Press Release: Indie Songwriter Groups Thank @RepFitzgerald For His Letter to @CopyrightOffice Urging Improvements to the US Mechanical Licensing Collective

The Songwriters Guild of America (SGA), the Society of Composers & Lyricists (SCL) and the Music Creators North America (MCNA) coalition –on behalf of over ten thousand US songwriter and composer members and their heirs and with the support of tens of thousands more represented by our organizations’ affiliated International Council of Music Creators (CIAM)– offer our sincerest thanks and support to US Congressman Scott Fitzgerald (R-WI) for his stalwart efforts in seeking to protect our rights through much needed operational and structural improvements to the US Mechanical Licensing Collective (MLC). The MLC collects and distributes hundreds of millions of dollars in royalties to songwriters and composers through their music publishing administrators each year.

Following the filing by our coalition in May, 2024 of comments expressing conditional support for re-designation by the US Copyright Office of the current MLC if –and only if– certain reforms are instituted to improve its transparency, operational fairness and accuracy in distributions (https://www.songwritersguild.com/site/potential-re-designation-mlc-and-dlc) Representative Fitzgerald came forward with his own letter to the Copyright Office dated August 29, 2024 asserting the need for reforms in full basic harmony with our own positions. His Congressional office is one of many with whom our groups have had impactful and productive discussions concerning the need for closer governmental oversight of the MLC process in order to protect American music creator rights, as clearly intended by Congress in the Music Modernization Act enacted five years ago.

Among the urgently required reforms addressed in Congressman Fitzgerald’s letter are:

–greater MLC budgetary transparency,

–improved outreach and accuracy in identifying and contacting owners of unmatched “black box” royalties (potentially approaching one billion dollars in unmatched and/or undistributed funds by 2025), and

–improved MLC board neutrality, balance and fairness.

As to this latter issue, the Congressman was forthright in acknowledging that the MLC board has conducted itself more as an advocate solely for the corporate music publishing industry rather than, as Congressionally intended, an unbiased body charged principally with protecting creator’ rights and royalties.

There are several problems related to the presence on the MLC board of only four songwriter/composer directors as compared to ten music publisher representatives (a unique imbalance compared to all other music royalty collectives around the world), including the fact that “permanently” unmatched royalties are to be distributed by the MLC on a “market share”
basis.

That construct means that music publisher board members stand to benefit by NOT properly identifying and distributing royalties to their actual creator-owners, the very task legislatively assigned to the MLC at the time of its Congressional creation. Moreover, the alleged songwriter organizations’ representative appointed as the non-voting board overseer for music creator interests has proven to be nothing more than a rubber stamp for corporate interests in direct opposition to the creators’ interests it purports to safeguard. We are aware of no other American music creator group that supports continuation of this facade of creator “representation.”

Our groups appreciate the consistent outreach and earnest work of MLC chief executive officer
Kris Ahrend, but we join Congressman Fitzgerald and his supporting colleagues in the House and Senate in insisting that the enumerated reforms cited in our Copyright Office submissions must be considered essential prerequisites to MLC re-designation (including endorsement by the MLC Board of Congressional action to equalize board representation between music creators on the one hand and their corporate copyright owners and administrators on the other). Our coalition will meanwhile continue its work on Capitol Hill and with the Copyright Office advocating for genuine protections of independent, individual music creator rights by the MLC.

Read Rep. Fitzgerald’s letter here.

by Trichordist

Press Release from @AmericanPublish: Appeals Court Affirms Decision Against Internet Archive for Copyright Infringement

[The defeat of Big Tech and the Internet Archive is one of the most important copyright cases in the last ten years. This press release is a good summary of the ruling from our allies at the Association of American Publishers.]

Today the United States Court of Appeals for the Second Circuit affirmed the District Court’s March 2023 opinion in favor of publishers Hachette Book Group, HarperCollins, John Wiley & Sons, and Penguin Random House, finding Internet Archive liable for copyright infringement and rejecting all four factors of Internet Archive’s fair use argument.

The Court squarely addressed the question of whether it is “fair use” for a nonprofit organization to scan copyright-protected print books in their entirety, and distribute those digital copies online, in full, for free, subject to an asserted one-to-one owned-to-loaned ratio between its print copies and the digital copies it makes available at any given time, without any authorization from the copyright owner.  In the Court’s words, “[a]pplying the relevant provisions of the Copyright Act, as well as binding Supreme Court and Second Circuit precedent, we conclude the answer is no.”

The following is a statement from Maria A. Pallante, President and CEO, Association of American Publishers:

“Today’s appellate decision upholds the rights of authors and publishers to license and be compensated for their books and other creative works and reminds us in no uncertain terms that infringement is both costly and antithetical to the public interest. Critically, the Court frontally rejects the defendant’s self-crafted theory of “controlled digital lending,” irrespective of whether the actor is commercial or noncommercial, noting that the ecosystem that makes books possible in fact depends on an enforceable Copyright Act.  If there was any doubt, the Court makes clear that under fair use jurisprudence there is nothing transformative about converting entire works into new formats without permission or appropriating the value of derivative works that are a key part of the author’s copyright bundle.”

Key Quotes the Court’s decision:

  • Within the framework of the Copyright Act, IA’s argument regarding the public interest is shortsighted. True, libraries and consumers may reap some short-term benefits from access to free digital books, but what are the long-term consequences?
  • If authors and creators knew that their original works could be copied and disseminated for free, there would be little motivation to produce new works. And a dearth of creative activity would undoubtedly negatively impact the public. It is this reality that the Copyright Act seeks to avoid.
  • Because IA’s Free Digital Library functions as a replacement for the originals, it is reasonable and logical to conclude not only that IA’s digital books currently function as a competing substitute for Publishers’ licensed editions of the Works, but also that, if IA’s practices were to become “unrestricted and widespread,” it would decimate Publishers’ markets for the Works in Suit across formats.
  • Were we to approve IA’s use of the Works, there would be little reason for consumers or libraries to pay Publishers for content they could access for free on IA’s website. . .Thus, we conclude it is ‘self-evident’ that if IA’s use were to become widespread, it would adversely affect Publishers’ markets for the Works in Suit.
  • IA does not perform the traditional functions of a library; it prepares derivatives of Publishers’ Works and delivers those derivatives to its users in full…Whether it delivers the copies on a one-to-one owned-to-loaned basis or not, IA’s recasting of the Works as digital books is not transformative.
  • [B]ecause IA’s Free Digital Library primarily supplants the original Works without adding meaningfully new or different features that avoid unduly impinging on Publishers’ rights to prepare derivative works, its use of the Works is not transformative.
  • Digitizing physical copies of written work is not transformative, because the act ‘merely transforms the material object embodying the intangible article that is the copyrighted original work.’
  • The Copyright Act protects authors’ works in whatever format they are produced.
  • IA’s Free Digital Library does not “improv[e] the efficiency of delivering content” without unreasonably encroaching on the rights of the copyright holder; it offers the same efficiencies as Publishers’ derivative works while greatly impinging on their exclusive right to prepare those works.
  • While IA claims that prohibiting its practices would harm consumers and researchers, allowing its practices would―and does―harm authors.

The full decision can be found here.

by Trichordist Editor

Save the Date:  4th Annual Artist Rights Symposium on Nov. 20 in Washington DC

We’re excited to announce that the 4th Annual Artist Rights Symposium will be held on November 20, this time in Washington DC.  We have some big surprises in store that will be announced soon with new partners and speaker lineups. 

The topics we plan on covering will be ticketing, song metadata and black box issues, creator rights of publicity and transparency for artificial intelligence.

Watch this space!

by Trichordist Editor

@wordsbykristin: Legal Fights, Transparency & Neutrality: DiMA’s CEO On Improvements Streamers Suggest for the MLC

Kristin Robinson makes another important contribution to the artist rights conversation with her interview of Graham Davies, the new head of the Digital Media Association. Graham comes to DiMA from a background in the artist rights movement at our friends the Ivors Academy in the UK. We have high hopes for Graham who brings his intellect to clean up a long, long line of mediocrity at the DiMA leadership who are from Washington and here to help.

Kristin’s interview highlights DiMA’s recent filings in The Reup–the redesignation of the MLC by the Copyright Office that we’ve highlighted on Trichordist. He also has some well thought out analysis on how the MLC is not HFA, however similar the two may seem in practice.

This is an important interview and you can find it on Billboard (subscription required).

Here’s an example of Graham’s insight:

Do you think a re-designation every five years is not enough on its own?

I think it’ll be interesting to see what the re-designation process brings forward from the Copyright Office. Maybe the Copyright Office leans in on governance and says, “We’ve heard enough, and we can come forward with ideas.” But the re-designation process is a different thing than a governance review, which would bring in a special team to actually dig into governance-related issues and bring forward recommendations and proposals that could then be implemented. It would be something more specific and something the MLC could just do. You wouldn’t need the Copyright Office to sponsor it, though they could if they wanted to.

by Trichordist Editor

The Intention of Justice:  In Which The MLC Loses its Way on a Copyright Adventure

by Chris Castle

ARTHUR

Let’s get back to justice…what is justice?  What is the intention of justice?  The intention of justice is to see that the guilty people are proven guilty and that the innocent are freed.  Simple, isn’t it?  
Only it’s not that simple.

From And Justice for All, screenplay written by Valerie Curtin and Barry Levinson

Something very important happened at the MLC on July 9:  The Copyright Office overruled the MLC on the position the MLC (and, in fairness, the NMPA) took on who was entitled to post-termination mechanical royalties under the statutory blanket license.  What’s important about the ruling is not just that the Copyright Office ruled that the MLC’s announced position was “incorrect”—it is that it corrected the MLC’s position that was in direct contravention of prior Copyright Office guidance.  (If this is all news to you, you can get up to speed with this helpful post about the episode on the Copyright Office website or read John Barker’s excellent comment in the rulemaking.)

“Guidance” is a kind way to put it, because the Copyright Office has statutory oversight for the MLC.  That means that on subjects yet to be well defined in a post-Loper world (the Supreme Court decision that reversed “Chevron deference”), I think it’s worth asking whether the Copyright Office is going to need to get more involved with the operations of the MLC.  Alternatively, Congress may have to amend Title I of the Music Modernization Act to fill in the blanks.  Either way, the Copyright Office’s termination ruling is yet another example of why I keep saying that the MLC is a quasi-governmental organization that is, in a way, neither fish nor fowl.  It is both a private organization and a government agency somewhat like the Tennessee Valley Authority.  Whatever it is ultimately ruled to be, it is not like the Harry Fox Agency which in my view has labored for decades under the misapprehension that its decisions carry the effect of law.  Shocking, I know.  But whether it’s the MLC or HFA, when they decide not to pay your money unless you sue them, it may as well be the law.

The MLC’s failure to follow the Copyright Office guidance is not a minor thing.  This obstreperousness has led to significant overpayments to pre-termination copyright owners (who may not even realize they were getting screwed).  This behavior by the MLC is what the British call “bolshy”, a wonderful word describing one who is uncooperative, recalcitrant, or truculent according to the Oxford Dictionary of Modern Slang.  The word is a pejorative adjective derived from Bolshevik.  “Bolshy” invokes lawlessness.

In a strange coincidence, the two most prominent public commenters supporting the MLC’s bolshy position on post-termination payments were the MLC itself and the NMPA, which holds a nonvoting board seat on the MLC’s board of directors.  This stick-togetherness is very reminiscent of what it was like dealing with HFA when the NMPA owned it.  It was hard to tell where one started and the other stopped just like it is now.  (I have often said that a nonvoting board seat is very much like a “board observer” appointed by investors in a startup to essentially spy on the company’s board of directors.  I question why the MLC even needs nonvoting board seats at all given the largely interlocking boards, aside from the obvious answer that the nonvoters have those seats because the lobbyists wrote themselves into Title I of the MMA—you know, the famous “spirit of the MMA”.)

Having said that, the height of bolshiness is captured in this quotation (89 FR 58586 (July 9, 2024)) from the Copyright Office ruling about public comments which the Office had requested (at 56588):

The only commenter to question the Office’s authority was NMPA, which offered various arguments for why the Office lacks authority to issue this [post-termination] rule. None are persuasive. [Ouch.]

NMPA first argued that the Office has no authority under section 702 of the Copyright Act or the MMA to promulgate rules that involve substantive questions of copyright law. This is clearly incorrect. [Double ouch.]

The Office ‘‘has statutory authority to issue regulations necessary to administer the Copyright Act’’ and ‘‘to interpret the Copyright Act.’’  As the [Copyright Office notice of proposed rulemaking] detailed, ‘‘[t]he Office’s authority to interpret [the Copyright Act]  in the context of statutory licenses in particular has long been recognized.’’

Well, no kidding.

What concerns me today is that wherever it originated, the net effect of the MLC’s clearly erroneous and misguided position on termination payments is like so many other “policies” of the MLC:  The gloomy result always seems to be they don’t pay the right person or don’t pay anyone at all in a self-created dispute that so far has proven virtually impossible to undo without action by the Copyright Office (which has other and perhaps better things to do, frankly).  The Copyright Office, publishers and songwriters then have to burn cycles correcting the mistake.  

In the case of the termination issue, the MLC managed to do both: They either paid the wrong person or they held the money.  That’s a pretty neat trick, a feat of financial gymnastics for which there should be an Olympic category.  Or at least a flavor of self-licking ice cream.

The reason the net effect is of concern is that this adventure in copyright has led to a massive screwup in payments illustrating what we call the legal maxim of fubar fugazi snafu.  And no one will be fired.  In fact, we don’t even know which person is responsible for taking the position in the first place.  Somebody did, somebody screwed up, and somebody should be held accountable.

Mr. Barker crystalized this issue in his comment on the Copyright Office termination rulemaking, which I call to your attention (emphasis added):

I do have a concern related to the current matter at hand, which translates to a long-term uneasiness which I believe is appropriate to bring up as part of these comments. That concern is, how did the MLC’s proposed policies [on statutory termination payments] come in to being in the first place? 

The Copyright Office makes clear in its statements in the Proposed Rules publication that “…the MLC adopted a dispute policy concerning termination that does not follow the Office’s rulemaking guidance.”, and that the policy “…decline(d) to heed the Office’s warning…”. Given that the Office observed that “[t]he accurate distribution of royalties under the blanket license to copyright owners is a core objective of the MLC”, it is a bit alarming that the MLC’s proposed policies got published in the first place. 

I am personally only able to come up with two reasons why this occurred. Either the MLC board did not fully understand the impact on termination owners and the future administration of those royalties, or the MLC board DID realize the importance, and were intentional with their guidelines, despite the Copyright Office’s warnings. 

Both conclusions are disturbing, and I believe need to be addressed.

Mr. Barker is more gentlemanly about it than I am, and I freely admit that I have no doubt failed the MLC in courtesy.  I do have a tendency to greet only my brothers, the gospel of Matthew notwithstanding.  Yet it irks me to no end that no one has been held accountable for this debacle and the tremendous productivity cost (and loss) of having to fix it.  Was the MLC’s failed quest to impose its will on society covered by the Administrative Assessment?  If so, why?  If not, who paid for it?  And we should call the episode by its name—it is a debacle, albeit a highly illustrative one. 

But we must address this issue soon and address it unambiguously.  The tendency of bureaucracy is always to grow and the tendency of non-profit organizations is always to seek power as a metric in the absence of for-profit revenue.  Often there are too many people in the organization who are involved in decision-making so that responsibility is too scattered.  

When something goes wrong as it inevitably does, no one ever gets blamed, no one ever gets fired, and it’s very hard to hold any one person accountable because everything is too diffused.  Instead of accepting that inevitable result and trying to narrow accountability down to one person so that an organization is manageable and functioning, the reflex response is often to throw more resources at the problem when more resources, aka money, is obviously not the solution.  The MLC already has more money than they know what to do with thanks to the cornucopia of cash from the Administrative Assessment.  That deep pocket has certainly not led to peace in the valley.

Someone needs to get their arms around this issue and introduce accountability into the process.  That is either the Copyright Office acting in its oversight role, the blanket license users acting in their paymaster role through the DLC, or a future litigant who just gets so fed up with the whole thing that they start suing everyone in sight.   

Saint Thomas Aquinas wrote in Summa Theologica that a just war requires a just cause, a rightful intention and the authority of the sovereign (Summa, Second Part of the Second Part, Question 40).  So it is with litigation.  We have a tendency to dismiss litigation as wasteful or unnecessary with a jerk of the knee, yet that is overbroad and actually wrong.  In some cases the right of the people to sue to enforce their rights is productive, necessary, inevitable and—hopefully—in furtherance of a just cause like its historical antecedents in trial by combat.  

It is also entirely in keeping with our Constitution.  The just lawsuit allows the judiciary to right a wrong when other branches of government fail to act, or as James Madison wrote in Federalist 10, so the government by “…its several constituent parts may…be the means of keeping each other in their proper places.”  

That’s a lesson the MLC, Inc. had to learn the hard way.  Let’s not do that again, shall we not?

This post first appeared on the MusicTech.Solutions blog.

by Trichordist

Are You Better Off Today Than You Were Five Years Ago? Selected comments on the MLC Redesignation: Songwriters Guild of America, the Society of Composers & Lyricists, and Music Creators North America Joint Comment

The Copyright Office solicited public comments about how things are going with the MLC to help the Office decide whether to permit The MLC, Inc. to continue to operate the Collective (see this post for more details on the “redesignation” requirement). We are impressed with the quality of many of the comments filed at the Copyright Office. While comments are now closed, you can read all the comments at this link.

For context, the “redesignation” is a process of review by the Copyright Office required every five years under the Music Modernization Act. Remember, the “mechanical licensing collective” is a statutory entity that requires someone to operate it. The MLC, Inc. is the current operator (which makes it confusing but there it is). If the Copyright Office finds the MLC, Inc. is not sufficiently fulfilling its role or is not up to the job of running the MLC, the head of the Copyright Office can “fire” the MLC, Inc. and find someone else to hopefully do a better job running the MLC. Given the millions upon millions that the music users have invested in the MLC, and the hundreds of millions of songwriter money held by the MLC in the black box, firing the MLC, Inc. will be a big deal. Given how many problems there are with the MLC, firing the MLC, Inc. that runs the collective

The next step in this important “redesignation” process is that The MLC, Inc. and the Digital Licensee Coordinator called “the DLC” (the MLC’s counterpart that represents the blanket license music users) will be making “reply comments” due on July 29. The Copyright Office will post these comments for the public shortly after the 29th. These reply comments will likely rebut previously filed public comments on the shortcomings of the MLC, Inc. or DLC (which were mostly directed at the MLC, Inc.) and expand upon comments each of the two orgs made in previous filings. If you’re interested in this drama, stay tuned, the Copyright Office will be posting them next week.

If you have been reading the comments we’ve posted on Trichordist (or if you have gone to the filings themselves which we recommend), you will see that there is a recurring theme with the comments. Many commenters say that they wish for The MLC, Inc. to be redesignated BUT…. They then list a number of items that they object to about the way the Collective has been managed by The MLC, Inc. usually accompanied by a request that the The MLC, Inc. change the way it operates.

That structure seems to be inconsistent with a blanket ask for redesignation. Rather, the commenters seem to be making an “if/then” proposal that if The MLC, Inc. improves its operations, including in some cases operating in an opposite manner to its current policies and practices, then The MLC, Inc. should be redesignated. Not wishing to speak for any commenter, let it just be said that this appears to be a conditional proposal for redesignation. Maybe that is not what the commenters were thinking, but it does appear to be what many of them are saying.

Today’s comment is jointly filed by the Songwriters Guild of America (SGA), the Society of Composers & Lyricists (SCL), and Music Creators North America (MCNA), who advocate for independent songwriters in contrast to the powers that be. (For clarity, the three groups in their comment refer to themselves together as the “Independent Music Creators”.)

For purposes of these posts, we may quote sections of comments out of sequence but in context. We recommend that you read their thoughtful and detailed joint comments in their entirety. You can read the joint comment at this link.

[The Current Crisis with Spotify]

Prior to proceeding to the presentation of our Comments, we are compelled by recent events and circumstances to issue the following, important caveat. Just days ago, the National Music Publishers Association (“NMPA”) announced its apparent intention to seek fundamental legislative changes to the US Copyright Act in regard to the statutory mechanical licensing system established under the Music Modernization Act (“MMA”) (the legislation that resulted in the creation of the MLC and the DLC). This complete reversal in NMPA policy is the result of repugnant actions on the part of the digital music distributor “Spotify” to minimize its royalty payment obligations by identifying and exploiting alleged loopholes in what many view as the unevenly negotiated and drafted Phonorecords IV settlement. The Independent Music Creators previously voiced formal opposition to the details of that settlement prior to its ratification and adoption by the US Copyright Royalty Board at NMPA’s urging in December, 2022.

This morass, which threatens to deprive music creators of hundreds of millions of dollars in royalties over the next five years, is made even more complex by the fact that both NMPA and the MLC are served by the same team of legal advisors. Those same legal advisors also counseled NMPA on the negotiation of the Phonorecords IV settlement, which the MLC (albeit through another set of litigators) is now seeking to enforce against Spotify in federal court (an action we support), and which NMPA is now essentially seeking to vacate through Congressional action to eliminate statutory mechanical licensing via an opt-out system (which predictably favors the major music publishing conglomerates over creators and small music publishers).
 
The general idea of eliminating statutory mechanical licensing, the revival of which movement may now unfortunately be viewed as a fig leaf to camouflage poor NMPA decision-making and execution regarding the Phonorecords IV settlement, is one that the Independent Music Creators and many members of the music publishing sector have long believed should receive serious consideration. We will support such legislative reforms if fairly framed and developed with meaningful independent music creator input, along with pursuing our own legislative proposals expressed below. For now, however, this entire situation could hardly be less transparent or conducive to quick resolution than it currently remains.

In short, neither the Independent Music Creators nor any other groups of interested parties can possibly develop complete and cogent opinions on the issue of re-designation of the MLC and DLC without having greater access to the full body of facts surrounding this crucial new development regarding Spotify. These Comments, therefore, must be viewed against the backdrop of an unresolved and economically crucial dispute, the fallout from and resolution of which may completely alter the views expressed herein in the immediate future. As such, we look forward to making further comments on this issue as additional facts are disclosed concerning the Spotify/MLC/NMPA relationships and conflicts (past and present).

MLC Board Composition: It bears further re-emphasis that most if not all of these suggested changes have been necessitated by the actions of the corporate-dominated MLC board, including the structure established by the MMA that allocates ten board seats to corporate music publishing entities (which in practice automatically grants control of the MLC board and of the entire organization to the three “major” publishers that together administer more than two-thirds of the world’s musical composition copyrights) compared with just four music creator board member seats. Under such circumstances, music creator board members are virtually powerless to effect influence over the board’s actions and MLC policy, and are relegated to serving merely as an amen chorus in support of every MLC-related music publisher action and demand. This system of publisher majority rule is contrary to the structures and rules of government-sanctioned royalty collectives everywhere else in the world. To our knowledge, no similar royalty and licensing collective in the world is controlled by a board with less than fifty percent music creator representation.

The sound of this figurative rubber stamp within the MLC boardroom is further amplified by the fact that since inception, the non-voting seat set aside for music creator organizational input has been occupied by a non-creator whose organization’s allegiance to following in lock step with the music publishing industry is so obvious as to be beyond rational dispute. Thus, the current reality is total, corporate music publisher influence and domination of MLC’s rules and policies. This, despite the fact that the MMA as codified in section 115 of the US Copyright Act specifically mandates that the music creator organizational seat be occupied by the representative of “a nationally recognized nonprofit trade association whose primary mission is advocacy on behalf of songwriters in the United States.” This situation must change.

by Trichordist

Are You Better Off Today Than You Were Five Years Ago? Selected comments on the MLC Redesignation: Gwendolyn Seale

The Copyright Office solicited public comments about how things are going with the MLC to help the Office decide whether to permit The MLC, Inc. to continue to operate the Collective (see this post for more details on the “redesignation” requirement). We are impressed with the quality of many of the comments filed at the Copyright Office. While comments are now closed, you can read all the comments at this link.

For context, the “redesignation” is a process of review by the Copyright Office required every five years under the Music Modernization Act. Remember, the “mechanical licensing collective” is a statutory entity that requires someone to operate it. The MLC, Inc. is the current operator (which makes it confusing but there it is). If the Copyright Office finds the MLC, Inc. is not sufficiently fulfilling its role or is not up to the job of running the MLC, the head of the Copyright Office can “fire” the MLC, Inc. and find someone else to hopefully do a better job running the MLC. Given the millions upon millions that the music users have invested in the MLC, and the hundreds of millions of songwriter money held by the MLC in the black box, firing the MLC, Inc. will be a big deal. Given how many problems there are with the MLC, firing the MLC, Inc. that runs the collective

The next step in this important “redesignation” process is that The MLC, Inc. and the Digital Licensee Coordinator called “the DLC” (the MLC’s counterpart that represents the blanket license music users) will be making “reply comments” due on July 29. The Copyright Office will post these comments for the public shortly after the 29th. These reply comments will likely rebut previously filed public comments on the shortcomings of the MLC, Inc. or DLC (which were mostly directed at the MLC, Inc.) and expand upon comments each of the two orgs made in previous filings. If you’re interested in this drama, stay tuned, the Copyright Office will be posting them next week.

If you have been reading the comments we’ve posted on Trichordist (or if you have gone to the filings themselves which we recommend), you will see that there is a recurring theme with the comments. Many commenters say that they wish for The MLC, Inc. to be redesignated BUT…. They then list a number of items that they object to about the way the Collective has been managed by The MLC, Inc. usually accompanied by a request that the The MLC, Inc. change the way it operates.

That structure seems to be inconsistent with a blanket ask for redesignation. Rather, the commenters seem to be making an “if/then” proposal that if The MLC, Inc. improves its operations, including in some cases operating in an opposite manner to its current policies and practices, then The MLC, Inc. should be redesignated. Not wishing to speak for any commenter, let it just be said that this appears to be a conditional proposal for redesignation. Maybe that is not what the commenters were thinking, but it does appear to be what many of them are saying.

Today’s comment is by music lawyer Gwendolyn Seale who makes a number of excellent points in her filing including questioning whether the compulsory license itself is fit for purpose and what might happen if the MLC, Inc. is not redesignated. In particular, she addresses an alarming trend in the MLC, Inc.’s public messaging about the black box that has grown more cloudy as the size of the black box at the MLC has grown into the hundreds of millions.

For purposes of these posts, we may quote sections of comments out of sequence but in context. We recommend that you read the comments in their entirety. You can read Gwen Seale’s comment at this link.

Words Matter: The MLC Must Improve Its Presentation of Information

Confusion Regarding the Term, “Match Rate”

Upon reviewing the MLC’s 2021 Interim Annual Report in early 2022, I noticed reference to the
MLC having attained an 86% match rate. This metric seemed impressive, however, upon
learning the MLC’s definition of “match rate” (which I only learned by asking the MLC), I was
baffled. When the term, “match” is used alone, it refers to the matching of a sound recording
from a DSP report to a particular musical work. The Copyright Office’s NOI indicates the same
regarding the term, “match.”

Please describe how the Mechanical Licensing Collective has worked to improve automated and manual matching since the blanket license became available and plans to further enhance such matching over the next 5 years, including with respect to the matching of reported sound recordings to musical works as well as the matching of those musical works to identified and located copyright owners.

Being that a “match” constitutes pairing a sound recording with a particular musical work, it is
logical to deduce the “match rate” as being the percentage of sound recordings in DSP reports
which are matched to musical works registered at the MLC. However, that is not the case and
instead the term “match rate” as used by the MLC refers to the total amount of royalties matched
to musical works registered at the MLC over a given period. This definition was not provided to
the public so far as I can tell until June 30, 2022, in its final 2021 Annual Report.

As the most popular musical works are the ones generating the bulk of mechanical royalties over
a given month and are typically owned and/or controlled by the major music publishers with the
resources and capabilities to constantly monitor activities concerning their clients’ musical works
and engage in manual matching, the current definition of match rate (i.e., the royalty-based
definition) does not mean very much by itself. It would be useful for the MLC to also provide the
monthly match rate on a recordings-to-musical works-matched basis (hereinafter, “works-based
calculation”). Doing so would shine a light on the efficacy of the MLC’s and its vendors’
matching technology and would help to ensure the musical works of countless self-published
songwriters are being matched to reported sound recordings. I understand that there are issues
with catalog “fluff” and some sound recordings do not generate a single stream over a month’s
time. Thus, a works-based calculation could be tailored in a manner where recordings with less
than x streams per month or that generate less than x cents in mechanical royalties are omitted
from the calculation. Input from the Copyright Office regarding match rate terminology would
be helpful as well.

Historical Royalties: Eliminate  Illuminate = Obfuscate

The impetus behind establishing the MLC was to ensure that songwriters and publishers could
finally collect the nearly half billion dollars in historical royalties5 owed by the DSPs from the
early 2000s through the end of 2020. The task of the MLC was to eliminate the historical
royalties by ensuring that sound recordings could be matched to registered works in the MLC
database from this period. The MLC stated that eliminating these royalties was its goal:

The MLC cannot stress enough that its goal is to eliminate unclaimed accrued royalties, and that it has developed a realistic plan to pursue this goal.


Over time, the MLC shifted the language from eliminating to “illuminating” the historical royalties, beginning with the 2022 MLC Annual report:

Together, we will not only illuminate the “black box,” but also seek to eliminate it entirely!

At present, the MLC no longer references “elimination” of the historical royalties and purports
the job is done since the historical royalties have been “illuminated:”

Is there still a Black Box of Mechanical Royalties With The MLC?
No, the data on all unmatched uses is posted and available to be searched by Members. This includes all data for historical and blanket unmatched uses. All of these remaining unmatched uses are available to be searched by Members in The MLC’s Matching Tool. With this unprecedented transparency, The MLC has illuminated the so-called “black box” of streaming mechanical royalties for the first time.

The MLC started by moving the goalposts and concluded with eliminating them altogether. This
obfuscation of language is problematic. It misleads the public about the MLC’s performance and
gaslights those with knowledge about matching works and distributing royalties. Words matter.

This issue can be quickly solved by the MLC removing that particular FAQ above, and by providing monthly data regarding the total amount of unmatched, unclaimed, and on-hold
royalties (historical + blanket) in the MLC’s possession in a place that is easy to find on its
website.


.

by Trichordist Editor

No Bots, No Billionaires: StubHub’s Grotesque IPO Demonstrates Another Artist Ripoff By Our Tech Oligarchs

By Chris Castle

StubHub is one of the richest thieves in the live ticket arbitrage market. The company is also a direct beneficiary of the U.S. government’s abysmal failure to enforce the Better Online Ticket Sales (BOTS) Act. Just like Spotify, another Goldman Sachs’ grifter, StubHub’s main objective is about to be a reality–a $16.5 billion initial public offering that will make its executives even richer. In case you were wondering where the value of all that touring was going, now you know. And StubHub’s IPO is yet another slap in the face to artists, not to mention the fans exploited by this tech oligarch.

Given the government’s newly acquired interest in the ticketing business as measured by the Department of Justice antitrust lawsuit against Live Nation, you would think that the DOJ and FTC would also step up to their obligation to enforce the BOTS Act. Remember, The BOTS Act, signed into law by President Obama in 2016, was designed to curb the use of automated software (bots) that purchase large quantities of event tickets, often within seconds of their release, to resell them at inflated prices through market makers like StubHub. It is so under-enforced that StubHub will no doubt be able to sneak out an IPO and slurp up money from the pubic trough before anyone knows better.

BOTS-driven Risk Factors

If it were ever enforced, the BOTS Act could have a significant financial downside for StubHub. I can’t wait to see the risk factors about bots in their IPO prospectus because let’s face it–if there were no bots and no boiler room operations, StubHub probably wouldn’t have much of a business. No bots, no billionaires. This one is not a theoretical antitrust case, this one is dealing with real-time massive consumer fraud about to be perpetuated and funded by the public financial markets.

The government’s enforcement of the BOTS Act is so poor that Senator Marsha Blackburn, a gifted legislator and one of the law’s co-authors, found it necessary to introduce even more legislation to try to get the FTC to do their job. The Mitigating Automated Internet Networks for (MAIN) Event Ticketing Act is a bill introduced in 2023 by Senators Blackburn and Ben Ray Luján that aims to give the FTC even fewer excuses not to enforce the BOTS Act. It would further the FTC’s consumer protection mission against IPO-driven ticket scalping. 

The sad truth is that the FTC didn’t take its first action to enforce the 2016 law until 2021. And that’s the only action it has ever taken. Yet we live in hope.

When the drafting sessions get started for the StubHub IPO, the underwriters really need to ask themselves how big a hit the company’s valuation will take when prosecutors figure out how dependent reseller platforms are on bots and market manipulation to extract hard-earned dollars from enthusiastic fans.

And it isn’t just bots by the way. MTP readers will recall our discussions about speculative ticketing which turns live event tickets into commodities to be traded like pork bellies–minus the consumer protection of the securities laws. Speculative ticketing is when a market maker like StubHub allows shady operators to offer the public a ticket that the seller doesn’t actually own and may not even exist. This is what happens when an artist has publicly announced a concert tour but has not yet put the tickets on sale. Speculative ticketing lets a scalper offer a ticket that doesn’t exist without properly disclosing that the seller doesn’t own the ticket being sold.

Now that just sounds criminal, doesn’t it? Selling something you don’t own?

StubHub RICO Suave

And speaking of criminal, StubHub is currently defending a civil RICO case in New York, accused of making a market for tickets it is not able to sell. The Kaiser v. StubHub class action lawsuit, filed on January 3, 2024, in the Supreme Court of the State of New York, alleges fraudulent ticket sales by StubHub, Inc. The plaintiff, Daniel J. Kaiser, a resident of Brooklyn, New York, claims that StubHub knowingly and repeatedly advertised and sold fraudulent tickets, thereby defrauding consumers and violating the Racketeer Influenced and Corrupt Organizations Act. 

What’s RICO? Civil RICO can be brought by private plaintiffs like Mr. Kaiser, but criminal RICO has to be brought by the government. Criminal RICO cases are initiated by government prosecutors, who must first obtain an indictment from a grand jury, followed by a criminal trial. While both civil and criminal RICO cases address racketeering activity, criminal RICO focuses on punishing and deterring criminal behavior, requiring a high standard of proof and resulting in severe penalties. Now there’s a risk factor. How’s this sound:

Potential Liability Under the Racketeer Influenced and Corrupt Organizations Act (RICO)

We are currently under investigation for potential violations of the Racketeer Influenced and Corrupt Organizations Act (RICO). RICO is a federal law designed to combat organized crime by allowing for both criminal and civil penalties for acts performed as part of an ongoing criminal organization. The investigation is focused on allegations that certain activities conducted by our company and its affiliates may constitute a pattern of racketeering activity under RICO.

Uncertainty and Potential Impact on Business Operations

The outcome of this investigation is uncertain, and we cannot predict the timing, outcome, or potential impact on our business, financial condition, or results of operations. If we are found to have violated RICO, we could face severe penalties, including substantial fines, forfeiture of assets, and significant reputational damage. Additionally, a criminal conviction under RICO could result in imprisonment for our key executives, which would severely disrupt our management and operations.

Nothing says white collar crime like RICO. This kind of consumer fraud is happening on a massive scale, yet the FTC apparently doesn’t feel it rises to the level of an investigation priority. 

Making it Stop

In the face of this weak-kneed approach to law enforcement, artists could simply prohibit the resale of their concert tickets. If companies like StubHub keep trying, that very well may be the result, particularly with fan-to-fan solutions like Twickets competing with the likes of StubHub. How about this risk factor:

Restrictions on Ticket Resales Could Adversely Affect Our Business

Our business model relies significantly on the resale of concert tickets. However, many artists and event organizers have implemented policies that prohibit the resale of their tickets above the face price. These restrictions are designed to prevent ticket scalping and ensure that fans can purchase tickets at reasonable prices.

If artists or event organizers enforce these resale restrictions, it could limit our ability to sell tickets at a premium, which is a key component of our revenue generation. This could result in reduced profit margins and negatively impact our financial performance. Additionally, compliance with these restrictions may require us to implement new systems and processes, which could increase our operational costs.

Furthermore, any violation of these resale restrictions could lead to legal actions against us, including fines and penalties, and could damage our relationships with artists, event organizers, and customers. This could harm our reputation and result in a loss of business opportunities.

Investors should consider the potential impact of these resale restrictions on our business and financial condition before making an investment decision. There can be no assurance that we will not face additional restrictions or legal challenges related to ticket resales in the future, which could further adversely affect our business.

Underwriters be thinking, where do I sign up, right? Maybe not.

[This post previously appeared on MusicTechPolicy]

by Trichordist