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Holding the Line on Tradeoffs for Statutory Damages

October 1, 2017 1 comment

It is very likely that we will hear about a move to make significant amendments to the Copyright Act at some point before the beginning of campaign season in 2018.  There are a high number of copyright-related bills that have been introduced in the House of Representatives in the current session, so brace yourself for an “omnibus” copyright bill that would try to cobble them all together Frankenstein-style.

A Frankenstein omnibus bill would be a very bad idea in my view and will inevitably lead to horse trading of fake issues against a false deadline.  Omnibus bills are a bad idea for songwriters and artists, particularly independent songwriters and artists, because omnibus bills tend to bring together Corporate America in attack formation.

MIC Coaltion

The MIC Coalition

When you consider that Google and Facebook are part of Corporate America (not to mention Apple), the odds of the independent songwriter and artist, but really any songwriter and artist, just holding onto the few crumbs they currently have crash and burn.  The odds of actually righting wrongs or–God forbid–getting rid of the legacy consent decrees that protect Big Business vanish into the limit.

Of course, what certain elements of Big Tech would really like to do is push all licensing of music into one organization that they could then control through consent decrees or other government regulation and supervision by exercise of the massive lobbying and litigation muscle of the MIC Coalition and DIMA.  While I realize that may actually sound anti-competitive, it is typical of monopolists to use the antitrust law to destroy competition (as Professor Taplin has taught us).   That’s certainly what has happened with the PRO consent decrees–reduced competition and lower royalties.  Not to mention such a licensing organization would collapse under its own complexity.  This is probably why the Copyright Office envisioned a “Music Rights Organization” that would combine the PROs and mechanical rights licensing but provided the relief valve of an new opt-out right so that songwriters could escape the madness.  (“Under the Office’s proposal, except to the extent they chose to opt out of the blanket statutory system, publishers and songwriters would license their public performance and mechanical rights through MROs.”  Copyright Office Music Licensing Study at p. 9)

If you want some ideas about the kinds of property rights that Big Tech wants the government to take away from songwriters and artists, just read Spotify’s most recent filing in the songwriter litigation in Nashville where their lawyer tries to define away mechanical royalties (unsurprisingly, the lawyer is a long-time protege of Lessig).  Why?  Because they are being brought to a trial by their peers on statutory damages for copyright infringement and the potential for having to pay the songwriters’ lawyers due to a statutory right to recover attorneys fees.  (Statutory damages for copyright infringement has long been an attack point of Big Tech and we get a preview of where they want it to go in Pamela Samuelson’s “Copyright Principles Project”–essentially abolished.)

One way or another, the Big Tech cartel (which includes all the companies in the MIC Coalition and MIC Coalition member the Digital Media Association which itself has members like Spotify and, curiously, Apple) is very likely going to go after statutory damages and try to create yet another “safe harbor” for themselves with no burdens–a “friction free” way to infringe pretty much at will because the actual damages for streaming royalties will be pennies.

If the cartel succeeds in eliminating statutory damages and attorneys fees awards, this will truly make copyright infringement litigation toothless and entirely eliminate the one tool that independent songwriters and artists have to protect their rights.  It will neuter massive copyright infringement as alleged in all of the Spotify class actions, not to mention cases like Limewire.

Oh, you say–did you just switch from song copyrights to sound recording copyrights by referencing Limewire?  Yes, I did–because that’s exactly what I predict the DIMA and MIC Coalition have in mind.  Why do I say this?  Because that’s what these companies are backing in the radioactive Transparency in Music Licensing and Ownership bill (HR 3350).  And if you blow up all the current separate bills into one omnibus copyright “reform” bill, the pieces may reconstitute in forms you didn’t expect.

But realize that in almost all the many copyright bills currently before the House of Representatives, the other side is trying to bootstrap unjust harm into a negotiation chip to shakedown creators.  And it’s not just pending legislation–the shakedown is especially observable with the millions of notices of intention to rely on statutory mechanical licenses for songs filed with the Copyright Office.  That’s a nice song you got there, it would be a shame if something happened to it.

Big Tech’s basic negotiation method is to rely on a loophole, bootstrap the loophole to build up the pressure on people who can’t fight back, then run the shakedown to get concessions that should never be made.  This is what Google has done with the DMCA and is the same shakedown tactic on mass NOIs taken by Google, Amazon, Pandora, Spotify, and others–but curiously not Apple.  Somehow Apple has made it work with the most successful digital music platform in history.

Let’s go down the issue list:

Bootstrapped Issue Fix Bill
Pandora and Sirius stopped paying artists for digital royalties on pre-72 recordings—because of loophole based on federal copyright protection for sound recordings Start paying artist royalties on classic recordings made before 1972 CLASSICS Act
Terrestrial radio created a loophole so they don’t have to pay performance royalties to artists on sound recordings; stop artists from opting out Start paying artist royalties for broadcast radio (with protection for noncommercial and small broadcasters) Fair Pay Fair Play Act, PROMOTE Act
Big tech suddenly started using a loophole to file millions of “address unknown” NOIs with Copyright Office after indie songwriters filed class actions Require Big Tech to use existing databases to look up copyright owners or don’t use the songs or recordings. None
No “central database” that has all songs (but no requirement to actually look up anything), requires double registration If songwriters and artists don’t register, then no statutory damages Transparency in Music Licensing and Ownership Act

Blown up into parts:

–Avoid raising mechanical royalty rate or paying artist royalties on terrestrial at all

–How to use the lack of the mythical “central database” as a bright and shiny object to avoid paying royalties and shirk liability for not doing copyright research, an absurd position for companies that owe much of their wealth to their unprecedented ability to profile people around the world and “organize the world’s information”

–Avoid paying statutory damages

–How to avoid paying royalties that should have paid anyway (pre-72, terrestrial, mass NOI) through distorted interpretations of the law or even safer harbors

–Avoid an obligation to actually look up anything (new databases)

–Use any work they want if all they have to pay is actual damages and no attorneys fees

–Keep songwriters and artists from opting out

–Create biggest black box possible

It should be apparent which way Big Tech is trying to push the creative community.  It is important for creators to understand that any legislative concession that the MIC Coalition or DIMA win against songwriters or artists they will then turn around and try to extract in the next shakedown–authors, photographers, film makers, all the copyright categories.

It is in everyone’s interest to support a healthy creative community that will continue to engage fans and do enough commerce to create value for the tech monopolies.  But–it is crucial to understand that it doesn’t work the other way around.

The purpose of the creative community is not to create value for tech monopolies.  It is to support compelling artists and help them engage with fans, and sometimes it is art for art’s sake alone.  If those artists throw off some commercial gain that the tech monopolies can turn to profit themselves, fine.  But creating profit for these monopolists is not the goal of artists.

Instead of creating fake problems to try to extract concessions that further undermine creators like offering ice in winter, the tech monopolies like Google, Spotify, Amazon and Pandora should identify real problems and work with us toward real solutions–and not a loophole-driven shakedown.

 

 

#irespectmusic and Fasten Your Seatbelts: Where Do We Go From Here on Pre-72?

September 25, 2014 Comments off

This has been a good week for artist rights–the Turtles struck a major blow in the struggle against the new boss in their case against Sirius to protect the rights of artists who recorded prior to 1972.  What should we expect now from new boss companies like Pandora, Sirius, YouTube and Clear Channel?  When we remember that the new boss is far, far worse than the old boss, there are certain events we can anticipate.  No money, bigger alliances against us and crony capitalism on steroids.  I’d love to be wrong, but don’t be surprised if I’m right.

1.  No Payments and Scortched Earth Litigation:  While it would be the right thing to do, my prediction is that it will be a frosty day in Hell before the new boss will ever pay a penny to pre-72 artists, musicians or background vocalists without a final nonappealable judgement following absolute scorched earth litigation.  The one advantage to artists about this is that the new boss litigation will bring into sharp focus exactly who these people are and whose side they’re on.  Artists will get a reminder of who they’re dealing with every single day of the lawsuits–that could go on for many years.  Yes–they have that much disdain for artist rights.  You have to ask yourself when does disdain cross over into something much darker.

2.  Alliance of Big Tech and Big Radio:  Don’t forget that broadcast radio is directly implicated by the Turtles decision.  Even though a Clear Channel was not a defendant, the decision could easily be interpreted to require a public performance license for pre-72 recordings at terrestrial broadcast radio.  This is the very issue that the National Association of Broadcasters has been fighting for decades, spending probably over $100 million to stop artists getting paid for radio play–which just happens to be the damages award that the Turtles asked for in their case against Sirius.  (So you have to ask, what if they just paid the royalty like every other country except a handful such as North Korea and Rwanda.)

As we saw with Pandora and Sirius’s disastrous adventure with the Internet Radio Fairness Act (“IRFA”) and the Internet Radio Fairness Coalition, the NAB no longer has to fight artists by themselves.  No, they have company.  Pandora is a member of the Digital Media Association (DiMA) for starters, which includes Amazon, Google and Apple as members.  I would bet that the market cap fluctuation of DiMA members on a brisk trading day exceeds the worldwide market capitalization of the entire music business.

And this doesn’t include DiMA’s alliances with the Computer and Communications Industry Association and the Consumer Electronics Association.  Here’s the panel at a recent “invitation only” DiMA “Congressional seminar” on Capitol Hill:Screen Shot 2014-07-20 at 3.23.11 PM

Expect to see the IRFA alliance reanimated to oppose us in litigation and especially in lobbying.  And remember–friends don’t let friends get IRFA’d.

3.  Crony Capitalist Lobbying:  I would expect to see Pandora and Sirius trot out the old standbys of “platform parity” and “full federalization” seasoned with incantations of “innovation” and “don’t break the [FILL IN BLANK]”.  It likely will be phrased like this:  “We would be happy to pay if all platforms were treated the same to preserve innovation and consumer choice.” (It’s unlikely that any royalty payment increase will be passed on to consumers.) In the case of the Turtles, this will mean that broadcast radio has to pay for pre-72 on terrestrial.  These statements will be greeted by tech industry lobbyists and publications as though someone had presented some self-evident wisdom.  Google Shill Listers will likely trumpet this as an issue of fundamental fairness, don’t break the [FILL IN BLANK] yadda yadda.  Or perhaps in the positive as in “Break the free market”, the DIMA mantra.  A THREAT TO DEMOCRACY AS WE KNOW IT.

Because it’s so fair to take advantage of a self-defined loophole that at least one judge thinks is a mirage.  And it’s so democratic to lobby your way to commercial advantage.  (So I don’t want to hear a peep from any of these people about Citizens United or campaign finance reform.)

You can also expect to see the combined lobbying brainpower of companies with over a trillion dollars in market value introduce legislation written by their lobbyists that will compete with the Internet Radio Fairness Act for cruelty.  This may well be an amendment to the RESPECT Act that will effectively gut it under the guise of “platform parity” or “full federalization”.

Understand what “full federalization” means.  Pandora has been saying they’d support the RESPECT Act if it only provided for “full federalization” of pre-72 recordings.  What that means is that Pandora wants the federal government to preempt any state law sound recording copyright protection.  This would effectively “federalize” and gut state law so that all the federal defenses to copyright infringement would be available.  Companies like Google would love that to no end.  This is because Google does not get DMCA safe harbors on pre-72 recordings (I predict this is the next big artist lawsuit).  How this helps Pandora, I don’t quite see, but then Google’s Doubleclick handles all their advertising–that is, controls their revenue–so go figure.

Dima Panel

So when you hear “full federalization” think “fully formed opportunity to screw you over”.  They will pass this off as supporting artist rights, by which they mean the “termination rights”–the rights of authors to terminate transfers and licenses established under the 1976 revision of the U.S. Copyright Act.  (Specifically pursuant to Sections 203 and 304(c) for those who are reading along.)  They won’t tell you that most recording artists will have a tough time qualifying for termination rights for a host of reasons starting with work for hire, the termination applies in the US only, and a few other things.  Like they’ve never met an artist right they didn’t want to gut.  Not that it’s not worth dealing with the termination issue for pre-72 at some point–it is.  It’s just not worth giving up all the compensation rights for 50 years or so of recorded music in order to maybe get a handful of those artists covered.  That issue can be dealt with in regular order and separately.

In other words–pre72 artists don’t have a termination right now, but they do have a right to be compensated.  Like the bully in the playground stealing your lunch money, they want you to feel like they really do have your nutritional interests at heart if you’d just lick their boots clean.

Also known as ice in winter.  Because whatever it is that Pandora and Sirius choose to do, we know from past performance it will not be the right thing to do.

So fasten your seat belts, kids, it’s going to be a bumpy night.

Register in September. Vote in November.

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Hold On, I’m Coming: Reactions to the Turtles/Sirius Ruling on Unlicensed Use of Pre-72 Recordings #respectallmusic

September 24, 2014 3 comments

Reactions to the Turtles crushing defeat of Sirius are coming in, here are a few:

Sam Moore (of Sam & Dave) said it best:

Winners never quit and quitters never win.  The recording artists of the pre-72 era are winners and we are not quitting until it’s all made right for every single one of us.

It’s a good day for artists, musicians, songwriters and labels whose life’s work was infringed by Sirius.

Richie Furay (Buffalo Springfield):

“Today we are one step closer to pre-1972 music creators receiving fair pay. The ruling against Sirius XM for playing, but not paying Flo & Eddie (aka The Turtles), is a victory in music licensing history.”

T Bone Burnett:

“It is good that a federal judge made clear that online and mobile music services that have pre- 1972 recordings on their playlists should pay the artists who created these recordings. This decision puts in high relief how arbitrary the idea of 1972 is as a dividing line. If Aretha Franklin is driving listeners to a digital music service, she should share in the revenue that is generated.”

The incomparable Martha Reeves:

“This music is our legacy, and we are grateful that the court in California has acknowledged that artists have the right to be compensated when it is used by digital radio services.”

And Mark Farner of Grand Funk Railroad:

“The Court’s ruling in favor of the Turtles makes it clear that all recordings are worthy of protection.  It’s a matter of simple fairness and I am delighted that legacy artists are being heard by our justice system. Thanks to the Turtles for bringing this issue front and center.  Now more than ever it’s clear that Congress should pass the RESPECT Act, which clearly and fairly makes sure that ALL artists are treated fairly by digital radio.”

Earlier this year, SoundExchange joined with a coalition of artists in launching Project72, a campaign to ensure fair compensation for those who recorded music before 1972 and in support of H.R. 4772, the RESPECT Act. We’ve discussed Project 72 and the RESPECT Act previously on MTP:

Mike Huppe, CEO of SoundExchange:

“This decision in California confirms what we have always known: all sound recordings have value, and all artists deserve to be paid fairly for the use of their music. It does not – and should not — matter whether those recordings are protected by state or federal law.

While we are thrilled with the Turtles’ legal victory, it’s unfortunate that artists and labels were forced to pursue litigation just to receive fair payment for their art. Legacy artists like the Turtles built the foundation of music today – music that helps Sirius XM make billions of dollars a year – and it is outrageous that some digital radio services believe they can use the music of legacy artists for free.

It is clear now more than ever that Congress should quickly move to pass the RESPECT Act.  The bill, introduced by Representatives George Holding (R-NC) and John Conyers (D-MI), would require digital radio services to pay royalties to pre-1972 artists when their music is played. The RESPECT Act would also give Sirius XM, Pandora, and other services an easy and efficient way to get the rights that the federal court in the Turtles case has confirmed they need – and to give the artists the payment they deserve.”

It’s as well to remember an important passage from the Copyright Office’s report on pre-72 sound recordings:

The [Copyright] Office thinks it is unreasonable for the age of a sound recording to dictate whether royalties are paid on public performances by means of digital audio transmissions, so long as copyright subsists in that sound recording.

Looks like the Turtles made that so.

#IRespectMusic: California Court Rules for The Turtles, Deals Crushing Blow to Sirius in Victory for Artist Rights on pre-72

September 23, 2014 3 comments

Score Round One for the Duke, the Count and Satchmo–Flo & Eddie pka The Turtles have won a crushing victory over Sirius XM requiring Sirius to license and pay royalties for Flo & Eddie’s recordings published before 1972.  Sirius had taken the position that because the Congress did not expressly include pre-1972 recordings when it established the performance right for sound recordings in 1995, Sirius did not have to pay royalties on pre-72 recordings it used on its service.  This is a position held by Pandora and the Digital Media Association which includes Google among its membership.  More about that later.

The case was brilliantly argued for Flo & Eddie by Henry Gradstein and Harvey Geller, two long time artist advocates (the firm is also representing Aimee Mann in her lawsuit against MediaNet).  The theory is actually very simple, even biblical–thou shalt not steal.  But then I’m an Old Testament kind of guy.

However, the case is based on a complex set of legal principles that need to be mastered and presented just so in order to prevail.  Because Flo & Eddie managed to get back ownership of their masters years ago, they were able to bring the case themselves without any record company involvement.  (After the artists led the way, the major labels also sued Sirius.)  And Gradstein and Geller made a very effective and compelling argument to the Court that resulted in victory, a victory that will be available to artists and copyright owners everywhere seeking to correct the “Pandora loophole.”

Not only will this defeat for Sirius, Pandora and DiMA be encouraging to artists wishing to take action, it also provides what must be a tremendous sense of satisfaction to the sponsors of the RESPECT Act (HR 4772), introduced by Rep. George Holding and Rep. John Conyers.  The cosponsors are a bipartisan group seeking to right the wrong of the Pandora loophole: Reps. Coble, Blackburn, Chu, Cooper, Deutch, Gohmert, Jeffries, Peterson, Rangel, Lowenthal, Collins, Rooney and Fincher.

The Pandora loophole is an effort to justify denying artists their right to satellite radio and webcasting royalties by playing with dates.  Those dates are 1972, 1995 and 1998.  (In Flo and Eddie’s California case, another date was 1982.)  1972 is important because that was the first year that Congress extended the federal copyright law to sound recordings.  Before 1972, sound recordings are governed by state common law, sometimes included statutes as is the case in California that has an extensive state copyright act directly on point as one might expect.  1995 is important because that was the year that Congress established a limited public performance right in sound recordings transmitted digitally (including satellite radio and webcasting) and 1998 is important because that was the year that Congress fleshed out the law that established the compulsory license under Section 114(g), the royalty rate setting and put the finishing touches on establishing SoundExchange.

The Pandora loophole is some version of this argument:  Because state law applies to pre-72 sound recordings and because Congress did not intend to extend the performance right to sound recordings in 1995, pre-72 artists and copyright owners (as well as the non featured singers and musicians) get none of the royalties established in 1998 under the compulsory license.  But here’s the truly weird part:  Sirius rejected the safety of the compulsory license established in 1998 to commercialize the limited performance rights established in 1995 in favor of no license at all under state law.

Yes, that’s right:  Grown men thought this was a good idea.

The case boils down to a very simple concept:  California has a carefully crafted state copyright law that the Court ruled includes the public performance right (and does not exclude it):

The Court finds that copyright ownership of a sound recording under § 980(a)(2) [the California copyright statute] includes the exclusive right to publicly perform that recording. See Cal. Civ. Code § 980(a)(2).  Accordingly, the Court GRANTS summary judgment on copyright infringement in violation of §980(a)(2) in favor of Flo & Eddie.

The point–and one made recently by David Lowery–is that there is no language in either the California state law or in the 1995 amendment to the federal Copyright Law that excludes public performance royalties for pre72 recordings.  So the RESPECT Act can be thought of as almost a technical amendment to fix this Pandora loophole.

Neither Pandora nor Sirius exactly trumpet to their users the fact that these companies are using the pre-72 recordings in multiple channels to their profit–but none of the fees paid by fans ever gets to the artists.  Pandora even misappropriates the artist’s name in the music genome and uses association with artists by name in order to sell their service–and that’s not covered by the compulsory license, either.  (And neither is the derivative work created by the music genome–but that’s another lawsuit.)

So you have to ask yourself–what were they thinking?  Wouldn’t it have been better if Sirius really wanted to stiff old guys and dead cats that they paid the royalties and sought declaratory relief before cutting off America’s musical treasures?

Pandora and Sirius have a chance now to openly reject the bad advice they got (apparently from DiMA) and start paying on pre-72 IMMEDIATELY.  Throw their support behind the RESPECT Act.  Disassociate themselves from DiMA, CCIA, CES or whoever is giving them this horrible advice that it’s worth the downside liability risk and yet more bad PR to “save” a few bucks and stiff Miles Davis, Duke Ellington, Neil Young and so many greats who are responsible for putting American music on the map.

But if past behavior is any prediction of future action, they won’t.  You get into these scrapes by being pig-headed, and you can’t waive a magic wand and make a pig into something else.  You can fire them, however.

And when Wall Street gets a load of the level of liability that these companies have taken on without a care in the world, the reaction will be interesting.

Apparently Pandora’s CFO would like Pandora to be a better partner to artists.  That’s easy.

All he has to do is act like it.

 Register in September.  Vote in November.

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Pandora and Sirius Side by Side And Does Sirius Mislead Consumers?

May 5, 2014 Comments off

Expect income inequality to be a major theme in this fall’s elections, and fairness begins at home.

We’ve posted about Pandora’s executive compensation before and certainly “Million a Month” Tim Westergren has become something of a poster child for Pandora’s problems due to his stock sales.

westergren 5-5-14

It’s important to know that the term “executive compensation” as used by the investor watchdog companies like Morningstar includes both salary and stock compensation.  The real bang is usually in the stock–this is the upside for entrepreneurs.  No one should begrudge Westergren or the Pandora executive team the upside.  It is, after all, their company and they put it all together and took the company public.  Twice.

But the problem for Pandora is that their entire value is based on their ability to sell one product–music.  And they have made a science of wringing their hands to the US government to try to drive down the price they pay that is very much a part of their market valuation.  To drive the price down through lobbying and influence peddling.

And who can forget Paul Resnikoff’s interview with Pandora’s former CEO Joe Kennedy immediately following the catastrophic IRFA hearing when the Pandora CEO claimed not to know how much money he made?

In other words, Pandora want to force artists to license to them, they like that part.  But Pandora want to keep all the upside for themselves.  I have often said that what Pandora should do if they want lower royalty rates is put a big chunk of stock into an escrow account and liquidate that stock every two years.  Distribute the proceeds out to the artists like a “royalty dividend.”  That way if artists invest in Pandora by giving Pandora a discounted rate on royalties like is currently the case, the artists involved could recapture the upside of that investment as represented by the escrowed stock.

Otherwise, Pandora is looking for free money.  And since that royalty dividend idea was not only rejected but was met with a demand for even lower royalty rates with absolutely no upside for anyone but Pandora executives and shareholders–not to mention costly shenanigans for the rate courts’ latest feeble attempt at a command economy–we begin to get the picture.

And here it is.  CEO compensation up 3,882.3%:

Pandora Executive Comp

Sirius’s Misleading Advertising

The same Morningstar comparison for Sirius shows a very interesting result.  Remember, Pandora constantly complains that it is unfair that Sirius pays an arguably lower royalty rate for music than does Pandora (which is misleading, because Sirius is not a pure music play, had much greater startup costs, a few other reasons).

sirius exec comp

Interesting–the total executive comp for the covered executives is actually less than Pandora (by an amount close to what Pandora paid ASCAP songwriters)–even though Pandora pays (according to Pandora) a higher royalty and Sirius has to deal with paying non-compulsory rates for non-music channels.

And the compensation to Sirius’s CEO was up a mere 596.21% year over year.  Compare Sirius:

sirius exec comp 2to Pandora:

Pandora Key Executive Comp CloseupBut yet each company wants to salt their earnings by stiffing pre-72 recording artists and their estates.  It’s hard to tell definitively, but each company appears to have decided to stop paying pre-72 artists at almost the exact same time.  No collusion there, though, surely.

How has each service communicated their desire to stiff artists to the user base?  I haven’t been able to find anything from Pandora to their users. But I did find this about Sirius.

Sirius has a special part of their website advertising dealing with music rates.  The company charges consumers separately for music, probably so that users see the cost to Sirius of the music the users enjoy.  Sirius no doubt would like consumers to think that this is a lot of money for music–it’s actually much more believable that the users will reach the opposite conclusion.

Remember–Sirius stopped paying on pre-72 recordings around December 2013.  Here’s their marketing collateral effective January 2014:

sirius music fee 1

The language in paragraph 1 used to read like this:

sirius music fee old 1

The music fee used to say this:

sirius music fee old 2But now says this:

sirius music fee 2

So even though Sirius stopped paying on pre-72 recordings and decreased their music royalty payout, they still increased the music fee charged to their users (that ostensibly is charged to offset royalty costs).  And for all the waffling around about what they pay on, Sirius never acknowledges to their consumers that they are in fact not paying pre-72 artists because they decided to stop paying.  And they clearly did not pass the savings on to the consumer.

This sure smells a lot like false advertising to me.

If You Put Your P&L On the Table, Expect Scrutiny

Some people will say that artists don’t have a right to a share of stock in these companies and don’t have a right to criticize their operators or operating costs.

Wrong–the only compensation artists get is their royalty which is a reflection of the upside (or it should be).  Both Sirius and Pandora deny artists that upside.  When companies both deny artists the benefit of their bargain through lobbying paid for by the very upside the artists are denied, reward themselves richly and mislead consumers….don’t be surprised if people get angry.

And remember–Pandora was the one that complained of low profits.  So maybe we can help them man up and cut some costs before we hand over even more of our royalty.

The Tide Has Risen: Five Simple Facts About the “Internet Radio Fairness Act”

October 28, 2012 1 comment

Big Tech and Big Media have joined forces in the “Internet Radio Fairness Coalition” which includes Clear Channel Media and Entertainment, Computer and Communications Industry Association (Google), Consumer Electronics Association (Google), Digital Media Association (Google) and…Pandora.

So you see, the way this works is the group put Tim Westergren out with the long face and the sad eyes to talk about how Pandora was having such a hard time and that artists and fans just had to support Internet radio and his $1 million a month or so in stock sales from his company with (what was then) a $2 billion valuation.  Oh,no sorry–just support Internet radio because Tim used to be in a band.  Once Tim began to realize that just like his days in a band, objects in the rear view mirror were smaller than they appear, guess who jumps out from behind the curtain?

The Great Oz–Google and Clear Channel.

And so much for Pandora’s commitment to independent artists–Did Clear Channel ever make good on their indie radio promise out of the last payola investigation?  And what’s the threat if you disagree with them?  Same one it always is with Big Media–if you get in the way, you won’t get played.

So let’s be clear–it’s not about “Internet Radio”, the Internet or Fairness.  It’s about money, power and lobbying, although I guess you could say it’s an act.  But it’s not just about the rates paid to artists–if that’s all it were about, then there would be no need for the court packing and chilling effects in the bill.  What court packing and chilling effects, you say?  You’d never know that stuff was in the bill if you just listened to Tim Westergren or read the pro-IRFA press releases.

The Tide Has Risen and Pandora is Throwing You Overboard

Here’s five reasons why artists should be very concerned about the “Internet Radio Fairness Act”:

1.  Reverse Payola to Monopolies for “Music Discovery”: The Internet Radio Fairness Coalition is backed by some of the biggest monopolies in the world: Google and Clear Channel–it’s Big Tech and Big Media combined.  Is it reverse payola?  If you make us pay you more money, we won’t play your records?

Remember all the good things Clear Channel was supposed to do after they got slammed for payola in 2007?  What did they actually do?  Clear Channel tried to get artists to waive both their songwriter’s performance royalties and their artist royalty collected by SoundExchange–in other words, the same direct licensing that artists now oppose.

[Following Clear Channel’s recent settlement of a payola investigation with the FCC, Clear Channel (and other broadcasters) agreed to air 4,200 hours of indie music.  The Future of Music Coalition commented at the time:]

Clear Channel is giving indie artists a raw deal by forcing them to give up performance royalties as a condition of getting airplay on its hundreds of stations. Remember, as a condition of its settlement with the FCC over payola allegations, Clear Channel and other broadcasters were required to play 4,200 hours of local and indie music. It’s replacing one form of a payola with another.

Sneaky. Greedy. Egregious. Any number of pejoratives could be used to describe the move, but it is especially troubling because digital performance royalties are becoming an ever more important source of revenue for artists as technological changes drive the way music is delivered….This is a company that is not — and has never been — on the side of artists.

[According to FOMC’s former executive director,] “’The fact that Clear Channel would require artists to waive royalties to get consideration for airplay clearly shows they’ve learned little from the payola scandal of the last couple years,’ said Jenny Toomey, executive director of the Future of Music Coalition. ‘Clear Channel is playing the same old tune.’”

2.  Pandora Wants to Legislate Profits on the Backs of Artists:  Now that Pandora has a $2 billion valuation, the simple truth is that Pandora is trying to legislate its profits on the backs of artists and so does Google and Sirius XM–a company that has $1.5 billion in cash on their balance sheet.   This is just about money, it’s not about music.

But for musicians, the salary remains the same.

3.  Look Musicians in the Eye and Explain Trickle Down Innovation:  Musicians gave Pandora and Sirius a discount on royalties in 2009–and helped save their businesses.  Pandora and Sirius have billions dollar valuations today and their executives–including Tim Westergren–are millionaires.  Obviously, Google and Clear Channel also have multibillion dollar valuations.

So now these companies have joined together to tell artists, musicians and vocalists that a rising tide carries all boats and that the benefits from making Big Tech and Big Media richer still will trickle down to creators.

The tide has already risen.  Not only has it not carried all the boats, the Internet Radio Fairness Coalition want to throw creators overboard.

4.  IRFA is Censorship Hiding Behind Fairness:  IRFA allows monopolists like Clear Channel, Google and Sirius to threaten any artist organization with an antitrust law lawsuit if the artists “impede” Big Media’s lust for direct licensing.

Yes–you read that right.  Monopolists threatening an antitrust lawsuit against artists who organize.  Go straight to jail, do not pass go, do not collect your $200.  Using this government mandated gag rule, Clear Channel could have tried to silence that statement about them from the Future of Music Coalition’s Jenny Toomey.  Coalition, get it?  Or the Recording Artist Coalition, or any one of a number of artist advocacy groups.

What Clear Channel and Sirius really want is artist-by-artist direct deals to pick off artists one-by-one.   Google has already demonstrated a desire for the same treatment with the Authors Guild.

Google attorney Daralyn Durie told Judge Denny Chin [the presiding judge in the Google Books case] in federal court in Manhattan that [millions of] authors and photographers would be better off fending for themselves because their circumstances varied widely, especially since the copyright issue for authors involves the display of small snippets of text. (emphasis mine)

Did Tim Westergren tell you about this part?   Does the “Internet Radio Fairness Coalition”?

Nope.  Read the bill, it’s right there under Section 5(a): “Limitation of antitrust exemptions”.

And if there’s no intent to chill artists, then why doesn’t Tim Westergren say so since he so identifies with being in a band?

5.  Payback is a Bear:  IFRA Guts the Copyright Royalty Judges:   Big Tech and Big Media want the Congress to get rid of the Copyright Royalty Judges who set the rates for Internet radio.  That’s right–they want the Congress to fire the current judges and replace them with political appointees.  Read the bill–Section 6 “Proceedings of the Copyright Royalty Judges and judicial review”.

This is simply payback for the current judges having the temerity to refuse to bow to the money.  It’s called “court packing”.  Get rid of judges you don’t like and replace them with judges you can control.

Not only that–notice the other part of that titles: “and judicial review”.  Big Tech even wants to control what previous rulings the new judges can take into account as precedent in later rulings.  That means their judges start with a clean slate and can do whatever they like.  He who doesn’t like history drools over erasing it.

Tim Westergren isn’t talking about this either.

And by the way–don’t let them tell you that somehow the judges are in the pocket of “Hollywood” (whoever that is)–all the current rates were highly negotiated by some of the very people who are complaining of them now.

Remember, Westergren declared “the royalty crisis is over!” in July of 2009.  Barely 3 years later they’re back?

And now they want scorched earth.

The tide has risen and artists need to keep their heads above water.   If Google, Clear Channel and Pandora haven’t made that an antitrust violation.

Trickle Down Innovation Alert: Mr. Pandora the secret censor

October 11, 2012 Comments off

“Have you seen the bigger piggies in their starched white shirts

You will find the bigger piggies stirring up the dirt

Always have clean shirts to play around in.

In their sties with all their backing

They don’t care what goes on around

In their eyes there’s something lacking

What they need’s a damn good whacking.

Everywhere there’s lots of piggies

Living piggy lives… Clutching forks and knives to eat their bacon.”

Piggies by George Harrison.

Hidden in the deceptively named “Internet Radio Fairness Act” is one of the most insidious anti-artist provisions we’ve seen in many years.  Don’t be fooled–these people are trying to silence artists and use lobbying power to cram down terms to satisfy Wall Street.  And if they can outlaw speech by the AFM and AFTRA, just think what Congress can do to the rest of our industry and beyond.

Pandora’s Big Lie

So here’s the latest milk and cookies tripe from behind the Pandora curtain according to Business Week:

“We envision a future in which Internet radio can offer more as the sector grows and innovates — but this is only possible if Internet radio can compete on a level playing field with the other forms of digital radio,” Mollie Starr, a  Pandora spokeswoman, said in an e-mail.”

The Ministry of Truth at Pandora would like you to believe that this is all for your own good, you see, and what’s good for Mr. Pandora is good for “middle class musicians” to borrow a phrase from One of the Most Influential People in the World, Tim Westergren.  (You should also read the excellent reporting by Glenn Peoples “The Truth About Pandora’s Payments to Artists” where Glenn takes apart the latest heaping serving of bunk from the 1% in Pandora’s board room.)

Westergren and Pandora’s Ministry of Truth (or Minitrue as Orwell called it) wants you to believe that Less is More.  Yes, the Chris Anderson crap pile under the Wrong Tail has returned.

This is a tough sell.  Westergren is out there touting how much they pay to specific artists in a very questionable method of calculation according to Glenn Peoples (which makes perfect sense to me) and he’s wrapping Pandora’s name around the names of these artists while he discloses what he would like you to believe they will make–under the current rates.

Here’s the argument: Pandora is so cool because Pandora pays all this money to artists.  And now Pandora is so cool because they want to cut those payments in half by spending big lobbying bucks!!  And it’s good for the artists because the benefits to Pandora (and presumably Sirius and  Clear Channel) will trickle down to “middle class artists”!

Complete mindless crap, right?  Only makes sense on Wall Street in the confines of the 1%.

This line of argumentation is less insidious than it is pitiful.  We feel for Pandora’s lifers who are now being forced to serve The Man 2.0.  It doesn’t justify being a shill for the money, but we get it.

Pandora’s Thumb on the Scales of Justice

But what is more insidious than innovation trickling down their legs is what else is in the Internet Radio Fairness Act.  The Molly Starrs of this world at Pandora’s Minitrue want you to stay focused on the glittering generalities about innovation trickling down and how less is more and so on.  She holds the bright and shiny object in one hand and hopes you are too dumb to notice the knife in the other.

Pandora wants to fire the judges that rule on their rates and reinstall them with judges who they must think will be more pliable. We discussed Pandora’s court packing plan already.  (And they must be pretty confident that they are going to win that part because if they lose those judges they wanted to fire will be ruling on them in a courtroom near them.)

Enter Pandora the Union Buster

But here’s another even more insidious part of IRFA:

Section 5(a)(1)(B): `Nothing in this paragraph shall be construed to permit any copyright owners of sound recordings acting jointly, or any common agent or collective representing such copyright owners, to take any action that would prohibit, interfere with, or impede direct licensing by copyright owners of sound recordings in competition with licensing by any common agent or collective, and any such action that affects interstate commerce shall be deemed a contract, combination or conspiracy in restraint of trade in violation of section 1 of the Sherman Act (15 U.S.C. 1).‘.

You would not necessarily catch this unless you knew about the efforts by Clear Channel and Sirius to enter into direct license agreements with record companies and bypass SoundExchange.  Direct licensing is bad because it allows the record company issuing the direct license to collect the artist’s share of revenue and apply it against unrecouped balances.  SoundExchange protects the artist from this practice and pays artists directly.  Plus, direct licensing essentially guts the ability of artists to audit Pandora and Sirius because SoundExchange conducts collective audits.  Which of course, is an innovation that Pandora and its fellow innovators do not like one little bit.

In fact, Sirius is actually suing SoundExchange and A2IM on this basis because they allege that SoundExchange and some labels had the temerity to stand up and advise their members about the bad effects of direct licensing.  (So did we: See “Clutching Forks and Knives to Eat Their Bacon: How Sirius Wants to Gut SoundExchange“.)

So what Pandora’s lobbyists are trying to accomplish here is to make it illegal with the wave of a lobbyist’s pen “to take any action [including the action of speech] that would…interfere with, or impede direct licensing by copyright owners of sound recordings in competition with licensing by any common agent or collective…”

Aside from the fact that this provision is probably an unconstitutional burden on First Amendment rights of speech and association–you know, CENSORSHIP–this provision would directly prevent artists who own their own recordings from being represented by any collective, whether it’s SoundExchange or a collective they form on their own (unions have an anti-trust exemption under the National Labor Relations Act that not even Pandora wants to touch).

And as we’ve always said, what the tech companies really want is to break up any form of collective that empowers creators and keep us all weak and alone so they can treat us how they like.  If you have any doubts about this, see the Google Books case where Google lawyer Daralyn Durie  tried to force individual authors to bring individual lawsuits against Google instead of acting as a class against the Leviathan of Mountain View.

According to Business Week:

Google attorney Daralyn Durie told Judge Denny Chin in federal court in Manhattan that authors and photographers would be better off fending for themselves because their circumstances varied widely, especially since the copyright issue for authors involves the display of small snippets of text.

Never fear, she was laughed out of court.  That time.

So you can see how the Pandora trickle down innovation approach would further this goal of weakening artists.  In fact, I’d like to hear an explanation from the Congressmen who are proudly carrying this bullying tripe, Messrs Chaffetz and Polis, as to exactly what the purpose of this section is, and what the implications are.  I think you have to be kind of sick to be proud of this obscene overreach.

This collective busting section of IFRA boils down to this formula:

[People who disagree with Pandora] + [cannot interfere or impede Pandora in what Pandora wants to do] + [and they can’t form a collective bargaining group] + [to do things Pandora doesn’t like] = [and if they do so, or conspire to do so, it may be a crime or a violation of civil law] (See DOJ Antitrust Division Criminal Enforcement Manual.)

For example, if Chaffetz and Polis are successful in passing this bit of collective busting overreach, why wouldn’t this kind of law be used by the National Association of Broadcasters to try to prohibit ASCAP, BMI and SESAC from protecting their songwriter members in negotiations?  Or empower various employer groups (public or private) to run to Congress to try to prohibit unions or collectives from advocating for their members on central commercial issues in their industries?

And like the man said:

In their sties with all their backing, they don’t care what goes on around

In their eyes there’s something lacking, what they need’s a damn good whacking.

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