@NorthMusicGroup Joins the List Opposing Frozen Mechanicals With the Copyright Royalty Board

We’ve been keeping track of those who are for freezing the statutory mechanical royalty rate for physical and permanent downloads for another five years out to 2027. The issue is currently part of the rate setting proceeding before the Copyright Royalty Board–which froze the same rate at 9.1¢ in 2006 and was first extended in 2009.

Frozen Mechanicals

Here is the current list of those for and against freezing mechanicals on these categories for a total of 21 years:

Against Frozen MechanicalsSupporting Frozen Mechanicals
Songwriters Guild of AmericaNational Music Publishers Association
Society of Composers and LyricistsNashville Songwriters Association International
Alliance for Women Film Composers 
Songwriters Association of Canada 
Screen Composers Guild of Canada 
Music Creators North America 
Music Answers 
Alliance of Latin American Composers & Authors 
Asia-Pacific Music Creators Alliance 
European Composers and Songwriters Alliance 
Pan African Composers and Songwriters Alliance 
North Music Group 

Copyright Royalty Board Responds to Coalition of Songwriter Groups on Frozen Mechanicals

A group of songwriter organizations from around the world wrote to the Copyright Royalty Board last week opposing a proposed private “settlement” between the major labels and the major publishers to freeze mechanical rates on physical and downloads at the 9.1¢ 2006 rate that was filed in the current Copyright Royalty Board (CRB) rate court hearing called “Phonorecords IV”. (You can find the entire list of filings in the case here.)

The twist here is that if the CRB approves the private settlement at the request of “the parties” and doesn’t take into account the views and evidence of people who actually write songs and have to earn a living from songwriting, it will be grotesquely unfair and possibly unconstitutional wage and price control. The CRB will have frozen the mechanical rate for physical and downloads at the 2006 rate when inflation alone has eaten away the buying power of that royalty by approximately 30%. This would be like the Minerals Management Service adopting a settlement written by Exxon.

On average–on average–the physical and download configuration make up 15% of billing for the majors and for some artists vinyl is a welcome change from fractions of a penny on streaming. And then there’s Record Store Day–hello? These are a couple of the many reasons anyone who is paying attention should reject the terms of the settlement.

US Revenue by Source 2020

The Coalition had a simple ask: Let the public comment:

In the interests of justice and fairness, we respectfully implore the CRB to adopt and publicize a period and opportunity for public comment on the record in these and other proceedings,especially in regard to so-called proposed “industry settlements” in which creators and other interested parties have had no opportunity to meaningfully participate prior to their presentation to the CRB for consideration, modification or rejection. In the present case, hundreds of millions of dollars of our future royalties remain at stake, even in a diminished market for traditional, mechanical uses of music. To preclude our ability to comment on proposals that ultimately impact our incomes, our careers, and our families, simply isn’t fair.

The Copyright Royalty Board responded! According to our sources, the Copyright Royalty Board said that they would publish the private settlement in the Federal Register and give the pubic the chance to comment. This is great news!

But we will see what they actually do. The Copyright Royalty Board does not have a great track record in understanding songwriter interests in raising the mechanical rates as we can see in this except from their final rule freezing mechanicals again in 2009:

Copyright Owners’ argument with respect to this objective is that songwriters and music publishers rely on mechanical royalties and both have suffered from the decline in mechanical income. Under the current rate, they contend, songwriters have difficulty supporting themselves and their families. As one songwriter witness explained, “The vast majority of professional songwriters live a perilous existence.” [Rick] Carnes [Testimony] at 3. [Rick Carnes signed the Coalition letter as President of the Songwriters Guild of America.] We acknowledge that the songwriting occupation is financially tenuous for many songwriters. However, the reasons for this are many and include the inability of a songwriter to continue to generate revenue-producing songs, competing obligations both professional and personal, the current structure of the music industry, and piracy. The mechanical rates alone neither can nor should seek to address all of these issues.

We simply do not accept that the Founders put the Copyright Clause in the Constitution so creators could have a side hustle for their Uber driving which is exactly where frozen mechanicals take you, particularly after the structural unemployment in the music business caused by the COVID lockdowns.

Here is a summary of who is for and who is against frozen mechanicals.

Against Frozen MechanicalsProposing Frozen Mechanicals
Songwriters Guild of AmericaNational Music Publishers Association
Society of Composers and LyricistsNashville Songwriters Association International
Alliance for Women Film Composers 
Songwriters Association of Canada 
Screen Composers Guild of Canada 
Music Creators North America 
Music Answers 
Alliance of Latin American Composers & Authors 
Asia-Pacific Music Creators Alliance 
European Composers and Songwriters Alliance 
Pan African Composers and Songwriters Alliance 

Which side are you on? If you want to write your own comment to the Copyright Royalty Board about frozen mechanicals, send your comment to crb@loc.gov

Coalition of Songwriter Groups Call on Copyright Royalty Board for Fairness and Transparency on Frozen Mechanicals

[Editor T says this is a letter from a coalition of US and international songwriter groups to the Copyright Royalty Board about the frozen mechanical issue. If you want to write your own comment to the Copyright Royalty Board about frozen mechanicals, send your comment to crb@loc.gov]

MUSIC CREATORS
NORTH AMERICA

May 17, 2021

Via Electronic Delivery

Chief Copyright Royalty Judge Jesse M. Feder
Copyright Royalty Judge David R. Strickler
Copyright Royalty Judge Steve Ruwe
US Copyright Royalty Board
101 Independence Ave SE / P.O. Box 70977
Washington, DC 20024-0977

To Your Honors:

As a US-led coalition representing hundreds of thousands of songwriters and composers from across the United States and around the world, we are writing today to express our deep concerns over the “Notice of Settlement in Principle” recently filed by parties to the proceedings before the Copyright Royalty Board concerning its Determination of Royalty Rates and Terms for Making and Distributing Phonorecords (Phonorecords IV) (Docket No. 21–CRB–0001–PR<(2023–2027)). For reasons explained below, several highly conflicted parties to this proceeding have apparently agreed to propose a rolling forward to the year 2027 of the current US statutory mechanical royalty rate for the use of musical compositions in the manufacture and sale of physical phonorecords (such as CDs and vinyl records). This proposal (and related industry agreements yet to be disclosed by the parties— see, https://app.crb.gov/document/download/23825) should neither be acted upon nor accepted by the CRB without the opportunity for public comment, especially by members of the broad community of music creators for whom it is financially unfeasible to participate in these proceedings as interested parties. It is our livelihoods that are at stake, and we respectfully ask to be heard even though we lack the economic means to appear formally as parties. If procedures are already in place to accommodate this request, we look forward receiving the CRB’s instructions as to how to proceed.

The current U.S statutory mechanical rate for physical phonorecords is 9.1 cents per musical composition for each copy manufactured and distributed. That rate has been in effect since January 1, 2006. It represents the high-water mark for US mechanical royalty rates applicable to physical products, a rate first established in 1909 at 2 cents. That 2-cent royalty rate, in one of the most damaging and egregious acts in music industry history, remained unchanged for an astonishing period of sixty-nine years, until 1978. Nevertheless, the recording industry now seeks  to repeat that history by freezing the 9.1 cent rate for an era that will have exceeded twenty years by the end of the Phonorecords IV statutory rate setting period.

Inflation has already devalued the 9.1 cent rate by approximately one third. By 2027, 9.1 cents may be worth less than half of what it was in 2006. How can the US music publishing industry’s trade association, and a single music creator organization (which represents at most only a tiny sliver of the music creator community) have agreed to such a proposal?

The answer to that question is an easy one to surmise. The three major record companies who negotiated the deal on one side of the table have the same corporate parents as the most powerful members of the music publishing community ostensibly sitting on the other side of the table. Songwriter, composer and independent music publisher interests in these “negotiations” were given little if any consideration, and the proposed settlement was clearly framed without any meaningful consultation with the wider independent music creator and music publishing communities, both domestically and internationally.

How on earth can these parties be relied upon to present a carefully reasoned, arms-length “Settlement in Principle” proposal to the CRB under such circumstances, fraught as they are with conflicts of interest, without at least an opportunity for public comment? Further, how can these parties be relied upon in the future to argue persuasively that mechanical royalty rates applicable to on-demand digital distribution need to be increased as a matter of economic fairness (which they most certainly should be), when they refuse to seriously conduct negotiations on rates applicable to the physical product the distribution of which is still controlled by record companies (who not so incidentally also receive the lion’s share of music industry revenue generated by digital distribution of music)?

The ugly precedent of frozen mechanical royalty rates on physical product has, in fact, already served as the basis for freezing permanent digital download royalty rates since 2006. Is this the transparency and level playing field the community of songwriters and composers have been promised by Congress through legislation enacted pursuant to Article I, Section 8 of the Constitution?

The trade association for the US music publishing industry is supported by the dues of its music publisher members, the costs of which are often in large part passed along to the music creators affiliated with such publishers. It is thus mainly the songwriter and composer community that pays for the activities of that publisher trade association, a reality that has existed since that organization’s inception. Still, the genuine voice of those songwriters and composers is neither being sought nor heard. Further in that regard, we wish to make it emphatically clear that regardless of how the music publishing industry and its affiliated trade associations may present themselves, they do not speak for the interests of music creators, and regularly adopt positions that are in conflict with the welfare of songwriters and composers. Their voice is not synonymous with ours.

Unfortunately, the music creator community lacks the independent financial resources –in the age of continuing undervaluation of rights, rampant digital piracy and pandemic-related losses–to rectify these inequities by expending millions more dollars to achieve full participation in CRB legal and rate-setting proceedings. Clearly, such an inequitable situation is antithetical to sound Governmental oversight in pursuit of honest and equitable policies and results.

In the interests of justice and fairness, we respectfully implore the CRB to adopt and publicize a period and opportunity for public comment on the record in these and other proceedings,especially in regard to so-called proposed “industry settlements” in which creators and other interested parties have had no opportunity to meaningfully participate prior to their presentation to the CRB for consideration, modification or rejection. In the present case, hundreds of millions of dollars of our future royalties remain at stake, even in a diminished market for traditional, mechanical uses of music. To preclude our ability to comment on proposals that ultimately impact our incomes, our careers, and our families, simply isn’t fair.

Finally, we request that this letter be made a part of the public record of the Phonorecords IV
proceedings. We extend our sincere thanks for your attention to this very difficult conundrum
for music creators, and further note that your consideration is very much appreciated.

Respectfully submitted,

Rick Carnes
President, Songwriters Guild of America

Ashley Irwin
President, Society of Composers and Lyricists
Officer, Music Creators North America Co-Chair, Music Creators North America

List of Supporting Organizations
Songwriters Guild of America (SGA), https://www.songwritersguild.com/site/index.php
Society of Composers & Lyricists (SCL), https://thescl.com
Alliance for Women Film Composers (AWFC). https://theawfc.com
Songwriters Association of Canada (SAC), http://www.songwriters.ca
Screen Composers Guild of Canada (SCGC), https://screencomposers.ca
Music Creators North America (MCNA), https://www.musiccreatorsna.org
Music Answers (M.A.), https://www.musicanswers.org
Alliance of Latin American Composers & Authors (ALCAMusica), https://www.alcamusica.org
Asia-Pacific Music Creators Alliance (APMA), https://apmaciam.wixsite.com/home/news
European Composers and Songwriters Alliance (ECSA), https://composeralliance.org
Pan-African Composers and Songwriters Alliance (PACSA), http://www.pacsa.org

cc: Ms. Carla Hayden, US Librarian of Congress
Ms. Shira Perlmutter, US Register of Copyrights
Mr. Alfons Karabuda, President, International Music Council
Mr. Eddie Schwartz, President, MCNA and International Council of Music Creators (CIAM)
The MCNA Board of Directors
The Members of the US Senate and House Sub-Committees on Intellectual Property
Charles J. Sanders, Esq.

Open Letter: Dozens of Artists, Musicians and Songwriters Seek Referral to UK Regulators to Oversee Streaming Royalties

[A bit of context: With all the riches being made from streaming, session musicians and vocalists make zero. And don’t forget that music made Daniel Ek a billionaire.]

Broken Record Campaign

Ivors Academy

Musicians Union

April 20, 2021

The Rt Hon Boris Johnson MP
Prime Minister
10 Downing Street
W1A 2AA

Dear Prime Minister,

We write to you on behalf of today’s generation of artists, musicians and songwriters here in the UK.

For too long, streaming platforms, record labels and other internet giants have exploited performers and creators without rewarding them fairly.  We must put the value of music back where it belongs – in the hands of music makers.

Streaming is quickly replacing radio as our main means of music communication. However, the law has not kept up with the pace of technological change and, as a result, performers and songwriters do not enjoy the same protections as they do in radio.

Today’s musicians receive very little income from their performances – most featured artists receive tiny fractions of a US cent per stream and session musicians receive nothing at all.

To remedy this, only two words need to change in the 1988 Copyright, Designs and Patents Act. This will modernise the law so that today’s performers receive a share of revenues, just like they enjoy in radio. It won’t cost the taxpayer a penny but will put more money in the pockets of UK taxpayers and raise revenues for public services like the NHS.

There is evidence of multinational corporations wielding extraordinary power and songwriters struggling as a result. An immediate government referral to the Competition and Markets Authority is the first step to address this. Songwriters earn 50% of radio revenues, but only 15% in streaming. We believe that in a truly free market the song will achieve greater value.

Ultimately though, we need a regulator to ensure the lawful and fair treatment of music makers. The UK has a proud history of protecting its producers, entrepreneurs and inventors. We believe British creators deserve the same protections as other industries whose work is devalued when exploited as a loss-leader.

By addressing these problems, we will make the UK the best place in the world to be a musician or a songwriter, allow recording studios and the UK session scene to thrive once again, strengthen our world leading cultural sector, allow the market for recorded music to flourish for listeners and creators, and unearth a new generation of talent.

We urge you to take these forward and ensure the music industry is part of your levelling-up agenda as we kickstart the post-Covid economic recovery.

Yours Sincerely,

Damon Albarn OBE

Lily Allen

Wolf Alice

Marc Almond OBE

Joan Armatrading CBE

David Arnold

Massive Attack

Jazzie B OBE

Adam Bainbridge (Kindness)

Emily Barker

Gary Barlow OBE

Geoff Barrow

Django Bates

Brian Bennett OBE

Fiona Bevan

Aflie Boe OBE

Billy Bragg

The Chemical Brothers

Kate Bush CBE

Melanie C

Eliza Carthy MBE

Martin Carthy MBE

Celeste

Guy Chambers

Mike Batt LVO

Don Black OBE 

Badly Drawn Boy

Chrissy Boy

Tim Burgess

Mairéad Carlin

Laura-Mary Carter

Nicky Chinn

Dame Sarah Connolly DBE

Phil Coulter 

Roger Daltrey CBE

Catherine Anne Davies (The Anchoress)

Ian Devaney

Chris Difford

Al Doyle

Anne Dudley

Brian Eno

Self Esteem

James Fagan

Paloma Faith

Marianne Faithfull

George Fenton

Rebecca Ferguson

Robert Fripp

Shy FX

Gabrielle

Peter Gabriel

Noel Gallagher

Guy Garvey

Bob Geldof KBE

Boy George

David Gilmour CBE

Nigel Godrich

Howard Goodall CBE

Jimi Goodwin

Graham Gouldman 

Tom Gray

Roger Greenaway OBE

Will Gregory

Ed Harcourt

Tony Hatch OBE

Richard Hawley

Justin Hayward

Fran Healy

Orlando Higginbottom

Jools Holland OBE, DL

Mick Hucknall

Crispin Hunt

Shabaka Hutchings

Eric Idle

John Paul Jones

Julian Joseph OBE

Kano

Linton Kwesi Johnson

Gary Kemp

Nancy Kerr

Richard Kerr

Soweto Kinch

Beverley Knight MBE

Mark Knopfler OBE

Annie Lennox OBE

Shaznay Lewis

Gary Lightbody OBE

Tasmin Little OBE

Calum MacColl

Roots Manuva

Laura Marling

Johnny Marr

Chris Martin

Claire Martin OBE

Cerys Matthews MBE

Sir Paul McCartney CH MBE

Horse McDonald

Thurston Moore

Gary “Mani” Mounfield

Mitch Murray CBE 

Field Music

Frank Musker 

Laura Mvula

Kate Nash

Stevie Nicks

Orbital

Roland Orzabal

Gary Osborne 

Jimmy Page OBE

Hannah Peel

Daniel Pemberton

Yannis Philippakis

Anna Phoebe

Phil Pickett 

Robert Plant CBE

Karine Polwart

Emily Portman

Chris Rea

Eddi Reader MBE

Sir Tim Rice 

Orphy Robinson MBE

Matthew Rose

Nitin Sawhney CBE

Anil Sebastian

Peggy Seeger

Nadine Shah

Feargal Sharkey OBE

Shura

Labi Siffre

Martin Simpson

Skin

Mike Skinner

Curt Smith

Fraser T Smith

Robert Smith

Sharleen Spiteri

Lisa Stansfield

Sting CBE

Suggs

Tony Swain 

Heidi Talbot

John Taylor

Phil Thornalley 

KT Tunstall

Ruby Turner MBE

Becky Unthank

Norma Waterson MBE

Cleveland Watkiss MBE

Jessie Ware

Bruce Welch OBE

Kitty Whately

Ricky Wilde

Olivia Williams

Daniel “Woody” Woodgate

Midge Ure OBE

Nikki Yeoh

Save the Date! January 14 at Noon CST, Zoom Panel with @musictechpolicy @northmusicgroup @sealeinthedeal for Independent Songwriters

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By Chris Castle

I’m grateful to Texas Accountants and Lawyers for the Arts, Austin Texas Musicians and the Austin Music Foundation for hosting an information webinar next week on the impact of the new blanket mechanical license under the Music Modernization Act on independent songwriters. We will also cover the nuts and bolts of dealing with The MLC, Inc. and a unit on the Digital Licensee Coordinator.

I couldn’t be happier to have two great panelists in music publisher and song data solver Abby North and my fellow Austin music lawyer Gwen Seale.

While this panel has an Austin origin, the topics are not Austin-centric and will apply to all songwriters in the world just like the MLC does.

Please RSVP to Eventbrite if you think you might attend at this link and also take a moment to complete the anonymous 10 question MLC Awareness Questionnaire on Survey Monkey at this link. The Zoom code to join will be posted through Eventbrite.

I’ll be posting some other materials, but for those who want the more nitty gritty background, you can read this package of documents at this link.

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

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

Quality Control of The MLC’s Operations and Platforms

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

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

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

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

Mr. Thompson also stated at the December 2019 panel:

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

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

Mr. Thompson also stated:

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

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

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

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

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

As the House Judiciary Committee stated:

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

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

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

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

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


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

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

[3] Kickoff Transcript at 40 ln 2.

[4] Kickoff Transcript at 40-41.

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

[6] 17 U.S.C. § 115 (d)(3)(J)(iii).

[7] House Report at 8.

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

What’s Good for Google is Not What’s Good for the USA: Supreme Court Brief of @davidclowery, @helienne, @theblakemorgan and @sgawrites in Google v. Oracle, Part 6

Google’s appeal of its major loss to Oracle on fair use is shaping up to be the most important copyright case of the year, if not the decade.  It could set fair use standards for years to come.  We’re going to be posting installments from the friend of the court brief that David, Helienne, Blake and The Songwriters Guild filed in the U.S. Supreme Court supporting Oracle in the Google v. Oracle fair use case.  This is the last installment.  We decided to omit the footnotes for this posting, but you can read the whole brief here.

Cover Page

Moreover, Amici believe that Google’s fair use expansion campaigns are designed to serve as a honeypot for Google’s data scraping business model that feeds its outsized profits from ads. Google likewise seems to promote expansion of the fair use doctrine as way to easily keep more videos on YouTube, while providing material support to its partners that allows them to outlast any songwriter or artist in the game of whack-a-mole under its copyright strike policies. No one is giving creators a shadowy milliondollar fund to defend against the misapplication of fair use.

Amicus Mr. Lowery summed it up in his 2014 testimony to the House Judiciary Committee:

I am not concerned with parody, commentary, criticism, documentary filmmakers, or research. These are legitimate fair use categories. I am concerned with the illegal copy that masquerades as fair use, but is really just a copy. This masquerade trivializes legitimate fair use categories and creates conflict where there need be none.

Scope of Fair Use at 22.

Unfortunately, Google manipulates fair use to extract value by monetizing verbatim  copies to the great disadvantage of creators who can little afford to fight back against the multi-national, trillion dollar corporation, and usually do not. Thus, independents
are caught without leverage in cases that rarely get to court.

The end result is that even where its use is “free,” Google’s interests are steadfastly commercial. Accordingly, the Federal Circuit was correct in finding that the nature and purpose of Google’s use was entirely commercial in nature.

III. GOOGLE’S PRIVATE INTERESTS ARE
NOT THE PUBLIC INTEREST.

The ultimate question in a fair use analysis is “whether, and how powerfully, a finding of fair use would serve or disserve the objectives of the copyright.” Leval at 1110–1111; see also Harper & Row, 471 U.S. at 546 (noting purpose of copyright is to give creators
“a fair return for their labors”).

Google’s only response to whether its use furthers the public interest—i.e., in promoting an effective system of copyright—is that allowing it to copy verbatim Oracle’s declaring code and structure would be “promoting software innovation.” Such verbatim copying is a “facile use of the scissors.” Folsom v. Marsh, 9 F. Cas. 342, 345 (C.C.D. Mass 1841) (Story, J.).

Yet what is good for Google is not synonymous with what is good for the public—no more than “[w]hat’s good for General Bullmoose is good for the USA.” Johnny Mercer and Gene De Paul, Li’l Abner (1956).  In fact, a ruling for Google would be “promoting” software innovation only in that the purported “innovation” would be furthering Google’s private
interest—i.e., using works without permission or a license fee.

This case again appears to be the latest in Google’s long-term strategy to use its market dominance and overwhelming commercial power to continually distort copyright exceptions, thereby artificially depressing the market price of copyrighted works.  Google’s proposed outcome would be yet another distortion. Were Google to prevail here, Amici expect Google (and its proxies) to throw its full weight behind such a ruling, far beyond the confines of its text. This case would become another totemic faux license or safe harbor that Google could use as a cudgel against creators and copyright owners.

Left unchecked, eventually the copyright distortions they seek—including in the case at bar—could nullify copyright, particularly for those who cannot afford to fight back or fear retaliation for doing so. Under the Google anti-copyright regime, exceptions would devour the rules of protection in whole, digesting art and culture along with them.

CONCLUSION

Amici respectfully suggest that the Court should consider whether a decision in favor of Google would merely “unleash” yet another weapon for Google’s private benefit, and whether Google’s infringement of Oracle’s declaring code and structure constitutes
“simple piracy” for which the company should most certainly be held accountable.

This Court should affirm the decision of the Federal Circuit below.
Respectfully submitted,
CHARLES J. SANDERS
Counsel of Record
29 KINGS GRANT WAY
BRIARCLIFF, NEW YORK 10510
(914) 366-6642
cjs@csanderslaw.com

CHRISTIAN CASTLE
CHRISTIAN L. CASTLE, ATTORNEYS
9600 GREAT HILLS TRAIL
SUITE 150W
AUSTIN, TEXAS 78759
(512) 420-2200
asst1@christiancastle.com
Counsel for Amici Curiae

 

There are untold riches in running the internet of other people’s things: Supreme Court Brief of @davidclowery, @helienne, @theblakemorgan and @sgawrites in Google v. Oracle, Part 4

Google’s appeal of its major loss to Oracle on fair use is shaping up to be the most important copyright case of the year, if not the decade.  It could set fair use standards for years to come.  We’re going to be posting installments from the friend of the court brief that David, Helienne, Blake and The Songwriters Guild filed in the U.S. Supreme Court supporting Oracle in the Google v. Oracle fair use case.  This is part 4.  We decided to omit the footnotes for this posting, but you can read the whole brief here.

Cover Page

Cover Page of Friend of the Court Brief

ARGUMENT

II. GOOGLE’S USE IS CLEARLY COMMERCIAL.

Against this backdrop, Amici agree wholeheartedly with the Federal Circuit that “the fact that Android is free of charge does not make Google’s use of the Java API packages noncommercial.” Oracle Am., Inc. v. Google, LLC, 886 F.3d 1179, 1197 (Fed. Cir. 2018) (“Oracle II”). In arriving at this conclusion, the Federal Circuit cited evidence that Google generated over $42 billion from Android through advertising. Id. at 1187, 1197.

Google concedes that its creation of Android was “a commercial endeavor,” but argues more amorphously that its copying of Oracle’s code and organization served the noncommercial purpose of “promoting software innovation.” Pet. Br. at 43-44. Likewise,
Google’s amici argue that because Android was offered to consumers for free, its copyright cannot be commercial. See Copyright Scholars Br. At 12.

Yet contrary to the views of Google’s amici, the Federal Circuit properly found that Google’s use was commercial and properly weighed such a commerciality finding in the fair use inquiry. Just because Google did not sell Android to consumers does not mean its
copying did constitute commercial use. In fact, the $42 billion figure cited by the Federal Circuit is likely only the tip of the iceberg.

A. Google’s Market Dominance Lowers the “Customary Price” of Copyrighted Works.

As this Court stated in Harper & Row, whether a use is commercial “is not whether the sole motive of the use is monetary gain but whether the user stands to profit from exploitation of the copyrighted material without paying the customary price.” 471 U.S. at 562 (emphasis added). In other words, a commercial use is found where a defendant is “[g]iving customers for free something they would ordinarily have to buy.”  Oracle II, 886 F.3d at 1197 (quoting A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1015 (9th Cir. 2001)).

The Federal Circuit is in accord with the other Courts of Appeals that have considered this proposition. See, e.g., Soc’y of Holy Transfiguration Monastery, Inc. v. Gregory, 689 F.3d 29, 61 (2d Cir. 2012) (“‘Profit,’ in this context, is thus not limited simply to dollars and coins; instead, it encompasses other non-monetary calculable benefits or advantages.”); Weissmann v. Freeman, 868 F.2d 1313, 1324 (2d Cir. 1989) (factor one disfavored use where professor’s benefit in academic prestige and recognition was “ill-measured in dollars”); A&M Records, 239 F.3d at 1015 (“Direct economic benefit is not required to
demonstrate a commercial use.”); see generally Nimmer on Copyright 13.05  “Commercial uses’ are extremely broad.”).

Here, there should be no question that the purpose of offering a mobile platform was commercial in nature: Google simply wanted to maintain its ad sales dominance. See Oracle II, 886 F.3d at 1210.

One thing that content creators have grown to understand is that Google is not a tech company—it is an advertising company. When one sees this, all is revealed. See Jake Swearingen, Can Google Be More Than an Advertising Company? New York Magazine
(Feb. 5, 2019) (“Of the $39 billion [Google’s parent Alphabet] brought in [during Q4 2018], $32.6 billion of it was in advertising revenue — that’s 83 percent of its total revenue.”). Google has become enormously successful, though not always transparently.
Moreover, Google dominates the market for online advertising, with disturbing  implications for privacy.

As is well-known by now, Google extracts value from its users through selling advertising on works that Google makes available at no charge to the user, and through scraping user data in the background that Google then adds to its ballooning behavioral knowledge database through highly complex user profiling. Google extracts this value by selling targeted advertising, often in connection with verbatim copies of works generally offered for free to users on YouTube. There are untold riches in running the
internet of other people’s things.

The reason is this: free is critical to Google’s model, which depends on the en masse exploitation of copyrighted content. This business model is the sort that this Court has analyzed as commercial:

[Defendants] make money by selling advertising space, by directing ads to the screens of computers employing their software. As the record shows, the more the software is used, the more ads are sent out and the greater the advertising revenue becomes. Since the extent of the software’s use determines the gain to the distributors, the commercial sense of their enterprise turns on high-volume use, which the record shows is infringing.

See Grokster, 545 U.S. at 940. Likewise, Google’s business model enables staggering profits with little to no direct commercial transactions between it and the
end-user, particularly on YouTube. See Jason Fitzpatrick, If You’re Not Paying for It; You’re the Product, Lifehacker (Nov. 23, 2010).

Google’s evangelists have even coined a term to describe such takings: “permissionless innovation.” See Adam Thierer and The Mercatus Center, Permissionless Innovation and Public Policy: A 10 Point Program at 12 (2016). Vinton G. Cerf, Keep the Internet Open, N.Y. Times (May 24, 2012) https://www.nytimes.com/2012/05/25/opinion/keep-theinternet-
open.html.

Yet “permissionless innovation” is just another term for what polite creators call the underpinning of the infamous “value gap” currently plaguing the global community of music creators and artists. In fact, the disparity between artists’ royalties and Google’s
enormous ad-based music distribution profits off of their music has become its own market phenomenon and largely led to the adoption of the European Copyright Directive in 2019 which seeks to address the devastating value gap by requiring Google to
operate on a more level playing field for creators.

In order to achieve and maintain permissionless innovation in the United States, accused infringers in contrast continue to lean on burden-shifting regimes like the DMCA safe harbors to impose the costs of policing infringement onto copyright owners while
giving Google leverage in licensing negotiations.

From a copyright perspective, permissionless innovation relies on a system of risk shifting safe harbors and forces artists into an unsustainable game of whack-a-mole to which Google’s amorphous interpretation of fair use is tightly bound. Google leverages this commercial windfall into exerting dominance at scale. For example, while Google makes much of the purported (and unsubstantiated) “lock in” effect that would result from Oracle’s vindication of its copyrights, see Pet. Br. 40, Google itself locks in creators to coerce their agreement to commercial deals with YouTube. For example and
as further discussed below, contracting with YouTube’s subscription service was a condition of access to YouTube’s infamous Content ID system28 a linkage that
continues to draw scrutiny.

Any revenue that copyright owners receive, then, must price in the transaction costs of dealing with Google’s unpredictable policies. The aggregate revenue from Google after deducting transaction costs is a long way from a “customary price.”

[To be continued]

It sure costs a lot of money to give things away for free: Supreme Court Brief of @davidclowery, @helienne, @theblakemorgan and @sgawrites in Google v. Oracle Part 3

Google’s appeal of its major loss to Oracle on fair use is shaping up to be the most important copyright case of the year, if not the decade.  It could set fair use standards for years to come.  We’re going to be posting installments from the friend of the court brief that David, Helienne, Blake and The Songwriters Guild filed in the U.S. Supreme Court supporting Oracle in the Google v. Oracle fair use case.  This is part 3.  We decided to omit the footnotes for this posting, but you can read the whole brief here.

Cover Page

Cover Page of Friend of the Court Brief

ARGUMENT

I. INDEPENDENT ARTISTS AND SONGWRITERS RELY ON COPYRIGHT
PROTECTION AND CLEAR FAIR USE STANDARDS TO DEFEND THEMSELVES
IN THE MARKET (continued from Part 2).

Google interacts with the music industry in a variety of ways, but primarily through its YouTube video platform. YouTube is by far the world’s most popular music streaming service, with over 1.9 billion registered users as of June 2018. It is much, much
larger than subscription-based services like Spotify (with 160 million users) or Apple Music (with 45 million users). According to the International Federation of the Phonographic Industry, nearly half of all streaming users consume music on YouTube. It is hard to be in the music business online and not do business with YouTube.

And in turn, music is a large part of YouTube’s business. As of Jan 2020, 93% of the most-watched videos were music videos.” Kit Smith, 54 Fascinating and Incredible YouTube Statistics, Brandwatch (Jan. 17, 2020) available at https://www.brandwatch.com/blog/youtube-stats/; “47% of time spent listening to on-demand music is on YouTube,” Music Consumer Insight Report, International Federation of the Phonographic Industry (IFPI) at 13 (2018). This revenue accrues to Google’s great benefit, with its parent company Alphabet reporting more than $15 billion in revenue from YouTube last year alone.

Unfortunately, despite YouTube’s market success, revenue does not proportionately flow back to copyright owners. In the aggregate, advertising-supported free streaming services (of which YouTube is by far the largest) contributed one-third of all streams in 2018, but only 8% of total revenue. See Recording Industry Association of America, RIAA 2018 Year End Music Revenue Report (Feb. 2019). YouTube’s royalty rates are consistently lowest among the top digital music services.  In fairness, Google does contract with aggregators representing independents to collect YouTube royalties, such as Audiam.
However, in Amici’s experience, YouTube is the primary music service that actually incorporates an ad hoc and arbitrary exploitation of copyright safe harbors
and exceptions like fair use as a part of its largely advertising-supported business model which is grounded substantially on “user-generated content” or “UGC.”

Therefore, YouTube is incentivized to unfairly attempt over and again to utilize narrow, statutory exceptions to copyright protection, including the fair use doctrine, on a seemingly ad hoc and extremely expansive basis to undermine the very protections that
creators rely on. This unpredictable fiat guides YouTube’s partners toward monetizing their UGC—which generates a reward of revenue that YouTube shares with the partner. Google’s exploitation of fair use as a business significantly increases the transaction cost of dealing with YouTube beyond what independents like Amici can reasonably afford. It sure costs a lot of money to give things away for free.

This is particularly true since independents cannot credibly use litigation as leverage against a commercial giant. Examples of these costs include engaging services to identify infringements and send takedown notices under the Digital Millennium Copyright Act (hereinafter DMCA) for infringing links in search or on YouTube, or analyzing fair use claims in counternotifications. See 17 U.S.C. §§ 512(c)(1)(C), 512(g). Nor are these costs common across other ad-supported digital music services. For example, Amici
do not bear these high transaction costs with other ad-supported digital music services such as Spotify’s free version.

It appears to Amici that Google’s business model, both with YouTube and with its verbatim copying in Android, are prime examples of what one of Google’s
amici has repeatedly proclaimed to be the “fair use industries.”

Amici—like most creators—do not think of fair use as the basis for an “industry” whose “rights” can be asserted separately from authorship furthered by reliable rules of copyright protection and narrow exceptions under individualized, special circumstances.
If fair use were an “industry,” Amici would be rendered into both the unlicensed input and the royalty-free output of that economic sector, destroying the market balance that has developed under copyright regimes over a period of centuries. Rather, fair use is a
statutory defense that permits creators to use copyrighted materials for well-defined and generally noncommercial or noncompeting purposes. Without copyright, of course, there is no fair use. At best, the notion of “fair use industries” and its protection is a non-sequitur. At worst, it is a destroyer of markets and eventually of national cultures.

In short, the “fair use industries” spin is Google’s attempt to invent cover for its extremely predatory market practices against creators.  Amici are concerned that “fair use industries” are merely those markets in which Google’s monopoly power permits it to simply ignore the copyright interests of other market actors (including and especially independent creators) and call its conduct fair use, safe in the knowledge that challenging Google in court is a nonstarter for most independents. This spin is bolstered through funding academic research as well as outright lobbying and strategic litigation that consistently weakens copyright and undermines creators. Even Google’s amici in this appeal include individuals paid by or otherwise associated with Google. See Br. of 83 Computer Scientists at A1 n.1.

In fact, Google reportedly said as much to former Prime Minister David Cameron when lobbying him in 2011 to amend UK copyright laws to remove “barriers to new internet-based business models” raised by the “costs of obtaining permissions from existing rightsholders.”  Adam Sherwin, David Cameron’s “Google-Model” Vision for Copyright Under Fire, The Guardian (March 14, 2011) (“[Prime Minister Cameron’s announcement] was greeted with unalloyed delight at Google’s California HQ—and left the music industry, ravaged by web piracy, with that all too familiar sinking feeling.”).

Of course, Google’s responses are essentially the same each time—as they are [in the Oracle case].  Google wields a variety of weaponized copyright exceptions on top of rhetoric that is both deceptively public-spirited (letting Google win is “promoting innovation”) and ominous (impeding Google would “break the internet”). Google further seeks to justify these exceptions by trying to hide behind small players. It engages in astroturfing tactics to give the impression that it has more public support than it does.

All of this is on display in Google’s brief and its many amicus briefs. See, e.g., Pet. Br. 44 (“Android is an open source initiative that benefits hundreds of device manufacturers, millions of developers, and more than a billion consumers around the world.”), 45
(Android “enabled Java developers to unleash their creativity” by using Google’s platform), 49 (“Android benefitted Oracle”); 50 (finding against Google “would
disrupt the ongoing development of modern, interoperable computer software”).

[To be continued:  Google’s Use Is Clearly Commercial]

Google’s Fair Use Industries Part 2: Supreme Court Brief of @davidclowery, @helienne, @theblakemorgan and @sgawrites in Google v. Oracle

Google’s appeal of its major loss to Oracle on fair use is shaping up to be the most important copyright case of the year, if not the decade.  It could set fair use standards for years to come.  We’re going to be posting installments from the friend of the court brief that David, Helienne, Blake and The Songwriters Guild filed in the U.S. Supreme Court supporting Oracle in the Google v. Oracle fair use case.  This is part 2.  We decided to omit the footnotes for this posting, but you can read the whole brief here.

Cover Page

Cover Page of Friend of the Court Brief

ARGUMENT

I. INDEPENDENT ARTISTS AND SONGWRITERS RELY ON COPYRIGHT
PROTECTION AND CLEAR FAIR USE STANDARDS TO DEFEND THEMSELVES
IN THE MARKET.

Copyright is of critical importance to independent creators and artists. It is not empty rhetoric to say that without the statutory and constitutional protections of copyright, professional creators could not earn their livings and simply would not produce new works, and the world would be poorer for it.  The reason is simple but profound: copyright protection allows for a vibrant creative environment in which artists can predictably recover the gains of their creative labors. See U.S. Const. Art. I, § 8, cl. 8; see also Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 558 (1985) (“By establishing a marketable right to the use of one’s expression, copyright supplies the economic incentive to create and disseminate ideas.”). Because Congress has codified this incentive structure through centuries of copyright legislation, independent artists
and songwriters regularly rely on the exercise of their exclusive rights by creating, reproducing, distributing and publicly performing their works.

Importantly, these rights are not just abstractions.  They tangibly alter the licensing negotiations vital to a modern creative ecosystem. An exclusive right to exploit a creative work (such as a musical composition or a sound recording) can be the only backstop against markets where the marginal cost to digitally create perfect copies of an original is nil. See Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 928 (2005) (noting “digital distribution of copyrighted material threatens copyright holders as never before, because every copy is identical to the original [and] copying is easy”). These burdens do not fall solely on creators of sound recordings or musical compositions, but extend across copyrightable subject matter, including visual arts, motion pictures, and literary works such as novels or software. See 17 U.S.C. §§ 101, 102(a).

To be sure, independent creators may also benefit from uses that fall under the category of fair use. Fair use helps disseminate the artist’s work to the larger culture, and increases the amplitude and quality of discourse within and surrounding the work—all without compromising the work’s value. See Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 578 (1994) (noting fair use must be analyzed “in light of thepurposes of copyright”); Pierre N. Leval, Toward a Fair Use Standard, 103 Harv. L. Rev. 1105, 1107 (1990). (“[f]air use should be perceived . . . as a rational, integral part of copyright, whose observance is
necessary to achieve the objectives of that law.”). It is therefore not surprising that a significant number of fair use cases arise in the music business. See, e.g., Campbell v. Acuff-Rose Music, 510 U.S. 569 (1994); Estate of Smith v. Graham, No. 19-28 (2d Cir. Feb. 3,
2020); Capitol Records, LLC v. ReDigi Inc., No. 16-2321 (2d Cir. Dec. 12, 2018); Lennon v. Premise Media Corp., 556 F. Supp. 2d 310 (S.D.N.Y. 2008); Fisher v. Dees, 794 F.2d 432 (9th Cir. 1986); Elsmere Music, Inc. v. Nat’l Broad. Co., 482 F. Supp. 741 (S.D.N.Y.), aff’d, 632
F.2d 252 (2d Cir. 1980).

Yet these fair use benefits only accrue when the analysis is predictable, consistent, and respectful of the underlying existing copyright incentives for original creation. Under such market conditions, independent creators nearly always stand ready to license their works at a fair market rate to those who respect their rights. This is how fair use works effectively within the creative industries. On the other hand, the more amorphous and unreasonably expansive the analysis and application of the fair use doctrine, the harder it becomes to establish the value of the copyrighted work during licensing negotiations that are the lifeblood of the creative ecosystem.

In the modern music business, such licensing negotiations are intricate and delicate. The exclusive rights guaranteed by the U.S. Copyright Act have allowed independent songwriters, recording artists and labels to contract with distributors such as Audiam, CD
Baby, INgrooves, Merlin Network, The Orchard and TuneCore. These aggregators in turn sublicense collectively to interactive, on-demand digital delivery services like Amazon Music, Apple Music, Deezer, iTunes, Google Play Music, Pandora, and Spotify in return for royalties that the aggregators pay to their songwriter or artist licensees.

SoundExchange, for example, administers the limited statutory performance license for
noninteractive exploitations of sound recordings. See 17 U.S.C. § 114. Through this statutory scheme, SoundExchange oversees the statutory license of sound recordings used by many noninteractive services such as Pandora, SiriusXM, iHeart Radio and other Internet radio services as well as business establishments. Meanwhile, performing rights organizations like ASCAP, BMI, Global Music Rights and SESAC collectively license the public performance of the corresponding compositions.

Artists and songwriters rely on this intricate market system of licensing that is entirely based on the exclusive rights of copyright owners and the traditionally reasonable application of the fair use doctrine. These market practices have, over the past two decades, undergone a metamorphosis, as new customs evolved in the digital age, emerging once again into a predictable licensing landscape. The exclusive rights that independents enjoy as copyright owners allow them to compete with the licensing, distribution and marketing operations of major labels and music publishers—when those rights are respected.

And that is where Google’s seemingly perpetual campaign for fair use expansion becomes a major hindrance in the equitable and efficient functioning of
the marketplace.

[To be continued]