MUSIC • TECHNOLOGY • POLICY

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:

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…

T]his transaction review is the first genuine opportunity and powerful legal process for those alleging anti-competitive harm by Amazon to have antitrust authorities’ full ear in a confidential process where warranted.

via @scleland: Why Amazon Buying WholeFoods Will Attract Serious Antitrust Scrutiny — Artist Rights Watch

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.

Consumer Watchdog’s John Simson grills Eric Schmidt to a stutter while Google CFO Ruth Porat twiddles her thumbs and counts her shares.

Consumer Watchdog report referenced in the video: “How Google’s Backing of Backpage Protects Child Sex Trafficking.”

Trailer for “I Am Jane Doe”

And here is YouTube’s channel partner Seeking Arrangement for advice to young women about how to pay off student loans through “sugar baby” relationship at “Sugar Baby University”:

Another brilliant post by Tessa Leena puts Patreon in its place!

Beauty of begging, sold to us as something romantic and newly brilliant: We are back to the Middle Ages where creative professionals–um, troubadours–were whores and marginalized individuals. Except now, between the troubadour and the generous peasants, there is a clever middleman like Patreon who makes money on bulk.

via @tessamakeslove: Would everybody just f*ck off about the beauty of begging? — Artist Rights Watch

Canadian artist Miranda Mulholland articulated the common reality that we hear every day from artists around the world. Thankfully she gave her clear-eyed assessment of reality at the Economic Club of Canada–it would be great if we could get a comparable audience for artists around the world. Here’s an excerpt:

via Must Watch Talk By Artist @MirandaMulholland on Redefining Success in the Digital Marketplace — Artist Rights Watch

More on this later, but Robert Levine is reporting in Billboard that the combined Lowery/Ferrick potential class actions have reached a $43.4 million settlement with Spotify (read the latest court document on the settlement here from Pacer).  The settlement still requires identifying a class which the documents define (at p. 3) as:

All persons or entities who own copyrights in one or more musical compositions (a) for which a certificate of registration has been issued or applied for on or before the Preliminary Approval Date; and (b) that was made available by Spotify for interactive streaming and/or limited downloads during the Class Period (December 28, 2012 through the Preliminary Approval Date) without a license. (my emphasis)

This definition leaves out anyone who hasn’t filed a copyright registration of their song, which is likely to include many ex-US songwriters who are not required to register in order to enjoy copyright protection, and indeed many US writers who haven’t gotten around to registering their works as of what appears to be a yet-to-be-defined “Preliminary Approval Date.”  So the clock is ticking for those who have yet to play the registration game.

It should also not be lost on anyone that the reference to the class certification includes compositions exploited by Spotify “without a license”.  This clause should more properly state “without a license issued by the copyright owner or for which a license has been served on the copyright owner directly and not served on the Copyright Office pursuant to 17 USC Sec. 115(b)(2).”  Why?

The proposed settlement’s registration requirement as drafted may also explain why Spotify has taken a sudden interest in serving “address unknown” NOIs on the Copyright Office in order to claim to have a faux statutory license.  Spotify may be trying to argue that anything in their mass NOI filing is not registered and that by filing the mass NOI they have a “license” under the Copyright Act.  It may be well to pay closer attention to the definition of “license” in the class settlement.  (See “Loopholeapalooza!  Spotify Files 247,112 Address Unknown NOIs”)

Spotify’s 72 NOI filings to date, each with multiple spreadsheets with hundreds of thousands of songs

It also excludes the publishers who signed up to the NMPA settlement (which I think was a $30 million settlement depending on how you count it), those who have reached their own settlements, and a few other categories that should not be controversial.  If memory serves, the NMPA settlement was thought to cover some 90% of the songs at issue.

It is well to remember that Spotify started out with licenses for a bunch of material and just fell down on their licensing rules in a rather expensive way for a company with $1 billion of debt.

Compare Spotify to Facebook.  Facebook has no licenses.  None. Zero. Zilch.  They know they have no licenses and they don’t seem to be in much of a hurry to solve this problem.  For all of Spotify’s problems, Facebook is not Spotify.  Facebook is a royalty deadbeat.

What the Spotify cases should tell Facebook is that Facebook should not expect to get a pass for their bad behavior.  Facebook should expect to write a very large check for the past and a very large check for the future.

How much?  Facebook’s Sheryl Sandberg has said that $500,000,000 is not a material sum for Facebook, so let’s start there.  That’s not a crazy number, either–Facebook has about 20 to 40 times the number of users than does Spotify (depending on which Spotify number you believe), so if anything $500,000,000 is cheap.  That payment should just about cover the past and then we can talk about the go forward.

What is different for Facebook than it was for YouTube or even Spotify is that independent artists and songwriters have found their collective voice and they are not scared by Emperor Zuck and his billions.