Archive

Author Archive

Save the Date: “Music Publishing After the Music Modernization Act” at Texas Bar Entertainment Law Institute on November 9

June 15, 2018 Comments off

I’m pleased to let you know that veteran music publisher Richard Perna and I will be presenting “Music Publishing After the Music Modernization Act” on November 9 at the 29th Annual Entertainment Law Institute in Austin co-sponsored by the State Bar of Texas Entertainment & Sports Law Section.  You can get more information and register at this link.

If the bill fails by November 9, we will discuss why.

If the bill has become law by November 9 we will discuss:

–the future of voluntary licensing and payment of minimum guarantees after passing;

–how will local repertoire be represented in the U.S. collective;

–practical aspects of transferring all existing NOIs to the collective;

–operational deadlines for collective;

–the reachback safe harbor and valuations;

–hidden administration costs and who bears them (unfunded mandates of the federal government);

–the practical aspects of engaging with the new “mechanical licensing collective” for U.S. and international publishers;

–what kind of publishers and valuations are likely to be most affected by the law;

–what kind of publishers and valuations are likely to be unaffected by the law;

–how songwriters and publishers will collect monies owed to them;

–ethical implications of withdrawals from the black box by the collective’s board of directors;

–ethical implications for CPAs ordered by the government to seek benefits for digital services against their client’s interest.

 

 

Spotify’s Latest Wrong Turn: Direct Licenses With Managers for Rights They Don’t Control

June 10, 2018 1 comment

Billboard reports that Spotify’s latest and greatest is paying a minimum guarantee (aka an advance against royalties) for direct deals for artists:

Under the terms of some of the deals, management firms can receive several hundred thousand dollars as an advance fee for agreeing to license a certain number of tracks by their independent acts directly to Spotify.

That is an odd sentence for a number of reasons.

Management Agreement:  Crucially, managers typically do not (or should not) own the rights to either songs or recordings created by their artist clients.  They also typically do not (and should not) have the right to sign license agreements in the name of their artist clients.

Both these points are usually the subject of some agita in the negotiation of management agreements.  Smart managers want nothing to do with signing agreements or cashing checks in the name of their clients.  If you look at some of the prominent artist-manager disputes over the years, they almost always revolve around some version of this story (see Richard Pryor, Billy Joel, Amy Lee).

I also find it hard to believe that the artist’s lawyer would allow the client to get into one of these situations if the lawyer knew about it.

If a manager is receiving “several hundred thousand dollars” there’s also the question of double dipping or other conflict of interest if the manager is also commissioning the advance and perhaps royalties after a theoretical recoupment point.  Again, smart managers usually stay away from this kind of thing.  If you try hard enough, payments like this can look like an umm…uh…a whatchamacallit.  A bribe.

Cross-Recoupment:  Let’s say that Spotify somehow gets around these wrinkles in the management agreement, there’s a simple question of calculating recoupment since the advance will be recouped from different artists at different rates.  Let’s say that Manager X signs artists A, B and C to this arrangement, and allocates an equal portion of the advance to each artist (after commissions).  Then the algorithmically fortunate Artist C lucks out and gets into the super-popular Men of Rock playlist and recoups Artist C’s share of the allocated advance.   Artists A and B are not so lucky and are unrecouped.

Artist C will be payable, but Spotify will say not so fast…your manager is unrecouped so no cheese for you.  How is that going to go over if Artist C cares about the $0.0003 per stream?

Or what if Artist C is so algorithmically blessed that they recoup the entire advance to A, B, C and the manager’s commission.  Since Artist C only got their allocated share of the advance, Artist C’s earnings applied to Artist A and B are actually payable royalties to Artist C (as the earned royalties exceed the advance paid to C.)  Spotify will say, sorry, no cheese for you, go to your manager we already paid.  How is that going to go over?

Pre-Existing Distribution Agreements:  If an artist distributes through an indie (either digital only or full service) the artist has already given away the rights that Spotify purports to license from the manager.  Pulling tracks out of that distribution agreement is probably a breach of the exclusivity clause, particularly if the distributor already paid an advance for the recordings.

That may sound like intentional interference in a contract–but of course Spotify’s deal is with the manager, not the artist, and any distribution agreement will likely not be with the manager but with the artist.  So Spotify probably has no provable knowledge of the distribution agreement.

Future Term Recording Artist Agreements:  If Artist C gets an offer to sign to a major label during the term of this Spotify license, the label is probably going to expect these “prior masters” to be included in their deal.  No matter how impressive the algorithms, there are some basic deal points to satisfy, and the label is going to expect to see those streams show up on their account.  This can be solved pretty easily as long as no one gets greedy–the label simply buys out the unrecouped balance.

But–Spotify doesn’t have to agree to those terms and may not.  Artist C may never have had a chance to negotiate such a clause in “their deal” because the manager–who was supposed to be looking out for their client–may have “forgotten” to raise the point with Spotify and the artist is not under contract with Spotify.

If the artist is also simultaneously firing their manager as they sign with the major (which certainly has been known to happen), the manager may not be too terribly inclined to modify the terms of the manager’s deal with Spotify after the fact.

Yes, it’s sheer genius from the Spotify A&R Department (does that stand for “Algorithms and Redirects”?).

Again.

Must-Read by @LizPelly: Discover Weakly: Sexism on Spotify

June 8, 2018 Comments off

De6lz41WkAA6SNa.jpg-large

Liz Pelly demonstrates how Spotify perpetuates gender stereotypes.  Spotify–where A&R stands for “Algorithms and Redirects .” Why are we helping these people again?

“Spotify has actively steered its listeners away from the album as a format and toward playlists. This serves Spotify’s interests: a music culture dependent on playlists is dependent on Spotify, whereas a music culture dependent on albums is dependent on record labels. As Spotify vies to become more powerful and influential than labels, emerging as the music industry’s new center of power, one of its primary strategic focuses has been on playlists—curated by humans, algorithms, and sometimes a hybrid approach—making the process of navigating its platform more convenient and ever more personalized.

As a result, Spotify’s most popular playlists have emerged with outsize influence. After I created a new Spotify account earlier this year for this very listening experiment, when I clicked the “albums” tab on my brand-new account, Spotify responded, “Your favorite albums will appear here,” followed by, tellingly, “Go to your Browse page to find amazing playlists for every mood and moment.” A small but powerful gesture: at every turn the platform encourages playlists over albums. This, of course, raises several concerns regarding how fans relate to music and even this music’s context. Which is all to say: in the realm of Spotify, playlist placement matters. A lot.”

Read the post on The Baffler (h/t Artist Rights Watch)

Why Won’t Anyone Budget the MMA’s Mechanical Licensing Collective?

June 6, 2018 Comments off

There was an interesting exchange between Chairman Grassley and the CEO of the Digital Media Association regarding the costs of operating the Music Modernization Act’s mechanical licensing collective at the recent Senate hearing on the Music Modernization Act.  (See the video of the exchange here.)

MTP readers will recall that I have a bone to pick regarding the complete absence of a publicly disclosed budget or business plan for the mechanical licensing collective.  I find this particularly annoying because digital music services paying for creating the collective’s operations, data and (we have to assume) royalty accounting was a major sales pitch for supporting the MMA.

I thought for a while that it was simply impossible that the biggest corporations in commercial history (Amazon, Apple and Google) actually didn’t know how much money they were committing to pay (and were essentially committing other blanket license hopefuls yet unknown to pay) pay for the MLC with no idea at all about the operating costs they were signing up for–and essentially signing up everyone else for who wants a blanket license.  This just seems insane to me.

Chairman Grassley evidently thought this lack of a budget was worth a couple questions as well.  Here’s the Chairman’s exchange with the DiMA CEO:

CHAIRMAN GRASSLEY:

Mr. Harrison, I have [two] questions about the mechanical licensing collective….Can you tell us what are the Digital Media Association’s estimate of the expecting cost of the new collective? Are members concerned that they’ll be responsible for excessive and unreasonable costs or does the bill prevent that from happening? And then the second question, do you believe that the oversight and accountability requirements in the bill are adequate, or do you think they can be improved? 

MR. HARRISON:

So, Senator, it’s difficult to know what the cost of operating collective will be. We saw estimates come out of the CBO when reviewing the House [version of the MMA] legislation that said the number was somewhere in the — between $20 and $30 million a year.

So let’s unpack this unsatisfying answer to the Chairman’s common sense question.  First, why is it “difficult to know”?  We know that the failed Global Rights Database cost approximately $70 million and they never processed a payment.  I know what it cost to build the SNOCAP database and tools.

Does anyone really believe that Amazon, Apple and Google can’t apply their collective brainpower to estimating the startup costs of the MLC…because “it’s difficult to know”?  Really?  Is that how it works back at the Googleplex, in Seattle or Cupertino?  Can’t come up with a budget for that moonshot project because “it’s difficult to know”?

Sorry.  Ain’t buying that.

And then notice the deflection–it’s not that DiMA or its members could estimate the costs–no, no.  The Congressional Budget Office came up with an estimate–which by the way was not $20 to $30 million.  Which is it?  20 or 30?  $30 million is 50% more than $20 million.  Is that what they tell the Apple shareholders back in Cupertino?  Too difficult to know, put it down as $20 million.  Or $30 million.  Or something in that range.

And why are we relying on the Congressional Budget Office?  All they did was guess–here’s what they actually said:

H.R. 5447 would authorize the MLC to spend amounts collected under the administrative assessment levied by the Copyright Royalty Judges, without further appropriation, to cover the MLC’s costs. Such expenditures would be considered direct spending. For this estimate, CBO expects that the Copyright Royalty Judges would estimate the operating costs of the MLC accurately and set an assessment rate to equal those costs each year. Using information from industry experts and the administrative costs to operate entities that engage in similar activities, CBO estimates that expenditures by the MLC would average $30 million annually and would total $227 million over the 2021-2028 period.

All the CBO did was ask “industry experts”–who might they be?  Perhaps DiMA members?  But why would the DiMA CEO deflect Chairman Grassley’s question and give a non-responsive answer?  The Chairman didn’t ask what the CBO’s estimate was, he very clearly asked “[W]hat are the Digital Media Association’s estimate of the expecting cost of the new collective?”

I think the Chairman deserves a direct answer to a direct question.  “We didn’t try to find out” or “We intend to negotiate that number into the ground and take all available appeals to all possible forums before we pay a nickel” are both perfectly acceptable answers and are probably pretty close to the real truth.

FDR’s D-Day Prayer

June 6, 2018 Comments off

Then I heard the voice of the Lord saying, “Whom shall I send? And who will go for us?”
And I said, “Here am I. Send me!”
(Isaiah 6:8)

Ron Wyden’s Oregon Updates the Business Plan: Sell Electricity to Data Centers

June 3, 2018 1 comment

Here’s a blast from the past–five years ago Senator Wyden was already demonstrating his fealty to Google, Amazon, Facebook and Rackspace–all members of the Internet Association.

Music Technology Policy

In case you were wondering what the deal is with Palo Alto High School alumnus and Oregon Senator Ron Wyden’s interest in Big Tech, maybe it’s this: Amazon, Rackspace, Facebook and of course Google, all have built massive data centers in Oregon that suck down Oregon’s hydroelectric power.

Yes, according to The Oregonian:

Data centers have become one of Oregon’s biggest industries, with Google, Apple, Facebook and Amazon spending billions of dollars to buy and equip online storage facilities in rural parts of the state. They’re lured primarily by tax savings, which can shave tens of millions of dollars from a server farm’s annual operating cost.

Good thing these Gang of Four members are all supporting the local tax base.  Oopsie!  Wrong!

View original post 591 more words

Music Biz Weekly Podcast: Are Streaming Services A Level Playing Field for Artists? @MichaelSB and @JayGilbert talk to @ChrisRizik on @musicbizpodcast

June 1, 2018 Comments off

An excellent discussion of the “ethical pool” royalty approach for streaming services to properly compensate artists who send fans to a streamer.

 

Read Chris Rizik’s important post “How Spotify Is Killing Jazz, Soul, Classical Music

%d bloggers like this: