@davidclowery: Silicon Valley’s Loophole Arbitrage on Display Yet Again with OpenAI

by thetrichordist

No Hits, No Hit Records: The Streaming Mechanicals Poverty Program at the CRB

by Chris Castle

Government intervention into the economy can, and usually does, produce negative externalities (or unanticipated harms). Government interference with price can produce the negative externality of poverty. While we can sue if we are harmed by some negative externalities, we usually can’t sue the government for causing poverty. 

Understanding poverty often considers the government’s interaction with citizens. Do the government’s policies increase poverty or reduce poverty? 

One of those analytical inquiries is whether the government gives the people too much or too little agency in establishing poverty policy. Does poverty policy remember to allow people the ability to have a meaningful effect on their lives and outcomes based on their own efforts and human agency? Or does poverty policy trap them and limit or even take away their agency? 

The Compulsory License as Poverty Program

I can’t think of a better example of the government limiting the outcomes of a class of people than the compulsory mechanical license. Minimum wage tries to influence poverty favorably by establishing a lower bound of fair compensation for employees. Minimum wage policy anticipates that some employers will pay above minimum wage because employees will be able to quit a lower paying job and strive for a higher paying job. 

Employees exercise agency because the government policy does not stop them from doing so and gives them a seat at the table in negotiating their own compensation. Money isn’t the only consideration, but it is a core issue. And employees can walk across the street and get a better paying job. Unlike the minimum wage, the compulsory license places a limit on what the biggest corporations in the world are required to pay a specific class of people–songwriters. 

Neither can I think of a better example of the government working with Big Tech to destroy human agency than the Copyright Royalty Board–which is strangely consistent with Big Tech’s dehumanizing data trafficking business model.

The New Streaming Mechanical Rates

The Copyright Royalty Judges have issued their final ruling on the rates and terms under the government-mandated compulsory license for streaming mechanicals. That ruling is to be published in the Federal Register in the coming days and is based on a settlement among the National Music Publishers Association, Nashville Songwriters International, Amazon, Apple, Google, Pandora, and Spotify.

The CRJs mostly discuss the 20 comments they received on the proposed version of their rule and don’t really spend much time defending why they are adopting the settlement reached by the richest corporations on Earth (and in Earth’s history) on the one hand and–let’s be honest (and we’ll come back to this)–the major publishers on the other hand. The Judges are adopting the deal these parties made essentially because the CRJs can’t find anything unreasonable or illegal about it.

Said another way, the Judges can’t find a reason to take the heat of rejecting it. That’s unfortunate, because they did reject the “frozen mechanicals” settlement as is their role in the Copyright Royalty Board process required by Congress.

I’m not going to argue about the rates and terms of the settlement itself. I could and I know others will, but I’m going to focus on one economic point today: the absence of a cost of living adjustment (or COLA). There are some other points that should also be addressed that are more nuanced and policy oriented which I’ll come to in another post.

It’s important to understand one aspect of the CRB’s procedural nomenclature: Participants and commenters. There is only one individual songwriter who is a participant in Phonorecords IV–a songwriter named George Johnson who represents himself. Being a “participant” means that you are appearing before the Judges as a legal matter. In the case of settlements that the Judges intend to approve and adopt as law, the Judges are required to make those settlements available for public comment which they did. Those comments are posted in the CRB’s docket for the particular proceeding, styled as “Phonorecords IV” in our case today. Note that if the Judges did not make those settlements available, no one who is answerable to the electorate would be involved in the rate setting.

It is important to understand that the voluntary settlement excludes George Johnson from negotiation and drafting of the settlement even though he is a participant. Commenters are also excluded and only find out the terms of the proposed settlement once the Judges post the settlement as a proposed rule and seek public comments.

Unless commenters persuade the Judges to reject a settlement (which MTP reader will recall happened in the “frozen mechanicals” proceeding), this means that the only people who have a meaningful opportunity to affect the outcome are the important people: The National Music Publishers Association, Nashville Songwriters International, Amazon, Apple, Google, Pandora, and Spotify, that is, “Big Tech.”

Nobody else.

It should be noted that the smart money is betting that the next session of Congress will not be a pleasant experience for any of these DSPs based on public statements of a number of Members, including House Judiciary Chairman-select Jordan. It will be easy for songwriters to point to the latest insult in the form of the streaming mechanical ruling as yet another example of that special combination of Big Tech, the compulsory license and the nine most terrifying words in the English language. One novel issue of law at least at the CRB that the Copyright Office may wish to opine on is what happens if one or more participants in a proceeding negotiate an oppressive voluntary agreement but cease to exist when it is put into effect. Just sayin.

But songwriters will be able to point to the poverty-creating externality of the compulsory rate and the human agency-destroying effect of Congress’s Copyright Royalty Board.

The Failure to COLA

As the Judges confirm in the streaming mechanicals ruling, George Johnson and the commenters who opposed the settlement all support some version of a cost of living adjustment applied to the statutory rate. A COLA is the standard government approach to preserving buying power in a number of areas of the economy driven by government intervention including the physical mechanical royalty for the same songs.

However, since the important people did not agree to a COLA as part of their settlement for the streaming mechanical, the Judges evidently believed they were unable to add a COLA in the final rule because it might disturb the “negotiation” by the biggest corporations in commercial history and God know we wouldn’t want to do that. They might get mad and there’s no poverty at Big Tech.

The Judges authority is an issue that one day may be decided in another forum, perhaps even the Supreme Court. I’m not so sure the role of the Judges was to ignore the utility of a COLA and merely scriven into law the deal the lobbyists and lawyers made while ignoring George and all the public comments in this case supporting a COLA.

This is of particular interest because the Judges had just adopted a COLA in Phonorecords IV for physical records and permanent downloads and have adopted COLAs in other compulsory licenses (and have done so for many years). It must be said that one reason there is a COLA in the “Subpart B” proceeding for physical royalties is because the Judges themselves suggested it when they rejected the initial Subpart B settlement. Presumably the Judges could have done the same thing in the streaming mechanicals proceeding despite the tremendous political clout wielded by Big Tech, at least for the moment.

For some reason, the Judges decided not to treat likes alike when it involved the richest corporations on Earth.  This means that the exact same writers with the exact same songs will have the value of the government’s compulsory rate protected by a COLA when exploited on vinyl but not when the exact same song and the exact same writers on the exact same recordings are streamed.

If that’s not arbitrary, I’m looking forward to the explanation. I’m all ears.

Bootstrapping for Rich People

One might think that this unequal treatment wasn’t arbitrary because the Judges are directed by Congress to favor adopting as the law applicable to all songwriters voluntary settlements agreements on rates and terms reached among some or all of the participants in a proceeding like Phonorecords IV. Of course Congress made it so expensive to be a participant in a proceeding (and that negotiation) that it’s likely that if you are both a participant and also a party to any voluntary settlement, you must be one of the rich kids.

What is very interesting about Phonorecords IV is that the proceeding was divided between physical and streaming mechanicals. Although the publisher representatives were the same (NMPA and NSAI), the music users were, of course different: The major labels were in the physical negotiation and the DSPs were in the streaming. Faced with strident opposition from commenters and continued opposition from George Johnson, the major labels came up with a solution that included a COLA and got the publishers to agree. That solution increased the minimum penny rate from 9.1¢ to 12¢ as a base rate with an annual COLA. 

Why this difference between labels and DSPs? Could it be because the labels understand that they are in the age of the songwriter and they need to be certain that songwriters thrive? You know, no hits, no hit records? Could it be because the DSPs are so blinded by leverage, wealth and political power that they and their THIRTY SIX LAWYERS lack this understanding?

The label deal was acceptable to a lot of people, albeit begrudgingly in some cases, but it closed. And the deal was a step toward what I would call the primary goal of government rate setting–stop bullying songwriters with insulting rates while repeating nonsense talking points that nobody in the trenches believes for a second. It should not be forgotten that the label deal also came with a renewed commitment to finding a way toward a longer table with more people at it to negotiate these deals in the future. We’ll see, but the labels should expect to be reminded about this in the future.

But–nothing like this common sense approach to inclusion happened on the streaming side with DSPs. Why not? Probably because the rich kids were calling the shots and did not give a hoot about what the songwriters thought. They used their situational leverage as participants throughout the Phonorecords IV proceeding to jam through an insulting deal no matter how much they embarrassed themselves in the process. The conduct of the DSPs–and did I mention their THIRTY SIX LAWYERS–was the complete opposite of how the major labels conducted themselves.

You may notice that I refer to the DSPs and the labels as calling the shots in these negotiations. There’s a very simple reason for that–the government has put its thumb on the scale because of the compulsory license. Songwriters can’t say “no” (much less “Hell, no”), so are forced to fight a rear guard action because the outcome is predetermined–unless the settling parties do something to change that outcome. To their great credit, the labels did. But to their great–and highly predictable–shame the DSPs–and did I mention their THIRTY SIX LAWYERS–didn’t. The way the government has constructed the CRB procedures songwriters are thrown into the arena to engage in what amounts to slow motion begging and managed decline.

When the Judges’ ruling is subject to legal review, this arbitrary distinction may be difficult to defend and the Judges certainly don’t put much effort into that defense in their ruling. They say, for example:

[T]he Judges observe the broad increases within the Settlement, including the headline percentage rate applicable to Service Revenue, the percentage of Total Content Costs, and each of the fixed per subscriber elements. The Judges find that the structure and increases are a reasonable approach to providing an organic cost of living adjustment.

In other words, the DSPs and the Judges are pushing a “trickle down” approach that a rising tide lifts all boats. They ignore the underlying algebra that is the flaw at the heart of the “big pool” royalty calculation that’s as true for songwriters as it is for artists. The more DSPs keep prices the same and the more songs are added to the big pool denominator, the lower the per-song royalty trends (particularly for estates because the numerator cannot grow by definition). If the rate of change in the denominator is greater than the rate of change in revenue or the number of songs being paid out in the numerator, the Malthusian algebra demands that the per-writer rate declines over time. It may be less obvious in streaming mechanicals due to the mind bending greater of/lesser than formula, TCC, etc., but gravity always wins. 

Why COLA?

There is a common misapprehension of what the COLA is intended to accomplish as well as the government’s compulsory license rate. A COLA is not an increase in value, it is downside protection to preserve value. Stating that the headline rate increases over time so you don’t need a COLA compares apples to oranges and gets a pomegranate. It’s a nonsense statement.

Plus, no element of the Judge’s list of producer supply side inputs have anything to do with cost items relevant to songwriters providing songs to DSPs (or publishers and labels for that matter). The relevant costs for COLA purposes are the components of the Consumer Price Index applicable to songwriters who receive the government’s royalty such as food at home, rent, utilities, gasoline and the like. That’s why you have a COLA–otherwise the real royalty rate declines BOTH because of inflation AND because of the Malthusian algebra. And that creates the negative externality of poverty among songwriters and discourages new people from taking up the craft.

There’s a reason why Big Tech never wants to talk about per-stream rates on either recordings or songs. That’s because if you explained to the average person or Member of Congress what the rates actually were in pennies, the zeros to the right would make it obvious how insulting the entire proposal is to songwriters. 

One of the surest ways to cause poverty is for the government to cap income and destroy human agency. But this is what has happened with the streaming mechanicals. Songwriters are crushed again by Big Tech–and did I mention their THIRTY SIX LAWYERS?

And don’t forget–if no one writes hits, no one has hit records. Eventually, this will become a catalog business and American culture will be impoverished right along side the impoverishment of songwriters.

by thetrichordist

Urgent call to action! Call @SenatorLeahy to Support the American Music Fairness Act (202) 224-4242

We have a chance to make history today––the American Music Fairness Act, our bi-partisan congressional bill, is on the runway to pass but we need the support of just one Senator who is holding it up:

Call @SenatorLeahy and tell him to support The American Music Fairness Act: (202) 224-4242

We don’t ask you to take time out of your day to support legislation very often, but this is one of those times and YOUR CALL MATTERS!

We have all worked together on the #IRespectMusic campaign towards this moment for years, and our moment has finally arrived. Make your voices heard, please call @SenatorLeahy and urge him not to turn his back on American artists in our hour of need!

DID YOU KNOW the USA is the only democratic country in the world where artists don’t get paid for radio airplay? DID YOU KNOW only Iran & North Korea share the USA’s position on this issue? Tell Senator Leahy that it is time to get America off this list!

by Trichordist Editor

@repdarrellissa on #AMFA: The right number is not zero #IRespectMusic

Starting with Frank Sinatra on December 12, 1988–nearly 34 years ago to the day–artists have campaigned for fair treatment in line with the rest of the world and get a performance royalty for broadcast radio. The House Judiciary Committee led by the stalwart Rep. Jerry Nadler moved that goal a little closer this week by passing HR 4130, the American Music Fairness Act, out of committee.

Almost as significant as the vote was the comments by Rep. Jim Jordan and Rep. Darrell Issa (the remaining author of the bill after the wonderful Rep. Ted Deutch announced he would not run for reelection). Given the party change in the House next session, Rep. Jordan is the front runner for Chair of the House Judiciary Committee. He was very clear that the committee will be taking up the bill if it doesn’t pass in the lame duck, because it is time to resave this unfairness. Rep. Darrell Issa summed it up: It is time for bipartisan compromise so that America is not in the same category as North Korea, Cuba and Iran, and whatever the right number is it is not zero. 

This is not where we needed up before on prior versions of the legislation. We are in a much, much better place than before. I would say that’s for two reasons. First, because the legislation itself addresses radio’s objections and makes the NAB’s mean-spirited lobbying tactics ring hollow and cheap. That dog just won’t hunt anymore.

The other reason is because of a superb messaging effort by the MusicFirst Coalition under new management. MusicFirst under Joe Crowley took their job seriously and understood their job to be very simple: We win, they lose. Too often, lobbyists view their job as perpetuating the conflict so the money keeps flowing. You can tell when you are in one of those because the organization doesn’t seem to quite get it that when you have fewer points when the clock runs out, we call that losing. Even in Washington.

Turning this beast around was a tough job and the entire MusicFirst team deserves recognition and appreciation. We’re not done–there may still be some magic tricks left in this session. But as Congressmen Jordan and Issa said, if the bill doesn’t pass this session, they are committed to taking it up early next session and getting it passed in the House.

Godspeed to everyone who has worked so hard for so long to make this a reality for all of our artists and musicians who need it. It’s what Frank would do.

by Trichordist Editor

Artist Rights Symposium III at @TerryCollege at UGA, Keynote by @MMercuriadis of @HipgnosisSongs

We’re back! David Lowery hosted the third annual Artist Rights Symposium at the University of Georgia’s Terry College in Athens on November 15 as an in-person event. The Symposium is an all-day event that allows students in the Music Business program to participate and interact with panelists as part of the music business program.

Our keynote speaker was the inspiring Merck Mercuriadis, long time songwriter advocate, manager and music industry veteran who founded and runs the Hipgnosis Songs Fund. Merck is an active songwriter advocate around the world, particularly with the recent inquiry into the music streaming economy by the UK Parliament’s Digital Culture Media & Sport Committee and the UK Competition and Markets Authority. As Kristin Robinson reported on Billboard

Merck explained why he feels the industry is in the “age of the songwriter.” “There has been a massive paradigm shift,” he said. “Forty years ago, the power was in the artist brand,” but now, most songs that top the Billboard charts are written by a larger number of songwriters than ever, meaning the demand has never been higher for good hitmakers. “But songwriters have to have a place at the negotiating table now,” he said, citing that in the United States, rates for mechanicals are set by the government’s Copyright Royalty Board, barring “free market” negotiations. “Let’s face it, [the government controlling rates] is insulting to songwriters.”

This year’s symposium topic was “The Future of Authorship and the US Copyright Office” and Merck and the stellar panelists had a lot to say about the many advocacy issues facing contemporary songwriters.

Fortunately, thanks to Terry College the symposium is available on YouTube at no charge and you can watch it in its entirety.

Welcome/Opening remarks

9:00 AM -9:10 AM David Barbe, Director, Terry College Music Business Program

Georgia Legislative Overview and Agenda 9:10 AM- 9:30 AM

Panel 1: Libraries vs Authors: The Internet Archive’s “Controlled Digital Lending” and Fair Renumeration for Authors. 9:35 AM- 10:50 AM

Panelists

Janice Pilch.  Rutgers University
John Degen:  Writer, Head of Writers Union Canada.
Stephen Carlisle: Copyright Officer Nova Southeastern University,Florida
Mary Rasenberger, CEO, Authors Guild and Authors Guild Foundation.

Panel 2 Managing a longer Table at the Copyright Royalty Board 11:10 AM to 12:25 PM

Dr. David C. Lowery Moderator
Rick Carnes, Songwriters Guild of America
David Turner, Penny Fractions, SoundCloud
Crispin Hunt, Songwriter, Ivors Academy, #BrokenRecord

Lunch and Fireside Chat with Merck Mercuriadis 12:45– 2:00 PM

Panel 3 #DoubleStat: The Future of Compulsory Rates 2:20 PM – 03:35 PM

Chris Castle Moderator, Founder Christian L. Castle, Attorneys, Austin and MusicTechPolicy blog
Richard Burgess, CEO of the American Association of Independent Music (A2IM)
Helienne Lindvall, President, European Composers and Songwriters Association
Samantha Schilling, Songtradr, IAFAR

Metadata, Matching and Claiming at the MLC 3:55 – 5:10 PM

Moderator Abby North, North Music Group
Erin McAnally, Artist Rights Alliance
Helienne Lindvall President, European Composers and Songwriters Association
Melanie Santa Rosa, Word Collections, The MLC

Please leave a comment if you have any questions!

by Trichordist Editor

Senator Leahy Says Show Me the Money on the MLC’s Black Box

Readers will recall that the Mechanical Licensing Collective, Inc. aka the MLC, is sitting on a pile of other peoples money (remember that the Mechanical Licensing Collective is the digital music services’ one-of-a-kind joint venture quango mandated by the good folks from Washington who are here to help). We estimate that the MLC has got at least $500 million socked away at City National Bank in Nashville collecting dust–or interest. More on that later. This would include current black box accruing since January 1, 2021 plus $424 million or so in historical black box that was voluntarily paid to the MLC by the DSPs in February 2021–an inexplicably large sum given all the DSP audits over the years. 

And the clock is ticking, tick tock, tick tock.

Readers will also recall that the U.S. Copyright Office is responsible for the operations of the MLC, or as they say in Washington where all the children are above average and no one is responsible for anything, “has oversight” which usually means “gets to blame somebody else” when the fan takes over. And of course the Congress has oversight of the Copyright Office. Every so often, the head of the Copyright Office gets the rare joy of attending an oversight hearing at the Congress which happened recently and resulted in certain follow up “questions for the record” that get answered in writing. 

The MLC and its employees should get one thing straight–they are about to be blamed for some grubby practices when Congress wants you to show them the money. And you will be thrown under the bus, count on it. Just think–you could have stolen the money the old fashioned way. In the dark. But no, you wanted the government to force songwriters to deal with you and you could not stop congratulating yourselves about how smart you were. Well, you wanted it, and now you’ve gotten it.

Senator Patrick Leahy, Chair of the Senate Judiciary Committee, submitted some rather pointed questions about the MLC black box which drew a rather pointed response:

Question: The Mechanical Licensing Collective (MLC), the organization created under the Music Modernization Act to collect mechanical royalties for songwriters and publishers, also has an obligation to identify the owners of musical works that have accrued royalties when the owners are not known. The major publishers who largely control the MLC keep the royalties from unidentified works if the owners cannot be found. Over the past year, the MLC has identified only a tiny fraction of the rightful owners. [You were warned.] The major publishers stand to gain hundreds of millions of dollars from that failure to find rightful owners. We did not intend to create a disincentive for the MLC and major publishers to find the rightful owners of music works.

What can the Copyright Office do to help ensure that the MLC is working to make sure that rightful owners of music works are identified and paid?

Response: The Mechanical Licensing Collective (“MLC”) should make every reasonable effort to ensure that royalties are paid to the rightful owners of musical works. According to the MLC’s first annual report, it has distributed over $420 million under the new blanket license for uses reported in 2021, with a steadily improving match rate reported to be approximately 88% of all royalties. With respect to the historical, pre-2021, unmatched royalties, which were reported to be about $426 million, the annual report says that the MLC recently started distributing those that it has been able to match. It also says that the MLC has begun making associated usage data for historical unmatched royalties available to copyright owners, which will facilitate further claiming and matching. Notably, the MLC plans to wait to process historical unmatched royalties from the Phonorecords III rate period until the Copyright Royalty Judges finalize those rates in the ongoing remand proceeding and digital music providers provide adjusted reports of usage and royalty payments. It is the Office’s understanding that the bulk of historical unmatched royalties come from that period. [More on this PR III issue below]

The Copyright Office has been active on the issue of matching musical works to accurately pay copyright owners. Last year, we issued a report recommending best practices for the MLC to consider to reduce the incidence of unclaimed royalties. The report’s comprehensive recommendations ranged from high-level concepts to detailed suggestions across seven areas: (1) education and outreach; (2) usability of the MLC’s systems, including the public musical works database and claiming portal; (3) data quality; (4) matching practices; (5) holding and distributing unclaimed accrued royalties; (6) measuring success; and (7) transparency. One of the report’s most significant recommendations was that the MLC should hold unclaimed royalties for longer than the statutory minimum period, to maximize its matching efforts and the ability of copyright owners to make claims before any market-share-based distributions are made. We recommended that the MLC should wait to make such distributions of unclaimed royalties based on the evaluation of various objective criteria, like match rates and engagement metrics.

Additionally, the Office and the MLC are each involved in substantial education and outreach efforts to help ensure that publishers and songwriters, especially self-published songwriters, are aware of the Music Modernization Act (“MMA”), understand their rights under the new system, know that they can register their works with the MLC and claim royalties, and know that royalties for unclaimed works will be equitably distributed to known copyright owners.

[Here comes the bus.]. The Office is continuing to engage with the MLC and other industry stakeholders, including digital services and songwriters, to monitor the MLC’s progress as it continues to ramp up operations. While the MLC has not indicated that it plans to make a distribution of unclaimed royalties anytime soon, the Office possesses broad regulatory authority to act if necessary to prevent a premature distribution. The statute requires the MLC to give ninety days’ notice before any distribution. We have previously cautioned that making a premature distribution of unclaimed royalties could jeopardize the continuation of the MLC’s designation. 84 Fed. Reg. 32,274, 32,283 (July 8, 2019) (“[I]f the designated entity were to make unreasonable distributions of unclaimed royalties, that could be grounds for concern and may call into question whether the entity has the ‘administrative and technological capabilities to perform the required functions of the [MLC].’”) (quoting 17 U.S.C. § 115(d)(3)(A)(iii)).

One issue that is not discussed in the QFR or anywhere else for that matter is what is happening to the hundreds of millions that the MLC is sitting on. Remember that the MLC is required to pay a government interest rate on black box, and that interest rate has been steadily increasing this year thanks to the Federal Reserve. That interest payment is presumably covered under the MLC’s administrative assessment and government fees charged to music users for the privilege of using the compulsory blanket license.

But wait–there’s more. According to the MLC’s annual report (at p. 4), the MLC invests the black box according to its internal “Investment Policy” established by its board of directors.

Investment Policy: This policy covers the investment of royalty and assessmentfunds, respectively, and sets forth The MLC’s goals and objectives in establishing policies to implement The MLC’s investment strategy. The anti-comingling policy required by 17 U.S.C. § 115(d)(3)(D)(ix)(I)(cc) is contained in The MLC’s Investment Policy. The Investment Policy was approved by the Board in January 2021.

This raises some interesting points. First and foremost, it is unclear where any trading profits reside. Realize that every CMO is confronted with the decision about what to do with the royalty float and black box, but not every CMO decides to invest these funds in the market. If they do invest the funds, it is generally the case that any trading profits, dividends or interest goes to offset the CMO’s administrative costs that otherwise would be deducted from collected royalties.

However, the MLC’s administrative costs are paid by the users of the blanket license (making the United States, I believe, the only country in history or the world that charges for the use of a statutory license). Therefore, the return on the MLC’s investment of the songwriters’ money would not be used for the same purpose as all the world’s CMOs that follow a similar practice. 

Whether the ROI is returned to songwriters or to the users or retained by the MLC is unclear to me from the MLC’s annual report. It is also unclear as to the authority that the MLC’s board (or the Copyright Office for that matter) would have to put the songwriters’ money at risk in the market, what record keeping is made or required of the investments and ROI, or really much of anything at all, aside from the quoted statement above. 

It is also unclear how, if at all, the MLC distinguishes between ROI on royalty or the administrative assessment. It would make sense for trading profits on received but unspent administrative assessment funds to offset current or future assessments, but it’s not clear if that is done.

Assuming there are any. Profits, that is.

I was hoping that this topic would be addressed in the oversight hearing, but maybe next time.

by theinvisiblestagehand

Trickle-Down Streaming Mechanical Royalties Will be Be Up for Discussion

You may have noticed that a cost of living adjustment for statutory royalties was front and center in the recent (and still ongoing) physical mechanicals rate setting. Unfortunately, the idea of a COLA seems to have disappeared in the streaming mechanicals proceeding.

Note that it’s different music users on the physical mechanicals than on streaming. The physical mechanicals are paid by record companies and streaming mechanicals are paid by some of the biggest corporations in history, namely Amazon, Apple and Google and other wealthy public companies like Spotify and Pandora/SiriusXM. All these companies have market capitalizations greater than the gross national product of some countries. 

You may have also noticed that after years of frozen subscription rates, Apple is the first of the streaming subscription services to raise rates by $1 on several of its services including Apple Music. Tim Ingham is asking if Spotify will follow (you know, one of those price fixing agreements inferred from conduct). Who knows, but what’s interesting about this is the effect it will have on streaming mechanical rates, or more pointedly the effect that the Big Tech cartel would like you to think it will have.

The calculation for streaming mechanicals is absurdly complicated. You do have to wonder which of the genii came up with that one. About the only thing that is certain is that the negotiation of that rate every five years (and judicial appeals occasionally) guarantees employment for lots of lawyers and lobbyists on both sides, although definitely skewed toward Big Tech’s share of the 46 lawyers on the docket.

The streaming rates are so bizarre that the Copyright Royalty Judges seem to have lost trust in the process and have issued two separate orders instructing the participants in the streaming mechanical proceedings to either disclose or “certify” that they have come clean with the Judges as to any side deals that may have artificially lowered the rates–the second order makes for interesting reading.

Unlike the physical mechanical, the settling parties rejected a cost of living adjustment in these historically inflationary times. Why they rejected a COLA is hard to understand aside from the fact that they thought they could get away with it.

One thing that is clear, however, is that any argument that a COLA is not necessary with streaming mechanicals because the rate is theoretically based on increases or decreases in revenue is a particularly insulting form of trickle down gaslighting. 

It must be said that the record company group of music users that pays the physical mechanical rate voluntarily agreed a COLA on their rates that is currently pending approval by the Judges. There really is no excuse for the streaming services to rely on the discredited trickle down theory to pawn off their Rube Goldberg royalty structure on songwriters for streaming mechanicals.

by Trichordist Editor

3rd Annual UGA Artist Rights Symposium: The Future of the Copyright Royalty Board and the Copyright Office

Tomorrow! Live stream 3rd Artist Rights Symposium at @TerryCollege with @MMercuriadis David Lowery, @MusicTechPolicy @richardjburgess @helienne @northmusicgroup Samantha Schilling @crispinhunt @smalldrinkofh20 David Turner @jkdegen Steve Carlisle, Janice Pilch Mary Rassenberger

Livestream tomorrow (Nov 15) at 9am ET at this link https://www.facebook.com/ugambus

by trichordist

Sorry Dave: Breaking Google’s Hold on Government May Be Harder Than You Think

We’ve all been predicting that Google will get broken up by government for any one of a host of reasons. It’s not just songwriters watching the overlawyered lawfare in the Copyright Royalty Board that produces the insulting trickledown royalty structure that you need a team of accountants to understand. Big Tech lawfare is everywhere and it’s even more insidious than you might think. Big Tech spreads their gold around the world to control politicians and conflict lobbyists and lawyers so their combined headlock on laws and markets is hard to comprehend. And then there’s the academics. We’ve been screaming from the rooftops about the censorious Google for years and Google still leads the charge against creators in particular and human decency in general.

Lots of politicians will tell you they want to break up Google and Facebook but will Google and Facebook tell them “I”m sorry Dave, I’m afraid I can’t do that.”

Eamon Javers at CNBC has a story that shows the most recent example of just how difficult it will be to get Google out of the government. Mr. Javers reports “How Google’s former CEO Eric Schmidt helped write A.I. laws in Washington without publicly disclosing investments in A.I. startups”.

Yes, that’s right: Shady Uncle Sugar is back in the news, this time with added corruption and even less transparency than a Google royalty audit. Mr. Javers reports that the crux of Uncle Sugar’s latest grift is that he was appointed by former House Armed Services Committee Chair and Club Raytheon plankowner Mac Thornberry to something called the National Security Commission on Artificial Intelligence. This “commission” is one of those “independent commission” thingys, but this one on AI didn’t exist before Uncle Sugar arrived.

Where the hell did that commission come from? Smells like astroturf to us. A complete fabrication Truman Show-style designed to push Eric Schmidt and Google even deeper into the AI business and the Washington swamp. Remember, Google acknowledges it ran AI research in cooperation with the Chinese government–in China–for years under the leadership of Stanford/Google University Professor Fei Fei Li. Keep an eye on that one.

According to the Commission’s website:

Section 1051 of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (P.L. 115-232) established the National Security Commission on Artificial Intelligence as an independent Commission “to consider the methods and means necessary to advance the development of artificial intelligence, machine learning, and associated technologies to comprehensively address the national security and defense needs of the United States.

And of course, you won’t be surprised to know that China has taken the lead on developing model AI regulations and business practices. Which brings us to Mr. Javers reporting and the National Security Commission on Artificial Intelligence.

We’ll keep poking around on this “commission”, but this entire commission thing smells like a Washington lobbyist (perhaps Shady Uncle Sugar himself) got the government to pay for a study and put the US government’s stamp of approval on its work product. With Sugar running the whole show. Full on astroturf. And remember–the very best astroturf constructs an alternate reality that is controlled by the special interests. Interests don’t get more special than Shady Uncle Sugar who is too special for his shirt and is so special it hurts.

Curiously, right about the time that Uncle Sugar started touting the Commission’s work product, China has some work product of its own along similar lines:

On September 6, 2022, the Shenzhen government passed China’s first local regulation dedicated to boost AI development – Regulations on Promoting artificial Intelligence Industry in Shenzhen Special Economic Zone (the Shenzhen AI Regulation), which will take effect on November 1, 2022.

The Shenzhen AI Regulation aims to promote the AI industry by encouraging governmental organizations to be the forerunners in utilizing related technology and increasing financial support for AI research in the city. It also establishes guidelines for public data sharing to organizations and businesses involved in the sector.

But of course the kicker with the ex-Googler Schmidt brought his own Sugar to the party as Javers tells us:

In short, the commission, which Schmidt soon took charge of as chairman, was tasked with coming up with recommendations for almost every aspect of a vital and emerging [AI] industry. The panel did far more under his leadership. It wrote proposed legislation that later became law and steered billions of dollars of taxpayer funds to industry he helped build — and that he was actively investing in while running the group.

That’s right–if you think the government is going to break up Google, just realize that Google doesn’t want to get broken up because it is all working so well with zero oversight whether they are bamboozling government oversight in Congress or ravaging songwriters at the Copyright Royalty Board. It’s hard to get them out of the government when they are the government. If the Oracle case showed us anything, it showed us that Google’s reach is far and wide. Their special brand of evil knows no boundaries. And we never have gotten an explanation for why Eric Schmidt suddenly left Google.

“Open the pod bay doors” is not going to get it done. We must have an answer when they say “I’m sorry, Dave, I’m afraid I can’t do that.”

by thetrichordist