Black Box Invasion! Duties of Collective’s Board Under Music Modernization Act

February 17, 2018 Leave a comment

One of the most unusual aspects of the non-profit collective to be established under the Music Modernization Act is the method of codifying the number of seats on the board of directors (and a couple other boards) and designating the characteristics of the kind of person who gets to hold those seats.  (Of course, it must be said that if there is any language in the bill that actually says who gets to appoint members of the collective’s board of directors in the first place, how long they can serve and how they can be voted off, I can’t find it.)

As the implications of the collective’s Congressionally mandated board composition starts to be understood by songwriters and publishers it is increasingly viewed a highly unusual–and, frankly, extremely patriarchal and expansionist–role for the federal government.  The composition of an organization’s board is something that is always handled in the organization’s by-laws.  By-laws are rules enacted by at least the board of directors of a private company for its own government and are sometimes thought of as a contract between the board and the shareholders, or in this case the governing (the board) and the governed (everyone who has ever written a song and everyone who will ever write a song in the future).  (Some nonprofits may appoint a by-law committee that then reports to the board on recommendations to amend the by-laws, then voted on by the board of directors.)

What is interesting about the MMA board of directors from a process point of view is that because the number of directors and committee structure are fixed by statute, changing the composition of the collective’s governance will probably require an act of Congress.  Which is like saying this may never change and the initial board members are appointed for life and maybe the afterlife.

Of course, the collective is to be a nonprofit corporation.  That means that the nonprofit corporation itself will have to incorporate somewhere in some state, often Delaware, which will have its own rules on by-laws and that pesky voting stuff that the MMA does away with.  It appears that the MMA will immediately cause the collective to come into conflict with state corporate law.

Since the MMA is the greatest expansion of federal power into the lives of songwriters in the history of the United States (a fact not lost on our opponents in the copyleft who might like to get some, too), I would imagine that the response will be the usual don’t worry, be happy.   Federal preemption will fix everything and simply override state law by fiat.  Because they’re from Washington and they’re here to help.  In case you haven’t noticed, not all states are huge fans of this kind of thing.  I live in one such state.

But then I’m just a country lawyer and I’m not as smart as these city fellers.  I’m sure they have it all figured out.

One thing I fully expect to start hearing as the response to the many, many holes in the MMA is not to let the perfect be the enemy of the good enough and that regulations will fix it all.  I have actually heard this said.

That’s right–regulations–as in more regulations.  And if all corporate formation and governance issues are to be handled by regulations, that’s one pile of regulations.  All of which are likely subject to discovery under the Freedom of Information Act, including all board minutes, correspondence, agendas, votes, transcripts, etc.

And then let’s not forget that the MMA has to get signed into law by a President who is making it his business to cut regulations.  Radically.  Whether you like him or not, whether you are a populist or a resister, it is an obvious fact that cutting regulations was definitely a part of the Trump platform and it is definitely something he is doing every day.  So think about how that‘s going to go over.

Back to ignoring reality.  First of all, more regulations require a rulemaking, probably by the Copyright Office.  Ever notice how long it takes for rulemakings to get finalized?  Public comments, etc.?  Is the Copyright Office really up for handling the governance structure of the collective?  Is the collective a government agency which would require rulemakings and regulations to operate or is it a private nonprofit that handles its own rules through the same process that have served organization well in America for a couple hundred years.  You know, that pesky voting thing without the feds looking over your shoulder.

One more thing–remember that the MMA has this clause (aka the “Black Box Invasion”):

INTERIM APPLICATION OF ACCRUED ROYALTIES.—In the event that the administrative assessment, together with any funding from voluntary contributions as provided in subparagraphs (A) and (B), is inadequate to cover current total costs of the mechanical licensing collective, the collective, with approval of its board of directors [unanimous?  simple majority?], may apply unclaimed accrued royalties on an interim basis to defray such costs, subject to future reimbursement of such royalties from future collections of the assessment [to be paid by digital music services after a final, nonapealable judgment].

That’s right–“they” intend for the government to fund the collective’s overbudget out of the black box.  (We can’t know who “they” are because the MMA does not say.)  Well, at least this time they’re honest about it.

And what is the most likely common characteristic of anyone whose money is in the black box?  Songwriters with no direct deal with the services aka the little people in the majority of songwriters.

Remember–the collective has no business plan and no budget.  Yet the board is at least permitted if not required by law to use unmatched money they hold in trust to pay overbudget–for which there is no approved budget so could literally be someone’s cigar bill, legal fees, who knows what.

Note the “subject to future reimbursement of such royalties from future collections of the assessment”.  What if the judges don’t agree to the assessment or that the Digital Media Association appeals every ruling for years which I fully expect them to do because they don’t care about songwriters.  And if you think that’s extreme, name five things quickly that they’ve ever done that would make you think otherwise?

Remember–it’s not their money.  It’s not the government’s money either.  This is why all the black box needs to put in a true escrow account held by an independent third party or escheated to the state like your utility deposit you forgot to collect.  If it’s good enough for your electric bill, shouldn’t it be good enough for your royalties?

The board will be acting as a trustee for that black box money.  Trustees don’t get to make themselves or their companies loans from the money they hold in trust.

Remember–songwriters have been suing to find a fiduciary duty owed to them from their publishers under their publishing contracts for a long time.  It may not be under their publishing contracts, but the MMA hands songwriters that fiduciary duty on a silver platter with the black box invasion.

Board members–serve at your peril.

 

 

 

Call to Action: Please Help Support Our Musical Legacy and Tell the Congress #irespectmusic on the CLASSICS Act

February 15, 2018 Leave a comment

joanaIRM

I don’t often ask MTP readers to agree with me, much less sign a petition.  But the exception proves the rule and I’m asking that you please sign the petition to support legislation in the U.S. Congress that would close the loophole that some digital music services have been leveraging for quite some time on so-called “pre-72” recordings.

If it sounds implausible that the date a record was released should make a difference in copyright protection or entitlement of the artists to the same royalties as everyone releasing records after that date–that’s because it is.  It’s actually worse–it’s the kind of thing that someone would do if they truly viewed music as a commodity.

But that’s exactly what Pandora and Sirius started doing a few years ago when a truly meanspirited bunch of lawyers and bean counters decided they could save a few bucks by stiffing old guys and dead cats and their heirs.  Between Pandora and Sirius, this bunch of rocket scientists have paid out $300 million in settlement to the major labels and will pay even more in that Turtles class action to the indie community.

And that’s right–these geniuses could have come out better if they had just paid the damn royalties in the first place.

So you know what this is about–it’s a piece of the #irespectmusic campaign for artist pay for radio play.  Except this time it’s about reclaiming rights we already fought over back in 1995.  It’s about claiming a little piece of righteousness for those who can’t do it themselves.

What these jerks at Pandora and Sirius (and the Digital Media Association) were really about was bootstrapping an issue into a bargaining chip by withholding payment on pre-72 recordings like bullies do.  And here’s why:  Remember Blake Morgan told us that the U.S. is one of the only countries in the world that doesn’t recognize a performance right for sound recordings?  Well, before 1972 the U.S. didn’t recognize a federal copyright in sound recordings at all.

The Congress amended that astonishing oversight in 1972 to recognize a federal sound recording copyright and then in 1995 and 1998 adopted a limited performance right in sound recordings performed in a digital medium.  You know–back when it didn’t seem like this funny digital thing didn’t matter much.  Under certain circumstances, there is also a royalty paid for digital performances for webcasting, simulcasting, satellite radio and a few other radio services.  That’s basically your “SoundExchange money.”

Sounds good, right?  Do you think that there was one member of Congress in 1995 who voted for the limited performance right but secretly said king’s x–a royalty for everyone except James Brown, Duke Ellington, Aretha Franklin, Ella Fitzgerald, Louis Armstrong, Jimi Hendrix, Willie Nelson, Buddy Holly and ZZ Top?  No, but that’s what the Digital Media Association, the NAB and their knuckleheads would have you believe.  Remember–not even Pandora believes this bunk anymore.  Amazing what new lawyers will do for the soul.

So the Congress has been forced to introduce legislation to fix the pre-72 loophole once and for all–and that’s what I’d really appreciate your support for.  The bill is called the CLASSICS Act and it’s supported in the House by Ranking Member Jerry Nadler (D-#irespectmusic) and Rep. Darrell Issa (R-CA) and in the Senate by Sen. Chris Coons (D-DE) and Sen. John Kennedy (R-LA).

We have a lot of people to thank for advancing the ball to this point, especially all the folks carrying the legislation, but especially Ranking Member Jerry Nadler who thankfully believes in this so much he’s always up for another fight for artist rights.  We also have to thank The Turtles and their team, SoundExchange CEO Mike Huppe and his team, and Chris Israel and his team at MusicFirst.

You told them how you feel about #irespectmusic and I would ask you to please do it once again because we can’t stop fighting until the fight is done.  But don’t do it for me, do it for Ella, Aretha, the Duke, the Count, Maceo, Jimi with an i and Hendrix with an x.  Do it for all of those who came before, both living and back home and those they left behind.

We never ask you to sign anything you don’t understand, so if you’re still unclear, please let me know.

The MusicFirst Coalition has a petition here.  I’d really appreciate your signing up.

The Bipartisan Classics Act Is Ready For Prime Time: Time to fix Pre 1972 Loophole — The Trichordist

February 15, 2018 Leave a comment

Issa (R-CA) and Nadler (D-NY) sponsored the Classics Act in the house. Artists that had the misfortune to record before 1972 do not get royalties for the public performance of their recordings on satellite and non-interactive streaming services. This so-called loophole is simply a creation of federal courts (Ninth & Second) and apparent collusion by […]

via The Bipartisan Classics Act Is Ready For Prime Time: Time to fix Pre 1972 Loophole — The Trichordist

@hitsdailydouble: Thoughts on a Perfect Storm

February 14, 2018 Leave a comment

The music business is guilty. Guilty of sexism, guilty of shielding harassment, guilty of an old-(white) boy network that has deep and seemingly intractable roots. It would be pointless to pretend otherwise.

The behavior and attitudes represented by this fraternity aren’t all-encompassing; plenty of people in the business have long fought against them. Still, these old-boy traits remain defining characteristics of some parts of our business.

It would also be wrong to suggest that these conditions evolved in a vacuum. They can be found in every sector—Silicon Valley, Wall Street, Washington D.C. and Madison Avenue. They are vestiges of systemic inequality, when women and people of color were legally—or at the very least practically—accorded the status of property….Crucial to that change is the #MeToo movement, which entered the mainstream as part of the larger uprising of women most conspicuously evidenced by the massive worldwide women’s marches of 2017 and 2018.

Then there is #TimesUp, which is not about chronicling past wrongs but preventing future ones.

These threads came together, in our demimonde, at the Grammys, which reflected both the gathering voice of women’s protest and the obstacles to change….

Those obstacles are both institutional and attitudinal. Male domination in the boardroom is matched by male domination on the charts. Only six female artists made the overall Top 50 of 2017; only 10% of the Top 50 tours of 2017 were by female acts (half as many as in 2016). While more than half the acts on the year-end 2017 Top 40 Pop radio chart were female (or had a key female performer), Rhythm had seven such acts—and the Country and Alternative radio charts fewer than 10%.

A recent Annenberg study, meanwhile, found that women received less than 10% of the most recent Grammy nominations. As has been reiterated with considerable fervor since Grammy night, only one female artist accepted an award during the telecast—and the only female Album of the Year nominee wasn’t given a spot to perform.

Which is part of why Neil Portnow’s ill-advised comment about women needing to “step up” became such a flashpoint, turning the Recording Academy boss into a walking example of the problem; thus the letter from female industryites demanding he step down, and a subsequent missive from six top-level biz women insisting that he implement serious changes. His words represented a status quo that is increasingly out of touch with the direction of the biz and the culture.

The response to his words from a number of industry professionals—notably, “The Six,” aka  Jody Gerson, Michele Anthony, Julie Swidler, Sylvia Rhone, Julie Greenwald and Desiree Perez—is chronicled elsewhere in this issue, and is far more eloquent than we could hope to be.

For the music world, the Grammys thus became a point of inflection, thanks to the perfect storm of the repressive Trump-era climate—with the government’s unapologetic embrace of injustice and prejudice—and the post-Harvey Weinstein eruption of the #MeToo movement, which many had been expecting to reach the music industry for some time.

THE NEW LEADERS
In recent years we’ve seen the emergence of a wave of new, young leaders, many of them women and many people of color, who are clearly ready to break with the excesses of the past. Leaders whose hiring and policy choices are changing the culture.

This is happening in all sectors, no matter how many old (white) boys run amok.

Our own business is seeing profound growth in female leadership. Women are running major companies, piloting artists’ careers and plenty more—and refocusing the cultural conversation via activism. A young, diverse wave is coming, and it will in all likelihood alter the dynamics across the biz.

 

Read the post on HITS

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@musicbizworld: An Interview with The Great One: Bruce Allen: ‘ARTISTS TODAY HAVE MORE POWER THAN THEY REALIZE’

February 14, 2018 Leave a comment

This is a must read interview with Bruce Allen, one of the great managers in the history of the music business.

Read the post on Music Business Worldwide

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Press Release on CLASSICS Act to Close Pre-72 Loophole

February 14, 2018 Leave a comment

[Editor Charlie sez:  Let’s not forget–if it weren’t for The Turtles stepping up with Henry Gradstein’s team and suing Sirius and Pandora in a class action to close the nasty loophole leveraged by their legal teams, none of this would be happening.  Artist class actions work and sometimes are the only thing that work.

The consensus behind the CLASSICS Act and songwriter complaints demonstrate that the Music Modernization Act is simply not ready for prime time.  If we’re not going to stand behaind Chairman Nadler’s Fair Play Fair Pay, the CLASSICS Act deserves a chance to stand alone and not be tied to the punitive and controversial Music Modernization Act that would vastly restrict songwriter class actions.  You can support the CLASSICS Act and also acknowledge that MMA is rushed, is full of problems and not ready for prime time.]

PRESS RELEASE


Historic Coalition of 213
Musical Artists Calls on Congress to Pass CLASSICS Act,

Fix the “Pre-1972” Loophole for Legacy Artists
Music Organizations Press Congress to Consolidate
Widely Backed Music Licensing Reforms Into Single Bill
WASHINGTON, February 13, 2018 — An unprecedented coalition of 213 musical artists, supported by eight leading music organizations, called upon the U.S. Congress to pass the CLASSICS Act, bipartisan legislation pending in both the House and Senate to address one of copyright law’s most glaring loopholes.
In a two-page advertisement that will appear in Wednesday’s Politico, the artists state:
Digital radio makes billions of dollars a year from airplay of music made before Feb. 15, 1972. Yet, because of an ambiguity in state and federal copyright laws, artists and copyright owners who created that music receive nothing for the use of their work. The CLASSICS Act (H.R. 3301 / S. 2393) would correct this inequity and finally ensure that musicians and vocalists who made those timeless songs finally get their due. We urge Congress to pass the CLASSICS Act and other pro-artist reforms quickly.
The advertisement marks the start of a robust advocacy campaign by artists and music community leaders A2IM, American Federation of Musicians, Content Creators Coalition, musicFIRST Coalition, Recording Academy, Recording Industry Association of America, SAG-AFTRA and SoundExchange.
The ad can be viewed here.
The CLASSICS Act is an essential component of a package of music licensing reforms supported by the organizations that includes additional critical reforms such as the Music Modernization Act (H.R. 4706 / S. 2334), the AMP Act (H.R. 881) and the establishment of market-based rate standards. In the coming weeks, music community leaders anticipate the House Judiciary Committee will commence formal consideration of the music licensing reform legislation with the goal of consolidating the key reforms into a single bill.

The Music Modernization Act’s “In Terrorem” Clause

February 11, 2018 1 comment

The more the “Music Modernization Act” is discussed, the more rocks get turned over and the more toads jump out from under the rocks with nasty surprises.  Even before it is passed, the MMA is already disrupting private contracts, well settled expectations and a century of law.  Which is a real neat trick by Big Tech, this time in the form of the Digital Media Association (or “DiMA”).  And the most punitive aspect of the proposed bill appears to exist for no reason that relates to the proposed bill’s primary purpose–creating a prospective safe harbor for Big Tech to exploit every song ever written by anyone in the world and every song that may be written in the future by anyone in the world. But it also creates a “snap back” retroactive safe harbor that will scare songwriters into not filing infringement lawsuits before the bill even gets a vote, or what the law calls an “in terrorem” clause.  Those clauses are designed to scare people into not taking legal action to protect their rights and the MMA has a huge one in the first of several brand new safe harbors that will be way worse than the DMCA.

Here’s the first and most punitive safe harbor that insulates music services from lawsuits for “prior unlicensed uses.”  In case you missed it, “prior unlicensed uses” is a nice way of saying “prior copyright infringements.”

(10) PRIOR UNLICENSED USES.—  ‘‘(A) LIMITATION ON LIABILITY IN GENERAL.—A copyright owner that commences [a lawsuit] on or after January 1, 2018 [i.e., before the enactment of the MMA], against a digital music provider for the infringement of the exclusive rights…arising from the unauthorized reproduction or distribution of a musical work by such digital music provider in the course of engaging in [uses covered by the new blanket license in the MMA] prior to the license availability date, shall, as the copyright owner’s sole and exclusive remedy against the digital music provider, be eligible to recover the [statutory streaming mechanical] royalty [in that lawsuit]…from the digital music provider, provided that such digital music provider can demonstrate compliance with the requirements of subparagraph (B) [searching for copyright owners that 60 million mass filings of “address unknown NOIs suggest they are incapable of doing], as applicable. In all other cases the limitation on liability under this subparagraph shall not apply.

What this paragraph means is that unless a copyright owner has already filed a lawsuit against a service for infringing uses that occurred prior to January 1, 2018, that infringing service can only be sued for the measly streaming mechanical royalty–which almost guarantees that the service will never be sued.  No statutory damages, no attorneys’ fees, no injunctions.  This is why Wixen Music Publishing filed a lawsuit against Spotify on December 29, 2017.  (Note that suing for unpaid royalties is the only type of claim the copyright owner can make against the infringer.)

The “license availability date” is the January 1 following the second anniversary of the date the bill becomes law (assuming it ever does).  I have no idea why this section is written this way which seems designed to confuse anyone who is not already familiar with it.

I also have no idea what is so special about January 1, 2018 aside from the fact that it was a matter of days after the bill was quietly introduced, before a copy of the bill was made publicly available, and was most likely to protect further lawsuits that might affect the rumored Spotify IPO.  (Which is why some call the MMA the “Spotify Preservation Act”.)

So, for example, if the bill became law on June 1, 2018, two years following would be June 1, 2020, so the next January 1 would be January 1, 2021.  That means that the new safe harbor applies to any infringements between January 1, 2018 and January 1, 2021, or for lawsuits not yet filed for infringements occurring before January 1, 2018 that are still within the Copyright Act’s three-year statute of limitations.  That’s right–the safe harbor applies before the Music Modernization Act was given legal effect.

And of course the clause that limits the safe harbor to situations where the “digital music provider can demonstrate compliance with the requirements of subparagraph (B) [searching for copyright owners that 60 million mass filings of “address unknown NOIs suggest they are incapable of doing]” would itself require a lawsuit.  How do you think Big Tech would respond to a request for proof?  Probably a two world answer “we complied” followed by another two word answer to the inevitable challenge.  That means that every songwriter would have to be willing to sue some of the biggest corporations in the world with no guarantee of the statutory damages and attorneys’ fees in the private attorney general provisions of the Copyright Act.

Yes, as Tom Waits teaches us in Step Right Up, “the large print giveth and the small print taketh away.”

Ask yourself this–if a copyright owner didn’t know about this bill and filed their lawsuit after January 1, 2018, what would happen if the bill is subsequently enacted into law with this in terrorem clause intact?  When you ask people who were involved with the closed door negotiations of the bill that produced this clause, you get the answer “DiMA wouldn’t agree to take that out”.  Well, no kidding.  The very presence of this clause in a draft bill creates the in terrorem situation that is the clear object of the exercise.  So much for closed door negotiations.

Aside from the whole MMA being very poorly thought out and a vicious attack on basic rights of songwriters, Attorney Richard Busch, among others (including me), believe this section to be violative of several of our most cherished protections in the Constitution and it certainly doesn’t pass the smell test for work the government should be about.  If anyone thought that this bill was designed to get the government out of the music business, that is just a laughable assertion.

More on this later, but I’d be interested in hearing from anyone who has an idea how this in terrorem provision would be given effect if someone dared to test the punitive legislation and filed an infringement case after January 1, 2018 for “prior unlicensed uses” that occurred before the enactment of MMA but within the statute of limitations.  My view is there’s no fixing this section and it just needs to be stricken now rather than wait the five to ten years or so it will take for a case to reach the Supreme Court or WTO.

 

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