You may be aware that the government compels songwriters to license songs for “reproductions” which includes vinyl, CDs, ringtones, permanent and limited downloads as well as interactive streaming. The government also compels songwriters to accept the government’s royalty rate for those uses which is given effect through a legislative branch agency called the “Copyright Royalty Board” which is run by the “Copyright Royalty Judges” (who are not judicial branch judges just to make it even more Kafka-esque).
In addition to compelling songwriters to license and accept the government’s rates on reproductions, the government also compels most songwriters to accept the rates set by “rate courts” for public performances under what I believe is the longest running consent decree in the history of the United States with ASCAP and a close second with BMI.
If songwriters ask themselves what the F did I do to deserve this, what was the original sin, it’s so long in the past that nobody living had anything to do with it, whatever it was. You have to actually do some research to even understand what the cause of either government action even was.
What we do know is that both these regimes have resulted in absurdly low royalty rates for songwriters. On the reproduction or “mechanical” side, the government set the rate at 2¢ in 1909 and everyone involved including Congress, the Copyright Office and the publishers failed to raise the rate until 1978. That’s right–four major wars, the great depression, one pandemic, the Dust Bowl and the Beach Boys, Otis Redding, The Beatles, Wilson Pickett, the Rolling Stones, Jimi Hendrix, Mowtown, Stax and Saturday Night Fever, none of these events had any impact for songwriters. It was 2¢ a unit all the way through.
The rate began to increase incrementally in 1978 until 2006 when it stopped at 9.1¢ for physical and stayed there and is still 9.1¢. The streaming rates did not get set until 2009–many, many years after streaming and limited downloads became a thing. This is the work of the Copyright Royalty Board which is supposed to divine what a market rate would be. But it’s not just the Judges–it’s also the lawyers. A bunch of lawyers.
Fast forward to the current dumpster fire called Phonorecords III. This is the one you may have heard about where the same people who watched the rates freeze since 2006 and waited 9 years or so to even establish the first streaming mechanical rate (all the while issuing “rateless licenses”) claim to have “won” a rate increase of 40-odd percent, only to have the digital music services–led by the soulless Spotify and the equally immoral Google and Amazon–exercise their right of appeal which resulted in the case being sent back to the Judges for a re-look at the rates, also called a “remand”. Also called “losing.” But Washington DC is one of the few places where “winning” means “losing.” Or as Slider said in Top Gun, “they won, too.”
So that was the first appeal of Phonorecords III. The Judges are supposed to hear from the “participants” in the case on how to satisfy the appeals court’s remand ruling and then come up with another rate, which the participants will have the right to appeal again. My take on the likelihood of a second appeal based on the filings and hearings in the case so far is that the likelihood of either side appealing is very, very high. Because you know, winning being what it is.
But you can’t really decide the rate for Phonorecords IV until you know how Phonorecords III came out–strangely except for the frozen mechanical rate, but that’s another story. And this is all happening because somewhere, some time long, long ago, somebody decided that songwriters, unlike Big Tech, just couldn’t be trusted and had to be highly regulated. Or they might do something like…control their copyrights or some equally fantastic action that must be crushed before it even becomes a germ of an idea.
There actually is a bright side to this absurdity. First of all, it calls into question whether there should even be a compulsory license at all. What would fix this situation pretty quickly is the songwriters pulling their songs off the services en masse. That could have been fixed in the sainted Music Modernization Act fiasco, but we were all told by the smart people that the one thing you could not do was tell the services they couldn’t use songs unless songwriters liked the deal. Don’t ask me why because I don’t know the answer today any more than I have known the answer for many, many years of watching lobbyists spew gibberish about free markets, willing buyers, and so on.
What the Phonorecords III remand napalming shows is just how over-lawyered this whole idiocracy has become. Understand there are 38 lawyers involved in this remand proceeding. Yes, that’s right–38 lawyers. And here they are starting with the services:
Now here are the lawyers for the songwriters and the publishers–yes, the same lawyers are representing both–I guess it saves money.
That’s right–38 lawyers. The only songwriter who’s in the proceeding is George Johnson who is representing himself. George has the patience of Job and adds as much sanity to the process as he can which is a challenge given the over lawyering. One might argue that he’s not only representing himself, he’s speaking for all songwriters.
Without discussing whether you can call a dumpster fire winning or losing, let’s talk turkey about what’s really important, being money. Because you can bet that however you want to measure it, somehow the songwriters end up paying for this ungodly nightmare. Why? Because as Jackson Browne wrote, nobody rides for free.
I did a little poll on Twitter just for fun to see what people thought the combined hourly billing rate was for 38 lawyers from the top law firms. The consensus view was that it’s something like $25,000 per hour or more.
That’s right–and when you think about it, that could be low. The top chairs on these teams (and you notice they don’t list their names alphabetically, so there’s probably a pecking order there) could easily bill well over $1000 per hour. The lowest chair is probably no less that $500 per hour and my bet is actually higher. (Of course this doesn’t count the very junior folk who don’t actually “appear” at the CRB or paralegals so are not on the list.)
Remember that this particular case has been going on since 2016 and probably will go on for even more years. (See Bleak House.) That’s putting kids through prep school, college, graduate or professional school. Oh, no, not your kids, their kids. And that doesn’t even count Phonorecords IV which hasn’t been decided yet but involves pretty much the same cast of characters.
None of these services care much about the legal fees–oh sure, they care, but it’s not like it’s going to break the bank. All of them probably will have covered their legal fees for the year by the time you finish reading this post.
But the publishers and the songwriters? That’s another story. The publishers in particular are going to get a humongous bill for this whole escapade and probably have already. My bet is that the publishers’ run rate for the CRB process is around $500,000 a month in legal fees at a minimum in a light month. When you combine the remand and Phonorecords IV, that could easily be much higher. That has to come from somewhere. And remember that the pyramid system of hourly rates in law firms tends to make the aggregate bill be about what it would have cost to have the most junior associate do all the work (higher billers theoretically spend less time than lower billers so if the higher biller’s rate is 2 or 3x the lower biller…you get the idea). I’d also bet that whatever “winning” looks like, the total transaction costs of getting through this gauntlet may well exceed the benefit.
So I think $500,000 a month is actually pretty low. Good thing those publishers have oodles of cash to blow on Captain Ahab and Moby Dick.
Tired of winning yet?