Google has announced their new “form” for processing requests from Europeans wishing to exercise their “right to be forgotten” under the recent ruling of the European Court of Justice. True to form, they found a way to hack the orders of the nation state and jack their users. Like sullen little schoolboys, the oligarchs who run Google have found a way to reduce their compliance in the way they know best: Intimidation.
According to Liz Gannes writing in Re/code:
Google asks people to explain why a URL contains information that is “irrelevant, outdated, or otherwise inappropriate.” It also asks for “a clear, readable copy of your valid driver’s license, national ID card, or other photo ID” to verify that impersonators aren’t using the form.
So what’s happening here is that you will not only have to disclose your identity, not only will you have to give Google your identifying digits from your identity card–you will have to UPLOAD A SCANNED COPY OF YOUR ID CARD TO BE KEPT BY GOOGLE. And where do you think that scanned copy might end up? Google does say they will delete it within a month of “closing your removal request case except as required by law.” Really? And how would you ever know. And does deleting the scan mean the same thing as deleting the information in the scanned copy? What does “closing your removal request case” mean? How would you know it is closed and whether the copy was deleted? And what law is it that would require Google to keep your ID card longer than 30 days after a date that you won’t know passed? Let me guess…a National Security Letter perhaps?
You don’t suppose that Google would hand over copies of that scan to government agencies, do you? Because they will. You can say that the government might have issued that card or passport to you so wouldn’t they already have a copy? True, but the requesting agency might not be from the same government (particularly in the EU) that issued the card in the first place. Like you might give Google a copy of a UK passport that they then hand over to the U.S. National Security Agency or FBI. And you’ll never know.
And sure enough, here’s the actual form:
Ah yes. FRAUD. Now that is a driving concern at the Googleplex, right? Street View cars with WiFi sniffers masquerading as mere cameras to take pictures of your house when they were actually staging electronic breakins to your house. Disappearing competitors in search results. Lying to the U.S. Senate. Scamming keywords to better sell prescription drugs to kids or selling artists names as Adwords to drive traffic to pirate sites. 20 million take down notices a month to search alone.
Shall I go on?
But now FRAUD, that’s where they draw the line in Mountain View.
Update: Brian Womack at Bloomberg reports that Google has already gotten in hot water with German privacy authorities:
Hamburg’s privacy watchdog criticized Google’s request for photo identification documents to authenticate a user’s request, saying private companies weren’t allowed to store scanned copies of ID cards and passports under German law. People should avoid sending such scans and should black out unnecessary details, it said. It was “unfortunate” that Google hadn’t discussed with Hamburg how to implement the ruling, the regulator said in an-mailed statement.
Google can accept other forms of identification, including a utility bill, if a person has concerns over photo ID, the company said in an e-mail.
European privacy officials will discuss the consequences of the EU ruling next week, French and Luxembourg authorities said.
That didn’t take long. Once again, the Google oligarchs are missing the point that should be obvious to anyone capable of sequential thought:
Why should users have to give up even more very personal information about themselves to a known NSA collaborator in order to get rid of bad information about themselves that Google has been ordered to remove without restrictions?
Can users trust Google not to exploit the very information that users are giving up in order to enforce their rights?
We’ve seen quite a bit of “new boss” activity this week: Google screwing indie labels, Amazon screwing authors and now yet another missed opportunity for Sirius and Pandora to demonstrate that they care about the artists who deliver them riches. Yes, it’s that old and unimproved digital radio, now with even more exploitation. Meet the new boss, worse than the old boss.
This time, however, Sirius and Pandora are behaving so badly that it requires passing new legislation just to get their noses up to the fair compensation line. SoundExchange is taking steps to protect “legacy” artists from the most recent attack on artist royalties from Sirius XM and Pandora. Why? Because Pandora and Sirius want to use recordings from pre-1972 without respecting the artists enough to pay them royalties, not to mention getting a license.
And pre-72 recordings are…well, how to say it? The entire legacy of contemporary music perhaps? Yes, that about sums it up.
Here’s a screen capture I took today from Pandora of The Beatles, pre-72 (Let It Be was released May 8, 1970):
And a pie chart for Sirius showing the uses of Beatles music by channel, again from today:
And here’s Janis Joplin:
And Roy Orbison
So you can see that Sirius (and I am confident that searches for Pandora channels would deliver similar results) wants to use the music but doesn’t respect the artists. (Pie charts are available from Dog Star Radio’s invaluable searchable database of Sirius playlists available at http://www.dogstarradio.com/search_playlist.php)
Somewhere around December 2013, both Sirius and Pandora decided to stop paying royalties on ALL pre-72 recordings. These litigious companies had to know that nobody would take this lying down. Particularly since you can see from these examples that both services are using the music and not paying for it.
Why is 1972 the date at issue?
One of the quirks of U.S. copyright law is that sound recordings did not get federal copyright protection until February 15, 1972. It’s not that the recordings didn’t have any protection before 1972, they did, but that protection was provided by state law. This is the center of the Turtles case against Sirius filed in 2013 in California, New York, and Florida.
Congress established the compulsory license and royalty for sound recordings online in the 1990s and the pre-72 issue was not addressed. The gist of the argument that Sirius and Pandora make is that because the compulsory license each service relies on is in the federal Copyright Act and because pre-72 recordings are not protected by federal copyright law, no royalty payment is required for pre-72 recordings under the federal Copyright Act’s compulsory licenses administered by SoundExchange.
SoundExchange is now essentially being forced to deal with this issue because Sirius and Pandora both have decided to stop paying on these recordings while continuing to play them. Or rather, while continuing to play the most popular ones.
Let’s be clear–this is not about feeling sorry for “legacy” artists. These are some of the best known artists of all time–which is why they are still getting played on Sirius and Pandora–in many cases 70 years after the records were released. The reason Sirius has “40s,” “50s,” “60s” and “70s” channels is because it profits them to do so.
And the artists should be paid because they deserve that respect.
Representatives George Holding and John Conyers are introducing a bill in the U.S. House of Representatives to handle this issue–the RESPECT Act. We haven’t seen the legislation yet, but I anticipate that it will be consistent with the SoundExchange filing in the Copyright Office Music Licensing Study request for comments. It is not necessary to go to full “federalization” of the pre-72 recordings in order to clarify that they are to be included in the royalty payment.
Whatever the result, what is not correct is what Pandora and Sirius are doing now–playing the music without paying the artists. This is yet another missed opportunity for these two public companies. They could very easily have said that they’d continue paying artists rather than rely on a loophole. They could easily have joined with artists to fix this ambiguity. But…they didn’t. More bad advice and lobbying malpractice.
And here’s some of the artists they could have joined with, all of whom are supporting the RESPECT Act: The Allman Brothers Band, The Beach Boys, Roseanne Cash, Melissa Etheridge, Al Green, B.B. King, The Moody Blues, Cyndi Lauper, Martha Reeves, members of Steely Dan, The Supremes, The Temptations and Three Dog Night.
So once again, the Congress has to put other pressing business on hold in order to deal with Sirius and Pandora, public companies who want to get something for nothing. And make no mistake, Sirius at least is making money on this deal. Here’s the before and after on their “music fees” as told to their customers:
Before December 2013:
After December 2013:
Do you get the impression from this advertising that Sirius is charging more but paying less? If you were a fan of the “decade” channels would you have any idea that Sirius was stiffing your favorite artists? This is verging on false advertising.
More on this as it evolves, you can get the latest from Project 72, the new effort from SoundExchange to make this right and #respectallmusic
Who took on the Standard Oil men and whipped their ass
Just like he promised he’d do
There ain’t no Standard Oil man gonna run this state
It’s gonna be run by folks like me and you
Kingfish, by Randy Newman
Monique Goyens, the Director General of the European Consumer Organization (BEUC), published an opinion piece in the leading German newspaper Frankfurter Allgemeine Zeitung (in both German and English) sharply critical of the embattled EU-Commissioner for Competition Joaquín Almunia and the controversial antitrust settlement that Mr. Almunia would like to reach with Google. Or said another way, the controversial settlement that Google would like Mr. Almunia to reach with Google.
Mr. Almunia shouldn’t feel too badly. The U.S. Federal Trade Commission let Google go free on antitrust charges, too.
Yes, the FTC actually hired Beth Wilkinson as the outside lawyer in charge of the Google antitrust investigation–because, you know, there just aren’t enough experienced antitrust lawyers among the professional staff at the FTC. That would be the same Beth Wilkinson who was mentored by Jamie Gorlick when the two worked at the Clinton Department of Justice. The same Jamie Gorelick who represented Google in the negotiation with Eric Holder’s Department of Justice of Google’s $500,000,000 settlement for violating the Controlled Substances Act. The same Eric Holder who succeeded Jamie Gorelick as Deputy Attorney General during the Clinton Administration. That would be the U.S. Federal Trade Commission that let Google off the hook entirely after Google gave money to an advocacy group that gave Federal Trade Commission Chairman Jon Leibowitz an award for his work.
But what’s interesting about Ms. Goyens’ critique of Mr. Almunia’s settlement with Google is that the EC competition laws are not only supposed to protect businesses, they are also supposed to protect consumers. And Ms. Goyens’ association represents 41 consumer association in 31 European countries. So Mr. Almunia needs to take this into account–a bunch of consumers aren’t buying his deal:
Increasingly, people who use Google are placing themselves in a virtual gated community, or what was once known as „a company town“ – you can go anywhere you like, as long as you use the company’s roads and you can buy anything you like, as long as you shop at the company’s stores. Today, this online company town does not objectively lack the supply of anything, but the cost is a tremendous state of dependency.
Google is fond of saying that they lack a monopoly because their competition is “one click away”. This is, of course, complete crap when it comes to the millions of people who were suckered into using Gmail, and Ms. Goyens makes short shrift of this argument as well:
Google continues to expand its range of activities and develop its own services and products – Gmail, YouTube, Maps, Calendar to name a few. It is becoming something of a gatekeeper to the internet and is uniquely positioned to direct consumers to information, while it continues to acquire a great deal of users’ personal information. To do without Google is often no real option when the worldwide number 2 – Baidu – is from China and could represent a language hurdle for most European consumers for the foreseeable future.
You have to understand that Mr. Almunia has been teasing this Google settlement for years. The settlement is an alternative to a “Statement of Objections” which increasingly seems to be Mr. Almunia’s only realistic alternative. A Statement of Objections is essentially a full blown antitrust investigation into Google and is something that Google really, really doesn’t want. If Mr. Almunia continues down his current path, the European Commission is going to look not only toothless, but purposely ineffectual. I mean, anyone who grew up in Texas politics would be lacking in manners and intellect enough to just assume the dude is on the take. I don’t mean he’s getting brown paper bags of cash or selling cleans out of his trunk for walking around money, but something is just downright weird about the whole thing. I’d need someone much smarter than me to explain it all, because surely Mr. Almunia has an explanation. Perhaps one provided him by his new buddy Google Chairman Eric Schmidt, call sign “Uncle Sugar.”
If public officials try hard enough, it is possible that the public they purport to serve will hang a sign around their necks that’s really nigh impossible to remove. Ms. Moyens gives us a taste of the kind of commentary that will no doubt dog Mr. Almunia the rest of his life if he continues on this path with his Google settlement:
After years of investigations and lengthy negotiations, the Competition Commissioner of the European Commission, Joaquin Almunia, has announced his intention to reach a settlement with Google. Despite the unanimous rejection of the proposed remedies by market players and consumer organisations, Commissioner Almunia has decided to leave the negotiating table empty handed.
The same is not true for Google. Not only do their latest set of proposals fail to address the problems identified by the Commission, but they appear to be tailored to maximise Google’s profits and commercial interests. The Commission is essentially offering Google a free pass to continue manipulating search results and excluding vertical service competitors from the online search market. The impact on consumer choice and innovation has been and will be significant.
The new proposals are based on the incorrect assumption that more prominent (and purchased) display of some of Google’s competitors is the best solution to discriminatory behaviour. Google and the Commission continue to ignore the views of the majority of complainants, third parties and the European Parliament to end its current practices of manipulation of search results.
Instead of remedying the discrimination within the market in which the California-based multinational is clearly dominant, the deal as it stands will provide Google with additional tools to strengthen this dominance. Side effects of the Commission coming away empty handed from a lengthy investigation will be the emboldening of Google and that future action by the Commission will be less likely and credible. Such a situation is worse than doing nothing.
Yes, worse that doing nothing. Here’s a new data point for Mr. Alumnia: Google’s bullying of independent labels in its “negotiation” (if you can call it that) with YouTube.
The very company that Mr. Almunia wants to let off the hook is threatening independent labels with a take or leave it deal that will penalize the labels on YouTube if they don’t give Google the terms it wants on an as-yet-unlaunched music service designed to compete with Spotify. This will not only harm small businesses, but also the very consumers that Mr. Almunia is supposed to protect.
And why do you think that Google thinks they can get away with those threats, Mr. Almunia?
Because you let them.
Talk about DMCA abuse! Some people don’t deserve a safe harbor when they turn it into a minefield.
WIN YouTube statement
YOUTUBE ISSUES CONTENT BLOCKING THREATS TO INDEPENDENT LABELS
WIN Raises Concerns About New Music Streaming Agreements
Talks Between the Two Parties Yield No Significant Results
London, May 22nd 2014 – The Worldwide Independent Network (WIN), the organisation that represents the interests of the global independent music community has responded to news that YouTube intends to block the content of members who do not sign a new music streaming agreement describing it as ‘unnecessary and indefensible’
WIN was formed in 2006 to represent the global independent industry, which boasts the second largest global market share after Universal.
As reported by several news sources:
(http://www.hypebot.com/hypebot/2014/04/YouTube-music-subscription-music-service-to-launch-this-summer-report-.html) YouTube is expected to launch a new music streaming service. The service has apparently negotiated separate agreements with the three major labels – Sony, Warner and Universal – but according to WIN’s trade association colleagues has yet to reach any substantive agreement with their members.
At a time when independent music companies are increasing their global market share WIN has raised major concerns about YouTube’s recent policy of approaching independent labels directly with a template contract and an explicit threat that their content will be blocked on the platform if it is not signed.
According to WIN members, the contractscurrently on offer to independent labels from YouTube are on highly unfavourable, and non-negotiable terms, and undervalue existing rates in the marketplace from existing music streaming partners such as Spotify, Rdio, Deezerand others.
WIN has held extensive talks with YouTube at their instigation over the last 24 hours to try and resolve this issue but no progress has been made. WIN’s request for YouTube to rescind the termination letters sent to its members has not as yet been agreed to.
Alison Wenham, CEO of WIN and Chairman of AIM (Association of Independent Music, UK)said, “Our members are small businesses who rely on a variety of income streams to invest in new talent. They are being told by one of thelargest companies in the world to accept terms that are out of step with the marketplace for streaming. This is not a fair way to do business.WIN questions any actions by any organization that would seek to injure and punish innocent labels and musicians — and their innocent fans— in order to pursue its ambitions. We believe, as such, that these actions are unnecessary and indefensible, not to mention commercially questionable and potentially damaging to YouTube itself, given the harm likely to result from this approach. The international independent music trade associations call uponYouTube on behalf of their members to work with them towards an agreement that is fair and equitable for all independent labels. This has uncomfortable echoes of similar behaviour by MTV ten years ago, who chose initially to take a similar approach in undervaluing the independent sector, but who subsequently concluded a deal on fair terms, which lasts to this day. It is for every company to determine their own commercial arrangements, but it is in no one’s interests to see independent artists being undervalued in the digital marketplace.
Other organisations and WIN members from around the world also joined calls for YouTube to re-consider its position. Statements of support have so far been received from organisations in the following countries
“The proper functioning of the digital market is essential and the EU takes trading practices like these seriously because they destroy competition and innovation. Rather than moving from the ‘disrupter’ to the ‘destroyer’, the real challenge for Google should be to use its muscle to develop a disruptive remuneration system which recognises that 80% of all new releases, which are so important in YouTube’s offer, are generated by independents.”
Helen Smith, Executive Chairman – Impala, Europe
“It is unfortunate that a service like YouTube with a worldwide scope appears not to be interested in treating all copyright owner creators equally. This has an effect not just on A2IM’s label members but also upon their artists and the consumer fans of our artists who will lose this form of access to our music. We hope that we can continue discussions with YouTube and ultimately restore and grow our relationship with this very important service.”
Rich Bengloff, President -American Association of Independent Music (A2IM)
“We are disappointed with reports of YouTube not negotiating in good faith with independent music labels. We urge YouTube to reconsider its approach, and recognize that independent labels deserve to be treated with more respect. It is in everyone’s best interests for music service providers like YouTube to work with the independent music community to negotiate a deal that is fair, equitable and respectful for all parties involved.”
Stuart Johnston – President CIMA, Canada
“The independent sector has struggled for decades to have a fair market in which to work. There is no reason for us to, at this point, give to one player privileges that could jeopardize the market health as a whole. This pressure over the labels is insane and will lead nowhere, but to a delay in service launch.”
Luciana Pegorer – Managing Director ABMI, Brazil
“We are extremely disappointed at YouTube’s decision to use its market power to unilaterally enforce inferior commercial terms on the independent sector. For a company that has arranged its structure to pay minimal tax in our market, to now see YouTube’s treatment of independent Australian labels who provide so much of its Australian music content so as to further improve their profitability at the sake of local content creators is deeply concerning.”
David Vodicka – AIR, Australia
“It seems obvious that a streaming/subscription service from YouTube is imminent and if the offering does not house the indie sector YouTube is plainly making the claim that this sector holds no value for them. In an age where New Zealand artists spring from the very independent ethos to achieve worldwide acclaim it makes no sense forYouTube to pursue this tactic of exclusion.”
Scott Muir – Deputy Chair of Independent Music, New Zealand
“It is regrettable and unacceptable that YouTube tends to abuse its dominant position as a digital channel to impose unfair conditions on independent labels. Further, the threat of blocking or removing their content would have the negative effect of preventing consumers from enjoying a substantial part of the whole music catalogue”
Jérome Roger – General Manager UPFI, France
“We are regretful to hear of pressure being put by YouTube on suppliers who have so far chosen not to sign up to their current contract offer. We may adore new, disruptive business models, but even more we love appropriate, fair, social and artist-valuing remuneration. So dear YouTube – we’d appeal for a move towards a more co-operative understanding and negotiation, working together, not against each other.”
Joerg Heidemann – VUT, Germany
“It is deeply disturbing that YouTube so far has not even tried to negotiate deals for their upcoming streaming service with independent labels from Austria. We vehemently protest against YouTube’s policy that is trying to squeeze small labels into deals that are discriminatory. YouTube as one of the world’s leading online services with a significant market power is obliged to offer deals to all interested labels around the world on equal terms and conditions.”
Alexander Hirschenhauser – VTMOE, Austria
“The AMAEI, the Portuguese Independent Music Association, hereby asserts its position that any service that utilizes music that takes a differentiated approach between major label vs. independent content is not only on the wrong ethical path – a file is a file, a song is a song – but also on the wrong side of technological progress and development. It is the vibrant independent music community that drives creativity and growth, and any service that leaves out the independents will ultimately lose out on appealing to an ever-increasing audience. Independent music is the life-blood of the internet. Don’t spill it.”
Nuno Saraiva – Vice President of AMAEI, Portugal
“We want YouTube to reconsider its position in this matter and to work with the independent music sector to agree a fair resolution to this issue. We value and respect what YouTube has to offer to the digital music marketplace and would like that appreciation reciprocated by them so that we can all move forward towards a mutually beneficial solution.”
Kees van Weijen – STOMP, Netherlands
“DUP represents the Danish independent record labels and we’re appalled that YouTube has issued these individual ultimatums. YouTube’s self-proclaimed role as a ’a distribution platform for original content creators and advertisers large and small’ is little more than hollow branding of a company that in reality is losing touch with the very creators and audience that have bloated the size of the platform into the stratosphere over the years. For a global mastodon like YouTube to further undermine the value of music to a level well below existing streaming services can spread like a virus and destroy the independent recording industry, labels and artists alike”
Kristoffer Rom – Co-Chairman of DUP , Denmark
“The Safe Harbour provision of the DMCA dates from 1998. It’s being used to deprive culture workers and creators of their right to withdraw their labour and when you can’t do that – you’re a slave. Spain’s parliament is considering a law which begins to adapt copyright for creators to the new landscape. We couldn’t hope for a better illustration of the problems that need solving than Google’s behaviour at this negotiating table. It’s a reminder that they need to be shown how not to be evil.”
Mark Kitkatt – UFI, Spain
“We find it very odd that YouTube has not contacted Finnish independent labels to negotiate deals for its streaming service, and we object to any proposal by a dominant platform such as Youtube which excludes or unfairly discriminates against independent right holders in Finland.”
Tapio Korjus, Chairman IndieCo, Finland
“Independent labels, organizations and even artists themselves are incubators for the new talent of the world that drive creativity and what’s ‘next’ in music. It is through social media platforms such as YouTube that these creatives have the ability to not only survive as artists, but to thrive beyond areas that major labels do not support. By hindering the opportunities for independent artists to be discovered and making unexplored areas of creativity unsearchable,YouTube will contradict its own rule of ethics if it executes its intended plans.”
Mimi Nguyen – Lang Van, Vietnam
“We, LIAK (Record label industry association of Korea) fully support WIN’s position onYouTube’s recent policy of discrimination against the independent music sector.Independent music needs to receive fair treatment from major global platforms for healthy diversity of music in the world.”
Chan Kim – Chairman, LIAK South Korea
For further information:
Andy Saunders at Velocity Communications
+ 44 (0) 207 430 0200
The Worldwide Independent Music Industry Network (WIN) is a global forum for the professional independent music industry. It was launched in 2006 in response to business, creative and market access issues faced by the independent sector everywhere. For independent music companies and their national trade associations worldwide, WIN is a collective voice. It also acts as an advocate, instigator and facilitator for its membership.
Thanks to Alison Wenham and the indies for standing up to the face of evil! This should be reported to Almunia as an example of how Google abuses its monopoly power. #istandwithwin
There is an interesting story breaking in the UK’s Guardian about negotiations between indie labels rights organization Worldwide Independent Network (WIN) and Google’s YouTube.
“Music industry trade association the Worldwide Independent Network (WIN) has accused YouTube of strong-arm negotiating tactics trying to force indie labels to sign up to the new service.
WIN, which represents independent labels worldwide, claims that YouTube is approaching labels directly with a “template contract” and threatening that if they do not sign it, all their music videos will be blocked on YouTube.”
Bring on the black out? How ironic would it be that Google would resort to content blocking as the champions of an open internet and freedom of speech online.
We can see it now…
This video has been removed by Google who chose not to compensate the creator fairly for their work. Sorry about that ;-(
READ THE FULL STORY AT THE GUARDIAN…
View original post 2 more words
I’ll gladly pay you Tuesday for a hamburger today!
J. Wellington Wimpy
We recently posted an excellent piece by music publisher Monica Corton that aptly expresses the frustration of music publishers in the Kafka-esque world of government control of songwriting and music publishing. The agita over government control has been developing for years. The latest Pandora experience for ASCAP brings the issue front and center.
I understand the frustration and MTP readers will know that I have written about the issues extensively here, the Huffington Post, The Hill, pretty much anywhere they’d have me. I’m not the only one, either–David Lowery has also make many convincing arguments about the problem of government control of songwriters. It is ludicrous that in a world where Google runs roughshod over artists as well as consumers and is essentially unfettered by antitrust concerns that the government puts its fearsome boot on the neck of songwriters.
And it is the government control part that is the problem. I believe that all the other manifestations, including low royalty rates, are just symptoms of the underlying problem. So given that this is my view, I both agree with Monica in some ways and disagree with her in others. In general, we are allied in music and it is possible to disagree with our friends in the songwriter and publisher community once a decade without abandoning them, which would be unthinkable.
A Burger Today: Rate Court as Cottage Industry
The PRO rate court process is getting ridiculous. From a licensing perspective, the PROs and SoundExchange are two of the very few examples of effective music licensing. You go to them and you get a license for essentially the universe of music. From a digital retailer’s perspective, this is a great result and produces a very measurable saving. If there’s already a rate in place, then this kind of blanket licensing for songs from ASCAP, BMI and SESAC is very appealing to all concerned.
It is the setting of the rate that is the problem and it all comes down to this: The PROs cannot say no. Music can be used on a rateless basis during a negotiation and the fight over rates will continue. The eventual rate essentially will be applied retroactively. Who in their right mind would have ever agreed to that deal? Aside from J. Wellington Wimpy, that is.
This hack is not lost on the more litigious–read, well-funded–members of the music tech community. We are currently doing a study of the last swath of rate court decisions and an interesting trend is emerging. The same law firms seem frequently to be representing the licensees and the fact patterns are similar. As Monica notes, when you take into account the total transaction costs of establishing a rate, the litigants very likely end up on the losing end of the deal. Songwriters seemingly must lose every time, but can do little about it. Aside from the fact that the PRO consent decrees are some of the longest running consent decrees in history, why keep a system where nobody wins?
Knowing that the rate court awaits, some litigious licensees (like Pandora or the monopolist YouTube) engage in a “negotiation” with ASCAP and BMI. Who can know what lurks in the hearts of men, but forgive me if I am highly suspicious of whether this type of licensee ever intends to actually reach a conclusion in the negotiation that precedes the rate court filing. My hunch is that the negotiation is merely a prelude to litigation.
And that is exactly the entirely predictable behavior that the government has produced by installing an unelected judicial elite in a far away Eastern city to oversee the world’s songwriters. And it really is the world’s songwriters, because rate court judges dictate to songwriters who are not otherwise subject to U.S. law exactly what the value of their music is to be when performed in the U.S.
So it is not surprising that a very loud rumbling is heard coming from the songwriting community that chafes against the government’s boot on their throat. There is a desire among songwriters and publishers to dismantle the entire consent decree process. And since getting rid of the consent decree would likely have to be ruled on by the very rate court judges who contribute to the problem, how do you think that’s going to go? I think this will involve a long, long litigation process while songwriters suffer. Drip, drip, drip.
In the meantime, the ASCAP rate court is doing the best it can to force the eventual disintegration of ASCAP by essentially requiring publishers to withdraw from ASCAP altogether in order to enjoy their rights in a free market negotiation. The court is essentially calling the bluff with little regard for the aftermath. A much weakened ASCAP will inevitably be less effective for independent songwriters and music publishers who remain out of necessity. (Not to mention that the court is forcing the FUBAR situation of publishers withdrawing while their ASCAP songwriters remain in the organization, a result that would beggar belief.)
I think that getting rid of the consent decrees altogether in favor of binding arbitration or some other alternative dispute resolution process would be a very serviceable repair for a rate setting system that is clearly useless (in contrast to a very efficient licensing structure). Even if one had to suffer on through the rate court process, it seems that allowing songwriters and publishers to opt out of either the blanket license or the compulsory license on any basis they chose would be consistent with the goals of the consent decree itself and would also have a very beneficial effect on rates. I’m willing to be educated otherwise, but that seems like a relatively straightforward legislative fix that could trump the consent decrees. (Not without controversy, to be sure.) For PROs, that would mean allowing songwriters and publishers to opt out on a song by song, license category (i.e., all digital or all radio) and deal by deal basis. It would reestablish the songwriter’s right to say no.
For mechanical licenses, that would mean opting out of the compulsory license altogether. That one repair–opting out–would preserve individual liberty, allow markets to develop around rates, and would obviate the need for a rate court. Remember–Pandora had already negotiated direct deals with publishers when they were in the very rate court that not only hammered songwriters on the rates, but set aside these freely negotiated contracts. A truly shocking rejection of the actual free market by a court that is supposed to be divining and setting an equivalent of a free market rate. A rate that hasn’t existed since 1941.
Get Your Own Burger
I have to gently disagree with a couple of supporting arguments that one hears more frequently: Tim Westergren is rich and that the problem for songwriters is that services like Pandora pay too much to record companies.
I first met Tim Westergren when he was knocking around Silicon Valley with a company called Savage Beast that eventually became Pandora. (Personally, I was not attracted to Savage Beast because I do not believe in machines making music recommendations for humans. Can you imagine anyone saying, hmm, what new music shall I listen to? Let me ask my robot. I think I’m going to be right about this in the long run.)
Whether you like the idea or not, Tim put his heart and soul into this company and after years of struggling finally made it through. He is getting a payday, and I’m happy for him to get the money. I want all entrepreneurs to be able to reap the benefits of their efforts. I may think they are overpaid, I may think that only and idiot would pay $x billion for that (not mentioning any names there, Ian), but I do not question the correctness of their reward. They deserve the upside.
But so do the songwriters and artists that Pandora asks to invest in them by taking a lower royalty rate. However, Pandora offers creators no benefit on the upside. We are to take all the downside risk and give them all the upside benefit. In fact, Pandora not only offers no upside, they actually want songwriters and artists to take less the more successful the one-product company becomes. Should Pandora be surprised that this approach has not gone well for them?
Pandora has made a couple very big mistakes. Colossal errors. First, they got into the habit of crying poor when they were and forgot that when you get rich you can’t cry poor anymore or people think you are an…well…let’s say a hypocrite. The other thing they did wrong in their public messaging was hitch their wagon to the percentage of their gross or net (depending on the day) that they paid for royalties. This is not a smart move for a number of reasons. (Even if you ignore their IPO and follow on offering.)
The main reason this is a weak argument is that it is misleading. Pandora’s royalty rates on sound recordings are largely a fixed rate and on songs are also a fixed percentage. Gross or net income fluctuates. Pandora is itself in control of its gross income. If you want Pandora’s royalty payments to be a lower percentage of its revenues–increase the revenues. (The blend between songs and sound recordings will tend to decrease the overall percentage.)
For example, Pandora famously said that it pays over 60% of its revenue in royalties. That sounds like it expresses a royalty rate of 60% of revenue, right? Wrong. On a quarterly basis, Pandora’s royalty payments as a percentage of gross fluctuates as you would expect. The trend line of royalties as a percentage of Pandora’s revenue is down–in fact Q4 of 2013 the percentage was 47%. That ain’t 60.
So by expressing the royalty payment in terms of percentage of gross revenues, Pandora puts its overall business strategy on the table.
If Pandora wants to compare royalty payments to a percentage of its net, the company is now putting its operating P&L on the table. You know, for items like executive compensation. Sure you want to do that?
I really don’t object to Tim and Co. getting rich from selling Pandora stock. Go with God, buddy. But don’t come crying to me about royalties. There’s a way to negotiate these deals based on principled self interest and not scapegoating. And of course you know who scapegoat number 1 always is?
The record companies.
Tim has done absolute back flips trying to shoehorn his troubles into being the fault of “record companies.”
This is the second place I would gently disagree with one of Monica’s supporting arguments. The main reason that songwriters get less than artists is because the government is all up in their business and has been for over 100 years (since the 1909 Copyright Act if not before). Songwriters fought like the dickens when the 1976 revision of the Copyright Act came around, principally in the person of one Hoyt Axton, a great songwriter and a great man.
The government had artificially suppressed the mechanical royalty rate at 2¢ since 1909. Yes, that’s right. Year in and year out, through two world wars and economic booms and busts, for nearly 70 years songwriters got the same rate. In 1976, the mechanical rate was essentially indexed to inflation and gradually rose from the increase to 2.75¢ in 1978 to the current 9.1¢.
Great result, you might say. True, better than having the government’s 2¢ boot on your neck for another 70 years. But had the government decided to index that 2¢ rate retroactively to determine under the principle of indexing what the rate would have been in 1976 and then indexed that uplifted 1976 rate prospectively, the current mechanical rate would be closer to 50¢. Or–perish the thought–let songwriters negotiate their own rates.
When songwriters accepted this state of affairs, it locked into place the idea that songs are to be paid a low rate. That’s not something that artists or record companies have control over. Maybe it wasn’t the best deal that could have been made, but it was the deal that was made with the government.
And it is important to recognize that the rates that Pandora pays for sound recordings are negotiated by SoundExchange which is comprised of artists, unions, indie labels and the majors. That artist/union/label board has to approve the sound recording rates. So it is really buying into Westergren’s fallacy to try to find a victim, first of all, but then to think that somehow the purported songwriter victim is victimized by the faceless “record companies” is really just factually incorrect scapegoating.
Not only do we not want to allow Pandora–of all people–to be able to get the community to turn on each other, we all want to support songwriters in getting more money but not at the expense of other members of our community or vice versa. Whether that means supporting publishers in withdrawing digital rights from PROs, supporting songwriters in opting out of compulsory licenses and negotiating their own fair market rates, getting rid of the consent decrees or asking the songwriters to support artists in negotiating more favorable rates with digital services.
But I would hate to see the creative community allow litigious companies like Pandora, Sirius, Google and their ilk, or the National Association of Broadcasters and the Radio Music License Committee for that matter, to cause us to begin thinking that there is a single pie for music that is defined by our opponents and that they can dupe us into fighting over.
We should all be united in getting the government out of the equivalent of wage and price controls for songwriters. Songwriters have the right to say no over sync licenses for film, TV and commercials. That’s been in place just as long as the compulsory license and the world has not ended. Extending that right to say no to performance and mechanical licensing is the first step towards helping songwriters get fair compensation, not fighting over an imaginary pie.
I think that if we go that route, we’ll soon be picking over each others carcasses. And our mutual opponents would just love that to no end.