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Billions and Billions: Carl Sagan Meets the Music Modernization Act
According to a post in Variety, there seems to be a rather large chunk of cash sitting at the digital music services. As Artist Rights Watch posted, Variety’s initial story read:
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 updated the post (you might call it a “correction”) to read:
The DSPs are holding some $1.5 billion in unmatched mechanical royalties [ADDED — that total is the sum of all Notice of Intent (NOI) filings currently parked at the U.S. Copyright office, and is climbing.] If the MMA passes, that money would be passed through to the MLC which would match it to the songwriters and publishers.
Both these statements are rather odd. If there’s $1.5 billion in unmatched royalties at services, one must ask what is it doing there?
On the other hand, if the “correction” is correct, the $1.5 billion sum includes, I guess, royalties payable for the NOIs at the Copyright Office. Not clear from Variety, but this reference must be to the “address unknown” mass NOIs (since Variety refers to “at the Copyright Office” and I think that’s the only NOI that would get filed “at the Copyright Office”). (See my post on Big Tech’s mass NOI loophole from the ABA Entertainment and Sports Lawyer.)
This “correction” is also very strange to me because the mass NOIs are royalty free–that (and escape from liability) is the whole point of the loophole. I think we have probably bored everyone with many posts on just what a joke these filings are. Everyone from Ed Sheeran to the Neville Brothers are subject to these NOIs, and I’m told that at least Ed Sheeran is getting paid under a voluntary agreement. Having said that, I would be very surprised if there were anywhere near 1.5 billion NOIs filed at the Copyright Office, although there may certainly be tens of millions or maybe over 100 million. I’m willing to be educated otherwise, but that 1.5 billion number just doesn’t scan to me. (You can look these up on SX Works’ handy NOI Lookup, the best tool for finding out if you have one filed on your song.)
The only way I can think of that both Variety’s original statement and the correction could be true would be if there were a voluntary retroactive unmatched payment by the digital services as part of the deal for the Music Modernization Act. Even so, $1.5 billion is awfully generous, even for the biggest companies in commercial history. But then, if it is a voluntary payment, how would you ever know if it isn’t also voluntarily disclosed?
So I’m looking forward to seeing if there’s a further correction. It could just be confusion on the part of Variety or their source. Time will tell. But the entire exchange shows that the Copyright Office should never have allowed Spotify, Amazon, Google et al to get this started. Strangely enough, Apple seems to get by just fine without using “address unknown” NOIs.
Rule Takers vs. Rule Makers: Congress Should Support Startups in the Music Modernization Act
If you read the current version of the Music Modernization Act, you may find that it’s more about government mandates that entrench incumbents than a streamlined blanket compulsory license that helps startups climb the ladder. Yet in the weeds of MMA we find startups dealt out of governance by rule makers and forced as a rule taker to ante up payments by their competitors in a game that the bill makes into the only game in town.
Billboard reports that Senators Cornyn and Cruz suggested a fix for this flaw—allow private market competition alongside the MMA’s government mandate. (Vaguely reminiscent of the “Section 115 Reform Act” from the 109th Congress in 2006.)
Let’s review why this fix is necessary and how it could balance the roles of rule makers and takers.
It’s necessary because the problem doesn’t come from songwriters. It comes from the real rule makers—Amazon, Apple, Facebook, Google and Spotify. And startups know which side butters their bread.
Public discussion of MMA has focused on the song collective and the compulsory blanket license for songs, but the mandated digital services collective is more troubling given the size of the players involved. MMA calls the services’ collective the “digital licensee coordinator” or the “DLC”. Rule taker startups are governed by the rule maker DLC but have no say in the DLC’s selection.
Like Microsoft’s anonymous amici, startups know their place. Especially against Google, Amazon and Facebook, whose monopoly bear hug on startups includes hosting, advertising and driving traffic.
The MMA authorizes these aggressive incumbents to effectively decide the price to startups for the “modernized” blanket license. Why? Because the MMA requires users of the license to pay for the lion’s share of the “administrative assessment,” the licensees’ collectivized administrative cost payment that the CBO estimates will be over $222 million for 8 years.
Senators Cruz and Cornyn object to MMA’s delegation of the government’s authority to one collective for songwriters and one collective for digital services—with an antitrust exemption. Why only one game in town? Rather than have the DLC run by the usual suspect monopolists, why not allow competition?
This is important–if startups can’t afford to buy-in to the license, it does them no good, and their biggest competitors decide the price of that license through the DLC.
Both collectives are to be approved by the Register of Copyrights, but MMA puts the Register in the unenviable position of being constrained to appoint certain types of entities by statutory mandate.
Here’s the mirror image language from the MMA instructing the Register on selecting both the song collective and the DLC:
“[The Register must choose an entity that] is endorsed by and enjoys substantial support from [digital music providers/copyright owners of musical works] that together represent the greatest share of the [licensee/licensor] market for uses of [musical/such] works in covered activities, as measured over the preceding 3 full calendar years;”
Startups–who are potential music users most in need of the statutory blanket license–need not apply to be the DLC.
That clause alone justifies the Cornyn/Cruz solution.
There is another toad in the weeds: The allocation of the “administrative assessment” to each music user of the blanket license. In a clause fraught with moral hazard, MMA authorizes the DLC to “equitably allocate the collective[’s] total costs across digital music providers…but shall include as a component a minimum fee for all digital music providers.” Plus, the DLC also gets to set the “dues” payment for each of its “members.” Plus startups pay royalties to the song collective.
Rule makers set a lot of payments. But curiously no one can tell a startup today the hard cost of their blanket license tomorrow.
If a startup wants the MMA’s blanket license, the DLC can compel it to pay a share of the assessment at a price determined by the DLC—as well as a membership fee. These mandatory payments are enforced by the DLC and are required for any music user to get a blanket license. If this sounds cumbersome and bureaucratic, that’s because it is. But absent the Cornyn/Cruz amendment, the bill gives rule makers control of the only game in town.
Crucially, there currently is no budget for even the first administrative assessment or the membership fee—for the biggest change to the Copyright Act in 100 years. That comes later—perhaps years later after appeals. When asked by Chairman Grassley, DiMA was unable to come up with a number and referred to the CBO’s cost estimate of all things. The ante for a startup with 0.5% market share would be $1.11 million before royalties. Yet—if a startup fails to pay the DLC, they can lose the blanket license even if current on royalty payments.
Senators Cornyn and Cruz are rightly skeptical.
“Modernization” should make licensing easier, level the playing field for startups and protect them from famously predatory competitor incumbents—as well as copyright infringement lawsuits from the rule takers.
These are all good reasons for the private market solution. Competition at least gives startups a hope for the pursuit of fair treatment.
A wise member of the Texas Congressional delegation once told me Big Tech gets to climb the ladder to the American Dream like everyone else. What they don’t get to do is pull the ladder up behind them after getting to the top.
Expanding competition rather than mandating an exclusive collective could keep that ladder available to everyone.
@helienne Lindvall on MMA Safe Harbor
It must be said that Music Modernization Act safe harbor was released the same time as CISAC released an economic impact study of the DMCA safe harbor. We think of DMCA as being worse because we’ve lived with it for decades–in decades how will we feel about the MMA safe harbor and is anyone feeling lucky?
Content Creators Coalition & MusicAnswers Applaud the Revision and Passage of the Music Modernization Act by the Senate Judiciary Committee — Artist Rights Watch
PRESS RELEASE
[Washington, D.C.] – The Content Creators Coalition and MusicAnswers released today the following statement on the Senate Judiciary Committee’s vote in support of the Music Modernization Act.
C3 and MusicAnswers applaud the Senate Judiciary Committee’s vote to advance the Music Modernization Act, while incorporating key changes we had urged to make the legislation stronger, more transparent, and more equitable.
The MMA will strengthen the music ecosystem and all its participants, including songwriters, publishers, performing rights organizations, artists, record companies, music services and fans. It ensures digital music services will pay fair royalties for every song they stream, establish a better standard for determining royalty rates, and eliminate some out-of-date provisions of the PRO consent decrees. In return, digital music services get certainty, legal protection, and new streamlined tools to bring more music to more people at lower cost.
It’s a reasonable bargain, and, therefore, we have consistently and publicly supported the basic construct of the legislation.
We are especially grateful that the Senate Judiciary Committee, led by Chairman Chuck Grassley (R-IA) and Ranking Member Dianne Feinstein (D-CA), was willing to engage with our organizations on ways to improve the bill and include in the Managers Amendment approved today key protections for creators and the public.
As a result, the MMA now provides greater transparency, including rigorous audits to make sure that royalties are flowing to the correct parties, a commitment to educating all music creators about their rights and the royalties due them collected under the new Music Licensing Collective (MLC), a requirement to study and follow best practices in order to find the proper owners of unclaimed royalties, and increased clarity regarding who owns the data generated by the new system.
While we support the legislation and are proud of the changes we have achieved as artist and songwriter advocates, we continue to have concerns about three key issues: whether the entity that is designated as the MLC is being foreordained by the bill and precludes competition with the MLC; the composition of the Board of Directors of the MLC, which is unduly tilted towards major publishers; and the methods used to distribute royalties from works where even using best practices the authors could not be identified. We urge the full Senate and the House to consider further improvements to those flawed provisions and we call on the Copyright Office to ensure in implementation of the final legislation that no stakeholder group can dominate the MLC and that all royalties are distributed in a fair and equitable and non-self-interested manner.
The process leading to this moment has been strong in many ways. But it has also included its fair share of divide-and-conquer tactics and efforts by powerful incumbent forces to crowd out grassroots organizations like ours and to divide the music community within itself. We believe that we are strongest when we respect and support each other – a lesson too many in our business still have yet to learn.
We are deeply appreciative of the partnership c3 and MusicAnswers have forged. Together, we represent thousands of writers, producers, performers, and music business professionals, and over the past few weeks we have worked steadfastly to pursue improvements in the MMA. We look forward to future collaboration and welcome the involvement of other collaborative groups and individuals.
What’s Up With @SenSasse’s Vicious Little Amendment on pre-72?
It’s important to know who your friends are, and we’ve learned this week that Nebraska Senator Ben Sasse is not one of them. It’s a bit surprising given Omaha’s musical legacy that starts with the big band era–you know, the musicians and artists Sasse was trying to dis with his amendment to strike the CLASSICS Act pre-72 fix from the Music Modernization Act. Not to mention the Saddle Creek juggernaut.
It’s such a strange little tableau that it’s hard to really understand what in the world Senator Sasse thought he was up to with his vicious little amendment that would stab pre-72 artists and their heirs in the alley. But we learned to keep a close eye on this character who seems to be in league with Senator Wyden, Google, Public Knowledge and the Electronic Frontier Foundation.
So while you think about that one, you may want to have a listen to his fellow Nebraskan, my friend Buddy Miles with my old band mate Wally Rossi on guitar.
Here Comes the Shiv: Sen. Sasse to Move to Strike the CLASSICS Act and Screw Pre-72 Artists
MTP readers will not be surprised to learn that Senator Sasse is circulating an amendment to strike the CLASSICS Act from the Senate version of the Music Modernization Act. The amendment appears to have been drafted by the Google Shills at Public Knowledge.
This is, of course, the classic back stabbing we have come to expect from Public Knowledge, so is par for the course. What that means, of course, is that Google gets to screw the pre-72 artists and get their new reachback safe harbor that the songwriters and publishers gave up.
We need to move on this quickly. If you can call your Senator and ask them to oppose the Sasse amendment to the Music Modernization Act (bill number S. 2823), that would be great. You can look up your Senator’s information on Phone Congress at this link. Choose “Any Other Topic Not Listed Here” on the pull down “Topic” menu.
Ron Wyden’s Teachable Moment: Should one Senator be allowed to stop 415 Members of Congress on the Pre-72 Fix
It’s rare that we get insight into just how sleazy the Congress can be–but Senator Ron Wyden is giving us all a guided tour when it comes to his singular dedication to screwing pre-72 artists. There is a process in the Senate called a “hold” (see this memo from the Congressional Research Service describing the rules for holds) which can seriously slow down passage of legislation. Any one senator can put a hold on any bill, and Senator Wyden appears to be threatening to put a hold on the Music Modernization Act if he doesn’t get significant changes to the pre-72 fix, probably before Thursday’s “markup.”
That would be the pre-72 fix in the CLASSICS Act that was just passed by 415 Members of the House of Representatives. That’s right–ONE senator can replace the judgement of FOUR HUNDRED FIFTEEN elected representatives of the American people. ONE senator can crush the hopes of thousands of pre-72 artists or their heirs, because some people have waited so long to get a fair shake from the Congress that they died.
Why would any senator do such a thing? You can kind of understand this anti-democratic shenanigans on a controversial bill, or a bill that barely passed the House. On this bill, however, I have to believe that Wyden’s threatened hold can only be explained by blatant cronyism and swamp fever. And Oregonians need to know the dark side to Ron Wyden.
MTP readers will remember the story of Senator Ron Wyden (D-OR) and his descent into the swamp. You might think, what’s a senator from Oregon doing up to his eyeballs in cronyism and the slime? Easy answer–cheap hydroelectric power from Oregon’s part of the Columbia River that powers many huge data centers owned by…you guessed it…Google, Facebook, Amazon, Rackspace. Cheap power that goes straight to their bottom line.
Columbia River water vapor burned by Google’s Data Center at The Dalles, Oregon
All get tax breaks of dubious value to Oregonians according to a state audit and cheap power, crowding out local businesses and residents. Each job created by these highly automated data centers costs the local communities up to $800,000–which might make it worth it to pay the companies to stay away.
Google, Facebook, Amazon and Rackspace all are members of the Internet Association, home to Mr. Shoegazer who gives “voting with your feet” a whole new meaning. Google and Amazon are also members of the Digital Media Association or “DiMA”. And DiMA’s grubby little paws are all over the Music Modernization Act, particularly the blanket mechanical license which reads like tech industry lobbyists wrote it.
And Google’s grubby little paws are all over Public Knowledge and the Electronic Frontier Foundation, both card carrying members of the Google Shill List and both leading the charge against the CLASSICS Act, now part of the omnibus Music Modernization Act in the Senate. Remember, the omnibus Music Modernization Act includes CLASSICS as the fix on the pre-72 loophole . CLASSICS allows artists who recorded prior to 1972 and their heirs to benefit from digital royalties when their recordings are played on SiriusXM, Pandora or any other noninteractive radio platform.
Wyden has proposed an insanely complicated and unworkable alternative to the version of CLASSICS that got the Music Modernization Act passed in the House. The only reason that anyone is taking him seriously is because of his threatened hold and he’s going to try to jam this philistine and nonsensical alternative right down the throats of all the artists who had their hopes lifted when the House passed the bill unanimously.
All that Wyden is doing is using the hold system to leverage his way into jacking with the copyright term and throwing a bone to Google, Lessig and the entire anti-copyright and anti-artist crew.
And here’s what he should get for it…
Nothing.
He should get nothing at all and should be sent packing. Let him place his hold and see what happens. He may be narcissistic enough to believe that he’s entitled to replace the vote of 415 of his colleagues with his own cronyism, but we don’t have to buy it.
Nothing. He gets nothing.
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