Selected Comments on the Copyright Office Proposed Rule on Termination Rights and MLC Operations: John Barker

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

We will be posting selected comments that we think might be interesting to Trichordist readers. The project is a bit wonky, but important to stay informed on. This comment by Nashville publisher John Barker who founded ClearBox Rights, the IP rights management company is a great introduction to the termination issue and how we got to where we are today by a deep thinker on copyright.

In today’s digital streaming marketplace, there is rarely a need for a traditional re-release of a recording into a collection, best-of, or other packaging combination, since most streaming services offer single song selections, with the ability to create a custom “play list” to suit the consumer’s taste. The basic result is, once a song is recorded, licensed and utilized on a DMP, there is little need for new licenses for that recording/song combination with the DMP provider. The significant portion of compensation writers and heirs had experienced through new licenses of that recording/song in the mechanical world has been reduced to almost nothing.

What had been an accepted practice of Terminating Claimants participating in licensing and receiving royalties for older recordings with new licenses was thwarted to a considerable extent through the unintended consequences of this modern-day digital distribution method.

The combination of the negative impact through the MLC’s Notice and Dispute Policy, along with the consequences of the digital marketplace replacing recorded re-packaging, makes this issue of the Copyright Office ruling even more critical for writers and heirs.

So here we are, dealing with this again.

colc-2022-0004-0008_attachment_1Download
by trichordist

Physical/Download Song Rate Increases, No Change for Streaming

Thanks to the efforts of the “frozen mechanicals” commenters to the Copyright Royalty Judges and the labels who agreed to the structure, there is now an annual cost of living adjustment (called a “COLA”) for the statutory mechanical royalty paid for songs on physical (like vinyl or CDs) and permanent downloads. Starting this month and going forward, that COLA is made by the Copyright Royalty Judges in December, effective the next January 1.

Remember that the frozen minimum statutory mechanical rate was 9.1¢ since 2006 but increased to 12¢ effective 1/1/23.

The Copyright Royalty Judges announced the new COLA rate yesterday which has increased to a minimum rate of 12.40¢ for recordings of songs with a running time of 5 minutes or less, and a per-minute long-song rate of 2.39¢. Depending on how frequently you get accountings, you could see that COLA rate increase show up on your next statements for sales after 1/1/24.

Remember, the purpose of having a COLA is to preserve the buying power of the government’s royalty because songwriters get one opportunity every five years to negotiate compensation for mechanical royalties. Of course, the COLA rate may get distorted by “controlled compositions” clauses in artist agreements, so check your contracts.

Also remember that the rate paid for physical and downloads is actually paid by the record companies as the “licensee” who agreed to the COLA on royalties they pay.

The rate paid for streaming is paid by the digital music platforms like Spotify, Apple, Google, Amazon, Tidal and others.

There is no COLA adjustment for streaming even though same songs and same time period and even though the MLC gets a guaranteed annual increase in its “administrative assessment”.

2024 rate. For the year 2024 for every physical phonorecord and Permanent Download the Licensee makes and distributes or authorizes to be made and distributed, the royalty rate payable for each work embodied in the phonorecord or Permanent Download shall be either 12.40 cents or 2.39 cents per minute of playing time or fraction thereof, whichever amount is larger.

2023-12-07 Phono IV COLA (2024) – for eCRB – special filing- FYI onlyDownload
by Trichordist

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

COLC-2022-0004-0089_attachment_1Download

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

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

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

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

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

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

by thetrichordist

@mikehuppe on American Music Fairness Act #IRespectMusic

We’re still looking for the phalanx of industry leaders making this point about the irony of broadcasters enriching themselves at the expense of songwriters when they don’t pay artists–so far it’s just Mr. Huppe who has been here with us before. Complete Music Update has the story:  iHeartMedia confirms incoming $100 million pay day as a result of BMI sale

The boss of US record industry collecting society SoundExchange has used the news that iHeartMedia will make $100 million from the sale of BMI to again call for politicians to back the American Music Fairness Act.

SoundExchange CEO Michael Huppe wrote on Twitter: “The irony of a radio giant profiting millions while underpaying performers is yet another reason why the American Music Fairness Act is so vital for #MusicFairness”.

by Trichordist Editor

Selected Comments on the Copyright Office Proposed Rule on Termination Rights and MLC Operations: North Music Group

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

We will be posting selected comments that we think might be interesting to Trichordist readers. The project is a bit wonky, but important to stay informed on.

This comment to the Copyright Office from Abby North of North Music Group raises important issues including whether the MLC should have the ability to create disputes on its own, what happens to samples, interpolations and medleys, and the need for substantial consultations by the Copyright Office with rights holders large and small.

Abby’s thesis is:

The Supplemental Proposed rule is simply too broad.  Without customary Copyright Office consultations with industry working groups and roundtables to allow stakeholders to participate in the decision-making, the Office runs the risk of creating rules that are contrary to music publishing industry practices and costly to implement administratively. Further, without extensive consultation and revisions, it is nearly impossible to avoid unintended consequences as we are currently experiencing with the unreimbursed transaction costs imposed on publishers and songwriters of verifying and correcting data at The MLC.

Neither the first proposed rule, nor the supplemental rule addresses termination in the context of interpolations and medleys. If a work that has been terminated was included as an interpolation into another work prior to termination, the songwriter’s post-termination publisher or administrator should be able to terminate related to the interpolated work as well. 

There must be a mechanism for the songwriter and/or his/her post-termination publisher or administrator to notify The MLC of derivative interpolations/samples and medleys and become the royalty recipient for the applicable share of mechanicals generated by those works.

This proceeding raises the question of whether The MLC itself should have standing to initiate a dispute when no stakeholder has done so.  Due to the absence of rules and due process applicable to The MLC, it seems that The MLC should be prohibited from creating disputes on its own motion.  Alternatively, if The MLC is the party initiating a dispute, there should be some process and constraints applicable to its actions.  This might include limiting any review by The MLC to a fixed time to complete a review. The Office should define what that review entails; notice requirements so that copyright owners are made aware that The MLC is initiating a dispute on its own; under what circumstances The MLC is permitted to hold the funds of a copyright owner; where those funds are to be held (such as a segregated bank account); and how the MLC’s decision must be communicated to copyright owners and how copyright owners can appeal.  The MLC should not be allowed to interrupt the payment of royalties based on mere suspicion.  

Following is Abby’s entire comment.

Hon. Suzanne V. Wilson
General Counsel and Associate Register of Copyrights
U.S. Copyright Office
101 Independence Avenue, S.E.
Washington D.C. 20559-6000

Re: Termination Rights And The Music Modernization Act’s Blanket License: Response to Request For Public Comments Regarding Supplemental Notice of Proposed Rulemaking – The Applicability of the Derivative Works Exception To Termination Rights Under the Copyright Act To the New Statutory Mechanical Blanket License Established by the Music Modernization Act (“MMA”).

FR  Doc. 2023-20922
Docket No. 2022-5

Dear Associate Register Wilson:

I appreciate the opportunity to submit comments in response to the Supplemental Notice of Proposed Rulemaking regarding the applicability of the derivative works exception to termination rights under the Copyright Act.

I am a music rights manager who represents many estates and legacy songwriters and composers who have exercised, and plan to exercise their right to recapture their copyrights.

As interactive streaming has clearly become one of the biggest sources of royalty income for music publishers and songwriters, it is imperative that not only the derivative work exception be clarified related to the Section 115 Blanket Mechanical License, but further, the rules and processes The MLC follows in navigating distribution of royalties and dispute resolution after a termination has been perfected must also be defined.

ORIGINAL PROPOSED RULE VS. SUPPLEMENTAL PROPOSED RULE

The original proposed rule specifically addressed the issue of the Section 115 statutory blanket license not having a derivative work exception. Clarification is/was required, which the proposed rule provides.

The Supplemental Proposed rule is simply too broad.  Without customary Copyright Office consultations with industry working groups and roundtables to allow stakeholders to participate in the decision-making, the Office runs the risk of creating rules that are contrary to music publishing industry practices and costly to implement administratively. Further, without extensive consultation and revisions, it is nearly impossible to avoid unintended consequences as we are currently experiencing with the unreimbursed transaction costs imposed on publishers and songwriters of verifying and correcting data at The MLC.

RECIPIENT OF ROYALTIES POST-TERMINATION

For example, the Proposed Rule states that royalties under the blanket license should be distributed to the owner at the time of usage, rather than to the owner at the time of royalty distribution.  If the work has been claimed and matched to recordings by copyright owners, and there is a post-term collection period and the usage occurred during the term of that post-term collection period, the original grantee should receive the royalties. If the post-term collection period has ended, or there was no post-term collection period, the post-termination publisher should be the royalty recipient.

Once a songwriter/composer terminates his/her agreement with a publisher, that publisher no longer is the assignee of that songwriter’s copyrights, and consequently should not be the recipient of the songwriter’s mechanicals. While most publishers continue to distribute applicable post-term royalties they receive to songwriters whose agreements have terminated, they do so as a courtesy, but they may decide to stop doing so. If a songwriter ends a relationship with a publisher because the publisher exhibits weak administration skills or the business relationship was unfavorable, it is simply unfair to the songwriters to require them to continue a relationship with that publisher.

If the original grantee neglected to claim works and match to recordings during its term, but the post-termination publisher administers comprehensively and does claim and match, that post-termination publisher should be the recipient of the royalties once the post-term collection period has ended. Currently, the burden and cost to “play our part” is placed on the publishing administrators. However, because of the amount of time and resources (both human and tech) required to efficiently, accurately and comprehensively claim and register musical works and then match those works to all the recordings of the works, some publishers cannot afford to do the work. Often, larger publishers prioritize the highest earning works, simply because resources are limited even for them. If the post-termination publisher, who faces the same limitations in resources does put in the work, does register and claim the works that were not comprehensively and accurately registered or claimed, and does perform the very time-consuming process of manually matching recordings to those works to “play our part,” certainly that publisher should be compensated for its time and efforts.

SAMPLES/INTERPOLATIONS AND MEDLEYS

Neither the first proposed rule, nor the supplemental rule addresses termination in the context of interpolations and medleys. If a work that has been terminated was included as an interpolation into another work prior to termination, the songwriter’s post-termination publisher or administrator should be able to terminate related to the interpolated work as well. 

This language in 17 USC §304(c)(5) suggests that a voluntary agreement (such as an interpolation agreement) does not trump the right of termination:

 Termination of the grant may be effected notwithstanding any agreement to the contrary, including an agreement to make a will or to make any future grant.

There must be a mechanism for the songwriter and/or his/her post-termination publisher or administrator to notify The MLC of derivative interpolations/samples and medleys and become the royalty recipient for the applicable share of mechanicals generated by those works.

DISPUTE RESOLUTION

The Proposed Supplemental Rule sets forth three Dispute Resolution scenarios. Each of these attempts to facilitate resolution when the dispute is between or among rightsholders. The third scenario attempts to prevent disputed funds from being held indefinitely. If the parties to a dispute do not voluntarily agree on a resolution, the Proposed Supplemental Rule requires that the party initiating the dispute must commence a legal proceeding to maintain the hold. In my experience, copyright litigation will always arbitrarily favor the better funded party and should not be the default dispute resolution tool.

There needs to be a timeline imposed for the scenario in which the party collecting royalties does not respond to the dispute. If there is no response within a fixed period of time, such as 90 days, I recommend The MLC begin distributing these royalties to the party initiating the dispute, both retroactively and prospectively. This approach will help to incentivize parties to participate in the dispute resolution.

Further, this proceeding raises the question of whether The MLC itself should have standing to initiate a dispute when no stakeholder has done so.  Due to the absence of rules and due process applicable to The MLC, it seems that The MLC should be prohibited from creating disputes on its own motion.  Alternatively, if The MLC is the party initiating a dispute, there should be some process and constraints applicable to its actions.  This might include limiting any review by The MLC to a fixed time to complete a review. The Office should define what that review entails; notice requirements so that copyright owners are made aware that The MLC is initiating a dispute on its own; under what circumstances The MLC is permitted to hold the funds of a copyright owner; where those funds are to be held (such as a segregated bank account); and how the MLC’s decision must be communicated to copyright owners and how copyright owners can appeal.  The MLC should not be allowed to interrupt the payment of royalties based on mere suspicion.  

If the MLC fails to comply with these rules or cannot demonstrate good cause to continue to hold funds, or if the copyright owner appeals, The MLC should then release funds to the copyright owner or The MLC member with which it initiated the dispute and pay applicable royalties prospectively.

In conclusion, I acknowledge that some stakeholders in the music industry are anxious for resolution and would prefer not to have a protracted process. To that end, I recommend the Copyright Office finalizes the original proposed rule that specifically clarified the derivative works exception. However, The Copyright Office should pause the process related to the Supplemental Rule and its many very complex and nuanced elements that go beyond clarifying the derivative works exception. The industry must be given time and a process to evaluate and report on the impact of the Proposed Supplemental Rule. 

It is essential that the Copyright Office conducts a consultation on the Rule with a very substantial table with seats for many more voices that have experience in royalty distribution and dispute resolution. Experts and songwriter advocates must be given the opportunity to assist in the creation of the royalty distribution and dispute resolution processes and systems. It is crucial to take the necessary time to evaluate and prevent unnecessary or unintended consequences. To prevent complications, errors, and the need for even more clarifying Rules, we absolutely must get this right from the start.

I am thankful for the opportunity to express my views and concerns.

Best,

Abby North, North Music Group                   

by Trichordist Editor

BMI’s Insult that Keeps On Insulting! @hypebot: Radio doesn’t pay performers, but iHeart will get $100M from BMI sale to Google/Private Equity

[T Editor sez: Remember how we have all fought alongside #IRespectMusic, Blake Morgan and MusicFirst to get artists paid for radio play of their recordings on terrestrial radio? Remember how iHeartMedia and the rest of the National Association of Broadcasters used their lobbying muscle to block our heroes in Congress like Reps. Jerry Nadler, Ted Deutch, and Darrell Issa and Senators Marsha Blackburn and Alex Padilla from passing the American Music Fairness Act? And are blocking it to this day? Well, adding insult to injury, the broadcasters who apparently own BMI, the for-profit PRO, are making serious bank for selling their shares to Google and private equity fund New Mountain. You know, Broadcast(er) Music, Inc.? Thus screwing songwriters, but screwing artist/songwriters TWICE. Who are they? According to the most recent BMI annual report we could find they are probably the same companies with board seats which are these smiling faces:

Bruce Hougton at Hypebot fills us in on the details of just how profitable the sale for Google’s blood money really is for one stockholder owner of BMI, iHeart Media (formerly Clear Channel). iHeart is, of course, the largest radio station owner in the US and poster child for media consolidation and screwing artists. iHeart profits from blood money stealing from artists and then does it again stealing from songwriters. And if iHeart is doing it, the rest of the BMI owners are, too. Of course you can complain to your songwriter-board member of BMI…oh wait, you don’t have any. Unlike ASCAP and SoundExchange. Of course, the question is whether those Members of Congress who worked so hard on the American Music Fairness Act and its predecessors will exercise their oversight role and investigate the sale. As well as the series of moves that lead to Google acquiring songwriter personal data that we don’t think belonged to BMI in the first place. It may not just be insulting, it may also be illegal. And answer the musical question, how big is your black box?]

 In an ironic twist, iHeart Media, the largest owner of broadcast radio stations in the US, will receive $100 million from the sale of BMI to New Mountain Capital [and Google’s CapitalG venture fund]. The windfall is a result of iHeartMedia’s equity interest in BMI.

Read Bruce’s post on Hypebot

by Trichordist Editor

Blood Money:  BMI’s Mushy Press Release Buries The Lede on Google “Investment”

By Chris Castle

What’s a better way to hide a story than a Friday news dump?  A long weekend news dump.  (Remember when The MLC announced that they had “decided” to pick the Harry Fox Agency as their principal vendor after jerking chains for months?). 

So I’m not surprised that the BMI sale got a turkey press release on the Thanksgiving long weekend.  BMI’s press release is remarkable for what it doesn’t do.  For example, it doesn’t announce the financial terms of the deal in favor of the bright and shiny object of a $100,000,000 tip to its 1.4 million “affiliates” which works out to about $71 each.  Want to bet that BMI’s shareholders and executive team are pocketing a bit more on the deal?

Which is fine—it’s their company, they can decide how they want to share the sale price windfall.  But if you’re going to be a capitalist, be a capitalist and don’t try to sugar coat the fact that you got rich(er) selling data that doesn’t belong to you and trading on the efforts of songwriters.  In the great tradition of streaming that we’ve become accustomed to from Big Tech, songwriters get the shortest end of the stick.  Oh, and don’t overlook how BMI intends to distribute that $100 million—my bet is that 90% of BMI songwriters won’t even net anything like $71.

But here’s the line that BMI definitely buried in the very last sentence of their press release:  “As part of New Mountain’s investment, CapitalG will also invest a passive minority stake in BMI.”

Now who might CapitalG be?  CapitalG is a side venture fund owned by Google.  So that’s right—after 20 years of fighting the biggest copyright offender in the history of commerce, a seller of advertising on pirate sites like Megavideo, BMI has invited them inside the wire.

“Passive” normally means the party does not participate in the management decisions of a company they have invested in.  However, without knowing the terms of the investment, there’s really no way to know what that means.  “Minority” typically means that the party holds less than 50% plus one of the outstanding voting shares of the target company on an as-converted basis, in this case the BMI shares following the closing of the sale transaction.  Again, without seeing the post-money capitalization table, you really have no way of knowing what “passive minority stake” really means.

So that leads me to look at the public statements of CapitalG, such as on its website.  Here’s a couple of examples:

“CapitalG is Alphabet’s (Google’s) independent growth fund.”

“By maintaining a small, concentrated portfolio, we are able to invest heavily in each company’s success, fueling them with recurring, significant capital and consistent, hands-on operational and strategic support.”

What this sounds like is what you would expect—a very engaged, Silicon Valley style venture investment.  It is inevitable that this investment will result in at least one board seat or “board observer” which is even worse from the company’s point of view.  And that investment style is confirmed by another statement on CapitalG’s website:

“3000 Googlers have advised 4500 portfolio employees.  Hands-on go-to-market, people & talent, and product & engineering support, often producing multimillion-dollar value within the first year.”

What that means is that Google will be all up in your grill, BMI folk.  Get ready for it, because they will now be able to push you around for real with your jobs on the line because THEY OWN YOU.

What is worse than Boston Consulting Group telling you what you ought to do?  Google telling you what you must do.  And they will.

Why do they do it?

“16 IPOs and 9 M&A exits.  Laser focused on each company’s success–with the track record to prove it.”

“Each company’s success” means the exit.  That’s all it means.  All those smiling people are smiling for a reason. They don’t care about songs, songwriters, writer relations or anything else.  They are about the data, the tech, and all their hairbrained ideas about how the music business really should work in their utopia.  Assuming “owning” the MLC and BMI passes antitrust scrutiny at President Biden’s FTC.

In other words, they are going to pump you up and sell your ass.  And they’ll do it with the blood money they made by ripping us off for decades. That’s one way to get a job at Google.

So—as long as we understand each other.  Something to think about when your writers and publishers start firing you.

[This post first appeared on MusicTechPolicy]

by Trichordist

Selected Comments on the Copyright Office Proposed Rule on Termination Rights and MLC Operations: SpiritMusic

Spirit_COLC-2022-0004-0080_attachment_1Download

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

We will be posting selected comments that we think might be interesting to Trichordist readers. The project is a bit wonky, but important to stay informed on.

Spirit’s thesis:

We commend the US Copyright Office (USCO) for its highly regarded work in protecting rightsholders and their intellectual property rights. Your efforts have achieved great strides to prevent the misuse and abuse of music copyrights.

Although the [Notice of Proposed Rulemaking]’s original intent was to address the ambiguity in certain aspects of the Termination Right, the USCO’s extension of the scope beyond Termination Rights disrupts standard practices that have been long tested and put into practice by rightsholders. The administrators of copyrighted material are best suited to understand the most current and pragmatic business practices. As such, the administrators should be the ones to establish the day-to-day standards of copyright administration and to make the recommendations pertaining to the administration of copyrights and their respective payments at the MLC.

We believe the administrators’ standard practices and pragmatic solutions must be considered.

by Trichordist Editor