[Read Part 2 here. This is the last of 3 parts]
The services tell us in their Copyright Office comment that the whole point of the Music Modernization Act was this (largely secret) deal to get them a new retroactive safe harbor so their massive infringement couldn’t be stopped by songwriters. (That’s their third statutory safe harbor counting DMCA and Section 230.) What do you think that MMA safe harbor is worth to them to avoid what they call “ruinous litigation”?
Let’s use Spotify’s market cap as a proxy for the value of the safe harbor–imperfect, yes, but at least it is transparent unlike anything else having to do with Title I of the MMA.
Around October of 2018 when the MMA was signed into law, Spotify traded at $189. A recent closing price for SPOT is $268. Is it fair to say that the MMA was the rocket fuel that made Daniel Ek a billionaire? Not entirely. You can see from the graph that Spotify actually broke through a $190 per share support level to the downside right after the MMA was signed and bounced around below that price for a year or more.
The clear driver of Spotify CEO for Life Daniel Ek’s wealth and profiteering is the COVID virus. Make no mistake, human misery–not the MMA safe harbor–is what provided the rocket fuel for Spotify’s 2020 growth. In fact, the same rocket fuel of misery seems to have benefited each of the exploitative cohort as this graph shows using Live Nation as a proxy for the collapse of touring:
So it could be said that the entire “ruinous litigation” argument from the DLC is simply so much bullshit that these companies fed to the MMA negotiators by the plateful. What is not bullshit, however, is that the one thing the negotiators could have scored that they didn’t is a waiver of the services appeal rights in the Phonorecords III rate setting decision. This is the appeal that the services recently won when the appeals court handed the negotiators heads to them. There could also have been a settlement since they seem to like those so much. The negotiators didn’t do either. We’ll see how the do-over turns out, but one thing we know is that there will be millions in legal fees that songwriters will have to eat one way or another that could easily have been avoided.
What is also not bullshit is the other side of the MMA transaction: The loss to songwriters of this heretofore secret deal.
You will note that none of the music services appear to have paid out jack in the way of newly matching the previously “unmatched” in the years since the signing of the MMA. Why? Because the MMA negotiators did not require any interim payments of matched funds or any public reconciliation of black box to matching efforts. No, no, the first time the black box gets disclosed publicly is when those funds are paid to the MLC, not to the songwriters who earned the money. Round and round and round it goes, and where it stops, nobody knows.
If you believe as we do that the services have not lifted a finger to increase their matching efforts (and based on the DLC’s disclosures seem to have already paid out pre-MMA black box on a market share basis), you will better understand why we think this was a colossally terrible deal for songwriters. You will also understand why this part of it was largely kept secret or downplayed.
The Eight Mile Style complaint against Spotify and the Harry Fox Agency (which is the same Harry Fox Agency that is now going to be handing your royalties for The MLC, how curious) has an informative passage about the timing of this retroactive safe harbor:
In addition, the retroactive elimination of the right to profits attributable to infringement, statutory damages, and attorneys’ fees under the MMA is an unconstitutional denial of substantive and procedural due process, and an unconstitutional taking of Eight Mile’s vested property right, and this Court should so declare.
It is settled law that an infringement claim is a property right that vests in a plaintiff the moment the infringement occurs. The Bill that ultimately became the MMA, written by the NMPA, with input from Spotify, became law in October 2018, but provides retroactively that a plaintiff who did not file an action by December 31, 2017, could lose any right to profits attributable to infringement, statutory damages, and attorneys’ fees if successful in a case against Spotify or other DMPs of interactive streams. On information and belief, the MMA, according to the NMPA’s own announcements, lobbyist spending, and congressional testimony on Capitol Hill, was jointly crafted by members of the NMPA (whose three top markets shares and dues-paying affiliated companies own equity in Spotify) and Spotify, DiMA, and other interactive streaming companies.
They knew what they were doing….
[W]ith the removal of these remedies, it cleared the last hurdle for Spotify to go public, thereby reaping tens of billions of dollars for its equity owners, including the major music companies as mentioned above. The unconstitutional taking of Eight Mile’s and others’ vested property right was not for public use but instead for the private gain of private companies.
The reference to timing on Spotify “going public” means Spotify filing their “DPO” to sell stock on the public markets–the really big money. That’s relevant to the MMA negotiation because the MMA bill was introduced on December 21, 2017. Spotify filed a confidential paper with the Securities and Exhange Commission on January 3, 2018 and Spotify’s stock started trading on April 3, 2018. The MMA allowed them to show the markets that they were doing something about their systemic copyright infringement problem and gave fuel to the specious argument that lawsuits against them were merely opportunistic gotcha lawsuits and not a bellweather for their utter incompetence and cavalier treatment of songwriters.
Why is this timing important? Because the MMA was filed on December 21. What happened on December 22? Congress closed for the holidays and would not reopen until after January 1, 2018. That meant there would not be an official version of the bill until after January 1, 2018, the deadline to sue before the retroactive safe harbor would eventually take effect. Various copies leaked, but since the entire music industry was also shut down for the holidays, it was unlikely that any songwriters would see it, particularly because we can’t find that their so-called “representatives” ever brought it up in any public messaging before the January 1 deadline had passed.
Do you think that timing is a coincidence?
As Eight Mile Style tells us:
The proof is in the pudding: Spotify was sued many times prior to December 31, 2017, for similar acts of copyright infringement as alleged herein, but not once since December 31, 2017. This is because the Bill that ultimately became the MMA first publicly leaked shortly before December, 2017, leaving music publishers with little or no time to investigate or file a lawsuit for infringement, even if they somehow became aware of the Bill at that time.
It just happened that Wixen Music Publishing was already on a war footing from opposing the various Spotify settlements and was able to easily pivot to filing its own lawsuit against Spotify before the December 31, 2017 deadline in a move worthy of General Patton at Bastogne. But Wixen was alone. No one else probably even knew the deadline was passing or what it meant.
The value of what the “negotiators” gave away cannot realistically be measured for the reason that Eight Mile Style clearly states, which is also the same reason that the retroactive safe harbor is unconstitutional:
The only practical or realistic remedies in these cases is the statutory damage remedy, and profits attributable, together with the ability to receive attorneys’ fees, and the drafters of the MMA knew it. The elimination of these remedies takes away from Eight Mile and others who may be similarly situated any practical or realistic remedy, immunizes complying DMP’s from suit, and should be declared an unconstitutional deprivation of due process and a taking of a vested property right.
So what’s the value that songwriters gave up in the MMA? Wixen sued for $1.6 billion. You figure it out.