#FrozenMechanicals Crisis: Comments of @helienne Lindvall, @DavidCLowery and @TheBlakeMorgan to the Copyright Royalty Board

Before the

United States Copyright Royalty Judges
Copyright Royalty Board

Library of Congress

Docket No. 21–CRB–0001–PR
               (2023–2027)

COMMENTS OF HELIENNE LINDVALL, DAVID LOWERY AND BLAKE MORGAN

            Helienne Lindvall, David Lowery and Blake Morgan submit these comments responding to the Copyright Royalty Judges’ notice soliciting comments on whether the Judges should adopt the regulations proposed by the National Music Publishers Association, Nashville Songwriters Association International, Sony Music Entertainment, UMG Recordings, Inc. and Warner Music Group Corp. as the so-called “Subpart B” statutory rates and terms relating to the making and distribution of physical or digital phonorecords of nondramatic musical works that, if adopted by the Judges, would apply to every songwriter in the world whose works are exploited under the U.S. compulsory mechanical license (86 FR 33601).[1]

            We object to the proposed rates and terms for the following reasons and respectfully suggest constructive alternatives.  The gravamen of our objection is that (1) the Subpart B rates have already been frozen since 2006; (2) no evidence has been publicly produced in the Proceeding that justifies or even explains extending the proposed freeze; (3) very large numbers of songwriters of various domiciles around the world do not even know this proceeding is happening and have not appointed any of the parties to act on their behalf or been asked to consent to the purported settlement; (4) physical sales are still a vital part of songwriter revenue; and (5) there are many just alternatives available to the Judges without applying an unjust settlement to the world’s songwriters.

 A.  Statement of Interests.

By way of background, following are short summaries of the commenters’ respective biographies demonstrating their respective significant interests in the subject matter of this proceeding.

            Helienne Lindvall:  Ms. Lindvall is an award-winning professional songwriter, musician and columnist based in London, England. She is Chair of the Songwriter Committee & Board Director, Ivors Academy of Music Creators (formerly British Academy of Songwriters, Composers & Authors BASCA) and chairs the esteemed Ivor Novello Awards. She also is the writer behind  the Guardian music industry columns Behind the Music and Plugged In and has contributed to a variety of publications and broadcasts discussing songwriters’ rights, copyright, and other music industry issues.

            David Lowery:  Mr. Lowery is the founder of the musical groups Cracker and Camper Van Beethoven and a lecturer at the University of Georgia Terry College of Business and is based in Athens, Georgia.  He has testified before Congress on the topic of fair use policy[2]  and is a frequent commentator on copyright policy and artist rights in a variety of outlets, including his blog at TheTrichordist.com.   He has been a class representative in two successful class actions by songwriters against music streaming services.

            Blake Morgan:  Mr. Morgan is a New York-based artist, songwriter, label owner, music publisher, and the leader of the #IRespectMusic campaign[3] which focuses on supporting fair payment for creators across all mediums and platforms including supporting the American Music Fairness Act sponsored by Representatives Deutch and Issa.[4]  Mr. Morgan also lectures on artists’ rights at music, business, and law schools across the United States. 

Helienne Lindvall, David Lowery and Blake Morgan (collectively, the “Writers”) are independent songwriters who own the copyrights to many of their songs. They previously were amici in Google v. Oracle[5] together with the Songwriters Guild of America.  In some instances, they have written songs whose copyrights they have transferred in limited parts and in some cases for limited periods of time to major music publishers.  In other cases, their songs are not owned by major music publishers but are administered by one or more of them, in many cases also for limited periods of time.  In some instances, these transfers were in perpetuity subject to certain statutory or contractual termination rights.  They also have retained the copyrights to many of their songs and are self-administered songwriters with respect to those nondramatic musical works. 

            We thank the Copyright Royalty Judges for inviting the public to comment on the proposed regulations in the docket referenced above (“Proceeding”) and the purported “settlement”[6] that in large part resulted in the Copyright Royalty Board’s proposed regulations.

B.  Objections, Discussion and Solutions

            We appreciate this opportunity to make our views known and hope that our suggestions are helpful to the Judges in trying to solve the frozen mechanicals crisis.  We also appreciate that the Judges seek to do justice and find a fair result given their appointed role of administering the awesome power of the government to compel songwriters to accept all rates and terms of the statutory license.

1.  Lack of Authority to Negotiate for Non-Participants

            As a threshold matter, we think it is important to clarify the source of authority for the purported settlement as set forth in the Motion.  Some play a bit fast and loose with who represents whom in a parade of glittering generalities and hasty generalizations.  The Writers are not members of the Nashville Songwriters Association International and have not authorized NSAI to negotiate any agreement on their behalf, nor would the Writers ever authorize any lobby shop to do so. 

            Neither are the Writers members of the National Music Publishers Association, nor have Writers authorized the NMPA to negotiate any agreement on their behalf.  The NMPA has many members but we seriously doubt that the NMPA has expressly obtained authority from any of its members to negotiate the purported settlement on their behalf, outside of its board of directors.  That authority may give the NMPA employees cover, but is pretty weak sauce as authority for the negotiation of frozen rates to be applied to all the songwriters in the world. 

            We doubt that any other songwriter (outside of the insiders) or that any copyright owner gave consent either, aside from members of the NMPA Board of Directors authorizing employees of the NMPA to accept (or perhaps even propose) frozen rates on behalf of the board.  Neither do we see any evidence that the NMPA or NSAI were appointed a “common agent” by copyright owners to set prices and otherwise negotiate and agree upon the terms and rates under Subpart B.[7]  Therefore, we encourage the Judges to inquire further to determine if an appointment was a necessary condition for settlement or if the majority are claiming a kind of misconstrued authority, perhaps with the best of intentions.  One person’s negotiation strategy is another’s catastrophe.

            We anticipate that the Judges will take that position that the Writers will be “bound” by the purported “settlement” in the Motion among the NMPA (which owns no copyrights), the NSAI (which owns no copyrights), and the major labels (which in theory own no musical work copyrights).  We find it astonishing that entities that do not appear to represent, or to have been appointed a common agent of, all the persons to be bound by the settlement, are still able to use the Copyright Royalty Board to bind nonparties to a settlement.  This seems at best contrary to American constitutional jurisprudence requiring the consent of the governed and at worst destructive of the ends of government. 

            If anyone contests our position that the parties to the settlement had no authority to bind strangers to the deal, let them come forward with a common agent appointment, board minutes, board votes, membership votes, court ruling or other evidence of due process to disclose how this purported settlement described in the Motion was actually approved and which copyright owners authorized the NMPA and NSAI to conclude the agreement on their behalf (and, therefore, which did not). 

            We think that what such disclosure will demonstrate at most is that the respective boards of directors of the two organizations[8] authorized the settlement.  Since neither the organizations nor their respective boards were likely authorized to accept a frozen rate by strangers to that deal, the board members may have merely indicated their own company’s intention to be bound by the settlement.  They likely had no actual authority to do more. 

Even this seems odd.  Each NMPA board member who represents a publisher presumably would be agreeing on their own behalf.  It is unclear what the NSAI board actually approved, since NSAI owns no copyrights and at least some of the songwriter board members are likely signed to publishers, perhaps some or all of the same publishers who were voting on the NMPA board.[9]  Murkiness abounds.  So, if anyone says that their board approval resulted in some kind of “consensus” binding on strangers, that may be something of a misdirection that does not consider the obvious and customary limitations of a board’s authority.  We respectfully ask the Judges to get to the bottom of exactly how this happened by asking for supplemental briefs or such other means as the Judges deem appropriate.

The Writers are in two different groups that fairly are not represented in the Proceeding.  First, Writers are in the very large and global group of songwriters and copyright owners who cannot afford to participate in the Proceeding.  As the Judges are likely aware, yours is very rarified air where only the very rich drive the process but all songwriters must bear the burden of the result.  Songwriters and copyright owners living outside the United States (and even those living outside of Washington, DC)  are essentially prevented from participating at hearings in a far-away capitol although the Judges’ rulings directly affect their works when exploited in America.  This is how process becomes punishment.[10]

            Second, the Writers are in another bucket with some songs still co-published or administered by publishers that may be represented by the NMPA in the settlement—we do not know because individual publishers did not sign the Motion in their own names.  None of those publishers have consulted with the Writers about freezing the statutory royalty rates for yet another five years and essentially granting a reduced rate license without our permission.  Many co-publishing or administration agreements include a restriction on the publisher that prohibits them from granting licenses at less than the statutory rates—songwriters did not consider negotiating an additional restriction that would prohibit the publisher from lobbying to indirectly reduce the rate through freezing the statutory rate and then bootstrapping that agreement to apply to the world through the CRB. Perhaps the CRB will give songwriters a reason to start negotiating a “no frozen rate lobbying” marketing restriction in future deals.

            Respectfully, the Judges should not enable these publishers to do indirectly that which they cannot do directly.  We would ask the Judges to inquire further and opine as to whether such marketing restrictions are at work in the purported settlement as to songwriters or publishers administered by any of the settling publishers.  Since those publishers are not individually parties to the settlement, we have no way of confirming who is in and who is not.

            Regardless, Writers did not authorize anyone to negotiate the frozen rates on their behalf and never would.  If the Judges adopt the proposed settlement without a mechanism to obtain consent of those they govern, such a ruling seems to us to fly in the face of all the fundamental building blocks of democracy and in particular American Constitutional democracy.  Accordingly, Writers reserve the right to challenge any such decision to freeze mechanicals on a number of grounds[11] including due process, equal protection and 5th Amendment takings.

            The parties to the purported settlement would have the Judges believe that because they claim that ‘‘the settlement represents the consensus of buyers and sellers representing the vast majority of the market for ‘mechanical’ rights for Subpart B Configurations”[12] and seem to ask the CRB to accept without question the lack of evidence of the authority to negotiate the settlement in the first place which belies the unelected “consensus.”  It must be said that on the one hand, songwriters are not polled to determine what they want in the way of rates, but on the other hand their number or the number of their works are used to justify frozen rates to argue for a “majority” view (when songwriters were never asked if they want the freeze).  Such “consensus” is chimerical and is, frankly, an equivocation that defies a common definition[13] of the word “consensus” that we find inapt given the current facts and is closer to Kings X.

            The settling parties (presumably the NMPA in this case) would have the Judges apply their private deal to all songwriters throughout the world.  It’s easy to get a faux consensus from “the majority” if you do not invite—and even attack or threaten[14]–those with opposing views.  It illustrates the “tyranny of the majority” that every American high school civics class discusses in the context of governance[15]–even assuming there was a vote of the affected songwriters which there apparently was not.[16] 

Therefore, from the outset the proposed rule is simply not a reasonable basis for setting statutory rates or terms for those not party to the voluntary agreement set forth in the Motion.

            But on a more practical note, we think songwriters will ask what can be done to try to fix the mess the parties have created?  We offer several concrete solutions.

2.  Limit the Settlement to Named Parties to the Agreement or Let Sunlight Shine on the Settlement if Settlement Applies to All Songwriters in the World: 

            We call the Judges’ attention to the record company parties to the settlement.  Note that each of the major labels signed in their own organization names, yet for some reason the publishers did not.  Had they signed in their own names, the symmetry between the two might be obvious due to common ownership at the group level.[17]

The Judges could require that the voluntary settlement apply only to those parties who actually agreed it, rather than trade associations that own no copyrights and likely have limited agency at best.  The Judges could cabin the rates and terms to those parties who are actually signatories to the settlement, directly or indirectly.  The publishers involved could be ordered to step forward for the rationally related purpose of determining who the settlement rate should apply to.  This approach would treat the purported settlement more in the nature of a voluntary license among the parties as is permitted under the Copyright Act.  This cabined approach seems to be consistent with the Act and the proper role of regulatory agencies like the CRB, not to mention the Constitution. 

            If the Judges do not wish to take this approach, the Judges may wish to assure that all songwriters who are affected by their ruling are provided with the full picture of what the deal was that induced the purported settlement.  This approach recognizes that the proposed regulations do nothing to disclose all consideration that was paid in connection with the settlement.  This question has been raised by many interested persons, including Representative Lloyd Doggett in a July 13, 2021 letter[18] to the Librarian of Congress and the Register of Copyrights regarding CRB procedures.

            The settlement expressly refers to undisclosed terms that sound very much like other consideration exchanged and also expressly refers[19] to a side deal or “MOU” between the NMPA and the major labels.[20]  How can the Judges determine, or expect anyone outside the insider group to agree, that the rates and terms set forth in the proposed regulations are fair and reasonable without knowing the full extent of the consideration exchanged?  Therefore, the proposed rule as drafted is simply not a reasonable basis for setting statutory terms or rates for those not party to the voluntary agreement as set forth in the Motion and who are not “in the know” regarding its terms including the terms of the MOU.

3.  Opt In for Independents and Co-Published Songwriters

            We perceive the obvious lack of authority to bind non-parties is a fatal flaw of the proposed settlement.  If true, lack of authority is likely sufficient good cause for the Judges to reject the settlement without even addressing whether the rates and terms meet the willing buyer-willing seller standard required by Congress. 

            We recognize that the Judges may wish to avoid an outright rejection of the purported settlement.  An agreement among the parties is consistent with the goals of a voluntary negotiation.  One remedy might be for the Judges to require the parties to construct an opt-in structure that would only apply to those who affirmatively agree to accept the frozen rate.  There clearly are precedents for implementing an opt-in structure that would allow songwriters and copyright owners to accept the settlement or reject it and negotiate their own arms-length rate as true and unrelated willing sellers to a willing buyer.[21]  If there really is a “consensus,” an opt-in process would simply confirm it in a legally cognizable manner.

            For example, if copyright owner A was party to a co-publishing agreement with publisher X who is represented on the NMPA board, it would be a simple thing to require publisher X to proffer an authorization document permitting the negotiation of the settlement on behalf of copyright owner A.  Failing that proffer, publisher X could put the settlement out for opt-in consent by copyright owner A and those in the same class as copyright owner A.  An opt-in process seems efficient.  Common questions would predominate, the publishers concerned would not be prohibitively numerous, the copyright owners could easily be located based on the billing relationship between them and publisher X and an opt-in structure would no doubt be preferable and less costly than other remedies.

            Alternatively, songwriters or copyright owners could be allowed to opt-out of the settlement by a simple notice by their publisher to them requesting an opt-in, or from them to their publisher opting in or out.  The Judges would, of course, do well to specify the rules for this process and supervise the administration.

            Absent this or similar evidence of authority, there will always be an open question of whether the purported settlement provides a reasonable basis for setting statutory terms or rates which may be answered later down the line in the CRB or other fora.

4.  When the Willing Buyer and Willing Seller Are Effectively the Same Legal Person

            It must be said that we sympathize with the position that the Judges are in of trying to divine a free market rate in America where songwriters have not been free in over 100 years.  In fact, songwriters in America have not been free for so long we could safely say they have never been free in stark contrast to the U.S. economy generally.  Generations of songwriters are held guilty of some long-forgotten and Kafka-esque original sin requiring a degree of government regulation as though songs were hazardous materials.  Regulation that protects monopolists like Google and iHeartMedia from the supposed anticompetitive urges of songwriters who we are asked to believe seek out the closed door of the writer room for one reason–collusion.

            While this willing buyer-willing seller standard makes good sense in the case of webcasting rates[22] or streaming mechanicals where the parties typically are not and are not likely to be related, it is extraordinarily difficult for the Writers to swallow in the case of the parties to the purported settlement—an ancient conflict of interest that was easily predictable on the face of the “Music Modernization Act.”[23]  There is nothing modern about this unitary buyer/seller problem. 

            The major publishers are, of course, owned at the group level by the same companies that own the major labels.  That’s what makes them “major” but that is also what makes them unitary.  Assuming arguendo that the major publishers have obtained the consent of their co-publishers or their administration principals, they would be free to enter into any permitted settlement even with their affiliated record company music users.  But the Motion is hardly a willing buyer-willing seller scenario—the two are essentially the same legal person, or are “unitary.”  Congressman Doggett raised a question about this very issue in his Letter, and we raise it here to the CRB.  We think it deserves a detailed reply from the CRB and will be a key legal precedent going forward under the “new” MMA standard.[24]  All the more reason why the settlement is more suited to a voluntary license among the parties than a rule that applies to all the world.

            The Judges may find the recent report[25] by the UK Parliament’s Digital Culture Media and Sport Committee to be helpful on this point; Ms. Lindvall and the Ivors Academy campaigned for the DCMS Committee’s inquiry. 

            The DCMS Committee called upon the Government to have the UK’s Competition and Markets Authority investigate competition in the recorded music market, particularly the tied song and sound recording markets,[26]  noting that: 

 “With [independent] music publishers…unanimously calling for the value of the song to have parity with the value of the recording [citation omitted], it is conspicuous that the MPA [the UK counterpart to the NMPA] refused to give a definitive perspective on the debate, particularly given that the publishing arms of the three major music groups are counted amongst their members….Whilst the major music groups dominate music publishing, there is little incentive for their music publishing interests to redress the devaluation of the song relative to the recording.[27]

            Accordingly, we do not believe, as discussed more fully below, that the purported settlement agreement in any way approximates fair or reasonable royalty rates and terms, or rates and terms that would have been negotiated in the marketplace between an arms-length willing buyer and a willing seller, i.e., a non-unitary buyer/seller.  Given the position expressed by the DCMS Committee, it’s entirely possible that at least the UK Parliament may wish to resolve the issue in another forum. 

We are open to being persuaded otherwise by the Judges, but it appears that the unitary willing buyer-willing seller will establish a critical precedent going forward.  Therefore, the proposed rule is simply not a reasonable basis in this great moment for setting statutory terms or rates until the application of this standard to related parties is clearly spelled out by the CRB and reviewed.

5.  Vinyl Is a Booming Business

            We ask that the Judges take notice of the multitude of news reports on vinyl sales.[28]  Contrary to the vague assertions by NSAI members outside of the Proceeding about unnamed and undisclosed “industry revenue analysis” when defending their decision to “accept” a frozen rate because they believe that physical is a declining configuration,[29] vinyl sales are, if anything, understated due to the severe inability of supply to keep up with demand.  (Why a rational commercial actor would allow that mismatch to continue to such an egregious extent and to the detriment of artists and songwriters is a whole other question.[30]

            These supply chain problems started well before the pandemic,[31] so please do not allow yourselves to be “gaslighted” into the belief that the problems are caused by the pandemic.  Since the whole point of capitalism is for supply to meet demand, we must assume that this situation will be remedied eventually considering the incredibly strong and nearly vertical demand for vinyl, yet that remedy is slow in coming. 

            While the 2008 coming of Spotify is taken by the press (and Spotify itself) as some sort of celestial arrival of a savior straight out of the Book of Revelation,[32] the data tell a different story about vinyl sales.  For whatever reason of consumer taste, the coming of Spotify was also roughly the beginning of the vinyl boom.  Respectfully, it does not take an economist to read the newspaper—stories of vinyl’s resilience to cannibalization by streaming abound. 

            This upward sales trend is reflected in new survey data as well.  According to a small survey conducted by Artist Rights Watch[33] of self-selected songwriters during the period June-July 2021, approximately 26% of respondents said that, roughly speaking, their songwriting income from physical sales had increased over the last two years, and 32% said they expect their income from physical sales to increase over the next two years.[34]

           

These survey results are consistent with the views expressed by Jeff Gold[35], a music industry veteran, historian and author who has operated the Record Mecca collectibles site for many years.  Rolling Stone profiled Mr. Gold as one of the five “top collectors of high-end music memorabilia.” Mr. Gold told us in an interview[36]:

            “I think the vinyl boom is being driven by a number of factors. First, nostalgia: people like me love the experience of looking at an album cover, putting a vinyl record on the turntable, and traveling back in time. The Record Collector world I live in has expanded as well, with highly collectible records [selling] for much more than ever.

            Second, for younger people I think there is a collectible factor – – they are trying something from a different era, it’s trendy to have a turntable and play vinyl records, and they think maybe this is something they can buy that’ll be worth more later. And that is often the case.

Also, there’s the Record Store Day[37] phenomenon, under pressing records to make instant collectibles.  And to some [vinyl records] are merch[andise] for fans of artists who want to own everything connected to that act.

The market for vinyl has dramatically expanded, and the rare vinyl I sell is more desirable than ever. If I had to guess I would think that the collectible record world will continue to expand, but at some point the fad vinyl buying will begin to ebb. Though I’ve been saying that for a long time and there’s no sign of it.”

            The Artist Rights Watch small survey and recent commentary[38] supports a phenomenon that we respectfully suggest the Judges should explore further before accepting the alleged “consensus” for the purported settlement as fact—a significant number of songwriters appear to find mechanical royalty income from physical sales to be important to them and likely would not accept the terms of the voluntary agreement.  Again, we are not trying to dictate rates and terms to those who find the voluntary agreement to suit their needs; they should have their rates and terms.  But we respectfully ask the Judges not to impose those frozen rates on everyone else without their participation and consent as well as evidence.  What is good for the goose may be anathema to the gander.

            Even if every single one of the current vinyl trends are wrong, even if vinyl stops being a resurgent business and abruptly crashes and burns at some point in the next five years due to supply chain problems or reversals in consumption patterns not currently measurable, even if the NSAI songwriters’ undisclosed sources turn out to be 100% correct, what remains even in the industry-wide and world-wide 1% of revenue projected by the NSAI songwriters is still a significant revenue stream to a large portion of songwriters[39] and even music users.  We will believe the users do not care about physical and digital downloads when the first record company president comes forward and declines 15% of annual billing.

            These assertions and speculations about the future are a fine example of a judgement based on conditional probabilities that does not consider the effect of prior probabilities.  If this sudden crash theory really is part of the majority’s thinking, it does seem that the least they could do is provide the Judges and the public with supporting evidence on the record for their projection (or their guesswork) that so far is entirely absent from the record.

            We do not make an emotional appeal, however.  Sales levels do not change the fact that songs have value that deserves greater economic analysis and justification than a finger in the wind.  As the DCMS Committee observed in their referral to the UK’s competition authorities, there are some unusual forces at work here.  The Motion may well provide greater evidence for such a review albeit inadvertently.

            In the absence of an economic case put on by any party to the voluntary agreement regarding freezing Subpart B rates, we ask that the Judges take notice of the overwhelming amount of public information available to document the importance of vinyl and the error of the fundamental assumptions of the NSAI songwriters which we assume gave voice to certain NMPA members.  We have provided the Judges with a handful of representative articles above.
            While the CRB may have other reasons for continuing to impose the existing frozen mechanical rate on the world’s songwriters for another five years, relying on an unnamed “industry revenue analysis” of imaginary dwindling physical sales without inquiring further when there is ample public evidence to the contrary seems to be an unreasonable and arbitrary basis for setting statutory terms or rates.  In fact, putting your finger in the air and guessing that vinyl sales will reverse course into a nose-dive in the face of overwhelming facts and data to the contrary seems the very definition of arbitrary.

6.  Disclosure Should be Mandatory

            Respectfully, we believe there is a compelling need for the Judges to require the disclosure of both the settlement agreement that established the frozen rates as well as the MOU referenced in the Motion.[40]  It appears from the Motion that there was additional consideration beyond putting a finger in the air and deciding to freeze the rates another five years; yet, that additional consideration is described but not disclosed.  It seems that no copyright owner (other than insiders) can rationally evaluate the purported settlement without knowing all the facts.

            We respectfully call the Judges’ attention to analogous facts in Pandora’s ASCAP and BMI rate court proceedings from 2007.  While dated, the story is good background for understanding the problems that can be unleashed from bootstrapping secret deals into law—in the Pandora case, one could say that it led directly to the Music Modernization Act’s provisions requiring random assignment of rate court judges.  This quote from Billboard[41] is a succinct description of the problem:

Back in 2007-2010, when ASCAP and BMI rate court judges were involved in litigation between DMX and performance rights societies, the judges examined the direct licensing deals DMX cut with publishers. During that process, judges did not review the advances or any of the other aspects of the deal, and only looked at the reduced per-store royalty rate. Consequently, in the case of BMI, this resulted in the per-store negotiated rate falling from $36.36 to a per-location fee of $18.91, much to the chagrin of the publishers, who stayed a part of the PROs’ blanket licenses. The ASCAP rate court returned a similar finding.

             Congressman Doggett also correctly raised this question in his Letter and it is entirely understandable—without disclosure of all consideration, strangers to the settlement are being asked to buy a pig in a poke.

            Accordingly, we ask that you compel the disclosure of all documents, payments and other consideration that changed hands or were promised to change hands in the purported settlement.  This would include any payments outside the four corners of the Motion but related to the purported settlement. In the absence of that disclosure or binding certification that it does not exist, the proposed rule is simply not a reasonable basis for setting statutory terms or rates until the full terms of the purported settlement are disclosed or the settlement is cabined as a voluntary license among the parties. 

7.  Raising the Rates

                 First and foremost, the problem with the CRB adopting the purported settlement as the law of the land is the appearance of the bootstrapping of a private deal among apparently related parties and the controlled opposition into rates and terms that apply to all songwriters in the world.  As Congressman Doggett says in his Letter, these are rates and terms that apply to all songs ever written or that ever may be written.  We know you will agree that the rule making authority of the CRB is a serious and solemn example of the awesome power of the government over unrepresented songwriters. 

                 The potential for this bootstrapping is particularly offensive to songwriters who live outside the United States as evidenced by opposition to the frozen mechanicals from a host of international songwriter groups. 

                 We wish to express our desire for a separate and higher rate from the frozen rate accepted by the parties to the purported settlement.  We recognize the corner that the CRB has been backed into regarding raising the rates that have been frozen for so long that they have been substantially eroded by inflation without even considering the value of songs to the booming vinyl business.  According to the Bureau of Labor Statistics CPI-U calculator[42] (the same index used by the Judges in the recent Web V rate determination), a 9.1¢ rate set in 2006 would be indexed to 12¢ today. We therefore estimate that 9.1¢ in 2006 would have the buying power today of approximately 6¢, less than the 1992 mechanical rate established 29 years ago.[43]   

                 However justified, we are sure that raising the 9.1¢ rate across the board would be met by a great howling and rending of garments by at least some of the parties to the purported settlement.  The easy answer to this issue is one raised by Congressman Doggett in his Letter–limiting the settlement rate to the settling parties and setting a higher rate for non-settling parties, i.e., the inverse of the trick referenced above that was played by DMX on the entire industry and the rate courts.

                 The new minimum statutory rate applied to the non-settling parties could be as simple as a headline rate between a bounded range greater than 9.1¢ and up to 12¢ with the appropriate adjustment for the long-song formula.  That headline rate could then be adjusted for inflation and indexed to the CPI-U for the out-years in a similar manner as the Judges applied in Web V.  Even these rates are excruciatingly low and demonstrate the deep hole that the government imposed on songwriters between 1909 and 1978 when the rate for generations of songwriters was frozen at 2¢ through two World Wars, the Great Depression, a global pandemic, two post-war booms and a moon walk.  Songwriters have been digging out ever since, both in the US and abroad due to America’s long commercial shadow.  The Writers fear that a similar freeze has developed with the Subpart B rates and without meaningful consultation.[44]  While we cannot reasonably ask the CRB to solve all the world’s mistakes, we can ask that the Judges not repeat them.  As Congressman Doggett says, we are concerned that we not misstep.

           Alternatively, the CRB could, after consultation with representative parties opposing the frozen rates such as the Songwriters Guild of America, Ivors Academy, ATX Musicians, the Society of Composers and Lyricists, MusicAnswers, the Screen Composers Guild of Canada, Alliance of Latin American Composers & Authors, Asia-Pacific Music Creators Alliance, Pan-African Composers and Songwriters Alliance, Music Creators North America, the Alliance for Women Film Composers and ECSA appoint a representative for independent songwriters to negotiate with both the major labels and the independent labels on rates applicable to and higher than the rates in the settlement.  Such a consultation in this or another forum would go a long way toward clearing up the due process and equal protection Constitutional issues hanging like a cloud over the current Proceeding.  Obviously, the cost of such negotiation should not be borne by the songwriters or recouped from their royalties.

           Therefore, absent such a ruling by the Judges, the proposed rule is simply not a fair or reasonable basis for setting statutory terms or rates until there are truly representative bodies negotiating on behalf of songwriters and independent copyright owners. 

              Thank you again for this opportunity to express our views on the proposed rule.  We respectfully hope that our comment has provided the Judges with some additional insight into how the proposed rule affects independent songwriters and publishers both in America and around the world, particularly since none of us can afford to participate in the rate setting proceeding itself.  We greatly appreciate the Judges’ willingness to avoid process becoming punishment.

                                                                  Respectfully submitted.

                                                                 Christian L. Castle
                                                                
                                                                 Christian L. Castle, Attorneys
                                                                 9600 Great Hills Trail, Suite 150W
                                                                 Austin, Texas 78759

                                                                 July 26, 2021


                  [1]  We focus in this comment almost entirely on the Subpart B rates applicable to physical carriers under 37 C.F.R. §385.11(a).  We note, however, that there is some apprehension among songwriters that the “music bundle” rate in 37 C.F.R. § 385.11(c) could be twisted in a way to drag Non-Fungible Tokens into the frozen rates.  We doubt that Congress intended to include NFTs in the statutory rates since they did not exist even at the time of the Title I amendment to Section 115.  It would certainly add insult to injury for large sums to change hands for NFTs but songwriters be reduced to their usual meagre gruel in compensation while everyone else enriches themselves from the songs. Clarity on this point would be appreciated.

                  [2] See The Scope of Fair Use: Hearing before the Subcomm. on the Courts, Intellectual Property and the Internet of the H. Comm. on the Judiciary, 113th Cong. (Jan. 28, 2014) (statement of David Lowery)

                  [3] See #IRespectMusic campaign, available at https://www.irespectmusic.org.

                  [4] See Reps. Issa, Deutch Introduce Bill to Ensure Artists Receive Fair Pay for FM/AM Radio Airplay (June 21, 2021) available at https://issa.house.gov/media/press-releases/reps-issa-deutch-introduce-bill-ensure-artists-receive-fair-pay-fmam-radio.

                  [5] Google LLC v. Oracle America, Inc., 593 U.S. ___ (2021), Brief of Amici Curiae Helienne Lindvall, David Lowery, Blake Morgan and the Songwriters Guild of America in support of Respondent (2021) available at https://www.supremecourt.gov/DocketPDF/18/18-956/133298/20200218155210566_18-956%20bsac%20Helienne%20Lindvall%20et%20al–PDFA.pdf.

                  [6] Motion To Adopt Settlement Of Statutory Royalty Rates and Terms For Subpart B Configurations, Docket No. 21-CRB-0001-PR (2023-2027) hereafter the “Motion.”

                  [7] See, e.g., 17 U.S.C. §115(c)(1)(D).

                  [8] We invite the Judges to take notice of the relationships at the board level between the NMPA and the NSAI which is beyond the scope of the comment, but we think the Judges may find very relevant for discussions of negotiating authority and the scope of designation of a common agent.

                  [9] It must be noted that the NMPA board and the NSAI board share members from time to time.

                  [10] We are mindful of the result of the WTO arbitration over the Fairness in Music Licensing Act that found the United States liable for damages in violating the TRIPS Agreement. See WT/DS160/12 (Jan. 15, 2001) available at https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S006.aspx?Query=(@Symbol=%20wt/ds160/*)%20and%20(@Title=%20((arbitration%20under%20article%2021.3)%20and%20((award%20of%20the%20arbitrator)%20or%20(report%20of%20the%20arbitrator))))&Language=ENGLISH&Context=FomerScriptedSearch&languageUIChanged=true#,

                  [11] See, e.g., United States v. Arthrex, Inc., 594 U.S. ____ (2021).

                  [12] Motion at 4.

                  [13]  The Cambridge English Dictionary defines “consensus” as either a “generally accepted opinion” or a “wide agreement,” neither of which apply to frozen mechanicals.

                  [14] Paul Resnikoff, AMLC Board Member Accuses NMPA President David Israelite of Tortious Business Interference and Collusion, Digital Music News (Nov. 28, 2018) available at https://www.digitalmusicnews.com/2018/11/28/amlc-nmpa-president-david-israelite-collusion/

                  [15] Thomas Jefferson, First Inaugural Address (1801) (“All too will bear in mind this sacred principle, that though the will of the majority is in all cases to prevail, that will, to be rightful, must be reasonable; that the minority possess their equal rights, which equal laws must protect, and to violate would be oppression.”)(emphasis added); James Madison, Federalist Papers 10 and 51.  John Locke, Second Treatise of Government (1689) at par. 95 (“[N]o one can be put out of [his property], and subjected to the political power of another, without his own consent.”)

            [16] The tradition of concern with the familiar “tyranny of the majority” sounds in discussions of representative government, the concern being that the majority that gives a representative quorum in a body also could lead to disastrous consequences for the minority.  This is particularly true when the governed have rules imposed on them that they had no part in crafting by persons they had no part in electing.  Washington expressed it well and highlights the very point before this Court today:  “To be fearful of vesting Congress, constituted as that body is, with ample authorities for national purposes, appears to me the very climax of popular absurdity and madness. Could Congress exert them for the detriment of the public without injuring themselves in an equal or greater proportion? Are not their interests inseparably connected with those of their constituents? By the rotation of appointment must they not mingle frequently with the mass of citizens? Is it not rather to be apprehended, if they were possessed of the power before described, that the individual members would be induced to use them, on many occasions, very timidly and inefficaciously for fear of losing their popularity and future election?”  George Washington, “To John Jay,” August 15, 1786, The Papers of George Washington, “Confederation Series,” Vol. 4 (1976) at 212–13 (emphasis added).  If the truth is as we apprehend it, that a dedicated group of essentially unelected likeminded people known for extracting vengeance from anyone who dares question them got in a private room at a private meeting and decided the fate of the world’s songwriters was their unelected remit, then this is not even a vote fulfilling the tyranny of the majority because there was no vote and there was no majority—just tyranny.  de Tocqueville admonishes that “[t]he despotism of faction is not less to be dreaded than the despotism of an individual.”  Alexis de Tocqueville, Democracy in America, Vol. 2, Ch. XIV (1840) at 289.

                  [17] This is particularly relevant in the case of a songwriter who has entered one of the various publishing, co-publishing or administration agreements commonly in use in the music business.  If publisher X intends to be bound by the settlement, yet does not act under its own name in the settlement, songwriters “signed” to publisher X have no way of knowing if they are to be bound.  While certain relationships can be inferred, it seems that there should be clarity regarding the parties to such a watershed agreement.

                  [18] Letter from Hon. Lloyd Doggett to Librarian of Congress Dr. Carla Hayden and Register of Copyrights Shira Perlmutter (July 13, 2021), available at https://thetrichordist.files.wordpress.com/2021/07/letter-library-of-congress-register-of-copyrights-7.13.21.pdf hereafter “Letter”.

                  [19] “Concurrent with the settlement, the Joint Record Company Participants and NMPA have separately entered into a memorandum of understanding addressing certain negotiated licensing processes and late fee waivers.” Motion at 3.

            [20] The “MOU” description and “late fee waiver” reference brings to mind another late fee “MOU” being the NMPA Late Fee Program available at http://www.nmpalatefeesettlement.com/mou2/index.php.  If this MOU is a version of that MOU, it could be a substantial sum.  (“The Record Companies have represented there is approximately $275 million in “pending and unmatched” accrued royalties (the “P&U Royalties”) that have not been distributed to the music publishers. In exchange for waivers of certain late fees through 2012, the Record Companies must comply with the provisions of the MOU, including paying participating music publishers and foreign societies their respective market share of accrued P&U Royalties.”  Available at http://www.nmpalatefeesettlement.com/group_1/summary.pdf)

                  [21] For example, see the Songclaims.com portal used to implement the Spotify class action settlement.

                  [22] 17 U.S.C. §§ 112, 114(d)(2).

                 [23] 17 U.S.C. §§ 115(b)(1) and (3).

                  [24] It is worth noting that we have been unable to find any reference to the unitary buyer/seller in any of the public comments or legislative history regarding the Music Modernization Act.  In fact, the NMPA’s “pitch sheet” entitled Music Modernization Act (MMA): Bringing Songwriters into the Digital Age (Dec. 28, 2017) states that the new MMA rate standard establishes “[r]ates based on what a willing buyer and a willing seller would agree to reflect market negotiations” in contrast to the 801(b) standard that resulted in “below-market rates.”

                  [25] Digital Culture Media and Sport Committee, Economics of Music Streaming (Second Report of Session 2021-22), UK Parliament (July 15, 2021) available at https://committees.parliament.uk/publications/6739/documents/71977/default/.

                  [26] Id. at 3 and 105.

                  [27] Id. at 71 (emphasis added).

                  [28] Tina Benitez-Eves, Vinyl Record Sales up 108.2% in First Half of 2021, American Songwriter (July 16, 2021) (“For the past 15 years, vinyl record sales have seen consecutive growth, despite the continued uptick of digital consumption in the U.S. and drop in sales and backup in production due to the pandemic.”)  available at https://americansongwriter.com/vinyl-record-sales-up-108-2-in-first-half-of-2021/;  Sarah Whitten, Music Fans Pushed Sales of Vinyl Albums Higher, Outpacing CDs, Even As Pandemic Sidelined Stadium Tours, CNBC (July 14, 2021) (“Music consumption in the first half of the year has remained robust even without the sold-out stadium tours, according to a new report. While on-demand audio streaming is up 15%, consumers are also looking to own more tangible collectibles like vinyl albums, which continue to surpass CD sales. In the first six months of 2021, 19.2 million vinyl albums were sold, outpacing CD volume of 18.9 million, according to MRC Data, an analytics firm that specializes in collecting data from the entertainment and music industries.”) available at https://www.msn.com/en-us/entertainment/news/music-fans-pushed-sales-of-vinyl-albums-higher-outpacing-cds-even-as-pandemic-sidelined-stadium-tours/ar-AAM6S31; Ed Christman, Audio Streams Up 15%, Vinyl Sales Double in First Half of 2021, Billboard (July 15, 2021) (“Vinyl sales, which have grown for the past decade, more than doubled between January and June, up 108.2% to 19.2 million from 9.2 million in the first six months of last year. Even CD sales, which have been steadily and precipitously declining, posted a modest 2.2% gain, to 18.9 million units. The only serious loss was in digital sales: Album downloads fell 26.8%, to 12.92 million, while track sales dropped 20.3%, to 101.8 million. But physical sales rose so much that, for the first time in years, total album sales rose, by 12.6% to 51.26 million.”) available at https://www.msn.com/en-us/music/news/audio-streams-up-15-vinyl-sales-double-in-first-half-of-2021/ar-AAM9Sk7); Sam Willings, Sainsbury’s Supermarket Will Stop Selling CDs, Sale of Vinyl Records Will Continue (July 13, 2021) (“A spokesperson for the British Phonographic Industry (BPI) told the BBC that “The CD has proved exceptionally successful for nearly 40 years and remains a format of choice for many music fans who value sound quality, convenience and collectability.”  They continued: “Although demand has been following a long-term trend as consumers increasingly transition to streaming, resilient demand is likely to continue for many years, enhanced by special editions and other collectable releases.”) available at https://www.musictech.net/news/sainsburys-supermarket-will-stop-selling-cds-sale-of-vinyl-records-to-continue/; Andre Paine, Record Store Day set to deliver another summer boost for vinyl sales, Music Week (July 15, 2021)(“ Participating shops will be expecting queues from the early hours as fans and record collectors seek out rare and exclusive vinyl titles being released especially for the day.”) available at https://www.musicweek.com/labels/read/record-store-day-set-to-deliver-another-summer-boost-for-vinyl-sales/083710; Sage Anderson, Barnes & Noble ‘Vinyl Weekend’ Launches With Grateful Dead, Fleetwood Mac Exclusives, Rolling Stone (July 15, 2021)(“Barnes & Noble may be known for their cozy bookstores and massive collective of great reads across all genres, but the retailer has also just announced the return of their fan-favorite “Vinyl Weekend,” which offers dozens of limited-edition records and exclusive in-store and online specials.”) available at https://www.rollingstone.com/product-recommendations/lifestyle/barnes-and-noble-vinyl-turntable-sale-1197904/. 

                  [29] L.B. Cantrell, NSAI Songwriters Respond to Criticism of Decision not to Challenge Physical Mechanical Rates, Music Row (June 2, 2021)(“Based on industry revenue analysis, it is anticipated that physical mechanical royalties will amount to less than 1% of the total mechanical royalty revenue in the United States during 2023-2028, the rate period this CRB proceeding covers.”) available at https://musicrow.com/2021/06/nsai-songwriters-respond-to-criticism-of-decision-not-to-challenge-physical-royalty-rates/.

                  [30] Erin Osman, “It’s a Total Nightmare”: Problems at Direct Shot Distributing Has Made New Vinyl and CDs Scarce, Billboard (Dec. 18, 2019) (“Since April, record stores and labels have been plagued by a distribution bottleneck that began when Warner Music Group moved its physical product to Direct Shot Distributing (DSD). The change made DSD, which also has contracts with Universal and Sony, one of the largest distributors of physical music in the country. The problem became apparent on April 13 — Record Store Day, the busiest and most profitable day of the year for many retailers — when some stores didn’t receive the exclusive releases they had ordered. Since then, the problem has gotten worse.”), available at https://www.billboard.com/articles/business/8546794/direct-shot-distributing-problems-vinyl-cds-physical-product.

                  [31] Allison Hussey, A Major Music Distributor Has Stifled Vinyl Sales for Record Stores and Indie Distributors, Sources Say, Pitchfork (Dec. 19, 2019) available at https://pitchfork.com/thepitch/a-major-music-distributor-has-stifled-vinyl-sales-for-record-stores-and-indie-labels-sources-say/.

                  [32] David Rowan, Daniel Ek: Europe’s Greatest Digital Influencer Tops Wired 100, Wired (May 16, 2014) available at https://www.wired.co.uk/article/wired-100-daniel-ek.

                  [33] “Thriving on scorn from the establishment since 2015”, http://www.artistrightswatch.com               

[34] Artist Rights Watch, Songwriter Mechanical Royalty Income Questionnaire June-July 2021 to be made available at http://www.artistrightswatch.com and results available from the commenters (N=54).

                  [35] https://recordmecca.com/about/

                  [36] Available from the authors.

                  [37] See, e.g., https://recordstoreday.com

                  [38] See, e.g., Artist Rights Watch Podcast Episode 1 “Frozen Mechanicals” available at https://podcasts.apple.com/us/podcast/the-artist-rights-watch/id1574250584; The Trichordist.com “frozen mechanicals” category https://thetrichordist.com/category/frozen-mechanicals/

                  [39] We are likewise unaware of any provision of the Copyright Act or regulations promulgated there under that provides for a sales-based determination of any particular rate.  Such an argument appears to be exactly what underlies the NMPA and NSAI acquiescence to frozen rates but it simply is not the law that the fewer phonorecords sold the lower the royalty rate that the CRB may set.

                  [40] There may be other side agreements that are not disclosed in the Motion.

                  [41] Ed Christman, Less Could Be More:  Why Merlin’s Deal with Pandora May Pay Off, Billboard (Dec. 11, 2014) (emphasis added).

                  [42] U.S. Bureau of Labor Statistics, CPI Inflation Calculator available at https://www.bls.gov/data/inflation_calculator.htm.

                  [43] The minimum statutory royalty rate in effect during the 1992-93 period was 6.25¢.  U.S. Copyright Office, Mechanical License Royalty Rates (Sept. 2018) available at https://www.copyright.gov/licensing/m200a.pdf.

                  [44] Respectfully, the Congress missed an opportunity to strike a blow for fairness in the Copyright Act of 1976 when it failed to index the 2¢ rate retroactively and instead treated a 70-year wage and price control as thought there were nothing to see here.  Had Congress indexed the rate retroactively and then increased the rate prospectively based on value and indexed to inflation, songwriters would be exponentially better off.  When songwriters complain to the CRB that they struggle to make a living, it is this decades long dark hole of the 2¢ rate freeze that is a major contributing factor and apparently punishment for some long-forgotten original sin.  While the CRB is not tasked to fix all the songwriters’ financial woes, an argument could be made that it is at least partly responsible for fixing the ones cause by the government or at least not making it any worse by taking actions such as freezing mechanical royalty rates for twenty years.

#FrozenMechanical Crisis: @RosanneCash’s Must-Read Comment to Copyright Royalty Board

[Rosanne Cash brings a heartfelt and vitally important songwriter’s perspective to the Copyright Royalty Board’s public comments on the frozen mechanical rulemaking. Download and share her comment at this link.]

Rosanne Cash

New York, NY

Copyright Royalty Judge David R. Strickler
Chief Copyright Royalty Judge Jesse M. Feder
Copyright Royalty Judge Steven Ruwe

US Copyright Royalty Board
101 Independence Avenue S.E.
Washington, DC 20024

Your Honors:

Electronically Filed

Docket: 21-CRB-0001-PR (2023-2027) Filing Date: 08/02/2021 03:16:26 PM EDT

I welcome this opportunity to comment on the review of rates and terms for royalties for songwriters. Songwriting is an honorable profession, and a lifelong vocation with the same discipline, attention to detail, and devotion to craft as every other creative pursuit which elevates our humanity and expresses our deepest feelings. ‘It all begins with a song’, as a recent documentary about songwriters was titled.

I am a guest teacher in music and writing departments at various universities around the country— Yale, NYU, University of Iowa, University of Pennsylvania, and more, as well as a songwriter for forty-plus years. I’m enormously grateful for the gift of being able to weave poetry and stories into melodies, and have applied a rigorous discipline to better myself in my work over the decades. The intensity of purpose and willingness to work hard which I see in young songwriters when I hold writing workshops is heartwarming, and often heartbreaking, because I know so few of them will actually ‘make it’ in the music business.

One of the most reliable ways a songwriter can still make a minimum-to-decent wage is through mechanical royalties from sales of songs— both download and physical purchases— but the small percentage of these sales going to songwriters has not been raised or even been adjusted for inflation since the rate was set 15 years ago. Vinyl sales are increasing— which is wonderful news for creators. Young music consumers are newly enamored of vinyl records. They want something they can own, and hold in their hands. They want to read liner notes and pull out the inserts and see who the musicians are, and who wrote the songs, and read the lyrics. I am by no means a young or new artist, but even my audience is slowly turning back to vinyl, as partly evidenced by the number of vinyl records I sign after each show.

There are many things that need to be changed to support the creative class and show writers and artists that they are valued members of society, and that they deserve to be paid for their work as much as any other professional who provides service— and we are indeed a service industry, albeit one for the heart and soul.

One easy change is to release songwriters from a 20 year freeze-out (to use a term from songwriter Bruce Springsteen, who, by the way, is doing fine financially, but I assume would want young songwriters coming up behind him to also do fine), to increase the rate, and adjust for inflation.

I value the next generation of songwriters deeply, and I don’t want to see an entire population give up their passion and their chosen vocation, because they can’t pay the rent. I am also fine financially (not as fine as Bruce or Beyonce, but who is?) but there are many, many struggling songwriters who critically depend on a fair rate for physical sales.

The need for fair pay in regards mechanical royalties from sales of songs is more dire because of the lack of fairness in compensation from streaming services. Streaming services are not in the music business. They are in the tech business, and they have built multi-billion dollar profit machines on the back of songwriters and musicians whom they use as loss-leader content. Again, a modicum of equity and fairness could be created for songwriters in a place that can be controlled by setting a fair rate, adjusted for inflation. It’s only a beginning in our determination to protect and value the creative population, but it’s a very real-world, common sense step, and I hope you consider who is behind the music that sustains, nurtures, and uplifts you in your lives, and adjust this critical royalty rate.

It all begins with a song.

Respectfully,

Rosanne Cash

Songwriter
Board member, Artist Rights Alliance

New York City August 1, 2021

#FrozenMechanicals Crisis: Comments to CRB by Twelve International Songwriter Groups Opposing Frozen Mechanicals Part 2

[Editor Charlie sez: This post demonstrates that no single songwriter group–including NSAI–speaks for every songwriter in the world and that songwriters around the world do not want their incomes smashed. So that’s a bit of a pickle.]

Part 2 of 2 parts, read part 1 here.

COPYRIGHT ROYALTY BOARD (CRB)

In re DOCKET NO. 21-CRB-0001-PR-(2023-2027)

Making and Distributing Phonorecords (Phonorecords IV)

Notice of Proposed Rulemaking re: 37 C.F.R. Part 385 Subpart B

Comments Submitted by the Songwriters Guild of America, Inc.,  the Society of Composers & Lyricists, Music Creators North America, and the individual music creators Rick Carnes and Ashley Irwin

These Comments Are Endorsed by the Following Music Creator Organizations:

Alliance for Women Film Composers (AWFC). https://theawfc.com

Alliance of Latin American Composers & Authors (AlcaMusica) https://www.alcamusica.org

Asia-Pacific Music Creators Alliance (APMA), https://apmaciam.wixsite.com/home/news

European Composers and Songwriters Alliance (ECSA), https://composeralliance.org

The Ivors Academy (IVORS), https://ivorsacademy.com 

Music Answers (M.A.), https://www.musicanswers.org

Pan-African Composers and Songwriters Alliance (PACSA), http://www.pacsa.org

Screen Composers Guild of Canada (SCGC), https://screencomposers.ca

Songwriters Association of Canada (SAC), http://www.songwriters.ca

[Continued from Part 1]

IV. Discussion of Objections By Independent Music Creators


A. The Willing Buyer-Willing Seller Standard and the Conflicts of Interest Inherent in the Present Settlement Negotiation Process

In evaluating whether the terms of the settlement proposal set forth in the May 25 Motion to Adopt “provide a reasonable basis for setting statutory terms or rates,” the US Copyright Act establishes a blueprint in §115(c)(1)(F) for determining the reasonability and adequacy of any such proposed, industry-wide agreement:   

The Copyright Royalty Judges shall establish rates and terms that most clearly represent the rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller(emphasis added).

The US Treasury Department provides further insight into the “willing buyer-willing seller” construct in the Code of Federal Regulations:[21]

Valuation of Property; in general:  The value of the property is the price at which such property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell, and both having reasonable knowledge of relevant facts (emphasis added).

Thus, while under certain circumstances the US Copyright Act provides that private agreements and licenses may be entered into between copyright owners and prospective users that apply various other indicia and metrics to gauge the advisability of one particular royalty rate over another, that latitude does not exist in regard to proposals for the adoption of industry-wide settlements by the CRB “binding on all copyright owners of musical works” per §801(b)(7)(A).

The circumstances under which the settlement negotiations were conducted that produced the proposed royalty rate freeze set forth in the May 25 Motion to Adopt can be fairly characterized  –under the above standards– as being exactly the opposite of what both Congress and the Executive Branch have in mind in defining “reasonability” under the “willing seller-willing buyer” formula.  Rather than arm’s length negotiations between parties on opposites sides of the table, the referenced discussions that produced the settlement agreement instead seem to have taken place solely among vertically integrated parties and their trade association agents, apparently with little or no input from independent music creators and copyright owners[22] upon whom “those rates and terms [will be] binding.”

More to the point, the corporate parties participating in such settlement discussions could by definition plausibly have been compromised by the conflicts of interest inherent in the fact that the corporate overseers of each major label participating in the “negotiation” likewise control the affiliated music publishers of each such label.  UMG is not only one of the three largest record labels in the world, it also is one of the world’s three largest music publisher owners of copyrights in musical compositions, with both UMG entities reporting to the same corporate ownership (Vivendi, Inc. of France).[23]  The same holds true for both WMG (in regard to the multinational corporation Access Industries headquartered in New York)[24] and SME (in regard to the Sony Corporation of Japan).[25]  

Together, these three international conglomerates control close to 70% of the market for sound recordings and musical compositions in the world.[26]  All three represent both sides in any Subpart B mechanical royalty rate discussions, rendering the concept of “willing buyer-willing seller” almost farcical in relation to fashioning a fair proposal to the CRB.  Simply put, in this case, the buyers are the sellers (and the prospective licensors are the prospective licensees). 


NMPA’s role in these negotiations was, and is, as the trade association for music publishers operating in the US, including the above-mentioned major music publishing firms that serve as their most powerful and influential board members by far– and who answer to the same owners as those against whom they and NMPA are allegedly negotiating.  It is unclear what level of input independent music publishers were enabled to exercise in the negotiations, including those with representatives on the board of the trade association.  

In regard to NSAI, its demonstrably uniform alignment with NMPA on a broad array of music industry issues over recent years has in our view appeared so unwavering as to approach potential inseparability.  As a result, we believe we are correct to be concerned that the organization cannot be said in this instance to represent music creator rights and interests in an independent, unbiased manner.  In an informal survey conducted by the well-respected music industry publication Trichordist, to our knowledge not a single music creator entity (either organizational or individual) responded that it intended to join NSAI and its narrow membership in support of the “royalty freeze” proposal.[27]  Organizations and individuals representing hundreds of thousands of songwriters, composers and lyricists, on the other hand, have publicly voiced objection to the proposed royalty rate freeze. 

Based upon these facts and circumstances alone, the settlement agreement produced by the Settling Parties can in no way be considered to have been fashioned upon “willing buyer-willing seller” principles.  As such, respectfully, it should not be relied upon as the basis for a conclusion by the CRB that the proposed settlement “[provides] a reasonable basis for setting statutory terms or rates,” per §801(b)(7)(A) of the Copyright Act and otherwise.

B. Lack of Transparency in the Negotiating and Settlement Process

As previously noted, the Independent Music Creator Community remains additionally concerned over the general lack of transparency that has marked the entire process described above.  We are especially disquieted by the unexplained contents of a “separate Memorandum of Understanding addressing certain related issues” referenced in the March 2 Notice as having been negotiated among the three major labels and publishers and NMPA, with the conspicuous absence of NSAI. 

Has such an MOU been presented to the CRB for approval or adoption?  Has it been seen by NSAI?  Is NSAI endorsing it?  These are important, additional details and questions that require comprehensive answers to complete a full evaluation of any settlement alleged to be reasonable and based upon “willing buyer-willing seller” principles.

Further on the issue of transparency, we also are compelled to raise the issue of NSAI’s public statements purportedly made to explain its support for a five-year continuation of the Subpart B royalty rate freeze. These statements give insight into the level of factual distortion that may have been foisted upon NSAI during negotiations, and that may have hampered it in evaluating the advisability of the settlement, as discussed below.

C. Misleading Mechanical Royalty Statistics

In an open letter to its “Fellow Songwriters and Composers” published by NSAI on or about June 2, 2021,[28] the organization presented the following analysis of its position in favor of continuing the Subpart B royalty freeze:

Based on industry revenue analysis, it is anticipated that physical mechanical royalties will amount to less than 1% of the total mechanical royalty revenue in the United States during 2023-2028, the rate period this CRB proceeding covers [sic]. History and experience told us not to create a powerful opponent when there is a strong possibility of losing with little to gain. So, we decided to focus on the digital streaming services and streaming rates during the next trial. While 1% of revenue is meaningful, waging war was not worth the risk, especially since the rate may have been lowered!

The statistics presented by NSAI in its statement are patently misleading and/or incorrect, contradicted by data published by the principle trade association of US recording companies, the Recording Industry Association of America (RIAA) (a participating party in the Phonorecords IV proceeding).  According to the RIAA’s Year-End 2020 Revenue Report,[29] the record industry’s total US revenues in both 2019 and 2020 from the combined categories of physical phonorecords and permanent downloads surpassed $1 billion in each of those years, correlating on a percentage basis to 14.3% of total revenues in 2020 and 17% of total revenues in 2019:

RIAA US RECORDING REVENUES (rounded)     2020                                        2019

VINYL                                                                      $620M (5.1%)                        $480M (4.3%)

CDs                                                                         $483M (4.0%)                        $631M (5.7%)

DOWNLOADED ALBUMS                                     $320M (2.6%)                        $369M (3.3%)

DOWNLOADED SINGLES                                      $312M (2.6%)                        $408M (3.7%)

TOTAL PERCENTAGES                                            14.3%                                      17.0%

The data published by the International Federation of the Phonographic Industry (IFPI) for 2020 regarding global recorded music revenues is even more starkly indicative of the continuing statistical and economic importance of physical phonorecords and permanent downloads.  According to IFPI, those two categories combined for over 25% of total worldwide earnings.[30]

On the basis of these numbers, it would seem a near impossibility for mechanical royalties attributable to physical phonorecords and permanent downloads (projected by NSAI to be less than 1% of US mechanical revenues by 2027) to represent anywhere near such a tiny comparable percentage to total recording revenue in the same categories.  That is especially so when one takes into account the fact that recording revenues from vinyl recordings are actually growing at a substantial rate (a 30% increase in 2020), not diminishing.  In fact, recent reports for the first half of 2021 indicate that this vinyl growth trend is actually accelerating.  Vinyl sales in quarters one and two of 2021 reportedly rose a whopping 108% over the same period in 2020,[31] and demand for vinyl records is outpacing manufacturing capabilities on both a national and global basis.[32] 

Thus, while no one can plausibly argue that “traditional” mechanical uses of music have not shifted significantly toward streaming on demand in the digital age, that is not to say that Subpart B uses in the US are disappearing or anything close to it.  Subpart B mechanical royalty income remains a substantial and continuing revenue source for many music creators and independent music publishers, almost certainly amounting to tens of millions of dollars per year out of the $823.5 million in mechanical royalties NMPA reports are generated annually in the US.[33]  

And make no mistake about it.  Those tens of millions in annual Subpart B revenues are keeping thousands of songwriters and composers financially afloat in an age that continues to be dominated by unlicensed uses of music on the Internet, and far-below market value royalty rates being paid for music streaming.  The freezing of the Subpart B royalty rate starting in 2006 has inarguably caused significant financial harm to creators in an era when they could least afford it. 

One independent music publishing company owner with substantial, practical insight into this issue, recently offered the following observations:

The royalty amount for digital streams is a micro-penny. Unless we are talking about top songwriters with hundreds of millions to billions of streams, there is an excellent chance he or she still may be driving an Uber to support a family.  It literally takes hundreds of streams to equal the 9.1 cent mechanical publishers receive for a physical sale or download.  That’s why the physical and download mechanical rate is so important to independent creators, and especially to those just starting out.

Vinyl sales are still strong among many retailers, including Amazon. CDs remain a significant media format, and many listeners still prefer to ‘own’ rather than temporarily cache the music they listen to.  Major music publishers do not face the same struggles as independent publishers and songwriters. They are part of multi-national conglomerates that own both the major publishers and major record labels. Major publishers that agree to freeze the statutory rate are simply leaving more money in the pockets of the labels that are their sister companies.  We, on the other hand, are trying to preserve the only sources of revenue that we have.  We don’t have another pocket.  That’s why we must fight to be heard.[34]

D. NFTs

On a very much related issue, the emergence of non-fungible tokens (NFTs) and related block chain technologies seem to have been glaringly omitted from the mechanical royalty analysis presented in NSAI’s informal statement and explanations of the proposed Subpart B settlement.   Although the longevity periods of such trends are notoriously difficult to predict, NFTs appear to be forming the basis of new, specialized and mainstream music products and associated downloads. 

As a category of recording industry revenues, NFT estimates for 2020-21 are in the tens of millions of dollars (out of billions of dollars in NFT earnings in all categories during that period so far).[35]  The question of whether this issue was raised in the Phonorecords IV Subpart B settlement negotiations is an important one, on both a conceptual and a financial basis.  Given the wide range of NFT supported consumer products that may be introduced in the near future, it is not a phenomenon that can be prudently ignored in light of its significant potential effects on the future of US and global mechanical royalties.

NFTs, which by definition are regarded as electronic and non-fungible, have since their introduction in the music realm often been bundled with specialty physical product and downloads to increase their total value.  We pose the rhetorical question of whether there shouldn’t be a conversation taking place at the CRB level as to whether an NFT that is purchased for hundreds, thousands or even millions of dollars (as some recently have been), and which includes a bundled, sometimes unique physical sound carrier or download component, shouldn’t produce more than a one-time, 9.1 cent revenue payment for music creators and copyright administrators?  Are these really sales to the public for private use under §115 of the Copyright Act, and what royalty rate should apply to them?   Might a fixed percentage of the sale price realized be a more equitable means of compensating music creators in such situations?    Millions of dollars in songwriter, composer and independent music publisher revenue may be riding on the answers to those questions.  

On a much broader scale, the same holds true for recorded physical products and downloads that are sold to the general public as part of mainstream NFT packages now and in the future.  Some industry analysts are predicting a further, significant resurgence of vinyl sales and downloads predicated on an NFT boom that will drive purchases of products such as artist box sets and other music collections and compilations.  As we stand on the threshold of what might be a new era reliant in important part on NFT music distribution, the extension of a new, five-year freeze on already frozen Subpart B mechanical rates would further exclude the creative community from participation in the real and potential rewards such new technologies are intended to generate.

While the future may not be clear, the fact that these issues deserve full, public airings and careful consideration before the CRB certainly is.  We should not and cannot permit silent acquiescence through privately negotiated, confidential agreements, to control the future of NFT-related mechanical royalties.  Moreover, we cannot help but wonder whether the NFT issue has been relegated to the unknown contents of the Settling Parties’ MOU (at least executed and possibly negotiated without the participation of NSAI), which we expect may be claimed by those same Settling Parties to be subject to non-disclosure requirements (including those set forth in the protective order in place for these proceedings). 

These are issues of serious concern and great financial importance to the independent music creator community.  We urge that they be addressed transparently and publicly as part of the Phonorecords IV Subpart B proceedings.  At the very minimum, it also seems that NFTs should be excluded from the “music bundles” contemplated by Subpart B.

E. Economic Bars to Effective Music Creator Participation

There is one additional, extremely important issue raised by NSAI’s explanatory statement upon which we believe it is essential to comment.  It concerns the financial ability of independent music creators to participate in CRB proceedings, and the severely compromised bargaining positions of music creators when it comes to the negotiation of so-called “industry settlements” under the current CRB rate setting system.

In defending its position in favor of the continuing Subpart B royalty rate freeze in Phonorecords IV, NSAI offered the following observation:

The question songwriters and composers should be asking is why these false critics [apparently referring to all other music creator organizations] did not participate in the trial [sic] themselves. Any of these groups or individuals could have participated, but they did not even try.

That position presents an interesting juxtaposition to this prior assertion made by NSAI within the same published statement:

What these critics are not telling you is that we did fight that battle in 2006, during CRB I, when we asked the Copyright Royalty Board to increase the physical rate, while critics were nowhere to be found.[36]  [footnote added] Instead, after our side spent more than $20 million, the judges kept the rate exactly where it was, at 9.1 cents [emphasis added].

The point made by NSAI about the necessity of huge participatory expenditures goes a long way toward explaining why the only “songwriter group” participating in the Phonorecords IV settlement discussions is NSAI.[37]  Other music creator organizations do not have millions of dollars –or anything close to it– to allow their full participation in CRB proceedings.  Neither, in reality, does NSAI.  In fact, we wonder how NSAI continues to be able to participate in $20 million battles without accepting support from other groups on its “side” whose conflicted goals and actions may be antithetical to songwriter interests, both long and short term.

Much has changed since 2006.  In practice, the prohibitive costs of participating in CRB rate setting proceedings now form a nearly impenetrable barrier to entry for any independent music creator group wishing to participate while maintaining its autonomy. To participate generally means to acquiesce to those music publishing mega-corporations with the funds to remain in control of the negotiation, settlement and/or litigation process, including the conflicted major music publisher affiliates of the major record labels (some of whom purportedly utilize revenues charged back to their songwriters and composers to pay for positions taken before the CRB that are incompatible with those same music creators’ interests—such as the approval of frozen royalty rates). 

Thus has the current Phonorecords IV Subpart B settlement negotiation process continued to move forward without independent music creator input, tainted by the appearance of conflicts of interest created through vertical integration.  Unsurprisingly, the resulting “settlements” now unfairly threaten to harm the ability of music creators to argue successfully for substantial and desperately needed increases in streaming royalty rates. 

In that regard, shortly after the March 2 Notice was filed by the Settling Parties concerning their anticipated agreement to again freeze Subpart B royalty rates in Phonorecords IV, a witness for the music streaming company Pandora in the Phonorecords III Remand proceeding filed testimony citing the March 2 Notice as proof that frozen or diminished streaming royalty rates are similarly needed as a matter of both sound policy and fairness.[38]   

This predictable backfiring of the Settling Parties’ “roll forward” strategy is likely to be the catalyst for many more, baseless claims by other members of the digital distribution community desperately seeking to avoid paying market value streaming royalty rates under the Phonorecord III Remand and the Phonorecord IV proceeding.  That sad eventuality raises even more complex, potential conflict of interest issues concerning past or current cross ownership/investment arrangements between record companies and digital distributors too labyrinthian to detail in these Comments, but worthy of future consideration.  For now, however, we should consider that the ability of a stronger, broader group of independent music creator organizations and representatives to affordably participate in future CRB rate setting proceedings might avoid many of these unfair and counter-productive results.  It is an inquiry that we believe is worth pursuing through the US Copyright Office.

In the meanwhile, to independent music creator organizations such as ours and our colleagues, the choice to officially participate in the Phonorecords IV proceedings (especially regarding the Subpart B settlement negotiations) as second-class citizens on an economically tilted playing field remained no choice at all.  We instead have chosen to rely on the comments process, and our belief in the authority and wisdom of the CRB to ensure that the principles set forth in §§115 and 801 of the US Copyright Act, among others, are diligently applied.

To us, the events of 2006 occurred too long ago to be used as a pretext not to fight now for higher, more equitable Subpart B mechanical royalty rates, which in the interim have been devalued by a third simply due to inflation, inflicting significant economic harm on creators.  Rather, we submit as independent music creator representatives that the circumstances described throughout these Comments demonstrate beyond doubt –despite the endorsement by NSAI of the Subpart B royalty rate freeze in Phonorecords IV—that the proposed settlement does not come close to providing a reasonable basis for setting royalty rate standards arrived at through a willing buyer-willing seller process.

V. Recommendations

In light of the foregoing, and with likely hundreds of millions of dollars of music creator income at stake for the future rate periods under consideration in Phonorecords IV, the independent music creator signatories to these Comments respectfully submit the following recommendations in regard to this Rulemaking:

  1. For the reasons stated throughout these Comments, we urge the CRB to decline to adopt the settlement agreement as a basis for statutory rates and terms.   Adoption of the settlement and the rules as proposed would represent a miscarriage of justice, placing the imprimatur of the CRB on a negotiation and settlement process that was unfair, non-transparent, and may have been conducted under circumstances that were anything but reasonable pursuant to (and setting crucial precedent for) the required “willing buyer-willing seller” standard.
    
  2. We further urge that the CRB publish for comment at the earliest possible time the full text of the settlement
    agreement as submitted by the Settling Parties, and the MOU referenced in the March 2 Notice.  As Congressman Lloyd Doggett of Texas wrote to the Librarian of Congress and the Register of Copyrights on July 18, 2021, “it seems appropriate that every songwriter who will be affected by the outcome of this proceeding, from San Antonio and Austin, Memphis, to Detroit and beyond, should have the opportunity to read and comment meaningfully on the actual settlement agreement posed for adoption, and the related MOU referenced.”[39]
    
  3. We urge that at minimum, new royalty rates be made applicable to Subpart B uses pursuant to Phonorecords IV, adjusted to reflect changes in the CPI since 2006 as a starting point, and further adjusted according to changes in the CPI each year thereafter (with a permanent floor of 9.1 cents and corresponding per minute rates for physical phonorecords and permanent downloads).   Precedent and support for such a prospective adjustment methodology can be found in §805 of the Copyright Act,[40] as well as in the CPI-based mechanical royalty rate adjustments applied during the period January 1, 1990 through December 31, 1997,[41] and recent §114 decisions, among other sources.  Moreover, at a minimum, it seems that NFTs should also be excluded from the “music bundles” contemplated by Subpart B.  If the Settling Parties wish to establish different rates through private agreements for themselves, that is their prerogative.  Non-participants in such settlements and agreements, however, should not be tied to such settlements and agreements (especially ones not negotiated at arm’s length) by the CRB.
    
  4. We urge that the CRB recommend the undertaking of a study by the US Copyright Office to improve the ability of independent music creators and music publishers to more fully participate in CRB proceedings at reasonable cost.  The current inability of all but the major music publishers and their affiliated music publisher and music creator groups to effectively participate in CRB proceedings due to the costs of such participation must be effectively addressed.  Until then, it is incumbent upon the CRB to help level the playing field by taking into account the interests and predicaments of the independent music creator community, whose Constitutional, creative and economic interests the US Copyright Act is primarily intended to protect pursuant to Article I, §8 of the US Constitution.

VI. Conclusion

We thank the Copyright Royalty Judges and the CRB for this opportunity to participate in the Phonorecord IV proceedings through the submission of these Comments.

Respectfully submitted,

    

Rick Carnes                                                    Ashley Irwin

President, Songwriters Guild of America      President, Society of Composers and Lyricists

Officer, Music Creators North America         Co-Chair, Music Creators North America



List of Other Supporting Organizations

Alliance for Women Film Composers (AWFC). https://theawfc.com

Alliance of Latin American Composers & Authors (AlcaMusica) https://www.alcamusica.org

Asia-Pacific Music Creators Alliance (APMA), https://apmaciam.wixsite.com/home/news

European Composers and Songwriters Alliance (ECSA), https://composeralliance.org

The Ivors Academy (IVORS), https://ivorsacademy.com

Music Answers (M.A.), https://www.musicanswers.org

Pan-African Composers and Songwriters Alliance (PACSA), http://www.pacsa.org

Screen Composers Guild of Canada (SCGC), https://screencomposers.ca

Songwriters Association of Canada (SAC), http://www.songwriters.ca

cc:    Charles J. Sanders, Esq.

         Ms. Carla Hayden, US Librarian of Congress

         Ms. Shira Perlmutter, US Register of Copyrights

         Mr. Eddie Schwartz, President, MCNA and International Council of Music Creators (CIAM)

         The Members of the US Senate and House Sub-Committees on Intellectual Property


[1] https://www.songwritersguild.com/site/index.php

[2] https://thescl.com/

[3]  https://www.musiccreatorsna.org

[4] https://www.songwritersguild.com/site/rick-carnes

[5] https://en.wikipedia.org/wiki/Ashley_Irwin

[6] https://www.fairtrademusicinternational.org/

[7] See, e.g., http://www.americanmusicpreservation.com/songwriters.htm

[8] https://www.bls.gov/data/inflation_calculator.htm

[9] See, e.g., https://escholarship.org/content/qt332557hg/qt332557hg.pdf

[10] https://copyright.gov/licensing/m200a.pdf

[11] https://www.bls.gov/data/inflation_calculator.htm

[12] Ibid..

[13] As songwriter and recording artist Michelle Shocked has so aptly commented on this issue, “many may forgive the past, but we do not forget it.”

[14] https://app.crb.gov/document/download/25288

[15]  https://app.crb.gov/document/download/23883

[16] https://www.musiccreatorsna.org/mcna-letter-regarding-fairness-and-transparency-on-frozen-mechanicals/

[17] https://thetrichordist.com/2021/05/25/coalition-of-songwriter-groups-ask-crb-wheres-the-motion-on-insider-deal-for-frozen-mechanicals/

[18] https://app.crb.gov/document/download/25288

[19] https://www.govinfo.gov/content/pkg/FR-2021-06-25/pdf/2021-12950.pdf     

[20] 801 (b) Functions.—Subject to the provisions of this chapter, the functions of the Copyright Royalty Judges shall be as follows:

…(7)(A). To adopt as a basis for statutory terms and rates or as a basis for the distribution of statutory royalty payments, an agreement concerning such matters reached among some or all of the participants in a proceeding at any time during the proceeding, except that—

(i) the Copyright Royalty Judges shall provide to those that would be bound by the terms, rates, or other determination set by any agreement in a proceeding to determine royalty rates an opportunity to comment on the agreement and shall provide to participants in the proceeding under section 803(b)(2) that would be bound by the terms, rates, or other determination set by the agreement an opportunity to comment on the agreement and object to its adoption as a basis for statutory terms and rates; and

(ii) the Copyright Royalty Judges may decline to adopt the agreement as a basis for statutory terms and rates for participants that are not parties to the agreement, if any participant described in clause (i) objects to the agreement and the Copyright Royalty Judges conclude, based on the record before them if one exists, that the agreement does not provide a reasonable basis for setting statutory terms or rates.

[21]  26 CFR § 25.2512-1

[22] See, e.g., Statement of Anthony Garnier, https://thetrichordist.com/category/frozen-mechanicals/.

[23] https://www.digitalmusicnews.com/2021/06/18/biggest-record-labels-of-2021/

[24] Ibid.

[25] Ibid

[26] Ibid

[27] See, https://thetrichordist.com/2021/06/07/the-ivors-academy-joins-the-no-frozen-mechanicals-campaign/

[28] https://musicrow.com/2021/06/nsai-songwriters-respond-to-criticism-of-decision-not-to-challenge-physical-royalty-rates/

[29] https://www.riaa.com/wp-content/uploads/2021/02/2020-Year-End-Music-Industry-Revenue-Report.pdf

[30] https://www.ifpi.org/our-industry/industry-data/

[31] https://www.cnbc.com/2021/07/13/music-fans-pushed-sales-of-vinyl-albums-higher-in-first-half-of-2021.html

[32] https://static.billboard.com/files/2021/06/june-08-2021-billboard-bulletin-1623187818.pdf

[33] https://www.royaltyexchange.com/blog/u-s-music-publishing-grows-nearly-10-to-over-4b-in-2020

[34] Comments of Abby North of North Music Group.  See also, “Hit Songwriters are Driving Ubers,”  https://www.bbc.com/news/entertainment-arts-55232418

[35]  See, e.g.,  https://variety.com/2021/music/news/nft-sales-imusic-business-wild-west-1234970419/;  https://www.businessinsider.com/how-crypto-art-muscians-primary-income-nfts-record-labels-2021-3; https://www.forbes.com/sites/forbesbusinesscouncil/2021/06/09/are-nfts-the-new-crypto-a-guide-to-understanding-non-fungible-tokens/?sh=51fc14763d95  

[36] It should be noted that SGA did participate in the 2006 CRB proceedings.  Moreover, perhaps the fact that “critics” in the music creator community were “nowhere to be found” in 2006 is because all espoused the same position in favor of a royalty rate increase for Subpart B uses. 

[37] As the Independent Music Creator signatories have previously pointed out in these Comments, one individual music creator is participating in the Phonorecords IV proceedings. As always, we admire the courage and energy of Mr. George Johnson, whose efforts are appreciated by his fellow creators.  However, as Mr. Johnson has often readily admitted, his ability to match the overwhelming firepower arrayed against him at every turn in these and other proceedings before the CRB severely diminishes his capacity to serve as an effective advocate, and frequently results in his total marginalization by other participants.

[38]  See pages 65-67 at  https://app.crb.gov/document/download/23858; https://thetrichordist.com/2021/06/25/guest-post-by-sealeinthedeal-a-foreseeable-result-of-the-phonorecords-iv-private-settlement-opening-pandoras-box/   

[39] https://thetrichordist.com/category/frozen-mechanicals/

[40] 805. General rule for voluntarily negotiated agreements

Any rates or terms under this title that—

(1) are agreed to by participants to a proceeding under section 803(3),

(2) are adopted by the Copyright Royalty Judges as part of a determination under this chapter, and

(3) are in effect for a period shorter than would otherwise apply under a determination pursuant to this chapter, shall remain in effect for such period of time as would otherwise apply under such determination, except that the Copyright Royalty Judges shall adjust the rates pursuant to the voluntary negotiations to reflect national monetary inflation during the additional period the rates remain in effect [emphasis added].

[41] https://copyright.gov/licensing/m200a.pdf

#FrozenMechanicals Crisis: Monica Corton’s Comment to Copyright Royalty Board

July 26, 2021

Chief Copyright Royalty Judge Jesse M. Feder
Copyright Royalty Judge David R. Strickler
Copyright Royalty Judge Steve Ruwe

U.S. Copyright Royalty Board 101 Independence Ave SE

P.O. Box 70977

Washington, DC 20024-0977

SENT VIA ELECTRONIC DELIVERY

RE: DETERMINATION OF ROYALTY RATES AND TERMS FOR MAKING AND DISTRIBUTING PHONORECORDS, DOCKET NUMBER 21-CRB-0001-

PR (2023-2027) (Phonorecords IV)

Honorable Judges:

My name is Monica Corton, and I am the CEO and Founder of Go to Eleven Entertainment, a newly formed independent music publishing company that is funded. I have been in the music publishing business for over thirty years, twenty- seven of which were spent as the Senior Executive Vice President of Creative Affairs & Licensing at Next Decade Entertainment. My experience is in all areas of music licensing, registrations, and royalty payments, and my former clients included the catalogs of Boston, Harry Belafonte, Vic Mizzy (the “Addams Family Theme” and “Green Acres Theme”), Sammy Hagar, and many more.

It is my understanding that the CRB judges are being asked to accept a Motion to Adopt a freeze or a non-rate increase for all mechanical licensing uses for physical phonorecords, i.e., CDs and vinyl, permanent digital downloads, ringtones and music bundles (when multiple songs are downloaded in groups) for the Rate Period of 2023 to 2027. The rates for these types of uses have been frozen and have not increased for any music publisher or songwriter since 2006. In the past, the National Music Publishers Association (“NMPA”) has explained these freezes as a necessary component to their negotiation for an increase in the digital rates for mechanical licenses. For many years (2006-2021), I have gone along with this explanation, but after fifteen (“15”) years of having no increase on any physical product or digital downloads, I now believe it is completely unfair and no longer justifiable for music publishers and songwriters, particularly the independents and DIY creators (do-it-yourself), to have been denied an increase in these rates after

15 years of allowing record labels to get away without paying any increase whatsoever and now face being blocked from a raise for another five (“5”) years.

To date, the justification for not increasing our physical and digital download mechanical royalty rates has been a fear of potentially stalling or disrupting the transition to the distribution of music digitally. We now are long past that transition, and the major record labels who are pressing for a freeze or no increase in our mechanical rates now are very stable businesses. Indeed, they are flourishing. Universal Music Publishing Group is expected to go public, the major labels are signing more catalog than ever before, and they all are claiming a very healthy, booming industry in the media and to their investors. Part of the reason they are so financially sound is because they are not paying their fair share in mechanical royalties to creators when it comes to physical product, digital download, ringtone, and music bundle mechanical royalties.

You might ask, “Why are the parties outlined in the Motion to Adopt Settlement of Statutory Royalty Rates and Terms for Subpart B Configurations agreeing to this freeze on mechanical rates?” Let’s look at who the parties are that are agreeing: all the major labels, all of their sister music publishing companies, such as Sony Music, Universal Music Publishing, Warner/Chappell Music, and the Nashville Songwriters Association International (“NSAI”). The odd man out is NSAI, a songwriter organization based in Nashville. Why would songwriters approve of a rate that does not allow them to make a living from the mechanical licensing of their songs? The answer is unclear as many NSAI members, when asked, tell me that they are unaware that their organization is selling out their member’s copyrights for an under-market mechanical rate price in the 2023-2027 mechanical rate negotiations with the CRB. A perusal of the NSAI website shows nothing about NSAI’s participation in these negotiations or the positions it is taking in such negotiations. If their membership does not know that NSAI is agreeing to freeze these mechanical rates, how can the songwriter member of NSAI be a “willing buyer, willing seller”?

The NMPA’s Motion to Adopt Settlement states “the Settlement represents the consensus of buyers and sellers representing the vast majority of the market for “mechanical” rights for Subpart B Configurations”, yet this is incorrect. It seems likely that songwriters represented by the major labels have no idea that their publisher is agreeing to not increase their mechanical royalties for another 5 years, for a total twenty-one (“21”) years of non-increases in physical product, digital download, ringtone, and music bundle mechanical rates. While these songwriters have been denied any increased rates, nearly everything else in the world has

increased in price substantially. There is no food item, rent, mortgage, car, gasoline, school or tax rate that has not increased from 2006 to 2021 and will not increase from 2023 to 2027.

Further, another concern is that the NMPA has kept the negotiations for this subsection very quiet. As a member of many of the music trade organizations and someone who is paying attention to the pulse of independent publishers and songwriters, I can attest that there has been no discussion of these frozen mechanical rates. Outside of the major companies that control copyrights, there is vast market of independents, foreign music publishers/songwriters, and do-it- yourself (“DIY”) creators who have no voice in these hearings or rate settings.

These are the people who are having a much harder time making a living from their music. Many of them have songs that sell a lot of physical product and digital downloads, as physical product is still doing well in many niche markets where independent music publishers/songwriters and DIY creators live. These creators are not well-educated in music publishing, either from an industry knowledge of licensing perspective or a legal perspective (where they would follow the day-to- day happenings of the CRB hearings.) They are the silent 40+% of the market that makes up the independent side of music publishing. We are a mighty group. We represent thousands of creators, and our numbers are increasing the balance of the business every year, so much so that Sony Music just bought AWAL, a formerly independent label that administered master rights for thousands of DIY creators and was owned by Kobalt. Please read (https://www.rollingstone.com/pro/features/why-did-sony-music-just-spend-430- million-on-kobalt-indie-label-awal-1122350/).

Are you certain that those AWAL artists, who often also are the songwriters of the songs that they record, have any idea that their new label owner is advocating for them not to get a mechanical rate increase for physical copies, digital downloads, ringtones, and music bundles for the next 5 years, after already 15 years of not receiving an increase in their mechanical rates? I would argue that a significant majority of them have no idea that this is happening.

There is reference in several places that the major labels and major publishers are party to some “side deal” which ostensibly could mean the major publishers are receiving some extra compensation for these frozen rates with some additional payments that effectively make the major music publishers mechanical rates increase their rates for physical mechanicals, digital downloads, ringtones, and music bundles. What is this settlement? Who is party to it? How will it affect the music publishing industry at large?

I would ask that the CRB consider raising the mechanical rates for physical product, digital downloads, ringtones, and music bundles to at least a standard of living increase since 2006, which I have calculated using the CPI Inflation Calculator that is provided by the U.S. Bureau of Labor Statistics (https://www.bls.gov/data/inflation_calculator.htm). This would mean that the physical mechanical rate and the digital download rate for songs under five minutes would increase to $.12 per unit and the per minute rate for anything over five minutes would increase to $.02 per minute. The ringtone rate would increase to $.33 per ringtone, and the music bundle rate should increase proportionally as well. Unfortunately, I am unclear regarding where the music bundle rates stand now, but the calculator is very easy to use, and I leave it to the CRB judges to assist reasonably in determining the increase for said music bundle mechanical royalty rate(s). These mechanical rates should take effect on January 1, 2023 and be the starting point for the next rate period. In addition, the rate should increase each year of the 5-year term as is the standard with all other mechanical rates that are set by the CRB.

I believe this is the only fair and equitable way to deal with these frozen mechanical rates, and I hope that my explanation on behalf of thousands of independent publishers and songwriters who represent the independent and DIY communities will give the CRB judges pause to reconsider the physical product, digital download, ringtone, and music bundle mechanical rates included in Subpart B for the period 2023-2027. I am happy to elaborate in any way regarding any aspect of this letter should the CRB judges like further explanation on my reasoning herein.

Best wishes,

Monica Corton
CEO & Founder

Go to Eleven Entertainment

Letter from Congressman Lloyd Doggett about Frozen Mechanicals to Librarian of Congress and Register of Copyrights

[This is a letter from Austin Congressman Lloyd Doggett (D-TX) to the Librarian of Congress (who appoints and can sack the Copyright Royalty Judges) and the head of the Copyright Office about procedures in the Copyright Royalty Board’s proceeding on frozen mechanicals. Download the original letter here.]


Dr. Carla Hayden, Librarian of Congress
Shira Perlmutter, Register of Copyrights
The Library of Congress
101 Independence Ave SE Washington, DC 20540

Dear Dr. Hayden and Ms. Perlmutter,

As a Representative covering music communities from San Antonio to Austin, the “Live Music Capitol of the World,” some of my songwriter constituents[1] are concerned about some procedural and substantive issues arising in the ongoing “Determination of Royalty Rates and Terms for Making and Distributing Phonorecords (Phonorecords IV)” currently pending before the Copyright Royalty Board (CRB). I write to seek some clarity for them and for me. The statutory rates set by the CRB are binding on all songs ever written or that may ever be written by anyone in the world who exploits songs in copyright in the United States. While referred to as a “minimum” I am told that statutory rates in practice are a maximum and are, of course, compulsory. Naturally, I am concerned that we not misstep.

While I know the CRB has not rendered a decision in Phonorecords IV, I am trying to understand the process by which the CRB: (1) evaluates settlement agreements proffered by certain parties to a proceeding prior to publishing those settlements for public comment, (2) determines the application of the new “willing buyer/willing seller” standard for rate setting when buyer and seller are related parties, and (3) the degree of transparency that the CRB may require of participants in the proceeding particularly terms of private settlements that the parties voluntarily disclose related to the rates they have negotiated.

In particular, I draw your attention to the Motion To Adopt Settlement Of Statutory Royalty Rates And Terms For Subpart B Configurations, Docket No. 21-CRB-0001-PR (2023-2027) filed by the National Music Publishers Association (NMPA), Nashville Songwriters Association International, Sony Music Entertainment, UMG Recordings, Inc. and Warner Music Group Corp.[2]     This settlement has provoked concern because of its disclosed terms regarding an additional five-year freeze for “mechanical” royalty rates on phonorecords in the physical and permanent download configurations, and undisclosed terms if adopted by the CRB in its determination.

The settling parties apparently refer to both a settlement agreement relating to certain mechanical royalty rates and another agreement that refers to undisclosed “negotiated licensing processes and late fee waivers.” Those settling parties ask the CRB to adopt their settlement on an “industry-wide basis,” and I am trying to better understand what this request means.  I do not wish to interfere in the CRB’s adjudication of the matters before it, but I hope you can help me understand certain procedural matters relating to the CRB itself.

I would appreciate your answering the following questions at your earliest convenience due to the ongoing nature of both Phonorecords IV and other rate setting proceedings before the CRB and thank you in advance for your courtesy.

(1) There appear to be two settlements referenced in the Motion, being the rate setting settlement summarized in draft regulations attached and this other “memorandum of understanding” (“MOU”) between Sony Music Entertainment, UMG Recordings, Inc. and Warner Music Group Corp. (i.e., the same parties to the private rate settlement except the NSAI).

Question: May the CRB disclose (or compel the settlement participants to disclose) the unredacted actual settlement agreements referenced in the Motion, including the MOU?

(2) In the Music Modernization Act,[3]  Congress directed CRB Judges to set the statutory mechanical royalty rate by utilizing a “willing buyer/willing seller” rate standard designed to model the rates that would be reflected in a free market. In the case of the “industry-wide” settlements proposed by the Motion, it appears that there may be joint ownership of some of the members of the NMPA and the record companies proposing the settlement on rates.

Question: Are the Subpart B rates subject to the “willing buyer/willing seller” rate standard?

Question: If so, what is the rule when the “willing buyer” and “willing seller” are under the same corporate umbrella?

(3) It seems that the participants in the proceeding, and certainly the participants in the settlement, are dominated by major publishers and record companies seeking to impose their private settlement on all other songwriters. If other songwriter groups are not participating in the proceeding but object to the settlement (such as songwriters from more diverse communities) I am concerned that those songwriters may have no recourse.

Question: May the CRB limit the scope of a private party settlement to the parties, but determine a higher rate applies to others?

The Motion and the “frozen mechanicals” issue has prompted considerable public debate in the United States and Europe as reported in The Trichordist artist blog[,[4] Billboard, [5]   Complete Music Update[  [6]  and the Creative Industries Newsletter[7].   Three NSAI songwriters have published a defense[8] of their participation in the Motion. The Trichordist notes that the CRB produces considerable frustration and passion on all sides because the process is “inequitable, unwieldy and prohibitively expensive.”[9]

On page 4 of the Motion, the parties advise the CRB that this settlement represents the “consensus of buyers and sellers representing the vast majority of the market for “mechanical ” rights for [physical, permanent downloads]…” Setting aside the issue of the settlement participants representing “buyers” and “sellers” under the same corporate umbrellas, it seems appropriate that every songwriter who will be affected by the outcome of this proceeding, from San Antonio and Austin, Memphis, to Detroit and beyond, should have the opportunity to read and comment meaningfully on the actual settlement agreement posed for adoption, and the related MOU referenced.

I look forward to your response and to continuing to work with you on these matters of such critical importance to our culture and to songwriters everywhere. Please also let me know if you have any other insights to this which may be helpful for my constituents.

Sincerely,

Lloyd Doggett

[1] ATX Musicians Joins Opposition to Frozen Mechanicals, The Trichordist, https://thetrichordist.com/2021/05/28/atx-musicians-joins-opposition-to- frozen-mechanicals/

[2] Available at https://app.crb.gov/docwnent/download/25288

[3] 17 U.S.C. § 115(c)(2)(A).

[4] https://thetrichordist.com/category /frozen-mechanicals/

[5] https://www.billboard.com/articles/business/9577976/songwriters-crb-royalty-rate-comments-letters

[6] https://completemusicupdate.com/article/songwriter-groups- urge-us-copyright-royalty-board-to-open­ submissions-on-proposed-new-mechanical-royalty-rate-on-discs-and-downloads/

[7]  http: //legrandnetwork.blogspot.com/2021/06/songwriters-organisations-object-to.html

[8] https://musicrow.com/2021/06/nsai-son gwriters-respond-to-criticism-of-decision-not-to-challenge-physical­ royalty-rates/

[9] https://thetrichordist.com/2021/06/03/three-nashville-songwriters-respond-on-frozen-mechanicals/

How to Register to Comment at the Copyright Royalty Board on the Frozen Mechanicals Rate Hearing

[This post first appeared on MusicTech.Solutions]

By Chris Castle

If you’ve been following the heated controversy around the frozen mechanicals crisis, you’ll know that the Copyright Royalty Board has received a proposal from the NMPA, NSAI and the major labels to freeze the statutory rate for songwriter mechanical royalties on physical (like CDs and vinyl) and permanent downloads (like iTunes) for another five years. That proposal mentions a settlement to establish the frozen rates (which extends the rates that were first frozen in 2006 for another 5 years) and a memorandum of understanding between the NMPA and the major labels for something, we’re not quite sure what.

There’s quite a bit of material about the problem that was posted on the Trichordist, so you can check there to read up on the background. You can also subscribe to the Artist Rights Watch podcast and listen to our first episode about frozen mechanicals. This post today assumes you already know the background and are ready to file your comment.

Filing comments with the CRB is not quite as simple as filing comments with the Copyright Office and it takes a bit of time–comments close on July 26, so do not leave setting up your account until July 26, or even July 25. I would do it today. You can set up your account before you file your comments so that the account part is all ready to go.

Here are some steps you will probably go through to set up your account:

  1. Go to app.crb.gov. Look for “Register for an account” (the one in small print at the bottom of the list)


2. “Register for an account” will take you to a sign up page. Scroll down to “User Information”. You only need to complete the required fields with a red star (so ignore the bar number, etc.)

There is a pull down menu under “Register as” with a few different roles listed. The one you want is “Commenter”

Then complete the form completing only the required fields.

3. The CRB will then authenticate your account and send you an email confirmation. That part goes pretty quickly. However, once your account is authenticated, make sure you log on. You should be taken to a dashboard, but the question is whether your dashboard looks like this:

Note that the dashboard does not have a button to “File a comment”. If this is what you see when you log into your account, you are not done. Contact the CRB support people ecrbsupport@egov.com and tell them that your account has not been activated to comment.

4. Your account should look like this:

The comment you want to file is for Phonorecords IV. You can ignore the other dockets. It took me several trips to the support desk to get the correct filing tabs on my account, hopefully you won’t have that problem. But–just in case, don’t be running around crazy on July 26 trying to file the comment you slaved over because you left the account to the last minute.

The @ArtistRights Watch Podcast: Episode 1: The Frozen Mechanicals Crisis with Guest @CrispinHunt

Nik Patel, David Lowery, and Chris Castle feature in this podcast where they discuss the current issues of artists’ rights in the music industry. Find the Artist Rights Watch on your favorite podcast platform here https://linktr.ee/artistrightswatchpod Please subscribe, rate and share!

On the first episode of the Artist Rights Watch, Nik Patel, David Lowery, and Chris Castle sit down with Ivors Academy Chair, Crispin Hunt to talk about the frozen mechanical royalties crisis currently playing out in the United States and how it threatens UK songwriters and indeed songwriters around the world.

Crispin gives us his invaluable analysis of how the frozen mechanicals crisis affects songwriters around the world and the highly effective #brokenrecord and #fixstreaming campaigns that Ivors Academy supports in the UK that has lead to a parliamentary inquiry and legislation introduced in the UK Parliament.

The “frozen mechanicals” crisis is rooted in a private deal between big publishers and their big label affiliates to essentially continue the freeze on the already-frozen U.S. mechanical royalty rate paid by the record companies for CDs, vinyl and permanent downloads. The private deal freezes the rate for another five years but does not even account for inflation. Increasing the royalty rate for inflation, does not actually increase songwriter buying power.

The major publishers and labels have asked the Copyright Royalty Board in the US to make their private deal the law and apply that frozen rate to everyone.

In the past, the music industry has experienced a $0.02 mechanical royalty rate that lasted for 70 years, and with the current mechanical royalty rate of $0.091 being set in 2006, advocates hope it’s not a repeat of the past.

In this Artist Rights Watch episode, we cover its numerous implications and consequences such as controlled compositions clauses, the Copyright Royalty Board, CPI and fixed increases, how the UK compares, and potential resolutions.

Below are some links for further reading on frozen mechanicals and Crispin Hunt:

Take the Artist Rights Watch Survey on Mechanical Royalty Rates

How to file your comment with the Copyright Royalty Board on the frozen mechanicals crisis!

Controlled Compositions Clauses and Frozen Mechanicals. Chris Castle

https://musictechpolicy.com/2020/10/10/controlled-compositions-clauses-and-frozen-mechanicals/embed/#?secret=Rftsxg1vsl

What Would @TaylorSwift13 and Eddie @cue Do? One Solution to the Frozen Mechanical Problem. Chris Castle

https://musictech.solutions/2021/05/13/what-would-taylor-and-eddie-do-one-solution-to-the-frozen-mechanical-problem/embed/#?secret=N8n44nO4gn

The Trichordist posts on frozen mechanicals

https://thetrichordist.com/category/frozen-mechanicals/

The Ivors Academy Joins the No Frozen Mechanicals Campaign

Year-End 2020 RIAA Revenue Statistics

Click to access 2020-Year-End-Music-Industry-Revenue-Report.pdf

Below are our social links and terms of use:

Crispin: https://twitter.com/crispinhunt

Chris: http://www.christiancastle.com/chris-castle

David: https://twitter.com/davidclowery?s=20

https://www.instagram.com/davidclowery/

Nik: https://www.instagram.com/nikpatelmusic/

Website: https://artistrightswatch.com
Facebook: https://www.facebook.com/artistrightswatch
Twitter: https://twitter.com/ArtistRights?s=20

Terms of Use: https://artistrightswatchdotcom.files.wordpress.com/2021/01/arw-podcast-terms-of-use-v-1-i-1.pdf

@theBlakeMorgan Joins the List Opposing Frozen Mechanicals at the Copyright Royalty Board #irespectmusic

Blake Morgan songwriter, publisher, producer and label owner, two-time U.S. Supreme Court amicus, founder of the #irespectmusic campaign and relentless artist rights advocate joins the list opposing frozen mechanicals on vinyl and physical. “This is about so many things, but we simply must fight to keep digging out from a 68 year injustice. Big thanks to the inspirational Abby North for standing up for fairness and transparency!”

BlakeIRespectMusic

Against Frozen MechanicalsSupporting Frozen Mechanicals
Songwriters Guild of AmericaNational Music Publishers Association
Society of Composers and LyricistsNashville Songwriters Association International
Alliance for Women Film Composers 
Songwriters Association of Canada 
Screen Composers Guild of Canada 
Music Creators North America 
Music Answers 
Alliance of Latin American Composers & Authors 
Asia-Pacific Music Creators Alliance 
European Composers and Songwriters Alliance 
Pan African Composers and Songwriters Alliance 
North Music Group 
Blake Morgan 

@KayHanley Reaction to @NorthMusicGroup Letter to Congress on Frozen Mechanicals and Copyright Royalty Board

@NorthMusicGroup Joins the List Opposing Frozen Mechanicals With the Copyright Royalty Board

We’ve been keeping track of those who are for freezing the statutory mechanical royalty rate for physical and permanent downloads for another five years out to 2027. The issue is currently part of the rate setting proceeding before the Copyright Royalty Board–which froze the same rate at 9.1¢ in 2006 and was first extended in 2009.

Frozen Mechanicals

Here is the current list of those for and against freezing mechanicals on these categories for a total of 21 years:

Against Frozen MechanicalsSupporting Frozen Mechanicals
Songwriters Guild of AmericaNational Music Publishers Association
Society of Composers and LyricistsNashville Songwriters Association International
Alliance for Women Film Composers 
Songwriters Association of Canada 
Screen Composers Guild of Canada 
Music Creators North America 
Music Answers 
Alliance of Latin American Composers & Authors 
Asia-Pacific Music Creators Alliance 
European Composers and Songwriters Alliance 
Pan African Composers and Songwriters Alliance 
North Music Group