Why Worry About Political Ad Pinocchios With @Jack Dorsey’s Twitter BotNet Apps?

November 15, 2019 Leave a comment

Cancelling political ads that tread on (or even trample…or even incinerate) someone’s truth are all the rage.  Having skimmed the cream from political ad revenue, Twitter has announced it is banning political ads to great fanfare–after the cow escaped from the barn.  (What this “ban” actually means in practice remains to be seen.)  Twitter CEO Jack Dorsey said he would announce the policy today, although I haven’t seen it yet as of this writing.  (Almost sounds like…a publisher…don’t it?)

This banning announcement came directly from Jack in a series of platitudinous Tweets, one of which was particularly eye catching:

Jack Dorsey Pol Ads

What Twitter did not tell you is that while they may take a hit on revenue from dropping political ads and they feel great about preserving democracy, bot farming is alive and well on Twitter.  Let’s take two examples of apps that permit bot nets based on rules established by Twitter for this purpose.

Phone2Action

Phone2Action is a private for-profit company that has raised millions in the private VC market.  The company creates “civic engagement” tools used by some progressive campaigns and nonprofits, but also used by Big Tech for “grass roots” organizing.  In fact, the head of the Consumer Technology Association (remember him?) is closely tied to Phone2Action.

phone2action gary shapiro

“Civic engagement” by a corporation is also called “lobbying” in some circles.  David Lowery has some excellent research on why this “civic engagement” looks fake (a la the European Copyright Directive debacle that backfired on Google’s use of similar tools), but suffice it to say there’s some oddities about how Phone2Action pulls off this “civic engagement,” and their Twitter app is one of them.

These campaigns center around sending messages to elected officials with the client messaging and also some call-in apps that allow anyone from anywhere in the world to call elected officials in their country or another country to lobby on the client’s message.

Boaty

The call-in app has some spooky implications highlighted by that sturdy Scot Boaty McBoatface when demonstrating a similar fake call-in campaign from Fight for the Future:

 

Note–if Boaty hadn’t told Rand Paul’s office he was calling from Scotland, Sen. Paul’s office could have gotten the misapprehension that Boaty was a constituent.  You get the idea.

Take a close look at the permissions that Phone2Action requires from users of its app on Twitter:

P2A TWITTTER annotated

Call me cynical, but when I read these permissions they seem far beyond tweeting something like “I called my Member of Congress”.  It’s more like someone gets the ability to manipulate your own Twitter account without your knowing it is happening.  We’ve seen things like this in the past produce results like this disproportionate number of likes (from the European Copyright Directive):

Bot 4 1-5-19

Bots 14-2-19 Edited

So even if Jack thinks that he will get lots of praise for cancelling political ads on Twitter, as long as he allows for-profit companies to create botnets to lobby for their interests, that ain’t nothing compared to twitter bots he allows to masquerade as true grassroots.

TikTok

Not only does Jack allow Phone2Action to monetize bot farms on Twitter, he let’s TikTok do the same.  This is another element of the national security investigation into TikTok or should be.  Here’s the identical Twitter permissions granted by everyone using the TikTok app for Twitter:

TikTok Twitter

Again, Twitter allows TikTok to have extraordinary access to your Twitter account, just like Phone2Action.  And if you think the Chinese government doesn’t have access to your data, ask Jack Ma who really owns Alibaba.

So here’s a few questions that immediately come to mind:  How much does Twitter charge for this level of access?  Who gets the data?  How much of the data scraped from users and the “look alikes” (who you follow and who follows you) is sold and resold and to whom?

And of course, which messages are they sending out in your Twitter account?  One that relates to the campaign you originally signed up for?  Or something completely unrelated?

We’re way past political ads now.

 

Must Read: @realrobcopeland: Google’s ‘Project Nightingale’ Gathers Personal Health Data on Millions of Americans

November 13, 2019 Comments off

Wall Street Journal reporter Rob Copeland has unearthed another Google data scraping scandal, this time your private health information.  As usual, Google doesn’t want you to focus on how they use this data in the background for data profiling in ways that you don’t know is happening and that you were never asked to consent to.

The scandal isn’t that it’s illegal, the scandal is that it isn’t illegal.  Yet.

Remember that where Google gets into trouble is not necessarily because of what you can see, it’s what they do with the data that you can’t see.  For example, Google uses Google Books as a corpus to teach their translation algorithm in the background through a process of machine learning.  That was what the Google Books case was about–not the “Digital Library of Alexandria” BS.

Just like many Google products, the company uses the old head fake to get you thinking the deal is about one thing, but it’s actually about something else you wouldn’t like.

 

 

 

 

Save the Date: Alissa McCain to Receive Cindi Lazzari Artist Advocate Award from TESLAW

November 10, 2019 Comments off

Alissa McCain will receive the 2019 Cindi Lazzari Artist Advocate Award from the Texas Entertainment and Sports Law Section (TESLAW) of the State Bar of Texas on November 20 at the InterContinental Stephen F. Austin Hotel.  Alissa has twenty years of dedicated and groundbreaking artist advocacy work that has had a substantial impact on the lives of thousands of artists across Texas.

A highly experienced and well-respected community leader, Alissa has maintained a singular focus:  the success and advancement of artists.

Her work at Texas Accountants and Lawyers for the Arts over the last seven years has provided both pro bono legal counseling to artists statewide in Texas and events and programs in all major cities in Texas.

In addition, Alissa was not only a founding board member of Capitol View Arts and working board member every year since its inception, she worked tirelessly as a member of the Austin Arts Commission to assist in re-working the funding metrics used to provide City of Austin grant money to help the smaller arts organizations receive their fair share of those funds.

Other notable accomplishments include her service as a Commissioner on the Austin Arts Commission (appointed by Council Member Ora Houston), a consultant and contributing writer to the Austin Music Census, COO of the Austin Creative Alliance, and Director of Programs and Operations for the Austin Music Foundation.

Alissa’s career embodies the traditions of the Lazzari Award — supporting and educating artists by creating the kind of resources that allow creators to thrive.  TESLAW will present the award to Alissa on Wednesday, November 20, 2019 at 6:15 P.M. at the Stephen F. Austin Hotel in conjunction with the welcome event for the 29th Annual Entertainment Law Institute hosted in Austin by the State Bar of Texas.

Alissa will receive a plaque created by renowned Austin Artist Rejina Thomas.

About the Lazzari Award:  The Lazzari Artist Advocacy Award is named for the late Cindi Lazzari, a leading Texas attorney who went far beyond the call of duty in her efforts to protect the rights of artists in the music industry.   It is awarded by TESLAW.

In these challenging times for Texas musicians, the Section wants to recognize the exciting heroes and heroines of all the music communities across Texas who carry on the tradition of Cindi’s good works.

Previous recipients of the Lazzari Award include Juan Tejeda (musician, arts administrator and activist), Robin Shivers (artist manager and founder of the Health Alliance for Austin Musicians), Texas Accountants and Lawyers for the Arts, SIMS Foundation, Nikki Rowling (co-founder of Austin Music Foundation and author of the Austin Music Census), Casey Monahan (the first head of the Governor’s Music Office) and Margaret Moser (the journalist and long-time music editor for the Austin Chronicle).

About the Artist: Rejina Thomas (African American Contemporary Artist) Circa 1979- present. Creative, Rejina Thomas has mastered her trades of Custom Glass Engraving and fabrication with mixed media including metal, stone, and plastics over the last three decades. Her acclaimed artwork is held in public places and private collections around the world.  She did all the double acid etch Victorian stencil pattern Glass Art in the Texas State Capitol.  Miss Thomas is also well respected as an abstract painter and muralist. Reji Thomas lives and works in Austin, Texas and continues every day to look at life through Abstract Colored glasses in order to see the best in Humanity.  https://www.rejithomasart.com/

Mystery Redaction in Spotify Filing for Eight Mile Style Lawsuit

November 8, 2019 Comments off

“We never get accustomed to being less important to other people than they are to us.”

Holly Martins in The Third Man by Graham Greene

As MTP readers will recall (especially newsletter readers), Spotify is being sued in Nashville by the publishers of a good chunk of Eminem’s extremely popular catalogs (on albums each streamed over 1 billion times on Spotify according to the press).  The lawsuit alleges that Spotify has failed to comply with the conditional (and highly controversial) reachback safe harbor under the Music Modernization Act’s Title I.  The suit also challenges the reachback element of the Title I safe harbor giveaway as an unconstitutional “taking”.  (The case is cited as Eight Mile Style, LLC and Martin Affiliated, LLC v. Spotify USA Inc., Civil Case No.3:19-cv-00736, U.S.D.C. Mid. Dist. Tenn., Nashville Div., Aug. 21, 2019.  You can read the complaint here.)

In pre-answer pleadings, Spotify has filed a motion to dismiss for improper venue and has asked the Court to transfer the case to the Southern District of New York failing dismissal.  (Spotify was also granted a pre-answer stay of discovery which makes even less sense.)  This is because despite the fact that Spotify has a Nashville office and has spent considerable resources for a very long time on a charm offensive directed at Nashville songwriters, Spotify alleges that all of its music publishing licensing operations are in New York.  That may be true, but that doesn’t mean that a Nashville jury should be denied the right to hear the case.  It’s also unclear why it would be inconvenient for Spotify to be tried in Nashville.

Because the Internet.

But we’ll see.  What was interesting about the Spotify motion to dismiss was that it is supported by an affidavit from a Spotify employee describing Spotify’s US mechanical licensing operations for songs.  This affidavit was the normal sort of thing you’d see from a defendant trying to give the Court context about why the Court should transfer the case to somewhere else where the defendant was shopping…sorry…where the defendant was based.

And…like most Big Tech multinationals, especially public ones, Spotify wanted part of that affidavit “sealed”, meaning they wanted the Court to prohibit the public from being able to read part of it and most importantly no doubt, they wanted the plaintiffs barred from being able to speak about the sealed part.  (Google especially likes that sealed business and has been successful employing that strategy.)

Crucially, this particular case involves critical issues of public policy that strongly militate against secrecy and in favor of complete transparency.  The timing of this case is itself of critical importance as the Copyright Office is currently considering regulations to implement the very bare bones federal statute at issue in the case.  The Constitutional issue presented alone is of the essence of Title I.  Therefore, normal practice on sealing materials in this vitally important lawsuit should be balanced against strong legitimate public interest.

This is particularly true because the redaction appears to address how Spotify is handling mechanical royalties for thousands of songwriters (and potentially many, many more ) both in the U.S. and around the world, all of whom have a strong interest in Spotify’s processes and a right to know where there money is.

It might be important to remind everyone involved in the case that the eyes of the world are upon them and that the money involved is payable under a license that songwriters are compelled by law to grant.  Therefore, all information relating to the payment of those monies should be made public.  This case is different than your garden variety rate proceeding which is aspirational in nature and where redactions are common and reasonable.  This case is brought because it appears that someone screwed up with the money.  And if they screwed up with Eminem’s money, they probably screwed up with everyone’s money.

Although it must be said that reading tea leaves about redactions must be a cautious undertaking because there could always be an innocent explanation rather than artifice, here’s what’s odd about the redaction.  (You can read the entire affidavit here.)

The affidavit lists some, perhaps all, of the current and former Spotify employees involved in mechanical licensing.  We’re not focused on them right now.  Who they are is less important than what they do.

After that list comes a heading “Relevant Third Parties”.

Spotify Declaration Eight Mile Style 1.png

Unsurprisingly, Spotify lists its parent company (Spotify AB) as a “Relevant Third Party”.  While not “third party” in the normal sense, we can understand why the defendant would want to treat the parent as such as a legal fiction.  Spotify also lists HFA, which is equally unsurprising as HFA has provided services to Spotify as Spotify’s agent for many years.  (This may be a little confusing to songwriters who thought HFA just worked for them, but that’s a story for another day.  For now, suffice it to say that HFA seems to be “on the wall” and works for both sides of the same transaction in some cases albeit providing different services in many cases.)

As an aside, HFA has been, I think, unfairly maligned in the press over its handling of Spotify’s mechanical licensing.  I think this is very unfair and I have defended HFA against these attacks.  At the end of the day, while HFA may have been the company’s agent, it was Spotify who decided to do what it did and Spotify alone should be held responsible.  Criticizing HFA for Spotify’s decision is not only silly and petty in my view, I also think it’s just a bad reading of the law.  Having said that, Eight Mile Style has made some serious allegations in its complaint and bears the burden of proving them up which may turn a different direction.

But back to the affidavit–observe the outline form of that redaction.  The redaction covers three paragraphs in a separate heading under the affiants’ “Relevant Third Parties” bullet. The redaction aligns with both “Spotify AB” and “Harry Fox Agency” bullets above it.  Whatever the redaction says, it appears to be describing a third entity that is neither Spotify AB nor HFA but that provides third party services similar to both.

Spotify Declaration Eight Mile Style 1 Annotated.png

Maybe nothing but maybe something.  If it is something, it appears to be an entity involved with handling songwriters money in yet a sixth lawsuit (including a class action) filed against the same company.  One could easily make a compelling argument that this is a lawsuit filed against the very company that drove a major amendment to the licensing practice under the Copyright Act in the form of Title I originating with David Lowery’s and Melissa Ferrick’s class action against Spotify.

And it appears from both the compliant and the affidavit that not much has changed after the passing of the Music Modernization Act. If you look at all the cases against Spotify, they all have one thing in common.  Spotify had many, many chances to settle the claim before it became a case.  They either ignored the claims before they went legal, or didn’t take them seriously.  Expensive oversight for the shareholders, but given Spotify’s governance by dual class voting stock, no surprise that the insiders’ moral hazard cuts against shareholders.  Here, Spotify not only had an opportunity to avoid liability, they even amended the Copyright Act to provide themselves a lifeboat.

If something was fixed at Spotify by the MMA, please tell me because I’m missing it entirely.  There does seem to be the strong possibility that unless something gets fixed at the company, the pattern will be full again very soon.  Eight Mile Style’s attorney Richard Busch must have become something of a bête noire for Spotify–is this the fifth lawsuit against them or are there more?  I’ve lost count.  Removing the Eight Mile Style case to Timbuktu won’t change the attorney though.  And even though it’s a stones throw from Spotify’s luxurious offices in World Trade Center, the SDNY just might be getting tired of seeing Daniel Ek’s smiling face in their chambers.  Maybe not yet.  But maybe they’d actually be better off staying in Nashville.

Someone should ask this question, so why not us–who is this mysterious third party who does Spotify’s mechanical royalty licensing or accounting that we are compelled to use by the statutory license?

How do they have their mitts on our money?  And why so secretive?

20 Questions for New Artists Part 7: Sound Recording Aggregators

November 6, 2019 Comments off

[From 20 Questions for New Artists by Chris Castle and Amy Mitchell]

An independent artist is practically required to sign up with an aggregator in order to have your works serviced to many online outlets–some aggregators service hundreds of different retailers. (So one example of a pre-existing contract under Question #10 may be a band member’s contract with a sound recording aggregator.)

It is important to remember that without marketing and promotion, a new artist is simply a needle in an even bigger digital haystack. Do not expect the aggregator to do any significant marketing or promotion, much less guarantee it.  This is the primary difference between a traditional distributor and an aggregator, but even traditional distributors may have a shaky ability to do marketing and promotion.

Given that there are so many potential digital outlets, it is important for an artist to be able to decide on a case by case basis whether they want to be included and preserve the right to opt-in to any retailer or to opt-out at any time.

Artists should also be able to terminate the aggregator deal on short notice for any or no reason (e.g., 30-60 days). If you are asked to sign a deal with an indie label or with a major label, these labels may well require that you give them exclusive distribution rights–including the digital rights you have already granted to the aggregator. That means that you need to have the ability to terminate your aggregator deal and transfer digital distribution to the new label, often as part of an exclusive bundle of rights. There have been instances where digital distributors tried to hold up artists from signing to a label with the previously released recordings–a problem solved by the payment of money. Keep an eye on that issue.

How the aggregator is compensated is also an issue of concern. In the traditional model, the aggregator took a percentage of sales as their compensation. This meant that the aggregator only made money if the artist made money. (This is similar to a traditional distributor model.) Some aggregators charge a flat fee on some basis (such as a per-retailer basis or an annual fee) instead of a percentage. There may also be initial setup fees.

Each model has its strong and weak points. The percentage model pays the aggregator regardless of whether they are making an effort to stimulate sales (which few of them do in any event). However, under the percentage model the aggregator only makes money if you make money, so the incentives are aligned. The percentage should be lower than the traditional 12-25% to take into account that the aggregator has lower incremental costs over time of maintaining content in their catalog.

The flat fee model has the artist pay the aggregator a fee for distribution instead of paying the distributor a percentage. While this is attractive from the point of view that the artist knows what their distribution costs will be up front, it also transfers much if not all of the financial risk of distribution to the artist.

In order to determine which is the better model, the artist should compare their most favorable percentage-based offer to the flat fee model and see what the breakeven point will be. Try using a formula like this:

[Flat Fee]/[percentage] = Gross Income Required to Equal Aggregator Payment

Gross Income/wholesale price = breakeven units

or, for example, if the flat fee charged is $100 compared to a distribution fee of 10% for the same services, a distribution fee of 10% will equal a flat fee payment of $100 if you earn $1,000 of gross income.

Said another way, the 10% model is better for the artist for the first $1,000 of income

$100/.10 = $1,000 (Gross Income)

How many units would you have to sell in order to reach $1,000 of gross income?

$1,000/$0.70 = 1428 units (rounded down) for a download.

$1,000/$0.00397 = 251,889 Spotify streams to earn back either a $100 flat fee or 10% distribution fee, or $1,000/$0.00783 = 127,714 Apple Music streams (roughly half what it costs on Spotify).

This means at breakeven, you will be indifferent between the two deals.  But it also means that if in reality you sell less than the breakeven numbers, you will be better off under the distribution fee model.  If you sell more, you will be better off under the flat fee model.

From the distributor’s point of view, on flat fee distribution deals they (i.e., distributors) will make more profit from artists who sell less than artists who sell more than the theoretical break even. It’s essentially a perversion of the normal goal of a distributor to encourage sales because a flat fee model distributor profits the most when they simply have a lot of content (rather than “popular” content). The classic quantity over quality.

In any of these examples, you will need to use your own projections on sales, wholesale price and configurations in order to get a projection that is relevant for your own use.

Also, the aggregator need not collect SoundExchange monies and should not be able to list itself as the sound recording copyright owner in order to receive statutory royalties.  The artist need only sign up with SoundExchange in order to collect statutory royalties.  SoundExchange has an entire artist relations staff to help you with registering and becoming a member.  (See Question #2 on SoundExchange).

Be aware that it may not be that obvious from the click through aggregator agreement that the company intends to collect SoundExchange royalties.  Look for words like “non interactive statutory royalties” which means royalties collected by SoundExchange.

It must also be said that no digital aggregator should be able to enter into any agreements on behalf of the artist/copyright owner that allows the aggregator to waive any rights on your behalf (such as litigation rights) or to settle any claims or audits.

Another big problem with flat fee aggregators is that you have no idea what their deals with their accounts may be and you are betting on their ability to both negotiate a favorable deal and also pass those benefits along to you directly including audit recovery (especially since you may not have the right to audit them).

Should the Copyright Office’s Best Practices Shine Sunlight on the Unmatched?

November 5, 2019 Comments off

[This post first appeared in the MusicTechPolicy Monthly newsletter.  Become an email follower of this blog to get your copy.]

The Music Modernization Act is a litigation magnet because of its failure to mandate a wholistic solution to the controversial black box. There are two commercially available systems that can address the problem.

We’ve all heard that the digital music services are sitting on a pile of cash in unmatched statutory mechanical royalties also known as the “black box”.  No one knows how much because Title I of the Music Modernization Act does not require them to disclose the unmatched sums being held as of the enactment date (October 11, 2018–a year ago), much less a bring down of the current amount.  And unsurprisingly, no service has voluntarily disclosed how much they are holding.

One may ask, why can’t you just look up on the financial statements of at least the public companies how much they are accruing for their share of the black box?  Good luck with that.

The monies owed to the unmatched “known unknowns” is probably the number one question the services don’t ask their third party reporting agents.  And because of the well known agency principle that “notice of a fact that an agent knows or has reason to know is imputed to the principal if knowledge of the fact is material to the agent’s duties to the principal,” these services likely know as a matter of law how much is in their principals’ respective black boxes or at least what they couldn’t match.  (Restatement (Third) of Agency Sec. 5.03.)

Fortunately, the Copyright Office is tasked with establishing best practices for distributing these unmatched black box monies through regulations to implement these and other provisions of the Music Modernization Act, such as the late fee for non-compliant services.

The Copyright Office has also announced the “kick off” of its study of unclaimed royalties study to be held in Washington, DC on December 6.  This will be great for Washington area songwriters, as well as convenient for the lobbyists and lawyers, but everyone else will have to wait for the transcript and video which unfortunately (and perhaps incredibly) will not be live streamed.  Even so, these pending regulations and the upcoming mandated study on matching are the best chance songwriters have had for a generation to get a straight count on unmatched mechanicals.

There are two currently existing standards that the Copyright Office can reference for examples of industry best practices-the SoundExchange unclaimed royalty search for new members and the Lowery-Ferrick Spotify class action Songclaims portal powered by Crunch Digital.  It seems inescapable that these claiming standards should be guideposts for both the Copyright Office and the Copyright Royalty Judges.

Having such clear cut standards–already operational so not theoretical–is fortunate because it seems obvious that the Congress is both concerned with the black box distributions not being gamed and also intends to exercise its statutory authority to retain oversight over the Mechanical Licensing Collective’s operations.  In fact, Senator Grassley specifically stated in his questions for the record following the Copyright Office oversight hearing that:

The success of the Music Modernization Act (MMA) will depend, to a large extent, on the effective and efficient operation of the Mechanical Licensing Collective (MLC). The MMA included provisions to ensure that there was robust ongoing oversight of the MLC by both the Copyright Office and Congress, and that the new MLC would be accountable to the stakeholders.”

This is in addition to the oversight role of the Copyright Royalty Judges with respect to the Administrative Assessment and at least budgetary aspects of the MLC’s operations that inevitably will turn the quantitative into the qualitative.

During her July 30 testimony at the Copyright Office oversight hearing of the House of Representatives Committee on the Judiciary, Register of Copyrights Karyn Temple was peppered with questions about the black box from Members of the Committee, including Representatives Ted Deutch, Sheila Jackson-Lee and Chairman Jerry Nadler.

These months after the hearing, the gravamen of the Committee’s questions were crystalized in yet another copyright infringement suit brought against Spotify, this time by Eminem’s publishers.  The key theory of the suit is that Spotify is out of compliance with the conditions for the new safe harbor for copyright infringers that is one of the central themes of the MMA.  The Copyright Office can use the complaint as another guidepost for best practices to be compassed by their new regulations.

As drafted, Title I is an invitation for litigation, so it should be no surprise that the independent publishing community stepped forward to sue as that was the only way to find out what was going on behind the curtain.  However, as Senator Grassley emphasized, Congress charged the Copyright Office to establish regulations to implement Title I and gave the Copyright Royalty Judges a defacto oversight role through their approval of the MLC’s budget.

  1. Copyright Office Regulations

The Copyright Office is in the process of drafting regulations for a number of areas in Title I.  The Copyright Office therefore is in a unique position to avoid a maelstrom of litigation by adopting regulations that shine light on the unmatched, recognize industry practices by SoundExchange and Crunch Digital, and accomplish simple goals.  This is not hard.

Regulations should require iterative public disclosure to accompany the iterative matching  required by Title I.  Remember-many of these services are the biggest, smartest and richest companies in the history of commerce.  They know something about these systems as they all have to one degree or another developed significant in-house expertise.

However, it is crucial to have the unmatched actually administered by an unrelated and trusted infomediary.  This could be done by repurposing existing searchable databases for unclaimed funds while simultaneously disclosing to the public the amounts owed for each song.

Balance the Checkbook:  Immediate Public Release of Trial Balance and Monthly Updates of Unmatched

Each service currently participating in the Initial Administrative Assessment proceeding before the Copyright Royalty Judges should disclose an aggregate trial balance of the total sums they are holding in their respective unmatched accounts.  This total number should be made public as well as the methodology used to calculate it.  Nothing should or needs to be redacted.

The services should update that initial disclosure on a monthly basis.  The monthly calculation should show the month’s starting balance of unmatched royalties, how much was paid out during the month, how much was added during the month, and the remaining balance at the end of the month.  This simple calculation would allow songwriters to know what monies were being held with no intermediaries.  It’s as simple as balancing a checkbook.

Unmatched Lookup

If the services know the total sums, they should also be able to disclose the sound recording titles at least, if not the artist names, ISRCs, other metadata for the recordings of the songs that comprise the totals.  These services should be able to provide a simple web-based look-up so that songwriters could know if their songs are included in a service’s unmatched accrual.

Cost Reimbursement

It is becoming increasingly obvious to independent publishers that there will be significant resources and costs required to deliver their data to the MLC and claim their unmatched.   Those transaction costs of delivering data to the MLC-without which the imagined global rights database would not be functional enough to distribute the black box effectively-are incremental to publishers who have been doing business prior to the MMA and the MLC.

These incremental costs are easily identifiable and should be invoiced to the MLC by rights owners to be included in the next administrative assessment and reimbursed by the services.

Future Licensees

Any future licensee (blanket or nonblanket) should also be required to comply with these obligations and disclosures.

2.  Role of the Copyright Royalty Judges

The Copyright Royalty Judges are currently conducting a proceeding to establish the initial “administrative assessment” for the MLC.  The rules of the proceeding require the MLC and the Digital Licensee Coordinator to attempt to reach a voluntary agreement on the amount of the assessment.  If they fail, the CRJs will determine it for them.  The voluntary negotiation is divided into two periods: July 8 to September 6, and then September 7 to January 28.

The parties have failed to reach an agreement in the first period already, so a very basic assessment of probabilities means there’s less than a 50% chance they will agree during the second period.  If they fail to reach an agreement by February 17th, the CRJs will commence a hearing to reach the decision for them.  (One could argue that the likelihood of a voluntary agreement increases with the passing of time, but that doesn’t seem to be the case at this point-it seems to be going the opposite direction.)

Remember-the MLC is supposed to have their imagined global rights database up and running and be fully operational and able to render statements shortly after January 1, 2021, or a little over 14 months from now.  At this point, it seems that there is a greater than 50% probability that Congress will have to amend the MMA to extend the deadline.  Presumably something has happened in the last year to advance the ball.

Crucially, there is an inextricable link between the amount of the administrative assessment and what the MLC intends to do with the money.  Two of those functions will be (1) the MLC’s own efforts at matching whatever is unmatched when the Digital Licensee Coordinator delivers the unmatched accounts (and presumably transaction logs) from the services to the MLC after January 1, 2021, and (2) ingesting data for the imagined global rights database.

Unmatched Best Practices and Disclosures

The CRJs should take a very close look at both the startup and the operating budget for the MLC as well as the underlying assumptions, processes and vendors for those functions to take on the U.S. accounting burden for the entire world.  It should be obvious that the services have a great deal of experience in licensing copyrights and operating royalty systems.

The CRJs should also consider whether they have the authority to address the nexus between the best practices to be adopted by those seeking to rely on the retroactive safe harbor, payments of the newly matched prior to 1/1/21 and public reporting of both accrued unmatched royalties and claiming before and after 1/1/21.  I think they do and they probably have an obligation to do so that is at least as great as the obligation on the Copyright Office.<

Sufficiency of Funding and Sufficiency of Allocation

As Senator Grassley has asked, the CRJs need to address what happens if the process fails to hit the deadlines as part of their determination of the administrative assessment.  Each passing day makes it more likely that the entire procedure will grind to a halt before statements can be rendered.

This concerns both the DLC funding the MLC sufficiently, but it also depends on the MLC allocating those sums appropriately across its operations–and the quantitative implies the qualitative.  Moreover, the CRJs need to fashion a procedure for relief that can be taken up inexpensively by any copyright owner that has a good faith belief they have simply not been accounted to. An example would be someone who was being paid under a statutory license (NOI or modified compulsory) prior to January 1, 2021 whose statements then drop to zero thereafter or who simply receive no statements at all.

While the Register said in response to Rep. Deutch during the Copyright Office oversight hearing that both MLC and AMLC had agreed with the Copyright Office interpretation that unclaimed funds are not to be distributed before 2023, the MLC’s actual statement on the issue is more nuanced.  The judges need to take this into account and leave nothing to the imagination in their determination.

3.  Sunlight is the Best Disinfectant

As Mr. Justice Brandeis taught us in Other People’s Money-And How Bankers Use It,“sunlight is said to be the best of disinfectants; electric light the most efficient policeman.”

Songwriters are in need of both.

RIP Jay Rosenthal

November 2, 2019 1 comment

When I started MusicTechPolicy in 2006, Jay Rosenthal was one of the first people in Washington policy circles who embraced me.  This says much more about him than it does about me.  He didn’t need to be particularly courteous to me or even acknowledge I existed.  But he was a kind person, genuinely interested in mentoring and he extended me encouragement and courtesy in the finest tradition of the legal profession.  As they say, damn few.

We were on many, many panels over the years and I always enjoyed his deep knowledge and generous nature as did everyone in our line of work.  In the few instances when we were opposite, he always proved himself to be a man whose word was his bond—better than a contract or leverage.  Jay demonstrated that the importance of courtesy and honesty cannot be emphasized enough to all lawyers, new and old.  He was living proof that great authority can be wielded with great humility and that those who do so gain great admiration and respect from those with whom they deal. 

A great human being and a kind, forthright and charitable man first and foremost.   And also a great leader and legal thinker.  

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