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$20 Million a Month Daniel Ek Shows “Million a Month” Tim Westergren How It’s Done

October 16, 2018 Comments off

Remember when we were all appalled that Pandora founder Tim Westergren was making $1,000,000 a month from selling Pandora stock while he was behind fighting songwriters in rate court for ASCAP and BMI royalties and stiffing artists with the Internet Radio Fairness Act and refusing to pay pre-72 artists?  And then there was the 13 bathroom house in Marin.  It was all a bit hard to stomach.

According to Jem Aswad in Variety, Daniel Ek is putting Westergren in the rear view mirror for sheer excess.  Based on SEC filings made available to a Swedish publication (probably SEC Form 4):

….Ek sold 336,213 shares $61.7 million worth of stock between July and September, and late last month signaled his intent to sell another $69.9 million sold in July–September for a total of $61.7 million.

So a little over $20 million a month, and it appears that when added to the shares he already sold and will sell, Ek should gross more than all the songwriter class action settlements combined.

“Daniel will sell a small share of Spotify shares in the next nine months as part of his long-term financial strategy. This sale of shares will constitute a minimal part of his holding in the company,” Spotify rep Sofie Grant told the [Swedish] paper. Ek and Lorentzon declined comment.

Of course, it remains to be seen how Spotify does with the several individual infringement lawsuits in Nashville and the Wixen Music Publishing lawsuit in Los Angeles. (Spotify recently lost a motion to dismiss against Bluewater Music represented by attorney Richard Busch, see Order Denying Motion To Dismiss For Lack Of Standing And Failure To State A Claim, Sept. 29, 2018, Bluewater Music Services Corporation, Inc. v. Spotify USA Inc.,  Case No. 3:17-cv-01051 (D.C. W.D. Tenn.) (2017), which also happens to be a great lesson in copyright law by the judge.)

So–Mr. Ek could spend his money on building an effective licensing operation, but….nah….Sounds like Mr. Ek is a man in need of yet another safe harbor, right?

@songpreneurs: Why Is Tom Petty Suing Spotify and How Does This Relate to the Music Modernization Act? — Artist Rights Watch

January 8, 2018 Comments off

[Editor Charlie sez:  Another songwriter group against the controversial Music Modernization Act! See the Songwriter’s Guild opposition letter here  and read the legislation here.]

The end of 2017 and beginning of 2018 has seen a flurry of activity as headlines reveal another $1.6 Billion Dollar Lawsuit against the tech streaming online distribution company, this time by Wixen Music Publishing, who represent compositions by Neil Young, Tom Petty, Rage Against the Machine and others.

This latest lawsuit joins nearly half a dozen other class action / lawsuits against Spotify by independent music creators and rights administrators filed in the past two years.

“The Trichordist” blog collaborator, Cracker and Camper Van Beethoven front man, David Lowery of Athens, Georgia and songwriter Melissa Ferrick successfully sued Spotify and settled with a $43.4 Million Fund for unpaid songwriter and publisher royalties last year.

Around the same time the NMPA (National Music Publishers Association) also stepped in and made their own $30 Million settlement with Spotify as reported by Robert Levine in Billboard in May of 2017.

Nashville / Texas based Bluewater Music Services Corp filed a lawsuit against Spotify in 2017, led by champion of the underdog attorney Richard S. Busch, the same lawyer who represented the victorious Marvin Gaye estate in their “Blurred Lines” infringement case, and helped Eminem successfully stand up to EMI when his rights were being squashed in the name of commerce.

The Bluewater suit and yet another Spotify lawsuit by an independent music publisher, Rob Gaudino are both detailed in this Variety article “Spotify Faces Two New Lawsuits From Music Publishers” by Janko Roettgers in July 2017.

 These lawsuits highlight Spotify’s ongoing battle to do business with its suppliers, the songwriters and music publishers who are forced through federal regulation to make their material available to Spotify and other streaming companies against their will through a practice known as Compulsory Licensing, whereby the rights owners are not permitted to deny usage of their intellectual property.

What kind of negotiation can actually happen if one party cannot walk away?  Not much, we are proving.

Read the post on Songpreneurs

 

@philouza: New Bill Calling For Transparency In Music Is Surprisingly Opaque — Artist Rights Watch

August 2, 2017 Comments off

NPR’s Andrew Flanagan on the controversial Transparency in Music Licensing and Ownership Act (TIMLAOA).

via @philouza: New Bill Calling For Transparency In Music Is Surprisingly Opaque — Artist Rights Watch

Why Spotify Needs A Magistrate

July 19, 2017 Comments off

Spotify was served in federal court in Nashville with two new lawsuits for massive copyright infringement by parties represented by Richard Busch (who has a strong track record in the area).  Based on the allegations in the complaint and reports about what appear to be breaches of Spotify’s recently concluded settlement with NMPA, it seems abundantly clear that when it comes to mechanical royalties, the company is simply not getting it done.

It must be asked, where is the board? Who is minding the store at Spotify? One conclusion that the latest litigation suggests is that Spotify’s future will be a lot like Napster–endless litigation from songwriters and publishers who are either not part of the settlements because they opted out or whose works were infringed recently and are not picked up by any settlement.  This should give any board of directors pause–not to mention a gut check with their D&O insurance company.

But what about the songwriters who don’t want to go through the litigation maze and just want to be paid fairly when Spotify plays their songs?  As long as Spotify takes a cavalier attitude–even in the face of massive litigation–no one can trust the company to do the right thing.

As Matt Pincus told the New York Times in a different, but relevant, context: “The more controversies [Spotify] have that have a moral underpinning to them, the more of a problem they will have in the bigger fight.”

Not only does Spotify have the “black hat” problem with songs and songwriters, they also make people wonder about their reporting and licensing on sound recordings and artists.  If Spotify’s accounting on songs is so sloppy and the company is either so slow or so unwilling to fix themselves, how can they possibly be doing it perfectly on sound recordings?

There is a solution to this that one would think both sides would welcome–a court appointed federal magistrate to oversee an independent third party rendering Spotify’s royalty statements and handling its licensing.  There is an apocryphal story that Goldman Sachs partners are under continual audit by the IRS by means of an IRS office inside Goldman.  While that may seem oppressive if true, at least a Goldman partner would know that they were already clean with the IRS.

If a court ordered a federal magistrate to review Spotify’s royalty reporting for say the next 10 years, songwriters might actually get paid and the Spotify board and their insurance company could breathe easier.  Not to mention the implicated employees.

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

June 12, 2017 Comments off

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.

Just Say No: Will Spotify Still Be Seeking Forgiveness During Its IPO?     

June 5, 2017 Comments off

[A version of this post appeared in last month’s MusicTechPolicy Monthly.]

While Spotify’s technocrats may be breathing a sigh of relief after the company’s most recent multimillion dollar settlement with songwriters, it is well to remember that the company is probably not anywhere close to out of the woods.  As others have learned the hard way, once you replace the rights of songwriters and artists with your own lust for IPO riches, the lawsuits can go on for a very long time indeed.  You would think that after nearly 20 years of massive infringement online, the obvious answer would suggest itself to the “get big fast” group:  Don’t use music you don’t have rights to use.

Yes, that’s right.  Just say no.

The typical reason given by interactive services about why their need to offer unlicensed music exceeds their desire to offer only licensed music is because of competitive pressure from YouTube.  Why do they feel this competitive pressure?  Because their investors tell them at every board meeting that they should feel it.  But let’s be clear–I doubt that Tim Cook gets Eddie Cue in a headlock over the issue over at the Infinite Loop.  If you agree, then that kind of narrows it down.

But entertain that idea for a moment, however ill founded.  Why is YouTube able to sustain this competitive position that supposedly makes otherwise licensed services soil themselves with fear of being undercut and overrun by YouTube?

That’s right–the “DMCA license”, or YouTube’s absurd use of the “safe harbors” granted to them under the U.S. Copyright Act which YouTube likes to think makes them bullet proof.  (Which is also what Cox Communications thought until they weren’t and is probably what Facebook thinks, too.)

So get that straight–some would say that The Golden Child (aka Spotify) is to be allowed to limp their way to the increasingly inexplicable goal of some kind of big financial reward (or “exit”) in an IPO of whatever stripe while we are all asked to look the other way and allow them the same shite arrangements that YouTube enforces through lobbying, litigation and unprecedented monopoly position (aka crony capitalism).

And you thought it was all about the “Value Gap”?  Apparently not.

We are being told that the licensing practices of interactive services should be allowed to look more like YouTube’s widely loathed safe harbor and YouTube tries to make us believe that they are really pro-artist.  We are asked to hold the proposition “A” and the proposition “not A” in our heads simultaneously.  It can be done, but it is rather uncomfortable and it is uncomfortable because in this case it is unnatural.  Not to mention, it is, of course, all bull.  Irving Azoff crystalizes the view no doubt held by everyone who has ever dealt with any of these people:

“The truth is that, despite having to compete with services like YouTube who hide behind outdated, safe harbor protections, legitimate services like Spotify and Apple Music are attracting more subscribers than ever,” he continued. “If YouTube had the same level of commitment, their subscription service would be more than a head fake—and they’d be working hard, like Spotify does, to convert users to the paid tier for unlimited music. Maybe Google should do a study on that.”

The difference is that Irving is actually looking out for the best interests of his clients and is not afraid to tell the truth.  The one clarification I have to his assessment is that Apple doesn’t seem particularly worried about their competitive position–it is Spotify that runs to the Nanny State at every turn and files mass “address unknown” NOIs all the livelong day.

And then, of course, the whole “Value Gap” concept is only half right–it should really be called the Pinto Gap, because it’s not just that Google decided to make money off the backs of artists and songwriters through a distorted loophole.  Google also made that choice to be a knowing mass infringer the same way Ford decided to knowingly sell consumers its Pinto model with an exploding gas tank.  It profited them to do so, just like it profits them to trade in terror recruiting videos.

So the Pinto Gap is not much of an excuse for either a competitor service, the DMCA safe harbor, or as a policy the industry should support.  (And that goes for Facebook, too.)

Spotify CO May 12

As it stands now, it would at least potentially be a big mistake to assume that Spotify has done sufficient ameliorative work to be prepared for the big bucks to roll in (for everyone except the songwriters and artists).  All that these songwriter settlements have done is allow songwriters the chance to earn a royalty from Spotify that starts two or maybe three or maybe four decimal places to the right, depending on the month and which of Spotify’s two main services are serving the song or recording.  This is not particularly exciting news for songwriters once the bloom is off the class action rose.

It’s entirely possible that a lawsuit could be brought by any songwriters who are not part of the latest class action or a private settlement.   That certainly would explain why Spotify showed a sudden interest in serving hundreds of thousands of notices on the Copyright Office using the “address unknown” NOI loophole.  The company has probably been advised this tactic would fend off future infringement lawsuits and allow Spotify to use songs under the compulsory license.  It might, but there is a telling section of the settlement document (at p.4) that echoes my own criticism of the mass NOIs (so naturally it caught my eye):

Spotify will invest time and resources to initiate and support an industry-wide
effort (to include representatives of composers, publishers, streaming services,
labels, and others) with the goal of obtaining and digitizing all U.S. Copyright
Office registration records for musical works registered before January 1, 1978,
 and making that information far more accessible to the Class. (my emphasis)

Why is that language intriguing?  Because it is likely there for a reason the language dances around–the public records of the Copyright Office are only searchable online for registrations or recordations after January 1, 1978 and are paper records before that date.  We have long believed that digital services are not going to search the paper records of pre-78 works but are going to file mass NOIs based on “address unknown” status on pre-78 works without actually checking to see if the address is in the Copyright Office records.  Why?  Because when you’re born digital you don’t stoop to looking through paper.  And because it is consistent with their “seek forgiveness not permission” approach that is proving so costly.  Even if they get sued faster than a three finger swipe.

That’s also not going to help them with any stream rips of live shows that have found their way into the extremely porous aggregators that distribute to these services or any other illegal distributions of sound recordings for which a compulsory license isn’t available in the first place.

In other words, if Spotify (or any other service) relies on the mass “address unknown” NOI loophole for pre-78 works without doing the proper research, they are potentially right back where they started–if not worse, because they potentially have misfiled their mass NOIs on a grand scale.  And you know who is good at looking into things done on a grand scale is a grand jury.

So it comes down to the same issue–if the service really is all that valuable, then wouldn’t the fastest way of identifying song owners be by refusing to post their songs until there’s a license in place?  Particularly if you don’t buy into the Pinto Gap excuse?  Isn’t the market much more likely to produce that information in an efficient way through the exercise of leverage and rules?  You know, like the Copyright Act?

 

Spotify IPO Watch: Blame ≠ Profit — Music Tech Solutions

August 25, 2016 Comments off

A combination of factors have gotten Spotify where it is now. Market conditions, bad management, arrogance, stiffing songwriters and getting too big, too fast. Until all those things change to one degree or another, it’s likely that the Spotify IPO myth will remain just that.

via Spotify IPO Watch: Blame ≠ Profit — Music Tech Solutions

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