Weekly Top Three Artist Rights Stories

The top three artist rights stories this week in review

1. Blake Morgan’s Must Read Huffington Post Op-Ed, “Why Music Makers Are the Real American Innovators:  If you are sick and tired of being talked down to, called a Luddite, ignored, demeaned and exploited by The Man 2.0 in the Grey Flannel Suit, you’ll love Blake’s latest homerun op-ed:

Music makers don’t require a lesson on American innovation at all.

We know all about American innovation.

Rock & Roll is an American innovation. Hip-Hop is an American innovation. Jazz isan American innovation. Blues, Country, Gospel, Bluegrass, each of these — and so many others — are distinct American innovations.

Music is one of the things America still makes that the world still wants. The people who make that music should be paid fairly for their work.

That’s our argument.

2.  UK Artist Rights Advocates Defeat MMF-UK for PPL Board Seat:  The UK’s collective licensing body Phonographic Performance Ltd. (or “PPL”) held an election at the end of last year for a seat on the PPL board allocated to an artist representative to the PPL (called an “Elected Performer Director”).  This is similar to SoundExchange, the PPL’s counterpart in the U.S., that has a certain number of seats allocated to artist representatives, one of which is currently held by David Byrne.  You know–an artist.

Notwithstanding some proxy tactics that seemed unusual to me, Crispin Hunt and Mark Kelly were elected over the candidate from the MMF-UK (which some have suggested are under the influence of Spotify and Google, perhaps through direct investment by Google’s Executive Chairman Eric Schmidt).

FAC Proxy

3.  Mitosis and Spotify: Class Actions Continue Apace:  Despite apologias from a minority of voices in the music industry establishment, this week we had a viral post from Stephen Carlisle that laid out in no uncertain terms key flaws in Spotify’s failed licensing practices based on personal experience.  Stephen’s guest post got a lot of attention and was even quoted by Stuart Dredge in the influential MusicAlly blog in a post about David Lowery’s class action against Spotify filed on December 29.

The week ended yesterday with a new class action against Spotify filed by Henry Gradstein and Harvey Geller, the champions of artist rights who also represent The Turtles in a class action against SiriusXM and Pandora for robbing pre-72 artists. The second Spotify class action is filed along the same lines as David Lowery’s class action but with independent songwriter Melissa Ferrick as the class representative.

Time will tell where both these class actions go, but one thing is clear–Spotify’s “nothing to see here” defense isn’t fooling anyone.  The Ferrick class action introduces an interesting fact:

For the musical compositions that are at issue in this litigation, Spotify did not negotiate direct licenses and did not avail itself of the compulsory licensing procedures in the Copyright Act. Instead, Spotify chose a third path: it outsourced its licensing and accounting obligations to the Harry Fox Agency (“HFA”), a music publishing rights organization that was ill-equipped to obtain licenses for all of the songs embodied in the phonorecords distributed by Spotify. As a result, neither Spotify nor HFA directly licensed or timely issued NOIs for many of the musical compositions embodied in phonorecords that Spotify was reproducing and distributing on a daily basis as part of the Service.

This reference to HFA may be a little confusing.  Most people think of the venerable HFA as being an agent and true blue fiduciary for publishers, perhaps especially independent publishers who cannot afford to run their own royalty departments and outsource to HFA.  So how is HFA involved in this class action lawsuit (although not a named defendant)?  As Spotify disclosed in its comments to the Copyright Office Music Licensing Study:

Spotify secures the right to reproduce and distribute the musical works embodied in sound recordings either from musical work copyright owners (typically music publishers) through its licensing administrator Harry Fox or pursuant to the statutory license set forth in Section 115 of the Copyright Act.

The Spotify comments state and the Ferrick complaint suggests that HFA is actually working for Spotify in this instance and at least as far as the putative class is concerned “was ill-equipped” for the task of clearing songs on those inbound licenses.

So that clears it up.

As much as Spotify would like to blame others for its manifest failures, at the end of the day the choice to go forward without licenses on what is evidently a massive number of songs rests solely with Spotify.  As the Ferrick complaint notes, this decision to accept the business risk was apparently driven–incredibly–by a belief that in order to have an effective consumer offering, Spotify had to have tens of millions of tracks available.

I’d be very interested to know exactly where this consumer research is that shows the marginal value of an additional 12 million songs is so meaningful to a music service that it trumps the infringement exposure.  I frankly have never seen it.

As Will Page, the former economist for PRS, found in a 2008 study of PRS revenues that famously debunked Chris Anderson’s absurd “long tail” theory, the “long tail” is pretty meaningless for music services:

[PRS] found that only 20% of tracks in our sample were ‘active’, that is to say they sold at least one copy, and hence, 80% of the tracks sold nothing at all. Moreover, approximately 80% of sales revenue came from around 3% of the active tracks. Factor in the dormant tail and you’re looking at a 80/0.38% rule for all the inventory on the digital shelf.

Mr. Page now works for Spotify.