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A must read post on @thetrichordist by @davidclowery: A Compromise Proposal to Fix Streaming Royalties,Licensing and Notification

I have a feeling I’m about to wander off the reservation here. I say this because what I’m about to propose is essentially a modification of a potential legislative proposal that rumor has it the NMPA is floating. That proposal seems to be generating some negative backlash in songwriter/publisher community (whether it deserves it or […]

via @davidclowery: A Compromise Proposal to Fix Streaming Royalties,Licensing and Notification — Artist Rights Watch

@KatHall42: Google [FINALLY] hit with record antitrust fine of €2.4bn by Europe

According to Kat Hall’s insightful reporting in The Register:

Google has been hit with a record antitrust fine of €2.42bn (£2.1bn) from the European Union today for promoting its own shopping search service over those of smaller rivals.

The regulator found that Google had abused its market dominance as a search engine “by giving an illegal advantage to another Google product, its comparison shopping service,” it said.

European regulators gave the tech giant 90 days to stop its illegal activities or face fines of up to 5 per cent of the average daily worldwide turnover of parent company Alphabet. That currently amounts to around $14m a day.

The commission has the power to fine Google’s parent up to 10 per cent of its annual revenue, which was more than $90bn (£70.8bn).

Commissioner Margrethe Vestager, in charge of competition policy, said: “What Google has done is illegal under EU antitrust rules… It has denied other companies the chance to compete on their merits and to innovate, and most importantly it has denied European consumers the benefits of competition, genuine choice and innovation.”

“Most importantly, today’s decision shows that in Europe companies must compete on the merits regardless of whether they are online, the high street, and whether they are European or not.”

She said since she had taken the helm as commissioner in 2014, she has given high priority to the case. During its probe, she said the commission sifted through terabytes of data, the equivalent of 1.7 billion search queries: “It’s a lot of data and it is of course needed because our decision has to be based on firm evidence. “

She said she has no reason to believe that Google will not comply, but said the commission intended to monitor Google’s compliance closely. “This means this issue will remain on our desk for some time. “

This decision was a very long time in coming–which means of course that Google have managed to operate illegally since at least 2010 with this fine hanging in the air (see my 2014 post “The Delay’s The Thing: April Fools and the Google Antitrust Case at the European Commission“).

The Google Transparency Project has an excellent review of Google’s revolving door employees in the UK and Europe:

fig4

Not surprisingly, the Computer and Communications Industry Association came out with one of those innovation based thingys defending Google, a fellow member of the MIC Coalition cartel.

Obviously more on this to come, but the real question is when will the EU go after Google for YouTube.

If you ever wondered just how arrogant the YouTube negotiators really are, realize that these geniuses decided that it would be a good time to alienate the WIN and Merlin labels–based in…where was that again…oh yes…Europe…right in the middle of the EU antitrust investigation.  And how did they alienate the indies?  By doing pretty much the EXACT SAME THING that Google was accused of doing in search–abusing their dominant position to benefit themselves.

To be continued…

@bgedelman: Uber Can’t Be Fixed — It’s Time for Regulators to Shut It Down — Artist Rights Watch

The problem at Uber goes beyond a culture created by toxic leadership. The company’s cultural dysfunction, it seems to me, stems from the very nature of the company’s competitive advantage: Uber’s business model is predicated on lawbreaking. And having grown through intentional illegality, Uber can’t easily pivot toward following the rules.

via @bgedelman: Uber Can’t Be Fixed — It’s Time for Regulators to Shut It Down — Artist Rights Watch

@IRMPodcast #2: @RadioCleveKKG Interviews @theblakemorgan about #irespectmusic — Artist Rights Watch

Alexa, where’s my credit?

Last year, I was honored to participate in a symposium on the subject of “moral rights” sponsored by the U.S. Copyright Office and the George Mason University School of Law’s Center for the Protection of Intellectual Property.  The symposium’s formal title was “Authors, Attribution and Integrity” and was at the request of Representative John J. Conyers, Jr., the Ranking Member of the House Judiciary Committee.

The topic of “attribution” or as it is more commonly thought of as “credit” is extraordinarily timely as it is on the minds of every music creator these days.  Why?  Digitial music services have routinely refused to display any credits beyond the most rudimentary identifiers for over a decade, and of course the pirate sites that Google drives a tsunami of traffic to are no better.

Marty Bandier raised this very issue at the NMPA Annual Meeting yesterday in New York according to Billboard:

“When I look today at the likes of Spotify, Apple Music and YouTube, I ask: where are the names of the songwriters,” said Bandier, who was presented with the organization’s Lifetime Service Award by Motown legend Smokey Robinson. “They are either not there or so hidden that you would have to be a special prosecutor, or perhaps The Washington Post – to find them. It is as if the songwriters do not exist and the only people who matter are the recording artists. However, without the songwriters coming up with the words and music in the first place, there would be nothing for the artist to record and no music to stream.”

Yet these services frequently rely on government mandated compulsory licenses (in Copyright Act Section 115), near compulsory licenses in the ASCAP and BMI consent decrees, and of course the sainted “safe harbor”, the DMCA notice and takedown being a kind of defacto license all its own particularly for independent artists and songwriters without the means to play.  They get the shakedown without the takedown.

According credit in connection with the services’ use of the Section 115 compulsory license is particularly timely as the services are filing tens of millions of NOIs under the “address unknown” loophole in the Copyright Office.  (Amazon, for example, has filed over 19 million “address unknown” NOIs alone as of January according to Christopher Sabec of Rightscorp.)

Conversely, however, since the predicate for filing an NOI under the address unknown loophole is that the copyright owner cannot be found in the public records of the Copyright Office, there must be even more millions of songs for which the services can and evidently do find a copyright registration.

So why aren’t the songwriter credits included in the service’s own metadata?  And is there no moral rights obligation in the U.S. to accord credit if the government is going to force a license?

Compulsory for thee but not for me

Moral rights are typically thought of as two separate rights: “attribution”, which is essentially the right to be credited as the author of the work, and “integrity” the author’s right to protect the work from any derogatory action “prejudicial to his honor or reputation”.  They can be found most relevantly for our purposes in the Berne Convention, the fundamental international copyright treaty to which the U.S. signed on to in 1988.  (Specifically Article 6bis.)

It is important to understand that the United States agreed to be subject to the international treaties protecting moral rights and that these rights are different and separate from copyright.  Copyright is thought of as an economic right, while moral rights continue even after an author may have transferred the copyright in the work.  Even so, both the moral rights of authors (and the material rights) are recognized as a human right by Article 27 of the Universal Declaration of Human Rights.  Or as Gloria Steinem said, artist rights are human rights.

The question then came up, why should the U.S. government require songwriters to license their works through the compulsory license without also requiring proper attribution consistent with America’s treaty obligations, good sense and common decency?

Why not indeed.

It is important to note that there are certain requirements relating to the names of the authors that are required by regulations for sending a “Notice of Intention” to use a song under the compulsory license which is what starts the formal compulsory license process.  And these services send NOIs by the bushel.  The required “Content” of an NOI is stated in the regulations is:

(d) Content.

(1) A Notice of Intention shall be clearly and prominently designated, at the head of the notice, as a “Notice of Intention to Obtain a Compulsory License for Making and Distributing Phonorecords,” and shall include a clear statement of the following information….

(v) For each nondramatic musical work embodied or intended to be embodied in phonorecords made under the compulsory license:

(A) The title of the nondramatic musical work;

(B) The name of the author or authors, if known;

(C) A copyright owner of the work, if known…

As I suspect based on the various lawsuits against Spotify over its apparent failures in the handling of these NOIs, the “if known” modifying “the name of the author or authors” is actually translated as “don’t bother” as most of the form NOIs don’t even have a box for that information.  This is a bit odd, because if the song is registered with the Copyright Office, the names of the authors most likely are listed in the registration and thus are “known.”

The question for moral rights purposes, of course, is not whether the music user sends the names of the authors in the NOI–presumably the copyright owner already knows who wrote the song.  The question is whether the music user displays the names of the authors of a song on their service, or better yet, is required to display those names so that the public knows.

This seems a very small price to pay when balanced against the extraordinarily cheap compulsory license that songwriters are required to grant with very little recourse against the music user for noncompliance.  (Short of an unimaginably expensive federal copyright lawsuit against a rich digital music service, of course.)  As the Spotify litigation is demonstrating, these services only have about a 75% compliance rate as it is, if that much.  The decision to accord credit to songwriters so that poor Alexa can answer the question “Hey Alexa, who wrote that song?” seems like a business decision that Amazon could take faster than the Whole Foods cashiers can file for unemployment after an Amazon takeover.

Hey Google!  Where’s My Credit?

It is pretty commonplace stuff for liner notes to include all of the creative credits.  So who is behind the times?  The artist releasing a physical disc with all of these credits, or the digital music service with its infinite shelf space that doesn’t bother with 95% of them–particularly the multinational media corporation dedicated to organizing the world’s information whether the world likes it or not?  And we’re not even broaching the topic of classical music, where the metadata and credits on digital services are dreadful.

In fairness, I have to point out that iTunes has made great strides in cleaning up this problem voluntarily, at least for songwriters.  Which goes to show it can be done if the service wants it done.

Digital services should care about whether the songwriters are fairly treated as ultimately songwriters create the one product the services have built their business on–songs.  There is an increasing level of distrust between songwriters and services, so proper attribution can help to restore trust.

But the main reason to accord credit is because “everyone has the right to the protection of the moral and material interests resulting from any scientific, literary or artistic production of which he is the author.”  (Article 27, Universal Declaration of Human Rights.)

 

Producer’s Share of SoundExchange Royalties

We often get questions about whether producers get a share of webcasting royalties.  Let’s get one thing straight first of all: SoundExchange deals with the limited performance right for sound recordings available in the U.S.  This is not about songs or publishing.

Remember–producers get paid a share of the artist royalty, usually from all sources.  Take the example of a producer getting a royalty in a mid-to-major label deal structure.  The artist has already signed to the record company and is getting paid an “all-in” artist royalty.     The artist’s record deal will almost invariably require the artist to hire the producer, mixer, engineer and other recording personnel and pay them out of the recording budget.

Producers will typically get paid a cash payment, some or all of which will be an advance, and will also receive a producer royalty.  (Some mixers or remixers also get a royalty, and the structure is essentially the same in those deals.)

An “all-in” artist royalty means that the label and artist have agreed that no matter who the artist hires as a producer, that producer’s royalty is included in the artist’s royalty.  Another way of saying this is that the producer gets a share of the artist’s royalty and the producer’s share reduces the royalty the label pays to the artist.  In order for the artist to pay royalties to the producer directly from their record company, the artist must send the record company a “letter of direction” that instructs the record company to pay the producer according to the producer’s contract with the artist.

This is because the producer is hired by the artist and not by the record company (or at least not since about the mid-to-late 1970s or so) and the producer is not a party to the record deal (assuming the artist is signed directly to the label and not through a production deal).  Artists and producers solve this by the artist sending an instruction to their record company (the “letter of direction”) telling the label to pay the producer’s royalty directly and reduce the artist’s royalty by the amount paid to the producer.

Because producers were not allocated a share of artist royalties by law when the webcasting royalties were passed, the artist must follow an analogous process by sending  SoundExchange an instruction to pay a share of the artist’s royalties (called the “featured artist” share of royalties) to the producer.  That instruction is called a “letter of direction”.

How much should the producer be paid?  This will always be expressed as a percentage of what the artist would otherwise be paid.  This can be a little confusing because in the record deal context we speak of producers getting “points” as in “she’s a 4 point producer”.  What does this mean?

A “4 point producer” means that the producer gets a royalty rate of 4% on the same basis as the artist.   Let’s say an artist gets a 16% all-in royalty.  In that case a 4 point producer would get 4 of those 16 points leaving the artist with 12.  That rate gets applied to what are typically called “royalty base price” sales that involve a wholesale price, like CDs or permanent downloads.

If there is revenue to the artist from something other than a royalty base price sale, let’s say a master license for a movie or statutory royalties from SoundExchange, there’s no royalty base price but the producer’s contract still entitles them to a share of that revenue.  In this case, we have to calculate that percentage.  The way that calculation is typically done is by expressing the producer royalty as a percentage of the artist revenue.

In our example, a 4 point producer on a 16 point all-in artist royalty is actually getting 4/16ths of the revenue, or 25%.  So in the case of the movie license, the producer would get 25% of the artist’s share of the license fee.  In the case of SoundExchange royalties, the producer’s letter of direction would instruct SoundExchange to pay the producer 25% of the featured artist share of royalties.

If you have questions about how to get paid as a producer or how to pay your producer if you are an artist, the best place to start is at the SoundExchange website and download the SoundExchange letter of direction packet.

No one can know how a statutory share of performance royalties would be given effect in the future, but it would probably be administered by SoundExchange the same way that the featured artist share of royalties is currently administered.  Because we can’t know how much that statutory rate would be, artists should negotiate with producers for the lesser of the statutory rate or the contract rate, and producers should negotiate with artists for the greater of the two.

Needless to say, there is a lot more to producer agreements than what we have covered here and there may be a lot of twists and turns as more companies use direct deals.  One thing is certain: if there’s no letter of direction, you’re not starting from a good place.

Spotify’s Songwriter Charm Offensive Stops Short in Sweden with STIM

Music, and especially songs, are treated differently in digital commerce than are other products.  Amazon won’t sell you a CD or a download without a credit card on file, and they won’t ship a CD without a credit card payment authorization.  Neither will Spotify sell you a subscription without a credit card to charge it to.  No payment, no product.  Amazon, Spotify and other online retailers protect their accounts payable risk carefully, and consequently their revenue.

Songs are different, particularly on streaming services like Amazon and Spotify.  The services get to use the song first, and then songwriters often have to chase them for payment.  This chasing is particularly true with songwriters who are not writing the current hits, but even hit writers may be chasing payments.  Or more accurately their publishers or collecting societies are.

In fact—chasing the money is becoming an increasingly common exercise for songwriters with companies like Spotify, Amazon, Pandora, Google, Loudr and others.  And through the manipulation of loopholes, these companies get the benefit of the product without paying at all in the case of the mass NOIs in the US.

Bad Timing on Spotify’s Charm Offensive

But this play and no pay is not just an American loophole.  According to MusicAlly, Spotify has recently taken dodging songwriters to a whole new level by refusing to pay the Swedish authors’ collecting society Svenska Tonsättares Internationella Musikbyrå or “STIM.”  That’s right—Spotify the Swedish company is stiffing the Swedish collecting society STIM for payments to Swedish songwriters (and any other writers STIM collects for).  And in a great example of Spotify’s seemingly endless right hand/left hand problem, Spotify is stiffing STIM at the same time as Spotify is launching its high profile charm offensive for superstar songwriters (“Spotify Secret Genius”) and trying to get a federal judge to approve a class action settlement.

It is a common mistake (or dodge) for music users to think that there should be some great master database for songs like the county recorder’s office keeps for real estate.  This is a fundamental mistake–they’re not making any more dirt (Mischief Reef notwithstanding) and so a database for relatively static ownership information for real estate is a manageable problem.  New songs are written every minute somewhere in the world, so asking for this Great Pumpkin database of song ownership is clearly inapt (which is probably why it has always failed).  There being no connection between real estate and songs, attempting to connect the two is what Mill would call a fallacy of analogy.  Yet it is one of the most importune asks and is the principal Great Excuse from the Unlicensed.

Remember when Spotify complained of the lack of comprehensive ownership information on all the world’s songs in their response to David Lowery’s class action lawsuit?  That was, of course, after they used the songs anyway (see “Sorry We’re Not English”).  An underlying theme of that unavailing defense was America lacks the blanket license the rest of the world provides through authors’ collecting societies like STIM.   And yet here we are again.

How the Blanket Licenses Work (More or Less)

So how can Spotify get away with this latest dodge?  At a high level, the way these ex-US blanket licenses work is that a service like Spotify sends each society a data feed of its song usage under the terms of the society’s blanket license with the service.  (All these ex-US deals work essentially the same way in countries with a single authors’ society.)

Having received that data feed, the society then determines how much of the usage for that accounting period is from songwriters it represents.  That society then determines how much money the service owes in royalties by applying the terms of the society’s blanket license to the usage.  The society then sends the service an invoice for the royalties and—way, way after the moment that the song is performed and the service gets the benefit of the song—the service pays the invoice.  Or is supposed to.

This whole process has to take place in a hurry in what is obviously a give to the services—reportedly the society has to invoice millions if not billions of transactions for an accounting period in a matter of a couple months, or potentially lose the right to claim payment for that accounting period.

Like everything else in music publishing for the last 100 years or so, sometimes there are conflicts between what the societies claim and what they actually represent (either over or under 100%).  Given the importance of Sweden in contributing some of the world’s top songwriters like Max Martin (who is a member of STIM if I’m not mistaken), you would think that any company, much less a fellow Swedish company like the monopolist Spotify, would not want to be holding Max Martin’s money hostage.

But Spotify Leverages Its Market Power

And yet—here’s the story broken by Stuart Dredge in MusicAlly:

“[STIM] have informed our rightsholders that the royalties from Spotify will be delayed, since Spotify has not yet payed the invoice regarding Q4 2016,” STIM’s spokesperson told Music Ally.

“We have invoiced according to the same routines as during the whole of 2016, but Spotify now makes a new interpretation of the terms of our current agreement. STIM’s position is that already agreed principles and business standards shall apply.”

The spokesperson added that STIM is in “constructive discussions with Spotify to have this resolved in a quick manner”, so that it can pay out the royalties as soon as possible.

For its part, Spotify’s spokesperson provided this statement to Music Ally:

“We are always working to ensure that royalties are paid out to rightsholders in a correct and efficient way. Spotify offered to pay STIM the full amount to matched rightsholders, but STIM declined,” said the spokesperson.

“The amount in dispute relates to unmatched tracks. We are actively working with STIM on having this resolved in order to present rightsholders with their earned royalties [when they get a final nonappealable judgement?].”

This is the second time that STIM’s Spotify payouts have been delayed. In September 2016, payments for the first quarter of that year were delayed for two weeks, although that was due to negotiations still being finalised at the time those payouts should have been distributed.

The way this process works is that it is possible that all the societies together may claim more than 100% of the revenue because of the usual glitches in the claiming system.  The likelihood of overclaiming is increased given the time pressure to render the invoice (for the service’s benefit).  Any digital service that is paying attention knows going into the deal that this glitch will happen, so has an opportunity to negotiate a solution in advance.

It is likely STIM’s responsibility to make adjusting payments to sums it collects which is one of the reasons why the societies have interlocking agreements about how these matters are to be addressed.  It is also STIM’s responsibility to credit Spotify’s account with any overpayments.

One possible reason why STIM does not want a partial payment is the astronoimical transaction costs of determining who gets what on a partial payment, then determining it again when claims are resolved on a rolling basis.  This is a prime example of when the transaction costs of accounting for streaming exceed the miniscule royalties payable.

Not only would the transaction costs of administering the Spotify license in this case likely exceed the payable royalties, such an accommodation allows Spotify to use the songs at issue without paying at all until some future time that may never come.  Given Spotify’s spotty—see what I did there—reputation on paying publishing royalties, there are few guarantees that the second adjusting payment will ever come in.  Not to mention the third, fourth, fifth or sixth iteration of the September 16 payment as more songs are matched on a rolling basis, answering songwriter questions, and bank fees.  And of course there’s always a risk of a Spotify bankruptcy that can’t be completely discounted to zero.

In other words—just because a song is unmatched does not mean that Spotify doesn’t owe someone for the stream.  It is more likely that STIM will find out who that someone is in the normal course of business than a company with a monopoly position in streaming that is looking at a never ending cascade of copyright infringement litigation for failing to keep its publishing house in order like at least one of its competitors.  You know, the competitor they complain about to any government agency who will listen in an infinite loop.

Is It Retaliatory?

For a company that has been the subject of two multimillion dollar songwriter settlements–that we know of–to be expecting trust in its payment of songwriter royalties is a bit much.  The right move would be to audit STIM if Spotify feels it has overpaid and make sure that it gets credit for the right amount of any overpayment.  Surely Spotify’s lawyers would not allow their client to suffer the indignity of being prohibited from auditing STIM.

Unfortunately, any Swedish songwriter who has licensed Spotify under the U.S. compulsory mechanical license system doesn’t have the same audit right against Spotify in the US due to the oppressive mechanical licensing rules.

You have to wonder if it is just STIM that the monopolist Spotify is refusing to pay.  The same overclaiming problem potentially exists at all collecting societies.  It is also a bit odd that we haven’t heard Apple complain of the same problems.  Or any other service for that matter.

It’s also worth noting that Swedish songwriters and STIM members signed an open letter to Spotify last year demanding fair royalties which probably did not help Spotify’s cred with the songwriting community.  There’s no evidence that Spotify has singled out these Swedish songwriters for retaliatory treatment, at least no evidence yet, but it does seem awfully coincidental that STIM members complained about Spotify and it appears that STIM is the only society being treated this way by Spotify.

Do you wonder how the songwriter “ambassadors” in Spotify’s “Secret Genius” charm offensive are doing on getting paid?  Since they all wrote mega hits, my bet is that they are in the group that is getting regular payments and is consistently matched to revenue.

The rest of the world’s songwriters must have a genius that’s so secret they are unmatched in earning power.

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