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Guest Post: We are Not Blind to the Harsh Economic Realities of Streaming: An Interview with an Indie Publisher

September 15, 2019 Comments off

[Following is an interview with a reader who is an independent publisher about how they view the future for songwriters and independent publishers in the streaming upside down world to the right of the decimal place.  The publisher requested to remain anonymous.]

Chris Castle/MTP:  I want to ask you about challenges in the streaming reality for an independent publisher.  So, readers get the context, about how many titles are in your catalog and what responsibilities do you have as a publisher or administrator?

Publisher: Our companies were originally founded in 1958 in Hollywood at Vine and Selma. We control over 2100 recorded known songs collectively – in four main publishing firms – which also includes 35 administrated composer artist’s own publishing firms as well, worldwide. We handle all licensing, collection, royalty accounting, back royalty recoveries and sync licensing, inhouse. This we do for 46 years now.

MTP:  One of the threshold problems that I’ve seen with the way royalties are calculated for streaming is that the per-stream rate shifts from period to period which makes it impossible to tell a songwriter—let’s not forget about them—how much they are getting paid.  Do you find that’s an issue for publishers or am I making too much of that information gap?

Publisher: That information gap IS holding us down, we have no way to know HOW it’s calculated as it is and those calculations ABSOLUTELY are not making any sense, there is no explanation, continuity or pattern to deciphering the differences for each part of the service’s tiers – and the amount of units reported to support the varied rates, it follows no logic at all. It changes from period to period and often you’ll see 25,000 units on a Spotify Premium plan that PAYS nothing. WHY? We have no rights to audit and are helpless to question this with hundreds of thousands of excel statements that keep making LESS sense.  

The rates are always different and incomprehensible!

PANDORA (PREMIUM/ AND PLUS

RATE             UNITS               TOTAL 

 0.1667          44755               0.57303

.24368         19756.5             0.24368

 ITUNES MATCH AND FAMILY AND ITUNES MATCH

RATE             UNITS               TOTAL

 0.000027       964                   0.02

 0.000511      1323                   0.67

 0.00048       2816                  1.35

 0.00001       1345                   0.01

 0.000011    4832                  0.05

SPOTIFY FREE!? PREMIUM

  0.00020  4765                      0!

  0.000174 1441                      0!

[NOTE: The Music Modernization Act creates an optional audit right for the MLC to audit service once every three years.  Remember this is an optional right created in the Mechanical Licensing Collective–not songwriters–to audit services operating under the blanket license (unclear when that three year period starts running, but probably 1/1/21, so the first audit can start after 1/1/24).  Unclear how songwriters can require MLC to audit services, or if the MLC’s audit right applies to periods before 1/1/21.  MLC is also allowed to use an “alternative verification process” which doesn’t preclude a settlement without an audit.  MMA is unclear on how audit recovery is shared.]

MTP:  Along that same line, Apple proposed a penny rate of $0.00091 in the last Copyright Royalty Board rate setting (aka Phonorecords III, which is currently being appealed for other reasons by Spotify, Google and Pandora).  Do you think that a fixed penny rate would be easier or more difficult to calculate?  Apple’s proposal was rejected.  Was Apple’s rate more or less than you collect now?

Publisher:  Of course, accounting with a penny rate would be easier than these fractional mini pennies.  YES, it seems as though GETTING at least a penny rate per stream, would be SOMETHING at least, better than all the units practically accounted AS free goods! The rate rise promised in the MMA is still on the horizon, yet that certain MMA Copyright Act granted yearly increase HAS NOT arrived yet, not until 2021 AND because the still HOSTILE-to-Creators and GREEDY Streaming Companies – are Appealing it now.

MTP:  Under the current regime, how difficult is it to calculate songwriter payments for streaming?

Publisher:  It’s real hell, you do your best to get it, account it and pay it out but honestly, it’s not making any financial sense. The logistics over the last 6 years on its delivery by excel downloads is absolute insanity. You can do five hours of just taking it off of each excel Song line – 0ver to the Individual Writer statement, and after the hours of cutting it – you find the grand total of the WHOLE STREAMING check with 21,000 rows turns out to be $10.00! The accounting is so time consuming, and with its tiny micro pennies, too often is beyond heartbreaking seeing the endless devaluation of thousands of copies of your famous songs for so little.

MTP:  Would you say that on a per-songwriter basis it costs you more to administer songwriter payments than you make?  How about on a per-stream basis?

Publisher:  THERE is NO question whatsoever EXACTLY how much the cost of Administration has exceeded the EARNED revenue since Napster and file sharing became legalized as Streaming. We have been under siege with OUR COSTS and our Administrative workload heavier and harder – but digital LOSSES are still growing each month.

If you ACTUALLY compared it to the example of the mechanical days of CD Song units sold at 9.1 cents – (pre-streaming) the resultant digital sea change to streaming NOT CD sales – has actually cost us over $126,000 in losses of normal record income in 6 years. My accountant thinks its just crazy. In order to survive the expense of administrating and office overhead and more- we were driven absolutely to the wall at the end of December 2018 and forced to personally leverage (my own private shares of some very famous songs controlled by a big company). Yeah, a ten-year loan against this income that was supposed to be part of my retirement.

The venture capital investors are buying up Catalog like vultures preying on the Indies who have been hurt. It’s a part of the history of Songs and it’s a travesty. But this is what Streaming rates have done to the business of Music Publishing/Administration UNTIL those rates are raised to an equitable and fair market value number. We have had to work DOUBLETIME in doing film/tv sync licenses at a fast pace just to help supplement our streaming income. It’s terrible that we have to do all this while the Corporations use our Creations and profit, while we collectively suffer. I’ve had to spend my own savings to advance to Writers and Clients in hardship during these times because THEY come first.

MTP:  Spotify’s failure to match is a key issue in the recent lawsuit by Eminem’s publishers.  How has the matching been for you since Title I of the MMA went into effect?

Publisher:  IT’S A friggin nightmare, I don’t have the personal time to DO all of this MATCHING and reclaiming our titles THAT THEY failed to even LOOK for. IT’S SO UNFAIR to put this on us the Victims of their infringing our works. YET we have no choice now BUT to GET THEM FOUND, FILED and claimed under The Spotify settlement, and The Rhapsody settlement too, and HELP get those PENNIES back for our Writers and Publisher clients.

MTP:  If you could change anything about the current system what would it be?

Publisher: The three major labels who first invested in this scheme and enabled themselves to ELIMINATE the manufacturing costs, and put all the Masters in the vaults – and devalued the price of songs with these terrible streaming rates really represents THE Corporate take over of the Song Business as we knew it.  The only thing other than setting us free from this slavery and unfair business competition and constant bleeding loss of royalty value – IS – WE want a fair market streaming rate that will help restore our Writers and Clients to some kind of sustainability in order for them to be able to pay their bills and survive these terrible years of attack on their livelihood and income. Nothing less.  Will the MMA law now bring us to that remedy and healing, I surely pray it does?

MTP:  Is there anything you’d like to add?

Publisher:  I hope this article reaches every creative person who’s suffering privately and silently and helps to show them they are not alone, and we are not blind.  That is my desire. Hugs and thank you for making it possible. Even anonymously I give this..this truth, as solace to all of us trying to make sense of it all.

The Countdown to Modernity: Copyright Royalty Board Posts Notices and Rules for MLC Assessment Proceeding — Artist Rights Watch

July 7, 2019 Comments off

Since there was no advance commitment or agreement on the budget for the Mechanical Licensing Collective (MLC) under Title I  of the Music Modernization Act, it appears that the clock is ticking on an agreement before the parties have to go before the Copyright Royalty Judges to be told what the budget (or the “assessment”) is to be.  The Copyright Royalty Board has beat the July 8 deadline for noticing the proceeding and has posted the notice and the rules for the hearing.

The “Notice announcing commencement of Initial Administrative Assessment proceeding and requesting Petitions to Participate” can be found here:

The regulations require the participation of the MLC and the Digital Licensee Coordinator (DLC) in the proceeding and permit the participation of copyright owners, digital music providers, and significant nonblanket licensees. 37 CFR 355.2(c)–(d).

The Judges hereby announce commencement of the proceeding, direct the MLC and the DLC to file Petitions to Participate, and request Petitions to Participate from any other eligible participant with a significant interest in the determination of the Initial Administrative Assessment…

Any participant that is an individual may represent herself or himself. All other participants must be represented by counsel….

Petitions to Participate and the filing fee are due on or before July 23, 2019.

The CRJ’s rules relating to the proceeding can be found here and have some relevant language relating to who can participate in addition to the MLC and DLC:

[T]he Judges believe that the views of other participants may be helpful, and perhaps essential, for the Judges to determine whether good cause exists to exercise their discretion to reject a settlement. The Judges, therefore, have modified [the regulations for the settlement negotiations and proceeding] to clarify that participants other than the MLC and DLC may participate in settlement negotiations and may comment on any resulting settlement.

via The Countdown to Modernity: Copyright Royalty Board Posts Notices and Rules for MLC Assessment Proceeding — Artist Rights Watch

The MTP Interview: David Lowery on the CRB Webcasting Rates

December 21, 2015 1 comment

This post is the second of a two part interview with Blake Morgan and David Lowery about the newly announced webcasting rates as determined by the Copyright Royalty Board.

MTP: How do you feel about the CRB decision in general as far as rates go?  

Well it’s a mixed bag.  Leans bad.  The rates went up marginally for Pandora, and that seems to be the lead in the press.  But it looks like rates went down for other webcasters.  You saw Pandora stock popped on the CRB news?   Sometimes markets tell you what no one dares say.  The markets are saying that this is good for webcasters and bad for artists.  Of course you won’t see that in the tech or music business press.  [Billboard posted one story on the wave of negative reactions at press time after David’s interview.]

MTP: Was this more of a victory for the Pandora/Clear Channel/Google MIC Coalition or for artists?

Definitely more of a victory for the MIC Coalition, and here is why:  The CRB allowed the Merlin-Pandora and WMG-IHeartRadio [Clear Channel] deals as evidence of free market deals.  I believe that at least the Merlin deal is illegal because it is payola.  IN CONSIDERATION OF ADDITIONAL AIRPLAY value went from Merlin labels to Pandora [now an FCC broadcaster].   Possibly the WMG deal is the same.  I’m less familiar with that deal.  How can an illegal contract be the basis for CRB rates?  What happens if the FCC gets off its ass and rules that Merlin/Pandora deal illegal?  Does the CRB go back and reset rates? Uncharted territory here. Whats next? Multinational corporations contracting to bribe executives to get a lower per stream rate?  Would that be allowed as evidence?  I really think artists need to contest this with the Copyright Office. 

MTP: Do you feel compensated for the value lost from the last CRB when Pandora got the CRB rates cut substantially?  Do you think that the CRB had in mind restoring what was taken away in the last rate setting five years ago?

Well first we have to pretend that micro pennies are a form of compensation. Second the CRB has no business “taking” value from anyone.  They are supposed to be setting rates at market rates.  But, no,  they haven’t made up for the amount that they took from artists last time.  

MTP:  How about no rate increases in the out years other than indexing to the Consumer Price Index?  I saw someone online suggesting that indexing essentially froze the 2016 royalty rate and just adjusted for inflation so that artists essentially would be paid 2016 value for the next five years.

This makes me really mad. This is federally mandated wage stagnation.  Basically this says if there is any “upside” in the value of streaming music over the next 5 years performers won’t participate.  If you think of songwriters and performers as being the public, this is the classic federal scam:  socialized costs/privatized profits.  It’s stunning that people in Washington can’t see their policies create the income inequality they decry.

MTP:  The press seems to always refer to the fact that Pandora “hasn’t turned a profit” yet, and tries to create this impression that Pandora is an otherwise well run company with $1.1 billion in revenue, zero debt, government mandated below market vendors, SG&A over 40% that’s going on an acquisition binge for unrelated businesses with no regard for integration costs—that also can’t manage to “turn a profit”.  Does anything bother you about that press profile?

Welcome to Web bubble 2.0!  I would say I’m looking forward to the coming crash, but I have a feeling that our pension funds will get left holding the bag.   SG &A you mean the Selling, General and Administrative costs right [in Pandora’s income statement]?   This is where they hide obscene executive salaries.  Pandora has paid out over 1/2 billion dollars in executive stock compensation since going public.   Does anyone else find this insane?  No. If you read the press, and I mean The New York Times or Wall Street Journal all you ever hear is how much Pandora is supposedly paying to artists.   I can’t wait for the New York Times to report that GROCERY STORES PAY A SIGNIFICANT AMOUNT OF THEIR GROSS REVENUES FOR GROCERIES!  Where is that headline?  When do we get to hear that sound bite on NPR? 

Seriously, we should offer a prize to MBA students.  Best plan for making Pandora a profitable company.   How many of those plans would start with that 40% SG&A.  

MTP:  How does this MIC Coalition rate from the CRB affect licensing for any streaming service that Pandora may want to launch out of the ashes of Rdio?

Well this doesn’t directly effect the on demand rates, but I’ve always maintained that the artificially low rates paid by services like Pandora, has allowed them to offer music free, which in turn allows the on-demand services to argue for free tiers.   It’s a race to the bottom. Let’s put it this way: This CRB ruling certainly doesn’t help us get better rates from on-demand services. 

The MTP Interview: Blake Morgan and David Lowery on the CRB Rates

December 17, 2015 1 comment

MTP had a chance to catch up to Blake Morgan and David Lowery for an interview about the CRB rates announced yesterday.  This is the first of the two posts with Blake Morgan, read David Lowery’s interview here.

MTP: How do you feel about the CRB decision in general as far as rates go?

While I’m happy the Copyright Royalty Board raised Pandora’s non-subscription royalty rate by 21%, I can’t celebrate fully. The fact that webcasting rates were cut by 25% makes this mostly a wash, and flies in the face of basic respect for music makers.

MTP:  Was this more of a victory for the Pandora/Google MIC Coalition or for artists?

Overall, Pandora is going to have to pay 15% more than they have been paying, so it’s certainly not a victory for Pandora/MIC. Artists are going to get more, so that’s a win. However, it could have been a slam-dunk victory for artists, and I feel this is more of a squeaker.

MTP: Do you feel compensated for the value lost from the last CRB when Pandora got the CRB rates cut substantially?  Do you think that the CRB had in mind restoring what was taken away the last time around?

It’s hard for me to climb inside their heads, but it does feel like the CRB decided to make a “some for them over here, and some for them over here” kind of decision. This is a significant cost increase for Pandora, but it’s still less then what we wanted––so it’s like the CRB tried to drive right down the middle. If they were trying to restore what’d been taken away last time, and that’s all, then that would be really disappointing to me.

MTP:  How about no rate increases in the out years other than indexing to the Consumer Price Index?  I saw someone online suggesting that essentially froze the 2016 royalty rate and just adjusted for inflation so that artists essentially would be paid 2016 value for the next five years.

Yeah, that’s a little how I feel. But, I hope it doesn’t matter because there’s such a strong possibility that Pandora won’t even be around in five years. At least if they continue to run their business the way they have been recently.

MTP:  The press seems to always refer to the fact that Pandora “hasn’t turned a profit” yet, and tries to create this impression that Pandora is an otherwise well run company with $1.1 billion in revenue, zero debt, government mandated below market vendors, SG&A over 40% that’s going on an acquisition binge for unrelated businesses with no regard for integration costs—that also can’t manage to “turn a profit”.  Does anything bother you about that press profile?

I have yet to meet a music maker who isn’t bothered by this. Far too many people have noticed that Pandora’s founder, Mr. Westergren, has bought and is building what’s being widely reported as a “massive” mansion, with 14 bathrooms. Not turning a profit? How full of shit do you have to be to need 14 bathrooms in your house, man.

MTP:  What’s the reaction in the #irespectmusic community to this latest move by the MIC Coalition?  Do the new CRB rates make getting a royalty for terrestrial more or less important?

Securing a terrestrial radio royalty for artists remains the singular issue in this fight for music makers’ rights and respect that everyone I talk to supports. They agree it’s embarrassing that we have to even talk about it, that it’s embarrassing for us as a nation to not have it, and it’s critical in winning. Simply put: it couldn’t be more important. It’s a century overdue, and it’s time to get this done for American music makers.

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