Chris Castle’s Copyright Office Comments on the Black Box Controversy

Here’s some more MLC news you’ll never read about in the trade press.

Yesterday we posted a shocking revelation from the MediaNet/SOCAN ex parte letter to the Copyright Office: It appears that the digital music services have no intention of complying with the much ballyhooed benefit to the Music Modernization Act–in return for the “reach back” safe harbor that somebody decided to grant the services retroactively, the services would pay over (or you could say “disgorge”) all the unmatched and unpaid mechanical royalties that they were holding, sometimes for years, and always secretly. (Adding insult to injury, MediaNet seems to think that referring to SOCAN’s ownership of MediaNet somehow makes screwing us over into a songwriter-friendly act of good fellowship and felicity. More likely, SOCAN itself knows nothing about it.)

Remember, MediaNet straight up threatened to decline the reach back safe harbor and not pay over the black box. As it turns out, MediaNet’s position is not unique–as Chris Castle identified in his reply comment on the Copyright Office’s black box study, all of the services represented by the DLC made that exact threat to the Copyright Office. As Chris observes, these are not idle threats. They are made by the biggest corporations in commercial history, one of which may be broken up due to antitrust investigations on two continents.

Something must be done and done quickly before the DLC decides to take the blanket license without the limitation on liability for past infringements having successfully scared off anyone who could have sued but didn’t thinking that there was a fixed reach back safe harbor. That seems like it will result in the big guys having paid off the big guys in the NMPA’s secret settlement that was being negotiated simultaneously with the MMA (the NMPA’s umbrella December 17, 2017 Pending and Unmatched Usage Agreement referenced in the MediaNet ex parte letter and talked around in other filings. Remember–the MMA was introduced a few days after the secret NMPA agreement on December 21, 2017 and Wixen Music Publishing felt they had to sue Spotify by December 31, 2017 because of the reach back safe harbor. So everyone except the songwriters–and perhaps most Members of Congress–seems to have known that the fix was in on black box.)

Another fine mess they got us into. Here’s the except from Chris Castle’s reply comment:

The DLC’s Quid Pro Quo Revelation

The concept of a “black box” distribution is a pale mimic of a simple
fact: It is not their money. The fundamental step that Title I excuses
is basic and would solve much of the unmatched problem if Title I did
not exist: Don’t use a work unless you have the rights.

It is a fundamental aspect of copyright licensing and it is not metaphysical.
Yet the message from all negotiators concerned in this process seems
to shelter legitimacy in a complication of dangers to the black box that
come down to another simple fact: Obey and be quick about it or the
law will take your money and give it to someone else.

How much is in the black box? They won’t tell you. From where? Not
your business. From when? Confidential. Is it yours? Already paid it
to someone else before you even knew it was there. And Lord knows
that money once taken incorrectly in the dark is unlikely to be paid
correctly in the light.

Comments by the DLC demonstrate conclusively that addressing the
black box has taken on even greater urgency. The DLC’s Initial
Comment in a related docket is unusually revelatory for a group with a
multitrillion dollar market capitalization that loves them some
protective orders. This passage is particularly breathtaking:

This was the heart of the deal struck by the stakeholders in
crafting the MMA: to provide legal certainty for DMPs, through
a limitation on liability, in exchange for the transfer of accrued
royalties.

If that were “the deal” it is news to me, and I like to think that I’ve
been reading along at home pretty attentively. If I wasn’t aware of
“the deal”, I’m sure I wasn’t alone in my ignorance, but I’m far more
understanding of why the negotiators would have been motivated to
keep “the deal” under wraps if that’s really what it was.

If “the deal” wasn’t kept quiet, someone might have asked why there
was a “deal” when the services were simply agreeing to pay money
they already owed and that they were already obligated to pay for infringements that already occurred. Yet, services still got the new
safe harbor trophy to put on the wall in the copyright hunting lodge
next to the DMCA and Section 230.

The gall doesn’t end there, however. The DLC goes on to make this
threat of imminent harm:

[The “deal”] is a crucial point for the Office to keep in mind as it
crafts rules in this space. If the regulations make it less likely
that a DMP will be able to rely on that liability protection when
it needs it—i.e., if it increases the risk that a court would deem a
DMP to not have complied with the requirements in section
115(d)(10)—a DMP could make the rational choice to forego the
payment of accrued royalties entirely, and save that money to
use in defending itself against any infringement suits.

It is a bit odd that the DLC seems to think of Title I as their private
contract, but there it is. The DLC members’ anticipatory repudiation
of the purported deal that the world now knows underpins Title I was
both refreshingly brazen and starkly shocking. Given that the Eight
Mile Style
case against DLC member Spotify (and both Spotify and
The MLC’s vendor the Harry Fox Agency) is a live action, the DLC is
not making an idle threat. The DLC tells us that if its market cap isn’t quite high enough to suit, Spotify could immediately dip into the black
box for “money to use in defending itself.”

The relationship with the services apparently has settled into the
customary laying about with threats and blackguarding both
songwriters and the Copyright Office. That’s reassuring in confirming
that human nature hasn’t actually changed and these companies really
were the Data Lords we had always known our betters to be after all,
sure as boots.17 Maybe one day the scorpion really won’t sting the frog.
Maybe another “unity dinner” is in order. But not today.

Regardless, it is clear that the Copyright Office is almost the only place
that songwriters can go for relief and an explanation of how the MMA
is to be implemented whatever secret deal the DLC now purports to
have made. Given the DLC’s unequivocal threat on behalf of its
members, there is no doubt of the imminent danger that the black
box currently being held is about to vanish into thin air if something
isn’t done immediately to preserve the status quo. The balance of
hardships pretty clearly tilts in favor of the songwriters as the safe
harbor services control the money and always have.

MediaNet Trying to Cut Off Black Box Payments

You can’t say these people aren’t cagey. Remember that one of the big selling points for the Music Modernization Act was that in return for the under-reported reach back safe harbor, songwriters would get paid on “black box” income by each digital music service dating back to the inception of each service. This is what the Copyright Office wants, too, unsurprisingly since that was the deal.

The reach back safe harbor was used as a scare tactic to keep songwriters from filing infringement lawsuits against these services and the MMA’s promoters went right along with it.

But–now that the bill is about to come due, guess who wants to change the deal? Services are beginning to threaten to decline the reach back safe harbor (and with it the blanket license, presumably) if they have to treat songwriters fairly on the black box. Instead of the MMA free ride that was handed to them on a silver platter, they now want to leverage the scare tactic and run out the clock on the statute of limitations that they will no doubt say had been running. That way they’d create their own safe harbor and never pay the black box but still try to use the blanket license.

So everyone should sue all of these loathsome people today and toll that statute. If enough of these services want to play hardball, there’s a real question of why bother having the blanket license at all.

Here’s an excerpt from MediaNet’s “ex parte” letter posted today:

We understand that the Office is contemplating that the cumulative report will provide data on unmatched usage back to the launch of the service. MediaNet, however, launched its service nearly 20 years ago. In light of that, and the change in vendors, we are requesting the Office adopt a narrow exception in the cumulative reporting regulations. We think such a regulation would be consistent with the overall statutory scheme. Notably, the statute references reporting pursuant to the “applicable regulations,” when discussing the information that must be provided to the MLC. That is a reference to the pre-existing reporting regulations. Significantly, those regulations provided that documentation related to royalties and usage for a particular period of time needed to be preserved only for a period of five years.

To be clear, MediaNet is not asking the Office adopt a regulation that allows a digital music provider to exclude all data from periods of time more than five years prior to license availability date (though such a rule would be consistent with the statute). Instead it is seeking a narrower provision that will provides all available data to the MLC. This would be in the form of a new paragraph in 37 C.F.R. § 210.20(c)(4) of the proposed rule:

(iii) The digital music provider shall be excused from providing the information set forth in paragraphs (i) and (ii) where the usage is from a period of time more than five years prior to license availability date, and the digital music provider certifies the following: that the information was solely held by a vendor with whom the digital music provider no longer has a business relationship, the digital music provider has requested that information from such vendor, and the vendor has informed the digital music provider that it cannot or will not provide that information.

Absent this narrow exception, MediaNet may decline to take advantage of the limitation on liability, which may deprive copyright owners of additional accrued royalties.

SoundExchange Comment on The MLC’s Public Database

[One of the problems that The MLC will encounter is matching songs to transaction data from the “safe harbor services” using the blanket licenses and enjoying the reach back safe harbor giveaway in the Music Modernization Act. There are different ways to do this, but it appears that The MLC wants to gather sound recording metadata (like the ISRC unique identifiers) and then map the songs to the sound recordings based on sound recording information from the services. This is hardly an authoritative basis to determine sound recordings, but that appears to be what The MLC intends to do. SoundExchange is the authoritative source for this information and they’ve been assembling that data for many, many years. This except from SoundExchange’s comment to the Copyright Office sheds light on the issues. Again, you’ll rarely find any of the issues in these Copyright Office comments discussed in the trade press unless someone like The MLC issues a press release. It’s also worth noting that The MLC has merely stated that The MLC “agrees that the data in the public MLC musical
works database is not owned by the MLC or its vendor.” First, “data” is not the same as a “database”. We want to find out if there is any difference between disclaiming ownership of individual data and claiming ownership of the database as a whole. But second, there’s no proof yet that The MLC’s current “data quality initiative” does not simply update the database of The MLC’s vendor, HFA.]

Read the entire SoundExchange comment here.

SoundExchange appreciates the inclusion in Section 210.31(h) of the Office’s proposed regulations the requirement that MLC Database include a “conspicuous” disclaimer that states that the database is not an authoritative source for sound recording information. It appears that the
MLC has decided to populate the MLC Database with sound recording identifying information sourced from usage data provided by digital music providers (rather than authoritative sources such as rights owners). SoundExchange believes this decision will result in the MLC Database being chock-full of redundant records variously misidentifying a large number of sound recordings.

Nonetheless, SoundExchange also recognizes that the MLC needs to launch its business on a tight timetable, and that the Office has sought to mitigate the issue through other provisions such as the requirement to provide data provenance. However, the MLC’s decision makes it critically important the MLC’s disclaimer concerning sound recording information be clear and prominent, and perhaps linked to a more detailed explanation of the issue, because this design decision carries a significant risk of confusing the public, which needs to understand what the MLC Database is and what it is not….

[I]t is critical that the MLC Database be easily accessible to all other
industry participants, so others can build on the MLC Database to create value-added resources for the industry. For example, while the MLC’s reluctance to include and organize its data around authoritative sound recording information may make sense given practical constraints, it represents a missed opportunity to develop a resource with authoritative linkages between sound recordings and musical works that would be of significantly greater value for participants in the ecosystem. Fortunately, the statutory requirement that the MLC make its data available to others provides an opportunity for third parties to fill that void. This kind of function depends on API access to the MLC Database.

@CISACnews and BIEM’s Copyright Office Comments on the MLC

[Songwriters outside the United States should pay close attention to the disconnect between their CMOs and the MLC. It’s becoming increasingly apparent that The MLC is very US-centric and at that very Anglo-American centric in its myopia. We haven’t done a point by point comparison, but we have posted CISAC and BIEM’s comments in the past and we can’t help noticing that their current comment has a few references to prior comments that seem to have been largely ignored. They are very polite about it (maybe too polite about it) but the consequences of ignoring the CMOs is that any ex-US songwriter whose songs are exploited in the US and who relies on their CMO to collect their US earnings may find their streaming mechanicals reduced to zero after 1/1/21 if the HFA database that The MLC is using is not properly mapped.

The MLC’s continued disregard for CMOs is puzzling unless you think perhaps that The MLC doesn’t think CMOs will continue to play a role in the international copyright system. Whatever The MLC’s long-term goals, it is clear that the Music Modernization Act was drafted from an entirely US-centric point of view and that the concerns of our international partners were never taken into account while at the same time forcing them to accept the MMA’s terms. Another example of the haphazard approach that is rapidly becoming the hallmark of the MMA.]

Read the entire comment here.

The International Confederation of Societies of Authors and Composers (“CISAC”) and the International Organisation representing Mechanical Rights Societies (“BIEM”) would like to thank the U.S. Copyright Office (“the Office”) for the opportunity to provide comments on the Proposed Rulemaking on the Public Musical Works Database (“Database”) and Transparency of the Mechanical Licensing Collective (“MLC”). This submission follows our previous comments to the Office, in particular on the Notifications of Inquiry from September 2019 and April 2020 (SG19-1116; SG19-1284; SG20-0614).

As already explained in previous submissions, CISAC and BIEM are international organisations representing Collective Management Organisations (“CMOs”) worldwide that are entrusted with the management of creators’ rights and, as such, have a direct interest in the Regulations governing the functioning of the Database and the transparency of MLC’s operations. CISAC and BIEM would like to thank the Office for highlighting the existence and particularity of entities such as CMOs that are not referred to in the MMA (page 58175 of the Proposed Rulemaking1) and should be treated equally.

CISAC and BIEM are grateful that some of their comments were taken into account by the Office in the Proposed Rulemaking, but would like to reiterate their concerns on certain provisions which, if not adequately addressed, may affect the administration of rights of foreign rightsholders in the US, as follows…

A/ Copyright ownership information and shares

As part of the list of mandatory information for matched works, the Office lists “the copyright owner of the musical work (or share thereof), and the ownership percentage of that owner” (for unmatched works, it is the same as long as the owner has been identified but not located).

For the sake of clarity, we reiterate the need to have CMOs clearly recognized as “copyright owners” under the provisions of the Proposed Rulemaking. Indeed, as already explained in several of our previous submissions, outside the U.S., the “copyright ownership” of the work is attributed to the CMOs managing the mechanical rights of the so-called BIEM repertoire. This would mean that the “copyright owner” share as defined in the Proposed Rulemaking should refer specifically to the share controlled by the CMO as administrator of the work, as opposed to the actual composer/songwriter share.

This clarification also has direct consequences with respect to the determination of sensitive and confidential information which cannot be made publicly accessible through the Database, as further argued in CISAC and BIEM’s comments to the Proposed Rulemaking on Treatment of Confidential Information (see SG20-0562).

If, however, it is considered indispensable for the DMPs and the MLC to have creators’ information and percentage shares for identification and distribution purposes, such data should not be disclosed to third-party entities or made publicly accessible in the Database for the reasons stated in our previous submission. In particular, in the 28 May 2020 comments to the Proposed Rulemaking on Treatment of Confidential Information submitted to the Office,2 CISAC and BIEM explained that there seemed to be no business need to include the creator percentage shares in the musical works, as this information was not required to license or distribute musical works, and constitutes particularly sensitive and confidential financial and business information for creators and their representatives.

Personal identifiable information

CISAC and BIEM fully agrees with the Office with regards to the withdrawal of the date of birth from the list of mandatory public information to be included in the Database. However, CISAC and BIEM continue to be very much concerned with the general compliance of MLC’s operations, including the Database, with data protection laws. As for now, the Proposed Rulemakings are silent on this, although this is a key issue for CMOs worldwide and probably also for other rightsholders.

CISAC and BIEM thus respectfully suggest that the Regulations include clear language on the MLC’s full compliance with data protection laws, and in particular with the European General Data Protection Regulation, as the MLC will process personal data of EU creators. This means that the Database shall be construed in compliance with the GDPR requirements from the building-up of the system (i.e. privacy by design) until the processing operations, providing the requisite security guarantees.

Point of contact for inquiries and Complaints

CISAC and BIEM welcome the inclusion of the need for the MLC to provide a point of contact for inquiries or Complaints. However, as requested in our submission SG20-0614, the Proposed Rulemaking should go further and also make mandatory the publication of the rules that will be applied by the MLC’s dispute resolution committee. This will help to streamline and give more transparency to the dispute resolution process, which will benefit both copyright owners and DMPs.

Future of Music Coalition Warns Against Vendor Lock-in in Copyright Office Comments

[The Future of Music Coalition joins the chorus of concern about shenanigans at The MLC, Inc. with special access and treatment of its vendors regarding the “public” database. As others have pointed out, there’s a real question as to whether The MLC, Inc. is actually building its own database or is just building up the data muscle of its vendor the Harry Fox Agency (formerly owned by MLC promoter and nonvoting board member NMPA. The MLC is prohibited by law from licensing other than the narrow window of streaming mechanicals, but HFA is not.]

[I]t’s important that MLC’s chosen vendors not be able to leverage their
status with the MLC to advantage themselves in other business activities not covered under the MMA. If a vendor was able to leverage its status with MLC to the detriment of competitors in other kinds of licensing activity (even informally), that wouldn’t serve competition, consumers, or creators. Additionally, the Office needs to ensure that provisions about database vendors being replaceable are meaningful.

We see no reason to expect that the MLC’s chosen vendors aren’t up to the task, but songwriters and composers need assurance that if a vendor ends up having problems and a change is necessary, that change will really be possible.

The Office can require the MLC to disclose what it is doing to prevent any vendor from being too operationally enmeshed with the MLC that it either enjoys an unfair advantage through that relationship, or that it would be practically impossible for another vendor to step in.

Read the entire post here.

Songwriters Guild and Society of Composers & Lyricists Copyright Office Comments on Database Ownership and Songwriter Credit in Public Database

[The Songwriters Guild of America and the Society of Composers & Lyricists filed a joint comment with the Copyright Office on proposed rules implementing the public database that The MLC, Inc. is charged with stewarding. They raise a host of issues, but also focus on the ownership issue raised by the Alliance of Recorded Music and the songwriter credit issue raised by Kerry Muzzey.]

Ownership of the Musical Works Database

As to the issue of “ownership” of the Musical Works Database, SGA and SCL were gratified by the USCO’s clear statement quoting the MMA that:
[w]hile the mechanical licensing collective must ‘establish and maintain a database containing information relating to musical works,’ the statute and legislative history emphasize that the database is meant to benefit the music industry overall and is not ‘owned’ by the collective itself. Under the statute, if the Copyright Office designates a new entity to be the mechanical licensing collective, the Office must ‘adopt regulations to govern the transfer of licenses, funds, records, data, and administrative responsibilities from the existing mechanical licensing collective to the public, either for free or at marginal cost, pursuant to the MMA.’

Nevertheless, we feel compelled to repeat once again the admonitions voiced by attorney Christian Castle in his recent submission to the USCO concerning practical issues, problems and anomalies that have arisen even prior to the commencement date of MLC public operations concerning the construction of the Musical Works Database:

I believe that The MLC is encouraging songwriters to correct their song data in the HFA database and that no data from HFA has been transferred to The MLC as yet, and may never be. If The MLC is having data corrected and filled out in the HFA database, then the rules applicable to vendor access to the database may not apply because the Congress’s musical works database is not actually being created at The MLC, it’s being created at HFA. Time will tell if I am correct about this, but it does seem that if I am correct, then The MLC and HFA are working together to exploit an imagined loophole in Title I that violates Congressional intent and certainly the spirit of MMA. Respectfully, the Office should find out what is going on.3

SGA and SCL believe that these are important questions of fact that require answers to ensure that data ownership issues are as clearly defined as possible in advance of any conflicts that may arise. Clarifying that (i) all data and corrections made through HFA will be mirrored in the Musical Works Database in real time, and (ii) that being compelled to provide data to HFA under color of authority from Title I does not constitute a license to HFA for any other purpose, will be important steps forward.

As we have also previously stated, the contractual role and authority of HFA (or any other vendor) should be subject to transparent scrutiny by all interested parties, includingthe music creators whose works are the subject of all information that resides in the database. That includes examination of the contractual rights of the vendor in regard to the data flowing through its own systems and/or those of the MLC, the ancillary vendor use rights (if any) of such data during both the pendency and post-expiration/termination periods of such contract(s), and the clarity of rights ownership of data by the MLC and successor iterations of the MLC (including as regards the Musical Works Database). We respectfully call on the USCO to address more robustly these important issues of transparency and data ownership, and ignore unsupported assertions that transparency and scrutiny of vendor relationships will invite inefficiencies as opposed to clarity and competition.

Songwriter and Composer Names in the Public Musical Works Database

As the USCO is aware and has recognized, SGA and SCL have been consistently outspoken concerning the fact that out of all pertinent identifiers for musical compositions, the names of the music creators of a work are among the only constant and unique data points. In all but the rarest of circumstances, such information is never subject to change, and therefore one of the most important and reliable elements necessary for accurate identification and matching of works.

Moreover, the extension of proper credit to human creators as part of this crucially important Musical Works Database –rather than simply limiting identifiers to the names of corporate assignees of rights which are frequently subject to change and termination– is both appropriate and essential to the fulfillment of the ideals and underpinnings of the MMA set forth in Article I, Section 8 of the US Constitution. As that section makes clear, copyright protections are first and foremost meant to serve the interests of the creators and the public, not the corporate entities that serve in an instrumental but secondary role as rights administrators.

We have therefore remained completely at a loss to understand why this crucial category of information was omitted from the MMA as a specifically required identifier (and why the music publishing community for some reason failed to support our efforts to correct that oversight), and are especially thankful that the USCO has put forth a proposed rule

that requires the MLC to include songwriter and composer information in the database. SGA and SCL continue to remain disquieted, however, with the additional qualifier added by the USCO concerning the standard to be applied by the MLC in seeking music creator data: “to the extent reasonably available to the collective.” Such a limited standard serves to diminish the requisite and explicit value of songwriter/composer identifying information.

We respectfully believe that music creator information should be more clearly defined as a mandatory data point required to be pursued for inclusion in the database by the MLC with vigor, and suggest once again that the rulemaking more specifically reflect the imperative nature of this duty. A more appropriate standard would be, in our view: “to the extent available to the collective through its best efforts to secure such data.” The avoidance of creating loopholes that may permit music publishers to omit music creator information from the data they voluntarily provide to the MLC is essential, and the independent community of songwriters and composers continues to seek the assistance of the USCO in this regard.

In respect to the foregoing, we desire to make clear that SGA and SCL also continue to support the rights of those music creators who may wish not to be publicly associated with certain musical works. That is and must continue to be right of any songwriter or composer. We therefore support the proposed rule put forth by the USCO that grants the MLC discretion to allow music creators the option of having songwriter/composer information listed anonymously or pseudonymously. We would, however, prefer that such a regulation be extended into a mandatory direction to the MLC to accept such direction from a music creator.

Read the whole comment here.

#ShowUsTheMoney: Guest Post: @CopyrightOffice Regulates the @MLC_US: Selected Public Comments on MLC Transparency: Chris Castle

[This is an except from Chris Castle‘s June 7 comment to the Copyright Office regarding the transparency of The MLC. You can read the entire comment here. Although The MLC has launched its “Data Quality Initiative” to great fanfare, that DQI process merely confirms how bad the HFA database is since there still is no MLC database as required by law. Since there’s no indication of when The MLC is going to launch and there is a strong indication that nobody in power is doing anything about it (looking at you, Copyright Office), this is a particularly timely excerpt. Remember you heard it here first if your mechanical royalty statements drop to zero once The MLC takes over on January 1. That is 113 days from today and we have yet to seen a thing from The MLC and we have no promise of when we will see anything. Given that there has been zero investigative journalism on this topic from industry outlets aside from “how does The MLC withstand its own awesomeness” the comments that we are serializing are about all you’re going to get in the way of transparency.]

Quality Control of The MLC’s Operations and Platforms

There is an immediate need for The MLC to demonstrate that its systems actually work.  That need will be ongoing, so it would be well for the Office to promulgate regulations requiring a periodic public demonstration of the operability of The MLCs systems, a frequent public disclosure of bugs and bug fixes, and a frequent public disclosure of any missed payments or other glitches.  These matters are appropriate for the transparency of The MLC because if either The MLC or another MLC are not required to disclose these items, no one may ever know there was a problem (but see the discussion of whistleblowers below).

In considering the timing, I would caution the Office against thinking in years rather than weeks.  There is a tendency to think about these things in annual or more time periods.  This will prove to be a mistake given the scale and volume of transactions.  Would you tell Visa it only need to confirm the integrity of its fraud detection systems once every three years?  Or should it be more frequently?  Financial services is a good corollary for streaming mechanicals, with the exception that the royalty payable for each stream starts several decimal places to the right unlike credit card transactions.

There is an immediate need for this transparency.  Recall that MLC executive Richard Thompson said at the Copyright Office panel on unclaimed royalties last December, “[A] lot of the time since July has been spent working very closely with the staff at HFA and ConsenSys, really starting to nail down how all of this is going to work at the, you know, lowest operational level, all of the things that we need to work out.”  (Referencing the July 8, 2019 designation of The MLC as the MLC.) [1]   

Of course, The MLC didn’t announce the selection of HFA and ConsenSys until November 26, 2019[2] and was evidently still interviewing vendors up to that date.  Even so, I’m sure The MLC has been hard at work on developing their platform.

Mr. Thompson also stated at the December 2019 panel:

So our current timeline has the first version of the portal going live late Q2, early Q3, of next year [i.e., 2020]. I emphasize again that is the first version. That will not be functionally complete. It will have the, you know, the first set of functionality that we want to make available to the rightsholder community. So in particular, sort of, being able to look at your catalog, manage your catalog.[3]

Late Q2 to early Q3 is now.  [As of this post, it is the end of Q3 and we still have nothing but Mr. Thompson still has a job.] To my knowledge, The MLC has made nothing available for songwriters to know what is going on at The MLC or how to start registering works. 

Mr. Thompson also stated:

“You know, the first version of the portal doesn’t have statementing on it, because we won’t need statementing until 2021, you know, the first quarter of 2021.”[4]

I would respectfully ask the Office to determine what happens if The MLC is not able to render statements on time.  Presumably the income from streaming mechanicals that had been paid by the services directly to songwriters or music publishers would be transferred over to The MLC as of the License Availability Date (currently January 1, 2021).  If that transfer occurs and The MLC is not then ready for “statementing” (or, presumably, its corollary, “paymenting”) for the billions if not trillions of streaming transactions for all the world’s music in less than a year’s time from today, then streaming mechanical royalties could drop to zero until The MLC could handle both statementing and paymenting.[5]

While Mr. Thompson seems to be focused on the Q1 2021 distribution date for royalties payable in the normal course, the other significant statementing and paymenting date is July 1, 2021 when the first unmatched distribution is to be paid under Title I.  There are also the obvious and expressly stated “public notice of unclaimed royalties” reporting requirements for The MLC’s public facing website listing all unmatched songs (or shares of songs) and publicity efforts for the unmatched.[6]  This provision, too, is glitchy, but  presumably will come into effect soon.  I realize there may be some side deals cut regarding extending that statutory payment date, but it would at least be a confidence building exercise to know that The MLC could make the unmatched payment as of the statutory date if called upon to do so. 

Songwriters have very little visibility into The MLC’s operations except what came out at the Copyright Office panels, for which I am grateful, and also various interviews.  There is little substantive information in the press, and even less on The MLC’s website.  Therefore, it would be very helpful if the Office could require The MLC to demonstrate to the public how its platform is to function.  Such a demonstration might bring helpful suggestions from their peers or the ex-US CMOs that have been operating for decades.

It would also be helpful if the Office promulgated a bright line regulation that told songwriters around the world if the July 1, 2021 goal posts have moved and if so where they have been moved to.  I must say I have somewhat lost the page on this, given former Register Temple’s last testimony to the House Judiciary Committee about who has agreed what on delaying distribution.  This rulemaking would be a great opportunity to tell the world if and how the insiders have decided to change the law.

As the House Judiciary Committee stated:

Testimony provided by Jim Griffin at the June 10, 2014 Committee hearing highlighted the need for more robust metadata to accompany the payment and distribution of music royalties….In an era in which Americans can buy millions of products via an app on their phone based upon the UPC code on the product, the failure of the music industry to develop and maintain a master database has led to significant litigation and underpaid royalties for decades. The Committee believes that this must end so that all artists are paid for their creations and that so-called ‘‘black box’’ revenue is not a drain on the success of the entire industry.[7]

Having accomplished their goal through compulsory legislation, we are all watching the database cadre get to work and looking forward to learning how it is done from their teaching.

Alternatively, as is widely suspected among some songwriters I have spoken to, The MLC might rely on HFA’s statementing and paymenting functionality to limp along by sending necessary but not sufficient statements to HFA publishers or publishers that HFA can match.  This would be, essentially, the same process that got a couple of HFA’s licensing clients sued repeatedly, and ironically led to the Title I safe harbor in the first place. 

Absent proper transparency in the runup to the License Availability Date, any sudden drop in revenue would catch songwriters by surprise.  In the time of the pandemic, such a sudden contraction of income could be even more devastating than usual.[8]

Transparency would help shine sunlight on that problem.  While The MLC may give interviews and appear on panels describing their activities, we should remember the words of the great Bruin John Wooden who cautioned that we should not mistake activity for achievement.  If you practice free throws by yourself all weekend, it doesn’t mean you’ll be a better player with the team at Monday practice—or that the team is any more likely to win when it is game time at Pauley on Saturday.


[1] Transcript, United States Copyright Office Unclaimed Royalties Study Kickoff Symposium (Dec. 6, 2019) at 28 ln 15 hereafter “Kickoff Transcript”.

[2] Tatania Cirisano, Mechanical Licensing Collective Selects Leadership, Partners for Copyright Database, Billboard (November 26, 2019).

[3] Kickoff Transcript at 40 ln 2.

[4] Kickoff Transcript at 40-41.

[5] It is well to note that such a contraction probably would not affect direct licenses or HFA’s modified compulsory licenses.

[6] 17 U.S.C. § 115 (d)(3)(J)(iii).

[7] House Report at 8.

[8] Songwriters are already expecting lower royalties in January 2021 according to BMI’s President and CEO Mike O’Neil: “[We] anticipate an impact in January 2021, when today’s performances and corresponding licensing dollars (2nd quarter 2020) will be reflected in your royalty distributions. While you may see a lower distribution that quarter than you might typically receive under ordinary circumstances, given BMI’s business model, we have the time and ability to plan for this outcome.” A Message from Mike O’Neil, BMI.com (April 7, 2020) available at https://www.bmi.com/news/entry/a-message-from-bmi-president-ceo-mike-oneill-regarding-royalty-payments

Is The MLC Updating the HFA Database?

The MLC announced an aspirational tool for publishers to confirm whether the MLC’s data is correct for their songs.  Apparently this is planned to be a quality control check for song metadata that The MLC has already acquired. As far as we can tell, the tool doesn’t actually exist yet.

VaporwareHere’s the press release language:

For Music Publishers, Administrators and CMOs: Data Quality Initiative (DQI)
The MLC created the Data Quality Initiative (DQI) to provide a streamlined way for music publishers, administrators and foreign collective management organizations (CMOs) to compare large schedules of their musical works’ data against The MLC’s data. Through the DQI, The MLC will provide participants with reports that highlight the discrepancies between the two sets of data so that they can more easily address those discrepancies and improve the quality of The MLC’s data.

The MLC has begun working directly with a number of music publishers and administrators to on-board them into the initiative. The MLC is also working with software vendors to help them enhance their platforms to enable users of their systems to participate in the initiative. The MLC looks forward to working with other music publishers, administrators, CMOs and software system vendors interested in participating in The MLC’s Data Quality Initiative.

“One of the biggest and most time-consuming challenges for music publishers, administrators and CMOs is checking the accuracy of their musical works’ data,” said Richard Thompson, CIO of The MLC. “We launched the Data Quality Initiative to help those parties increase the efficiency and effectiveness of this process. Participants in the initiative will be able to see where their musical works data does not match The MLC’s data, so that they can then take the necessary corrective action.”

Of course, The MLC has yet to permit songwriters (or anyone for that matter) to register their songs with The MLC at least not publicly.  Neither have they given anyone access to whatever data they actually have ingested–and still won’t with the DQI tools. When you use the DQI tool, you sit outside The MLC’s database and they give you “reports” so you may take “the necessary corrective action”.  At your own expense, of course.  You know, “Play Your Part On Your Dime to Keep Us Relevant.”

So if the goal of the Data Quality Initiative is for “The MLC [to] provide participants with reports that highlight the discrepancies between the two sets of data so that they can more easily address those discrepancies and improve the quality of The MLC’s data” we have to ask how did The MLC come to have any data to check for quality control in the first place?

Chances are pretty good that the source of The MLC’s data set is the Harry Fox Agency–if they’ve even bothered to copy the HFA data into The MLC’s database.  (One reason they send you a “report” is so the source of that report is not disclosed as if it were just the HFA database being queried, it might raise some hackles among songwriters and especially the DLC who is paying millions for the whole show.)

As has been noted, The MLC’s Richard Thompson announced that The MLC was working with HFA since The MLC was first designated by the Copyright Office as the MLC. (even before they announced that HFA was their vendor)  This is the HFA that services Spotify.  Spotify has been sued…ahem…a number of times for failures to license songs in historic litigation that led to their latest get-out-of-jail-free goal-post-moving exercise also known as the Music Modernization Act.  In fact, HFA is currently being sued alongside Spotify by Eminem’s publishers for all sorts of nasty things (which have yet to be proved).  But make no mistake, HFA was picked as best of breed by everyone’s favorite MLC, The MLC.

So what The MLC is really saying here is that they want everyone to take the time to check your own data against the HFA database and then correct it.  And who wants to bet that all those corrections–which could be a vast number of corrections and song-share updates–will end up back at HFA for HFA to use as it chooses (or its Rumblefish affiliate).

Play Your Part for HFA

But wait, there’s more.  Don’t forget:  The reason for this exercise in data cleaning is to “improve the quality of The MLC’s data“.  Why do you care about the quality of The MLC’s data? Very simple.  The government makes you do it.  What could be worse than a compulsory license?  A compulsory license with a safe harbor for massive infringers like Spotify and an industry-wide market share black box controlled by the for-profit companies that most benefit from the market share black box.

So what The MLC is really saying is “play your part” to “improve the quality of The MLC’s data” or we will take your money and there’s sweet F-all that you can do about it.  In the middle of a global pandemic.  The truth doesn’t read quite so well, right?  Oh, and by the way–you get to pay the costs of this data clean up job yourself even though it’s for the benefit of The MLC.  And why are you compelled to cover those costs?

Because they’ll take your compulsory royalties if you don’t.  And given the way these people work, maybe even if you do.  How would you ever know?

But wait, there’s still more.  Remember that the Eminem publisher’s case is about Spotify’s failure to match properly which is a condition of the MMA safe harbor that somebody decided was a good idea for the rest of us.  Let’s say that those publishers are wrong and that the services have actually been matching like crazy to keep their safe harbor (albeit in the background because the sainted MMA does not have any oversight or transparency about matching).

We don’t believe this, of course.  But let’s just say that they’re wrong for argument’s sake.

If The MLC got their data from the services instead of from HFA, then presumably all that matching being done by the biggest tech companies in human history would probably result in a greater match rate than HFA–particularly since HFA has been at the heart of many, many lawsuits against their clients for failing to match.  Let’s face it–many, many publishers have already burned a huge amount of energy fixing Google’s weak Content Management System alone.  Want to bet that CMS has a higher match rate than HFA?

So we don’t think that the song data that is being checked so you can “Play Your Part On Your Dime” is from anywhere but HFA.  We also think that if no one stops them, The MLC will simply hand over all those corrections to HFA for use in its own database for unrelated clients, such as for bundled performance licenses.  And who benefits from that besides HFA?  If you said the publishers with direct deals on services that engage HFA or Rumblefish to handle their licensing,  you probably would not be too far wrong.

Remember this?

Facebook Inc. has engaged HFA’s Rumblefish services to offer to publishers the opportunity to enter into a direct license agreement with Facebook for Facebook, Instagram, Messenger and Oculus. This opportunity is available to all publishers.

This license agreement will grant Facebook Inc. reproduction, display, synchronization, and public performance rights. As an HFA Affiliate you have already authorized HFA to act on behalf of your publisher with respect to licensing offers for the rights mentioned above other than performance, which means we need your written permission to accept this offer on your behalf.

So be sure to fire up that credit card and “Play Your Part”.  And be quick about it.  Your betters are waiting.

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

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

By Chris Castle

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

Here it is:

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

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

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

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

Plain Meaning

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

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

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

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

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

Holding Periods Maketh the Black Box

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

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

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

What Does Accrued but Unclaimed Even Mean?

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

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

Borrowing from Frankie to Pay Big Paulie

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

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

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

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

Required Transparency

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

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

Notice to Songwriters

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

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

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

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

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

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

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

Paying Songwriters Who Claim or Are Matched After the Loan

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

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

Yield Not Unto Temptation:  Detection Leads to Correction

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

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

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

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

[1] 17 U.S.C. § 115 (d)(7)(C).

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

[3] 17 U.S.C. §115 (d)(3)(H)(i).

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

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

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

Copyright Office Regulates @MLC_US: Selected Public Comments on MLC Transparency: @MusicReportsInc

This post first appeared on Artist Rights Watch.

[Editor Charlie sez: The U.S. Copyright Office is proposing many different ways to regulate The MLC, which is the government approved mechanical licensing collective under MMA authorized to collect and pay out “all streaming mechanicals for every song ever written or that ever may be written by any songwriter in the world that is exploited in the United States under the blanket license.”  The Copyright Office is submitting these regulations to the public to comment on.  The way it works is that the Copyright Office publishes a notice on the copyright.gov website that describes the rule they propose making and then they ask for public comments on that proposed rule.  They then redraft that proposed rule into a final rule and tell you if they took your comments into account. They do read them all!

The Copyright Office has a boatload of new rules to make in order to regulate The MLC.  (That’s not a typo by the way, the MLC styles itself as The MLC.)  The comments are starting to be posted by the Copyright Office on the Regulations.gov website.  “Comments” in this world are just your suggestions to the Copyright Office about how to make the rule better.  We’re going to post a selection of the more interesting comments.

There is still an opportunity to comment on how the Copyright Office is to regulate The MLC’s handling of the “black box” or the “unclaimed” revenue.  You can read about it here and also the description of the Copyright Office Unclaimed Royalties Study here.  It’s a great thing that the Copyright Office is doing about the black box, but they need your participation!

This comment from Music Reports gives some interesting insights into how The MLC is favoring the NMPA’s formerly wholly-owned Harry Fox Agency (HFA) which has been on the wrong side of most of the licensing debacles.  Chris posted some analysis on MediaNet’s comment about criticisms of the HFA-The MLC contract as well as its rather odd timeline as revealed at The Copyright Office roundtables on the next cluster jam, the unclaimed royalties.  At least that has the entertainment value of watching them steal in plain site with the Copyright Office drinking game of who will make the excuses for them this time like we don’t notice.  We’re not big MRI fans (or MediaNet fans for that matter), but when they’re right, they’re right.

The sad truth is that this entire MLC exercise has become about the rich getting richer from a data land grab for independent songwriters and publishers who have been duped into thinking it’s all for their benefit.  It was all so predictable, but nobody listened.  This is what they wanted, and now they’ve got it.  How about a rule that says if you had your fingerprints on any part of the debacle of the last 20 years, you are immediately disqualified?  Bye bye HFA, NMPA, MRI, MediaNet.  Unfortunately that is not and never will be the rule because these are the same people who make the rules and are the same people who gave songwriters frozen mechanicals from 1909-1978 and are still freezing the 9.1¢ statutory royalty for fourteen years.

MRI could have done with some editing, but stick with it, they make a lot of sense.]

Read Music Reports entire comment here.

Music Reports generally agrees with, endorses, and echoes the views of MediaNet as stated in the response to the NOI it filed today.

Music Reports also takes note of the MLC’s selection of HFA as a major provider of the capabilities required for its core operations. While the MLC is narrowly limited by the MMA to the principal purpose of administering the blanket license for Section 115-compliant audio-only streaming music services in the United States, and specifically prohibited from storing data about or administering public performance licenses, HFA/SESAC is not so constrained.

On the contrary, HFA/SESAC is free, as a non-regulated, for profit commercial music rights administration service, to administer any type of mechanical licenses. Moreover, SESAC, administers performance rights on a for-profit basis in competition with other PROs. Being hired by the MLC does not change the fact that HFA/SESAC is in competition with other commercial music rights administration services that are not the beneficiaries of a long term, highly-paid contract with the MLC. This is fair enough, so far is it goes.

snakeoil-cover-700x400-1

But as noted above, the boundaries between HFA/SESAC’s database and that which the MLC must build and make publicly available are completely unknown [want to bet that’s because they don’t exist?], as is the timeframe during which the former will substitute for the latter, and whether a proprietary MLC database built independently of HFA’s data will ever be the basis on which the MLC renders royalty distributions.

What is known, however, is that the MLC will enjoy publicity generated by its own statutory mandates (subsidized by the DLC), by the DLC itself, and by the Office, all of whom are authorized and required to devote budgetary allocations to direct publishers’ attention to registering their rights data with the MLC (the database of which is, for the foreseeable future, that of HFA/SESAC). Notwithstanding that the primary purpose of these provisions may be to publicize the existence of the database and of available unclaimed royalties, the consequence will be the direction of resources toward the focus of copyright owners’ attention on just one of several important, pre-existing music rights registries. This is in effect a set of reinforcing government subsidies of which one private enterprise, in competition with other marketplace actors, is the beneficiary.

To the extent HFA/SESAC directly benefits unfairly from a privileged place in the data ecosystem by virtue of this arrangement, the goal of the MMA to create a healthier music rights administration ecosystem will be perversely harmed by the creation of an uneven playing field that penalizes the investments in data made by other services. To be sure, other commercial services are free to compete with HFA to offer services to the MLC and others in the marketplace. But over time, a privileged place in the market’s information flow may distort competition to the determent of copyright owners and their administrators, DMPs, and the public.

Luckily, the Office can prevent this result quite simply by requiring that the MLC provide access to its public database on a competition-neutral basis.

As was noted above, there is an important temporal aspect to the management of music rights data. In order for two administrators to efficiently interoperate, they must be able to have a more or less shared contemporary view of the data about the works they are administering, even if they don’t always agree on every detail.

Therefore, the specific prescription called for here is a combination of the points made in the previous sections above: (a) the Office should use its authority under the MMA to adopt such regulations as it deems necessary to clarify that the public database which the MLC must establish and maintain will be identical to or at least contain the same data as the database on which the MLC will distribute royalties; (b) the MLC should make its public database available contemporaneously with the commencement of its royalty distribution efforts; and (c) the MLC must offer eligible parties bulk, machine-readable access to such data “on a basis that is both comprehensive and as frequent as necessary to efficiently manage the licensing and royalty distribution activities of the mechanical licensing collective itself, and not less than daily access to changed information within a day of any change to such information.”