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Wixen Music Publishing Lawsuit Against Pandora Raises Questions About Lyric Licensing

June 19, 2019 Comments off

In the “it was only a matter of time” department, Wixen Music Publishing has sued Pandora over infringing reproductions of the lyrics in songs it represents.  (For those reading along at home, Wixen is represented by badass David Steinberg, so good luck Pandora.)

All these cases against tech companies start with very similar facts–they were given a chance to fix the problem and they either entirely ignored the copyright owner (like David Lowery and Bluewater) or they obfuscated and tried to deflect blame, or did both.  Here’s the key fact from this Wixen case:

Plaintiff’s representatives put Pandora on actual notice of its infringing conduct in early 2018, yet Pandora did not even attempt to address its infringing conduct until May 2019, when it first purported to cease displaying some of the lyrics to the Musical Compositions on its service….Pandora’s infringement is therefore willful and deliberate.

In other words–Pandora apparently blew off its responsibilities for over a year and still didn’t fix the problem.  Here’s a practice point–when Wixen or someone like Wixen calls, you need to fix your problem.  Right. Now.

But this case raises an interesting side point that may indicate a likely waypoint down the trail.  There is a company called LyricFind that licenses lyrics for many publishers according to their advertising.  Wixen notes in the complaint:

Pandora may claim that it had obtained licenses to display the lyrics to the Musical Compositions from one or more sources, including an entity called LyricFind, the self-proclaimed “largest lyric licensing service” in the world, which claims that it “has licensing from over 4,000 music publishers, including all majors.” However, as Pandora knows, and has known, LyricFind did not have the authority to grant licenses to Pandora for the display of any of the lyrics to the Musical Compositions on its service.

How does Pandora know this?  Probably because Wixen (and possibly other publishers) told them so.  It’s entirely possible that Pandora has a license with LyricFind for the songs it represents, but if Wixen hasn’t authorized LyricFind to represent them for lyric licensing (which they evidently have not), then this is an irrelevant fact.

I have to believe until shown otherwise that LyricFind would be the first to tell their licensees that LyricFind does not purport to license all the lyrics for every song ever written or that ever may be written in any language from any songwriter or publisher in any country on the face of the Earth.

The problem seems to be the same problem that Big Tech has had with music from the beginning–the tech companies don’t want to have to confirm their rights because that involves human beings and human beings costs money.  It’s this dismally poor administration of licenses by the licensees that seems to be the stumbling block.

However, it does make for interesting viewing to see exactly what was said by whom when about what, and what assurances were given.  My bet is that the next step will be like the Music Modernization Act–a retroactive safe harbor with a blanket license and a statutory monopoly.

Read the Wixen complaint here.

@shiraovide: Pandora’s Eyes Are Bigger Than Its Wallet

January 13, 2017 Comments off

Remember the rending of garments by Pandora’s overpaid executive team about how they just couldn’t turn a profit because of the royalties they paid under their statutory licenses?   Statutory licenses allow Pandora to operate without paying minimum guarantees like they will need to do for their much ballyhooed on demand service that is yet to launch.   And remember the standing offer we made to pick any MBA lurking in any business school corridor anywhere in the world to help a company with government mandated price controls on the expense side and over $1 billion in annual revenue turn a profit?

Looks like their secret is out–as Bloomberg’s Shira Ovide writes, Pandora is feeling the burn.  This right before (we suppose) that Pandora launches its on demand music service for which they are serving millions of “address unknown” NOIs on the Copyright Office to stiff songwriters on statutory royalties.  The story from Ms. Ovide is thought provoking, but let’s provoke this thought:  What happens if Pandora can’t pay its statutory royalties at all?

At its current rate of cash burn, then, [Pandora] will exhaust its reserves of ready cash in about 10 months.

What happens to the statutory royalties if Pandora goes bankrupt?  Remember–in bankruptcy, artists and songwriters are known as “unsecured creditors” standing way, way behind Pandora’s creditors such as bond holder Texas Pacific Group.  Of course, it’s probably more likely that Pandora’s exit will be a sale–hopefully before it misses a royalty payment and hopefully for more than the $450 million of cold cash it spent on the misguided acqusition of Ticketfly.

Pandora said on Thursday that it was being savvy about how it lures new subscribers without overspending on marketing and that it was finding more ways to automate advertising sales. The company also said its “commitment to cost discipline” — i.e., its willingness to fire people and pinch pennies in nonessential areas — would allow it to devote funds to new products. Using a customized measure of earnings, Pandora said it expects to do better than the losses forecast by Wall Street analysts. The company still doesn’t expect to be profitable under conventional accounting standards.

The best hope to cure Pandora’s ills is a sale. And that’s why Pandora’s stock moves up mostly at any hints a sale might be coming.

Read the post on Bloomberg

 

 

The MTP Interview: Blake Morgan of ECR Music Group on the #irespectmusic campaign

March 31, 2014 1 comment

IRM blake

 

Chris Castle interviews Blake Morgan, head of ECR Music Group and the force behind the #irespectmusic campaign on Pandora, IRFA and the campaign for artist pay for radio play.

Theme music by Guy Forsyth.

You can also subscribe to the Music Tech Policy podcast on iTunes.

 

Blake Morgan on the Profession of Music and the Problem with Pandora

September 17, 2013 Comments off

An excellent interview with the well-spoken artist and entrepreneur Blake Morgan who tells a refreshingly civil yet blunt story of his encounter with Pandora.

 

 

Good News for Pandora

April 9, 2013 1 comment

According to Saving Alpha, some good news for Pandora today:

Pandora (P) reaches 200M users, up from 100M in July 2011, while over 140M members have used the online music-streaming service on a mobile device. Other stats that Pandora is proud of this morning include streaming 200M songs before 10 a.m. every day, and playing over 100,000 artists in March as well as over 1M unique songs.

Amazing what can happen when you stick to your knitting instead of listening to the siren call of lobbyists wanting to take your money….Sorry, I meant take the stockholders money.

Joe Kennedy Departs Pandora

March 8, 2013 3 comments

Pandora’s CEO Joe Kennedy announced today that he’s leaving the company.  Lots of rumors about who will succeed him, but nothing definite.

Joe’s taken some knocks lately (including here at MTP) as a result of the whole IRFA miscalculation–but that had better not be the reason that he’s leaving.  A CEO–particularly a public company CEO–has a lot to do and tends to rely on the lobbyists and PR folks that his company hires to know what they’re doing.  There’s only so much attention a CEO can really devote to worrying about DC versus worrying about his employees and stockholders.  Of course, the CEO is going to get blamed if the genius of these lobbyists and PR mavens falls short, even if the board approved the strategy and was in on it.  Blamed rightly or wrongly, and in my view if he’s being blamed for IRFA, he’s being blamed wrongly.

It’s very tricky stuff to build a company that blends the culture of tech companies with the music culture.  The two do not relate well to each other and tend to attract very different people.  Engineers typically work in large teams and don’t ever plan on owning what they make or having it last 100 years.  Musicians and artists typically work alone or in very small teams, plan on controlling every aspect of their work product and somehow feel they haven’t really made it until they have an “evergreen” song or record.  Joe Kennedy managed a company that blended both kinds of people and evolved its own culture.  They built a product anyone could be proud of–heck, I know people who are proud of it and never even worked there.  That’s a big deal, and we should all remember that Joe did that–not alone, but he did it.  Joe’s not a records man, but a records man would have been wrong for the job.

In fact, I’d say that where he screwed up was when he forgot about the need to blend those cultures–IRFA being a prime example.  I also think he miscalculated by not making a deal in the UK and Europe when he was close.  He overplayed his hand a bit with rate court and other bad advice.  Trying to negotiate by conducting what’s essentially a flame war only succeeds if the other side is afraid of being flamed.  If IRFA proved anything, it’s that those days are over.  Lighting doesn’t strike twice.  And I almost guarantee you that whoever comes after him will be more corporate, less a music person and will probably be a net negative for the company.

But the IRFA problem is really just a case of a CEO getting bad advice from people who are supposed to be experts.  So yes, he gets the blame because the buck has to stop somewhere.  But no, that misstep should never cloud the fact that Joe helped to build a great product that put a lot of money in the pockets of artists, musicians, vocalists and labels not to mention songwriters and music publishers.  He took his company public–a process that in and of itself is its own brand of torture.  And somehow managed to keep the music culture alive at Pandora while the company singlehandedly proved that webcasting could be a business.  And our business is the better for him.

How the Rate Court Cottage Industry is Leading to the Destruction of Collective Licensing

January 19, 2013 1 comment

The news that Sony/ATV made a direct deal with Pandora produced some strangely paranoid chatter in the echo chamber.  Sony/ATV can bring Pandora to their knees, getting around the rate court, etc.  I think it’s actually much simpler than that.

What appears to have happened is quite simple–Sony/ATV opted out of letting ASCAP and BMI license their catalog (which now includes EMI so is really quite massive).  This is perfectly legal, nothing shady, although a bit unusual.  They’ve announced they intend to take some digital licensing in house, so everyone should have expected this was coming.

It is perfectly legal because of the antitrust consent decrees that ASCAP and BMI operate under.  A condition of these consent decrees is that every affiliate of ASCAP and BMI retains the right to “opt out” of the blanket licenses (and rates) offered by these societies.  No reason need be given–it is a right that all enjoy.  (SESAC is a private company that does not (yet) operate under a consent decree.)

If a publisher opts out of one license or type of license, they can remain in the blanket license for all other licenses that are in place.  So for example, Sony/ATV can opt out for Pandora, but stay in for broadcast radio or venue licenses.

Why might a publisher opt out of a blanket license?  One reason is financial–they don’t have to pay the PRO collection fee on that revenue stream.  But another reason is that if they stay in the blanket license, then they are subject to rate court proceedings brought against the PRO if negotiations with a licensee (say Pandora) fail.

Rate court proceedings were relatively rare occurances prior to the arrival of Big Tech in our lives.  They have become increasingly common and almost always involve digital services.  In fact, they almost always involve the same lawyers representing the digital services.

Rate court proceedings cost a lot of money.  Millions in legal fees.  And the twist is that if you stay in the blanket license, ASCAP and BMI pretty much have no choice but to submit to the rate court proceeding which is required by their respective consent decrees.  So in this way while the PRO licenses are voluntary–not statutory like the compulsory mechanical license–and the rates are not set by the Copyright Royalty Judges–because they are not statutory rates–the rates are set by U.S. Federal District Courts sitting as rate courts.  (For example, Judge Stanton is the BMI rate court judge in the Southern District of New York.  MTP readers will remember him as the judge in the Viacom v. Google lawsuit who handed Google a complete victory over Viacom at trial in an opinion I found meandering and bizarre, which subsequently was substantially overturned on appeal.)

Rate court proceedings are in many ways similar to the Copyright Royalty Judges and take into account a variety of economic factors, including market rate deals for the same type of license.

Blanket licenses issued by the PROs are one of the great efficiencies in music licensing.  Rate court proceedings gum up the works and undermine the benefit of lower transaction costs in collective licensing.  I wonder if at the end of the day when one takes into account the legal fees and transaction costs concerned when Big Tech fights negotiated rates whether anyone actually comes out ahead.

Meaning if you compare the position of the parties before the rate court black hole and the ultimate rate imposed by the rate court, did the Big Tech company that used its litigation budget to force songwriters into the rate court proceeding actually end up better off?  Or did they just get their jollies from dragging songwriters through costly litigation so that the next time around the PROs were more likely to acquiesce?

One thing that you often hear these Big Tech types say about their direct licenses is that songwriters are better off to not be represented by PROs because even though the direct license rate is lower, it’s more than the songwriter would get through the PRO because they don’t have to pay the PRO “commission”.

Of course, the other benefit from PRO licensing that songwriters get that isn’t discussed is that the songwriters can audit collectively under the PRO’s blanket license.  Big Tech companies hate audits.  The more direct licenses, the less likely that any one songwriter will ever exercise an audit right.  And eventually the audit right will be withdrawn (as is already happening with the YouTube indie publisher license).

So how does this effect Sony/ATV?  Recall that Pandora sued ASCAP in the rate court to try to screw songwriters right about the same time they began their campaign to screw artists in the Congress with the so-called Internet Radio Fairness Act.

If I had to bet, I would bet that Sony/ATV said enough of this BS and withdrew from ASCAP and BMI for purposes of licensing Pandora.  That takes Sony/ATV out of the rate court.  They made a deal with Pandora for a higher rate and shorter term than will ultimately come down in the ASCAP rate court.

Note:  Of course, ASCAP may be able to use the Sony/ATV deal as evidence of a significant market rate for the Pandora service in the rate court, even though Sony/ATV is not party to the case.

Pandora had the choice of excluding all Sony/ATV songs from their service or make a direct deal with the publisher.  And now that Pandora has made that deal once, they will always.

And that’s really all there is to it.

But–if Pandora had not been advised to go to the rate court, would Sony/ATV have made the same decision?

Is Pandora lucky that Sony/ATV didn’t just opt out of the ASCAP and BMI blanket licenses and not license Pandora at all?  That would probably have brought down the service.

And–given the antagonism that was heaped on Pandora by songwriters from outside the US, will the societies representing these songwriters elect to opt out of the reciprocal agreements they have with ASCAP and BMI regarding Pandora and just not license Pandora?

Will other publishers follow Sony/ATV and avoid the rate court?  Won’t that mean that the cost of the rate court will be shared by an ever smaller group of songwriters forced to litigate by Big Tech?

One thing we don’t need is less efficiency and higher transaction costs in music licensing.  Most Big Tech companies and their shills whine about fragmented music licensing, yet the same people drive up those transaction costs while enriching a small group of lawyers who undermine the benefits of blanket licensing.

Do these Big Tech companies have the right to do this?  Sure.  Does it benefit them in the long run to jack songwriters around?  Not really.  If there’s anyone who has an existential threat from Big Tech it is the professional songwriter, often overlooked yet the most important part of the equation.

Continually trying to jack these people around accomplishes one thing:  It hastens the day of full commoditization of culture by Big Tech.  This is what they may think they want, but I would suggest to you that they really don’t.

So they may have the right to do it, but that doesn’t make it smart.  But then I’m just a country lawyer and I’m not as smart as these city fellers.

You can’t blame Sony/ATV given their options.  I’d have done the same.

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