Copyright Royalty Board – Page 3

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

[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.”

October 18, 2022 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.

October 7, 2022 by trichordist

A Response to A2IM’s Objection to the New Statutory Mechanical Rates: Part 3

Continued from Part 1 and Part 2

By Chris Castle

The American Association of Independent Music, the independent label trade association, filed comments with the Copyright Royalty Board opposing increasing the mechanical royalty to songwriters from the “frozen rates” to the 12¢ (plus cost of living adjustment) settlement rate of the participating record companies with the NMPA and NSAI. I wrote a reply to the A2IM comment that was timely filed with the CRB–barely. I will repost that comment in a few parts here on MTP. As I had about 10 minutes to write the comment due to the lateness of the A2IM filing, I will add some bracketed language to make it a bit less inside baseball.

The A2IM comment starts out claiming that the organization supports songwriters making more money, but then rejects the settlement that would demonstrably pay songwriters a higher rate because they don’t like the per-unit penny rate. That argument sounds a lot like “make it up on volume” which we’ve heard before.

Unfortunately, A2IM chose not to participate in the Phonorecords IV proceeding and came in a bit late to the party complaining of the check. Nobody stopped them from participating; it appears they put it all on red and it came up black. This is important because unlike independent songwriters who cannot afford the cost of participating at the CRB hearings, A2IM could have participated but evidently chose not to.

As I told the Judges in my comment, I will focus on a few issues raised by A2IM regarding the CRB settlement process in general, the penny rate structure of the mechanical royalty system in the United States, and their proposal that mechanical licensing for physical configurations be handed over to the Mechanical Licensing Collective.

A2IM raises an interesting point that mechanical rates should be different for new releases than for catalog titles. It sounds like they are asking for songwriters on new releases to take an even greater haircut than they already do given the effect of controlled composition clauses–which are justified by the same “investment” (largely recouped from artist royalties) that would be used to justify a further reduction in rates.

I agree that it is rather insane to expect the Judges to come up with a single rate that treats every song as the same when we all know that’s not true and never has been true.

Accordingly, the copyright law should make it easier for a hit songwriter to charge a higher rate for new releases because after all, the statutory rate is the “minimum”. Why shouldn’t a hit songwriter (or really any songwriter) be able to charge, say, double statutory for new releases, particularly if they are being courted to provide an unproven artist with a song for a single (often already produced). So while there may well be support for rejecting what A2IM describes as a one-size-fits-all approach, it may not come with the result they are looking for.

It must also be understood that when A2IM asks the Copyright Royalty Board to change the entire century-old mechanical royalty rate from an inflation-adjusted fixed penny rate to a percentage of wholesale is a vast undertaking. That’s why I made the following general comment to the judges:

As a general comment, all of these ideas must be examined under the authority delegated to the CRB by Congress, particularly in light of the Supreme Court’s recent ruling in West Virginia et al v. Environmental Protection Agency et al. [This case radically cut back the authority of administrative agencies like the CRB to vastly alter their Congressional mandate. Otherewise, the administrative state become effectively a fourth–and unaccountable–branch of government. At first blush, it appears to me that all of these ideas, whatever one thinks of the merits, will require Congress to act.

Mechanical Licensing Collective

The idea that the MLC will just take over the mechanical licensing process for configurations that Congress specifically held back from their portfolio [a few years ago] supports the idea that Congress would need to act in order to accomplish what A2IM wants to do.

I would respectfully point out to the Judges that the MLC has been sitting on top of at least $500,000,000 of other people’s money on the streaming side for a year or more and still can’t manage to get it matched and most importantly paid. There is also a growing anecdotal belief in the indie publisher community who actually deal with the MLC that there is no musical works database constructed as instructed by Congress—that database appears to be entirely resident at HFA, an MLC vendor. That seems odd and would be a good question for the Judges to ask of the MLC at the next administrative assessment. [I’ve found that people who are fans of a central planning approach to create a static database for a dynamic dataset like songs are usually people who themselves have never built one from the ground up.]

Plus, the MLC will not be able to do this additional work on physical accounting for free. I simply cannot imagine that the DLC will welcome the opportunity to provide free accounting services for access to the compulsory license when their own members pay up front a share of the millions that have vanished into the MLC in return for what I cannot say.

We must ask that if the A2IM members cannot afford the modest increase in mechanical royalties for their own songwriters—many of whom are their own artists—how will they afford a share of the administrative assessment plus the transaction costs of switching over to an entirely new accounting system plus what will almost certainly be frequent audits by the MLC.

Conclusion

In short, while A2IM’s comments are well-intentioned and I understand that they feel overlooked in the process, believe me they are not alone. There are a lot of people in the community who take their objections to heart and are willing to parlay about all these ideas in the future. Unfortunately, I don’t think there is support for derailing the process at the 11^th hour which should come as no surprise to anyone.

September 21, 2022 by thetrichordist

A Response to A2IM’s Objection to the New Statutory Mechanical Rates: Part 2

By Chris Castle

This post first appeared on MusicTechPolicy, continued from Part 1

The Longer Table

I actually was pleased to join A2IM at their annual Indie Week conference recently in New York on a panel devoted to this very topic. I am well aware that they believe their members will be disproportionately affected by the increase in cost although I have not seen the data. After many years in the music business, I will take on faith for purposes of this letter that they are correct.

I completely concur that the negotiation process for CRB needs a relook if not an overhaul. I made the point on the A2IM panel that David Lowery and I intend to host a conference devoted largely to this subject [on November 15] at the University of Georgia at Athens. Dr. Lowery and I are both of a mind that this issue needs to be vetted by the Copyright Office in their roundtable format.

However, I do not concur that the Subpart B resolution should be derailed at the 11^th hour because of these structural issues that lawmakers no doubt will need to resolve. The time for A2IM to have made their views known in Phonorecords IV has long passed. They had the opportunity to participate in the proceeding, which individual songwriters could not afford to do, and they did not. They had the opportunity to comment on the first and second comment periods for what became the rejected settlement and they did not. They had the opportunity to insert themselves in the second settlement and appear not to have done so until filing a comment on the last day at the 11^thhour.

Derailing the settlement for this purpose at the 11^th hour is inappropriate. Whether the Judges can even accomplish what is asked of them, I respectfully leave to Your Honors to decide, but I do think there’s a question of authority here. I do support including all these topics being on the table for Phonorecords V as do many other commenters.

What is the Actual Cost to Labels of the New Rates?

While I am prepared to take disproportionate impact on faith, I am less prepared to take disproportionate financial impact without more data. There is an assumption that A2IM labels all will have a one-to-one increase in costs because of the new rates, whatever they end up being. I’m not so sure about that and would want to know a few things including the following.

Many indie labels operate on a revenue share basis with their artists (or licensors). In those revenue share deals, the artist or licensor is paid a percentage of revenue that includes all mechanical royalties. In that structure, the new rates have arguably zero impact on the [independent] label.

Because of rate fixing dates in deals [with controlled compositions clauses] where the label does pay the mechanicals, the new rates would only apply to records delivered during the rate period, i.e., after January 1, 2023. Term recording artist agreements would typically include a controlled compositions clause as the Judges have noted in the Withdrawal Notice. In such an arrangement, the label would be paying a modest increase and could easily tell the artist that unless the artist-songwriter agreed to take still lower rates based on the previously frozen rates, the label would be unable to release their records.

A2IM does make a good point about the bull-headedness of the DSPs on permanent download rates. Perhaps the Judges could refer this issue to the Register for subsequent referral to the Department of Justice Antitrust Division to investigate these pricing practices. Congress seems focused on these kinds of issues at the moment.

[It is unfair for A2IM to complain of being excluded from settlement negotiations by the labels who did participate in the proceedings and who did negotiate a settlement with the NMPA publishers who also participated in the proceedings. Participating in the proceedings is a threshold condition for participating in a settlement of the proceedings. It’s hardly the case that the major labels conspired against the indies this time. If A2IM labels were concerned about being included in these negotiations there are a number of steps they could have taken, starting with participating in the bifurcated Subpart B proceeding–a much less expensive proposition than the streaming side.

There is also a threshold question–that A2IM does not really address–as to whether the CRB has the authority to unilaterally change U.S. mechanical licensing structure that Congress initiated in 1909 and has been based on a penny rate ever since, not to mention hundreds of thousands of term recording artist agreements and licenses incorporating those statutory rates. The entire US recording industry is built on statutory rates and controlled compositions clauses, not to mention the valuations of music publishing catalogs.

That change requested by A2IM is a question of such “magnitude and consequence” that it should require Congress to act based on both the CRB’s statutory authority, the U.S. Supreme Court’s recent holding in West Virginia vs. EPA as well as common sense. Not to mention there are other reasons why getting a CRB case before the Supreme Court could backfire and disrupt a process that in other important ways is working quite well.]

September 19, 2022 by theinvisiblestagehand

A Response to A2IM’s Objection to the New Statutory Mechanical Rates: Part 1

By Chris Castle

This post first appeared on MusicTechPolicy

A2IM, the independent label trade association, filed comments with the Copyright Royalty Board opposing increasing the mechanical royalty to songwriters from the “frozen rates” to the 12¢ (plus cost of living adjustment) settlement rate of the participating record companies with the NMPA and NSAI. I wrote a reply to the A2IM comment that was timely filed with the CRB–barely. I will repost that comment in a few parts here on MTP. As I had about 10 minutes to write the comment due to the lateness of the A2IM filing, I will add some bracketed language to make it a bit less inside baseball.

Unfortunately, A2IM did not participate in the Phonorecords IV proceeding and came in a bit late to the party complaining of the check. Nobody stopped them from participating; it appears they put it all on red and it came up black.

As I told the Judges, I will focus on a few issues raised by the American Association of Independent Music regarding the CRB settlement process in general, the penny rate structure of the mechanical royalty system in the United States, and their proposal that mechanical licensing for physical configurations be handed over to the Mechanical Licensing Collective.

The Clean Slate

A2IM raises the idea of compensating songwriters on a percentage of wholesale basis which is how mechanicals are paid in many if not most other countries. I understand why labels favor this structure but I also understand why publishers and songwriters do not.

First, I am of the view that a percentage of wholesale royalty is incompatible with a compulsory license. [To my knowledge, the European countries operating on a percentage of wholesale basis do not have a compulsory licensing regime.] Imposing a compulsory obligation to have a third party set the “just compensation” for rights the government takes from the songwriter has that unconstitutional ring to it [see 5th Amendment and Takings by Prof. Richard Epstein, an oldie but goodie].

And that really is the problem with a percentage of wholesale royalty—it allows the conflicted record company to call the tune [for songwriters] which is the very definition of moral hazard. Having said all that, I am happy to have a conversation about a clean slate and reimagining of the entire structure as long as it really is a clean slate. Of course, that will mean throwing away the entire controlled composition structure.

It must be said that in countries with a percentage of dealer price mechanical royalty there [are] no controlled composition terms at all. So if we are to have the discussion, let’s have all the discussion for all the record companies including catalog. If we want to be like Europe, let’s be European.

We cannot overlook that changing that compensation system will throw royalty compliance examinations of every record company onto the table with great force. How can songwriters be asked to give up a system that has been in place since 1909 without knowing whether they have gotten a straight count heretofore?

It must also be said that if A2IM members feel justified in changing the entire U.S. mechanical rate system, there is nothing stopping them from creating such terms in their new signings under controlled compositions clauses. In fact, such arrangements might be a good laboratory to experiment with these alternative structures.

[To be continued.]

September 18, 2022 by theinvisiblestagehand

Do Songwriters Want the Cheese or to Escape the Trap in Phonorecords IV?

By Chris Castle

Here it is. The US economic data is undeniably leading to a stagflationary outlook reminiscent of the 1970s. If you don’t have first hand knowledge of the inflation that started under Nixon and Arthur Burns, burned through Ford and Carter and finally came to rest with Federal Reserve Chair Paul Volker and President Ronald Reagan that ultimately resolved in the low inflation that began trending downward in 1983, trust me; it was awful.

This is why it is insane–if not actually cruel–to force songwriters to take a fixed five year mechanical rate with no downside inflation protection in the form of a cost-of-living adjustment. What is bizarre is that this just happened in the streaming mechanical for the Phonorecords IV proceeding, in case you didn’t hear it over the sound of the backslapping.

It appears that songwriters will get the cost of living adjustment (or “COLA”) on the physical mechanical side–you know, the one the smart people told us was unimportant–but failed to get it on the streaming mechanical side which the smart people tell us is critical to the continuation of life as we know it. Even though it certainly looks more likely than not that growth of the money supply and government debt produces the rocket fuel for the inflation that took 1200 points off of the DJIA in one day. 1970s all over again, including James Taylor crooning “Fire and Rain.”

But economists are beginning to remind us that what makes anyone think the 1970s is the worst it can get? There’s a tendency to think of 1970s stagflation as a downside boundary. It’s not. It just happens to be the worst sustained economic times in living memory as the Depression-era Greatest Generation settles into the silence of old age. However, there’s nothing magical about the 1970s.

As it stands today, over 40 countries already have an inflation rate in the double digits, America is a debtor nation, Wall Street has sold a huge number of jobs off shore, productivity growth is lower than the 1970s and we’ve gone along with the central banks’ zero interest rate policies in the years since the 2008 crash. The piper must be paid for the Lehman Bros. of this world leading us all over the cliff in the great recession, even though the central banks’ easy money policy has delayed that payback. All of these are reasons why there must be a cost of living adjustment in any government imposed statutory rate that takes away bargaining rights. But wait, there’s more.

When Federal Reserve Chair Jay Powell changed the Fed’s inflation targeting (remember “transitory inflation”?), he blew an opportunity to start fixing the real problem. But no more. The chickens are coming home to roost with increases in interest rates and yet-to-materialize promise of quantitative tightening. Now that Mr. Powell was reconfirmed for another term.

If there’s even a chance—any chance—that 1970s style stagflation and depression-level demand destruction may be the best we can hope for, anyone setting a wage control like the statutory mechanical royalty rate simply cannot order that rate for five years and fail to take into account the potential for a coming inflation spike even if the smart people sign a suicide pact. Yet this is exactly what just happened with the settlement of the streaming mechanical rates for Phonorecords IV at the Copyright Royalty Board.

Admittedly, the Copyright Royalty Judges are boxed in given the preference for voluntary settlements baked into the Copyright Act. That gives the smart people far too much credit and fails miserably to allow the Judges to do what judges do—bring contemplative thought to the problem. This is what judges do, it is not what lobbyists and their lawyers do. But unless the public raises the failure to include a cost of living adjustment in comments, so far there’s little basis for the Judges to correct the defective settlement.

It is essential that the Judges are allowed to do their job outside the hurley burley of the commercial relationship with the biggest corporations in history whose lawyers are hell-bent on conducting a scorched earth litigation campaign to crush songwriters. This is especially true of Google, Amazon and Spotify who have demonstrated truly vile behavior during the entire proceeding, a bully-fest beyond category.

George Johnson hit upon a potential solution in his recent comment. If one applies the COLA to the royalty pool after the mind-numbing “greater than/lesser of formula” created by those seeking full employment for lobbyists, lawyers and accountants, that’s actually a pretty elegant solution. I would quibble a little bit with the idea and apply the COLA as an uplift to the actual royalty statement so that the royalty recipients could see how that uplift was arrived at (which in theory would make them less likely to audit the MLC). That “show your work” approach would allow the payee to see how the MLC got there and make it easier to audit upstream for obvious mistakes.

It will also make it easier for the Judges to add the COLA because the building blocks of the calculation won’t change from the voluntary settlement (TCC, revenue share, etc.).

If songwriters are forced to stay in the confines of the statutory license trap, at least a COLA keeps the cheese from melting before their eyes. Plus they’re not required to guess today what the cost of food at home, shelter and gasoline will be five or six years from now.

The Judges would also have the opportunity to bring the services into a new era of fairness and wipe out the bullying of process as punishment that we all had to endure through two different proceedings.

Remember, as you have probably read or realized yourselves, all the US needs is one more good exogenous roundhouse shock to the economy (such as the world abandoning petrodollars for a basket of currency such as the ruble, the renminbi and the real to pick a few out of thin air), and we are in serious economic straights with hyperinflation as the real bugaboo.

Remember also that the US bonds pay interest at less than the inflation rate.

The decline of the dollar as the premier world reserve currency will put a stop to that interest/inflation spread practically overnight. The US government will not be able to borrow from a seemingly bottomless pit of lenders paying US dollars for US bonds at any price for the stability and transferability. What happens then? Probably interest rates will increase–a lot–to make it worth the lender’s money. Which means the debt service will take up an even bigger chunk of the US budget which will give us less to spend on the “Cross of Iron” weaponry that got us into the petrodollar business in the first place. And so it goes.

Songwriters may not be able to do anything tangible to stop cataclysmic economic events, but they can demand at least a bare minimum of downside protection through a COLA.

You may say, why so cynical? I’m not altogether cynical, I hope that I’m just cynical enough. The numbers don’t lie. If you know anyone who was a child during the Great Depression, or is the child of that person, ask them what it was like.

The overarching point is why would you want to take a chance and bet it all on the smart people?

The cheese or the trap. Which will you have?

September 16, 2022 by Trichordist Editor

Streaming Mechanical Complexity Begets Complexity Begets Legal Fees

Remember how the physical mechanical increased from 9.1¢ to 12¢? And it applies to each record sold? If a songwriter got a cut and the artist sold 100 records, the songwriter got $12. That’s $12 today, next month, six months from now. You could plan. You could complain about a statement to the record company. If the record company wanted you to write more songs for their artists, they’d listen and might even fix an error on your statement. Remember: On records and downloads, the record companies pay.

But what about streaming? The record companies don’t pay on streaming, Big Tech pays. The biggest corporations in the world pay: Spotify, Amazon, Apple, Google, Pandora, and their dozens of lawyers. Artist Rights Watch posted a series of Tweets that shows excerpts from the proposed regulations to calculate streaming royalties–and remember this is the one that we’re told is the important one, the one that dozens of lawyers spend millions in legal fees to come up with. It reads kind of like a drunk you can smell a block away but who sits down next do you and asks how do they look for three days?

The first think you realize is that unlike the 12¢ rate for physical, there’s no way anyone call tell a songwriter how much they’re going to make today or next year on a per play. They can’t even tell you how much you’re going to make today for a burger next Tuesday. Or Wednesday. Or Thursday. But one thing you definitely know is that the lawyers are going to make bank writing this crap, appealing this crap, renegotiating this crap. This section here is a big part of what the fight is all about, can you believe it? This is what the Big Boys and Girls think is important and you can understand why. It puts more legal fees on the table and you know who eventually pays for the legal fees one way or another? Take a look in the mirror.

And understand this: If you get a royalty statement for streaming royalties, take a look at the per-stream rate! It usually starts three or four or even five zeros to the right of the decimal place. It’s even worse than the recording royalty. And DIMA wants us to fight among ourselves against the record companies after all this?

In case you were wondering what an utter shitshow streaming mechanicals have become thanks to the dozens of lawyers and lobbyists getting rich from making it complicated–compare this to 12¢ a unit. This calculation gets made EVERY MONTH. https://t.co/rLwsCn5jVJ pic.twitter.com/vLa8KgqVrc
— Artist Rights Watch (@ArtistRights) July 25, 2022

pic.twitter.com/vcV2AtSiCx
— Artist Rights Watch (@ArtistRights) July 25, 2022

July 26, 2022July 27, 2022 by Trichordist Editor

@davidclowery and @musictechpolicy Talk Copyright Royalty Board on Who Knew: The Smartest People in the Room

Big thanks to Tom Truitt and the wonderful audience!

David and Chris discuss improvements in the Copyright Royalty Board rules and procedures including:

–A songwriter advocate as a permanent independent representative of songwriter interests and participant in the Phonorecords proceedings with full rights of a participant. All other participants would bear the cost of the advocate. Other participants would be prohibited from using the advocate as a way to engage in overreaching discovery against individual songwriters or their publishers.

–Each participant would be limited to one lawyer representing their interests in the Phonorecords proceedings. This would counteract the current abuses forced upon the CRB and intimidation tactics of Big Tech.

–Songwriters would be permitted to form a bargaining collective with a general antitrust examption.

–Music users who appeal the Judges’ rulings must pay higher rates pending appeal.

–Discovery would be extremely curtailed to protect songwriters from abuses by Big Tech to punish and intimidate songwriters such as that currently being imposed by Google and other Big Tech companies without songwriter consent or even notification.

–Should songwriters get an across-the-board antitrust exemption under competition law (like the Sherman Act)?

June 11, 2022June 13, 2022 by Trichordist Editor

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:

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.

June 6, 2022June 6, 2022 by Trichordist

Series 3 of the @ArtistRights Watch Podcast is here! Nik Patel, @DavidCLowery, @MusicTechPolicy and @KCEsq Discuss The Future of Frozen Mechanicals — Artist Rights Watch

Series 3 of The Artist Rights Watch Podcast is here! Nik, David, and Chris are joined by attorney Kevin Casini to talk about the latest with the Copyright Royalty Board and mechanical rates in the Phonorecords IV proceeding and discuss alternatives so songwriters are better represented at the CRB compared to the status quo.

Check out the podcast here!! Available on all platforms!

ARW Podcast S3E1: Unfreezing Mechanicals show notes

On the this episode of the Artist Rights Watch, Nik, David, and Chris sit down to talk about the recent developments with the CRB and mechanicals with lawyer and advocate, Kevin Casini. The Copyright Royalty Board who herein will more than likely be referred to as the CRB, ‘is a US system of three copyright reality judges who determines rates and terms for copyright statutory licenses and make determinations on distribution of statutory license royalties collected by the US Copyright Office.’ The US mechanical royalties are determined by the CRB and they meet every 5 years to determine the rate. Songwriter groups argued for a higher rate, and the CRB agreed. On March 29, 2022 the CRB agreed to unfreeze the $0.091 mechanical royalty rate which would commence a fight for a new rate in the 2023-2027 period. Over the past few years, there has been numerous criticisms about the constant rule for freezing the mechanical royalty rate. The royalty rate currently is $0.091 which was set back in 2006, and frankly, songwriters are making less money due to economic inflation.

Show Notes and Background Materials

Survey Results from Songwriter Survey on Frozen Mechanicals

Selected 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

Below are some links about Guest Kevin Casini:

Tweets by KCEsq

https://kcesq.medium.com