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Postdicting the Future: Five Things Congress Could Do for Music Creators That Wouldn’t Cost the Taxpayer a Dime from The Hill
[This is a July 30, 2013 summary from The Hill of my series that first appeared in the Huffington Post on July 26, 2013–let’s see how I did after the Music Modernization Act.]
1. Create an Audit Right for Songwriters for Compulsory Licenses: One of the oldest compulsory licenses in the Copyright Act is the “mechanical license”, the statutory mandate forcing songwriters to license songs that dates from 1909. The government mandates the license and also mandates the rate that songwriters are paid—from 1909 until 1977 that rate was set at 2¢ per recording. Although that rate was eventually indexed to inflation leading to the current 9.1¢ minimum, songwriters had to dig out of a deep hole.
Getting paid is another story. This statutory license requires songwriters be sent “statements of account” for royalties—but songwriters are not allowed to conduct a “royalty compliance” examination (called an “audit”). The law requires a company officer and a CPA to certify the company’s statements—a practice rarely complied with. As recently demonstrated by Aimee Mann’s lawsuit against Medianet, if songwriters don’t get paid there’s not much they can do except sue—a costly process.
The government tells the songwriter “trust—but don’t verify.” This is an easy fix. Congress could give songwriters an audit right as they did for stakeholders in the contemporary digital performance compulsory license for satellite radio and Internet radio.
2. Allow Artists and Songwriters to Opt Out of the Compulsory License: The recent blow-up regarding the so-called “Internet Radio Fairness Act” and the related ASCAP and BMI rate court proceedings should let the Congress know that there are many artists and songwriters who want to be able to decide who gets to license their songs. Again, the digital performance compulsory license allows copyright owners to control “interactive” uses of their works—why not at least do the same for the mechanical license as well?
3. Require Digital Royalties for pre-72 Sound Recordings: Sound recordings did not receive federal copyright protection until 1972. When the Congress established the digital performance royalty, it seemed to clearly apply to all recordings and did not arbitrarily exclude recordings prior to 1972. However, this “gotcha” is used by SiriusXM and others to avoid paying great American artists whose records were released before 1972—jazz, R&B and rock legends get nothing. Congress could fix this “gotcha” and secure a fair share of digital performance royalties to these authors of our musical heritage.
4. Require All Unpaid Statutory Mechanical Royalties Be Paid to the State Unclaimed Property Offices: As Aimee Mann’s alleged in her lawsuit against the white label provider Medianet, witnesses stated that 23 percent of the songs used by Medianet are unlicensed—which could easily be millions of songs if true. And there are likely a number of digital music services that are arbitrarily holding unpaid royalties in an unauthorized “escrow.”
It seems that there could be substantial royalties controlled by the very retailers who must pay songwriters under the law, a potentially significant moral hazard. Congress could require that any “escrowed” royalties be paid over under State unclaimed property laws—a lawful “escrow.”
5. Require that Online and Offline Videos Follow the Same Rules: As online video platforms become available through Internet enabled home televisions, attention should be paid to a frequently overlooked category of songwriter—the film and television music composers. Current reporting by online video platforms makes it difficult for score composers to be paid for their work. The Congress may well ask whether those who seek to replace television should be held to the same licensing standards as television.
These are but a few ideas the Congress could be addressing that might make a difference in the lives of artists and songwriters and would cost the taxpayer very little. All leverage existing structures and bureaucracies, eliminate “gotchas,” and help to reduce the unintended consequences of government mandated compulsory licensing.
Postdicting the Future: Five Things Congress Could Do for Music Creators That Wouldn’t Cost the Taxpayer a Dime Part 4: Fixing Unmatched Songwriter Royalties
[In 2013, I wrote 5 articles on Huffington Post titled “5 Things Congress Could Do That Wouldn’t Cost Taxpayers a Dime”. The series foreshadowed policies that were addressed in the Music Modernization Act five years later. This is a repost of Part 4 of that series. After the MMA, how did I do?]
The US is alone in the world in maintaining a compulsory license for songs. The government forces songwriters to license their songs at a rate approved by the government and then has rather flimsy rules about how songwriters actually get paid. These flimsy rules, I suggest, have resulted in unknown amounts of royalties not finding their way to songwriters, particularly under compulsory licenses used by on-demand digital music services.
There’s an easy fix for this — the same rule that was applied against record companies and music publishers for unclaimed royalties in the past: Pay the money to state unclaimed property offices. If songwriters are getting ripped off by brand sponsored piracy on the unlicensed sites, then let’s at least make sure they get paid on the licensed services.
The Compulsory License for Songs
When the Congress established the compulsory license in 1909, the legislative body was concerned that granting exclusive rights in “mechanical royalties” for songs in piano rolls might create a monopoly if a single publisher could buy up the market in songs. However real that concern might have been at the time, the most common complaint from digital music services about songs is that the music publishing market is too fragmented, so it seems that argument is no longer relevant.
One of the big users of compulsory licenses is, of course, Google Play. Concern about the antitrust lusting of songwriters is particularly difficult to comprehend in a world in which the same government allows Google to buy and subsidize YouTube with monopoly rents, buy Double Click to achieve a dominant position in online advertising, and is given a pass by the FTC for antitrust violations. But those songwriters…boy, we have to keep a close eye on them.
Unsupervised Digital Music Services
So what appears to be happening is this: Digital music services use the compulsory license and its labyrinthine regulations — often with notices that are too late, accountings that are noncompliant and data that is just incorrect. To give you a sense of scope, digital music services often offer 20 million or so recordings, all of which contain the co-equal copyright in the song being recorded. Songs and recordings of songs have to be separately licensed for on-demand streaming services (especially the popular “cover recordings”). Songs are frequently co-owned — so the service using the compulsory license must notify a minimum of 20 million songwriters of their use of the song and often two or more writers per song. So let’s just call it tens of millions of licenses.
The digital music services must then track the use of these songs and recordings and match the usage to licenses obtained. There inevitably will be songs for which the writers cannot be found. So even if you assume that these companies can get to the matching stage without making any mistakes at all, what happens when there is usage — and therefore payable royalties — for songs that the service is unable to match — even for the most honest of reasons.
How Digital Music Services Pay Themselves Free Money
Add to this problem another problem — digital music services frequently try to dupe songwriters — the ones they have found — into agreeing that the service need only account to them if the songwriter has over a certain amount in payable royalties — somewhere between $50 and $250 depending on the service. (Google Play, for example, has a $100 minimum threshold — unilaterally imposed — on all international and “friction free” electronic payments.)
To put some math on this, realize that there are about 20 million songs typically available in a broad based retail offering such as Google Play or Spotify. Assume that on average 50 percent achieve $25 in earnings in a given calendar quarter accounting period. (This is consistent with both the “long tail” power law type sales distribution and the miniscule royalties paid to songwriters by these services.)
If a service holds royalty payments from songwriters until payable royalties exceed $25 (such as Google Play’s $100 default threshold as stated in their “Publisher Statement of Account Preference”), this means that the service could then be sitting on up to $250,000,000 in interest-free money. Free money that they theoretically may never have to pay out and only have to pay out when the service determines that the songwriter’s account is payable. Free money that is not permitted under the compulsory license rules for songs.
And that’s one service.
This policy of withholding royalties is fraught with moral hazard and practical problems: The heirs of one songwriter recently tried to sort out these payments and were told they needed to hire a lawyer to deal with the highly litigious digital music service. They couldn’t afford a lawyer so guess what happens to the unclaimed monies? And then there’s the statute of limitations.
Unmatched and Unclaimed Royalties
But there’s another problem with the digital music services — if they service cannot match usage (and earnings) to a royalty recipient in their systems, what happens then? Particularly with monies based on a share of advertising revenue that is distributed proportionately based on usage?
In this example, if in one month all songs were played 100 times and your song was played 10 times, then you would get 10/100 (or 10 percentt) of the advertising pie for that period. But — if there were actually 120 songs played during that period but only 100 could be matched, what happens to the other 20 that were unmatched? There is a growing belief that what happens is that the services don’t count the 20 unmatched songs, and divide the pie up based on the 100 they are able to match.
That means — there are 20 songs that were exploited but that are never paid and are not on the books. Even though there should be no songs on the service that were unlicensed because the compulsory license applies. If this seems high, remember that MediaNet’s lawyers acknowledged in a declaration cited in the current case by Aimee Mann against MediaNet that 23 percent of the millions of songs on the service are unlicensed.
By not counting the unmatched (and probably also unlicensed) songs, a service could argue — albeit fallaciously — that it had no “unallocated” royalties as it allocated all payable royalties to songs it could match and did not accrue any unpaid royalties. If I’m right about this, services are overpaying the matched songs with a share of revenue from the unmatched songs (in our example, 10/120 or 8-1/3 percent instead of the overpayment of 10/100 or 10 percent).
Because the Congress does not allow songwriters to audit the digital music services, there is no real way to know whether this is happening or the degree to which it is happening. If 23 percent of the MediaNet songs are unlicensed, royalties payable on any activity on these songs seems like it should at least be accrued until the songwriters can be found.
This is, of course, why states have unclaimed property statutes. In 2004, then Attorney General Eliot Spitzer chased record companies and music publishers for unpaid royalties for artists who could not be found for a variety of reasons, some plausible, some not so plausible. Spitzer forced the royalties to be paid—like utility deposits, dividends, abandoned bank accounts, the works—to the state unclaimed property office where the monies are held forever and where somebody eventually tries to track down the rightful owner.
Of course — there is a chance that if the digital music services did this voluntarily they might be admitting that they were using unlicensed songs and they want to keep a good eye on those kinds of admissions. So they will come up with many excuses for why they should not be subject to the same laws as everyone else. It is, after all, the Internet, and you know how that can be.
An Easy Fix for Congress: Pay unclaimed money to people who deal with unclaimed money
Even if the Congress does not establish an audit right for songwriters for mechanical royalties as they have for rights holders under the more contemporary webcasting compulsory license and the Audio Home Recording Act, it would be quite simple for the Congress to clarify once and for all that unpaid royalties — whether for the unmet minimum thresholds unilaterally imposed by digital music services, unknown addresses for songwriters, or any other reason — should be paid to the state unclaimed property offices in the state of the songwriter’s last known address or at least the state where the company does business.
Companies that want to take advantage of the compulsory license rules for songs shouldn’t also get to make their own rules to take advantage of songwriters.
Postdicting the Present: Five Things Congress Could Do for Music Creators That Wouldn’t Cost the Taxpayer a Dime Part 3: Create an Audit Right for Songwriters
In 2013, I wrote 5 articles on Huffington Post titled “5 Things Congress Could Do That Wouldn’t Cost Taxpayers a Dime”. After the MMA, how did I do?
Copyright Office Issues Interim Rule for MLC Applications Including Oversight of MLC Board by Librarian of Congress
The U.S. Copyright Office issued an interim rule for comment that lays out an intricate and well thought out approach to the Register’s role in designating the Mechanical Licensing Collective and the Digital Licensee Coordinator under Title I of the Music Modernization Act.
Consistent with the MLC’s role as a quasi-governmental organization (or quasi-private, depending on how you look at it), the interim rule confirms that “directors of the MLC are inferior officers under the Appointments Clause of the Constitution [,] that the Librarian of Congress must approve each subsequent selection of a new director….[and] that the Register work with the MLC, once it has been designated to ensure that the Librarian retains the ultimate authority to appoint and remove all directors.” Presumably, state corporate laws governing the formation of the MLC will give way to this requirement.
The Librarian’s ability to can directors should help assuage some of the concerns about the powers of the MLC and is, of course, entirely consistent with the powers of the MLC as a quasi-governmental organization.
Another requirement that caught my eye relates to the “Hoffa Clause” that allows the MLC to invade the black box to pay operating expenses not covered by the services in the administrative assessment. The Copyright Office seems quite aware of the moral hazard present, and asks the prospective MLC candidates to provide:
Information regarding whether and how the proposed MLC may apply unclaimed accrued royalties on an interim basis to defray operating costs, as well as any accompanying plans for future reimbursement of such royalties from future collections of the administrative assessment, including relevant legal considerations and guidelines in the event the proposed MLC does intend to apply unclaimed accrued royalties.
All in all, the Copyright Office should be commended for putting together a comprehensive and even-handed “job description” for the MLC and the DLC in keeping with the Office’s statutory role in getting this quasi-governmental organization up and running.
Weekly Key Dates and Accomplishments for the Mechanical Licensing Collective Under the Music Modernization Act (11/30) by Artist Rights Watch (The “Countdown to Modernity”)
As best we can tell from the outside looking in, this chart has the dates for key events in the critical path to launch for the Mechanical Licensing Collective as required by the Music Modernization Act. We have called the chart the “Countdown to Modernity.” Obviously, this chart is not intended as legal advice, and you should consult your own attorney about any of these dates or events. Note: After 1/9/19, this chart, updates and analysis will be available to premium subscribers of MusicTechPolicy.
Recall that the Register of Copyrights gets to pick the entity to operate as the Mechanical Licensing Collective. The Tennessean reported that the first fully-formed candidate to emerge is the American Music Licensing Collective or the “AMLC”. (AMLC’s website is songrights.net.) Within days, Digital Music News also reported that two AMLC board members have left the organization for reasons that their source says were “directly tied to threats”. Digital Music News continues to report on these alleged “threats.”
The appearance of multiple candidates for the yet to be designated MLC raises another question–what about any existing black box? MTP and ARW readers will recall that the MLC is allowed to invade the black box to cover certain administrative costs that exceed the “administrative assessment” to be paid by the blanket licensees:
INTERIM APPLICATION OF ACCRUED ROYALTIES.—In the event that the administrative assessment, together with any funding from voluntary contributions…is inadequate to cover current collective total costs, the collective, with approval of its board of directors, may apply unclaimed accrued royalties on an interim basis to defray such costs, subject to future reimbursement of such royalties from future collections of the assessment.
Digital Music News also focuses on this issue:
According to the MMA’s language, mechanical licenses [presumably meaning royalties] that remain unclaimed after just one year will be largely mopped up by major publishers according to marketshare, an arrangement that has drawn protest. The value of the initial unclaimed tranche of funds has been estimated to be as high as $1.5 billion, at least according to a report by Variety.
We’re not big believers in this $1.5 billion number and it’s not exactly right that Variety reported that number–the Variety story has changed several times and is still a bit murky. Due to a later update to the article concerned it’s a bit unclear exactly what Variety meant in the original unsourced reporting. The original story as reported in Artist Rights Watch stated the industry-wide black box was $1.5 billion:
The DSPs are holding some $1.5 billion in unmatched mechanical royalties. If the MMA passes, that money would be passed through to the MLC which would match it to the songwriters and publishers.
Variety subsequently changed that language in the story at least twice that we know of, but never actually retracted the $1.5 billion number as far as we can tell, although they may have depending on your point of view of what constitutes a “retraction”. In any event, the story now reads:
The DSPs are holding millions in unmatched mechanical royalties — the sum of all Notice of Intent (NOI) filings currently parked at the U.S. Copyright office, while unknown, is climbing. If the MMA passes, that money would be passed through to the MLC which would match it to the songwriters and publishers.
Note–there’s still no source for either the “$1.5 billion” or the “millions” or for the “update”. Remember that in the MMA Senate Judiciary Committee hearing, Senator Feinstein said that the black box could be hundreds of millions.
Remember that the “initial administrative assessment shall be effective as of the license availability date” which is 1/1/21. It is not clear whether the initial administrative assessment will cover the MLC’s prospective costs, its startup costs, or both. One fair interpretation of the MMA is that the initial assessment shall be prospective and shall not cover startup costs, although the parties can, of course, agree to pay more than they are obligated to incur by statute. It is unclear if those additional costs would be passed down to all blanket licensees (who may object to paying more than the statute requires). You would think that this important issue would be clearly stated in the statute, but it is not.
The following chart is a work in progress, and if anyone sees anything wrong in it or something that should be clarified or corrected, please let us know. It should be considered a draft, but we hope that it will solidify over the next few weeks. We expect activity to pick up once the MLC filing deadline arrives.
Due to the formation of the AMLC, there are now two candidates for the MLC, there may be more coming. The COUNTDOWN TO MODERNITY chart needs to distinguish AMLC from the competing NMPA/NSAI MLC which does not have a name as far as we know. Until the NMPA/NSAI collective adopts a name, we will refer to it as the NMPA/NSAI collective.
The main takeaway from this chart should be the clock is ticking and time is going by. Our prediction? Time will become the MLC’s biggest enemy, if there isn’t already a time bomb in the drafting of the Music Modernization Act. What we don’t see in the MMA is any discussion of what happens if a deadline is blown for whatever reason.
But mark your calendars–we see the first key date as January 9, 2019 when the Copyright Office will request filings from MLC candidates, which so far include the AMLC and the collective to be formed by NMPA/NSAI. That’s 38 days from now and holidays count. The countdown to the License Availability Date: 761 days from now.
ARTIST RIGHTS WATCH
COUNTDOWN TO MECHANICAL LICENSING COLLECTIVE LAUNCH
WEEK 7
KEY DATES SCHEDULE FROM ENACTMENT DATE (10/11/18)
TO LICENSE AVAILABILITY DATE (1/1/21)
| EVENT | ACCOMPLISH | WHO OWNS? | TIME EXPIRED BEFORE LAD | TIME REMAINS TO LAD |
| REQUEST FILING TO BE MLC | STATUS UNKNOWN—Deadline 1/9/2019 | COPYRIGHT OFFICE | 90 DAYS AFTER ENACTMENT | 723 DAYS FROM DEADLINE |
| DESIGNATION OF MLC | STATUS UNKNOWN—Deadline 7/8/2019 | COPYRIGHT OFFICE | 270 DAYS AFTER ENACTMENT | 543 DAYS FROM DEADLINE |
| FORMATION OF MLC NONPROFIT | AMLC nonprofit formed
NMPA/NSAI STATUS UNKNOWN |
MLC | STATUS UNKNOWN | 543 DAYS FROM LAD |
| SUBSTITUTION OF BLANKET LICENSE FOR ALL VALID EXISTING COMPULSORY LICENSES | AUTOMATIC 10/11/2018
|
COPYRIGHT OFFICE | 761 days | |
| MLC BUDGET | STATUS UNKNOWN
(Assume deadline of 1/9/19) |
MLC/DLC/CRJ | 45 days | 770 days |
| INITIATE ASSESSMENT PROCEEDING w/CRJs | [MUST COMMENCE NO LATER THAN 7/8/2019]
STATUS UNKNOWN |
MLC/DLC/CRJ | 219 days | 545 days |
| ASSESSMENT RULING | [PUBLISHED IN FR NO LATER THAN 7/8/2020] | MLC/DLC/ CRJs |
585 days | 179 days |
| APPEAL OF ASSESSMENT RULING | 30 DAYS AFTER PUBLICATION OF ASSESSMENT RULING | MLC/DLC/ CRJ/ DCCOA |
616 days | 149 days |
| MLC BUSINESS PLAN | STATUS UNKNOWN
(Assume deadline of 1/9/19) |
MLC/CO | 39 DAYS | 723 days |
| ANNOUNCED BOARD NOMINEES | AMLC board announced (see DMN and above)
NMPA/NSAI called for nominations. The deadline for NMPA nominations passed on November 15 see NMPA. NSAI are accepting nominations for songwriter board member seats with a December 15 deadline. (these are nonstatutory deadlines) Songwriter board selection by Steve Bogard (NSAI), Rick Carnes (SGA), Lynn Gillespie Chater (SGA), Dallas Davidson (BMI), Chris DeStefano (NSAI), Bob DiPiero (BMI), Dan Foliart (ASCAP), Adam Gorgoni (SONA), Michele Lewis (SONA), Paul Williams (ASCAP) (Assume final deadline of 1/8/19) |
MLC | 39 DAYS | 723 days |
| APPOINTED BOARD | AMLC Board Announced (DMN reports Howard and Mestel depart):
John Barker (founder, president & CEO of ClearBox Rights, LLC). Brownlee Ferguson (founder, Bluewater Music).
Lisa Klein Moberly (founder and president of Optic Noise). Benji Rogers (singer-songwriter, founder of PledgeMusic and co-founder of dotBlockchain Media) Jeff Price (founder of Audiam and co-founder of TuneCore) Henry Gradstein (music industry attorney at Gradstein & Marzano, P.C.)
Ricardo Ordoñez (founder and president of Union Music Group) NMPA/NSAI: STATUS UNKNOWN (Assume deadline of 1/9/19) |
MLC/CO | 39 DAYS | 723 days |
| APPOINTED DLC | STATUS UNKNOWN—Deadline 7/8/2019 | COPYRIGHT OFFICE | 270 days AFTER ENACTMENT | 545 days |
| ENGAGED MLC VENDORS | AMLC: Clearbox Rights, Audiam (others?)
NMPA/NSAI: STATUS UNKNOWN (Assume deadline of 1/9/19) |
MLC | 39 DAYS | 723 days |
| PAID MLC VENDORS | AMLC: See board members above
NMPA/NSAI: STATUS UNKNOWN (ASSUME 7/8/2020 IF NO APPEAL OF ASSESSMENT) |
MLC | 270 days | 545 days |
| ANNOUNCE MLC DATA STANDARDS | STATUS UNKNOWN | MLC/DLC | ||
| REGULATIONS* | STATUS UNKNOWN | COPYRIGHT OFFICE | ||
| COMMENTS AND REPLY COMMENTS ON REGULATIONS | STATUS UNKNOWN | ALL | ||
| EXPLANATION OF OPERATIONS: HOW TO REGISTER WITH MLC AND COST OF REGISTRATION | STATUS UNKNOWN
(Assume deadline of 1/9/19) |
MLC/CO | 39 DAYS | 726 days |
| REGISTRATION START DATE | STATUS UNKNOWN |
MLC=Mechanical Licensing Collective
DLC=Digital Licensee Coordinator
CRJ=Copyright Royalty Judges
DCCOA=District of Columbia Circuit Court of Appeals
CO=Copyright Office
LAD=License Availability Date
*Topic areas to be updated as announced
Artist Rights Watch COUNTDOWN TO MODERNITY (11/23): Key Dates and Accomplishments for the Mechanical Licensing Collective Under the Music Modernization Act
As best we can tell from the outside looking in, this chart has the dates for key events in the critical path to launch for the Mechanical Licensing Collective as required by the Music Modernization Act. We have called the chart the “Countdown to Modernity.”
Recall that the Register of Copyrights gets to pick the entity to operate as the Mechanical Licensing Collective. The Tennessean reported last week that the first fully-formed candidate to emerge is the American Music Licensing Collective or the “AMLC”. (AMLC’s website is songrights.net.) Digital Music New reports AMLC’s public statements about its organization:
“We believe all song owners, from the kid in their bedroom, to the major music publishers, should be paid what they have earned,” the group declares in its manifesto.
“We are songwriters, artists, music publishers, musicians, composers and technologists. We get song owners paid.”
So who’s behind the American Music Licensing Collective, exactly?
We’ll start with one of the founders: Stewart Copeland, best known as the drummer for The Police. Also on the creative side is hit songwriter Rick Carnes, whose songs have propelled more than 40 platinum albums from the likes of Garth Brooks, Reba McEntire, Alabama, Pam Tillis, and Dean Martin.
Other founding members include:
- John Barker (founder, president & CEO of ClearBox Rights, LLC).
- Brownlee Ferguson (founder, Bluewater Music).
- George Howard (co-founder of both Music Audience Exchange and TuneCore and CIO of Riptide Publishing).
- Lisa Klein Moberly (founder and president of Optic Noise).
- Benji Rogers (singer-songwriter, founder of PledgeMusic and co-founder of dotBlockchain Media)
- Jeff Price (founder of Audiam and co-founder of TuneCore)
- Henry Gradstein (music industry attorney at Gradstein & Marzano, P.C.)
- Larry Mestel (founder, Primary Wave)
- Ricardo Ordoñez (founder and president of Union Music Group)
Listed as ‘observers’ are Grammy-nominated songwriter and producer Phil Galdston, and Grammy- and Emmy-nominated songwriter and producer David Wolfert.
“The board of directors of the AMLC have a profound and extensive knowledge of music publishing, mechanical license administration, big data, mapping and matching technology, payment processing, copyright ownership identification, conflict resolution, education, law, songwriting, architecture of technology systems and more,” the group notes.
Within days, Digital Music News also reported that two AMLC board members have left the organization for reasons that their source says were “directly tied to threats”:
Separately, a source close to the AMLC claimed that the departures were directly tied to threats by major publishers, with the National Music Publishers’ Association (NMPA) and at least one highly-influential publishing executive cited….AMLC cofounder Jeff Price confirmed to DMN that threats had been issued, but declined to name names. Price, who cofounded TuneCore and more recently founded Audiam, remains a board member of the AMLC but noted that he has “received threats that I recuse myself from the board or suffer repercussions to my career.”
Beyond that, Price was uncertain if other board members had received similar threats, but strongly suggested the possibility. “If there is a coordinated effort, and a colluded [sic] or orchestrated effort occurring to remove people from the AMLC, the question is why?”
“Is there something with the core mission statement they want to change? Otherwise what could it possibly be?”
The appearance of multiple candidates for the yet to be designated MLC raises another question–what about any existing black box? MTP and ARW readers will recall that the MLC is allowed to invade the black box to cover certain administrative costs:
INTERIM APPLICATION OF ACCRUED ROYALTIES.—In the event that the administrative assessment, together with any funding from voluntary contributions…is inadequate to cover current collective total costs, the collective, with approval of its board of directors, may apply unclaimed accrued royalties on an interim basis to defray such costs, subject to future reimbursement of such royalties from future collections of the assessment.
Digital Music News also focuses on this issue:
According to the MMA’s language, mechanical licenses that remain unclaimed after just one year will be largely mopped up by major publishers according to marketshare, an arrangement that has drawn protest. The value of the initial unclaimed tranche of funds has been estimated to be as high as $1.5 billion, at least according to a report by Variety.
We’re not big believers in this $1.5 billion number and it’s not exactly right that Variety reported that number–the Variety story has changed several times and is still a bit murky. Due to a later update to the article concerned it’s a bit unclear exactly what Variety meant in the original unsourced reporting. The original story as reported in Artist Rights Watch stated the industry-wide black box was $1.5 billion:
The DSPs are holding some $1.5 billion in unmatched mechanical royalties. If the MMA passes, that money would be passed through to the MLC which would match it to the songwriters and publishers.
Variety subsequently changed that language in the story at least twice that we know of, but never actually retracted the $1.5 billion number as far as we can tell, although they may have depending on your point of view of what constitutes a “retraction”. In any event, the story now reads:
The DSPs are holding millions in unmatched mechanical royalties — the sum of all Notice of Intent (NOI) filings currently parked at the U.S. Copyright office, while unknown, is climbing. If the MMA passes, that money would be passed through to the MLC which would match it to the songwriters and publishers.
Note–there’s still no source for either the “$1.5 billion” or the “millions” or for the “update”.
Soooo…
If there’s only one MLC when the deadline passes to file papers for Copyright Office designation, then any accrued but unpaid black box–whatever the number–could be paid through to the MLC, even before it’s really up and running with a completely stood up database for matching. It’s also theoretically possible–although very unlikely and not proven by any means–that the black box could have been paid through already in anticipation of there being only one MLC candidate.
Of course, if there’s more than one candidate, then any payment of black box for the past should be put on hold until the candidate is actually designated, particularly since the government took away copyright owners’ rights to statutory damages and attorneys fees if the copyright owner hasn’t filed their lawsuit as of January 1, 2018. (Black box accrual = unlicensed infringing use = admission of infringement.)
Soooo….you just gotta love you some MMA.
The following chart is a work in progress, and if anyone sees anything wrong in it or something that should be clarified or corrected, please let us know. It should be considered a draft, but we hope that it will solidify over the next few weeks. We expect activity to pick up once the MLC filing deadline arrives.
Due to the formation of the AMLC, there are now two candidates for the MLC, there may be more coming. The COUNTDOWN TO MODERNITY chart needs to distinguish AMLC from the competing NMPA/NSAI MLC which does not have a name as far as we know. Until the NMPA/NSAI collective adopts a name, we will refer to it as the NMPA/NSAI collective.
The main takeaway from this chart should be the clock is ticking and time is going by. Our prediction? Time will become the MLC’s biggest enemy, if there isn’t already a time bomb in the drafting of the Music Modernization Act. What we don’t see in the MMA is any discussion of what happens if a deadline is blown for whatever reason.
But mark your calendars–we see the first key date as January 7, 2019 when the Copyright Office will request filings from MLC candidates, which so far include the AMLC and the collective to be formed by NMPA/NSAI. That’s 45 days from now and holidays count. The countdown to the License Availability Date: 770 days from now.
ARTIST RIGHTS WATCH
COUNTDOWN TO MECHANICAL LICENSING COLLECTIVE LAUNCH
WEEK 6
KEY DATES SCHEDULE FROM ENACTMENT DATE (10/11/18)
TO LICENSE AVAILABILITY DATE (1/1/21)
| EVENT | ACCCOMPLISHED | WHO OWNS? | TIME EXPIRED BEFORE LAD | TIME REMAINS TO LAD |
| REQUEST FILING TO BE MLC | STATUS UNKNOWN—Deadline 1/9/2019 | COPYRIGHT OFFICE | 90 DAYS AFTER ENACTMENT | 726 DAYS FROM DEADLINE |
| DESIGNATION OF MLC | STATUS UNKNOWN—Deadline 7/8/2019 | COPYRIGHT OFFICE | 270 DAYS AFTER ENACTMENT | 545 DAYS FROM DEADLINE |
| FORMATION OF MLC NONPROFIT | AMLC nonprofit formed
NMPA/NSAI STATUS UNKNOWN |
MLC | 45 days | 726 days |
| SUBSTITUTION OF BLANKET LICENSE FOR ALL EXISTING COMPULSORY LICENSES | AUTOMATIC 10/11/2018
|
COPYRIGHT OFFICE | 770 days | |
| MLC BUDGET | STATUS UNKNOWN
(Assume deadline of 1/9/19) |
MLC/DLC/CRJ | 45 days | 770 days |
| INITIATE ASSESSMENT PROCEEDING w/CRJs | [MUST COMMENCE NO LATER THAN 7/8/2019]
STATUS UNKNOWN |
MLC/DLC/CRJ | 226 days | 545 days |
| ASSESSMENT RULING | [PUBLISHED IN FR NO LATER THAN 7/8/2020] | MLC/DLC/CRJ | 592 days | 179 days |
| APPEAL OF ASSESSMENT RULING | 30 DAYS AFTER PUBLICATION OF ASSESSMENT RULING | MLC/DLC/CRJ/ DCCOA | 623 days | 149 days |
| MLC BUSINESS PLAN | STATUS UNKNOWN
(Assume deadline of 1/8/19) |
MLC/CO | 45 DAYS | 726 days |
| ANNOUNCED BOARD NOMINEES | AMLC board announced (see DMN and above)
NMPA/NSAI called for nominations. The deadline for NMPA nominations passed on November 15 see NMPA. NSAI are accepting nominations for songwriter board member seats with a December 15 deadline. (these are nonstatutory deadlines) Songwriter board selection by Steve Bogard (NSAI), Rick Carnes (SGA), Lynn Gillespie Chater (SGA), Dallas Davidson (BMI), Chris DeStefano (NSAI), Bob DiPiero (BMI), Dan Foliart (ASCAP), Adam Gorgoni (SONA), Michele Lewis (SONA), Paul Williams (ASCAP) (Assume final deadline of 1/8/19) |
MLC | 45 DAYS | 726 days |
| APPOINTED BOARD | AMLC Board Announced (DMN reports Howard and Mestel depart):
John Barker (founder, president & CEO of ClearBox Rights, LLC). Brownlee Ferguson (founder, Bluewater Music).
Lisa Klein Moberly (founder and president of Optic Noise). Benji Rogers (singer-songwriter, founder of PledgeMusic and co-founder of dotBlockchain Media) Jeff Price (founder of Audiam and co-founder of TuneCore) Henry Gradstein (music industry attorney at Gradstein & Marzano, P.C.)
Ricardo Ordoñez (founder and president of Union Music Group) NMPA/NSAI: STATUS UNKNOWN (Assume deadline of 1/9/19) |
MLC/CO | 45 DAYS | 726 days |
| APPOINTED DLC | STATUS UNKNOWN—Deadline 7/8/2019 | COPYRIGHT OFFICE | 270 days AFTER ENACTMENT | 545 days |
| ENGAGED MLC VENDORS | AMLC: Clearbox Rights, Audiam (others?)
NMPA/NSAI: STATUS UNKNOWN (Assume deadline of 1/9/19) |
MLC | 90 DAYS | 726 days |
| PAID MLC VENDORS | AMLC: See board members above
NMPA/NSAI: STATUS UNKNOWN (ASSUME 7/8/2020 IF NO APPEAL OF ASSESSMENT) |
MLC | 270 days | 545 days |
| ANNOUNCE MLC DATA STANDARDS | STATUS UNKNOWN | MLC/DLC | ||
| REGULATIONS* | STATUS UNKNOWN | COPYRIGHT OFFICE | ||
| COMMENTS AND REPLY COMMENTS ON REGULATIONS | STATUS UNKNOWN | ALL | ||
| EXPLANATION OF OPERATIONS: HOW TO REGISTER WITH MLC AND COST OF REGISTRATION | STATUS UNKNOWN
(Assume deadline of 1/9/19) |
MLC/CO | 90 DAYS | 726 days |
| REGISTRATION START DATE | STATUS UNKNOWN |
MLC=Mechanical Licensing Collective
DLC=Digital Licensee Coordinator
CRJ=Copyright Royalty Judges
DCCOA=District of Columbia Circuit Court of Appeals
CO=Copyright Office
LAD=License Availability Date
*Topic areas to be updated as announced
Artist Rights Watch COUNTDOWN TO MODERNITY (11/16): Key Dates and Accomplishments for the Mechanical Licensing Collective Under the Music Modernization Act
As best we can tell from the outside looking in, this chart has the dates for key events in the critical path to launch for the Mechanical Licensing Collective as required by the Music Modernization Act. We have called the chart the “Countdown to Modernity.”
UPDATE: Recall that the Register of Copyrights gets to pick the entity to operate as the Mechanical Licensing Collective. According to Digital Music News, the first fully-formed candidate to emerge is the American Music Licensing Collective or the “AMLC”. (AMLC’s website is songrights.net.) Digital Music New reports AMLC’s public statements about its organization:
“We believe all song owners, from the kid in their bedroom, to the major music publishers, should be paid what they have earned,” the group declares in its manifesto.
“We are songwriters, artists, music publishers, musicians, composers and technologists. We get song owners paid.”
So who’s behind the American Music Licensing Collective, exactly?
We’ll start with one of the founders: Stewart Copeland, best known as the drummer for The Police. Also on the creative side is hit songwriter Rick Carnes, whose songs have propelled more than 40 platinum albums from the likes of Garth Brooks, Reba McEntire, Alabama, Pam Tillis, and Dean Martin.
Other founding members include:
- John Barker (founder, president & CEO of ClearBox Rights, LLC).
- Brownlee Ferguson (founder, Bluewater Music).
- George Howard (co-founder of both Music Audience Exchange and TuneCore and CIO of Riptide Publishing).
- Lisa Klein Moberly (founder and president of Optic Noise).
- Benji Rogers (singer-songwriter, founder of PledgeMusic and co-founder of dotBlockchain Media)
- Jeff Price (founder of Audiam and co-founder of TuneCore)
- Henry Gradstein (music industry attorney at Gradstein & Marzano, P.C.)
- Larry Mestel (founder, Primary Wave)
- Ricardo Ordoñez (founder and president of Union Music Group)
Listed as ‘observers’ are Grammy-nominated songwriter and producer Phil Galdston, and Grammy- and Emmy-nominated songwriter and producer David Wolfert.
“The board of directors of the AMLC have a profound and extensive knowledge of music publishing, mechanical license administration, big data, mapping and matching technology, payment processing, copyright ownership identification, conflict resolution, education, law, songwriting, architecture of technology systems and more,” the group notes.
This chart is a work in progress, and if anyone sees anything wrong in it or something that should be clarified or corrected, please let us know. It should be considered a draft, but we hope that it will solidify over the next few weeks.
Due to the formation of the AMLC, there are now two candidates for the MLC. The COUNTDOWN TO MODERNITY chart needs to distinguish AMLC from the competing NMPA/NSAI MLC which does not have a name as far as we know. Until the NMPA/NSAI collective adopts a name, we will refer to it as the NMPA/NSAI collective.
UPDATE: Black Box Invasion! MTP readers will recall that the MLC is allowed to invade the black box to cover certain administrative costs:
INTERIM APPLICATION OF ACCRUED ROYALTIES.—In the event that the administrative assessment, together with any funding from voluntary contributions…is inadequate to cover current collective total costs, the collective, with approval of its board of directors, may apply unclaimed accrued royalties on an interim basis to defray such costs, subject to future reimbursement of such royalties from future collections of the assessment.
The “black box” may have already begun accruing at all of the services, although the accrual will no doubt vary from one service to another. However, what should be clear is that since there are now two candidates for the MLC, neither should be able to tap the black box prior to final designation of the MLC by the Copyright Office or otherwise.
The main takeaway from this chart should be the clock is ticking and time is going by. Our prediction? Time will become the MLC’s biggest enemy, if that hasn’t already happened in the drafting of the Music Modernization Act. What we don’t see in the MMA is any discussion of what happens if a deadline is blown for whatever reason.
But mark your calendars–we see the first key date as January 7, 2019 when the Copyright Office will request filings from MLC candidates, which so far include the AMLC and the collective to be formed by NMPA/NSAI. That’s 52 days from now and holidays count. The countdown to the License Availability Date: 777.
ARTIST RIGHTS WATCH
COUNTDOWN TO MECHANICAL LICENSING COLLECTIVE LAUNCH
WEEK 5
KEY DATES SCHEDULE FROM ENACTMENT DATE (10/11/18)
TO LICENSE AVAILABILITY DATE (1/1/21)
| EVENT | ACCCOMPLISHED | WHO OWNS? | TIME EXPIRED BEFORE LAD | TIME REMAINING TO LAD |
| REQUEST FILING TO BE MLC | STATUS UNKNOWN—Deadline 1/7/2019 | COPYRIGHT OFFICE | 90 DAYS | 726 days |
| DESIGNATION OF MLC | STATUS UNKNOWN—Deadline 7/7/2019 | COPYRIGHT OFFICE | 270 days | 545 days |
| FORMATION OF MLC NONPROFIT | AMLC nonprofit formed
NMPA/NSAI STATUS UNKNOWN |
MLC | 36 days | 782 days |
| SUBSTITUTION OF BLANKET LICENSE FOR ALL EXISTING COMPULSORY LICENSES | AUTOMATIC 10/11/2018
|
COPYRIGHT OFFICE | 782 days | |
| MLC BUDGET | STATUS UNKNOWN
(Assume deadline of 1/7/19) |
MLC/DLC/CRJ | 782 days | |
| INITIATE ASSESSMENT PROCEEDING w/CRJs | [MUST COMMENCE NO LATER THAN 7/7/2019]
STATUS UNKNOWN |
MLC/DLC/CRJ | 233 days | 545 days |
| ASSESSMENT RULING | [PUBLISHED IN FR NO LATER THAN 7/7/2020] | MLC/DLC/CRJ | 599 days | 179 days |
| APPEAL OF ASSESSMENT RULING | 30 DAYS AFTER PUBLICATION OF ASSESSMENT RULING | MLC/DLC/CRJ/ DCCOA | 667 days | 149 days |
| MLC BUSINESS PLAN | STATUS UNKNOWN
(Assume deadline of 1/7/19) |
MLC/CO | 90 DAYS | 726 days |
| ANNOUNCED BOARD NOMINEES | AMLC board announced (see DMN and above)
NMPA/NSAI called for nominations. The deadline for NMPA nominations passed on November 15 see NMPA. NSAI are accepting nominations for songwriter board member seats with a December 15 deadline. (these are nonstatutory deadlines) Songwriter board selection by Steve Bogard (NSAI), Rick Carnes (SGA), Lynn Gillespie Chater (SGA), Dallas Davidson (BMI), Chris DeStefano (NSAI), Bob DiPiero (BMI), Dan Foliart (ASCAP), Adam Gorgoni (SONA), Michele Lewis (SONA), Paul Williams (ASCAP) (Assume final deadline of 1/7/19) |
MLC | 90 DAYS | 726 days |
| APPOINTED BOARD | AMLC Board Announced:
John Barker (founder, president & CEO of ClearBox Rights, LLC). Brownlee Ferguson (founder, Bluewater Music). George Howard (co-founder of both Music Audience Exchange and TuneCore and CIO of Riptide Publishing). Lisa Klein Moberly (founder and president of Optic Noise). Benji Rogers (singer-songwriter, founder of PledgeMusic and co-founder of dotBlockchain Media) Jeff Price (founder of Audiam and co-founder of TuneCore) Henry Gradstein (music industry attorney at Gradstein & Marzano, P.C.) Larry Mestel (founder, Primary Wave) Ricardo Ordoñez (founder and president of Union Music Group) NMPA/NSAI: STATUS UNKNOWN (Assume deadline of 1/7/19) |
MLC/CO | 90 DAYS | 726 days |
| APPOINTED DLC | STATUS UNKNOWN—Deadline 7/7/2019 | COPYRIGHT OFFICE | 270 days | 545 days |
| ENGAGED MLC VENDORS | AMLC: Clearbox Rights, Audiam (others)
NMPA/NSAI: STATUS UNKNOWN (Assume deadline of 1/7/19) |
MLC | 90 DAYS | 726 days |
| PAID MLC VENDORS | AMLC: See board members above
NMPA/NSAI: STATUS UNKNOWN (ASSUME 7/7/2020 IF NO APPEAL OF ASSESSMENT) |
MLC | 270 days | 545 days |
| ANNOUNCE MLC DATA STANDARDS | STATUS UNKNOWN | MLC/DLC | ||
| REGULATIONS* | STATUS UNKNOWN | COPYRIGHT OFFICE | ||
| COMMENTS AND REPLY COMMENTS ON REGULATIONS | STATUS UNKNOWN | ALL | ||
| EXPLANATION OF OPERATIONS: HOW TO REGISTER WITH MLC AND COST OF REGISTRATION | STATUS UNKNOWN
(Assume deadline of 1/7/19) |
MLC/CO | 90 DAYS | 726 days |
| REGISTRATION START DATE | STATUS UNKNOWN |
MLC=Mechanical Licensing Collective
DLC=Digital Licensee Coordinator
CRJ=Copyright Royalty Judges
DCCOA=District of Columbia Circuit Court of Appeals
CO=Copyright Office
LAD=License Availability Date
*Topic areas to be updated as announced
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