Spotify Hit With $150 Million Class Action Over Unpaid Royalties | Billboard

Vocal artist rights advocate David Lowery brings a massive action against the largest streaming service.

Camper Van Beethoven and Cracker frontman David Lowery, retaining the law firm of Michelman & Robinson, LLP, has filed a class action lawsuit seeking at least $150 million in damages against Spotify, alleging it knowingly, willingly, and unlawfully reproduces and distributes copyrighted compositions without obtaining mechanical licenses.

READ THE FULL STORY AT BILLBOARD:
http://www.billboard.com/articles/business/6828092/spotify-class-action-royalties-david-lowery-cracker-150-million

#irespectmusic

Three Simple Steps To Fix The Record Business in 2016… Windows, Windows, Windows…

windows

This time last year we correctly predicted the restructuring of at least one major label group when we asked the question, “Who will be the First Fired Label Execs over Spotify Fiasco & Cannibalization?“. It didn’t take long for us to find out, “It’s Just Math : Digital Music Execs Exit, But will the Pivot to Paid Subs Be Enough To Save The Record Biz?” We’re still not sure that even paid subscription streaming actually works in the long term, but we know for sure that unlimited free streaming does not!

What a difference a year makes. What a difference Taylor Swift makes. What a difference Adele makes.

Going into the next year our prediction is that the power of windows can not be overstated as the leading solution to the problems faced by the record industry. Effective windowing has always been a part of the economic life cycle of every album release. The physical singles sales business (ya’ll remember 45 prm records, right?) – well, that was largely a loss leader to boost singles chart positioning that combined retail and radio reports.

In every record store there was the “hit wall” of discounted new releases to encourage higher volume sales. Every store stocked a robust variety of titles across different genres and price points comprised of front line titles, mid-line titles, budget line titles, and at the end there was the cut-out bin. Also, let us not forget the “11 records for a penny” record clubs advertised in magazines.

Those, my friends, are windows. Those who are advocating against windows are probably too young to know better or have been lead around by the nose by some digital snake oil salesman protecting their own interests.

This is not a philosophical discussion. This is financial reality. Respected stock analyst Robert Tullo who is the Director Of Research at Albert Fried & Company says this:

Longer term IP Radio and Spotify are good annuity revenue streams and great promotional tools. However, we believe the system works better for everyone when artists have the right to distribute their Intellectual property how they see fit.

Ultimately we think windows for content will form around titles that look much like the Movie Windows and that will be great for investors and the industry as soon as all these so called experts get out of the way and spot trading fashionable digital dimes for real growth and earnings.

Mr. Tullo is correct. Not only will artist (and rights holders) do better when they have the freedom of choice but so will the partner platforms. This is how it works in the film business. Every month the “virtual inventory” on Netflix is rotated. New titles come in, old titles go out. If you really, really, really want to see something right now, you have to rent it or buy it via a transactional stream or download. The record business will benefit from the same models and strategies. Windowing works. Period.

See here’s the thing… If these new digital platforms are so great for artists, why wouldn’t artists want to participate on them?  The benefits would be self evident? If the product that Spotify, Pandora, YouTube (and others) are offering is so good for artists, why are these companies so afraid of artists and rights holders opting out? Maybe, just maybe these platforms are not offering the type of value that their suppliers find meaningful?

It really speaks volumes when a business model is so bad that one of  the essential features for survival of the company is to deny its suppliers the option to fairly negotiate their participation or have the ability to opt out. In the old neighborhoods that was known as a protection racket, or extortion.

Silicon Valley didn’t invent the freemium, they’re just doing it wrong. Really wrong. Horribly wrong.

Let those who want to give away their work freely do so, but also allow those who would rather opt out the ability to do so. If artists find value in the freemium tier, and they may well as they always have, then let them chose how to best utilize that option. Musicians pioneered the freemium model often using street teams to canvas concerts by giving away cassettes to fans of similar music.

If digital platforms allowed artists to use their technologies creatively, everyone might be pleasantly surprised how much better (and more profitable) things would work out.

Watching Pandora lose $5 billion in value in a year becomes a punch line when they believe they are better suited to dictate to artists how to best communicate with their own fans. It is indeed interesting to see Pandora admit what we’ve been saying for years, unlimited, ad-supported free streaming unsustainable. No Kidding. Here it is from Brian Andrews, CEO of Pandora:

“This gray market is unsustainable. If consumers can legally listen to free on-demand music permanently without converting to paying models, the value of music will continue to spiral downward to the benefit of no one.”

Of course what makes this comment most interesting is that Pandora is entering the crowded field of on demand streaming with it’s purchase of the failed Rdio. Pandora now has to compete with Spotify’s very large free tier of unpaid and entrenched users. Migrating those users to a new on-demand streaming platform will be a challenge (ask Apple and Tidal), and even more so as artists and labels grow tired of subsidizing these horribly flawed business models.

Here’s three uses of freemium streaming most artists (and rights holders) would probably embrace if given the choice.

1: The Hit Single

– Using the freemium platform to launch a single to gain ubiquitous awareness of a new album release. This is what both Taylor Swift and Adele did and the results speak for themselves. More artists would probably embrace releasing one or two songs or singles from an album on freemium tiers. With the artists support this becomes far more valuable than extorting the them into releasing their entire album on a platform they feel devalues their work.

BONUS: What if Adele made an official playlist of her favorite songs, leading with her new single? How much added value does an artist of this caliber bring to a platform when they feel they are being respected and valued? Answer, ALOT.

2: The Focus Track

– Not everyone has a hit single, but most artists have a focus track from their album. Like the hit single, these artists would embrace the opportunity to be discoverable and to build an audience of new fans. Developing artists are the most eager to try new opportunities because the have the most to gain. If digital streaming platforms worked with artists in a meaningful and respectful way, the mutual benefits could be huge for everyone.

3: Rotating Inventory Management

– By adopting a Netflix like inventory management of monthly rotating titles on the freemium (or even paid subscription) tier more artists might feel compelled to be more engaged. Rotating inventory management is a smart way to keep users and fans engaged as old titles rotate out and new ones in. This simple trick restores a great deal of the consumer engagement that is a part of discovery, and promotion.

Of course, the goal of every freemium model is to lead to more paid revenues in higher value products. Working together with artists and rights holders the future of streaming distribution could be very bright. But to get there we need to let go of Stockholm Syndrome. the old neighborhood protection rackets, bullying extortion threats and just plain bad business models.

There is a lot that can be done in the world of streaming. Streaming is not bad, it’s just a technology. Free streaming and subscription streaming both have their place in the ecosystem. What is bad are the exploitative business models, lack of transparency and devaluation of the artists work. These are fixable issues that have nothing to do with technology, just a lack of common and business sense.

Bumps Not Dumps: Merlin’s Pandora Catastrophe Continues

Merlin’s DMX-style direct deal with Pandora is the gift that keeps on giving.  As we expected, Pandora introduced their Merlin deal in the ratesetting preceding in Washington that sets all of our sound recording royalty rates for any service that uses the webcasting and simulcasting compulsory license.  This is done at the “Copyright Royalty Board,” which is three rate-court judges who rule on the rates we get paid on services like Pandora and Clear Channel/IHeartMedia.  This is different than the ASCAP and BMI rate courts for songwriters.

The way this works is similar to the “Chris Harrison Special” that DMX pulled with ASCAP and BMI.  The way this stunt works is that Pandora (under Chris Harrison’s guidance) goes out and finds some gullible label to make a direct deal with them at a low royalty rate.  (Harrison was the DMX lawyer who Pandora hired, likely because he did such a good job of screwing songwriters at DMX that Pandora wanted his special skills brought to their own end of the sty.  Harrison, aka Songwriter Enemy #1, has since gone on to greener pastures at SiriusXM where his special skills can be put to use in the Sirius direct licensing program–more on that later.)

They usually accomplish this by paying a big advance or giving the label some other incentive to make that direct deal.  Pandora then tries to use that low royalty deal as a “benchmark” for the Copyright Royalty Board to use as evidence of a market rate deal when setting the “willing buyer/willing seller” royalty rates that apply to everyone BUT the label that got the goodies for making the direct deal.

You can see that Pandora wants to make a direct deal with a royalty rate that is BELOW the current statutory rate that applies to the rest of us.  Why?  Because the assumption is that the current statutory rate will INCREASE in the current rate proceeding.  So if you’re Pandora, you want to try to find as many ways to screw artists and songwriters that you can, so you want to make as many of these “direct deals” as you can so you can put them in front of the Copyright Royalty Board to get the judges to IGNORE the goodies that incentivized the label to make the direct deal in the first place and ONLY look at the penny rate as evidence of an arms length “market rate” for the royalty rate that will apply to the rest of us who don’t get (and may not even want) the goodies.

The Chris Harrison Special

This is exactly the kind of “Chris Harrison special” that Pandora ran against us in the current rate setting (called “Web IV”).  The gullible label in this case is the Merlin label group.  What goodies did Merlin get?

1.   Advance:  Because we haven’t seen a copy of the Merlin deal with Pandora (or any side deals) we don’t really know what Merlin got in the way of an advance for Merlin labels or a flat fee for Merlin itself.  Even though Pandora had to file a copy of its Merlin deal with the Copyright Royalty Board in Web IV, the public version of that deal has the deal points blacked out.  That’s right–the very terms that Pandora and Merlin are using to screw the rest of us are secret.  Funny how The Verge hasn’t gotten a leaked copy of that deal.

2.  Steering Payola:  As David wrote in his comment to the FCC about the broadcasters request for a waiver of the payola rules, Pandora’s contract with Merlin allows Pandora to pay Merlin a lower royalty the more music they play from Merlin labels, called “steering”.  Remember–Pandora is now an FCC licensed broadcaster, so the payola rules apply to Pandora, and steering looks an awful lot like pay to play–a discount on royalties is just another form of payment.  David wrote the FCC to ask them to look into whether the Merlin steering deal with Pandora was even legal. Using forks and knives to eat their bacon!

3.  Direct Payments:  Merlin agreed that all artist royalties under the direct deal with Pandora should be paid through SoundExchange just like the compulsory license.  We really don’t know how this will work from a practical viewpoint.  This is kind of like what happens if a songwriter’s publisher pulls out of ASCAP or BMI because of the bizarre rate court rulings, but the writer wants to keep their writer’s share with their PRO.  It’s every bit as screwy.

We can’t believe that any Merlin label actually asked their artists if they wanted their records to be included in this direct deal rather than just get paid the compulsory rate directly from SoundExchange because the cost of accounting will probably exceed the royalty in many cases (through no fault of SoundExchange, by the way).  It appears that the only logical explanation for why Merlin wanted the artists to get paid directly in this screwed up deal was for the political cover it gave them.

Dumps Not Bumps

How is this fair for Merlin artists?  We’re not trying to speak for them, but by the looks of things, they need to wake up and smell the coffee.  We’ve heard of increases in royalty rate the better you do (“bumps”) but we’ve never heard of decreases in royalty rate the better you do (“dumps”).  Can you imagine the cocktail party conversation?  “Hey, man, I’m so special I get dumps from my label.”

It’s not enough that the royalty should be lower the more times you’re played or that your royalty should be lower the more times someone else is played, a deal that seems tailor made for the CRB to use to screw artists.  Surely that kind of royalty rate is not in anyone’s Merlin label record deal.

It’s also not enough that you don’t get told if there’s a Merlin side deal or what the terms of the Merlin side deal are, it’s not enough that your deal is going to be used by Pandora to screw every other artist–no, on top of it all, the cost of giving your label political cover has to make it so that the reporting administration for that political cover has to cost more than anyone else and may actually cost more than you make.

And who pays for that?  Who pays those additional reporting costs? Pandora?  Unlikely.  Merlin?  Even less likely.  More likely it’s SoundExchange, which may mean those costs (including the cost of fighting about it in the CRB) get “socialized” across all the featured artists, non featured artists and sound recording owners (often the same people at the featured artists).

How Can CRB Give Weight to an Illegal Payola Contract?

It’s pretty clear that the Copyright Royalty Board should give no weight to the Merlin contract in setting rates for the rest of us at least not until the FCC rules on David’s question to them in the Clear Channel payola waiver case.  Even if the FCC yields to Pandora’s lobbying power and upholds the deal, the Merlin deal still has nothing to do with anyone but Merlin, even if the steering contract isn’t illegal under the payola laws.

RAIN reports that Pandora is crowing about a ruling of the Register of Copyright that told the Copyright Royalty Board they were able to consider the direct deal as a “benchmark”:

The CRB judges asked for an opinion on the admissibility of specific direct-license benchmark agreements as evidence in their current proceedings. Today, the Copyright Office deemed that Pandora’s rate deal with indie label collective Merlin Network is admissible as a valid benchmark for the Copyright Royalty Board’s rate-setting proceedings.

Pandora’s antics would make you think they felt like they’ve won something major.  As we read the Register’s ruling, all she really said was that the CRB could consider “potentially probative benchmark agreements.”   We are mystified how a potentially illegal contract can have “potentially probative value” in setting the rates in a market that is itself defined by the compulsory license.

There’s a valid point to be made here that the CRB should not consider the Merlin deal at all when setting the compulsory rate because it really has no relation to everyone else’s deal.

Hopefully the CRB is on to Pandora’s “Chris Harrison Special” and will disregard it altogether.  Of course, if the CRB uses the Merlin rate minus goodies as a “benchmark” for our rates, then Pandora will have succeeded in screwing artists once again, and then we’ll all have to deal with that.

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Come to Jumpstart 8 at SXSW Co-Sponsored by @thetrichordist and #irespectmusic

We’re co-sponsoring the Jumpstart TX 8 show at SXSW with #irespectmusic and some other cool folks!  If you’re going to Austin, check it out on Friday, March 20 at The Legendary Side Bar from noon to 6pm,  602 East 7th Street, Austin TX 78701 (a few blocks from the Convention Center).

No badge required!

Register here and see you there!

Jumpstart 2015

New Adventures in Copyright Enforcement @SXSW #SXSW

Friday, March 14 | 2:00PM – 3:00PM
New Adventures in Copyright Enforcement
Austin Convention Center | Room 17B | 500 E Cesar Chavez St

lthough debates about how to protect copyright online might seem so 2010, they certainly haven’t abated. The current conversations aren’t as contentious as the SOPA skirmishes, but that doesn’t necessarily mean consensus. Current attempts to address piracy are taking place outside of Congress, and include efforts to establish “best practices” between stakeholders. From the recently-minted Copyright Alert System to voluntary agreements meant to curb unauthorized activity within ad networks and payment processors, new experiments in rights protection abound. What’s the thinking behind the various approaches? What does a “win” look like, and what are the parameters for oversight? How can artists get involved?

MMODERATOR
Casey Rae
Interim Exec Dir – Future of Music Coalition

Sherwin Siy
VP, Legal Affairs- Public Knowledge

Jill Lesser
Exec Dir- Center For Copyright Information

David Lowery
Musician/Internet Content Provider – Cracker

TODAY AT #SXSW : Love the Art, Fcuk the Artist: The Re-emerging Artist Rights Movement! #SXSW

Thursday, March 13 | 3:30PM – 4:30PM
Austin Convention Center | Room 12AB | 500 E Cesar Chavez St

http://schedule.sxsw.com/2014/events/event_MP990775

Business gets harder and harder for recording artists and songwriters. Problems have developed with labels, publishers, fans, online distribution services like Spotify, major ISPs like Google, and Internet radio networks like Pandora. They also endure antagonistic courts, ineffective laws, and government indifference. As a result, their property interest has been significantly devalued and their rights abridged. Recently some recording artists and songwriters have started to criticize and push back against this new status quo.

MODERATOR
Jay Rosenthal
SVP & General Counsel – National Music Publishers’ Association

Eric Hilton
Thievery Corporation

David Zierler
Pres – INgrooves

Lee Miller
Pres – Nashville Songwriters Association International

David Lowery
Musician/Internet Content Provider – Cracker

Washington Turned a Deaf Ear to Artists’ Rights Until One Guy Wrote The Words “I Respect Music” on an Index Card and Showed It to the World | Digital Journal

The Washington beltway turned a deaf ear to artists’ rights until one guy, one activist, wrote the words “I Respect Music” on an index card and showed it to the world.

Now, thousands upon thousands of music makers and music lovers are standing together and making history by adding their names to a petition that is not only shaking up the music world, it’s shaking up Congress.

To sign the petition, please visit http://www.irespectmusic.org.
#irespectmusic

READ THE FULL STORY DIGITAL JOURNAL:
http://www.digitaljournal.com/pr/1729302

Jean Michel Jarre: ‘Don’t forget that us creators are the smart part in a smart phone | MTP

by Helienne Lindvall

At this week’s Midem music conference in Cannes, France, I sat down with electronic music pioneer Jean Michel Jarre, whose career as an artist and composer is now in its fifth decade, having broken through internationally with his groundbreaking Oxygene album in 1976. Last year, he took over the presidency of CISAC, the global body for authors’ societies, after the previous president, Robin Gibb, passed away – and so his Midem “visionary talk” went under the headline Fair Share for Creators.

Jarre:

“We should never forget that in the smartphone, the smart part is us creators. If you get rid of music, images, videos, words and literature from the smartphone, you just have a simple phone that would be worth about $50. Let’s accept that there’s a lot of innovation in the smartphone, so let’s add $100 for this innovation – the remaining $300-$400 of the price should go to us.

So we should sit down and talk to all the telephone companies and computer companies selling hardware, the companies carrying the content on the internet, such as Facebook and Google. We need each other, so at the end of the day we have to find the right partnership. We are talking about a business partnership, not a tax, and this shouldn’t affect the consumer.”

READ THE FULL INTERVIEW AT MUSIC TECHNOLOGY POLICY:
http://musictechpolicy.wordpress.com/2014/02/05/jean-michel-jarre-dont-forget-that-us-creators-are-the-smart-part-in-a-smartphone-by-helienne-lindvall/