Category: Songwriter News

On the Internet, “Partners” Don’t Hear You Scream: Spotify CEO Makes a $350M “Bundle” While Sticking Songwriters with an ESG “Bundle” of Crap

Here’s a quote for the ages:

MICHAEL BURRY

One of the hallmarks of mania is the rapid rise and complexity 
of the rates of fraud. And did you know they’re going up?

The Big Short, screenplay by Charles Randolph and Adam McKay,
based on the book by Michael Lewis

We have often said that if screwups were Easter eggs, Spotify CEO Daniel Ek would be the Easter bunny, hop hop hopping from one to the next. That’s is not consistent with his press agent’s pagan iconography, but it sure seems true to many people.

This week was no different. Mr. Ek cashed out hundreds of millions in Spotify stock while screwing songwriters hard with a lawless interpretation of the songwriter compulsory license. That interpretation is so far off the mark that he surely must know exactly what he is doing. It’s yet another manifestation of Spotify’s sudden obsession with finding profits after a decade of “get big fast.”

The Bunny’s Bundle

Let’s look under the hood at the part they don’t tell you much about. Mr. Ek evidently has what’s called a “10b5-1 agreement” in place with Spotify allowing staggered sales of incremental tranches of the common stock. Those sales have to be announced publicly which Spotify complied with (we think). And we’ll say it again for the hundredth time, stock is where the real money is at this stage of Spotify’s evolution, not revenue.

As a founder of Spotify, Mr. Ek holds founders shares plus whatever stock awards he has been granted by the board he controls through his supervoting stock that we’ve discussed with you many times. These 10b5-1 agreements are a common technique for insiders, especially founders, who hold at least 10% of the company’s shares, to cash out and get the real money through selling their stock.

A 10b5-1 agreement establishes predetermined trading instructions for company stock (usually a sale so not trading the shares) consistent with SEC rules under Section 10b5 of the Securities and Exchange Act of 1934 covering when the insider can sell. Why does this exist? The rule was established in 2000 to protect Silicon Valley insiders from insider trading lawsuits. Yep, you caught it–it’s yet another safe harbor for the special people. Presumably Mr. Ek’s personal agreement is similar if not identical to the safe harbor terms because that’s why the terms are there.

As MusicBusinessWorldWide reported, Mr. Ek recently sold $118.8 million in shares of Spotify at roughly the same time that he likely knew Spotify was planning to change the way his company paid songwriters on streaming mechanicals, or as it’s also known “material nonpublic information”.

As Tim Ingham notes in MusicBusinessWorldwide, Mr. Ek has had a few recent sales under his 10b5-1 agreement: “Across these four transactions (today’s included), Ek has cashed out approximately $340.5 million in Spotify shares since last summer.” Rough justice, but I would place a small wager that Ek has cashed out in personal wealth all or close to all of the money that Spotify has paid to songwriters (through their publishers) for the same period. In this sense, he is no different than the usual disproportionately compensated CEOs at say Google or Raytheon. 

Stock buybacks artificially increase share price. Now why might Spotify want to juice its own stock price?

Spotify Shoves a “Bundled” Rate on Songwriters

Spotify’s argument (that may have caused a jump in share price) claims that its recent audiobook offering made Spotify subscriptions into a “bundle” for purposes of the statutory mechanical rate. (While likely paying an undiscounted royalty to the books.) 

That would be the same bundled rate that was heavily negotiated in the 2021-22 “Phonorecords IV” proceeding at the Copyright Royalty Board at great expense to all concerned, not to mention torturing the Copyright Royalty Judges. These Phonorecords IV rates are in effect for five years, but the next negotiation for new rates is coming soon (called Phonorecords V or PR V for short). We’ll get to the royalty bundle but let’s talk about the cash bundle first.

You Didn’t Build That

Don’t get it wrong, we don’t begrudge Mr. Ek the opportunity to be a billionaire. We don’t at all. But we do begrudge him the opportunity to do it when the government is his “partner” so they can together put a boot on the necks of songwriters. This is how it is with statutory mechanical royalties; he benefits from various other safe harbors, has had his lobbyists rewrite Section 115 to avoid litigation in a potentially unconstitutional reach back safe harbor, and he hired the lawyer at the Copyright Office who largely wrote the rules that he’s currently bending. Yes, we do begrudge him that stuff.

And here’s the other effrontery. When Daniel Ek pulls down $340.5 million as a routine matter, we really don’t want to hear any poor mouthing about how Spotify cannot make a profit because of the royalty payments it makes to artists and songwriters. (Or these days, doesn’t make to some artists.) This is, again, why revenue share calculations are just the wrong way to look at the value conferred by featured and nonfeatured artists and songwriters on the Spotify juggernaut. That’s also the point Chris made in some detail in the paper he co-wrote with Professor Claudio Feijoo for WIPO that came up in Spain, Hungary, France, Uruguay and other countries.

Spotify pays a percentage of revenue on what is essentially a market share basis. Market share royalties allows the population of recordings to increase faster than the artificially suppressed revenue, while excluding songwriters from participating in the increases in market value reflected in the share price. That guarantees royalties will decline over time. Nothing new here, see the economist Thomas Malthus, workhouses and Charles Dickens‘ Oliver Twist.

The market share method forces songwriters to take a share of revenue from someone who purposely suppressed (and effectively subsidized) their subscription pricing for years and years and years. (See Robert Spencer’s Get Big Fast.). It would be a safe bet that the reason they subsidized the subscription price was to boost the share price by telling a growth story to Wall Street bankers (looking at you, Goldman Sachs) and retail traders because the subsidized subscription price increased subscribers.

Just a guess. 

The Royalty Bundle

Now about this bundled subscription issue. One of the fundamental points that gets missed in the statutory mechanical licensing scheme is the compulsory license itself. The fact that songwriters have a compulsory license forced on them for one of their primary sources of income is a HUGE concession. We think the music services like Spotify have lost perspective on just how good they’ve got it and how big a concession it is.

The government has forced songwriters to make this concession since 1909. That’s right–for over 100 years. A century.

A decision that seemed reasonable 100 years ago really doesn’t seem reasonable at all today in a networked world. So start there as opposed to the trope that streaming platforms are doing us a favor by paying us at all, Daniel Ek saved the music business, and all the other iconographic claptrap.

Has anyone seen them in the same room at the same time?

The problem with the Spotify move to bundled subscriptions is that it can happen in the middle of a rate period and at least on the surface has the look of a colorable argument to reduce royalty payments. If you asked songwriters what they thought the rule was, to the extent they had focused on it at all after being bombarded with self-congratulatory hoorah, they probably thought that the deal wasn’t “change rates without renegotiating or at least coming back and asking.”

And they wouldn’t be wrong about that, because it is reasonable to ask that any changes get run by your, you know, “partner.” Maybe that’s where it all goes wrong. Because it is probably a big mistake to think of these people as your “partner” if by “partner” you mean someone who treats you ethically and politely, reasonably and in good faith like a true fiduciary. 

They are not your partner. Don’t normalize that word.

A Compulsory License is a Rent Seeker’s Presidential Suite

But let’s also point out that what is happening with the bundle pricing is a prime example of the brittleness of the compulsory licensing system which is itself like a motel in the desolate and frozen Cyber Pass with a light blinking “Vacancy: Rent Seekers Wanted” surrounded by the bones of empires lost. Unlike the physical mechanical rate which is a fixed penny rate per transaction, the streaming mechanical is a cross between a Rube Goldberg machine and a self-licking ice cream cone. 

The Spotify debacle is just the kind of IED that was bound to explode eventually when you have this level of complexity camouflaging traps for the unwary written into law. And the “written into law” part is what makes the compulsory license process so insidious. When the roadside bomb goes off, it doesn’t just hit the uparmored people before the Copyright Royalty Board–it creams everyone.

David and friends tried to make this point to the Copyright Royalty Judges in Phonorecords IV. They were not confused by the royalty calculations–they understood them all too well. They were worried about fraud hiding in the calculations the same way Michael Burry was worried about fraud in The Big Short. Except there’s no default swaps for songwriters like Burry used to deal with fraud in subprime mortgage bonds. 

Here’s how the Judges responded to David, you decide if they are condescending or if the songwriters were prescient knowing what we know now:

While some songwriters or copyright owners may be confused by the royalties or statements of account, the price discriminatory structure and the associated levels of rates in settlement do not appear gratuitous, but rather designed, after negotiations, to establish a structure that may expand the revenues and royalties to the benefit of copyright owners and music services alike, while also protecting copyright owners from potential revenue diminution. This approach and the resulting rate setting formula is not unreasonable. Indeed, when the market itself is complex, it is unsurprising that the regulatory provisions would resemble the complex terms in a commercial agreement negotiated in such a setting.

PR IV Final Rule at 80452 https://app.crb.gov/document/download/27410

It must be said that there never has been a “commercial agreement negotiated in such a setting” that wasn’t constrained by the compulsory license. It’s unclear what the Judges even mean. But if what the Judges mean is that the compulsory license approximates what would happen in a free market where the songwriters ran free and good men didn’t die like dogs, the compulsory license is nothing like a free market deal.

If the Judges are going to allow services to change their business model in midstream but essentially keep their music offering the same while offloading the cost of their audiobook royalties onto songwriters through a discount in the statutory rate, then there should be some downside protection. Better yet, they should have to come back and renegotiate or songwriters should get another bite at the apple.

Unfortunately, there are neither, which almost guarantees another acrimonious, scorched earth lawyer fest in PR V coming soon to a charnel house near you.

Eject, Eject!

This is really disappointing because it was so avoidable if for no other reason. It’s a great time for someone…ahem…to step forward and head off the foreseeable collision on the billable time highway. The Judges surely know that the rate calculation is a farce

But the Judges are dealing with people negotiating the statutory license who have made too much money negotiating it to ever give it up willingly although a donnybrook is brewing. This inevitable dust up means other work will suffer at the CRB. It must be said in fairness that the Judges seem to find it hard enough to get to the work they’ve committed to according to a recent SoundExchange filing in a different case (SDARS III remand from 2020).  

That’s not uncharitable–I’m merely noting that when dozens of lawyers in the mechanical royalty proceedings engage in what many of us feel are absurd discovery excesses. When there are stupid lawyer tricks at the CRB, they are–frankly–distracting the Judges from doing their job by making them focus on, well, bollocks. We’ll come back to this issue in future. The dozens and hundreds of lawyers putting children through college at the CRB–need to take a breath and realize that judicial resources at the CRB are a zero sum game. This behavior isn’t fair to the Judges and it’s definitely not fair to the real parties in interest–the songwriters.

Tell the Horse to Open Wider

A compulsory license in stagflationary times is an incredibly valuable gift, and when you not only look the gift horse in the mouth but ask that it open wide so you can check the molars, don’t be surprised if one day it kicks you.

A version of this post first appeared on MusicTech.Solutions

by Trichordist Editor

The First Shot Across the Bow at the MLC’s “Redesignation” Proceeding #TheReup

We must always tell what we see. Above all, and this is more difficult, we must always see what we see.
Charles Peguy

By Chris Castle

The Reup is on! MTP readers will remember that The MLC, Inc. is in the beginning of its “redesignation” proceeding before the U.S. Copyright Office that we call “the rep,” because…because….well, you have to laugh at some point. Having appointed (or “designated”) The MLC, Inc. as the statutory mechanical licensing collective in 2019, the Copyright Office is required by statute to review The MLC, Inc. to see how they are doing with their exclusive monopoly over songwriter streaming mechanical collections.

It’s important to remember that the mechanical licensing collective (lower case) is a statutory body. Congress tasked the head of the Copyright Office with selecting an entity to actually do the work. In a shocker that rocked the industry, the Copyright Office selected (or “designated”) the favorite corporation of the National Music Publishers Association and the Nashville Songwriters Association International that styled itself “The MLC, Inc.” 

The MLC, Inc. then turned right around and selected the Harry Fox Agency as its data vendor to actually run the accounting part of the collective–another shocker. If you thought you were going to escape the hubris and incompetence of HFA under the glorious revolution of the Music Modernization Act, tough break. So it is now the Copyright Office’s decision to either redesignate The MLC, Inc. (and by default, HFA) for another five years of holding onto your money in their vast black box, or find someone else.

And just to be clear, these exclusive appointments or “designations” last for five years. Every five years, Congress required the Copyright Office to take a critical look at the wisdom of their prior decision and determine after soul-searching and self-criticism whether they should ratify their previous genius by extending the monopoly another five years. As Congress said in the legislative history narrative:

The Register [the head of the Copyright Office] is allowed to re-designate an entity to serve as the collective every 5 years after the initial designation. Although there is no guarantee of a continued designation by the collective, continuity in the collective would be beneficial to copyright owners so long as the entity previously chosen to be the collective has regularly demonstrated its efficient and fair administration of the collective in a manner that respects varying interests and concerns. In contrast, evidence of fraud, waste, or abuse, including the failure to follow the relevant regulations adopted by the Copyright Office, over the prior five years should raise serious concerns within the Copyright Office as to whether that same entity has the administrative capabilities necessary to perform the required functions of the collective. In such cases, where the record of fraud, waste, or abuse is clear, the Register should give serious consideration to the selection of a new entity even if not all criteria are met pursuant to section 115(d)(3)(B)(iii).

So the way this is going to go down according to the Copyright Office is that they will seek a kind of thesis defense from each of The MLC, Inc. and the MLC’s counterpart for the digital services called the Digital Licensee Coordinator or “the DLC” which we often forget is there. Then the public gets to comment on how things are going.

Let’s understand how this game is played. Nobody likes to open the kimono and have their operations examined. But opening the kimono is actually a much bigger deal for the MLC than for the DLC. The MLC has a lot of functionality that perpetuates the same old spaghetti code from HFA and the need to hide it from sunlight. In my view the sense of entitlement and hubris is overwhelmingly stronger at The MLC, Inc. than at the DLC. Remember, the DLC pretty much just writes the overpriced checks to keep MLC executives in the style to which they have become accustomed (see Trichordist “Know Your MLC 2022“).

We are starting to get a sense of how the DLC is going to approach the reup proceeding given a recent blog post by Graham Davies, the new head of the Digital Media Association. DiMA essentially is the DLC. Technically, the DLC’s mission is to represent all users of the blanket mechanical license, and I think perhaps for the first time, the DLC will represent all the users both large and small, not just DiMA members. Let’s take a look at some of the points Graham raised.

The Insult of Governance

But first, remember that the MMA created the first US mechanical licensing CMO. This was an event that had been coming for oh, say 100 years round numbers. The first difference between the US and most other countries is that in the US there is not equal board representation between publishers and songwriters. This is an insult to songwriters. 

That’s right–in the rest of the world, songwriters have at least equal representation. Just call it what it is, it’s an insult. And not a casual insult or the insult of low expectations. This insult is right in your face.

There will be a lot of rending of garments about the unfairness of the MLC’s board composition and that’s all fine, but know this: You will not change the board composition until you change the mindset that produced the board composition.

What is astonishing about how this happened is that before they get to Washington, all these publishers with board seats have good relations with songwriters and value their writers. Do we have arguments inside the family? Sure. But something happens to these publishers when they get to Washington, DC and they go rogue or they are encouraged to go rogue. 

So I would encourage these board members to come back to your values and what you hold dear and don’t listen to the bad advice. The bad advice didn’t build your companies; your relations with your songwriters did. Yet there is such hostility toward this board composition that it will take you years to overcome the insult and the distrust it produced. It didn’t have to happen that way and it should not be allowed to continue.

No Free Lunch

The next big difference is that the cost of standing up and operating the MLC is born by the licensees. There is a reason that this doesn’t happen in any other country–it is a bullshit idea. It OBVIOUSLY produced an inherent conflict of interest at the outset. Does it shovel money onto the kitchen tables of the insiders? Of course. Does it feed into salaries, bonuses and T&E of the MLC? Oh, yes. So let’s see what Graham Davies has to say about this one.

For starters, here’s a headline: THE MONEY IS NOT HAPPY. Get it? What do you think happens when the money is not happy? Maybe, just maybe, you think they might not want to keep paying? Maybe just maybe they gave you your lead for five years and let you get good and hooked before they started reeling you in?

As Graham says:

All around the world, it is the rightsholders who bear the cost of the collectives licensing their rights, and copyright offices or similar government bodies often have oversight powers over the collectives to ensure that royalties are distributed fairly and the collectives operate efficiently.  

In the US, unlike anywhere else in the world, legislators placed the burden of funding the collective’s operations on the licensees as opposed to the rightsholders. This particular arrangement was a feature of the statute, but means a collective’s traditional incentives for optimum performance are not inherently built in and may become skewed. [Now there’s a shocker.]

This structure makes it even more important that the Copyright Office ensures fair and efficient operation of the collective, including for those who fund it.

How can you read that and not realize that THE MONEY IS NOT HAPPY. See what you see. Anyone who believed that the licensees large and small would just go on writing the checks for absurd salaries and ridiculous travel and entertainment expenses must be from Washington.

Oversight Culture Clash

This goes hand-in-hand with the true problem with the entire megillah which is where Graham starts: Lack of oversight. Don’t blow past this. 

Remember, DiMA represents the biggest corporations in commercial history and make no mistake–they own Washington, DC. So when the DiMA members look at this oversight issue, from their point of view the government works for them and the government is falling down on the job. The money is not happy. See what you see.

Oversight is a key part of Graham’s complaint.

As we embark on the redesignation process, oversight of the mechanical licensing collective is a key issue. Collective licensing is common for many rights in the music sector, because it is a sensible solution for reducing transaction costs and improving efficiencies between rightsholders and licensees….

The MMA mandated that the MLC be run by a Board made up largely of music publishers and some songwriters. While it makes sense for rights holders to have oversight over a collective of their rights, it has become apparent in the five years since the MMA was passed, that this structure, without guardrails and robust oversight, provides little incentive for the collective to carefully weigh risks and conduct rigorous cost-benefit analysis of decisions before action. [Like any CMO conducts a “rigorous cost-benefit analysis”–try not to laugh, but you get the idea.] This is of great importance because without a clearly circumscribed remit for The MLC, the positions the collective takes can have significant consequences for the functioning of the US music market.

The record shows that in passing the MMA, Congress chose to establish a collective that would serve as the administrator of  the mechanical blanket license….Congress [did not] intend to write the collective a blank check.  Indeed, Congress was astute in requiring that streaming services be responsible only for the reasonable costs of the collective. Such reasonable costs relate to the collective’s core functions – such as work registration and matching. Where The MLC has focused on these core functions, there is good work [no there isn’t], particularly in the context of the relatively short window from designation to operation [already making excuses]. However, where The MLC has gone beyond its remit, there has been, and continues to be cause for concern. Reasonable costs of the collective cannot include everything from traveling to distant countries to conduct outreach to songwriters far beyond the U.S. licensing system, to suing one of the licensees that pays its costs — using licensee money to pursue its allegations against a licensee on a novel legal theory. [This is the Pandora lawsuit filed by The MLC, Inc. I was wondering how long that would take to get under the skin.]

I take Graham’s point and understand his frustration (and discretion in not calling out the ridiculous salaries). But it must also be said that only lobbyists in the Imperial City would have drafted Title I of the MMA to provide for oversight of a private company by a government agency. That’s just idiotic. First of all, it’s really unfair to expect the Copyright Office to supervise the MLC’s travel and entertainment expenses. They barely have the resources to manage their own operations much less have oversight on Kris Ahrend’s tips in transit. It’s also just not in the cerebral culture of the Copyright Office to have the kind of dressing down relationship with the MLC that would be necessary for financial oversight. 

I also have to call bullshit on this complaint about costs being framed as an oversight issue. Yeah, sure, I guess on some level everything is an oversight issue. But if anything, this is an issue for the board of directors at the MLC which includes the DLC. But in most companies it’s a management issue for the CEO and the CFO. So if Graham has a beef about T&E (which sounds like a legitimate beef and is not the first I’ve heard of it), he needs to take it up with the management. You know, the management that reports to the board the DLC sits on (nonvoting or not).

Alternatively, the operating budget of the MLC comes through the Copyright Royalty Board which approves the budget in the form of the “Administrative Assessment.” The DLC can raise these complaints about spending in that forum as well and really should.

So Graham raises some important points that we should be aware of as the MLC enters its all-important reup proceeding. Stay tuned for responses.

by Trichordist Editor

MLC “ReUp” Proceeding Highlights Ownership Issues for Your Musical Works Database When You Correct To Collect?

Guest post By Chris Castle

Ever wonder who owns the registration data you have slaved to correct and recorrect at your own cost when you “Play Your Part” to “Correct to Collect” at the MLC?

Remember the sainted Music Modernization Act allowed the lobbyists a vehicle to create their mechanical licensing collective in the US that was going to solve all of Big Tech’s problems. The MMA, unsurprisingly, also gave Big Tech a brand new copyright infringement safe harbor arising out of the Spotify class actions. Generations of the children of lawyers and lobbyists will be put through college–thank you songwriters!

One of the few things Congress got right in Title I of the Music Modernization Act is the five-year review of the mechanical licensing collective. Or more precisely, whether the private company previously designated by the Copyright Office to conduct the functions of the Mechanical Licensing Collective (The MLC, Inc.) should have another five years to continue doing whatever it is they do.

Impliedly, and I think a bit unfairly, Congress told the Copyright Office to approve its own decision to appoint the current MLC or admit they made a mistake. This is yet another one of the growing list of oversights in the oversight. Wouldn’t it make more sense for someone not involved in the initial decision to be evaluating the performance of the MLC? Particularly when there are at least tens of millions of dollars changing hands as well as some highly compensated MLC employees, any one of whom makes more than the Copyright Royalty Judges. The MLC’s budget (paid by the services they oversee) was $32,900,000 in 2023 and will be $39,050,000 this year because, you know, the budget is indexed to inflation, just like streaming mechanicals…oh sorry. Not like streaming mechanicals.

Who Owns the Database?

What happens if the Register of Copyright actually fires The MLC, Inc. and designates a new MLC operator? The first question probably should be what is The MLC, Inc.’s plan for a hand off to a successor. But since that doesn’t exist, it instead should be what happens to the vaunted MLC musical works database and the attendant software and accounting systems which seem to be maintained out of the UK for some reason.

I actually raised this ownership question in a comment to the Copyright Office back in 2020. In short, my question was probably more of a statement: ‘‘The musical works database does not belong to the MLC or The MLC and if there is any confusion about that, it should be cleared up right away.” 

The Copyright Office had a very clear response:

While 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….Any use by the Office referring to the public database as ‘‘the MLC’s database’’ or ‘‘its database’’ was meant to refer to the creation and maintenance of the database, not ownership. [85 FR at 58172, text accompanying notes 30 and 31.]

So if the current operator of the MLC is fired, we know from the MMA and the Copyright Office guidance that one thing The MLC, Inc. cannot do is hold the database and its attendant systems hostage, or demand payment, or any other shadiness. These items do not belong to them so they must not assert control over that which they do not own. Neither does the database belong to any contractor if for no other reason than the MLC, Inc. cannot transfer to a contractor something that the MLC, Inc. doesn’t own in the first place.

Another thing that doesn’t belong to The MLC, Inc. is the hundreds of millions of black box money that the MLC, Inc. has failed to distribute in going on four years. I’ve even heard cynics suggest that the market share distribution of black box will occur immediately following The MLC, Inc.’s redesignation and the corresponding renewal of HFA’s back office contract which seems to be worth about $10 million a year all by itself.

What would also have been helpful would be for Congress to have required the Copyright Office to publish evaluation criteria for what they expected the MLC’s operator to actually do as well as performance benchmarks. Like I said, it’s a bit unfair of Congress to put the Copyright Office in the unprecedented position of evaluating such an important role with no usable guidance whatsoever. Surely Congress did not intend for the Copyright Office to have unfettered autonomy in deciding what standards to apply to their review of a quasi-governmental agency like the MLC? Yet Congress seems to have defaulted to the guardrail of the Administrative Procedures Act or some other backstop to sustain checks and balances on the situation.

But at least the ownership question is settled.

by Trichordist Editor

Show Me the Splits: Tiffany Red Illuminates Stealing Publishing

By Chris Castle
(A version of this post appeared on MusicTechPolicy and on Hypebot)

It’s unfortunately an old story, but that doesn’t make it right.

One of the most underpaid creatives in our business are songwriters who “just” write songs. “Just” is an odd word to use but it’s a common way to refer to those who give artists a voice because it really does all start with the song. And as Tiffany Red says in her video, the system is simply unjust.

“The system” is what has always been called “stealing publishing”. This is when an artist or a producer (and it happens with producers but for different reasons) threatens songwriters who created a song the artist may record with not covering that song unless the artist gets a chunk of the publishing. The amount can range all over the place, but often is at least 25% of the copyright. So not only are they not entitled to song’s earnings as a financial interest, they are definitely not entitled to the copyright because they created nothing.

On top of it, songwriters often have to eat many costs in order to get the song written, demoed and pitched. (I can’t tell you the number of times the songwriter demo essentially becomes the arrangement of the final recording, so “demo” is relative.). There’s a bunch of opportunities along the way for people to write themselves into the song when all they did was a job that they were probably being paid to do anyway. I have even encountered producers whose managers demanded a piece of publishing for the producer to even listen to an artist’s demos. 

On the producer side, some producers want a piece of all publishing on the record and if they actually write they want their contributor share as a writer ON TOP of the publishing they are already stealing. Why? What possesses anyone to think they are entitled to do this? And “entitled” is exactly the right word. 

One reason they steal publishing is because the producer royalty is unlikely to even recoup the producer advance in a streaming reality unless the track is a huge hit. (Remember that a producer gets a percentage of what the artist gets, say 30%ish, and the artist gets somewhere around 50% of the fraction of a penny per stream.) This is especially true of producers who enjoyed a lifestyle in the pre-streaming era and are trying to keep it going. It’s understandable, but that doesn’t make it right. 

And remember, the songwriter isn’t getting an advance. On top of the insult of stealing publishing, the artist has no intention of paying for it because the songwriter should consider themselves lucky to get the cover–which often is a career making record for the artist opening up income streams the songwriter never participates in.

When faced with these overreaching demands, songwriters have to make some hard choices. Occasionally I get to tell the artist’s team to fuck off. More often though–as Tiffany says–songwriters acquiesce.

I think Tiffany is also hitting at a point that Merck Mercuriadis made at the last Artist Rights Symposium that David hosts at the University of Georgia:

Let’s face it—this is insulting.  If I sat down and explained to my decent Greek working class parents that this is how songwriters get paid, they’d be shocked.  If you went to your bank manager and explained how songwriters get paid, they’d be shocked.  Doctors, lawyers, everyone who has some understanding of the economics of the world or what drives an industry and what creates value for an industry would be shocked by how songwriters are paid. 

But nobody can bring the frustration home like a songwriter on the receiving end of this injustice. Watch Tiffany’s video. Take 15 minutes out of your life and watch it from beginning to end with no distractions. She’s absolutely correct that until the artists stop, until they let their team know that stealing publishing is not acceptable and if they do it they are not only not helping the artist, but they’ll be fired–then it will start to change. 

She’s right about something else, too. A songwriter shouldn’t need a gatekeeper to protect them in a situation that should not be happening in the first place. There’s a line that we all learn from parents, teachers, coaches, mentors, the line between acceptable and unacceptable treatment of other humans, right and wrong if you like although that’s a bit simplistic. Stealing publishing is wrong, stealing publishing is on the wrong side of that line. This is what I think whenever I have to deal with the situation–how do you sleep at night?

Watch the video. it’s not a rant, it’s the truth.

by theinvisiblestagehand

Selected Comments on the Copyright Office Proposed Rule on Termination Rights and MLC Operations: Digital Licensee Coordinator

COLC-2022-0004-0089_attachment_1Download

The Copyright Office has asked for comments from the public on important issues for rulemakings under the Music Modernization Act. This will potentially affect the operations of The MLC and related rights especially because the Copyright Office recently extended the scope of that rulemaking. The proposal drew a mixed response.

We will be posting selected comments that we think might be interesting to Trichordist readers. The project is a bit wonky, but important to stay informed on. This comment by attorney Allison Stillman representing the Digital Licensee Coordinator (who controls the purse strings for The MLC) has some interesting complaints about The MLC that are food for thought in light of the MLC’s potential redesignation coming next year.

The DLC’s firm view is that any additional costs associated with a proposed rule that upends the practices of the entire industry, without actually facilitating the payment of royalties to songwriters or music publishers, as a matter of law would not be “reasonable collective total costs” that could be imposed on the DMPs, through the administrative assessment or otherwise….

As noted in the DLC’s Initial Comments…the [Copyright Office] raises important issues regarding the need for the MLC to have a fair, efficient and transparent methodology for administering corrections and adjustments to payments. These are issues that apply…more broadly to any form of payment adjustment that may be necessary….

While some other commenters echoed similar concerns, the MLC suggests that error corrections, adjustments, disputes and payee changes outside of the specific and purportedly unique termination context “do not represent a controversial topic that would require regulation of operational details” and merely constitute part of “the normal course of business, which The MLC can administer without additional regulation.”

But the DLC members’ experiences in waiting for corrections and adjustments from the MLC where the issue has arisen so far indicate otherwise, and that is before the MLC has had to operationalize the anticipated regular practice of DMPs’ over-estimating monthly royalties [or Phonorecords III retroactive adjustments]…. The same principles underlying any regulatory approach to ensuring the prompt and transparent correction of erroneous payments to one rightsholder vs another as a result of copyright termination apply equally to require the prompt and transparent correction of [other payments to DMPs or rights holders].

by thetrichordist

Copyright Office Rejects George Johnson’s Request for a new Study of the Effectiveness of the Compulsory License as Part of MLC Five Year Review

Before we get to George’s letter, a little context. If you’re coming to this subject for the first time, mechanical royalties are paid to songwriters (and their publishers) for the mechanical reproduction of their songs. The federal government established a compulsory license for this purpose and corresponding royalty rates starting in 1909. The license has evolved over time and now includes physical configurations like vinyl (paid by record companies) and digital transmissions like streaming (paid by DSPs like Spotify).

Until the Music Modernization Act, songs were licensed on a song-by-song basis notice-based system except for catalog licenses. Or at least theoretically–pre-MMA most of the streaming services didn’t take advantage of the statutory license they were entitled to because they couldn’t be bothered. (Until David’s class action called them out. We note that the Copyright Office, in particular a former lawyer at the Office now representing Big Tech against songwriters, allowed the streamers to get away with tens of millions of flawed “address unknown NOIs” that a cynic might say was a catastrophe with a purpose. Chris has an article about this fiasco that went largely unreported except by Hypebot.)

Fast forward to today. Every five years the Copyright Office is required to review the company that the Office has designated to run the Mechanical Licensing Collective. Currently that entity is The MLC, Inc. designated by the Copyright Office on July 8, 2019. Remember that The MLC, Inc. was independently chosen by the Copyright Office as the best in breed of all applicants after a rather odd beauty contest. This is their thing, and the MLC, Inc. is their idea. So do you think that creates an incentive to create a five year review that everything is peachy and they were geniuses for creating this dumpster fire?

Even though the first five year review is set to happen next year, Congress has already held a hearing about the MLC, Inc. which frankly did not go well for the company. Nobody got their ears nailed to the barn door, but the hearing was not the usual love fest. The review is to be conducted by the Copyright Office, so there’s a question as to why Congress decided that the House Judiciary Committee IP Subcommittee should conduct the first of what may be multiple hearings.

Everyone assumed that the Copyright Office would choose the first MLC as the NMPA-backed entry, The MLC, Inc. That company was so confident of winning the contract their confidence made people ask why anyone else bothered to try out. And when the next charade resulted in The MLC, Inc. choosing the former NMPA affiliate the Harry Fox Agency as their data vendor, everyone knew there was definitely gambling at Rick’s. All paid for by Big Tech (or maybe we should say Really Big Tech) because not even the taxpayer is stupid enough to fall for this BS. After all, nothing blew up and nobody died.

So the lobbyists and lawyers and the Copyright Office were busily building up a new bureaucracy to drive mechanical licensing back to the future and essentially preserve the 1909 compulsory license that George refers to. Because what they didn’t do was throw out the compulsory license and come up with an alternative more in keeping with streaming. You know, modernization.

In fact, they never really considered how one might implement mechanical licensing without the compulsory part. And that’s probably because there is a cottage industry of lobbyists, lawyers, and government clerks built up around compulsory licensing that would simply be out of a job if the compulsory were rejected. But they will get out the green eyeshades and the furrowed brow and tell you that mere songwriters cannot appreciate the complexity of getting rid of the compulsory license that governs their lives and has done for over a century.

But then there’s this five year review. What is the review reviewing if it never takes into account the compulsory license itself. Are we to just assume that the compulsory lasts forever? Are they just to review how The MLC, Inc. and HFA are doing administering a law that itself doesn’t work? Where does the failure of one start and the other begin?

The effectiveness of the statute itself really must be part of the five year review as well as a review of the MLC.

Enter George Johnson. George is a songwriter who has effectively represented himself at the Copyright Royalty Board and is fighting hard for increased songwriter royalty rates, holding up a mirror to the emperor in the Imperial City of Washington, DC. Needless to say, George has made no new friends among the grandees and courtiers who all see the advantage in complementing the emperor on his new clothes and complain that George does not shut up and let his betters run things the way they like. Billboard did an extensive profile on George during the frozen mechanicals crisis in which he played a major part.

George has written a timely letter to the Copyright Office anticipating the need for a review of the compulsory license statute itself from which spring all these problems for the obvious reason that you can’t really talk about the MLC with out talking about that statute (17 USC §115). (You may want to take a look at a proposal that David made a few years ago for a US version of extended collective licensing.) Just remember that it’s not really that difficult to transition off of song-by-song licensing to a blanket license administered by the MLC fiasco compared to extended collective licensing with an opt-in for songwriters who want to get away from HFA and the compulsory licesne.

Spoiler alert–the Copyright Office rejected George’s request. Their rejection does not mean George was wrong, it just means that the right person didn’t ask the question,

Following is George’s letter to the Copyright Office and we will later post the Copyright Office response. You can read George’s white paper here.

Monday, June 12, 2023

Via Email 

Attn:  Ms. Shira Perlmutter,

Register of Copyrights and Director

U.S. Copyright Office

101 Independence Ave. S.E.

Washington, D.C., 20559-6000

Re:  Study to Repeal §115 Compulsory License & Ex Parte Meetings to benefit Congress and all U.S. Songwriters and Music Publishers

Dear Register Perlmutter,

For the benefit of all American songwriters and music publishers “bound by” 1 the 114 year old §115 compulsory license, and to benefit Congress in their upcoming 2 decision making processes involving intellectual property law and music copyright policy, I respectfully request that the Copyright Office please initiate a compulsory license study and roundtables regarding it’s full repeal, including ex parte meetings.

The century old compulsory license is no longer an incentive or profitablefor all U.S. songwriters and music publishers, and there are many problems arising from it’s use, and misuse, not intended by Congress, the Constitution, and copyright law.

The 1909 compulsory license was designed for a different time, for the local sale of piano rolls and not contemplated to be used by the largest trillion-dollar corporations in the history of the world, with teams of attorneys, with no sale, by “access”, on “computers” or telephones, distributed digitally, through the air, and all for free from songwriters and publishers?  Now, with no COLA for streaming. 

Former Register Ms. Marybeth Peters initiated several studies 3 that questioned the continued necessity of the compulsory license, and for it’s full repeal or full reform 4. Unfortunately, those studies are now outdated and considering the vast changes in the delivery of musical works and sound recordings, experts 5 6 now think a new study would be very helpful in updating Congress on how the license is functioning post Music Modernization Act (MMA), to benefit their 2024 MLC review, but primarily so Congress can make an informed decision on full repeal or full reform?

While my comments here are my own and separate from my participation in the current Phonorecords III & IV proceedings at the Copyright Royalty Board, please feel free to notify me if there is any conflict or other legal protocol to be followed.

Other than the obvious economic arguments to finally pay songwriters the true value of their copyrights, the primary reason I believe compulsory license roundtables are necessary and so dire is the 3 major record labels’ current anticompetitive misuse of the compulsory license 7 at the CRB (See #1, 2, 3 in the attached white paper) that I’ve experienced as a 4 time CRB participant and appellant in Sound Exchange v. CRB 8 and Johnson v. CRB 9.   The 3 major labels’ misuse of the license is the #1 issue including several dozen other serious issues.

The license, the rate-structure, and the CRB process are all truly broken in almost every way and must be fixed immediately or completely abandoned.  All rational market actors who currently use private collective blanket licensing providers would certainly switch, proving no need for federal licensing to operate efficiently.

We all could really benefit from the Copyright Office’s input, ideas, and legal opinions on these extremely important issues since each and every songwriter cannot compete with RIAA and NMPA counsel, nor 25 years of their regulatory capture. 

We songwriters truly need Congress and the Copyright Office’s help and guidance.

We pray the Copyright Office 11 will initiate a study with roundtables, in addition to ex parte communications and meetings to benefit Congress, and all American songwriters and music publishers “subject to”11 the license — for these good reasons, good cause, and those contained in the following white paper attached below.

Thank you for your time and thoughtful consideration. 

Respectfully,

George D. Johnson

Singer/Songwriter

PO Box 22091

Nashville, TN, 37202

@georgejohnson

cc: Librarian of Congress                                                 

     General Counsel of the Copyright Office   

     U.S. House Judiciary Committee

     U.S. Senate Judiciary Committee

     Office of the TN Attorney General

1.  https://www.federalregister.gov/documents/2022/03/30/2022-06691/determination-of-royalty-rates-and-terms-for-making-and-distributing-phonorecords-phonorecords-iv  March 30, 2022 Withdrawal of Subpart B Final Rule by the Copyright Royalty Board.  Referencing §801(b)(7)(A) “That provision directs the Judges to provide those who would be bound by the negotiated rates and terms an opportunity to comment on the agreement.” Page 3 (emphasis added)

2.  Upcoming 5 year work product review of the Music License Collective (“MLC”) by Congress in 2024.

3.  https://www.copyright.gov/newsnet/2022/981.html  September 30, 2022 — In Memory of Marybeth Peters.  “Her leadership of the Office also included the generation of several landmark studies, such as those on statutory licenses…”

4.    To me, a full overhaul in dollars of the “nano-penny” rate-structure in §385 Subpart C streaming.

5. https://musictechpolicy.com/2023/04/05/should-the-copyrightoffice-begin-at-the-beginning-with-the-mlcs-first-five-year-review/  April 5, 2023 — by attorney and Phonorecords IV Commenter Mr. Chris Castle.  Should the Copyright Office Begin at the Beginning With The MLC’s First Five year Review “The continued need for a song compulsory license is just the kind of information that Reps. Jordan and Issa could use in case they were inclined to just get rid of it. It would be a great topic for the Copyright Office to study and hold round tables on, this time preferably lead by a Copyright Office lawyer who was not being recruited by Spotify.”

6.  https://musictechpolicy.com/2023/05/28/should-the-compulsory-license-be-re-upped/ May 28, 2023, Should the Compulsory License Be Re-Upped? by music attorney and official CRB Commenter Mr. Chris Castle.

7. …through NMPA’s, et al. re-writing all laws and definitions, and MMA, to fit label business models, not U.S. songwriters.  This is also in no way the Judges fault, they have to deal with it too, so reform would help them.   The Judges are great and not to blame when I say the process is broken.

8.  https://www.cadc.uscourts.gov/internet/opinions.nsf/8AE80A6C0FBDFB7B8525830C004D863A/$file/16-1159-1751123.pdf  SoundExchange, Inc. v. Copyright Royalty Board and Librarian of Congress, Case No. 16-1159, consolidated with 16-1162 (DC Cir. Sept. 18, 2018) (Srinivasan, J)

9.  https://www.cadc.uscourts.gov/internet/opinions.nsf/720464D843B0D6C7852585C10074B11B/$file/19-1028-1856124.pdf  George Johnson v. Copyright Royalty Board and Librarian of Congress, Case No. 19-1028, (D.C. Cir. Aug. 7, 2020) (Henderson, Garland, and Millett)

10.  https://www.govinfo.gov/content/pkg/FR-2023-02-17/pdf/2023-03392.pdf Ex parte.

11.  https://app.crb.gov/document/download/3715  September 29, 2016, SDARS III Order Denying Services’ Motion To Dismiss George D. Johnson d/b/a Geo Music Group.  “The Services’ reliance on the Librarian’s decision in PSS II—a decision that involved neither a copyright owner nor a copyright user—is misplaced because it is based on an erroneous premise. Unlike the party in PSS II, GEO is subject to the license at issue…and GEO would have no say in the matter—that is the essence of a statutory license.  For the forgoing reasons, the Judges DENY the Services’ Motion.” 

by Trichordist

@NorthMusicGroup Testimony to The IP Subcommittee Hearing on The Mechanical Licensing Collective

HEARING BEFORE THE UNITED STATES HOUSE OF REPRESENTATIVES
COMMITTEE ON THE JUDICIARY
Select Subcommittee on Courts, Intellectual Property, and the Internet


June 27, 2023
Testimony of Abby North
SUMMARY STATEMENT
Mr. Chairman, Members of the Subcommittee:

My name is Abby North. I am an independent music publisher and publishing administrator. I am a songwriter advocate. I am a technologist. I am a small business owner.

I began my career writing music, engineering and mixing recordings and ultimately created a
production music library. The library introduced me to music publishing.

My husband’s father was a film composer and songwriter named Alex North. When our family
had a worldwide reversion of rights in Alex’s song “Unchained Melody,” I wanted to learn about
global music publishing. “Unchained Melody” is a “standard” that has been recorded by thousands of artists but is best known as a recording by The Righteous Brothers in 1965. It is an “American Songbook” composition: one of the great songs of the 20th Century. Together, my family and the family of “Unchained Melody” lyricist Hy Zaret formed Unchained Melody Publishing LLC in 2013, and I began to administer our jointly owned copyright.

Unchained Melody Publishing then joined various foreign collective management organizations
(CMOs) and in doing so, I was able to identify incorrect or missing work and party metadata. By
correcting that metadata, I significantly increased our royalty collections. This is partly because
once I corrected our CMO registrations, our metadata stayed corrected over time.
Soon, other legacy songwriters and their families asked if I would administer their works as well.

As a music publishing administrator, I am responsible for accurately and comprehensively
maintaining metadata related to the musical works owned and created by my songwriter and
composer clients, their families and heirs. I must accurately and comprehensively register their
works with collective management organizations around the world.

These global CMOs rely on their music publisher affiliates to deliver works registrations that
clearly identify information about the musical works, about the songwriters and their publishing
entities, about the shares of the works that we own and collect, and about sound recordings that embody these songwriter’s works.

If we publishers do not register our works, we do not get paid and neither do our songwriters. It’s a simple equation: accurate, comprehensive metadata equals accurate, comprehensive royalty distribution.

THE MUSIC MODERNIZATION ACT
When I first heard about the Music Modernization Act and the possibility of a mechanical blanket license administered by one central CMO, I was pleased and hopeful. The previous method of one-off mechanical licensing was inefficient, unscalable, and absolutely
not meant for the digital distribution of music and the limitless supply of sound recordings being delivered to the Digital Service Providers. Blanket licenses can create efficiencies if based on authoritative and complete metadata.

In fact, every other CMO I am aware of outside of the United States has been blanket licens
mechanical rights for years. How exciting to see the United States catch up to the rest of the world’s CMOs!

That the Music Modernization Act was wholeheartedly supported by every sector of the music
business: songwriters, publishers, labels, artists and producers seemed like a modern-day miracle. We all have competing interests, but we came together, and the Music Modernization Act passed. I believed (and was promised) that the intention of the MMA was for a new authoritative database to be engineered and created, with closely interrogated and vetted, accurate, authoritative, comprehensive musical work, songwriter, publisher, performer and even sound recording data.

The music industry was told that The MLC’s data set was going to be the gold star standard that every global CMO could access and rely on.

Songwriters need this, and that’s what we were promised.

And, we were promised that the DSPs would pay for The MLC to perform this fundamental
obligation.

THE MECHANICAL LICENSING COLLECTIVE
The MLC Inc. won the assignment to be the first Mechanical Licensing Collective as created by
the MMA. We were told that after interviewing many competitors, The MLC, Inc. opted to engage the Harry Fox Agency as its data and back-end operations and administration vendor for an “unprecedented and truly revolutionary project.”

HFA has been integral to the music business since 1927. But the industry is well-aware that like
every other collective, HFA’s data is incomplete and sometimes inaccurate. Incomplete accounting by HFA was one driver of the push for the MLC in the first place.

One data set is not enough for the Herculean task of creating the best-in-class musical works
database. Based on my experience as a publishing administrator and technologist, I think that The MLC must license data from many providers, including HFA, Music Reports, SX Works/CMRRA, Xperi, and others.

Thus far, to my knowledge, the promised newly-created MLC database and new data set do not
exist.

When The MLC launched, it used slogans like “Play Your Part” to drive music publishers and
self-administered songwriters to sign up with The MLC, register their works and confirm the
completeness of The MLC’s data, often manually and on a song-by-song basis. But, it seems that “Playing Our Part” means doing The MLC’s job and devoting our own resources to the tasks the DSPs pay The MLC to do. Publishers have to go to The MLC to search for their works, one-by-one to see if the data and shares are correct. Publishers have to slowly and painstakingly search through the MLC’s Matching Tool to find unmatched recordings of their works.

MATCHING SOUND RECORDING TO MUSICAL WORK
Publishers and songwriters receive statutory mechanical royalties when recordings of their works are streamed or downloaded.

A significant part of The MLC’s mandated role is to match sound recordings to musical works in
its database. If a sound recording is not matched to a musical work, the publisher and songwriter do not receive mechanical royalties for that recording’s streams and downloads.
As an example of one kind of problem I’ve experienced with The MLC’s data, per The MLC,
“Unchained Melody” has been recorded by more than 30,000 performers. I would like to diligence those recordings by comparing The MLC’s data to my own data to confirm and track payments.

As part of my due diligence, I asked The MLC for a list of those sound recordings that The MLC
claims to have matched to the “Unchained Melody” composition. That type of list should be
exportable by The MLC for copyright owners and is available from other CMOs. However, The
MLC told me it was not possible for The MLC to export such a list. I was told if I had access to
the MLC’s vast data dump, then I could go find the information for my one song.
In order for publishers to perform mechanical royalty income tracking exercises, we must know
the International Standard Recording Code (ISRC) of the sound recording so we may confirm we have accurately been paid for the correct number of streams or downloads.

With a song like “Unchained Melody” and other very important and iconic American Songbook
songs, there are possibly hundreds, or thousands of new cover recordings released every year.
Publishers use various sources to identify and track royalties received (or not received) for streams and downloads of those recordings.

Fortunately, I do have access to The MLC’s data dump. I paid tens of thousands of dollars to create tech that allows me to compare data from The MLC and other sources in order to identify data gaps and errors. In order to get a sense of the quality of The MLC’s data, I queried The MLC data on behalf of various clients. For one well-known legacy song, 11% of the sound recording to composition matches were incorrect. For another, 20% of the sound recording to composition matches were incorrect. This is why I wanted to export a list of sound recording matches made by The MLC. I can’t be the only publisher who needs a streamlined, efficient way to access, view and analyze The MLC’s data.

THE BLACK BOX
Prior to the inception of The MLC, the DSPs held approximately $424,000,000—that we know
of–in unallocated royalties, otherwise known as Black Box money. After the MMA passed, the
DSPs transferred that money to The MLC, which has held those monies and even more unallocated sums for years.

If I licensed my works to DSPs pre-MMA and if I now register my works with The MLC, my
money should not be in that Black Box. But sometimes I have co-publishers who deliver different data about our shared works that overwrites data I delivered. Sometimes I am unaware of a recording of my work, perhaps because it’s in a foreign language, or perhaps because as in Jamaica where “Unchained Melody” is popularly known as “Unchanged Melody” the recording has a known title permutation inconsistent with the US song title.

Foreign songwriters or songwriters from within the United States who are not affiliated with
established CMOs and/or who are unfamiliar with the registration process undoubtedly have
money in that Black Box. This is especially likely for songwriters who create in languages other
than English, such as Spanish-language songwriters.

Foreign language characters such as accents or tildes often come across as jumbled data on
reporting statements from The MLC. Asian characters may be extremely difficult to translate.
It is understandable that all collectives have some unidentified works and parties from time to time, but by statute, The MLC is mandated to aggressively work and create technology to reduce that Black Box significantly. The world is experiencing rapid growth and development of Artificial Intelligence talent and technology. AI and machine learning technology utilized and trained well could assist in making composition to sound recording matches and identification of works and their parties.

Some of the money that is referred to as “Black Box” is actually claimed and matched but has been held as The MLC awaits the final decision regarding CRB Phonorecords III rates and terms. These 2018 – 2022 royalties apparently will soon be distributed by The MLC. We must prevent the wrong parties from receiving these royalties. As per above, my own research showed recordings matched to the wrong musical works.

The MLC must develop or license and utilize the best technology, the best and most comprehensive data and extremely attentive human beings to improve its quality of data.

AGGREGATORS OPENING FLOODGATES OF BAD DATA

Another example of a recurring problem I have with the MLC involves misclaimed copyright
shares by independent, DIY artists, of which there are thousands. Sound recording distribution aggregators such as Tunecore and CDBaby have lowered the barrier for delivery to DSPs in a dramatic way. Today, approximately 100,000 recordings per day are distributed to the various DSPs.

However, in creating the unfettered opportunity for anyone to distribute a sound recording, these aggregators have also flooded the CMOs with incorrect musical work data.
It is an honor and a blessing to control a song that so many performers choose to record. However, it is time-consuming to constantly police the erroneous data provided by so many of these performers. This is particularly frustrating when I have already corrected the same data.
In order to deliver a sound recording via an aggregator, the label or independent artist is required to provide information regarding the musical works embodied in the sound recordings to be distributed. Even if that artist has no idea who the writer or publishers are, that artist must provide some data.

Giving them the benefit of the doubt, many of these independent artists are unfamiliar with the
fact that the sound recording copyright is different from the composition copyright, and they
regularly identify themselves as writer and copyright owner when they are neither, and then falsely assign publishing administration to the aggregator’s publishing services. The aggregator’s publishing administration provider then executes its administrative role and attempts to collect this infringing share.

At least on a monthly basis. I must play whack-a-mole, searching The MLC’s portal to find new
registrations of “Unchained Melody” that make no mention of Alex North as composer, Hy Zaret as lyricist, or of our publishing entities.

We, as an industry, must force some vetting and validation mechanism in between the aggregators and The MLC (and other CMOs) and the DSPs. Musical work data must not be delivered into the music ecosystem until it has been vetted and validated. Every American Songbook and most frequently covered song I have reviewed at The MLC has the same problem with infringing data delivered on behalf of unknowing independent artists, and
we need a solution.

When I claim these infringing registrations at The MLC, my underlying registration of “Unchained Melody” goes into suspense. Meaning, “Unchained Melody” is iconic and well-known worldwide, and our data is easily searchable at other CMOs who do know who the writers and publishers are.

Unfortunately, music publishers have to repeatedly fight for our rights and our data at The MLC.
This is not the gold standard. With all the promise and hope of The MLC, I expected that the US
collective would be at least as good as, if not better than, the best foreign CMO.

I suggest that some iconic musical works should have flags preventing the wrong parties from
making claims. For example, if the song was a hit written and performed by a band, that song’s
writers are widely known, and no other person should be able to submit a registration claiming
that work. If I try to claim I am a writer of the Mancini/Mercer composition, “Moon River,” The
MLC should be aware I have no rights to that work. Our precious American Songbook treasures
and their songwriters must be protected.

The MLC was presented as a savior to songwriters. With the passing of the MMA, songwriters
were promised they’d finally receive all the mechanical royalties they are entitled to. Protecting
the works created by songwriters is a powerful step in this direction.
It’s been three years and the MLC is a long way from best in class. In fact, US publishers are
engaging the Canadian collective CMRRA, for a fee, to fix their data problems at The MLC. In
my experience, I have never heard of one CMO cleaning another CMO’s data. And, the publishers are paying for this service despite promises to the contrary.

CLAIM OVERLAP/DISPUTE RESOLUTION
To make the above even more complicated, there is no claim overlap/dispute resolution portal
within The MLC’s website.

With tens of millions of dollars paid by the DSPs to The MLC for operations and technology
development, The MLC has the opportunity to create truly innovative products, including at least a basic claim overlap/dispute resolution portal. Other collectives, such as SoundExchange and CMRRA have functional claiming portals.

A claiming overlap/dispute resolution tool could allow the parties to upload documents
substantiating claims, could allow the parties to directly communicate via the portal and facilitate resolution.

In the “Moon River” example above, this claiming portal could have information about “Moon
River” and its writers and parties that alerts others they have no right to claim this work, and also indicates to The MLC that it must block the infringing new claim. Preventing the infringing claims from occurring in the first place would also prevent “Moon River’s” mechanical royalties from going into suspense.

MLC CREATING BUSINESS RULES THAT CONTRADICT EXISTING LAW AND
REGULATIONS AND CREATE DOUBLE STANDARDS
The US copyright law permits authors or their heirs, under certain circumstances, to terminate the exclusive or non-exclusive grant of a transfer or license of an author’s copyright in a work.
The ability to recapture rights via the United States copyright termination system truly provides
composers, songwriters and recording artists and their heirs, a “second bite of the apple.” Many of my clients exercise this right and subsequently become the original publisher in the United States.
The unilateral decision made by The MLC that rights held at the inception of the new blanket
license might remain, in perpetuity, with the original copyright grantee was frightening. Not
recognizing that the derivative work exception does not apply in the context of the mechanical
blanket license would unquestionably have benefited the major publishers who control the bulk of legacy copyrights. It would have harmed songwriters and their families.

Fortunately, the US Copyright Office stepped in clarify that the appropriate payee under the
mechanical blanket license to whom the MLC must distribute royalties in connection with a
statutory termination is the copyright owner at the time the work is used.


The MLC has made unilateral decisions regarding how it treats public domain works. It invoices
the DSPs for streams of recordings that embody these public domain works, but no publisher is
entitled to these royalties. That means the MLC may collect money it may not pay out. This
makes little sense.

CONCLUSION
Music publishing administration and collective management of rights are very challenging
businesses. I control one of the most iconic of all of the American Songbook works, but I am truly an independent publisher. I work for my family and the other heirs who use the royalties we receive from our musical works to pay for mortgages, college educations, and food. I realize that The MLC considers me to be annoying and difficult, but I am responsible for the livelihood of others, and I am responsible for keeping alive the legacies of Alex North, Hy Zaret and the many other legacy songwriters I represent.

As such, I will continue to push for The MLC to meet the promises made by the MMA.
As a songwriter advocate, it is so important to me that songwriters collect every penny they are
due. Without songwriters and the songs they create, there is no music business. Songs connect people, define eras and bring joy.

The MLC must use its resources to perform its mandated duty to create a truly authoritative,
accurate, comprehensive database. It must use its resources to identify unidentified works and
parties. And it must make sure the wrong parties do not receive songwriter royalties.
The MLC must not make unilateral decisions that affect the lives of songwriters and music
publishers. If there is a question regarding a law, regulation or internal policy, the US Copyright
Office must be consulted and must participate in the decision- or rule-making process to take
corrective action or refer a matter to someone who can.

The MMA does not authorize The MLC to make legal decisions. The MLC is not judge, not jury,
and not arbiter. Rather, it was created to be a neutral mechanical royalty pass-through entity.
On behalf of songwriters who were told The MLC was going to get them paid, The MLC must
engage every resource, every data set, every technique and technology available in order to identify the unidentified and the misidentified. The MLC has the money and it has the staffing.

The MLC simply must do the job the DSPs are paying it to do. Until these tasks are completed, songwriters are not only being ill-served, songwriters are being harmed.

by thetrichordist

What would MCA Do? Spotify Shows Censorship for the Money–What Else Are They Doing? #FreeJimmyLai

Also read Associated Press “Former Bytedance executive says Chinese Communist Party tracked Hong Kong protesters via data” (Bytedance is the parent company of TikTok.)

Spotify follows bidding of tyrannical Chinese Communist Party while long time Hong Kong freedom fighter Jimmy Lai rots in prison after show trial.

by Trichordist Editor

Should the Compulsory License be Re-Upped?

By Chris Castle

[This post first appeared on MusicTechPolicy]

The wisest of those among you learn to read your portents well
There’s no need to hurry, it’s all downhill to Hell…

Don’t Stand Still, written by The Original Snakeboy, performed by Guy Forsyth

Congress is considering whether to renew The MLC, Inc.‘s designation as the mechanical licensing collective. If that sentence seems contradictory, remember those are two different things: the mechanical licensing collective is the statutory body that administers the compulsory license under Section 115. The MLC, Inc. is the private company that was “designated” by Congress through its Copyright Office to do the work of the mechanical licensing collective. This is like the form of a body that performs a function (the mechanical licensing collective) and having to animate that form with actual humans (The MLC, Inc.), kind of like Plato’s allegory of the cave, shadows on the wall being what they are.

Congress reviews the work product of The MLC, Inc. every five years (17 USC §115(d)(3)(B)(ii)) to decide if The MLC, Inc. should be allowed to continue another five years. In its recent guidance to The MLC, Inc. about artificial intelligence, the Copyright Office correctly took pains to make that distinction in a footnote (footnote 2 to be precise. Remember–always read the footnotes, it’s often where the action is.). This is why it is important that we be clear that The MLC, Inc. does not “own” the data it collects (and that HFA as its vendor doesn’t own it either, a point I raised to Spotify’s lobbyist several years ago). Although it may be a blessing if Congress fired The MLC, Inc. and the new collective had to start from scratch.

But Congress likely would only re-up The MLC, Inc. if it had already decided to extend the statutory license and all its cumbersome and byzantine procedures, proceedings and prohibitions on the freedom of songwriters to collectively bargain. Not to mention an extraordinarily huge thumbs down on the scales in favor of the music user and against the interest of the songwriters. The compulsory license is so labyrinthine and Kafka-esque it is actually an insult to Byzantium, but that’s another story.

Rather than just deciding about who is going to get the job of administering the revenues for every songwriter in the world, maybe there should be a vote. Particularly because songwriters cannot be members of the mechanical licensing collective as currently operated. Congress did not ask songwriters what they thought when the whole mechanical licensing scheme was established, so how about now?

Before the Congress decides to continue The MLC, Inc. many believe strongly that the body should reconsider the compulsory license itself. It is the compulsory license that is the real issue that plagues songwriters and blocks a free market. The compulsory license really has passed its sell by date and it’s pretty easy to understand why its gone so sour. Eliminating the Section 115 license will have many implications and we should tread carefully, but purposefully.

Party Like it’s 1909

First of all, consider the actual history of the compulsory license. It’s over 100 years old, and it was established at a time, believe it or not, when the goal of Congress was to even the playing field between, music users and copyright owners. They were worried about music users being hard done by because of the anticompetitive efforts of songwriters and copyright owners. As the late Register Marybeth Peters told Congress, when Congress created the exclusive right to control reproduction and distribution in 1909, “…due to concerns about potential monopolistic behavior [by the copyright owners], Congress also created a compulsory license to allow anyone to make and distribute a mechanical reproduction of a nondramatic musical work without the consent of the copyright owner provided that the person adhered to the provisions of the license, most notably paying a statutorily established royalty to the copyright owner.”

Well, that ship has sailed, don’t you think? 

This is kind of incredible when you think about it today because the biggest users of the compulsory license are those who torture the bejesus out of songwriters by conducting lawfare at the Copyright Royalty Board–the richest corporations in commercial history that dominate practically every moment of American life. In fact, the statutory license was hardly used at all before these fictional persons arrived on the scene and have been on a decades-long crusade to hack the Copyright Act through lawfare ever since. This is particularly true since about 2007 when Big Tech discovered Section 115. (And they’re about to do it again with AI–first they send the missionaries.)

If the purpose of the statutory scheme was to create a win-win situation that floats all boats, you would have expected to see songwriters profiting like never before, right? If the compulsory was so great, what we really needed was for everyone to use Section 115, right? Actually, the opposite has happened, even with decades of price fixing at 2¢ by the federal government. When hardly anyone used the compulsory license, songwriters prospered. When its use became widespread, songwriters suffered, and suffered badly.

Songwriters have been relegated to the bottom of the pile in compensation, a sure sign of no leverage because whatever leverage songwriters may have is taken–there’s that word again–by the compulsory license. I don’t think Google, a revanchist Microsoft, Apple, Amazon or Spotify need any protection from the anticompetitive efforts of songwriters. Google, Amazon, Apple, Microsoft, Spotify are only worried about “monopolistic behavior” when one of them does it to one of the others. The Five Families would tell you its nothing personal, it’s just business. 

Yet these corporate neo-colonialists would have you believe that the first thing that happens when the writing room door closes is that songwriters collude against them. (Sounding very much like the Radio Music Licensing Committee–so similar it makes you wonder, speaking of collusion.) 

The Five Year Plan

Merck Mercuriadis makes the good point that there is no time like the present to evolve: “In the United States, we have a position of stability for the next five years – at the highest rates paid to songwriters to date – in the evolution of the streaming economy. We are now working towards improving the songwriters’ share of the streaming revenue ‘pie’ yet further and, eventually, getting to a free market.” The clock is ticking on the next five years, a reference to the rate period set by the Copyright Royalty Board in the Phonorecords IV proceeding. (And that five years is a different clock than the five years clock on the MLC which is itself an example of the unnecessary confusion in the compulsory license.)

What would happen if the compulsory license vanished? Very likely the industry would continue its easily documented history of voluntary catalog licenses. The evidence is readily apparent for how the industry and music users handled services that did not qualify for a compulsory license like YouTube or TikTok. However stupid the deals were doesn’t change the fact that they happened in the absence of a compulsory license. That Invisible Hand thing, dunno could be good. Seems to work out fine for other people.

Let’s also understand that there is a cottage industry complete with very nice offices, pensions and rich salaries that has grown up around the compulsory license (or consent decrees for that matter). A cottage industry where collecting the songwriters’ money results in dozens of jobs paying more in a year than probably 95% of songwriters will make, maybe ever. (The Trichordist published an excerpt from a recent MLC tax return showing the highest compensated MLC employees.) Generations of lawyers and lobbyists have put generations of children through college and law school from legal fees charged in the pursuit of something that has never existed in the contemporary music business–a willing buyer and a willing seller. Those people will not want to abandon the very government policy that puts food on their tables, but both sides are very, very good at manufacturing excuses why the compulsory license really must be continued to further humanity.

The even sadder reality is that as much as we would like to simply terminate the compulsory license, there is a certain legitimacy to being clear-eyed about a transition. (An example is the proposals for transitioning from PRO consent decrees–ASCAP’s consent decree has been around a long time, too.) There would likely need to be a certain grandfathering in of services that were pre or post the elimination of the compulsory, but that’s easily done, albeit not without a last hurrah of legal fees and lobbyist invoices. Register Pallante noted in the well-received 2015 Copyright Office study (Copyright and the Music Marketplace at 5) “The Office thus believes that, rather than eliminating section 115 altogether, section 115 should instead become the basis of a more flexible collective licensing system that will presumptively cover all mechanical uses except to the extent individual music publishers choose to opt out.”  An opt out is another acceptable stop along the way to liberation, or even perhaps a destination itself. David Lowery had a very well thought-out idea along these lines in the pre-MLC era that should be revisited.

X Day

However, while there is a certain attractiveness to having a plan that the dreaded “stakeholders” and their legions of lobbyists and lawyers agree with, it is crucially important for Congress to fix a date certain by which the compulsory license will expire. Rain or shine, plan or no plan, it goes away on the X Day, say five years from now as Merck suggests. So wakey, wakey. 

That transparency drives a wedge into the process because otherwise millions will be spent in fees for profiting from moral hazard and surely the praetorians protecting the cottage industry wouldn’t want that. If you doubt that asking for a plan before establishing X Day would fail as a plan, just look at the Copyright Royalty Board and in particular the Phonorecords III remand. Years and years, multiple court rulings, and the rates still are not in effect.  Perseveration is not perseverance, it’s compulsive repetition when you know the same unacceptable result will occur.

But don’t let people tell you that the sky will fall if Congress liberates songwriters from the government mandate. The sky will not fall and songwriters will have a generational opportunity to organize a collective bargaining unit with the right to say no to a deal. 

Who can forget Sally Fields in Norma Rae?

The closest that Congress has come to a meaningful “vote” in the songwriting world is inviting public comments through interventions, rule makings, roundtables and the like–information gathering that is not controlled by the lobbyists. Indeed, it was this very process at the Copyright Royalty Board that resulted in many articulate comments by songwriters and publishers themselves that were clearly quite at odds with what the CRB was being fed by the lobbyists and lawyers. So much so that the Copyright Royalty Judges rejected not only the “Subpart B” settlement reached by the insiders but the very premise of that settlement. Imagine what might happen if the issue of the compulsory license itself was placed upon the table?

Now that songwriters have had a taste of how The MLC, Inc. has been handling their money, maybe this would be a good time to ask them what they think about how things are going. And whether they want to be liberated from the entire sinking ship that is designed to help Big Tech. And you can start by asking how they feel about the $500 million in black box money that is still sitting in the bank account of The MLC, Inc. and has not been paid–with an infuriating lack of transparency. Yet is being “invested” by The MLC, Inc. with less transparency than many banks with smaller net assets.

This “investment” is another result of the compulsory license which has no transparency requirements for such “investments” of other peoples’ money, perhaps “invested” in the very Big Tech companies that fund the The MLC, Inc. That wasn’t a question that was on the minds of Congress in 1909 but it should be today.

Attention Must Be Paid

Let’s face facts. The compulsory license has coexisted in the decimation of songwriting as a profession. That destruction has increased at an increasing rate roughly coincident with the time the Big Tech discovered Section 115 and sent their legions of lawyers to the Copyright Royalty Board to grind down publishers, and very successfully. That success is in large part due to the very mismatch that the compulsory license was designed to prevent back in 1909 except stood on its head waiting for loophole seekers to notice the potential arbitrage opportunity. 

The Phonorecords III and IV proceedings at the Copyright Royalty Board tell Congress all they need to know about how the game is played today and how it has changed since 1909, or the 1976 revision of the Copyright Act for that matter. The compulsory license is no longer fit for purpose and songwriters should have a say in whether it is to be continued or abandoned.

We see the Writers Guild striking and SAG-AFTRA taking a strike authorization vote. When was the last time any songwriters voted on their compensation? Maybe never? Voting, hmm. There’s a concept. Now where have I heard that before?

by thetrichordist

Copyright Office Authorized a Star Chamber at the MLC to Hold Your Money

We knew this would happen. The Copyright Office has empowered the Mechanical Licensing Collective to decide whether a song (or a sound recording) can be copyrighted all under the guise of AI. If the MLC–not the Copyright Office–decides that your song is not capable of being registered for copyright, the MLC can hold your money essentially forever.

Where’s the regulation on this important subject? Did you get a chance to comment on these crucial regulations and precedent?

Ah…no. You didn’t miss any notices in the Federal Register. No, we know this because of this cozy “guidance letter” to MLC CEO Kris Ahrend from the general counsel of the Copyright Office. That’s right, a letter that we just happened to run across. That letter states:

More specifically, the Office advises that a work that appears to lack sufficient human authorship is appropriately treated by The MLC as an “anomal[y],” consistent with its Guidelines for Adjustments, and The MLC should “place [associated] Royalties in Suspense while it researches and analyzes the issue.” Such research could include corresponding with the individual or entity claiming ownership of the work or [could include] inquiring whether the Office has registered the work and whether there are any disclaimers or notes in the registration record.

If The MLC subsequently concludes that the work qualifies for copyright protection and the section 115 license, it should distribute any royalties and interest in suspense to the copyright owner. Alternatively, if The MLC believes that the work does not qualify for copyright protection following its research and analysis, it should notify the individual or entity claiming ownership of the work of its determination and that associated royalties will be subject to an adjustment. This conclusion and adjustment may be challenged by initiating an “Adjustment Dispute” consistent with The MLC’s policies. If legal proceedings are initiated to challenge The MLC’s actions, the disputed royalties and interest should remain suspended until those proceedings are resolved.

So just in one paragraph, the Copyright Office has effectively delegated its role in the U.S. government to a private corporation controlled by the largest music publishers and financed by the largest tech companies in the world (actually the largest corporations in the history of commerce). If the MLC decides that your song “appears to lack sufficient human authorship” The MLC can hold your money while they research the issue.

Note this doesn’t say who makes that decision, it doesn’t say when they have to notify you, it doesn’t say they have to give you an opportunity to be heard, it places no timeline on how long all this may take. “The MLC” (whoever that is) could sit on your money for years without ever telling you they are doing it and also keep invoicing the DSPs for your royalties while they “research and analyze the issue”.

The only time they have to give you notice if they “believe” (whatever that means) “that the work does not qualify for copyright protection” then “it should” (not the mandatory “shall”, but the permissive “should”) notify you of that determination. You can then file an “adjustment dispute” based on the MLC’s own guidelines which you will not be surprised to learn places no disclosure obligations on them, imposes no timeline and cannot be appealed.

Note that this guidance from the Copyright Office pretty expressly contemplates that the MLC may dispute a work that has already been registered for copyright without qualification–which raises the question of what a copyright registration actually means, and where is it written that the MLC has the authority to challenge a conformed Copyright Office registration.

It also places the MLC in a superior position to the Copyright Office because it allows the MLC to initiate a dispute resolution system outside of the Copyright Office channels. Is this written somewhere besides a burning bush on Mount Horeb?

The letter does seem to suggest that you can always sue the MLC or that the MLC could be prosecuted for state law crimes, perhaps, like conversion, but it would help to know who at the MLC is actually responsible.

This also raises the question of why the MLC is invoicing the DSPs in the first place and what happens to the money every step along the path. Because of the idiotic streaming mechanical royalty calculation, it seems inevitable that the royalty pool will be overstated or understated if the MLC is claiming works that are not subject to copyright (like it would for public domain works it invoiced).

Ever wonder what prompts letters like this to get written?

Play your part, dude. Go back to sleep.

by Trichordist Editor