The Trichordist

Thank you readers.  You all rock!

When a government agency like The Copyright Office or The Department of Justice asks for comments,  they usually generate a few dozen. And the vast majority of these are from lobbyists, trade groups and law firms engaged in policy fights.

So this week the Capitol has been buzzing about the surprising number of comments that INDIVIDUALS submitted to the DOJ on the consent decree that governs songwriters.  There were over 180 comments from individuals submitted!   And we recognize that many of these comments are from fellow songwriters and readers.   We have made our voices heard.

So let’s keep it going.  Tweet the link to your DOJ comment at us and we will retweet it!  @thetrichordist

Here’s my own comment. 

 

 

“All animals are equal, but some animals are more equal than others.”

Napoleon in Animal Farm by George Orwell

The U.S. Copyright Office has raised a relevant question in its request for comments on music licensing:

Please address possible methods for enhancing transparency in the reporting of usage, payment, and distribution data by licensees, record labels, music publishers, and collective licensing entities, including disclosure of non-usage-based forms of compensation (e.g., [1] advances against future royalty payments and [2] equity shares).

Many artists and indie labels are probably not even aware that some deals they are being asked to opt-in for have some hidden economics that make the deal better, and often much better, for some artists or labels than others.  We first noticed this underhanded approach in the DMX-type deals where companies like DMX paid early adopters to take a low royalty in return for a big advance that may have been non recoupable.  Then they hold out that low royalty as an MFN type rate to others without disclosing the advance paid to the early adopters.  We’ve seen it perpetuated in the Spotify deals and maybe some other recently announced licensing deals.

Why is this a problem?  Because it’s not formally disclosed to the less equal animals, and sometimes it hides behind the NDA culture that Google has introduced into the music business.  It’s also a problem because those who need the money most are paid the least.

This is different than the “I’ll give you some stock if you say something nice about me to your friends” deals that we see all the time.  Those are corrupt for a different reason, the same reason that payola is against the law on radio and TV (and we all know how much Pandora wants to be treated like a radio station and YouTube thinks they’ve replaced TV).  Be careful what you wish for.

Thankfully, the U.S. Copyright Office is now focused on these under the table payments as a matter of public policy and we commend them for that stance.

Digital Music News has done a great job of surfacing this issue of the inequity of equity.  As Paul Resnikoff reported (How Streaming Services are Screwing Lady Gaga (and Every Other Artist), there are clauses in artist agreements, even highly negotiated ones, that deny artists a share of advances that are made for a label’s entire catalog in a clause like this one that Paul posted:

Focus closely on what this clause actually says:  If the label gets “payments…pursuant to any blanket licenses” for the label’s catalog, the artist–the one whose contract it is–doesn’t get any of those “payments.”  Paul uses this clause to attack the equity that labels got in streaming services.  He’s kind of right, but not for the reason you might think.

This clause is a very old concept in record deals and it has a legitimate above the table rationale and also a below the table one.  If a label makes a distribution deal for a blanket license of their entire catalog they typically negotiate a minimum guarantee, sometimes called an “advance”, against revenues that come in for their catalog during the life of that distribution deal.  The minimum guarantee is paid up front by the distributor, so it is a kind of bet by the distributor that the catalog will produce enough money to recover (or “recoup”) the minimum guarantee from royalties otherwise payable to the licensing label.  (Leave aside for the moment whether this is a “license” or a distribution deal for sales–see the Eminem litigation.)

That advance earns out over time depending on how the label’s catalog sells.  Advances are typically “recoupable but nonreturnable.”  The advance is recoupable, i.e., applied against the label’s share of the catalog’s sales during the distribution term.  The advance is “nonreturnable” meaning it doesn’t have to be paid back if the label’s share of revenues during the deal don’t equal or exceed the amount of the advance.  If the label is “unrecouped” at the end of the deal, the label keeps that delta.

Example:  Label X gets an advance of $100 from Distributor Y for the country of Airstrip One.  The deal lasts 5 years.  At the end of 5 years, Label X’s catalog has earned $90.  Distributor Y just sends royalty statements to Label X showing an unrecouped balance and doesn’t have to pay the $90-because Label X has already had it in the form of the advance.  If the deal is still unrecouped when it ends–meaning Label X got a bigger advance than it earned–then Label X keeps the extra $10.

From Label X’s point of view, Label X still has to pay its artists their royalties for the $90 of sales.  Say Label X has three artists, Hear, See and Speak.  Assume that artist Hear earns $85, See earns $5 and Speak has no sales.  (It’s actually more complicated because the artists will get less than 100% of the money, but leave that aside.)

The advance, then, is a kind of bet that Distributor Y makes on the Label X catalog.  It’s paid in cash and it’s paid up front, like ante.  Because that advance is a payment against actual future sales, there’s really no fair way to divide it up among the artists on the day that the deal is done, that is, before there are any sales.

This is the reason that you get for why this clause is in there.  That’s the “above the table” reason.

Here’s the “below the table” reason.  What if Label X was very valuable to Distributor Y, either because it was a huge catalog without which Distributor Y wouldn’t really have much of a business, or it was just a very hit-rich catalog and was likely to continue to be valuable to Distributor Y in Airstrip One.  Label X could very easily say to Distributor Y, you know that $100?  I have to share that with my artists.  How about you pay me $20 of that flat and just give me an $80 advance?  Meaning–Distributor Y pays Label X $20 on a nonrecoupable basis (“flat”) and Label X puts that money in its pocket.  And because it’s a “payment” for the blanket license, the label doesn’t have to share it with any artist.

Is it fair?  Is a nonrecoupable payment just a way to get a higher royalty or revenue share for the label?  That depends on how you look at it, but one thing that is certain is that the reason that the label is able to get this nonrecoupable payment is because of the value of the catalog.  That value is a mix of the work product of the label’s investment in the artist, but it’s also partly the value of the present and future work product of the artists.  And you won’t be surprised to know that we think it’s largely the work product of the artists.

Consider another aspect of the same example.  If the deal with Distributor Y is a true license, most of the time the revenue is split 50/50 with the artist (this is what the Eminem case was all about.)  However that advance earns out, you can see that if there is a portion of the money that is nonrecoupable, the nonrecoupable part is not shared with the artist.  Distributor Y will still have to pay Label X for sales occurring after the advance part is recouped, so it’s not like the artists are not getting paid for their sales.  (Assuming that Label X is accounting properly.)  There’s just a chunk of cash that never hits the artist royalty statement because it is paid directly to Label X as what some might call a vig.

The practice has been that when the label leverages the work product of their artists to get a payment for the label that they don’t share, they trot out this clause that Paul has found as the justification.  It’s still often kind of revenue neutral for the individual artists, it’s not like the label said give me this money and underreport sales, or give me this money and I won’t audit you.  Well…maybe they did say I won’t audit you.  But from the artist perspective the deal should be revenue neutral.

Now consider the same facts, but in addition to the nonrecoupable payment, Label X also demands shares of stock in Distributor Y.  Distributor Y says hold on there–I already gave you the nonrecoupable payment and you want stock, too?  What are you giving me for the stock?  Hmmm….who is not at the table here?  Let’s take their money.  So the label says sure, if you give me stock and a nonrecoupable payment, I will let you [increase your distribution fee/decrease the royalty base price/decrease the net sales on which the artist royalty is calculated/increase the reserves that are never liquidated] that determines the royalty I have to pay to the artist.  But only by a believable amount.  Say 10-20%.  This works particularly well in places like say Venezuela, China or Cambodia.  Or on the Internet.  Any place no one expects to get a decent accounting.  Or feels lucky to get any payment at all due to rampant piracy.  (Remember the three legged stool from Old Boss, New Boss.)

Why does this happen?  Because if you are not at the table, you are on the menu.

Back to Lady Gaga’s contract.  Do you think that this clause also covers stock that was extracted in return for a lower royalty rate?  In other words, what if the clause that Paul quotes ended with “in return for lowering your royalty rate to an abysmal and unsustainable level while your label gets rich beyond their wildest dreams”?  Or even if it said “payments in cash, shares of stock or other securities or other things of value”?  How do you think that would go down with the artist’s representative?

Another part of the vig is what happens at the end of Distributor Y’s contract if Label X is unrecouped.  Frequently, Distributor Y is allowed to extend the term under some conditions to try to recoup the unrecouped balance.  This doesn’t go on forever but it might be another 6 months or a year.  In the land of Internet where the living is easy, the fish are jumpin’ and the cotton is high, when the deal is over, the unrecouped balance often is not rolled into additional time on the contract.  Instead, the term is renegotiated and a new advance is paid for a new deal.  This pocketing of the unrecouped balance is sometimes called “breakage.”  Does Label X share the breakage with their artists?

What do you think?

If this is just a miscalculation by Distributor Y, that’s one thing.  If, on the other hand, Distributor Y for the Land of the Internet overpays the advance by what anyone would find to be an amount that is highly unlikely to recoup, and also has a crappy accounting system so that the accountings that Label X will use to account to their artists underreports sales–like reducing the percentage of net sales in the physical world–who benefits?  If Label X gets a big enough nonrecoupable payment, high enough breakage and enough shares of stock in a company that is likely to go public or have a big exit–while still making most of its current revenue from sources other than the Land of the Internet–do they really care that much?  Particularly if they distribute some of those shares of stock to Label X executives to hold personally?  Who’s going to complain?

If you’re not at the table, you are on the menu.

Of course if Label X lacks market power, it is unlikely that Label X will be able to extract any of these vigs.  And this leads us to the indie labels’ claims against YouTube.

To Be Continued.

What follows are the comments I submitted to the DOJ against the  ASCAP/BMI consent decrees. You have until the end of the day today to submit comments.  http://www.justice.gov/atr/cases/ascap-bmi-decree-review.html

 

The Consent Decrees Violate Individual Rights.

 

I am an American songwriter, a member of BMI and a member of the bands Cracker and Camper van Beethoven. I’m submitting this comment on my own behalf in opposition to the ASCAP and BMI consent decrees. I believe these government actions essentially are a compulsory license outside of the Congress and take away songwriters’ rights to due process of law.

 

Just to be clear, I am not saying that Justice Department consent decrees in general are oppressive. I am saying that the way these particular consent decrees operate is oppressive to songwriters. That operation is oppressive because of the extremely long period of time they have been in effect, because they take away our valuable property rights to negotiate our own licenses, and they essentially force songwriters into being judged guilty before we’ve even expressed ourselves.

 

Why Songwriters Matter

 

Most discussions surrounding the consent decrees start with a striking fiction: The consent decrees only apply to BMI and ASCAP but not to individual songwriters. From a songwriter’s perspective, this is extraordinary sophistry.

 

As a practical matter, all American professional songwriters have to join one of ASCAP, BMI or SESAC in order to earn a living from their chosen craft. Sure, it’s possible that SESAC (which is not yet under one of the government’s consent decrees) might invite someone like me to join. But they are known to be more difficult to join than ASCAP or BMI.

 

The only certain choice for all songwriters is joining one of ASCAP or BMI. And that means that the vast majority of songwriters are subject to the consent decree from the time they write their first song. Unless something is done about it, they will remain subject to the rate court until they write their last song and even beyond the grave.

The DOJ has essentially created a single exchange within the federal courts that requires songwriters to join a regulated PRO in order to participate in the market.

 

So in practice as soon as an individual decides to take the tiniest steps towards being a professional songwriter they immediately fall under one of the two consent decrees and the jurisdiction of one judge in one court. Let’s dispense with the fiction that the consent decrees do not apply to songwriters and hence dispense with the fiction that it does not limit the rights of individuals—living, dead and yet to be born.

 

The Single Exchange Takes My Right to Negotiate

 

The government limits my ability to participate in a free market; it takes my property rights without due process or just compensation; it even limits my kind of speech (public performance of my songs) as I must participate in this process or effectively forgo compensation when I perform my songs in the public square.  I know that there’s always the theoretical possibility of a direct license outside of the consent decrees, but as a practical matter, I can tell you that is very rare because it is rarely offered.

 

I am not a lawyer or a constitutional scholar but I believe the consent decrees violate the American social contract for many reasons, not the least of which is that in practice songwriters are singled out for the government’s scrutiny before they have done anything except engage in speech and create songs. When you are on the receiving end, this feels like a kind of writ of attainder. Allow me to explain.

 

A) Typically when we limit the rights of individuals in the manner prescribed by the consent decrees one of three things must occur:

 

1) Legislative action by elected officials.

2) Judicial proceedings finding a particular individual (not a class of individuals similar to that individual) guilty of something.

3) The individual must consent to have his/her rights limited (usually to avoid judicial proceedings or because they participated in an election).

 

As an individual songwriter the consent decrees effectively compel me to submit to this process. At least the compulsory license in the Copyright Act is a legislative action by elected representatives and if I don’t like that rule I can work to get someone unelected. Under the consent decrees, generations of songwriters are powerless to stop the government from taking our rights without that legitimacy—for decades. I do not understand how the Department of Justice has the authority to force us to submit to this process.

 

B) As soon as an ASCAP writer creates their first song, the writer is forced into a court proceeding that was opened in 1941, seventy three years ago.   The BMI consent decree is from 1964, fifty years ago. Many songwriters who are subject to the consent decrees weren’t even born when the Department of Justice opened the cases.

 

Even if I accept the premise that I am guilty until I can prove to the government that I am not, and that my licensing decisions require review by a federal judge at great social expense, what possible justification can there be for my decisions today being subject to a case opened so long ago? This seems like some arbitrary federal assignment of “original sin” to a class of Americans. Does the federal government have a crystal ball? Can they see into the future? Can they read my thoughts? How do they know that every single member of this class is doing something wrong? How is that possibly Constitutional?

 

C) How many of the government’s court cases are “open” for 73 years or even 50 years? How is that not a violation of due process? Why am I and all future songwriters required to pay for whatever misdeeds that occurred decades ago?

 

D) I can’t emphasize enough that from my point of view as a songwriter, the consent decrees act as a kind of compulsory license by government edict. The government compels songwriters to allow music services to use our songs whether we like it or not. And unlike the Copyright Act, I can’t complain directly to rate court except at great expense. There is nobody to get unelected if we don’t like the rate court’s decision except very indirectly.

 

As Ari Emmanuel once said, “Fair is where we end up.” He would be wrong in the case of these consent decrees. In practice the consent decrees effectively substitute the opinion of a federal judge for that of a fair negotiation to set the rates at which those services compensate my fellow songwriters and me. After 73 years this has effectively become an unlegislated compulsory license. The consent decrees walk and talk like a compulsory license and after decades of practice they effectively are a compulsory license. At least with a compulsory mechanical license we know where we will end up on the rate.

 

E) Essentially the consent decrees take valuable rights to negotiate the exploitation of property from over 500,000 Americans simply because they write songs. And there is no end in sight. (Not to mention the foreign songwriters whose works get swept up and who can’t afford to complain to the WTO.)

 

F) If we must live under consent decrees, why must all the cases be heard before the same judge in New York City? Not only do the consent decrees unfairly impose the government on songwriters, they also force music services to make their case before a single judge in New York City—twice, once for ASCAP and again for BMI. This is a very expensive process that only the most well-heeled services can afford.

 

Why shouldn’t a service be able to bring their rate case in San Francisco, Los Angeles, Nashville, Austin, Athens—or any federal court?   Respectfully, are two federal judges in New York the only federal judges in the entire country capable of trying PRO cases? Surely that can’t be true.

 

I believe that the decrees have become a crutch on which those well-funded music services that can afford the litigation have come to depend. Instead of actually innovating and improving their revenues they use the rate courts as a perceived competitive advantage at great expense to their own shareholders, songwriters and, of course, the taxpayer.

 

There’s also a question of how many new entrants don’t come into the market at all because they are scared off by the expense of the rate court process and the uncertainty of litigation.

 

So not only have the operation of these consent decrees created a single market inside a federal court, I suggest that the consent decrees actually limit access to that market to the number of potential buyers who can afford the millions in legal fees required to participate. I think most songwriters would say that they want to license their works to innovators, and yet access to the rate court market is limited to the rich innovators as a practical matter.

 

Yes—in practice the consent decrees may well be anticompetitive.

 

Are the ASCAP and BMI Consent Decrees Unconstitutional?

 

I pose this question not because I’m a learned lawyer or constitutional scholar. I pose it because I can tell you that living under these consent decrees feels oppressive and I have found that when the government acts oppressively it is often acting outside of the Constitution.

 

This is not to say that the government should not pursue claims against songwriters if we actually do violate the antitrust laws. I’m not asking for a free pass. We should get the same treatment as Google, Microsoft or anyone else.   It’s also not to say that there wasn’t some justification for the consent decrees long ago.

 

But from this songwriter’s perspective, that time has passed. As James Madison wrote in Federalist 44, “[government] interference is but the first link of a long chain of repetitions, every subsequent interference being naturally produced by the effects of the preceding.” Respectfully, I suggest that Madison could have been describing the Kafka-esque rate courts.

 

 

David Lowery

Aug 1^st 2014

Athens Georgia

 

As the guardian reported last week, a high ranking Google Executive has taken a seat on Spotify’s Board. This weekend we learned that the Google/YouTube’s Shiva Rajaraman is moving from YouTube to Spotify.  Rajaraman was part of the team launching YouTube’s music subscription service that would compete with Spotify.   While it is quite common for technology executives (and entertainment executives)  to move from one company to another, and for one company to have a seat on the board of another company, the fact that both of these companies are involved in licensing songs and recordings should raise concerns with The DOJ. Why?  Because it makes a mockery of the consent decrees that govern songwriters in their negotiations with these services. Because in effect the consent decrees are now backwards. There is a very real possibility of collusion and anti-competitive behavior from the services. (some would argue it’s already happened with YouTube’s indie label outrage.)  Couple this with the enormous resources that these companies have and it seems pretty ridiculous to keep songwriters under the consent decree.

One of the rationales of the World War II/Cold War era consent decrees was that songwriters and their PROs (our equivalent of unions) could collude against broadcasters (and now webcasters ) to fix prices.  But remember the consent decrees were enacted in the days that radio station ownership was severely limited. In 1941 ASCAP had a very strong negotiating position when it was up against individuals that might own one or two radio stations.   But those ownership limits have since been lifted and we now have companies like Clear Channel with over 840 stations.  In the digital realm we have Google/YouTube which is in effect an online video monopoly. Pandora has 77% of the webcasting market and is a near monopoly.   Everyone knows the internet wants only one or two of each kind of service,  it seems prone to monopoly. So it seems a little strange to think the federal government needs to protect these effective monopolies from  songwriters.

It’s even stranger when you consider the NOW very real possibility for collusion that exists on the part of broadcasters and webcasters.  Google/YouTube essentially has a seat on the board of Spotify and the Rajaraman has left YouTube for Spotify.   Are we really supposed to believe that details of deals and negotiations with Spotify are not gonna get back to YouTube?   Are we supposed to believe the deals the major labels  cut with YouTube won’t get back to Spotify?  We already know that Google/YouTube conspired with other technology firms to depress wages for software engineers by entering into an illegal agreement with other firms to not “poach” each others engineers.   Shouldn’t the DOJ be examining Google/YouTube and now Spotify for collusion?   Instead of songwriters?

And this isn’t even taking into account that the major labels own a large portion of Spotify?  This is a clusterjam™  of epic proportions.

The DOJ has collusion backwards.  The consent decree should not be pointed at the songwriters. And you can do something about this.  The DOJ has solicited comments on the consent decrees. You have till the end of the day wednesday.   You can be passionate but be polite:

http://www.justice.gov/atr/cases/ascap-bmi-decree-review.html

Although the DOJ has a series of specific questions on which it seeks comment, you can also make general comments about the fairness and even abolishment of the consent decrees.

You can read my fairly detailed comments which question the constitutionality of the entire process at the end of this article:

https://thetrichordist.com/2014/08/03/call-to-action-songwriters-submit-comments-to-the-doj-on-the-consent-decrees-now/

 

 

The DOJ is reviewing the WWII era consent decrees that force songwriters under federal court supervision for supposed anti-competitive practices.  Yes the awesome power of the federal government is being used to protect multi-billion dollar companies like Clear Channel, Sirius, Pandora, YouTube/Google, Amazon and Spotify from hippy freak songwriters. Considering that many of these companies are effective monopolies it’s a stunning abuse of federal power on behalf of a few politically connected corporations.

The consent decree forces songwriters to allow these services to use our songs while a single appointed for life judge (song czar) sets our rate of compensation.   You may remember that I posted that my million spins on Pandora earned me less than $17?   I can’t even opt out of this service, how is that even fair?  That’s how this kind of outrage occurs.  This amounts to an government mandated subsidy from songwriters to some of the largest companies in the world.

If you are a songwriter, please submit comments.  The DOJ specifically would like to hear from you.  If you don’t’ understand the legalese just make a simple statement about how you feel about the compensation from these digital services that results from these consent decrees. Be passionate but polite.  Here are the instructions:

http://www.justice.gov/atr/cases/ascap-bmi-decree-review.html

Here are my comments. I took a constitutional approach. You don’t have to be as esoteric or as detailed. Simple heartfelt comments are just as important.

 

The Consent Decrees Violate Individual Rights.

 

I am an American songwriter, a member of BMI and a member of the bands Cracker and Camper van Beethoven. I’m submitting this comment on my own behalf in opposition to the ASCAP and BMI consent decrees. I believe these government actions essentially are a compulsory license outside of the Congress and take away songwriters’ rights to due process of law.

 

Just to be clear, I am not saying that Justice Department consent decrees in general are oppressive. I am saying that the way these particular consent decrees operate is oppressive to songwriters. That operation is oppressive because of the extremely long period of time they have been in effect, because they take away our valuable property rights to negotiate our own licenses, and they essentially force songwriters into being judged guilty before we’ve even expressed ourselves.

 

Why Songwriters Matter

 

Most discussions surrounding the consent decrees start with a striking fiction: The consent decrees only apply to BMI and ASCAP but not to individual songwriters. From a songwriter’s perspective, this is extraordinary sophistry.

 

As a practical matter, all American professional songwriters have to join one of ASCAP, BMI or SESAC in order to earn a living from their chosen craft. Sure, it’s possible that SESAC (which is not yet under one of the government’s consent decrees) might invite someone like me to join. But they are known to be more difficult to join than ASCAP or BMI.

 

The only certain choice for all songwriters is joining one of ASCAP or BMI. And that means that the vast majority of songwriters are subject to the consent decree from the time they write their first song. Unless something is done about it, they will remain subject to the rate court until they write their last song and even beyond the grave.

The DOJ has essentially created a single exchange within the federal courts that requires songwriters to join a regulated PRO in order to participate in the market.

 

So in practice as soon as an individual decides to take the tiniest steps towards being a professional songwriter they immediately fall under one of the two consent decrees and the jurisdiction of one judge in one court. Let’s dispense with the fiction that the consent decrees do not apply to songwriters and hence dispense with the fiction that it does not limit the rights of individuals—living, dead and yet to be born.

 

The Single Exchange Takes My Right to Negotiate

 

The government limits my ability to participate in a free market; it takes my property rights without due process or just compensation; it even limits my kind of speech (public performance of my songs) as I must participate in this process or effectively forgo compensation when I perform my songs in the public square.  I know that there’s always the theoretical possibility of a direct license outside of the consent decrees, but as a practical matter, I can tell you that is very rare because it is rarely offered.

 

I am not a lawyer or a constitutional scholar but I believe the consent decrees violate the American social contract for many reasons, not the least of which is that in practice songwriters are singled out for the government’s scrutiny before they have done anything except engage in speech and create songs. When you are on the receiving end, this feels like a kind of writ of attainder. Allow me to explain.

 

A) Typically when we limit the rights of individuals in the manner prescribed by the consent decrees one of three things must occur:

 

1) Legislative action by elected officials.

2) Judicial proceedings finding a particular individual (not a class of individuals similar to that individual) guilty of something.

3) The individual must consent to have his/her rights limited (usually to avoid judicial proceedings or because they participated in an election).

 

As an individual songwriter the consent decrees effectively compel me to submit to this process. At least the compulsory license in the Copyright Act is a legislative action by elected representatives and if I don’t like that rule I can work to get someone unelected. Under the consent decrees, generations of songwriters are powerless to stop the government from taking our rights without that legitimacy—for decades. I do not understand how the Department of Justice has the authority to force us to submit to this process.

 

B) As soon as an ASCAP writer creates their first song, the writer is forced into a court proceeding that was opened in 1941, seventy three years ago.   The BMI consent decree is from 1964, fifty years ago. Many songwriters who are subject to the consent decrees weren’t even born when the Department of Justice opened the cases.

 

Even if I accept the premise that I am guilty until I can prove to the government that I am not, and that my licensing decisions require review by a federal judge at great social expense, what possible justification can there be for my decisions today being subject to a case opened so long ago? This seems like some arbitrary federal assignment of “original sin” to a class of Americans. Does the federal government have a crystal ball? Can they see into the future? Can they read my thoughts? How do they know that every single member of this class is doing something wrong? How is that possibly Constitutional?

 

C) How many of the government’s court cases are “open” for 73 years or even 50 years? How is that not a violation of due process? Why am I and all future songwriters required to pay for whatever misdeeds that occurred decades ago?

 

D) I can’t emphasize enough that from my point of view as a songwriter, the consent decrees act as a kind of compulsory license by government edict. The government compels songwriters to allow music services to use our songs whether we like it or not. And unlike the Copyright Act, I can’t complain directly to rate court except at great expense. There is nobody to get unelected if we don’t like the rate court’s decision except very indirectly.

 

As Ari Emmanuel once said, “Fair is where we end up.” He would be wrong in the case of these consent decrees. In practice the consent decrees effectively substitute the opinion of a federal judge for that of a fair negotiation to set the rates at which those services compensate my fellow songwriters and me. After 73 years this has effectively become an unlegislated compulsory license. The consent decrees walk and talk like a compulsory license and after decades of practice they effectively are a compulsory license. At least with a compulsory mechanical license we know where we will end up on the rate.

 

E) Essentially the consent decrees take valuable rights to negotiate the exploitation of property from over 500,000 Americans simply because they write songs. And there is no end in sight. (Not to mention the foreign songwriters whose works get swept up and who can’t afford to complain to the WTO.)

 

F) If we must live under consent decrees, why must all the cases be heard before the same judge in New York City? Not only do the consent decrees unfairly impose the government on songwriters, they also force music services to make their case before a single judge in New York City—twice, once for ASCAP and again for BMI. This is a very expensive process that only the most well-heeled services can afford.

 

Why shouldn’t a service be able to bring their rate case in San Francisco, Los Angeles, Nashville, Austin, Athens—or any federal court?   Respectfully, are two federal judges in New York the only federal judges in the entire country capable of trying PRO cases? Surely that can’t be true.

 

I believe that the decrees have become a crutch on which those well-funded music services that can afford the litigation have come to depend. Instead of actually innovating and improving their revenues they use the rate courts as a perceived competitive advantage at great expense to their own shareholders, songwriters and, of course, the taxpayer.

 

There’s also a question of how many new entrants don’t come into the market at all because they are scared off by the expense of the rate court process and the uncertainty of litigation.

 

So not only have the operation of these consent decrees created a single market inside a federal court, I suggest that the consent decrees actually limit access to that market to the number of potential buyers who can afford the millions in legal fees required to participate. I think most songwriters would say that they want to license their works to innovators, and yet access to the rate court market is limited to the rich innovators as a practical matter.

 

Yes—in practice the consent decrees may well be anticompetitive.

 

Are the ASCAP and BMI Consent Decrees Unconstitutional?

 

I pose this question not because I’m a learned lawyer or constitutional scholar. I pose it because I can tell you that living under these consent decrees feels oppressive and I have found that when the government acts oppressively it is often acting outside of the Constitution.

 

This is not to say that the government should not pursue claims against songwriters if we actually do violate the antitrust laws. I’m not asking for a free pass. We should get the same treatment as Google, Microsoft or anyone else.   It’s also not to say that there wasn’t some justification for the consent decrees long ago.

 

But from this songwriter’s perspective, that time has passed. As James Madison wrote in Federalist 44, “[government] interference is but the first link of a long chain of repetitions, every subsequent interference being naturally produced by the effects of the preceding.” Respectfully, I suggest that Madison could have been describing the Kafka-esque rate courts.

 

 

David Lowery

Aug 1^st 2014

Athens Georgia

 

 

You’ve all been following YouTube’s absolutely tone deaf “take it or leave it” brinksmanship strategy with indie labels represented by Merlin and WIN.  This one sided “negotiation” appears to still be grinding on.  Why would it take so long?  Why wouldn’t YouTube simply say, we’ll treat you like everyone else and close up the problem.

So what is Google’s next move to calm the waters?  Google buys its way onto the Spotify board and the Spotify board allowed them to do it.

If we ever needed proof that Spotify intends to keep screwing artists and songwriters, we just got that confirmation.  Without so much as blinking an eye, Spotify embraces Google like a long lost brother returning to the family.  Whether this is just the first step toward Google buying Spotify or a step toward a “powered by Spotify” Google music service will be told in the future.

But what we definitely know is that two companies have joined together to pursue their common goal of paying minuscule royalties to songwriters and artists.

By welcoming Google onto its board, Spotify has lost the last shred of a fig leaf for screwing artists and songwriters.  With Spotify, you just get reamed because the deals are awful and you’ll never participate in any of the stock that Spotify gave to major labels and their senior executives (and probably some select superstars).   These under the table advances and equity shares in exchange for lower royalties are so bad that even the U.S. Copyright Office has raised it as a concern!

But with Google you get reamed because the royalty rates are absurdly miniscule when paid by Google’s legitimate front businesses like YouTube and are actually negative when you take into account the pirate sites Google profits from through its unscrupulous AdSense business.

Doesn’t Spotify have enough artist relations problems without adding Google to the list?

Not if Google writes a big enough check!  There’s a couple ways that Google could invest in Spotify.  They could buy newly issued shares (probably in a new series of preferred stock) OR…Google could buy existing shares from existing stockholders.  For example, if you were an executive of a major label who had gotten Spotify stock and you were thinking of “pulling a Jimmy” and getting some island money, one way you could do it would be to sell your shares to Google (sometimes called a “selling stockholder”).

But whatever happened, Spotify has now embraced the pariah of the music business.  Google is on their board, votes on everything the board votes on, including royalty rates, under the table money, the works.

Not only that, but why would Google allow Spotify to renew their deals through the Harry Fox Agency when Google owns Rightsflow?

If Spotify had artist and writer relations problems before, that’s nothing compared to what they’re going to have.