@BMI smacks down @AmericanSpectator and Eric Peters on Music Licensing #FakeNews

Stick to cars Eric Peters.  So many alternative facts in this piece.  Great to see BMI smack him down.

But I have to admit that I love the fact that the American Spectator was bamboozled into supporting a position on music licensing  that was pushed only by  radical copyleft Obama DOJ officials and Google.  Pure Li-BRAT-arian nonsense.  Can someone explain to me how collectivizing any property right (even if they belong to mostly non trump supporting songwriters)  a conservative free market position?

Read BMI’s reply to Peters here.

https://spectator.org/no-macarena-for-trump-a-reply-from-broadcast-music-inc-bmi/

 

 

Will Spotify Convertible Debt Cannibalize Major Label and Insider Equity?

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Hypothetically, the one shirt Spotify employees and investors will have left after down round(s), debt conversion(s) and dilution(s). 

Bruce Houghton at Hypebot has a great article on Spotify’s tough financial situation, in particular the soaring interest rates and the ratcheting stock discounts attached to the convertible debt it took from private equity firms TPG and Dragoneer.   As Hypebot reports:

“Spotify pays 5% annual interest on the debt, adding 1% every six months for a total of up to 10%. Investors can convert their debt to equity at a 20% discount of Spotify’s IPO share price; and if there is no IPO within a year, the discount at which they can eventually buy stock increases 2.5% every extra six months. Additionally, these investors can sell their shares just 90 days after the IPO, well before the 180 day lockup for Spotify’s other investors and employees.”

http://www.hypebot.com/hypebot/2017/01/music-industry-has-upper-hand-as-spotify-faces-soaring-interest-rates-stock-discounts.htm

Houghton astutely points out that this gives the major labels some serious negotiating leverage as Spotify needs long term licensing deals from the majors in order to get to an IPO, and hence get out from under the metastasizing debt.

I’d just like to add something else: this looks like one of those nasty funding vehicles that are often the grist of HBO’s Silicon Valley Series.

What seems to be happening here is that Dragoneer and TPG have a radically different set of financial incentives than the current stockholders.   I haven’t seen the terms of the debt, but it appears that the longer it takes for Spotify to IPO the better it is for Dragoneer and TPG.  Why?  They have ratcheting interest rates and ratcheting discounts on the stock and the longer it takes to IPO the more money they get, and the more of the company they can buy with that convertible debt at a steeper discount.  If the IPO is late and the price is low, it’s entirely possible that the convertible debt allows Dragoneer and TPG to swallow most or even all the company.  This is especially likely if the IPO is spread over multiple offerings.   And why might the post-IPO Spotify stock price collapse?   Well, a lack of buyers will hurt a stock price.   And why might there be a lack of buyers? Perhaps the market is wary of the dilution implied by the  convertible debt held by Dragoneer and TPG?  See how that works?  This is a negative reinforcing loop.

So to all those labels, managers, Spotify employees and other sundry insiders who thought they got in on a “can’t lose” deal with that pre-IPO Spotify stock?  Check out what happened to Goolybib.

 

 

Mass NOI Update:  Christopher Sabec and Rightscorp Tackle the Songwriters’ Copyright Office Problem 

Mass “address unknown” filings to the copyright office allow companies like Amazon and YouTube to avoid paying royalties to songwriters. I have downloaded these massive files from the copyright office website and found that the “address unknown” filings are preposterous. For instance nearly the entire Beach Boys catalogue is listed as address unknown by one of the major Silicon Valley digital services. This may seem a little down in the weeds, but this new tactic employed by Silicon Valley firms has the potential to deprive songwriters of tens of millions of dollars in revenue each year. This looks like more loophole exploiting by Silicon Valley, in the same way they tried to exploit the pre-1972 sound recording copyrights.

Can’t this assholes just once play by the rules?  Most ordinary Americans play by the rules,  why can’ these guys?  Drunk on arrogance and power?

Fortunately this will likely end the same way the pre-1972 sound recordings fiasco ended. Kudos to Sabec for providing the tools to help songwriters stop this new outrage.

Music Tech Solutions

We’re going to assume that readers know the general background on the millions of “address unknown” NOIs filed with the Copyright Office under a loophole in the Copyright Act (Sec. 115(c)(1)).

The nutshell summary:  Starting April of last year,  Google, Amazon, Pandora and other on-demand digital services using compulsory licenses began filing very large numbers of “address unknown NOIs” for compulsory mechanical licenses with the Copyright Office.  These filings were implemented through a taxpayer funded customized electronic filing process that allows services to exploit songs for free–no royalty is payable.  The Copyright Office created this customized platform for these services about the time that the Copyright Office announced a reduced fee structure for this customized electronic filing process that increases the burden on songwriters.  (Even though Pandora has yet to launch its on-demand music service, Pandora appears to have served the Copyright Office with well over 1,000,000 address unknown…

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Without Music Licenses Facebook Can’t Pursue Long Form Video, Should Investors Say #F*ckTheZuck?

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Should investors and songwriters join hands and sing a rousing chorus of #FuckTheZuck? 

Facebook appears to have no licenses for music.  No sync licenses, no mechanical licenses, not even public performance licenses.  Yes, the world’s 6th richest man apparently thinks he doesn’t need music licenses for the world’s largest media company.  The Zuck seems to be in utter denial that it hosts hundreds of thousands if not millions of music videos.  Is this dude only surrounded by sycophantic “yes” men/women?  How could he not know he needs to pay artists? (Ed. Note:  Maybe a habit he picked up from Sean Parker?)

We artists may complain about the rates we get from YouTube, but at least they admit they need licenses!   Look if small shops,  music venues and small webcasters can get licenses, why doesn’t the Zuck?  Tech firm exceptionalism? Arrogance?  Sheer ignorance?  Either way this is absolutely shameful.   How is this any different than a luxury hotel billionaire stiffing refusing to pay subcontractors?

But it’s not just artists that are screwed by The Zuck’s refusal to license music and pay royalties, investors and shareholders are likely to suffer as well.  Many investors and analysts are beginning to speculate that Facebook may have peaked or plateaued in value.   Here’s a quote from a Wall Street Journal article titled Have We Seen Peak Facebook? 

“To achieve its next leg of growth, it must win over ad dollars from TV. Facebook has been promoting its live-streaming capabilities and is testing a new video-ad format that would insert ads into the middle of live videos. The company is also developing a video-centric app for TV set-top boxes and is discussing licensing long-form TV-style programming from media companies, The Wall Street Journal reported. But Facebook faces stiff competition for content and viewing hours from traditional TV and more established video-streaming platforms.”

It’s simple,  in order for Facebook to justify it’s lofty stock price (as measured by forward P/E ratio) it needs to get its hands on some professionally produced video from real media companies.  And generally this content has music in it.  And when Facebook reproduces the video content that contains music, at the very minimum they will need a public performance license!   Unless Facebook wants to limit itself to “long form content” with low grade royalty free “library music” it will have to get music licenses.  It can’t pursue a serious video strategy that gets TV ad dollars without these licenses.

Until Facebook grows up and starts paying royalties to songwriters investors should be very careful.

 

 

 

Musicians Action Group Submits Comments To Judiciary Committee On Copyright Reform

Musicians Action is a participatory democratic grass roots organization dedicated to public direct action to support economic justice for working artists in the digital domain.     Here is the text of our comments on copyright reform to the House Subcommittee on Courts, Intellectual Property and the Internet.

 

January 30, 2017

The Honorable Bob Goodlatte

Chairman, Committee on the Judiciary

United States House of Representatives

2309 Rayburn House Office Building

Washington, DC 20515

 

The Honorable John Conyers

Ranking Member, Committee on the Judiciary

United States House of Representatives

2426 Rayburn House Office Building

Washington, DC 20515

 

Re: Policy Proposal for Reform of the U.S. Copyright Office

Dear Chairman Goodlatte and Ranking Member Conyers,

We write in response to your request for written comments on the white paper entitled “Reform of the U.S. Copyright Office” issued on December 8, 2017 by the U.S. House of Representatives Judiciary Committee. We appreciate the opportunity to offer our views on this important process and we are grateful for your willingness to consider our comments.

Musicians Action is a participatory democratic grass roots organization dedicated to public direct action to support economic justice for working artists in the digital domain. The organization is comprised exclusively of working musicians. We have come together to present the voice of working artists. We exist for one purpose, and one purpose only—to inform legal policy discussions about how the decisions being made affect our livelihoods and ability to create, and to highlight the importance of modern and effective copyright protection to our ability to sustain ourselves and to fuel our creative output. Our website is available at http://musiciansaction.org.

We wish to comment on three of the issues outlined in the policy proposal for copyright reform.

The Register of Copyrights and Copyright Office Structure

The proposal recommends that the U.S. Copyright Office remain part of the Legislative Branch where it can provide independent and timely advice to Congress. We fully support the proposal that the Copyright Office have autonomy over its budget and technology needs.

More specifically, we believe that the Copyright Office should not fall under the general oversight of the Librarian of Congress. We believe that it should be removed from the Library of Congress so that it can function properly as an independent institution serving the public interest and immune from the influence of what we believe to be a misguided Library of Congress.

First, we view the recent removal of Register of Copyrights Maria A. Pallante by the new Librarian of Congress Carla Hayden as inappropriate. The unprecedented “reassignment” carried out by the Librarian of Congress in our view reflects special interest interference in governance at the highest level. It has destroyed our trust in the Library of Congress as an institution capable of properly serving Congress or functioning in the full interest of the American public.

Second, the subsequent posting online by the Library of Congress of a public survey to solicit input on the knowledge, skills and abilities required for the position of Register of Copyrights was in our opinion also an exercise in bad judgment and it undermines confidence in the authority of the Library of Congress in matters relating to copyright. We are alarmed that the Library of Congress posted a public survey like this that invites manipulated comments and robotically generated replies. It is well-known that technology corporations and their supporters are adept at influencing the public, particularly younger people with no knowledge or awareness of the issues in question, to follow suggestions to join petitions and submit robotic comments, such as they did during deliberations on SOPA / PIPA in January 2012, and more recently on April 1, 2016, when they overloaded the regulations.gov website with 86,000 sets of identical comments, crashing the system and making it impossible for people to file real comments by the deadline.

We are deeply concerned about the assumptions underlying this survey as it relates to public awareness of what the Register of Copyrights is, does, should be, or should do. The number of people who have adequate knowledge of the role of the U.S. Register of Copyright and the legal and policy context in which she works, and who are thus capable of sending a thoughtful reply, is small. The survey invites any member of the public over 13 years of age to participate; in actuality, there is no way to even confirm that a participant is over 13. We believe that this survey is subject to tampering and misrepresentation.

Also, questions arise as to whether and how the results of this survey can be used in public policy decisions or by the Library of Congress at all. As recently posted on The Trichordist blog, in a 2010 memo generated by the Executive Office of the President, Office of Management and Budget stated:

“Because, in general, the results of online rankings ratings, and tagging (e.g., number of votes or top rank) are not statistically generalizable, they should not be used as the basis for policy or planning.”

The fact that a survey is being conducted in this manner is troubling, and in our view it is evidence of faulty judgment at the Library of Congress. It indicates the inability of the Library of Congress to manage the issue of copyright law and to administer the U.S Copyright Office. We are concerned about the lack of common sense behind this survey and believe that it is critical to restore the integrity of the legislative process and the administration of copyright by removing Copyright Office from the Library of Congress where it does not belong.

Third, we observe that libraries as organizations have aligned with the interests of digital technology corporations against the interests of creators and other copyright holders. To the extent that the Library of Congress has authority over the Copyright Office, we believe that our interests will not be fairly served.

We ask Congress to resist the pressure of special interests who would destroy the integrity of the Copyright Office’s historic mission and its ability to administer the copyright law and to provide impartial expertise on copyright law and policy. The Library of Congress should function as a library and do what libraries do, and leave matters of copyright to Congress and the Copyright Office.

We agree with the proposal that future Registers of Copyright should be subject to a nomination and consent process with a 10-year term limit, subject to potential re-nomination, and that new advisory positions be created, including Chief Economist, Chief Technologist, and Deputy Register.

Information Technology Upgrades

We support the IT modernization plan developed by the Copyright Office and the white paper proposal for a quick rollout of the plan. We welcome the idea that the Copyright Office will maintain a searchable digital database of copyrighted works and copyright ownership information that will facilitate fair licensing of copyrighted works. The lack of an effective licensing framework and the lack of a comprehensive database of copyright information has had a negative impact on the ability of creators and rightsholders to negotiate with those who wish to use their works and to be fairly compensated for use of their works. We strongly support efforts that will contribute to the development of an effective licensing environment for all types of works so that creators and rightsholders will be properly recognized, particularly in the online environment, and so that the economic value of their works will be restored.

Small Claims

In the course of the study that led to the report by the Register of Copyrights on Copyright Small Claims, the U.S. Copyright Office received numerous comments from individuals and organizations representing the interests of creative people who face insurmountable challenges in enforcing legal rights that constitute the basis for their livelihoods. On the one hand, these rights are granted by copyright law but other hand, they are taken away by the inability to enforce them. In his letter to former Register of Copyrights Maria Pallante requesting the study, Representative Lamar Smith, Chairman, U.S. House Judiciary Committee wrote: “On an individual level, the inability to enforce one’s rights undermines the economic incentive to continue investing in the creation of new works. On a collective level, the inability to enforce rights corrodes respect for the rule of law and deprives society of the benefit of new and expressive works of authorship.”

This is the situation that we, as working musicians, face in the current environment where our rights, and enforcement of our rights, are being summarily denied due to a legal system that places the burden of infringement on us and provides us with no realistic mechanisms to address it. The vast majority of artists have limited incomes and we do not have the resources to engage in complex and expensive litigation when we find the value of our works decimated by infringement. What is most egregious is that the ineffective notice and takedown procedures and the special privilege “safe harbor” protections for corporate hosting platforms in Section 512 of the copyright law actually encourage mass infringement of our works.

We are grateful that this Congressional committee understands the importance of implementing a small claims system that will enable copyright owners to pursue small infringement matters and related claims, and provide a mechanism to ease the devastating impact of infringement. We would like to reinforce the urgency of this measure.

We also encourage Congress to amend the “safe harbors” for internet and online service providers in Section 512 that strip artists of their livelihoods and that enrich major technology corporations in what has become one of the most disgraceful episodes in the history of U.S. law. We urge Congress to end the massive injustice wrought by the safe harbors of Section 512 that were not intended by Congress when it implemented the DMCA. Testimony from the Section 512 Study being conducted by the Copyright Office provides more than adequate evidence than the business model of user-generated content based on stolen content should be eliminated, as outlined in the submission of the Music Community.

We also ask Congress to amend the unfair and ineffective notice and takedown regime that has developed into a massive copyright exception for wealthy digital corporations, and transform it into an enforceable system of permanent “staydown” to enable creators and rightsholders to exercise their rights. One example of many that could be offered to illustrate how the current system fails musicians is Facebook, the sixth largest company in the world by market capitalization. By any measure, Facebook is the world’s largest media company. It hosts millions of music video performances a day. Yet Facebook does not pay any fees to songwriters. It hosts infringing works posted by the public as a business model, profiting from our works and positing this “service” as a benefit to the public.

Too many observers posit a false division between the interests of the public and those of working creators, and many of those who do so are seeking to defend exploitative practices that benefit them economically, directly at our expense.

We thank the United States House of Representatives Judiciary Committee for your efforts to reform the statutory framework for the U.S. Copyright Office and stand ready to provide further comments at your request.

Respectfully,

David Lowery, Songwriter and Musician On behalf of Musicians Action

Was Daniel Ek Really Joking When He Offered Obama Job at @Spotify? Was Obama Joking When He Asked For One?

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Was Daniel Ek really joking when he offered a job to former President Barrack Obama?  In 2014 Spotify hired former Obama/Clinton official Jonathan M Prince to be the head of comms and public policy and ever since then we’ve noticed a certain “coziness” between Obama and the dominant player in the streaming market.  Cozy?  Sure: POTUS playlists;  this piece in Billboard where he says he’s “still waiting for his job at Spotify;”  and then of course he sic’ed the DOJ Antitrust division on both  Apple Music and songwriters in ways that greatly benefitted the streaming giant.

And here is Jonathan Prince begging his former boss to take a job at Spotify:

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And in case that wasn’t clear enough.  Prince tweets again:

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I know most musicians supported the president’s two campaigns, and this is probably upsetting to read but doesn’t this seem a little weird? And facts are facts.  The last two years of the Obama administration they have been #TeamSpotify all the way.  Imagine if George W Bush had joked that he was “waiting for his job at Halliburton?”  in his final days at the White House?  Imagine the outcry.

Come to think of it,  this is worse than Halliburton because there is the little matter of the $200 million plus class action songwriter lawsuit.  Spotify is being sued for not licensing songs and failure to pay royalties to millions of songwriters.   They don’t even deny it:

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(BTW this is total nonsense from Prince.  If Spotify doesn’t know who to pay its because Spotify didn’t bother to get licenses for those songs. Prince should know it’s not the “industry’s” duty to come together and bail out his multi-billion dollar Goldman Sachs backed employer.)

Here is the former head of Spotify music licensing admitting TO THE COPYRIGHT OFFICE in 2015 they were aware of the problem.  Yet they continue to this day to play music they haven’t licensed and continue to not pay songwriters.  For all practical purposes they are an outlaw corporation.

Hypothetically, let’s say a major airline had illegally refused to pay its baggage handlers,  or a luxury hotel chain had illegally failed to pay its sub-contractors, and thousands of workers were owed hundreds of millions of dollars, would Obama “joke” about going to work for one of these companies?  I think not.

This guy (Obama) turned out to be just as incurious about the financial plight of middle class workers as his predecessor.  How does Obama not know how shitty Spotify is to songwriters?  Or maybe he doesn’t care and just wants to cash in his Spotify chips. (BTW this comes from a guy who gave his campaign $2,500 in 2008.)

Oh and one last thing…  Here is Spotify’s Jonathan Prince visiting the White House immediately after taking the Spotify job.  90 minutes with Obama’s Chief of Staff on a Thursday afternoon?  Wow.    Wonder what they talked about…?  A little co-promotion between the office of the President and Spotify?  Maybe a summer playlist? Hopefully the job offer is simply a joke and there is not some sort of quid pro quo.  

White House Visits

 

 

YouTube’s Value Gap is the Record Industry’s Biggest Problem To Fix, and Here’s Why…

If the record industry is serious about growing streaming revenues (and the digital economy in general) it must address the problems with the exploitative practices of Google’s YouTube. We’ve been lucky to be supplied with Content ID data from the same source as our previous data – so we added that into the mix to see where it would rank.

These numbers are just staggering.

If you combine Content ID to the YouTube Subscription numbers you arrive at a whopping 63% of total streaming market share that only contributes  11% of revenue. Ya’ll taking notes here?

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Look at the combined YouTube revenues of Subscriptions and Content ID together at 11% of revenue. That puts the combined earnings at #3 in market share behind Apple Music. However, Apple Music creates more earnings than the two combined YouTube Revenue streams with less than 4% of the consumption. You’ll also notice that YouTube is the only streaming service with three zeros following the decimal point. That means YouTube is paying hundreds of dollars per million streams while the other leading streamers are paying thousands.

Apple Music generates 12% of revenue with less than 4% of streams. YouTube generates 11% of revenue with 63% of streams. Does that sound like a problem to anyone else?

As of this writing we’re not factoring in the direct channel uploads for artists to YouTube or Vevo, however we just can’t imagine that those numbers are much different in terms of plays versus revenues. We hear from a lot of label folks that they are afraid to give up their annual revenue from YouTube sources, but all we can say is that you’d be gaining more much more than you would be giving up.

We’ve heard of at least one executive who met with resistance when faced with the prospect of potentially walking away from millions of dollars a year in YouTube revenues. But, it’s not walking away from millions, it’s giving up 10’s of millions in true revenue.

Let us not forget, that this devalued revenue will prevent the overall growth of streaming as a format. With streaming revenues (largely from Spotify and Apple Music) now accounting for approximately 40% of overall digital music revenues why should YouTube be able to pay 1/10th of the other major players? Oh, that’s right because of user pirated content uploads…

It’s time for the record business to get serious about cleaning up YouTube.

 

After 16% drop in Per Stream rates, Spotify asks for another 14% Reduction…

We can’t make this up. We’ve stated many times before, as the consumption of streams increase (and those services grow) the per stream rate will drop as revenues level off. This is simply because revenues can not keep up with consumption, and there is no fixed per stream rate.

In our latest look at streaming rates we found that Spotify streaming rates had dropped 16% from 2014 to 2016. Now, Hypebot is reporting that Spotify is asking for another 14% reduction in royalty payments.

Please someone break out a calculator… that would be a 30% reduction in per stream rates in two years! It’s just math. Wow.

Read the full story at Hypebot:

Spotify’s Latest Offer To Labels: A 14% Lower Royalty Rate | Hypebot

Once Again Big Machine/Taylor Swift Lead the Way, This Time on YouTube

Our recent updated “streaming price bible” illustrates the terrible revenues from YouTube to musicians.  Using 2016 payments for a mid sized indie catalogue we estimated that YouTube pays $0.00069 to performer and label per stream.  10,145 spins to generate the revenue created by the sale of one album.

This is well below rates paid by Spotify ($0.00437) and Apple Music ($0.00735).

But the real shocker is this:   YouTube  represents 21.7% of all the catalogue streams but only 3.81% of all revenue.  But this also suggests a strategy.   With revenue at 3.81% who needs these guys right?  If labels and artists managed to pull all their tracks from YouTube the worst that would happen is we would lose a mere 3.81% of revenue.  But in exchange we could drive consumers to better paying services like iTunes an Spotify.   It’s possible this strategy could increase overall revenues.

Now comes this press release from Taylor Swift’s label Big Machine:

Big Machine Label Group will soon launch a proprietary digital video platform that gives fans direct access to content featuring the label’s superstar roster of talent.  Big Machine TV (www.BigMachineTV.com) will offer music videos and behind-the-scenes content when it goes live in February, later hosting exclusive interviews, announcements, contests and more. All of the label’s artists, including superstars Taylor Swift, Tim McGraw, Reba, Florida Georgia Line, Rascal Flatts and Thomas Rhett, will have individual channels on the platform that allow viewers to seamlessly search for desired content for an immersive online fan experience.

Holy shit!  Are Swift and company going after YouTube by creating their own video streaming service?   It’s too soon to know whether or not it will be successful, but this is the kind of in-your-face tactic we need to fight back against YouTube.    YouTube has been ruthless towards musicians.  They have fought fair pay for creators on every front: the courts, the congress and even proposed trade agreements.

It’s time we turn the tables on them.

Class Action by Artists Against Distributor For Accountings Under Direct Deal With SiriusXM

As labels cut more and more deals that bypass SoundExchange expect to see more of these lawsuits.

MUSIC • TECHNOLOGY • POLICY

The string trio Time for Three and S’More Entertainment filed a class action yesterday (Jan 17) in New York federal district court against “Defendants Entertainment One GP LLC and Entertainment One U.S. LP, doing business as E1 Entertainment and/or Koch Entertainment LP” for a variety of claims relating to the defendant’s direct deal with SiriusXM.

The class action complaint describes the suit:

4. In violation of the Class Member Contracts, Defendants entered into secret negotiations and agreements with satellite radio provider Sirius XM Radio (“Sirius XM”), for the exploitation of Plaintiffs’ and the Class Members’ intellectual property. Defendants have systematically failed to account for any revenue, or pay any portion of the revenue generated from the exploitation of the Class Members’ Musical Works on Sirius XM under this agreement.

5. Plaintiffs bring this nationwide class action on behalf of themselves and similarly situated Class Members arising from Defendants’ failure to…

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