TPR Music Artist Forum | In Partnership with SLATT Management
Musicians of all ages are invited to a networking workshop and panelist discussion dedicated to understanding the future of music technology, copyright law, entertainment law, obtaining royalties, and navigation of music streaming services.
321 W. Commerce St, San Antonio, TX 78205
Doors open at 6:30pm.
Panelist discussion will take place at 7:00pm.
Ondrejia Scott | 7:00pm – 7:10pm
Chris Castle | 7:10pm – 7:20pm
Krystal Jones | 7:20pm – 7:30pm
Dr. Steven Parker | 7:30pm – 7:40pm
Linda Bloss-Baum | 7:40pm – 7:50pm
Food and drinks will be provided.
Musicians are welcome to submit an original track to be featured on our TPR Music Artist Forum playlist:
Professional headshots will be offered free of charge by Oscar Moreno.
We will be ending out the night with a special live performance by J. Darius live in the Malú and Carlos Alvarez Theater.
RSVP here to reserve your spot for this free event!
June 2nd 2022 Anaheim California
Hello and thank you. Thanks to the board for this award. President James Weaver. Chair Charlie Sanders. Thanks to David Sanders for help with logistics.
And while I have him here, special thanks to Rick Carnes for his help a few years ago with the University of Georgia Artists Rights Symposium.
I wanted to start out today, by saying it is a great honor to receive this award.
When I look at past recipients and see names like Odetta, Dizzy Gillespie, Quincy Jones, Lena Horne, Hal David, Phil Ramon and Kris Kristofferson, I feel like the protagonist in the Talking Heads song: “How did I get here?”
You see, my original claim to fame is the song Take The Skinheads Bowling. How did the guy that wrote that song end up amongst such musical luminaries?
By way of introduction and explanation:
The song Take the Skinheads Bowling is the first single from a band I started in 1983 in Santa Cruz California.
The band is called Camper Van Beethoven. And it’s still around after 39 years.
I would describe that band as a psychedelic folk-rock garage band but we didn’t have a garage. We actually rehearsed in an attic.
Three flights of stairs… SVT.
Around the same time I started an indie record label to promote and distribute the records of Camper Van Beethoven. We later signed to Virgin Records.
I then started another band called Cracker. This band went on to have platinum hits. You’ve probably heard a few.
I produced albums by groups like Counting Crows.
I ran a recording studio complex for many years.
And in 2012 I began to speak out on behalf of artists at various technology conferences.
In particular I wrote a rather long essay, quite controversial at the time, “Meet the New Boss, Worse Than the Old Boss?”
In this essay I argued that the emerging digital landscape for music was one in which the new bosses (mostly tech companies) would pay nothing up front for our work, and very little on the back-end. I predicted this would shift most of the financial burden and risk onto those who could least afford it, the working class artist.
Unfortunately, my predictions were correct.
Now, It is important to note I am not hostile to technology and technology companies per se. Indeed I graduated with a degree in mathematics from UC Santa Cruz, and before Camper Van Beethoven became my full time job I worked as a computer programmer.
In addition I have had some success as a seed investor in technology startups. Since we are at NAMM I assume you all have heard of Reverb.com?
Technology is important in my life. It’s important to how I make music. Most other artists I know feel the same way. I don’t think technology companies and artists should always be at odds.
So let’s rewind for a second…
“I started a band in my attic (not garage) and later a record label.”
The foundational myth of Silicon Valley is the garage startup that becomes a global brand.
Look at my own startup: Camper Van Beethoven. A few kids in a faded beach town start a band. With a small personal loan from a singing cowboy-true story- we made a record and went from the attic to competing on a global scale in a few short years.
In the 80’s and 90s, this story was replicated, to different degrees, by hundreds of indie rock bands all across The United States.
And this story is not unique to the US or rock music. In1990 while traveling around Morocco I met many musicians who sold their recordings on cassettes in souks all across North Africa, the Middle East and southern Europe.
In 2014 I toured China as a cultural and Intellectual property ambassador for the US State Department. I met a Mongolian folk-rock ensemble that was doing essentially the same thing across central Asia.
If Silicon Valley is widely hailed for its entrepreneurial energy and innovation shouldn’t artists and bands also be praised and seen in the same light? We are certainly as creative.
We generate jobs and substantial economic activity. Some political scientists even think it was really American Pop Music that ended the cold war.
It has always seemed like something worth protecting to me.
Turning our attention back to this room, I see a similar entrepreneurial spirit in the boutique amp, instrument, and music software makers represented here by the National Music Council.
Conversely the big manufacturers and major rights holders represented here have problems that will feel familiar to artists:
The unlicensed use of their intellectual property and designs.
We have a lot in common.
Now this award is ostensibly given to me for my work as an artists rights activist. But I want to put that in a bigger context.
Many of you may have first heard of my efforts on behalf of artists when I filed a class action lawsuit against Spotify for failing to pay self published songwriters.
This, indeed, was a milestone as it gave songwriters the first opportunity in the digital age to extract some concessions from digital services.
Also the 2018 Music Modernization Act may be understood as an unintended consequence of this lawsuit.
But in the big picture, this lawsuit was a minor skirmish in what I call “the long war” to protect the rights of the creators.
And In this long war, I submit, I am just a foot soldier.
I look at the members of the National Music Council, whether music creators, unions, manufacturers, music associations, labels, educators or performing rights organizations and I can think of many many times when I have been aided in my efforts by the good folks from these organizations.
Because ultimately, we have this in common:
We are all fighting to protect our intellectual property
our neighboring rights,
and our designs
We fight to protect them from freeloaders that too often convince policymakers and courts that in the name of “innovation” they should have access to our Intellectual Property without permission or payment.
Sadly this is nothing new. There have always been and there will always be unscrupulous schemers that claim their exploitative business model is somehow “the future.”
The problem is, that in their vision of “the future” they get rich while little of that money trickles down to us. Those that create the intellectual property.
To paraphrase Led Zeppelin: The scam remains the same.
But it is here that the National Music Council has always been helpful. The council and its members provide the long lasting intellectual infrastructure that allows individual artists like myself, to fight.
To fight Today.
To fight 5 years from now
and to fight into the foreseeable future.
I humbly accept this award as someone who has simply followed in the footsteps of other council members and award recipients.
Keep up the good fight my friends,
You are truly on the right side of history.
Series 3 of The Artist Rights Watch Podcast is here! Nik, David, and Chris are joined by attorney Kevin Casini to talk about the latest with the Copyright Royalty Board and mechanical rates in the Phonorecords IV proceeding and discuss alternatives so songwriters are better represented at the CRB compared to the status quo.
ARW Podcast S3E1: Unfreezing Mechanicals show notes
On the this episode of the Artist Rights Watch, Nik, David, and Chris sit down to talk about the recent developments with the CRB and mechanicals with lawyer and advocate, Kevin Casini. The Copyright Royalty Board who herein will more than likely be referred to as the CRB, ‘is a US system of three copyright reality judges who determines rates and terms for copyright statutory licenses and make determinations on distribution of statutory license royalties collected by the US Copyright Office.’ The US mechanical royalties are determined by the CRB and they meet every 5 years to determine the rate. Songwriter groups argued for a higher rate, and the CRB agreed. On March 29, 2022 the CRB agreed to unfreeze the $0.091 mechanical royalty rate which would commence a fight for a new rate in the 2023-2027 period. Over the past few years, there has been numerous criticisms about the constant rule for freezing the mechanical royalty rate. The royalty rate currently is $0.091 which was set back in 2006, and frankly, songwriters are making less money due to economic inflation.
Show Notes and Background Materials
Selected Frozen Mechanicals Comments:
Below are some links about Guest Kevin Casini:
Below are some links for further reading:
Intro/Outro song: “All My Years” by Nik Patel
[This post first appeared on MusicTechPolicy]
by Chris Castle
One of the main beefs I’ve had with the Copyright Royalty Board is the secrecy in plain sight. Very few people follow what’s going on there, yet every time you move a rock, another toad hops out. Now that we are turning our attention to the streaming mechanical proceeding–which as we were told ad nauseam is the important one, don’t you know–the first thing we find is the shameful antics of Google on full display.
Remember–the Copyright Royalty Board split the rate proceedings in two. One was for the physical and download mechanical (paid by record companies) and one for the streaming mechanical (paid by digital music services), all under the compulsory license which was adopted for the huge benefit of each music user. And of course if it’s compulsory it takes (there’s that word again) away the rights of songwriters to bargain and set their own price without government intervention. (There are alternative ways to do this such as the Nordic model of extended collective licensing that David Lowery discussed in an important blog post a few years ago.)
The Copyright Royalty Judges are given the unenviable task of divining what a willing buyer would pay a willing seller in the open market. Of course that willing/willing rate is a complete legal fiction because in the novella of statutory rates there hasn’t been an open market for over 100 years which for rate setting purposes means there has never been an open market for songwriters. Why? Not sure, really, but there must have been an original sin, the novella tells us so. We can only assume that when that writer room door closes, those pesky songwriters just naturally start colluding, unlike Facebook, Amazon, Apple, Spotify and especially Google. Google who have never been prosecuted for violating the Controlled Substances Act for which they paid a $500,000,000 fine and who we let take over our children like they were a trustworthy television network or something.
So since there’s never been an open market because the government took the songwriters’ rights back in 1909 in this case (and 1941 in the case of the ASCAP consent decree), you can well imagine that a cottage industry of executives, lawyers and lobbyists have grown up to service the bizarre rate setting process that has totally lost their way in my view. It’s hard to believe when we read the shenanigans going on in front of the Judges that this is all designed to determine the value of songs. There are 38 lawyers billing time in the streaming proceeding which will raise the transaction cost of the proceeding to an absurd and Kafka-esque level, but it does help you understand why the lobbyists think that proceeding is so important–it’s definitely more important to them.
Which leads us to the extremely Googley discovery request that Google has filed and the Judges appear to have approved. In a nutshell, Google has said that they only way that the rates can be set is if the Judges force the National Music Publishers Association and the Nashville Songwriters Association International to turn over all to Google of your accounting statements and licenses so Google can determine if the past earnings back up the NMPA and NSAI royalty claims made by their many Lecterian lawyers.
But don’t feel bad–it’s not like they will be turning over the data to the public, just to Google. What a relief, right?
Here’s what the order actually says:
That’s right–Google wants “Music Publishers” to produce all the royalty statements for the most successful songwriters in the world to “test” whether songwriters are struggling financially. Given that this will involve many, many statements which probably have to have personally identifiable information redacted, it’s going to take many hours which is great for those who get paid by the hour but not so great for those who get paid by the song.
Is there no other way to determine whether mechanical royalties have declined to subsistence levels? Surely there must be, and you know what else? There’s also a way to test whether mechanical royalties have declined to below subsistence levels which is really the point here, right?
Yes, I got your test right here, soulless Google lawyers.
But wait, there’s more. Google also wants to raise transaction costs on songwriters by forcing the production of all “free market” licenses. (“Free market” benchmarks are themselves a laughable concept in a hugely distorted market that still suffers from the governments negligent wage and price control of a 2¢ rate from 1909 to 1978).
And given the parameters of the Copyright Royalty Board, the Judges seem to have granted Google’s request in part for the statements and entirely for the licenses.
You do have to ask whether there’s anything songwriters can do to keep their confidential royalty statements and license agreements out of the hands of the Leviathan of Mountain View. It does seem that there could be a process to intervene in the Phonorecords IV case to stop this from happening. Just because Google is trying to prove that songwriter income has not been decimated when we all know it has been does not seem to require the humiliation of having your royalty statements put on display. This is definitely something to speak about to your lawyer and your publisher.
This entire exchange is exceptionally bizarre because the “Copyright Owners” are the NMPA and NSAI, neither of whom own copyrights, send statements or enter licenses. And yet there seems to be an assumption that some group of publishers are bound by the order. I can only assume that the publishers who are on the receiving end of this order are the music publisher affiliates of the CRB participants at the group level of Sony, Universal and Warner, although the order doesn’t really demonstrate that connective tissue because…well, it doesn’t. Publisher affiliates are not participating and if the principle and policy is that every stand alone affiliate of a corporate parent is participating and subject to discovery because the corporate parent is…well, that’s an interesting proposition.
Before you heave a sigh of relieve that only the songwriters signed to a major will have their privacy invaded by the greatest privacy invader of all time, that would be Google hands down, just realize the cost of what can happen if you were to have the temerity to think you could participate in the Copyright Royalty Board.
You can have one of the biggest corporations in commercial history that rips you off every minute of every day and essentially prints money in the public market that they use to destroy your rights and creations sick their army of soul-crushing lawyers on you to prove that songwriters are dying penniless because of Google’s income transfer. And still pay you a number that starts many decimal places to the right and laugh about it over steaks at The Palm with fava beans and a fine Chianti.
Thanks for the HUGE response to the songwriter survey on what you think the new unfrozen mechanical rate should be!! The response has been so strong we’re going to keep the survey open so more of you can participate.
This Survey Monkey questionnaire is anonymous and easy to take–3 minutes to complete–and you could really help a lot by giving your opinions on what you think the rate should be! We will post the results so everyone can see.
You can start the survey at this link. Thank you!
By Chris Castle
[This post first appeared on MusicTechPolicy]
I have it on good authority from someone close to the talks not authorized to speak on the record that Universal is taking the lead on solving the now un-frozen mechanicals crisis. This obviously needs to be confirmed and may not be final, but I think it’s well worth posting about.
Recall that the crisis pertains to the so-called “Subpart B” mechanical royalties paid by record companies for permanent downloads, vinyl and compact discs. The mechanical rate has been frozen at 9.1¢ since 2008 and the Copyright Royalty Judges recently rejected a settlement among the NMPA, NSAI, Sony, Universal and Warner to extend the freeze in the Phonorecords IV proceeding. Having rejected the proposed settlement, the next step could be knock down, drop dead, drag out litigation that would, in my view, be totally unnecessary. Or the next step could be the labels and publishers submitting a new proposed settlement and asking for the Judges’ approval.
Also recall that the Judges hinted at a potential deal they would like to see in their rejection of the proposed settlement that would essentially uplift the current 9.1¢ rate by an inflation factor since the rate was set in 2008, bringing the minimum statutory rate for all “Subpart B” configurations to 12¢ that would be further uplifted by an annual cost of living adjustment based on the Consumer Price Index (CPI-U in this case).
We’ve written about this topic so much that you’re probably sick of hearing about it–but if this source turns out to be correct, it’s a real step in the right direction by Universal taking a leadership role that will no doubt be controversial.
As I understand it, Universal may propose a minimum statutory rate of 10¢ for permanent downloads and 12¢ for both vinyl and CD configurations. All three rates would be adjusted annually by the Consumer Price Index (in a similar way that the Judges just indexed the webcasting royalty in Webcasting V applicable to sound recordings). This rate would apply to all songs–not just to George Johnson–as one would expect.
There’s no way to know at this point today whether all the participants in the Phonorecords IV proceeding will accept these terms, including George Johnson who has held out for a much higher minimum statutory rate. Some may scratch their head over why the download rate is less, but my suspicion is that it’s because Apple and Amazon have been inflexible on increasing the wholesale price and I could understand why a label would give themselves some headroom on downloads going into what will surely be highly inflationary times but at the same time agreeing a cost of living adjustment. (When the dust settles, it may be worth a discussion in the artist rights community about whether to campaign against Apple and Amazon.)
I do think it’s commendable if Universal is taking the first step toward bringing fairness to a process that has been unfair for many years. We’ll see what happens, but it looks like it could be light at the end of the tunnel. Watch this space.
Nice post by Ed Christman in Billboard explaining the continuing crisis on frozen mechanicals. Ed comes up with a rough justice quantification of the impact on songwriter and music publisher revenues in light of controlled compositions clauses in recording contracts that apply to (a) songs written and recorded by artists, or (b) songs by “outside writers” if and only if the artist can get the outside writer to accept the controlled compositions terms and rates.
For those reading along at home, one theory (aside from sheer leverage) that gets used in this context is that the artist/writer can agree on behalf of all co-writers to accept the terms of the license granted by the artist to the label in the controlled compositions clause because they are co-owners of an undivided interest in the song copyright and can grant nonexclusive licenses in the whole subject to a duty to account provided the license is not economic waste or self-dealing. Let’s just leave all that where it lays for now, but that story has never really been properly challenged–particularly the economic waste part given the rate fixing date issue and even the frozen mechanicals crisis itself. We’ll come back to that bit some other time.
The rate fixing date is a key part of the discussion for understanding the impact of unfreezing mechanicals. So what is that rate fixing provision?
Remember, the controlled compositions clause starts with reducing the minimum statutory mechanical rate in the US (and in theory in Canada subject to MLA) in effect at a point in time. That point in time is either commencement of recording (booo!), delivery, release or sale of a unit embodying the song at issue. Remember that the labels only pay mechanical royalties on physical and downloads (the rates at issue in the frozen mechanicals crisis)–streaming services pay for the interactive streaming mechanicals (and there is no mechanical for webcasting, a whole other beef).
You say, wait–isn’t the mechanical rate 9.1¢? Why does it matter when the record was recorded, delivered, released or sold? Won’t the rates all be the same? And you’d be right if you were asking about a record recorded and released in 2006 or after, or a record recorded and released between 1909 and 1978, like, say some titles by Bob Dylan, The Beatles, Otis Redding or Miles Davis.
But–it wasn’t always this way. The mechanical royalty rate was set at 2¢ by Congress with the first statutory license, i.e., compulsory license, in 1909 and did not change until the 1976 revision of the US Copyright Act effective 1978. The rate then began to incrementally increase over the years until it reached 9.1¢ in 2006, a phased increase that was to compensate for Congress failing to increase the rate for 70 years, aka “the Ice Age”. The Congress really screwed up songwriters’ lives by freezing the rate at 2¢ during the Ice Age and songwriters and their heirs have been paying for it ever since, right up to the 2006-2022 period, aka “the Second Ice Age” or the Return of the Neanderthals.
In an effort to help songwriters shovel out from the Ice Age, The Congress also authorized indexing the minimum rate to inflation from 1988 to 1995. Indexing is again on the mind of the Copyright Royalty Board right now–bearing in mind that an increase in rates due to inflation has nothing to do with the intrinsic value of the song copyrights so there’s no confusion. Indexing simply applies any increase in the consumer price index to the statutory rate and preserves buying power. In a way, it is the opposite of a case about value. Indexing assumes that the value issue was already decided (in this case in 2006) and simply preserves buying power so that the “nominal” rate of 9.1¢ in 2006 can still buy the same amount of goods or services in 2022 (or 2023 in the case of the CRB rate period). Otherwise the “real” rate, i.e., the inflation adjusted rate, is not 9.1¢ it is about 6¢.
Remember–the proposed rate increase to 12¢ by the CRB is not about value, it’s about buying power because it’s solely focused on inflation.
So back to controlled compositions. It is no coincidence that at the same time as the 1978 increases were phased in, the labels established controlled compositions clauses that knocked songwriters back down. They would probably not have gotten away with freezing by contract at 2¢ so they let the rate float up but much more slowly and with several caps. The first cap is the maximum number of songs, usually 10 or 11. The next cap is the infamous 3/4 rate, where the label pays based on 75% of the minimum statutory rate. But the third cap is the rate fixing date and that’s the one we want to focus on in the unfrozen mechanicals context.
In simple form, it looks something like this contract language:
If the copyright law of the United States provides for a minimum compulsory rate: The rate equal to seventy-five percent (75%) of the minimum compulsory license rate applicable to the use of musical compositions on audio Records under the United States copyright law (hereinafter referred to as the “U.S. Minimum Statutory Rate”) at the time of the commencement of the recording of the Master concerned but in no event later than the last date for timely Delivery of such Master (the applicable date is hereinafter referred to as the “Copyright Fixing Date”). (The U.S. Minimum Statutory Rate is $.091 per Composition as of January 1, 2006);
The way that the statutory rate increases come into the controlled compositions clause is because from 1978-2006 the statutory rates increased across albums delivered across album cycles. If you consider that the rates used to increase about every two years and that an album cycle can be two years, it’s likely that LP 1 would have a lower rate than LP2, LP 2 than LP3 and so on right up to 2006.
Also remember that the increases in rates are prospective, meaning that the controlled compositions rate on recordings delivered in the future will, of course, get the higher rate, even if the past rates don’t change which they don’t, at least not yet. Also consider that permanent downloads often are excluded from controlled comp treatment and are paid at full rate, probably on the rate fixing date in the artist’s agreement. Sometimes the download rates “float” or increase in line with increases in the statutory rate, but that’s part of individual negotiations.
If there is an outside songwriter who does not agree to accept the artist’s controlled composition rate (and there are plenty of these) what happens? Typically the label will account to the outside writer at their full minimum statutory rate but will deduct that payment from the maximum aggregate mechanical royalty payable to the artist (i.e., the 10 song cap). There’s some twists and turns to this involving rates on different units “made and distributed”, but for our purposes there is one clear thing to understand:
Because of the rate fixing date which is frozen by contract (the Mini Ice Age) the artist/songwriter will be paying a higher mechanical to the outside writer from a frozen royalty “pool”.
This is why you should always, always demand “protection” for at least one outside song in your contract and then review each album to determine if that needs to be increased. This is particularly true for records made in places like Nashville where the record company will demand you work with “A” list songwriters (assume none of whom will take 3/4 rate) and then try to deduct the difference between the uncontrolled rate and the controlled rate from you (and if it gets big enough, cross it to your record royalties). (Not only will A list writers not take the 3/4 rate, they’re pissed because they can’t charge you double stat like they do double scale for sessions.)
Example: You have a 10 x 3/4 rate cap on mechanicals, the “cap rate”. That’s the 68.25¢ album rate you hear about (10 x .75 x 9.1¢). Say you have 10 songs on your album and you wrote all of them. You get the entire 68.25¢. If you had two outside songs whose writers get 9.1¢ under current rates, you deduct 18.2¢ from the cap rate, and that leaves 50.05¢ as the “controlled pool” or the total mechanical royalty payable to the artist/songwriter (actually all controlled writers, but leave aside that wrinkle).
So you can see, that’s no longer a 75% rate, it’s actually more like a 55% rate.
Now let’s assume that the new rate is 12¢. Same calculation, two outside songs now get 24¢, but the cap rate stays the same because of the rate fixing date. During the Mini Ice Age, i.e., while that cap rate is fixed at 9.1¢ x 10 x .75, the controlled pool now is expressed as 68.25¢ – 24¢ = 44.25¢, or about 48% (44.25 ÷ 91). The artist’s publisher is not going to be wild about that; the outside writer’s publishers will be thrilled.
This will start to true up on the next LP that takes a rate fixing date after the 12¢ rates go into effect. In that situation you’d be increasing both sides of the equation, so the cap rate would increase to 90¢ (10 x .12 x .75). The outside writers still get 12¢ each for two songs (or 24¢) which is deducted from the cap rate to get a controlled pool of 66¢. The true controlled comp rate is then back to about 55%.
These effects will be less pronounced if you have protection for one or more songs (or fractions of songs) or you have a higher cap, say 11 or 12 instead of 10 (with corresponding increases on other configurations). But you see the trend line.
I think this leads to the conclusion that increasing the statutory rate is a huge step forward and we should all be grateful to the Judges. The rate fixing dates for catalog titles (really the entire rate fixing date concept) must also be considered and any new effort to tweak the controlled compositions clause to effectively nullify the Judges’ rate increase will no doubt cause further conflict.
One day Congress will again act to reduce the effects of the controlled compositions clause and especially the rate fixing date, but in the meantime the Judges may well visit the issue to the extent they are able before we see the Return of the Neanderthals.
It was a big week for songwriters last week! The Copyright Royalty Judges rejected the frozen mechanicals settlement put forward by the majors in the current rate-setting proceeding at the Copyright Royalty Board thanks in part to the best audience in the world–that would be you! All that hammering on the issue paid off.
We also acknowledge the hard work of all the commenters who spoke straight from the heart and of course songwriter George Johnson who has been fighting the good fight in the Copyright Royalty Board all by himself for years now. We’re also very grateful to the Judges for a well-thought out ruling and a thorough vetting of the issues, George’s many filings and the songwriter public comments.
The question we’ve heard a lot in recent days is where do we go from here? Clearly the answer is “Up” but how far up is the question. We need to be mindful of the economic impact that increased rates will have on independent labels in particular, but at the same time acknowledge that all record companies have gotten the benefit of frozen rates for 16 years and that songwriters have taken it in the shorts for a long, long time.
The Judges seem to be hinting at a deal in their ruling (remembering this is the rate for physical and downloads only (called “Subpart B rates”) and not for Spotify-type streaming which is not affected by these rate changes). Here’s the relevant quote from the ruling:
Commenters advocated application of an inflation adjustment beginning, at a minimum, in 2006. See, e.g. [Songwriters Guild of America] Comments at 4; [Monica] Corton Comments at 4; [Kevin] Casini Comments at 4. According to the proponents of a cost of living adjustment (COLA) applied to the 2006 rates, that adjustment would yield a 2021 royalty rate of $ 0.12 (an upward 31.9% inflation adjustment over the sixteen-year period). See, e.g., SGA Comments at 4. SGA conceded that the COLA extrapolation cannot be considered dispositive on the issue of new rate-setting, but they contended that it does “starkly demonstrate the outrageous unfairness that has been imposed on the music creator community over a period of more than an entire century.”
Step one, then, could be to increase the minimum statutory rate to 12¢ (or 13¢ depending on how you do the math) with customary adjustments for the “long song” formula for songs over 5 minutes.
That increase in the rate would be significant and probably the biggest rate increase ever on a percentage basis for the statutory rate. Will that satisfy everyone? Probably not, but it’s a step forward.
But–and this is a big but–that’s not the end of the story. We do not want to be right back in the same position in a few years time. One way to avoid this is to increase the new rate for inflation every 12 months (called “indexing”) the same way that the webcasting rates are indexed for sound recordings.
The Judges also hint at indexing as a potential solution to avoid just another rate freeze:
[George Johnson] has long advocated inclusion of an inflation index in royalty rates set by the Judges, including the…rates at issue here. In support of his advocacy, GEO has filed 27 pleadings, including motions seeking imposition of an inflation index on section 115 rates and periodic notices of U.S. inflation rates. His plea is bolstered by the many commenters who, almost unanimously, included this suggestion.
So the way this would work is that starting in 2023, the current 9.1¢ rate would be increased to 12¢. After 12 months, the rate would be increased by the Consumer Price Index (the CPI-U rate) for each 12 month period until 2027 when new rates would get decided by the CRB in the next rate proceeding (Phonorecords V). Example: If the CPI is 10%, then the minimum statutory rate would increase to 13.2¢ for the next 12 months. If the CPI in the second year was also 10%, then the 13.2¢ rate would be increased to 14.52¢ and so on until the last year of the period (2027). (Of course we can’t tell today what the CPI will be in 2023.)
Given the Judge’s rejection of the frozen rates, it is very doubtful that there will ever be another freeze, but we have to stay alert and vocal. When the new rates come up, we all have to pay attention.
It’s important to remember that “indexing” to inflation just preserves buying power. Meaning that 12¢ today is what 9.1¢ was worth in 2006. Would it be the fair thing to index all the way back to 1909? Sure, but while the Judges hint at going back further (the “at a minimum” reference), the Judges may not be inclined to go further back than 2006 when the current freeze started, but we’ll see what happens.
We’d be very interested in hearing from you with any questions you have or other ideas for solutions. Obviously, this post is just sharing ideas with our audience and isn’t a formal statement by any particular person or group. There may be a number of proposals coming out and we’ll of course post them on Trichordist.
It must also be said that George Johnson has yet to weigh in on the situation and may very well have a different idea. There’s also some twists and turns to sort out, such as the black box “MOU” (the fourth of its name) but especially the controlled compositions rates that the Judges discussed in some detail (as Judge Barnett said, “The disparity between the static rate and the dynamic market is even more stark when considering the “controlled composition clause.””).
In any event, feel free to comment and we welcome the discussion.
By Chris Castle
If screwups were Easter eggs, Daniel Ek would be the Easter bunny. Right in the middle of Spotify’s crashing stock price, billion-dollar stock buy backs, shenanigans at the Copyright Royalty Board (which grows more chaotic by the day), the Joe Rogan controversy, and an investigation by the UK competition authorities after an investigation by the Digital Culture Media and Sport Committee of the UK House of Commons, here’s another Easter egg that Little Danny missed.
According to Marca, the sport site based in Spain, Ek is soothing his (so far) failed bid to buy the UK football club Arsenal by acquiring the naming rights to Barcelona FC’s super-stadium, Camp Nou, the largest football stadium in Europe. According to Marca:
Sponsorship seems to be the way in which Laporta hopes to get the Blaugrana out of the red and into the black.
An agreement with music streaming platform Spotify, which is expected to be confirmed imminently, will see the club receive 225 million euros.
In turn, Spotify will sponsor the men and women’s shirts as well as their training wear. Furthermore, Spotify will have the rights to the stadium for the next three seasons- which has received mixed reviews from fans of the club.
Barcelona expect annual income of 20 million euros from Spotify to sponsor the Camp Nou, which is estimated to be more than Manchester City‘s deal with Etihad – who sponsor their stadium for 15 million euros per season.
That’s right–not one red cent for artists (or songwriters) but millions for tribute. And how did this deal come about do you think? Well, realize that Barcelona is also shopping for a rather large loan to renovate the Camp Nou stadium and they turned to…Goldman Sachs, which happens to be one of Spotify’s investment bankers. So which came first?
Does Goldman think there’s anything unethical about a company that screws creators all the livelong day but spends hundreds of millions on naming a soccer stadium after itself? (OK, I got that out with a straight face, but you can laugh now.) Evidently not, because in the catechism of Goldman, you stop at the fees novena.
And speaking of fees, what is the source of funds for Daniel Ek’s latest self-aggrandizement or whatever you call it? Perhaps a loan from Goldman before interest rates spike this year if the Federal Reserve really does say goodbye to the easy money era that has bubbled up assets around the world?
Second Comments Submitted by the Songwriters Guild of America, Inc., the Society of Composers & Lyricists, Music Creators North America, and the individual music creators Rick Carnes and Ashley Irwin
These Comments Are Endorsed by the Following Music Creator Organizations:
Alliance for Women Film Composers (AWFC). https://theawfc.com
Alliance of Latin American Composers & Authors (AlcaMusica) https://www.alcamusica.org
Asia-Pacific Music Creators Alliance (APMA), https://musiccreatorsap.org/
European Composers and Songwriters Alliance (ECSA), https://composeralliance.org
The Ivors Academy (IVORS), https://ivorsacademy.com
Music Answers (M.A.), https://www.musicanswers.org
Pan-African Composers and Songwriters Alliance (PACSA), http://www.pacsa.org
Screen Composers Guild of Canada (SCGC), https://screencomposers.ca
Songwriters Association of Canada (SAC), http://www.songwriters.ca
- The Statutory Importance of Interested, Non-Participant Comments to CRB Decision Making
While Congress may have expressed enthusiasm for joint rate setting proposals being developed through arms-length, independent negotiations among the parties to a CRB rate-setting proceeding (which clearly may not have been what transpired in the present case among vertically integrated parties), Congress was also crystal clear in another of its related statutory directives. Namely, that the CRB also has a duty to ensure that interested, non-participating parties who would be bound by the terms of the negotiated agreement are given the full opportunity to comment upon the proposal as part of the record of the proceeding prior to the proposal’s adoption or rejection by the CRB.
Section 801(b)(7)(a)(i) of the US Copyright Act stipulates that:
[T]he Copyright Royalty Judges shall  provide to those that would be bound by the terms, rates, or other determination set by any agreement in a proceeding to determine royalty rates an opportunity to comment on the agreement and shall  provide to participants in the proceeding under § 803(b)(2) that would be bound by the terms, rates, or other determination set by the agreement an opportunity to comment on the agreement and object to its adoption as a basis for statutory terms and rates. (Bracketed numbers added for clarity)
More importantly for the purposes of these Comments, Section 801(b)(7)(a)(ii) explicitly sets forth the authority of the CRB to accept or reject the proposed agreements of parties to a proceeding based upon the combination of comments and objections filed both by participants in the proceeding and outside, interested party commenters:
[T]he Copyright Royalty Judges may decline to adopt the agreement as a basis for statutory terms and rates for participants that are not parties to the agreement, if any participant described in clause (i) objects to the agreement and the Copyright Royalty Judges conclude, based on the record before them if one exists, that the agreement does not provide a reasonable basis for setting statutory terms or rates. (emphasis added)
In the present case, the Major Music Conglomerates (once again counterintuitively joined by NSAI) have chosen to simply ignore the statutory requirements, set forth above, and focus solely on issuing a blanket rejection of the comments of pro se participant George Johnson (who formally objected to the proposed agreement). In fact, in their submission to the CRB of August 10, 2021, the Major Music Conglomerates did not even bother to mention the detailed comments of those many individuals and groups who, on behalf of their constituents comprising a large percentage of the US’ and the world’s music creators, filed detailed comments with the CRB objecting to the proposed frozen mechanical rate deal as unreasonable.
Rather, the Conglomerates opted instead to stand solely on the following, naked assertion:
Mr. Johnson provides no basis for the Judges to reject the Settlement. Mr. Johnson makes unfounded accusations of fraud and inaccurate statements concerning the corporate structure of record companies, but provides no economic reason to believe that the rates in the Settlement are outside the “zone of reasonableness.” This is nothing more than a rehash of arguments he made and the Judges rejected when a similar settlement was presented in Phonorecords III….
Objections to a settlement that is substantially the same as the one adopted in Phonorecords III, absent a showing of changed market conditions that would support a change in the rates and terms for Subpart B configurations at this time, do not permit the Judges to “conclude that the agreement reached voluntarily between the Settling Parties does not provide a reasonable basis for setting statutory terms and rates.” (citation omitted). Thus, as in Phonorecords III, “the Judges must adopt the proposed regulations that codify the partial settlement.” (emphasis added).
This evasive and misleading statement is counter-productive to upholding the Congressional mandate that all interested parties be heard –even those unable to afford the hundreds of thousands of dollars required to participate effectively in the formal rate-setting proceedings.
To repeat the obvious, when they filed the above comments, the Major Music Conglomerates were fully aware that Mr. Johnson was by far not the only person or entity to have filed detailed objections with the CRB to the frozen mechanical proposal, including the extensive comments of the Independent Music Creator groups who are the signatories hereto that had been submitted some two weeks prior to the filing of the Major Music Conglomerates’ comments on August 10, 2021 and reported on and published in the press.
Specifically, some two dozen other organizations and individuals filed or endorsed comments detailing with great specificity the unreasonable nature of the frozen royalty rate proposal made by the Major Music Conglomerates, owing to drastically changed market conditions that include the damage of long-term and now accelerating inflation, the growing length in time of the current freeze, and the demonstrably re-emerging physical phonorecord, download/Non-Fungible Token (NFT) markets amounting to tens of millions of dollars in annual royalty revenue for music creators. Those issues were spelled out extensively in our own Comments of July 26, 2021, and later updated in our Letter of October 20, 2021.
There is little mystery why the Major Music Conglomerates would choose not to acknowledge the existence of these many music creator dissenters, or to comment on what those dissenters had to say. As the CRB itself noted presciently in its Phonorecords III determination, “NMPA and NSAI represent individual songwriters and publishers.” For them to “engage in anti-competitive price-fixing at below-market rates,” would be against the interests of their potential constituents, who would likely “seek representation elsewhere” if they were so concerned.
In the current instance, the Major Music Conglomerates seem to be actively seeking to obfuscate the fact that this result, for whatever reason, is exactly what has transpired. The multiple sets of comments received by the CRB from US and global music creator advocacy groups bluntly criticizing the frozen royalty rate proposal signify the raising of voices of those representing a vast portion of the world’s music creators against the proposal’s obvious inadvisability and irrationality. The isolated support for the proposal by NSAI, an organization that represents only a tiny sliver of US songwriters and composers principally from a single genre and local geographic area (and whose underwritten presence in the proceeding raises significant questions about whether it can truly represent any collection of songwriters and composers – let alone the actual, diverse universe whose rights and livelihoods are presently at stake), has been drowned out by hundreds of thousands of other music creators arguing substantively through their organizational representatives against the thoroughly unreasonable nature of extending frozen rates for another five-year period.
Thus is the specious nature of the Major Music Conglomerates’ central claim –that the CRB has neither the authority nor sufficient reason to reject the proposed mechanical rate freeze as unreasonable– demonstrated. Fulfilling all statutory requirements, a participant in the proceedings (George Johnson) has objected to the privately negotiated deal concocted by the vertically integrated Conglomerates. Further, numerous interested commentators who “would be bound by the terms, rates, or other determination set by the agreement” have joined with Johnson in providing to the CRB amply detailed comments demonstrating significant, multiple changes in circumstances that make the proposed agreement unreasonable and irrationally flawed in 2021.
Under such circumstances, the CRB would be well within the scope of its statutory authority to either “decline to adopt the agreement as a basis for statutory terms and rates for participants that are not parties to the agreement,” or to reject it altogether. We prefer the latter, but respectfully suggest that it should most certainly do one or the other.
Moreover, the assertion by the Major Music Conglomerates that the CRB lacks sufficient reason or authority to review the Memorandum of Understanding (“MOU”) negotiated and agreed upon concurrently with the Frozen Rate Proposal for its effect on that rate proposal, is equally without merit. In their submission of August 10, 2021, the Conglomerates go so far as to claim that they “did not present the MOU to the Judges because they viewed it as routine, and irrelevant to the Judges’ decision-making concerning the Settlement.” To put it mildly, the Songwriter and Composer community views this statement with uneasiness as it pertains to the general issues of fairness and transparency in the Phonorecord IV proceeding, and hopes the CRB shares our concerns.
It suffices to say that two agreements –negotiated side by side with one another at the same time by the same parties regarding details of the same general matter—inarguably stand a substantial chance of being inter-related through both their content and potential quid pro quos. We therefore believe it obvious that in evaluating the fairness and reasonableness of one, the terms and scope of the other should be considered as a matter of course for reasons of both best practices and common sense.
 As stated in our Comments of July 26, 2021, it is by no means clear that the “negotiations” which took place among the vertically integrated participants in developing the frozen mechanical royalty rate proposal were at arm’s length. “The circumstances under which the settlement negotiations were conducted that produced the proposed royalty rate freeze set forth in the May 25 Motion to Adopt can be fairly characterized –under the above standards– as being exactly the opposite of what both Congress and the Executive Branch have in mind in defining “reasonability” under the “willing seller-willing buyer” formula. Rather than arm’s length negotiations between parties on opposites sides of the table, the referenced discussions that produced the settlement agreement instead seem to have taken place solely among vertically integrated parties and their trade association agents, apparently with little or no input from independent music creators and copyright owners upon whom “those rates and terms [will be] binding.” See, Comments of July 26, 2021 at 8-9.
 See, https://app.crb.gov/case/detail/21-CRB-0001-PR%20%282023-2027%29 for comments filed between dates July 19 and August 2, 2021.
 Phonorecords III at 15298.
 According to the Major Music Conglomerates: “Specifically, this memorandum of understanding (“MOU”) provides for (1) participating record companies and music publishers to work collaboratively on licensing processes to improve clearance of new releases, (2) a procedure for bulk distribution of mechanical royalties accrued by participating record companies that are not otherwise payable, and (3) late fee waivers when participating record companies follow specified clearance procedures for new releases.” See, https://app.crb.gov/document/download/25577 at 6.