Two vastly wealthy multinational media companies are exploiting a copyright law loophole to sell the world’s music without paying royalties to the world’s songwriters on millions–millions–of songs. Why? Because Google and Amazon–purveyors of Big Data–claim they “can’t” find contact information for song owners in a Google search. So these two companies are exploiting songs without paying royalties by filing millions of notices with the Copyright Office at a huge cost in filing fees that only megacorporations can afford–an unprecedented land grab in nature, size and scope.
That’s right–Google and Amazon are falling over themselves to use their market power to stiff songwriters yet again. And as I will show, it is not just obscure songs that are affected. New releases, including one example from Sting, are also targets suggesting significant revenue loss to songwriters. (I go into this in more detail on this series of posts.)
I happened to speak to a representative of one of the mass NOI filing companies after a recent panel in Los Angeles who assured me that the reason that his clients were filing these NOIs was not because they did not want to pay royalties but because they were so worried about liability from a “Jeff Price jihad” and that his clients fully intended to pay royalties retroactively once the song owner became known unlike the record companies who are “thieves”. I believe that he believes that his client believes that they’re just trying to avoid being sued for not having the rights, but humor this unbeliever. My bet would be that getting that retroactive payment will take the effort worthy of an act of Congress.
If his new boss clients had a reputation for or history of treating creators fairly, I’d be far more inclined to bet on sunshine and puppy dog tails, but they don’t so I won’t. The problem would be easy to solve–all they would need to do is issue a press release or even a blog post on the Google Public Policy blog stating that it is the official position of the company to pay retroactively. Even if you accept his premise that record companies and music publishers are “thieves,” they never filed millions of NOIs. In the meantime while we’re waiting for that post, I think we have to act as if it is not coming.
The U.S. Compulsory License
Songwriters are the most regulated workers in America. The government sets wage and price controls on most uses of songs and practically everything else about a songwriter’s business–except fulfilling government’s basic role of keeping them safe from piracy and multinational monopolists gaming the system. Congress needs to stop this latest scam.
The latest loophole that Google and Amazon are hacking is uniquely American–the compulsory license for songs. No other country has one. Most songwriters would prefer that the U.S. repeal this legacy anachronism from 1909 that keeps the government’s boot on their throats.
In order to get the government’s license, services only need notify the songwriter (or their publisher) that the service intends to use the song under the compulsory license. Of course, sending this notice of their intention to use the song (called an “NOI”) requires knowing who to send it to, and that is the “hack” that Google and Amazon are exploiting now. Others services surely will follow their market leadership if Congress fails to act.
The hack uses market power to manipulate a loophole in how those NOIs are sent. Common sense tells you that to send a notice, you must know who to send it to, even for a song. But does common sense also tell you that if you don’t know, the law should allow you to exploit the songs without compensation? Particularly if you’re the biggest purveyor of data in human history?
The legacy compulsory license allows services to exploit songs if they decide they can’t find the songwriter–and not pay royalties until the songwriter finds them.
That’s right–Google and Amazon trade on a loophole that allows them to serve NOIs on the U.S. Copyright Office if the song owner cannot be found in the public records of the Copyright Office regardless of what other information is readily available to these services, including their own. And once Google or Amazon serve that “address unknown” NOI, they don’t have to pay royalties and they cannot be sued for copyright infringement–so the millions in filing fees they will spend at the Copyright Office is a kind of insurance premium. This excerpt from the Copyright Act states the rule:
Why Can’t Google Search?
The “address unknown” NOI starts from this premise: Google is supposed to search for the song owner’s contact to send NOIs.
That’s right–Google is supposed to search. Think about that. This 1976 rule was never intended to apply to a music user with Google’s search monopoly. Yet, if Google “can’t” find the song owner after a search, then Google can serve an “address unknown” NOI to the Copyright Office and then exploit the song for free until the songwriter can be “identified” in the Copyright Office records–which may be never.
That registration by songwriters–while prudent–is costly and entirely voluntary. Forcing songwriters to register essentially turns the system into a version of YouTube’s “opt out” debacle, and probably violates international copyright treaties.
But the idea that Google can’t find someone is a remarkable thought. Gmail alone has over one billion users. Google knows everything about everyone and makes billions of dollars from reselling and manipulating that information. Not to mention the fact that Google bought the music licensing service Rightsflow–itself an NOI mill. Not to mention ten years of information Google has scraped from Content ID on YouTube or sheet music on Google Books.
Amazon also has a phenomenal amount of information about music ownership. As one of the biggest CD and DVD retailers, Amazon certainly has a head start in song research.
However–it appears that Google and Amazon are not using their own data for NOIs. Instead, they apparently are buying databases from the Library of Congress that tell them whether a song is registered for copyright or otherwise recorded in the digitized Copyright Office files (which songwriters are not obligated to do in order to get the benefits of the compulsory license). Those Library of Congress databases at best only cover copyrights after 1978 for technical reasons, so tens of thousands of jazz, blues and classical compositions created before 1978 are not included, as well as songs from outside the US before or after 1978.
Why buy this data when these giant corporations already have so much information at their fingertips? Because the point for the services is not to find out who actually owns the songs, the point is to find out if the Copyright Office has a record of who owns the songs based on the Library of Congress data.
That is the hack.
Kafka-esque Moral Hazard
In other words–the government allows Google to claim they can’t find the songwriter even if Google’s own data would reveal their identity just because the song owner isn’t included in the Library of Congress database at the time Google searches. And there’s the “gotcha”.
Kafka’s next book is in there somewhere.
Offering all the world’s music all at once presents a licensing problem that no system will be able to solve due to the sheer numerosity and disaggregation of the creative process. How many songs will be written by the time you finish reading this post and how would you find out who wrote them?
So it should not be surprising that the market has offered a few ways to solve for this problem: Direct licenses (bypassing the NOI altogether) and NOI clearance companies that specialize in maintaining song owner information to send out mass mailings of NOIs (sometimes called “carpet bombing NOIs”).
These are two significant methods available to Google and Amazon and my guess is that these monoliths employ both methods for their interactive streaming services (the kind of service that competes with Apple and Spotify).
What’s the Alternative?
If Google and Amazon cannot find the song owner under their direct licenses or through an NOI company, how can they find the song owner? The easy answer is don’t use the song. But that approach is counter to offering all the world’s music at scale by creating supply that is not responsive to demand.
Deciding which songs are right for “address unknown” NOIs requires some Silicon Valley style hocus pocus. Remember–it’s not that Google can’t find the song owner. The loophole requires that they can’t find the copyright owner in the pubic records of the Copyright Office, even if Google has actual knowledge of their whereabouts.
Then you have to believe that Google knows where to get the information for which direct licenses they want, they know how to carpet bomb NOIs, they have a decade of information in Content ID, but when it comes to some songs, Google has to turn to the Library of Congress? And Google’s only choice is to serve “address unknown” NOIs on the Copyright Office?
Once served, the Copyright Office posts these mass filings on their website in large Excel files so that songwriters can sift through the haystack to find their needles. This hit and miss and self-serving process is fraught with moral hazard and should not be the law in 2016.
This is what the filing looks like–but realize that “1 NOI” means “1 NOI With An Excel file with over 40,000 songs on it”.
Sting Songs Give Some Examples
A spot check of a couple of Google’s filings reveals that Google is not getting it right. Let’s use three Sting songs for an example.
Sting’s recent release “50,000” (coincidentally a tribute to David Bowie and Prince) is on Google’s “address unknown” NOI list. That song is probably subject to a direct license, but the song copyright registration may not yet have been processed. There’s almost always a delay in processing copyright registrations, so new releases will rarely appear in the Library of Congress database day and date with the song’s release. Google will not be paying royalties on Sting’s song, but will be exploiting it.
That’s right–a song that is a tribute to an artist rights advocate like Prince is itself being ripped off.
Google has also filed an “address unknown” NOI for a song entitled “Fragile (Live)”. My bet is that “Fragile (Live)” is “Fragile”, the well known hit song and anthem of the environmental movement.
This likely means that someone at Google seems to think–or wants to think–that “Fragile (Live)” is a different song than “Fragile”, probably because there is a sound recording registered for “Fragile (Live)” in the sound recording metadata but no song registered by that name in the Library of Congress database. And why would there be if it is the same song? We humans have a way to catch this kind of mistake.
It’s called listening.
This pattern repeats with “Brand New Day (Cornelius Mix)”, also included on Google’s “address unknown” NOI. Again, a version of the sound recording, not the song. The song remains the same.
It is highly likely that the songs “Fragile” and “Brand New Day” were registered with the Copyright Office long ago. That’s probably why the “Live” and remixed versions of the sound recordings show up in Google’s NOI filing for the songs and the original versions do not.
In this case, not only are these songs likely covered under a direct license with Sting’s publisher, but even if they are not, the song owner’s information is identified in the public records of the Copyright Office. The loophole does not apply, but Google takes it anyway and the cost of checking up on a multinational media company falls on the songwriter.
And given that it’s Google, the songwriter will probably have to sue them to a final non-appealable judgment in order to fix the mistake that should never have been allowed to happen in the first place.
The Congress Must Act
The government’s compulsory license has become distorted by rent-seeking behavior by multinational media corporations. It should be stopped or substantially modified. If Google is allowed to use this loophole to profit at the expense of songwriters from its considerable influence peddling and litigiousness, that will be crony capitalism writ large.
Despite the assurances of the mass NOI filing agent, my view is that until I see it in writing, I have to assume that Google and Amazon took this route because it not only offered an opportunity to react to Jeff Price or David Lowery who have the temerity to speak up on behalf of song owners, it had the added bonus of actually stiffing songwriters. The reason I think that is so is because that’s what they chose to do rather than taking the obvious alternative–just not using someone’s property if you decide you can’t find the owner.
Watch this Space: MTP Podcast on 100% Licensing with Michelle Lewis and Kay Hanley of Songwriters of North America, David Lowery, Chris Castle coming soon
Next week we will continue discussion of the Department of Justice [sic] ruling on 100% licensing and partial withdrawals from the songwriter’s point of view.
Participants will be songwriters Michelle Lewis and Kay Hanley of Songwriters of North America, David Lowery and Chris Castle.
Watch this space for links to the podcast when it is completed, probably August 17/18.
For background, check out the MTP podcast with Steve Winogradsky, David Lowery and Chris Castle on the technical aspects of the DOJ’s decision.
The MTP Podcast: The Consequences of DOJ’s New Rule on 100% Licensing with David Lowery, Steve Winogradsky and Chris Castle
David Lowery, Steve Winogradsky and Chris Castle discuss the implications of the new rule by the U.S. Department of Justice re-interpreting the ASCAP and BMI consent decrees to require 100% licensing and prohibiting partial withdrawal.
David Lowery is the founder of Cracker and Camper van Beethoven, leading artist rights advocate and writer of The Trichordist blog, and teaches at the Terry School of Business at the University of Georgia at Athens.
Steve Winogradsky is a senior music lawyer and co-proprietor of the music services company Winogradsky/Sobel in Los Angeles. Steve teaches at UCLA and Cal State Northridge and is the author of a leading legal handbook Music Publishing: The Complete Guide.
Chris Castle is founder of Christian L. Castle, Attorneys in Austin, Texas and edits the MusicTechPolicy blog. He is formerly an adjunct professor at the University of Texas School of Law, and lectures at law schools, music schools and business schools in the U.S. and Canada.
“Where’d You Get the Music” performed by Guy Forsyth.
–Will songwriters have to indemnify PROs for antitrust violations of failing to renegotiate licenses?
–Who bears the administrative costs?
–How DOJ’s new rule is actually anticompetitive and anticompetitive aspects of direct licensing.
–Is DOJ rule Google’s payback to Pharrell Williams refusing to license for YouTube?
–Devastating impact on music in television programs and motion pictures, “WKRP revisited”
–Google’s influence on the new rule through Renata B. Hesse, the new head of the Antitrust Division. Background link: How Google Took Over the Justice Department Antitrust Division: Renata Hesse’s Timeline
–What is the plain English version of the new rule?
–How U.S. Copyright Office rejected DOJ’s position. Background link to Copyright Office report rejecting DOJ’s position.
–DOJ requirement that songwriters renegotiate split agreements on every song registered with ASCAP and BMI
–Genre-based impact on hip hop and country music.
Watch this Space: MTP Podcast on 100% Licensing with David Lowery, Steve Winogradsky, Chris Castle coming soon
The MusicTechPolicy podcast is back! Next week we will kick things off with a discussion of the Department of Justice [sic] ruling on 100% licensing and partial withdrawals.
Watch this space for links to the podcast when it is completed, probably August 10/11.
It’s important to remember that David Lowery could have just sued Spotify over his own catalog. He didn’t do that. He brought a class action for the good of all songwriters who get overlooked and disrespected by Spotify and that’s a lot of people. I don’t know Melissa Ferrick, but I would bet the same could be said of her.
The plaintiff who can’t be bought off is a defendant’s worst nightmare. This is particularly true in David’s case because in addition to whatever money damages the class may be awarded, David is also asking for an injunction to require Spotify to bring in an independent third party compliance examiner to fix Spotify’s massive failure to identify copyright owners.
That injunction is probably more fear-inducing than whatever the payment might be, because that will once and for all fix the problem and eliminate the slush fund–or force Spotify to stop exploiting uncleared tracks. Make no mistake–unpaid royalties are a source of interest-free loans. While each songwriter may be owed a relatively small amount on average, when the service holds on to royalties they owe to thousands of songwriters, that can add up to millions of dollars.
Why do I think that Spotify is most afraid of someone they don’t control getting inside the company and looking under the hood? In Spotify’s motion to strike Lowery’s class action (and in the cut and paste job filed in Melissa’s case) Spotify’s lawyers say:
Next, Plaintiff wrongly contends that whether Spotify “made accurate royalty payments” is a common question [among class members]. To the contrary, that question could be answered, if at all, only on an individual song-by-song basis, and only after a detailed investigation into the streaming history and licensing circumstances of that song, as well as an accounting audit with respect to that song.
That task will be daunting—if not impossible—as it will require individualized inquiry into the royalty payments for each song.
Set aside how ludicrous it is to question whether getting stiffed on royalties is NOT a common question among the songwriters who got stiffed, the lawyers are right that it would require “a detailed investigation into the streaming history and licensing circumstances of that song, as well as an accounting audit with respect to that song.” But the Spotify lawyers are wrong about this: “That task will be daunting—if not impossible—as it will require individualized inquiry into the royalty payments for each song.”
That’s called a royalty compliance examination in the trade, sometimes shortened to an “audit”. Audits are neither “daunting” nor “impossible.” These audits happen all the time. In fact, they happen so frequently that the Harry Fox Agency has been conducting an audit of Spotify for several months now according to statements made by HFA representatives at the California Copyright Conference this week.
You may ask how could HFA be conducting an audit of a service for which it rendered outsourced song research and royalty accounting services. You may also ask, isn’t that HFA auditing itself? And these are questions you certainly should ask.
If HFA can audit Spotify, it sounds like what David is asking for is not “daunting–if not impossible” at all. It’s so possible that Spotify probably has already accrued a liability account to cover the HFA audit settlement payment to the songwriters represented by HFA’s publishers.
So let’s be clear–David is not in this to enrich himself. These positions are not those of someone who is looking for a quick payment. They are the positions of someone who wants to get to the truth.
And exactly what Spotify needs if they want to ever get out of the haunting treachery that Spotify have managed to smear all over themselves. Spotify should want what David wants–a court supervised examination of Spotify’s accounting practices. That’s the problem that Spotify has with plaintiffs like David and Melissa.
Because the question Spotify can’t answer is why they knowingly used the music without a license.
These plaintiffs want what’s right for everyone. And that’s a big problem for Spotify.
The Future of What is a great podcast series with the awesome Portia Sabin on important topics in the music business. In this episode, Portia dives into the class actions against Spotify with a series of interviews including songwriter (and plaintiff) Melissa Ferrick, Howell O’Rear, Christiane Kinney and me.
I’ve been reading over Spotify’s papers filed in response to David Lowery’s lawsuit against the company and noticed a couple of things. One that is hiding in plain sight, so to speak, the other that is quite a gloss on reality.
The Case of the Purloined Stream
Recall that Spotify has said several times that they want to pay “every penny” they owe songwriters, they just need to know who to pay. (Leave aside for the moment that this is more “Fancy” Grade bullshit because they actually don’t need to know who to pay in order to rely on the compulsory license–they just need to send the U.S. Copyright Office a notice of their intention to rely on the compulsory under the plain language of 17 U.S.C. Sec. 115(b)(1)–“If the registration or other public records of the Copyright Office do not identify the copyright owner and include an address at which notice can be served, it shall be sufficient to file the notice of intention in the Copyright Office”. While this may not be popular at the Copyright Office, I’m sure some accommodation could be worked out.)
Recall also that Spotify said in the company’s blog that:
[w]hen one of our listeners in the US streams a track for which the rightsholder is not immediately clear, we set aside the royalties we owe until we are able to confirm the identity of the rightsholder. When we confirm the rightsholder, we pay those royalties as soon as possible.
So why is it that the lawyers for Spotify did not inform Judge Beverly Reid O’Connell of their client’s action in the responsive papers? That begs the question, what is different about a blog post compared to a court filing?
Perhaps it is because the lawyers filing the court papers have an obligation as officers of the court not to make a false or misleading statement to the Court? Perhaps it is because the statement in Spotify’s blog post is not, strictly speaking….whatchamacallit…I guess you’d have to say “true”?
When Is A Job Not A Job?
Spotify’s lawyers are–quite understandably–throwing the Fancy against the wall to see how they can knock this suit out of the box in California where Spotify applied to do business as a foreign corporation:
One way they can do this is to prove that Spotify has insufficient contacts with the judicial district where the suit is filed to permit the Court to assert jurisdiction over Spotify (sometimes called an “inconvenient forum”), a common delaying tactic. Even so, it is becoming clear that Spotify wants to fight the case in New York. Here’s an example of that argumentation:
Plaintiff’s complaint points to only one form of contact that conceivably reflects Spotify’s direction of contacts towards California in particular: Spotify’s two California offices. But those offices are irrelevant to specific jurisdiction, because they are not related to this lawsuit….Spotify’s two small offices in California do not fit the bill. They employ a total of approximately 50-60 employees. This is far less than the 450-500 employees located in New York, which is the hub of the company’s United States operations. All but eight of these employees work in roles unrelated to the content part of Spotify’s business….The majority of California employees work in advertising sales and of the few California employees who perform work related to the content side of Spotify’s business, not a single one is involved with music composition licensing—the subject matter of this litigation.
High level, Spotify argues that if the defendant in a lawsuit has not originated contact with the particular judicial district by actions related to subject matter of the particular suit, then the defendant may be able to have the case removed to a judicial district where the plaintiff has more relevant business contacts, New York in Spotify’s case. Spotify is arguing that all the jobs that relate to Spotify’s publishing business are in New York–aside from the fact that Los Angeles is a major music industry hub and aside from the fact that the parent corporation of Spotify’s clearance agents the Harry Fox Agency has extensive offices in Los Angeles.
So remember–Spotify’s lawyers tell the Court that “not a single one is involved with music composition licensing.”
Imagine my surprise to find this job posting for a Los Angeles-based Director of Publisher and Songwriter Relations, North America on the Spotify website:
Particularly because the job description provides for the Director of Publisher and Songwriter Relations, North America to work on “reporting…finance and legal.” A director level job often reports to a senior director or VP and has various managers reporting to the director.
Sounds like a pretty “Fancy” job.
So perhaps what the lawyers meant to say was “not a single one is involved with music composition licensing”–yet.