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Artist Rights Watch COUNTDOWN TO MODERNITY (11/23): Key Dates and Accomplishments for the Mechanical Licensing Collective Under the Music Modernization Act

November 23, 2018 Comments off

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).

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 1/9/19)

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

Under a Red Flag: The Other Side of Whack a Mole–will it be back to the future for MCNs?

February 21, 2013 Comments off

Après moi, le déluge

Attributed to King Louis XV of France

Right after Google’s YouTube acquisition, Googler Zahava Levine appeared on a bar association panel in Los Angeles and sneered at the assembled entertainment lawyers that even though YouTube was using their clients’ works without permission, YouTube would continue to rely on the DMCA notice and takedown.  Unless, of course, “Hollywood” wanted to stop playing whack a mole and make a deal.

And the assembled room witnessed the birth of an urban legend: The Notice and Shakedown.

And what  many told me they thought (after where do they find these people) was why would Google want to play whack a mole.  Surely this game of “catch me if you can” is going to come back to bite them?  (See Parlophone.)

Fast forward a few years and enter the multichannel network (or MCN), somewhat shadowy groups of content producers and aggregators on YouTube.  If I had to bet, my bet would be that when Google contract with MCNs, Google place a fig leaf on clearances for music used in MCN programming–they place the burden on the MCN.  If Google then gets a claim for infringement, they simply tender it to the MCN as an indemnity claim.

Enter the Very Successful MCNs.  These MCNs make real money and attract real investment, sometimes from Google itself.  Based on the announcement of the Universal deal, it now becomes apparent that there must be a significant amount of uncleared music on these MCNs.  And, of course, if Google invests in an MCN that has a contract with YouTube…Google will have diligenced the MCN as part of its investment (or certainly had the chance to do so).

So what does that mean for Google’s “see no evil” version of its Notice and Shakedown defenses?  I think it’s called “actual knowledge” that appears under a red flag.

Why is this meaningful?

Hard on the heels of the news of Universal’s deal with Fullscreen and Makers, the National Music Publishers Association made it clear that just because one publisher made a deal with two MCNs doesn’t mean that those two MCNs don’t have a problem with other songwriters, and that other MCNs don’t have a problem with all the songwriters.

‘Recent news that two large multi-channel networks (MCNs), MakerStudios and Fullscreen, have reached a licensing deal with Universal Music Publishing Group is an important first step in compensating songwriters.  But let me be clear – all MCNs must be licensed for the use of all songs. This agreement between two MCNs and one music publishing company does not solve the entirety of the problem.  As the popularity of digital entertainment has grown, MCNs have significantly profited, often without compensating the songwriters whose work is being used.

Those who use the works of songwriters in videos must fairly compensate those songwriters and music publishers, and NMPA is committed to finding a complete solution.”

So let’s crystallize that for the MCNs:  If you get down on your knees and beg to be sued, don’t be surprised if someone sues you.

And your good buddies, you know, your “partners,” at Google?  They will throw you under the bus in a heartbeat.  If they haven’t already.

Listen up–Google advertised the sale of prescription drugs to kids.  They distributed sex club apps that exploit teens.  Do you really think people who can do that give a damn about an MCN?

And ask yourself this Mr. MCN investors–why do you want to play whack a mole?  What possible motivation could you have?  Because you don’t make as much money as Google, so your profit motive is radically different than theirs.

I’d say there’s another element of brilliance to the Universal deal–they got their songwriters’ money out first.

The Artists, United, Can Never Be Defeated

November 29, 2012 Comments off

Yesterday on Capitol Hill did not quite go the way that the Internet Radio Fairness Coalition had in mind.  At all.  More about that will be written.  Mr. Chaffetz–more about him later, too–had asked Mr. Goodlatte for a hearing on the so-called Internet Radio Fairness Act, and a hearing he got.  I would say mostly a “listening” but that’s good, too.  The hearing was scheduled for 11:30 am and in a brilliant move, David Israelite of the NMPA scheduled a performance by five of our community’s top songwriters in an adjacent meeting room just prior to the IRFA hearing.

The writers were Lee Miller performing his song “You’re Gonna Miss This” (as recorded by Trace Adkins), Kara DioGuardi performing “Sober” (as recorded by Pink), BC Jean performing “If I Were a Boy” (as recorded by Beyoncé), Desmond Child performing his song “Livin’ on a Prayer” (as recorded by Bon Jovi), and Linda Perry performing her song “Beautiful” (as recorded by Christina Aguilera).

Of course there was a masterful political element to the timing and messaging of these songwriters, but first think about this–these writers performed their songs with a single instrument accompanying them.  Just one instrument and the voice, about the simplest instrumentation you can have.

And of course–the song.  These songwriters reminded the audience comprised of Members and staffers of the importance of the songwriter, and they did it by letting the songs speak for themselves.  By performing these songs–not with the vast instrumentation and production values of the recordings that interpreted the songs, they really and truly demonstrated conclusively that which every record company executive knows that is not a hype, not a self interested spin–it really and truly does all start with the song.

The combined Pandora earnings for these songwriters in the first quarter of this year was $587.39.  For over 33 million spins.

And Tim Westergren wants to pay them less.

It’s too bad that Tim wasn’t there for the sing along that Desmond Child led on the chorus of Living on a Prayer.  Since he used to play in a band and all, you would have thought that Tim would naturally gravitate to hanging out with his own kind.

I guess Tim was too busy to show up for a reminder of the investment that these writers are making in his company by giving him a break on royalty rates that all songwriters richly deserve.

When Pandora, and the NAB, and David Pakman and Google complain about royalty rates, remember that’s just about greed.  By handling themselves the way they have, all these people have demonstrated once and for all that they just don’t get it.

That’s OK, they are not our friends.  We don’t have to be friends with everyone we do business with.

But here’s the real deal: Without great songs there are no great records and without great records there is no Pandora.

And that’s the fact.

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