history or the world that charges for the use of a statutory license). Therefore, the return on the MLC’s investment of the songwriters’ money would not be used for the same purpose as all the world’s CMOs that follow a similar practice.  The continuity in ownership for profits derived from The MLC, Inc.’s trading is also unclear;  if The MLC, Inc.’s existing designation is not continued but securities are being held or profits generated, what happens? 

[xii] Senate Judiciary Committee, Subcommittee on Intellectual Property, Oversight of the U.S. Copyright Office, Responses to Questions for the Record by Shira Perlmutter, Register of Copyrights and Director of the Copyright Office (Sept. 7, 2022), available at https://artistrightswatchdotcom.files.wordpress.com/2022/10/qfr-responses-perlmutter-2022-09-07.pdf. (“Questions for the Record”) (“With respect to the historical, pre-2021, unmatched royalties, which were reported to be about $426 million, the annual report says that the MLC recently started distributing those that it has been able to match. It also says that the MLC has begun making associated usage data for historical unmatched royalties available to copyright owners, which will facilitate further claiming and matching.”) 

[xiii] Id. at 4.

[xiv] President Donald J. Trump, Statement on Signing the Orrin G. Hatch-Bob Goodlatte Music Modernization Act (October 11, 2018) available athttps://www.govinfo.gov/content/pkg/DCPD-201800692/pdf/DCPD-201800692.pdf (“Because the directors are inferior officers under the Appointments Clause of the Constitution, the Librarian must approve each subsequent selection of a new director.”)

[xv] Questions for the Record at 4.

[xvi] See, e.g., Senate Report at 5 (emphasis added).  “For the responsibilities described in subparagraphs (J) [distribution of unclaimed royalties] and (K) [dispute resolution] of paragraph (3), the collective is only liable to a party for its actions if the collective is grossly negligent in carrying out the policies and procedures adopted by the Board of Directors pursuant to section 115(d)(11)(D). Since the Register has broad regulatory authority under paragraph (12) of subsection (d), it is expected that such policies and procedures will be thoroughly reviewed by the Register to ensure the fair treatment of interested parties in such proceedings given the high bar in seeking redress.” 

by Trichordist

@northmusicgroup Calls Out The MLC’s Ability to Make “Law” Through Business Rules that Hurt Songwriters and Skew the Black Box to Benefit Majors — Artist Rights Watch/Music Technology Policy

In this comment to the Copyright Office, Abby North (independent publisher and Artist Rights Symposium III Moderator) calls on the Copyright Office to stop the MLC quango from unilaterally establishing “business rules” that hurt songwriters and their heirs and protect working families from these arbitrary actions of The MLC. The passing of Jeff Beck reminds us once again that we must take care to protect the heirs of creators.

Read the original comment here on Regulations.gov

January 5, 2023

Via Electronic Delivery

Comments of Abby North

Docket No. 2022-5

Re: Termination Rights and the Music Modernization Act’s Blanket License

To the United States Copyright Office:

My name is Abby North. I am a music publishing administrator based in Los Angeles. My views expressed in this letter are solely my own. 

With my husband, I am a copyright owner of the classic song “Unchained Melody,” among other copyrights. I also administer musical works and sound recordings on behalf of songwriters, their families and heirs. In many instances, I assist my clients in identifying their termination windows, assist in the research required, and interface with the attorneys who process termination filings.

Abby North, Helienne Lindvall, Erin McAnaly, Melanie Santa Rosa speaking at UGA Artist Rights Symposium III (Nov. 15, 2022 in Athens, GA)

I’m thankful for the opportunity to submit comments in support of the Copyright Office’s proposed rule.

The ability to recapture rights via the United States copyright termination system truly provides composers, songwriters and recording artists and their heirs, a “second bite of the apple.” Many of my clients exercise this right, and in doing so grow their family’s revenue, which, given today’s inflation and very high interest rates, coupled with a depleted stock market, is absolutely necessary.

Allyn Ferguson was a successful composer of film/television scores including “Little Lord Fauntleroy,” “Les Miserables,” “Charlie’s Angels,” and “Barney Miller.” According to Variety in its June 27, 2010 obituary, Ferguson was “among the most prolific composers of TV in the past 40 years.” My company North Music Group administers works controlled by Ferguson’s family.

In addition to his scores, Ferguson wrote songs performed by artists including Johnny Mathis, Count Basie Band and Freddie Hubbard. While the bulk of his film and television scores were created on a work for hire basis, and therefore are not eligible for termination under US copyright law, Ferguson’s commercial compositions and songs were not created as works for hire. Ferguson’s family has been able to exercise its termination rights in various musical works,

thereby increasing its earnings as it now collects the publisher share of United States royalties generated by the terminated works. Individual songwriters and composers and their heirs are not copyright aggregators. Every musical work, and every penny generated is very necessary to these families.

The Music Modernization Act created the blanket digital mechanical license. This move from one-off copyright licenses to a blanket license was a dramatic improvement in US mechanical licensing. However, the suggestion that rights held at the inception of this blanket license might remain, in perpetuity, with the original copyright grantee was frightening. I concur with the Office’s proposed rule and legal analysis of the relevant statutes and authorities.

I appreciate the Office requesting comments on the mechanics of solving the payment issues, because for the independent publishers I speak with and for me personally, many operational questions arise regularly regarding The MLC’s uncharted territories.

As one of The MLC’s statutory goals is to provide transparency to songwriters and copyrightowners, I would ask that the Office require The MLC to notify copyright owners (1) if The MLC’s unilateral termination policy has already been imposed on payments previously paid or that are being held in the historical or current black box, and (2) when the adjusting payment required by the proposed rule had been made.

To be clear, this rule must absolutely be retroactive to inception date of The MLC. Beyond the simple, clarifying amendment to the MMA, I believe there are additional, related issues that must be resolved:

1) What is The MLC’s “business rule” regarding the MLC/HFA Song Code for the terminated work? Prior to the inception of The MLC, the Harry Fox Agency would assign one HFA Song Code fr the work and its pre-termination parties, and a different HFA Song Code for the work with the post-termination parties.

What happens now? Do these multiple HFA Song Codes remain in The MLC’s database? Will there continue to be two separate MLC/HFA Song Codes, particularly given the Harry Fox Agency continues to license physical and download mechanicals on behalf of many publishers? Is it reasonable for the HFA Song Code to be the same as The MLC Song Code, when there is no derivative works exception in Section 115?

2) Which party is entitled to the Unmatched (Black Box) royalties, the related interest fees and to The MLC’s investment proceeds for a terminated work?

Finally, it should be noted that the initial concept proposed by The MLC Board (that the server fixation date should impact termination dates) most likely would have served large publishers, not songwriters.

It is crucial that the Copyright Office exercise vigilant oversight and governance of The MLC’s reporting regarding any payment obligations to copyright owners. Specifically, composers, songwriters and their heirs must have as significant a voice as the largest publishers and copyright aggregators.

Additionally, in the spirit of full transparency, I request full disclosure of board or committee votes, minutes of meetings or other documentation of process. For me and others like me, this would tremendously enhance our understanding of The MLC.

Decisions are being made by The MLC’s board and committee members, while the general MLC member or songwriters have no mechanism to gain information regarding the discussions, the decisions and the implementations thereof. Access to minutes and notes would provide valuable insights to the general membership.

I applaud the Copyright Office for moving swiftly to create this rule and clarify and codify how The MLC must treat copyright terminations. It is important that this rule be dictated by the Office as it is absolutely not The MLC’s job todecide who controls rights and is entitled to collect royalties. 

That said, a “business rule” established by The MLC could have the effect of law absent vigilance by the Copyright Office.

On behalf of my family and clients, I wholeheartedly support this proposed regulation, and I truly appreciate the Copyright Office’s consideration of my comments.

Sincerely,

Abby North

North Music Group LLC

@northmusicgroup Calls Out The MLC’s Ability to Make “Law” Through Business Rules that Hurt Songwriters and Skew the Black Box to Benefit Majors — Artist Rights Watch–News for the Artist Rights Advocacy Community — Music Technology Policy
by Trichordist

Are Songwriters and Artists Financing Inflation With Their Credit Cards? — Music Tech Solutions

If streaming mechanicals are the most important income for songwriters, why doesn’t streaming get inflation protection?

Are Songwriters and Artists Financing Inflation With Their Credit Cards? — Music Tech Solutions

By Chris Castle

Recent data suggests that songwriters and artists are financing the necessities in the face of persistent inflation the same way as everyone else–with their credit cards. This can lead to a very deep hole, particularly if it turns out that this inflation is actually the leading edge of stagflation (that I predicted in October of 2021).

According to the first data release for the US Census Bureau’s recent Household Plus survey, over 1/3 of Americans are using credit cards to finance necessities at an average interest rate of 19%. Credit card balances show an increase that maps the spike in inflation CPI over the same time period. This spike results in a current debt balance of $16.51 trillion (including credit cards). There’s nothing “transitory” about credit card debt no matter the helping of word salad from the Treasury Department. Going into the Christmas season (a bit after this chart) U.S. credit card debt increased to the highest rate in 20 years

According to the Federal Reserve Bank of New York:

These balance increases, being practically across the board, are not surprising given the strong levels of nominal consumption we have seen. With prices more than 8 percent higher than they were a year ago, it is perhaps unsurprising that balances are increasing. Notably, credit card balances have grown at nearly double that rate since last year. The real test, of course, will be to follow whether these borrowers will be able to continue to make the payments on their credit cards. Below, we show the flow into delinquency (30+ days late) grouped by zip code-income. Here, it’s clear—delinquency rates have begun increasing, albeit from the unusually low levels that we saw through the pandemic recession. But they remain low in comparison to the levels we saw through the Great Recession and even through the period of economic growth in the ten years preceding the pandemic. For borrowers in the highest-income areas, delinquency rates remain well below historical trends. It will be important to monitor the path of these delinquency rates going forward: Is this simply a reversion to earlier levels, with forbearances ending and stimulus savings drying up, or is this a sign of trouble ahead?

What does it mean for artists and songwriters? It is more important than ever that creators work is valued and compensated. When it comes to government-mandated royalty rates like webcasting for artists and streaming for songwriters, due to the long-term nature of these government rates, it is crucial that creators be protected by a cost of living adjustment. (Remember, a cost of living adjustment or “COLA” is simply an increase in a government rate based on the rise of the Consumer Price Index, also set by the government.)

Of course, songwriters are in the position that the MLC could issue low to no interest credit cards to help them through hard times at least until the MLC was able to distribute the $500 million in black box they are sitting on.

Thankfully, the webcasting rates (set in “Web V”) are protected by the benchmark cost of living adjustment, as are the mechanical royalty rates paid to songwriters for physical and download. 

The odd man out, though, is the streaming mechanical rate which has no cost of living adjustment protection. This is troubling and exposes songwriters to the ravages and rot of inflation in what we continue to be told is the most important income stream for songwriters. If it’s the most important royalty, why shouldn’t it also have the most protection from inflation?

by Trichordist Editor

No Hits, No Hit Records: The Streaming Mechanicals Poverty Program at the CRB

by Chris Castle

Government intervention into the economy can, and usually does, produce negative externalities (or unanticipated harms). Government interference with price can produce the negative externality of poverty. While we can sue if we are harmed by some negative externalities, we usually can’t sue the government for causing poverty. 

Understanding poverty often considers the government’s interaction with citizens. Do the government’s policies increase poverty or reduce poverty? 

One of those analytical inquiries is whether the government gives the people too much or too little agency in establishing poverty policy. Does poverty policy remember to allow people the ability to have a meaningful effect on their lives and outcomes based on their own efforts and human agency? Or does poverty policy trap them and limit or even take away their agency? 

The Compulsory License as Poverty Program

I can’t think of a better example of the government limiting the outcomes of a class of people than the compulsory mechanical license. Minimum wage tries to influence poverty favorably by establishing a lower bound of fair compensation for employees. Minimum wage policy anticipates that some employers will pay above minimum wage because employees will be able to quit a lower paying job and strive for a higher paying job. 

Employees exercise agency because the government policy does not stop them from doing so and gives them a seat at the table in negotiating their own compensation. Money isn’t the only consideration, but it is a core issue. And employees can walk across the street and get a better paying job. Unlike the minimum wage, the compulsory license places a limit on what the biggest corporations in the world are required to pay a specific class of people–songwriters. 

Neither can I think of a better example of the government working with Big Tech to destroy human agency than the Copyright Royalty Board–which is strangely consistent with Big Tech’s dehumanizing data trafficking business model.

The New Streaming Mechanical Rates

The Copyright Royalty Judges have issued their final ruling on the rates and terms under the government-mandated compulsory license for streaming mechanicals. That ruling is to be published in the Federal Register in the coming days and is based on a settlement among the National Music Publishers Association, Nashville Songwriters International, Amazon, Apple, Google, Pandora, and Spotify.

The CRJs mostly discuss the 20 comments they received on the proposed version of their rule and don’t really spend much time defending why they are adopting the settlement reached by the richest corporations on Earth (and in Earth’s history) on the one hand and–let’s be honest (and we’ll come back to this)–the major publishers on the other hand. The Judges are adopting the deal these parties made essentially because the CRJs can’t find anything unreasonable or illegal about it.

Said another way, the Judges can’t find a reason to take the heat of rejecting it. That’s unfortunate, because they did reject the “frozen mechanicals” settlement as is their role in the Copyright Royalty Board process required by Congress.

I’m not going to argue about the rates and terms of the settlement itself. I could and I know others will, but I’m going to focus on one economic point today: the absence of a cost of living adjustment (or COLA). There are some other points that should also be addressed that are more nuanced and policy oriented which I’ll come to in another post.

It’s important to understand one aspect of the CRB’s procedural nomenclature: Participants and commenters. There is only one individual songwriter who is a participant in Phonorecords IV–a songwriter named George Johnson who represents himself. Being a “participant” means that you are appearing before the Judges as a legal matter. In the case of settlements that the Judges intend to approve and adopt as law, the Judges are required to make those settlements available for public comment which they did. Those comments are posted in the CRB’s docket for the particular proceeding, styled as “Phonorecords IV” in our case today. Note that if the Judges did not make those settlements available, no one who is answerable to the electorate would be involved in the rate setting.

It is important to understand that the voluntary settlement excludes George Johnson from negotiation and drafting of the settlement even though he is a participant. Commenters are also excluded and only find out the terms of the proposed settlement once the Judges post the settlement as a proposed rule and seek public comments.

Unless commenters persuade the Judges to reject a settlement (which MTP reader will recall happened in the “frozen mechanicals” proceeding), this means that the only people who have a meaningful opportunity to affect the outcome are the important people: The National Music Publishers Association, Nashville Songwriters International, Amazon, Apple, Google, Pandora, and Spotify, that is, “Big Tech.”

Nobody else.

It should be noted that the smart money is betting that the next session of Congress will not be a pleasant experience for any of these DSPs based on public statements of a number of Members, including House Judiciary Chairman-select Jordan. It will be easy for songwriters to point to the latest insult in the form of the streaming mechanical ruling as yet another example of that special combination of Big Tech, the compulsory license and the nine most terrifying words in the English language. One novel issue of law at least at the CRB that the Copyright Office may wish to opine on is what happens if one or more participants in a proceeding negotiate an oppressive voluntary agreement but cease to exist when it is put into effect. Just sayin.

But songwriters will be able to point to the poverty-creating externality of the compulsory rate and the human agency-destroying effect of Congress’s Copyright Royalty Board.

The Failure to COLA

As the Judges confirm in the streaming mechanicals ruling, George Johnson and the commenters who opposed the settlement all support some version of a cost of living adjustment applied to the statutory rate. A COLA is the standard government approach to preserving buying power in a number of areas of the economy driven by government intervention including the physical mechanical royalty for the same songs.

However, since the important people did not agree to a COLA as part of their settlement for the streaming mechanical, the Judges evidently believed they were unable to add a COLA in the final rule because it might disturb the “negotiation” by the biggest corporations in commercial history and God know we wouldn’t want to do that. They might get mad and there’s no poverty at Big Tech.

The Judges authority is an issue that one day may be decided in another forum, perhaps even the Supreme Court. I’m not so sure the role of the Judges was to ignore the utility of a COLA and merely scriven into law the deal the lobbyists and lawyers made while ignoring George and all the public comments in this case supporting a COLA.

This is of particular interest because the Judges had just adopted a COLA in Phonorecords IV for physical records and permanent downloads and have adopted COLAs in other compulsory licenses (and have done so for many years). It must be said that one reason there is a COLA in the “Subpart B” proceeding for physical royalties is because the Judges themselves suggested it when they rejected the initial Subpart B settlement. Presumably the Judges could have done the same thing in the streaming mechanicals proceeding despite the tremendous political clout wielded by Big Tech, at least for the moment.

For some reason, the Judges decided not to treat likes alike when it involved the richest corporations on Earth.  This means that the exact same writers with the exact same songs will have the value of the government’s compulsory rate protected by a COLA when exploited on vinyl but not when the exact same song and the exact same writers on the exact same recordings are streamed.

If that’s not arbitrary, I’m looking forward to the explanation. I’m all ears.

Bootstrapping for Rich People

One might think that this unequal treatment wasn’t arbitrary because the Judges are directed by Congress to favor adopting as the law applicable to all songwriters voluntary settlements agreements on rates and terms reached among some or all of the participants in a proceeding like Phonorecords IV. Of course Congress made it so expensive to be a participant in a proceeding (and that negotiation) that it’s likely that if you are both a participant and also a party to any voluntary settlement, you must be one of the rich kids.

What is very interesting about Phonorecords IV is that the proceeding was divided between physical and streaming mechanicals. Although the publisher representatives were the same (NMPA and NSAI), the music users were, of course different: The major labels were in the physical negotiation and the DSPs were in the streaming. Faced with strident opposition from commenters and continued opposition from George Johnson, the major labels came up with a solution that included a COLA and got the publishers to agree. That solution increased the minimum penny rate from 9.1¢ to 12¢ as a base rate with an annual COLA. 

Why this difference between labels and DSPs? Could it be because the labels understand that they are in the age of the songwriter and they need to be certain that songwriters thrive? You know, no hits, no hit records? Could it be because the DSPs are so blinded by leverage, wealth and political power that they and their THIRTY SIX LAWYERS lack this understanding?

The label deal was acceptable to a lot of people, albeit begrudgingly in some cases, but it closed. And the deal was a step toward what I would call the primary goal of government rate setting–stop bullying songwriters with insulting rates while repeating nonsense talking points that nobody in the trenches believes for a second. It should not be forgotten that the label deal also came with a renewed commitment to finding a way toward a longer table with more people at it to negotiate these deals in the future. We’ll see, but the labels should expect to be reminded about this in the future.

But–nothing like this common sense approach to inclusion happened on the streaming side with DSPs. Why not? Probably because the rich kids were calling the shots and did not give a hoot about what the songwriters thought. They used their situational leverage as participants throughout the Phonorecords IV proceeding to jam through an insulting deal no matter how much they embarrassed themselves in the process. The conduct of the DSPs–and did I mention their THIRTY SIX LAWYERS–was the complete opposite of how the major labels conducted themselves.

You may notice that I refer to the DSPs and the labels as calling the shots in these negotiations. There’s a very simple reason for that–the government has put its thumb on the scale because of the compulsory license. Songwriters can’t say “no” (much less “Hell, no”), so are forced to fight a rear guard action because the outcome is predetermined–unless the settling parties do something to change that outcome. To their great credit, the labels did. But to their great–and highly predictable–shame the DSPs–and did I mention their THIRTY SIX LAWYERS–didn’t. The way the government has constructed the CRB procedures songwriters are thrown into the arena to engage in what amounts to slow motion begging and managed decline.

When the Judges’ ruling is subject to legal review, this arbitrary distinction may be difficult to defend and the Judges certainly don’t put much effort into that defense in their ruling. They say, for example:

[T]he Judges observe the broad increases within the Settlement, including the headline percentage rate applicable to Service Revenue, the percentage of Total Content Costs, and each of the fixed per subscriber elements. The Judges find that the structure and increases are a reasonable approach to providing an organic cost of living adjustment.

In other words, the DSPs and the Judges are pushing a “trickle down” approach that a rising tide lifts all boats. They ignore the underlying algebra that is the flaw at the heart of the “big pool” royalty calculation that’s as true for songwriters as it is for artists. The more DSPs keep prices the same and the more songs are added to the big pool denominator, the lower the per-song royalty trends (particularly for estates because the numerator cannot grow by definition). If the rate of change in the denominator is greater than the rate of change in revenue or the number of songs being paid out in the numerator, the Malthusian algebra demands that the per-writer rate declines over time. It may be less obvious in streaming mechanicals due to the mind bending greater of/lesser than formula, TCC, etc., but gravity always wins. 

Why COLA?

There is a common misapprehension of what the COLA is intended to accomplish as well as the government’s compulsory license rate. A COLA is not an increase in value, it is downside protection to preserve value. Stating that the headline rate increases over time so you don’t need a COLA compares apples to oranges and gets a pomegranate. It’s a nonsense statement.

Plus, no element of the Judge’s list of producer supply side inputs have anything to do with cost items relevant to songwriters providing songs to DSPs (or publishers and labels for that matter). The relevant costs for COLA purposes are the components of the Consumer Price Index applicable to songwriters who receive the government’s royalty such as food at home, rent, utilities, gasoline and the like. That’s why you have a COLA–otherwise the real royalty rate declines BOTH because of inflation AND because of the Malthusian algebra. And that creates the negative externality of poverty among songwriters and discourages new people from taking up the craft.

There’s a reason why Big Tech never wants to talk about per-stream rates on either recordings or songs. That’s because if you explained to the average person or Member of Congress what the rates actually were in pennies, the zeros to the right would make it obvious how insulting the entire proposal is to songwriters. 

One of the surest ways to cause poverty is for the government to cap income and destroy human agency. But this is what has happened with the streaming mechanicals. Songwriters are crushed again by Big Tech–and did I mention their THIRTY SIX LAWYERS?

And don’t forget–if no one writes hits, no one has hit records. Eventually, this will become a catalog business and American culture will be impoverished right along side the impoverishment of songwriters.

by thetrichordist

Trickle-Down Streaming Mechanical Royalties Will be Be Up for Discussion

You may have noticed that a cost of living adjustment for statutory royalties was front and center in the recent (and still ongoing) physical mechanicals rate setting. Unfortunately, the idea of a COLA seems to have disappeared in the streaming mechanicals proceeding.

Note that it’s different music users on the physical mechanicals than on streaming. The physical mechanicals are paid by record companies and streaming mechanicals are paid by some of the biggest corporations in history, namely Amazon, Apple and Google and other wealthy public companies like Spotify and Pandora/SiriusXM. All these companies have market capitalizations greater than the gross national product of some countries. 

You may have also noticed that after years of frozen subscription rates, Apple is the first of the streaming subscription services to raise rates by $1 on several of its services including Apple Music. Tim Ingham is asking if Spotify will follow (you know, one of those price fixing agreements inferred from conduct). Who knows, but what’s interesting about this is the effect it will have on streaming mechanical rates, or more pointedly the effect that the Big Tech cartel would like you to think it will have.

The calculation for streaming mechanicals is absurdly complicated. You do have to wonder which of the genii came up with that one. About the only thing that is certain is that the negotiation of that rate every five years (and judicial appeals occasionally) guarantees employment for lots of lawyers and lobbyists on both sides, although definitely skewed toward Big Tech’s share of the 46 lawyers on the docket.

The streaming rates are so bizarre that the Copyright Royalty Judges seem to have lost trust in the process and have issued two separate orders instructing the participants in the streaming mechanical proceedings to either disclose or “certify” that they have come clean with the Judges as to any side deals that may have artificially lowered the rates–the second order makes for interesting reading.

Unlike the physical mechanical, the settling parties rejected a cost of living adjustment in these historically inflationary times. Why they rejected a COLA is hard to understand aside from the fact that they thought they could get away with it.

One thing that is clear, however, is that any argument that a COLA is not necessary with streaming mechanicals because the rate is theoretically based on increases or decreases in revenue is a particularly insulting form of trickle down gaslighting. 

It must be said that the record company group of music users that pays the physical mechanical rate voluntarily agreed a COLA on their rates that is currently pending approval by the Judges. There really is no excuse for the streaming services to rely on the discredited trickle down theory to pawn off their Rube Goldberg royalty structure on songwriters for streaming mechanicals.

by Trichordist Editor

Will the Copyright Royalty Board approve Big Tech’s attempted cover-up? 

By Chris Castle

[This MusicTechPolicy post appeared on Hypebot]

There’s an old saying among sailors that water always wins. Sunlight does, too. It may take a while, but time reveals all things in the cold light of dawn. So when you are free riding on huge blocks of aged government cheese like the digital music services do with the compulsory mechanical license, the question you should ask yourself is why hide from the sunlight? It just makes songwriters even more suspicious. 

This melodrama just played out at the Copyright Royalty Board with the frozen mechanicals proceeding. Right on cue, the digital services and their legions of lawyers proved they hadn’t learned a damn thing from that exercise. They turned right around and tried to jam a secret deal through the Copyright Royalty Board on the streaming mechanicals piece of Phonorecords IV. 

To their great credit, the labels handled frozen physical mechanicals quite differently. They voluntarily disclosed the side deal they made with virtually no redactions and certainly didn’t try to file it “under seal” like the services did. Filing “under seal” hides the major moving parts of a voluntary settlement from the world’s songwriters. Songwriters, of course, are the ones most affected by the settlement–which the services want the CRB to approve–some might say “rubber stamp”–and make law.

To fully appreciate the absolute lunacy of the services attempt at filing the purported settlement document under seal, you have to remember that the Copyright Royalty Judges spilled considerable ink in the frozen mechanicals piece of Phonorecords IV telling those participants how important transparency was when they rejected the initial Subpart B settlement.  

This happened mere weeks ago in the SAME PHONORECORDS IV PROCEEDING.

Were the services expecting the Judges to say “Just kidding”? What in the world were they thinking? Realize that filing the settlement–which IF ACCEPTED is then published by the Judges for public comment under the applicable rules established long ago by Congress–is quite different than filing confidential commercial information. You might expect redactions or filings under seal, “attorneys eyes only,” etc., in direct written statements, expert testimony or the other reams of paper all designed to help the Judges guess what rate a willing buyer would pay a willing seller. That rate to be applied to the world under a compulsory license which precludes willing buyers and willing sellers, thank you Franz Kafka. 

When you file the settlement, that document is the end product of all those tens of millions of dollars in legal fees that buy houses in the Hamptons and Martha’s Vinyard as well as send children to prep school, college and graduate school. Not the songwriters’ children, mind you, oh no. 

The final settlement is, in fact, the one document that should NEVER be redacted or secret. How else will the public–who may not get a vote but does get their say–even know what it is the law is based on assuming the Judges approve the otherwise secret deal. It’s asking the Judges to tell the public, the Copyright Office, their colleagues in the appeals courts and ultimately the Congress, sorry, our version of the law is based on secret information.

Does that even scan? I mean, seriously, what kind of buffoons come up with this stuff?  Of course the Judges will question the bona fides and provenance of the settlement. Do you think any other federal agency could get away with actually doing this? The lawlessness of the very idea is breathtaking and demonstrates conclusively in my view that these services like Google are the most dangerous corporations in the world. The one thing that gives solace after this display of arrogance is that some of them may get broken up before they render too many mechanical royalty accounting statements.

To their credit, after receiving the very thin initial filing the Judges instructed the services to do better–to be kind. The Judges issued an order that stated:

The Judges now ORDER the Settling Parties to certify, no later than five days from the date of this order, that the Motion and the Proposed Regulations annexed to the Motion represent the full agreement of the Settling Parties, i.e., that there are no other related agrements and no other clauses. If such other agreements or clauses exist, the Settling Parties shall file them no later than five days from the date of this order.

Just a tip to any younger lawyers reading this post–you really, really, really do not want to be on the receiving end of this kind of order.

Reading between the lines (and not very far) the Judges are telling the parties to come clean. Either “certify” to the Judges “that there are no other related agreements and no other clauses” or produce them. This use of the term “certify” means all the lawyers promise to the Judges as officers of the court that their clients have come clean, or alternatively file the actual documents.

That produced the absurd filing under seal, and that then produced the blowback that led to the filing of the unsealed and unreacted documents. But–wait, there’s more.

Take a close look at what the Judges asked for and what they received. The Judges asked for certification “that there are no other related agrements and no other clauses. If such other agreements or clauses exist, the Settling Parties shall file them no later than five days from the date of this order.”

What the Judges received is described in the purportedly responsive filing by the services:

The Settling Participants [aka the insiders] have provided all of the settlement documentsand, with this public filing, every interested party can fully evaluate and comment upon the settlement. The Settling Participants thus believe that the Judges have everything necessary to “publish the settlement in the Federal Register for notice and comment from those bound by the terms, rates, or other determination set by the” Settlement Agreement, as required under 37 C.F.R. 351.2(b)(2). The Settling Participants respectfully request that the Judges inform them if there is any further information that they require.

Notice that the Judges asked for evidence of the “full agreement of the Settling Parties”, meaning all side deals or other vigorish exchanged between the parties including the DSPs that control vast riches larger than most countries and are super-conflicted with the publishers due to their joint venture investment in the MLC quango.

The response is limited to “the settlement documents” and then cites to what the services no doubt think they can argue limits their disclosure obligations to what is necessary to “publish the settlement”. And then the services have the brass to add “The Settling Participants respectfully request that the Judges inform them if there is any further information that they require.” Just how are the Judges supposed to know if the services complied with the order? Is this candor?

It must also be noted that Google and the NMPA have “lodged” certain documents relating to YouTube’s direct agreements which they claim are not related to the settlement to be published for public comment. These documents are, of course, secret:

[And] are not part of the settlement agreement or understanding of the settling participants concerning the subject matter of the settlement agreement, and do not supersede any part of the settlement agreement with respect to the settling participants’ proposed Phonorecords IV rates and terms. Further, the letter agreements do not change or modify application of the terms to be codified at 37 C.F.R. 385 Subparts C and D, including as they apply to any participant. Rather, the letter agreements simply concern Google’s current allocation practices to avoid the double payment of royalties arising from YouTube’s having entered into direct agreements with certain music publishers while simultaneously operating under the Section 115 statutory license.

You’ll note that there are a number of declarative statements that lets the hoi polloi know that the Data Lords and Kings of the Internet Realms have determined some information involving their royalties is none of their concern. How do you know that you shouldn’t worry your pretty little head about some things? Because the Data Lords tell you so. And now, back to sleep you Epsilons.

So you see that despite the statements in the group filing to the CRB that the “Settling Participants” (i.e., the insiders) claim to have provided all of the settlement documents required by the Judges, Google turns right around and “lodges” this separate filing of still other documents that they think might be related documents with some bearing on the settlement that should be disclosed to the public but they apparently will not be disclosing without a fight. How do we know this? Because they pretty much say so:

Because the letter agreements are subject to confidentiality restrictions and have each only been disclosed to their individual signatories, each such music publisher having an extant direct license agreement with Google, Google and NMPA are lodging the letter agreements directly with the Copyright Royalty Judges, who may then make a determination as to whether the letter agreements are relevant and what, if anything, should be disclosed notwithstanding the confidentiality restrictions in each of the letter agreements.

Ah yes, the old “nondisclosure” clause. You couldn’t ask for a better example of how NDAs are used to hide information from songwriters about their own money.

The Judges noted when rejecting the similar initial frozen mechanical regulations that:

Parties have an undeniable right of contract. The Judges, however, are not required to adopt the terms of any contract, particularly when the contract at issue relates in part, albeit by reference, to additional unknown terms that indicate additional unrevealed consideration passing between the parties, which consideration might have an impact on effective royalty rates. 

So there’s that.

What this all boils down to is that the richest and most dangerous corporations in commercial history are accustomed to algorithmically duping consumers, vendors and even governments in the dark and getting away with it. The question is, if you believe that sunlight always wins, do they still want to hide as long as they can and then look stupid, or do they want to come clean to begin with and be honest brokers.

As Willie Stark famously said in All the King’s Men, “Time reveals all things, I trust it so.”

by Trichordist Editor

Thinking Outside the Pie: @legrandnetwork Study for GESAC Highlights Streaming Impact on Choking Diversity and Songwriter Royalties

By Chris Castle

[This post first appeared in MusicTech.Solutions]

Emmanuel Legrand prepared an excellent and important study for the European Grouping of Societies of Authors and Composers (GESAC) that identifies crucial effects of streaming on culture, creatives and especially songwriters. The study highlights the cultural effects of streaming on the European markets, but it would be easy to extend these harms globally as Emmanuel observes.

For example, consider the core pitch of streaming services that started long ago with the commercial Napster 2.0 pitch of “Own Nothing, Have Everything”. This call-to-serfdom slogan may sound good but having infinite shelf space with no cutouts or localized offering creates its own cultural imperative. And that’s even if you accept the premise the algorithmically programed enterprise playlists on streaming services should not be subject to the same cultural protections for performers and songwriters as broadcast radio–its main competitor.

[This] massive availability of content on [streaming] platforms is overshadowed by the fact that these services are under no positive obligations to ensure visibility and discoverability of more diverse repertoires, particularly European works….[plus]  the initial individual subscription fee of 9.99 (in Euros, US dollars, or British pound) set in 2006, has never increased, despite the exponential growth in the quality, amount of songs, and user-friendliness of music streaming services.

Artists working new recordings, especially in a language other than English, are forced to fight for “shelf space” and “mindshare”–that is, recognition–against every recording ever released. While this was always true theoretically; you never had that same fight the same way at Tower Records.

This is not theoretically true on streaming platforms–it is actually true because these tens of millions of historical recordings are the competition on streaming services. When you look at the global 100 charts for streaming services, almost all of the titles are in English and are largely Anglo-American releases. Yes, we know–Bad Bunny. But this year’s exception proves the rule.

And then Emmanuel notes that it is the back room algorithms–the terribly modern version of the $50 handshake–that support various payola schemes:

The use of algorithms, as well as bottleneck represented by the most popular playlists, exacerbates this. Furthermore, long-standing flaws in the operations of music streaming platforms, such as “streaming fraud”, “ghost/fake artists”, “payola schemes”, “royalty free content” and other coercive practices [not to mention YouTube withholding access to Content ID] worsen the impact on many professional creators….

This report suggests solutions to bring greater transparency in the use of algorithms and invites stakeholders to undertake a review of the economic models of streaming services and evaluate how they currently affect cultural diversity which should be promoted in its various forms — music genres, languages, origin of performers and songwriters, in particular through policy actions.

Trichordist readers will recall my extensive dives into the hyperefficient market share distribution of streaming royalties known as the “big pool” compared to my “ethical pool” proposal and the “user centric” alternative. As Emmanuel points out, the big pool royalty model belies a cultural imperative–if you are counting streams on a market share basis that results in the rich getting richer based on “stream share” that same stream share almost guarantees that Anglo American repertoire will dominate in every market the big streamers operate.

Emmanuel uses French-Canadian repertoire as an example (a subject I know a fair amount about since I performed and recorded with many vedettes before Quebecoise was cool).

A lot of research has been made in Canada with regards to discoverability, in particular in the context of French-Canadian music, which is subject to quotas for over the air broadcasters which however do not apply to music streaming services. The research shows that while the lists of new releases from Québec studied are present in a large proportion on streaming platforms, they are “not very visible and very little recommended.” 

It further shows that the situation is even worse when it is not about new releases, including hit music, when the presence of titles “drops radically.” It is not very difficult to imagine that if we were to swap Québec in the above sentence with the name of any country from the European Union [or any non-Anglo American country], and even with music from the European Union as a whole, we could find similar results.

In other words, there may be aggregators with repertoire in languages other than English that deliver tracks to streamers in their countries, but–absent localized airplay rules–a Spotify user might never know the tracks were there unless the user already knew about the recording, artist or songwriter. (Speaking of Canada, check the MAPL system.)

This is a prime example of why Professor Feijoo and I proposed streaming remuneration in our WIPO study to allow performers to capture the uncompensated capital markets value to the enterprise driven by these performers. Because of the market share royalty system, revenues and royalties do not compensate all performers, particularly regional or non-featured performers (i.e., session players and singers) who essentially get zero compensation for streaming.

Emmanuel also comments on the imbalance in song royalty payments and invites a re-look at how the streaming system biases against songwriters. I would encourage everyone to stop thinking of a pie to be shared or that Johnny has more apples–when the services refuse to raise prices in order to tell a growth story to Wall Street or The City, measuring royalties by a share of some mythical royalty pie is not ever going to get it done. It will just perpetuate a discriminatory system that fails to value the very people on whose backs it was built be they songwriters or session players.

We must think outside the pie.

by trichordist

@KerryMuzzey Calls Out Chinese Streamer iQiyi and Tencent for Massive Infringement of Composers

Readers will recall Kerry Muzzey, a leading film composer and outspoken advocate for composers. Kerry’s testimony before the U.S. Senate is some of the best analysis of the struggle of independent creators against the DMCA onslaught. We’ve also been lucky to have him post on MusicTechPolicy and Trichordist.

As Kerry has taught us, composers are often ripped off by some of the biggest names in streaming, some of which are based in China. This is particularly ironic given the long arm of companies like Tencent into the legitimate music business.

Never say never, but it does seem like the mainstream trade press never reports on this angle: These companies are ripping off our artists in a whole other kind of human rights violation because artist rights are human rights.

by thetrichordist

Save the date: A2IM Indie Week Panel with @musictechpolicy on the Impact on Indie Labels of Unfreezing Mechanicals

If you are coming to Indie Week, Trichordist readers might enjoy a panel Chris Castle is on to discuss the impact on indie labels of the Great Unfreeze! 

Entitled How the CRB’s Rejection of Frozen Mechanicals Will Affect Your Label?, the panel goes off at 10:30 am ET on Wednesday, June 15 at the New York Law School.

Speakers are Victor Zaraya: Concord (Moderator), Danielle Aguirre: NMPA (National Music Publishers’ Association), Glen Barros: Exceleration, and Chris.

If you want to read up on the issues that caused the Copyright Royalty Board to reject the failed settlement, here’s some background:

Copyright Royalty Board’s Rejection of NMPA, NSAI, Sony, Warner, Universal settlement

Copyright Royalty Board’s Reaction to Second Settlement Proposal by NMPA, NSAI, Sony, Warner and Universal

Survey Results from Songwriter Survey on Frozen Mechanicals

Comments:

Rosanne Cash

Helienne Lindvall, David Lowery, Blake Morgan

David Poe

Abby North, Erin McAnally, Chelsea Crowell

Kevin Casini

NMPA, NSAI, Sony, Warner, Universal Comment with Copy of MOU4

Chris will post about the panel afterward.

by Trichordist

Clowns to the Left of Me, Jokers To the Right: When Will the MLC Show Us the Money?

If you’ve received one of these emails from the MLC about having to recast their monthly statement inside of a single month, when you’re eying that $500,000,000 of supposedly unmatched money that’s sitting in the MLC, Inc.’s bank account (maybe?), or if you’re trying to figure out when they are launching the vastly overdue claiming portal, you’re probably wondering–who’s in the clown car today? Bozo or Pennywise?

But maybe they’re smarter than they look. Because all they have to do to distribute that $500,000,000 on a market share basis is keep you looking at the bright and shiny object while they run out the clock.

And if you’re waiting for the Copyright Office to save you because they have “oversight”, you’re going to be waiting for a long time. Here’s the reality–nobody is minding the store. There’s a difference between “oversight” and “overwatch.” In Washington, “oversight” means finding someone else to blame and from the very beginning it has been clear who the MLC intends to blame–you. Because you didn’t “play your part” or sufficiently “connect to collect”.

The Copyright Office has done a couple things while under the supervision of the current head lobbyist for Spotify. They’re good at studies, terrible at oversight, so let’s give credit where it’s due. But also realize that’s where it stops because they have about as much moxie as a starfish. (And if you think the NMPA is going to save you, take a look at the frozen mechanicals debacle and ask yourself if a rational person could really take that seriously.)

At the core of the MLC’s business model is the ability to match. Matching is kind of a “See Spot run” building block. If you can’t match, it’s very close to saying you can’t count. Because it depends on what the definition of “match” is.

So what is a match? Or as the Bard might say, how can I screw thee? Let me count the ways. The Copyright Office produced the Unclaimed Royalties Best Practices study partly on this very topic. Notice the difference between “best practices” and “rules.” “Best practices” is not the same as “rule”. If you violate a best practice, nothing happens to you, so therefore perfect for Washington. If you violate a rule, bad things happen to you. The connective tissue is enforcement. If you violate a rule at the Securities and Exchange Commission, you wear stripes. If you violate a rule at the Environmental Protection Agency, you will pay a fine, for sure. If you violate a rule at the MLC? There really aren’t any so it can’t happen. In other words, it’s just like the Harry Fox Agency.

But that’s what we have so let’s look at one passage in particular from the Best Practice Study because that’s the closest we have to a rule book.

The Office recommends that the MLC make all [matching] metrics publicly available, except to the extent it would cause confidential or business sensitive information to be improperly disclosed. [God forbid.] Specifically regarding match rates, the Office acknowledges the MLC’s point that “vendors can easily increase their claimed ‘match percentage’ by simply dropping the confidence level at which they call something a match.” For that reason, the Office recommends that the MLC provide appropriate context for its metrics, including information surrounding how it defines a match, relevant confidence levels, and how confidence levels are tuned. Additionally, so that they are clear and precise, and to avoid possible confusion, the Office recommends that all royalty figures be provided both with and without accrued interest. [How about a best practice of how they are practicing complying with best practices best?

The Office recommends that in addition to providing annual statistics in its annual report, the MLC also have a dedicated public webpage displaying all of these metrics in a clear, well-organized, user-friendly, and accessible manner. The webpage should be interactive and allow users to search, sort, and break down the data so it may be more easily reviewed and analyzed. The webpage should also have an export or download feature, including bulk exporting/downloading, to aid public consumption and dissemination. The Office recommends that the webpage be updated monthly after each batch of new reports of usage arrive and go through initial matching processes. All metrics should be retained and made available online indefinitely (though the MLC could distinguish between current and historic metrics in the future) so long-term trends can be assessed and to ensure the public and the Office have access to them in connection with the review of the MLC’s designation every five years. The MLC should also be very clear about how applicable metrics may change in response to DMP reporting adjustments and the reconciliation of any related royalty underpayments or overpayments permitted by the Office’s regulations. Relatedly, the Office also recommends that the MLC make publicly available relevant metrics about DMP reported usage that the MLC determines is not subject to blanket licenses (e.g., where it is subject to a voluntary license instead, public domain musical works, etc.), such that any related paid royalties have been credited or refunded back to the DMP.

What would also be nice is to tell you how much of your money they are holding and how you get it back. Maybe they could practice the best out of that.

There’s nothing particularly insightful about any of that, right? It’s the kind of thing that any songwriter giving the subject a moment or two of thought could have figured out at any point in the last 100 years. It’s also the kind of thing that you would have expected to have been built into the MLC’s system–which is essentially the HFA system–from the beginning.

It doesn’t matter what they say they aspire to do. Naturally they have to say they aspire to get it 100% correct–because otherwise that raises some interesting questions about intent, right?

Will they ever be called to account for their failures? Doubtful. The only business in the world where you can get the government to let you hold $500,000,000 of other people’s money and then keep it because paying it out was just too hard for you.

Do you think this mess is what Congress had in mind after they were fed a bunch of crap by the know-nothing lobbyists?

So let’s ask again–Bozo or Pennywise?

by Trichordist Editor