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The Single Garment of Destiny: Remaining Awake Through a Great Revolution

March 31, 2018 Comments off

Today is the 50th anniversary of the Reverend Martin Luther King, Jr.’s sermon at the National Cathedral now titled “Remaining Awake Through a Great Revolution”.

There can be no gainsaying of the fact that a great revolution is taking place in the world today. In a sense it is a triple revolution: that is, a technological revolution, with the impact of automation and cybernation; then there is a revolution in weaponry, with the emergence of atomic and nuclear weapons of warfare; then there is a human rights revolution, with the freedom explosion that is taking place all over the world. Yes, we do live in a period where changes are taking place. And there is still the voice crying through the vista of time saying, “Behold, I make all things new; former things are passed away.”

You Can’t Find What You Don’t Look For: Spotify, Google, Pandora Can’t Find Aerosmith’s Steven Tyler and Joe Perry–but what about Martha Stewart

March 28, 2018 Comments off

In another odd twist in the 60,000,000-plus “mass NOI” debacle, a five second search of the SX Works NOI Lookup database reveals that Spotify, Google, Pandora and other services can’t seem to locate Aerosmith songwriters like Steven Tyler and Joe Perry, not to mention their co-writers like long-time Bryan Adams collaborator Jim Vallence.  [Aside from that absurd result, the SX Works database is handy for revealing what certainly appear to be potentially bootleg releases for which a compulsory license cannot be obtained anyway.]

Aerosmith

If you’re not familiar with the “mass NOI” problem, here’s the explanation in a nutshell:  two factors collide to create massive confusion.  Due to what has now become a major loophole in the 1976 Copyright Act, if a song copyright owner is not identifiable in the public records of the Copyright Office, then a user like Spotify can serve a notice (“NOI”) on the Copyright Office notifying the world that Spotify intends to use the song in reliance on the statutory (sometimes called “compulsory”) license under the Copyright Act.  (Any songwriter is likely to have received their share of the millions upon millions of these NOIs sent to song owners by MRI, HFA and other agents acting for the services.)

Sending notices to the Copyright Office was something of a backwater operation for the decades after 1976 up until April 2016.  At that time the Copyright Office began accepting millions upon millions of these NOIs from services claiming they could not find the copyright owner.  By serving the NOI on the Copyright Office the service claimed a vaild compulsory license meaning they could not be sued for unlicensed uses.  Because no one at the Copyright Office examined the NOIs to see if they were properly filed, all of the tens of millions of NOIs were blindly accepted.  (If you want to drill down on the details, you can read an article on the subject I wrote that was published in the American Bar Association Entertainment & Sports Lawyer.)

The common reaction to the collision of these factors is one of sympathy for the Copyright Office.  We are told that the Copyright Office lacks the resources to review each of the millions upon millions of NOIs.  I understand that–but the proper reaction in that situation is not to let these companies get away with it–the proper reaction is to shut down the mass NOI filing and tell Congress to do something about it.  I know that Members of Congress were aware of the problem and did nothing about it, although somehow some people seem to think that the Music Modernization Act is the answer to the problem.

It’s not–it sweeps it under the rug.  But which notices are being swept under the rug, exactly?  Let’s take Aerosmith’s Sweet Emotion as an example.  Many music users have filed these “address unknown” mass NOIs on Sweet Emotion.  Remember–the loophole allows a royalty free compulsory license if the copyright owner cannot be located “in the registration or other public records of the Copyright Office.”  (17 USC 115(b)(1).)  It doesn’t matter if the music user seeking the compulsory license could easily find the owner in the PRO databases or has actual knowledge (such as is frequently the case with Google’s much ballyhooed Content ID or MRI’s Songdex)–what matters under the Copyright Act is if the Copyright Office has the information.

So here’s the “addres unknown” NOI filings on Sweet Emotion:

Sweet Emotion

These filers attest that they have looked for the copyright owner in the Copyright Office public records as required in the filing instructions:

In the case where the Notice will be filed with the Copyright Office pursuant to paragraph (f)(3) of this section, the Notice shall include an affirmative statement that with respect to the nondramatic musical work named in the Notice of Intention, the registration records or other public records of the Copyright Office have been searched and found not to identify the name and address of the copyright owner of such work.

This language is fixed in the template for each NOI served on the Copyright Office.

So you might not expect to find this Copyright Office public record on Sweet Emotion:

Sweet Emotion CO Catalog

So it seems pretty clear that Sweet Emotion does not qualify for an address unknown NOI and it also appears that the attestation in that “address unknown” NOI is false.  It’s also pretty likely that the music users are actually paying royalties under voluntary licenses that cover the Aerosmith titles.  They are also likely paying under the performance rights licenses to the Aerosmith PRO.  If that’s true, money isn’t the issue.  So if it’s not that they care about paying the royalty, then why are these users filing “address unknown” NOIs on titles for which they are highly likely to know the song owner’s address, making the filing false.

You’d have to ask the services why they would want to have a voluntary license–which has a term that expires–and a compulsory license–that is essentially perpetual and will continue on past the expiration of the voluntary license.  There is an assumption that voluntary licenses will be renewed, but of course if you have a side-by-side compulsory license there’s no incentive for the user to renew the voluntary license when they could just rely on the compulsory and let the voluntary license expire.  And avoid paying those nasty minimum guarantees.  Particularly if the controversial Music Modernization Act is passed into law because all those mass NOI “address unknown” filing will be automatically swept into the MMA’s automatic blanket license.

Of course if anyone bothered to check any of these mass NOIs–this means you, Copyright Office–they would have found a fly in the ointment.  Or maybe millions of flies.

And what is even more interesting is that it is highly likely that somebody at the services knows their company’s attestation is false (perhaps hundreds of thousands or even millions of attestations).  Which leads us to Martha Stewart.

If you recall, one of the transgressions that got Martha Stewart some time in stir was making false statements to agents of the federal government.  The particular statute that Ms. Stewart violated was 18 U.S.C. Sec. 1001 which states:

(a) Except as otherwise provided in this section, whoever, in any matter within the jurisdiction of the executive, legislative, or judicial branch of the Government of the United States, knowingly and willfully—

(1) falsifies, conceals, or covers up by any trick, scheme, or device a material fact;

(2) makes any materially false, fictitious, or fraudulent statement or representation; or

(3) makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry;

shall be fined under this title, imprisoned not more than 5 years or, if the offense involves international or domestic terrorism (as defined in section 2331), imprisoned not more than 8 years, or both. If the matter relates to an offense under chapter 109A, 109B, 110, or 117, or section 1591, then the term of imprisonment imposed under this section shall be not more than 8 years.

(b) Subsection (a) does not apply to a party to a judicial proceeding, or that party’s counsel, for statements, representations, writings or documents submitted by such party or counsel to a judge or magistrate in that proceeding.

(c) With respect to any matter within the jurisdiction of the legislative branch, subsection (a) shall apply only to—

(1) administrative matters, including a claim for payment, a matter related to the procurement of property or services, personnel or employment practices, or support services, or a document required by law, rule, or regulation to be submitted to the Congress or any office or officer within the legislative branch [such as the Copyright Office, part of the Library of Congress]; or

(2) any investigation or review, conducted pursuant to the authority of any committee, subcommittee, commission or office of the Congress, consistent with applicable rules of the House or Senate.

 

Spotify IPO Watch: Buy High, Sell Low — Music Tech Solutions

March 28, 2018 Comments off

Is Spotify’s unusual “DPO” approach and bizarre $132 selling price simply a way for insiders to short the stock? See SPOT run! Run SPOT run!

Here’s an interesting anecdote about that imminent Spotify stock offering.  Remember, Spotify is rumored to price at $132 per share based on private market trades (on a split adjusted basis, I guess).

If the Spotify “DPO” actually does trade at $132, it will probably be the highest valued IPO stock ever.  Dropbox, for example, priced at $21 and closed at $28.48 on its first day of trading.  Facebook priced at $38, Google at $85, Alibaba $68, Amazon was $18.  So Spotify will have to be pretty special to actually trade at $132 on the public market.

It’s good to remember that most of these comparisons had what’s called a “full commitment underwriting” where the company issues new shares that are purchased by an underwriting syndicate and then resold to the public.  Spotify will issue no new shares.  So–one would surmise that the only ones selling will be those who already hold Spotify shares that have been allowed to be sold on the public exchange.  That appears to mean the shares that will be trading will be the insiders (or mostly the insiders), with no restrictions on which of those insiders can sell on the first day of trading.  (Most IPOs have a restriction (called “lockup agreements”) on when employees can sell their shares to avoid a rush for the exits.)

I happened to be chatting with two sophisticated investors in recent days, one from a hedge fund and the other an entrepreneur who has taken a couple companies public.  Both of them had the same reaction after we talked through Spotify’s competitive position and some of the disclosures in Spotify’s SEC Form “F-1”.

Let’s start with Spotify’s description of who it counts as a subscriber:’

We define Premium Subscribers as Users that have completed registration with Spotify and have activated a payment method for Premium Service. Our Premium Subscribers include all registered accounts in our Family Plan. Our Family Plan consists of one primary subscriber and up to five additional sub-accounts, allowing up to six Premium Subscribers per Family Plan subscription. Premium Subscribers includes subscribers who are within a grace period of up to 30 days after failing to pay their subscription fee.

If you think that a paid subscriber means a subscriber who paid, you’re probably not wild about this definition, and both my friends thought it was not only a meaningless number but also was deceptive.  My guess is that it conservatively overstates “Premium Subscribers” by about 20% given the number of freebies that Spotify hands out.  We were all actually surprised that the Securities and Exchange Commission allowed Spotify to get away with this kind of disclosure as the definition is buried in a footnote.  Neither friend had noticed it, and these were people who are too smart to miss these things normally.

Then there was a discussion about that New York real estate–Pandora is certainly learning its lesson about sky high overhead and is migrating gradually to Atlanta.  I’ve always been mystified why money losing companies like Spotify get away with locating in some of the highest priced real estate in the world–San Francisco and Manhattan.  And also get away with complaining about royalties instead of rents.  Rather than the labels rewarding them based on subscribers, why not reward them based on subscribers if and only if they also lower their overhead (called SG&A) by a certain percentage.

Both conversations ended with a discussion of the 10 second MBA–buy low, sell high.  This is what you do with a long position in a stock.  In Spotify’s case, we were discussing another kind of position, a short position.  Short selling reverses the equation–buy high, sell low.

This is because the short seller is betting that the stock will trade lower, and usually considerably lower, than the price at the beginning of the short seller’s round trip.  In brief, what happens with short selling is that you borrow the shares from someone who holds them.  You get to borrow them for a fixed period of time.  You then sell those borrowed shares at the then-current market price.

short_sell_example

Because your bet with “directional” short selling is that the shares will decline in value over time after that initial sale of the borrowed shares, you then essentially use the proceeds from the sale of the borrowed stock to purchase the shares before your short period expires.  You then return the borrowed shares after you buy them back.

Sometimes you can make a fortune selling short (which doesn’t require shorting stocks, see George Soros shorting the UK pound stirling and The Big Short).  Of course, it can go the other way, too, and result in a short squeeze if the price of the shorted stock increases and short sellers have to “cover” at a higher price than they sold the borrowed shares so they can return the borrowed shares and not default.

“Short interest” is a published number and can be used as a measurement of market sentiment about a particular stock.  It’s the aggregated number of shares of a stock that have been sold short but haven’t been closed out or “covered.”  (Similar to the “put to call” ratio in options trading.)  So it was a bit remarkable to me that both these friends said they’d probably short Spotify as soon as they could.

That’s an interesting question–when could the Spotify stock be shorted.  In order to short, there must be some inventory of shares available to borrow and trade such as from a brokerage house (who can lend the shares from clients’ margin accounts, for example).  Typically, underwriters of an IPO are not allowed to short their IPO stock for 30 days or so.  However, there is no such restriction on retail investors–and Spotify has no underwriters.

Therefore, there may be no restriction on when the Spotify insiders can short Spotify stock.

And if my anecdotes are any guide, it certainly does look like there will be a market for short sellers.  One could even say that insiders seeking to short Spotify shares are simply acting prudently to protect their downside, not unlike a “collar” or other hedging transaction.  This will be particularly true if there is a real run on the exits and early investors or other holders (like the senior management team) start selling right away given they have none of the usual lockup agreements or restrictions on trading as far as I know.

In the words of one of the friends, the shorting will begin at 9:31 on the first day of trading.  As someone who knows the importance of a few seconds in the world of automated trading, I believe him.

 

 

via Spotify IPO Watch: Buy High, Sell Low — Music Tech Solutions

Latest Draft of the Music Modernization Act

March 23, 2018 1 comment

The 2nd Draft of Music Modernization Act 3/22/18 was released publicly today.  We are reviewing and will post comments in the coming days.

The first thing I noticed is that the tragic demonstration of the raw lobbying power of Big Tech: The litigation reach back safe harbor seems to still be in there which is designed to deny due process and other Constitutional protections to songwriters whose works are infringed prior to the enactment of the Music Modernization Act.

Plus the one-sided board of directors is still the inverse of the publisher/songwriter control in other countries, 70% publishers and 30% songwriters.

 

 

Can Blocking Ads Help Artists? Should Artists Encourage Fans to Block Ads? — The Trichordist

March 23, 2018 Comments off

Originally posted on The Trichordist: Rates are “all in” at source. Calculations based on royalty statements from a catalogue of 1500 titles 2014. Exception is Pandora which was calculated from 2nd quarter 2015 statements (higher than 2014). In the fight for fair pay artists are not at war with the Internet or really even…

via Can Blocking Ads Help Artists? Should Artists Encourage Fans to Block Ads? — The Trichordist

Must Read by @MarcHogan in Pitchfork: Congress Is Making Headway on a Bill to Modernize How [Songwriters] Are Paid — Artist Rights Watch

March 21, 2018 Comments off

[Editor Charlie sez:  Marc Hogan, Senior Staff Writer at Pitchfork, takes a detailed and objective look at the Music Modernization Act and makes some critical recommendations for amendments to the MMA.  This is a must-read for all songwriters wanting to better understand the nuances of the legislation.]

In December, [U.S. Representative Doug] Collins introduced the Music Modernization Act(MMA), a 109-page piece of legislation he claims “would literally usher copyright laws into the 21st century.” A Senate version followed a month later. Born from a year of behind-the-scenes negotiations, the proposed law has bipartisan support and—unusual for music-related efforts in Congress—endorsements by lobbying groups representing a broad swath of the industry, from record labels and publishers to streaming services and FM broadcasters. (Some of the bill’s advocates haveargued that it should pass because this time, for once, it could pass.) Provisions of Collins’ bill are expected to be included as part of a package that the Grammys’ policy chief has expressed “very high confidence” will make it onto President Donald Trump’s desk sometime this year….

Though lawmakers are describing the MMA as a “consensus bill,” most of that consensus appears to have been between lobbyists at the negotiating table. While publishing and record-label trade groups advocating for the MMA claim they have cosigns from more than 26,000 songwriters, some in the industry question how much these survey respondents were really told about the nitty gritty. This bill simply shouldn’t be crammed through before the rest of the music community understands what it is and offers ways to improve it. And it’s not just that working-class musicians haven’t been invited to the table—it’s also that the biggest artist advocates they could find are folks like Dionne Warwick and Steven Tyler, neither exactly representative of where songwriting is headed and where royalties should follow….

This alphabet soup of administration would be a lot simpler than the current system, but the details matter. As proposed, the streaming services would fund the MLC, and a board of publishers and songwriters would oversee it. At last (unofficial) count, the board would consist of 10 publishers and only four songwriters. In an open letter, songwriter and big-band leader Maria Schneider has called for an equal, 50-50 split between publishers and songwriters, along with assurance that songwriters would be able to choose their own board representatives. She has a point, and Congress should make the change.

Read the post on Pitchfork.

 

 

You Can’t Find What You Don’t Look For: Google Can’t Find The Beatles

March 18, 2018 1 comment

Beatles

The “address unknown” saga continues–it appears that Google and Amazon can’t find John Lennon and Paul McCartney (pka The Beatles) in the public records of the Copyright Office in order to send their notice for a compulsory license.  Because it’s not enough to have a way to force songwriters to license to them at the government’s cheesy rates.  A quick check of the SX Works NOI Lookup database shows us how bad it really is.

But two of the biggest companies in commercial history shouldn’t feel bad–Spotify can’t find The Beatles, either.  That’s right–the saviours of the music business can’t find one of the biggest bands in history.

Beatles 2

Of course what is interesting about Big Tech’s inability to find Lennon & McCartney in the public records of the Copyright Office is a little inside baseball.  If you are prepared to believe that these companies actually look for the copyright owners of songs they want to claim as “address unknown” (which I am not prepared to believe), Lennon & McCartney’s publisher would have registered the copyright in, say, Penny Lane when it was written or released.  (The Lennon/McCartney publisher is Northern Songs which I believe was administered by EMI at the time.  For those reading along at home, that’s 424 Church Street, Suite 1200, Nashville, TN 37219, at least for the moment.  They’re in the book.)

Penny Lane was released in 1967 as a double A side single (remember those?) with Strawberry Fields Forever.  It was later included on Magical Mystery Tour also in 1967.  That date is significant because it is before January 1, 1978–which is an important date because that is the earliest date that can be searched online in the Copyright Office Public Catalog.

If you agree with me that it doesn’t matter because they’re not looking anyway, then this is not an important fact.  If you are prepared to give these Digital Media Association companies the benefit of the doubt, you would look at their “address unknown” NOI filing and notice that the filers attest that they have looked for the copyright owner in the Copyright Office public records as required in the filing instructions.   (“In the case where the Notice will be filed with the Copyright Office pursuant to paragraph (f)(3) of this section, the Notice shall include an affirmative statement that with respect to the nondramatic musical work named in the Notice of Intention, the registration records or other public records of the Copyright Office have been searched and found not to identify the name and address of the copyright owner of such work.”  This language is fixed in the template for each NOI served on the Copyright Office.)

If they are looking in the pre-1978 records, then how would they accomplish this search? Copyright Office Circular 23 tells us:

Together, the copyright card catalog and the online files of the Copyright Office provide an index to copyright registrations and records in the United States from 1870 to the present. The copyright card catalog contains approximately 45 million cards covering the period 1870 through 1977. Registrations and records for all works dating from January 1, 1978, to the present are searchable in the online catalog, available at http://www.copyright.gov/records….

The copyright card catalog is located in the Copyright Public Records Reading Room (lm-404) on the fourth floor of the James Madison Memorial Building of the Library of Congress. The public can use the catalog, which is staffed
by a Copyright Office employee, between 8:30 am and 5:00 pm, eastern time, Monday through Friday, except federal holidays. Before starting your search, consult Circular 22, How to Investigate the Copyright Status of a Work, available on the Copyright Office website or from the staff member on duty.

Alternatively, Copyright Office staff can search copyright records for you.

So…if these companies really are doing the research they attest to doing, the Copyright Public Records Reading Room must be quite a busy place.  In fact, there must be a line out the door.  Or the research staff must be buried.

Or…these companies are telling what we call in the trade…a lie.

And of course, nobody is checking.

Why does this matter?  Because the Music Modernization Act would have us all rely on the kindness of strangers in doing the intial match for monies heading for the black box. Why in the world would you ever trust these people to do that matching if they really can’t find two of the most successful songwriters in history?  Or if they lie about it?

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