@digitalmusicnws Asks Is the MLC Putting Smaller Streaming Platforms Out of Business? — ArtistRightsWatch

By Editor Charlie

Dylan Smith at Digital Music News asks the question, “Is the MLC Putting Smaller Streaming Platforms out of Business?” We’ve raised this very question long, long ago, back in early 2018 when the Music Modernization Act was getting passed and the chorus of braying by MLC supporters was at a fever pitch. Everyone ignored the obvious flaws in the legislation, especially the anticompetitive nuances that Dylan has highlighted today. 

But understand–this issue is not new. We raised it in the blogs, and Chris raised it to Congressional staff directly–he said the response was a hangdog “I know, I know. It’s what the parties wanted.”

In other words, Congressional staff knew it was stupid, but were being railroaded into doing it anyway by “the parties” (plural) and there are so many hours in the day. When staff said “the parties” back in 2018 before there was an MLC, guess who they meant? One of those parties was the Digital Media Association which still runs the “Digital Licensee Coordinator” or the DLC–which is essentially the companies with trillion-dollar market caps who we think of as Big Tech. (The DLC’s membership application is here.)

And as you will see, it’s more like is the DLC putting smaller streaming platforms out of business. (See the DLC membership assessment fees “explainer” for DLC members.)

DLC Members

And since the DLC appears dominated by Google, Amazon and Spotify, maybe the real issue is that it’s Thursday, so of course Big Tech wants to keep competition weak and vulnerable to being shut down or acquired. And the MLC and its promoters did nothing to stop it because of the pact between the MLC and the DLC that they would each keep anyone out of the vicinity of the Copyright Royalty Judges who might get in their way. 

Of course the most ludicrous part of this is that these trillion-dollar companies don’t just eat the cost of running the DLC since by the time you get finished reading this post, they will have collectively grossed some sum well, well in excess of the annual operating costs.

But–as we will see, there may be some hope for brave startups to challenge the insider deal that penalizes them without giving them an opportunity to speak up for themselves.

As Dylan writes in DMN:

According to the document [establishing the insiders’ allocation of the fee structure], digital service providers have to cover the MLC’s startup fee ($33.5 million) via a “startup assessment,” or “the one-time administrative assessment for the startup phase of the Mechanical Licensing Collective.” This payment must be made alongside the first annual bill, which is due on February 15th, 2021; the second annual fee disclosure is due in November of the same year and must be paid by January of 2022, for a considerable overall obligation.

Total-wise, platforms “that have a Unique Sound Recordings Count” – or the average number of “royalty-bearing” works streamed or downloaded each month – of less than 5,000 will pay an annual minimum fee of $5,000, to a $60,000 annual minimum fee for those with over 5,000 such works. For DSPs that break the 5,000 threshold, it appears that 2021 will bring with it a low-end bill of $120,000.

Significantly, our source proceeded to indicate: “That’s just the minimum – the total assessment is dependent on market share, which is basically unpredictable at this point. And that’s on top of mechanical royalties for those who use the blanket license.”

This completely out of whack cost structure was obviously a major, major flaw in the Music Modernization Act–specifically the incredibly muddled and meandering Title I which established the Mechanical Licensing Collective and the DLC. The chickens are now coming home to roost.

As Chris wrote in Newsmax Finance on August 20, 2018:

[T]he problem [with the MMA] doesn’t come from songwriters. It comes from the real rule makers—Amazon, Apple, Facebook, Google and Spotify. And startups know which side butters their bread.

Public discussion of MMA has focused on the song collective and the compulsory blanket license for songs, but the mandated digital services collective is more troubling given the size of the players involved…Rule taker startups are governed by the rule maker DLC, but have no say in the DLC’s selection.

Like Microsoft’s anonymous amici, startups know their place —especially against Google, Amazon, and Facebook, whose monopoly bear hug on startups includes hosting, advertising and driving traffic.

The MMA authorizes these aggressive incumbents to effectively decide the price to startups for the “modernized” blanket license. Why? Because the MMA requires users of the license to pay for the lion’s share of the “administrative assessment,” the licensees’ collectivized administrative cost payment that the CBO estimates will be over $222 million for eight years….

Why should the government only permit one game in town? Rather than have the DLC run by the usual suspect monopolists, why not allow competition?

This is important–if startups can’t afford to buy-in to the license, it does them no good, and their biggest competitors decide the price of that license through the DLC.

“Modernization” should make licensing easier: level the playing field for startups and protect them from famously predatory competitor incumbents, as well as copyright infringement lawsuits from the rule takers.

These are all good reasons for the private market solution. Competition at least gives startups hope for the pursuit of fair treatment.

“The parties” and everyone else ignored this warning (and of course, since it wasn’t included in a press release, the trade press did no investigation). This is exactly what Dylan is focused on in DMN. It was only a matter of time until the invoice for startups came due. 

That invoice arrived as part of the “administrative assessment” hearing mandated by Congress in Title I. This is a curious procedure before the Copyright Royalty Judges that expressly excluded anyone from participating who might get in the way of the check that would reunite the Harry Fox Agency with its former owners. That order by the CRJs is the document that Dylan links to.

In a blog post at the time on MTP, Chris drilled down on the nuances of this settlement for the administrative assessment (which is what gives teeth to the mechanism to sandbag startups:

Notice two things:  First, the CRJs’ adopt the position of the MLC and the DLC that the only people who could object to the settlement were “participants”.  Who might that be?  Why the DLC and the MLC, of course.  There were other participants, most prominently the Songwriters Guild of America.  SGA was hounded out of the proceeding because the MLC apparently did not want to include SGA in the negotiation of a settlement.

I can understand the complexity of a three-way negotiation with those pesky songwriters about a matter that affects all the songwriters in the world who have ever written a song or that may ever write a song.  Those songwriters might really get in the way.  What I do not understand, however, is why the songwriters would not be afforded the opportunity to at least comment on the settlement that carries the awesome power of the Leviathan behind it.  I do understand how the rules came to be written the way they are, however.

And this leads to the other thing to observe about this ruling.  “Because there were no non-settling participants…the proposed settlement was unopposed.”  Rather tautological, right?  How can the settlement be opposed if those who might oppose it are not allowed to do so?

Let’s be clear what “opposition” means in this context.  You could just as easily say “improve” or “make fair”.  And lest you think that this is yet another example of sloppy legislative drafting in the mistake-prone Title I, this time I don’t think it’s a mistake.  I think it is exactly what the drafters intended.

This is all pretty darkly typical swampy behavior by the insiders and their lobbyists dedicated to lawyering their way to an unfair court order masquerading as a good thing for songwriters. Of course.

Here’s the ray of sunshine:

After the world “unopposed” the CRJs drop a footnote.  And it is this footnote that is probably the most important point to the unrepresented songwriters and startups who either couldn’t afford to participate or who were afraid of back alley retaliation if they did.

“The Judges have been advised by their staff that some members of the public sent emails to the Copyright Royalty Board seeking to comment on the proposed settlement agreement.Neither the Copyright Act, nor the regulations adopted thereunder, provide for submission or consideration of comments on a proposed settlement by non-participants in an administrative assessment proceeding. Consequently, as a matter of law, the Judges could not, and did not, consider these ex parte communications in deciding whether to approve the proposed settlement. Additionally, the Judges’ non-consideration of these ex parte communications does not: (i) imply any opinion by the Judges as to the substantive merits of any statements contained in such communications; or (ii) reflect any inability of the Judges to question, [on their own motion without a filing from a participant] whether good cause exists to adopt a settlement and to then utilize all express or reasonably implied statutory authority granted to them to make a determination as to the existence…of good cause [to reject the settlement now or in the future].

This footnote is very, very important.  I would interpret it to mean that the CRJs may anticipate that they are directly or indirectly appealed or their decision is examined by the Congress that has ultimate oversight. 

Note that the Judges clearly anticipate reviewing the assessment for “good cause” without a filling from the DLC or the MLC. It’s not clear exactly how that might happen, but it might be as simple as a startup complaining to the CRJs in an email.

So it seems to us that it’s only an MLC issue in that both the MLC and the DLC are each complicit in keeping outsiders away from the decisions about the administrative assessment and how it will be tagged to startups or smaller services. You know, “the parties” decided how the little people are to make do.

TikTok Gets an NMPA Special Out the Back Door as the FBI Comes in the Front Door

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A Friend in Need

It’s becoming more apparent with each passing day that TikTok is about to get shut down by the U.S. Government for any one of a variety of crimes like it has been in India and other countries.  Which means that they are a perfect candidate for an “NMPA Special” which is where a handful of insiders decide on the terms and a pool of money is paid by the infringer to the NMPA for what amounts to a promise not to sue the infringer by the insiders and whatever useful idiots the NMPA can get to opt in to their deal.  (Or at least the deal they tell you about–and remember that some running dogs are more equal than others.)

Then some impenetrable claiming portal is set up for the average dog to “claim” a share of a revenue pool they had nothing to do with negotiating while being forced to give up any rights to sue (because the last thing that the NMPA wants is getting shown up again by a David Lowery, Melissa Ferrick, Randall Wixen or anyone represented by Richard Busch), and then the money just kind of disappears.  The amount of the pool is always so low it makes you wonder if that’s all there is, but in any event it has a distorting effect on the market place to drive down the rates paid to songwriters.

In a world where Cox Communications, a stupid but largely legitimate company, pays $1 billion for copyright infringement on a handful of copyrights, TikTok should pay $1 billion to get a meeting.  And if the FBI is right that TikTok is a front for the Chinese Communist Party, they could easily pay $1 billion for a meeting.  Anyone want to bet the over/under that the NMPA settlement is less than $1 billion?

How much the NMPA gets to keep out of the gross on the front end or the unclaimed after the claiming period expires is never disclosed and as you will see, the NMPA deal with TikTok, like all other NMPA deals, only applies to NMPA members.  So if you want to participate, you most likely will have to join the NMPA and pay a fee (sometimes based on market share).  And as came up in The MLC designation, The NMPA members may have a large market share of revenue but not necessarily on the number of songs.

Here’s the twist:  TikTok has no way to track what music has been used, much less account for it.   TikTok has no Content-ID type technology or control over what music is used so has no way to count or monitor what uses are made of which songs. So unless that gets fixed,  it’s a bit unclear exactly what you would be claiming from the NMPA’s claiming portal  Based on the NMPA’s YouTube and Spotify settlement portals, this one is almost certainly going to be absolute shite.

So what is the deal?  According to MusicAlly:

The deal “accounts for TikTok’s past use of musical works and sets up a forward-looking partnership” according to the announcement.

“This new partnership will give NMPA members the ability to opt-in to a licensing framework that allows them to benefit from their works included on TikTok and is effective retroactively as of May 1, 2020.

The deal comes a day after TikTok announced a licensing deal with independent distributor Believe, and its TuneCore subsidiary.

“We are pleased to find a way forward with TikTok which benefits songwriters and publishers and offers them critical compensation for their work,” said NMPA boss David Israelite.

“Music is an important part of apps like TikTok which merge songs with expression and popularise new music while also giving new life to classic songs. This agreement respects the work of creators and gives them a way to be paid for their essential contributions to the platform.”

That might be true–but remember, there’s nothing in it for anyone who is not an NMPA member.  And a lot of people are not NMPA members regardless of what they tell judges.  So what happens to the great unwashed who are not NMPA members?  Unclear, but NMPA has likely set the market rate for TikTok settlements, so unless you plan on suing, they’ll just jam that deal down your throat.  Which works out well for TikTok.

But some lobbyist at TikTok has a friend when they are in need.

Head of Justice Dept Antitrust Division to Speak At Publisher Conference–can end of ASCAP/BMI Consent Decrees be coming?

Really great news!  It was recently announced that the head of the Justice Department’s Antitrust Division will speak at the National Music Publishers Association annual meeting in June!

This year’s keynote will be presented by United States Department of Justice (DOJ) Assistant Attorney General for the Antitrust Division, Makan Delrahim.

As David said a few weeks ago before this announcement, Mr. Delrahim is reviewing hundreds of DOJ consent decrees that have accumulated over the decades to see if these government orders should be continued.  This review includes the ASCAP and BMI consent decrees that Mr. Delrahim specifically mentioned in an address at Vanderbilt Law School earlier this year.  He seems to have come to this idea all by himself.

What’s really great about this is that it could mean the end of consent decrees in a relatively short period of time.  Since it’s never happened before, we don’t know exactly how the end of the consent decrees would impact ASCAP and BMI, but presumably the impact would be positive and quick. Goodbye rate court!  The smart money would probably be on existing rate court cases continuing, but disallowing new cases.  (Mr. Delrahim has been clear that the enforcement side would remain in place, meaning we guess that actual antitrust law violations would be dealt with case by case, just no ongoing regulatory oversight by unelected rate courts.  Example would be Global Music Rights awesome antitrust case against the broadcasters after the broadcasters brought one against GMR.)

It could possibly open the door to both organizations getting into the mechanical licensing administration business in competition with whatever comes of the collective established by the Music Modernization Act (which permits voluntary licenses outside of the collective).  In fact, BMI has already said they intend to pursue licensing outside of performances because their consent decree allows them to do so unlike ASCAP’s:

BMI is also evaluating the option of licensing beyond the performing right. We have long believed our consent decree allows for the licensing of multiple rights, which is why four years ago we asked the DOJ to amend our decree to clarify that ability, among other much-needed updates.

Of course, the last thing that anyone would want is for the DOJ to end the consent decrees, just to be replaced by some other bunch of regulations or bureaucracy.  For once, broadcasters will just have to suck it up.

So it’s a great idea that NMPA is inviting Mr. Delrahim to speak to the publishers who are most in the position to take advantage of a new dawn in songwriter freedom.  Many if not most of the NMPA members will be in the voluntary licensing category under MMA and outside the collective.  They would be in a fantastic position to support a one-stop shop for performance and mechanical licensing from ASCAP and BMI in line with what SESAC/HFA can offer, and presumably GMR could do as well.

Songwriters Are Losing $2.3 Billion A Year Due To Outdated Government Regulations | BuzzFeed

Right now a byzantine system is in place that not only dates back more than 70 years but also differs depending on the distribution platform. Traditional radio stations, for instance, pay royalties to the composer of a song, but not to the artist or band performing it — known in industry parlance as a performance right — if they are different. Sirius XM only pays royalties for songs released after 1972. Pandora does pay government-mandated royalties to songwriters but has been aggressively lobbying regulators to lower the rate in recent years. Use of music in both professional and user-based content on YouTube and other websites and in TV shows or commercials is yet another category of music licensing, with the difference being that it is free-market-based and not subject to government oversight.

READ THE FULL STORY AT BUZZFEED:
http://www.buzzfeed.com/peterlauria/songwriters-are-losing-23-billion-a-year-due-to-outdated-gov

Rap Genius Says It Will Seek Licenses for Lyrics | NYT

It’s been an interesting week in the battle over unlicensed lyric websites. These lyric sites, likes music piracy sites earn revenue from advertising but don’t “share” any of that revenue with artists and songwriters. The New York Times reports.

Rap Genius, a website that was accused by music publishers on Monday of reprinting thousands of song lyrics without permission, revealed that it had a major licensing deal all along — and also indicated that the site was likely to pursue more such deals in the future rather than fight with publishers over copyright.

“We want to spend our time building an interesting product and community instead of building a legal case, even though we’re sure it would be interesting,” he said. “We chose to partner up with the music publishers and license the lyrics so we could get on with our work and establish closer ties to songwriters and artists.”

David Israelite, the president of the publishers’ trade association, said of Rap Genius’s deal with Sony/ATV, “I think it proves that what Rap Genius is doing is not fair use, and I am hopeful it is a first step toward becoming a fully licensed site.”

READ THE FULL STORY AT THE NEW YORK TIMES:
http://www.nytimes.com/2013/11/15/business/media/rap-genius-says-it-will-seek-licenses-for-lyrics.html

In Music Piracy Battles, Lyrics Demand Respect Too | NYT

David Israelite, the president of the trade group, said that his organization was filing take-down notices against what it called the 50 “worst offenders” based on a web search conducted by David Lowery, a researcher at the University of Georgia. Mr. Lowery, best known as the lead singer of the alternative rock bands Camper Van Beethoven and Cracker, has become an outspoken advocate for artists’ rights in the digital age, which has often put him at odds with technology companies large and small.

“These lyric sites have ignored the law and profited off the songwriters’ creative works, and N.M.P.A. will not allow this to continue,” Mr. Israelite said in a statement, referring to his organization. “This is not a campaign against personal blogs, fan sites or the many websites that provide lyrics legally. N.M.P.A. is targeting 50 sites that engage in blatant illegal behavior, which significantly impacts songwriters’ ability to make a living.”

READ THE FULL STORY AT THE NEW YORK TIMES:
http://www.nytimes.com/2013/11/12/business/media/in-music-piracy-battles-lyrics-demand-respect-too.html