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Rule Takers vs. Rule Makers: Congress Should Support Startups in the Music Modernization Act

July 24, 2018 1 comment

If you read the current version of the Music Modernization Act, you may find that it’s more about government mandates that entrench incumbents than a streamlined blanket compulsory license that helps startups climb the ladder.  Yet in the weeds of MMA we find startups dealt out of governance by rule makers and forced as a rule taker to ante up payments by their competitors in a game that the bill makes into the only game in town.

Billboard reports that Senators Cornyn and Cruz suggested a fix for this flaw—allow private market competition alongside the MMA’s government mandate.  (Vaguely reminiscent of the “Section 115 Reform Act” from the 109th Congress in 2006.)

Let’s review why this fix is necessary and how it could balance the roles of rule makers and takers.

It’s necessary because the problem doesn’t come from songwriters.  It comes from the real rule makers—Amazon, Apple, Facebook, Google and Spotify.  And startups know which side butters their bread. 

Public discussion of MMA has focused on the song collective and the compulsory blanket license for songs, but the mandated digital services collective is more troubling given the size of the players involved.  MMA calls the services’ collective the “digital licensee coordinator” or the “DLC”. Rule taker startups are governed by the rule maker DLC but have no say in the DLC’s selection.  

Like Microsoft’s anonymous amici, startups know their place.  Especially against Google, Amazon and Facebook, whose monopoly bear hug on startups includes hosting, advertising and driving traffic.

The MMA authorizes these aggressive incumbents to effectively decide the price to startups for the “modernized” blanket license.  Why?  Because the MMA requires users of the license to pay for the lion’s share of the “administrative assessment,” the licensees’ collectivized administrative cost payment that the CBO estimates will be over $222 million for 8 years.

Senators Cruz and Cornyn object to MMA’s delegation of the government’s authority to one collective for songwriters and one collective for digital services—with an antitrust exemption.  Why only one game in town? Rather than have the DLC run by the usual suspect monopolists, why not allow competition?

This is important–if startups can’t afford to buy-in to the license, it does them no good, and their biggest competitors decide the price of that license through the DLC. 

Both collectives are to be approved by the Register of Copyrights, but MMA puts the Register in the unenviable position of being constrained to appoint certain types of entities by statutory mandate.

Here’s the mirror image language from the MMA instructing the Register on selecting both the song collective and the DLC:

“[The Register must choose an entity that] is endorsed by and enjoys substantial support from [digital music providers/copyright owners of musical works] that together represent the greatest share of the [licensee/licensor] market for uses of [musical/such] works in covered activities, as measured over the preceding 3 full calendar years;”

Startups–who are potential music users most in need of the statutory blanket license–need not apply to be the DLC. 

That clause alone justifies the Cornyn/Cruz solution.  

There is another toad in the weeds:  The allocation of the “administrative assessment” to each music user of the blanket license.  In a clause fraught with moral hazard, MMA authorizes the DLC to “equitably allocate the collective[’s] total costs across digital music providers…but shall include as a component a minimum fee for all digital music providers.” Plus, the DLC also gets to set the “dues” payment for each of its “members.” Plus startups pay royalties to the song collective.

Rule makers set a lot of payments. But curiously no one can tell a startup today the hard cost of their blanket license tomorrow.

If a startup wants the MMA’s blanket license, the DLC can compel it to pay a share of the assessment at a price determined by the DLC—as well as a membership fee.  These mandatory payments are enforced by the DLC and are required for any music user to get a blanket license.  If this sounds cumbersome and bureaucratic, that’s because it is.  But absent the Cornyn/Cruz amendment, the bill gives rule makers control of the only game in town.

Crucially, there currently is no budget for even the first administrative assessment or the membership fee—for the biggest change to the Copyright Act in 100 years.  That comes later—perhaps years later after appeals.   When asked by Chairman Grassley, DiMA was unable to come up with a number and referred to the CBO’s cost estimate of all things.  The ante for a startup with 0.5% market share would be $1.11 million before royalties.  Yet—if a startup fails to pay the DLC, they can lose the blanket license even if current on royalty payments. 

Senators Cornyn and Cruz are rightly skeptical. 

“Modernization” should make licensing easier, level the playing field for startups and protect them from famously predatory  competitor incumbents—as well as copyright infringement lawsuits from the rule takers. 

These are all good reasons for the private market solution.  Competition at least gives startups a hope for the pursuit of fair treatment.

A wise member of the Texas Congressional delegation once told me Big Tech gets to climb the ladder to the American Dream like everyone else. What they don’t get to do is pull the ladder up behind them after getting to the top.

Expanding competition rather than mandating an exclusive collective could keep that ladder available to everyone. 

Factiness EU Style: A Dedicated Group of Like Minded People Carpet Bombs The European Parliament

July 17, 2018 Comments off

ALEX

Viddy well, little brother. Viddy well.

from A Clockwork Orange, written by Stanley Kubrick based on the novel by Anthony Burgess

As we noted in Fair Copyright Canada and 100,000 Voters Who Don’t Exist back in 2009, the legitimate desire by governments to use the Internet to engage with the governed is to be admired.  But there have been incredible and probably illegal uses of the Internet to overwhelm elected officials with faux communications that reek of Google-style misinformation and central planning in the hive mind of the Googleplex.

We saw this again with the Article 13 vote in Europe last week with what clearly seems to be a Google-backed attack on the European Parliament for the purpose of policy intimidation.  That’s right–an American-based multinational corporation is trying to intimidate the very same European government that is currently investigating them for anticompetitive behavior and is staring down a multi-billion dollar fine.

Vindictive much?

Advocacy against Google’s interests on artist rights and copyright issues (not to mention human trafficking, advertising illegal drugs and counterfeit goods) can no longer be just about making a good argument to policy makers.  It has to anticipate that Google will pull these DDOS-type stunts capitalizing on what seems to be the element of surprise.

Except there shouldn’t be any surprise.

There is a real problem with policy-by-DDOS governing.  For example, Cass Sunstein, then the Administrator of the Obama Office of Management and Budget, issued a memo in 2010 to the heads of executive branch departments and regulatory agencies which dealt with the use of social media and web-based interactive technologies.

Specifically, the Sunstein memo warned that “[b]ecause, in general, the results of online rankings, ratings, and tagging (e.g., number of votes or top rank) are not statistically generalizable, they should not be used as the basis for policy or planning.”  Sunstein called for exercising caution with public consultations:

To engage the public, Federal agencies are expanding their use of social media and web- based interactive technologies. For example, agencies are increasingly using web-based technologies, such as blogs, wikis, and social networks, as a means of “publishing” solicitations for public comment and for conducting virtual public meetings.

The European Parliament would do well to take a page from Sunstein’s thinking and limit the amount of anonymous contact that anyone can have with MEPs when the European Parliament is suffering a DDOS-style attack.

But the most important thing for the European Commission to take into account is that a company that is the target of multiple investigations is using the very market place monopoly that caused the competition investigations to intimidate the European government into bending to its will on Article 13.  (That, of course, is the biggest difference between the Europeans and Article 13 and the Americans and SOPA–the US government had dropped the US antitrust investigation into Google and it had unparalleled access to the White House.  So the two are really nothing alike at all.)

The European Commission needs to launch a full-blown criminal investigation into exactly what happened on Article 13, particularly since there is another vote on the same subject coming in September.  Properly authorized law enforcement acting swiftly can set sufficient digital snares to track the next attack which surely is coming while they forensically try to figure out what happened.

Advocates need to understand that Google is a deadly force and this is the endless war.  Good arguments are clearly not enough anymore, particularly as long as the government and law enforcement do nothing to protect democratic values from bully boy tactics.

All the Royalty Deadbeats: Chairman @RepGoodlatte Holds Hearing on Google, Twitter and Facebook Monopolies and Filtering Practices

July 17, 2018 Comments off

Thank you Chairman Goodlatte!

PRESS RELEASE:

Washington, D.C. – House Judiciary Committee Chairman Bob Goodlatte (R-Va.) today delivered the following statement during the House Judiciary Committee’s hearing on “Facebook, Google, and Twitter: Examining the Content Filtering Practices of Social Media Giants.”

Chairman Goodlatte: Today, we continue to examine how social media companies filter content on their platforms. At our last hearing, which we held April, this Committee heard from Members of Congress, social media personalities, legal experts, and a representative of the news media industry to better understand the concerns surrounding content filtering. Despite our invitations, Facebook, Google, and Twitter declined to send witnesses. Today, we finally have them here.

Since our last hearing, we’ve seen numerous efforts by these companies to improve transparency. Conversely, we’ve also seen numerous stories in the news of content that’s still being unfairly restricted. Just before July Fourth, for example, Facebook automatically blocked a post from a Texas newspaper that it claimed contained hate speech. Facebook then asked the paper to “review the contents of its page and remove anything that does not comply with Facebook’s policies.” The text at issue was the Declaration of Independence.

Think about that for a moment. If Thomas Jefferson had written the Declaration of Independence on Facebook, that document would have never seen the light of day. No one would be able to see his words because an algorithm automatically flagged it—or at least some portion of it—as hate speech. It was only after public outcry that Facebook noticed this issue and unblocked the post.

Facebook may be embarrassed about this example—this Committee has the opportunity today to ask—but Facebook also may be inclined to mitigate its responsibility in part because it was likely software, not a human being, that raised an objection to our founding document. Indeed, given the scale of Facebook and other social media platforms, a large portion of their content filtering is performed by algorithms without the need of human assistance.

And Facebook is largely free to moderate content on its platform as it sees fit. This is in part because, over twenty years ago, Congress exempted online platforms from liability for harms occurring over their services. In 1996, the Internet was just taking shape. Congress intended to protect it to spur its growth. It worked because the vibrant Internet of today is no doubt a result of Congress’s foresight.

But the Internet of today is almost nothing like the Internet of 1996. Today, we see that the most successful ideas have blossomed into some of the largest companies on Earth. These companies dominate their markets, and perhaps rightfully so given the quality of their products. However, this begs another question—are these companies using their market power to push the envelope on filtering decisions to favor the content the companies prefer?

Congress must evaluate our laws to ensure that they are achieving their intended purpose. The online environment is becoming more polarized—not less; and there are concerns that discourse is being squelched—not facilitated. Moreover, society as a whole is finding it difficult to define what these social media platforms are and what they do. For example, some would like to think of them as government actors, as public utilities, as advertising agencies, or as media publishers—each with its own set of legal implications and potential shortfalls.

It’s clear, however, that the platforms need to do a better job explaining how they make decisions to filter content and the rationale for why they do so.

I look forward to the witnesses’ testimony.

@helienne Lindvall on MMA Safe Harbor

July 16, 2018 Comments off

It must be said that Music Modernization Act safe harbor was released the same time as CISAC released an economic impact study of the DMCA safe harbor.  We think of DMCA as being worse because we’ve lived with it for decades–in decades how will we feel about the MMA safe harbor and is anyone feeling lucky?

Are Data Centers The New Cornhusker Kickback and the Facebook Fakeout?

July 9, 2018 Comments off

In case you were scratching your head about why Nebraska Senator Ben Sasse decided to stick his beak into trying to continue discrimination against recording artists who had the misfortune to record before 1972–here’s a possible explanation.  Maybe he was just getting his beak wet?

Remember, Senator Sasse introduced an amendment to the Music Modernization Act in the dead of night the day before the markup of MMA in the Senate Judiciary Committee.  While Senator Ron Wyden–another data center beneficiary of Amazon, Facebook and Google–was at least trying to dress up his complicity in a Chanel suit and Louboutin shoes.  Senator Sasse went the more direct route:

Sasse Amendement

Now why might he be so interested, particuarly given Nebraska’s musical history?  It turns out that there is quite the competition between Nebraska and Iowa for Silicon Valley’s data center business, particularly given the rewewable energy profile of each state (wind is 37% of Iowa’s electricity production and about 20% of Nebraska (including hydro).  That checks the box for Silicon Valley.

Of course, as we see from Senator Sasse’s tone deaf foray into copyright lobbying, Silicon Valley thinks they can play the rubes in return for building data centers in their state, just like they did with Senator Ron Wyden and the people of Oregon.  What does stiffing pre-72 artists have to do with data centers?  Nothing.  What does it have to do with playing footsie with royalty deadbeats like Google and Facebook?

Everything.

And rumor has it that there is a deal in the wings for a new Google data center in Nebraska.  Which also explains a lot.

But somehow, Facebook knows that its Silicon Valleyness may not be that popular with the rubes.

According to Data Center Dynamics, Facebook has been going to great lengths to hide its involvement in massive data centers being built in Nebraska, which gives “Cornhusker Kickback” a whole new meaning:

Operating under the alias Raven Northbrook, Facebook has its eyes on Nebraska, DCDcan exclusively reveal

Late last year, local council officials granted approval for a large data center project in Sarpy County, Nebraska, but the company behind the huge facility was kept a secret.

Now, DCD can confirm that the corporation hoping to build four 610,000 square foot (56,670 sq m) data center halls at the Sarpy Power Park is Facebook.

You can run servers, but you cannot hide them

SHOW FULLSCREEN

Raven Northbrook, certificate of authority, Facebook

Source: Nebraska Secretary of State

Sarpy County documents reveal that the company, which is publicly represented by infrastructure engineering and design solutions company Olsson Associates, goes by the name Raven Northbrook.

Read the post on Data Center Dynamics

Content Creators Coalition & MusicAnswers Applaud the Revision and Passage of the Music Modernization Act by the Senate Judiciary Committee — Artist Rights Watch

June 28, 2018 Comments off

PRESS RELEASE

[Washington, D.C.] – The Content Creators Coalition and MusicAnswers released today the following statement on the Senate Judiciary Committee’s vote in support of the Music Modernization Act.

C3 and MusicAnswers applaud the Senate Judiciary Committee’s vote to advance the Music Modernization Act, while incorporating key changes we had urged to make the legislation stronger, more transparent, and more equitable.

The MMA will strengthen the music ecosystem and all its participants, including songwriters, publishers, performing rights organizations, artists, record companies, music services and fans. It ensures digital music services will pay fair royalties for every song they stream, establish a better standard for determining royalty rates, and eliminate some out-of-date provisions of the PRO consent decrees. In return, digital music services get certainty, legal protection, and new streamlined tools to bring more music to more people at lower cost.

It’s a reasonable bargain, and, therefore, we have consistently and publicly supported the basic construct of the legislation.

We are especially grateful that the Senate Judiciary Committee, led by Chairman Chuck Grassley (R-IA) and Ranking Member Dianne Feinstein (D-CA), was willing to engage with our organizations on ways to improve the bill and include in the Managers Amendment approved today key protections for creators and the public.

As a result, the MMA now provides greater transparency, including rigorous audits to make sure that royalties are flowing to the correct parties, a commitment to educating all music creators about their rights and the royalties due them collected under the new Music Licensing Collective (MLC), a requirement to study and follow best practices in order to find the proper owners of unclaimed royalties, and increased clarity regarding who owns the data generated by the new system.

While we support the legislation and are proud of the changes we have achieved as artist and songwriter advocates, we continue to have concerns about three key issues: whether the entity that is designated as the MLC is being foreordained by the bill and precludes competition with the MLC; the composition of the Board of Directors of the MLC, which is unduly tilted towards major publishers; and the methods used to distribute royalties from works where even using best practices the authors could not be identified.  We urge the full Senate and the House to consider further improvements to those flawed provisions and we call on the Copyright Office to ensure in implementation of the final legislation that no stakeholder group can dominate the MLC and that all royalties are distributed in a fair and equitable and non-self-interested manner.

The process leading to this moment has been strong in many ways. But it has also included its fair share of divide-and-conquer tactics and efforts by powerful incumbent forces to crowd out grassroots organizations like ours and to divide the music community within itself.  We believe that we are strongest when we respect and support each other – a lesson too many in our business still have yet to learn.

We are deeply appreciative of the partnership c3 and MusicAnswers have forged. Together, we represent thousands of writers, producers, performers, and music business professionals, and over the past few weeks we have worked steadfastly to pursue improvements in the MMA. We look forward to future collaboration and welcome the involvement of other collaborative groups and individuals.

via Content Creators Coalition & MusicAnswers Applaud the Revision and Passage of the Music Modernization Act by the Senate Judiciary Committee — Artist Rights Watch

What’s Up With @SenSasse’s Vicious Little Amendment on pre-72?

June 28, 2018 Comments off

Sasse Amendement

It’s important to know who your friends are, and we’ve learned this week that Nebraska Senator Ben Sasse is not one of them.   It’s a bit surprising given Omaha’s musical legacy that starts with the big band era–you know, the musicians and artists Sasse was trying to dis with his amendment to strike the CLASSICS Act pre-72 fix from the Music Modernization Act.  Not to mention the Saddle Creek juggernaut.

It’s such a strange little tableau that it’s hard to really understand what in the world Senator Sasse thought he was up to with his vicious little amendment that would stab pre-72 artists and their heirs in the alley.  But we learned to keep a close eye on this character who seems to be in league with Senator Wyden, Google, Public Knowledge and the Electronic Frontier Foundation.

So while you think about that one, you may want to have a listen to his fellow Nebraskan, my friend Buddy Miles with my old band mate Wally Rossi on guitar.

 

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