The UK Parliament’s Select Committee Digital, Culture, Media and Sport has rendered its final report on “Disinformation and Fake News.” While the report nominally focuses solely on Facebook, lovers of democracy should welcome the broader hope for both its methods as well as its findings.
Jonathan Griffin has another “fake artist” story about Spotify on BBC Trending (see also Laura Kobylecky prescient post from 2017, Making Fake Art: “1984”, The New Rembrandt, and The “Fake Artist”).
Mr. Griffin frames the story:
Mysterious musicians have cropped up on Spotify, racking up thousands of listens and (perhaps) hundreds of pounds. It’s a phenomenon that experts say could indicate a security flaw.
But while Spotify denies that accounts have been hacked, the music streaming site has not explained in detail how the playlists of some users indicate they’ve “listened to” musicians that nobody’s ever heard of.
They have names like Bergenulo Five, Bratte Night, DJ Bruej and Doublin Night. Apart from being musically unremarkable, they generally have a few things in common: short songs with few or no lyrics, illustrated with generic cover art, and short, non-descriptive song titles.
Interestingly, the bands also have little to no presence on the rest of the internet. At a time when social media plays a crucial role in connecting musicians and audiences, these artists have no fan pages, no concert listings, social media accounts or even photos of the actual musicians.
But somehow these mystery artists and a host of similar acts have snuck into people’s Spotify listening playlists, in some cases racking up thousands of listens and prompting a number of users to speculate that their accounts had been hacked.
“Hacked” like “glitch” is a word that hides a multitude of liabilities–particularly when the basic phenomenon of mystery tracks is one that has been around for years. Mr. Griffin offers what I’m sure is an honest technical assessment involving a security breach of the particular incidents of mystery tracks appearing on Spotify playlists. The complex explanation accepts a basic premise–hacked accounts–and overlooks a simpler explanation.
“Hacked” is one of those flexible Gumby words that can be molded to fit a particular situation, but it definitely implies that an intruder engaged in what is sometimes called an intentional possessory taking and carrying away of property not their own, or as it’s known in the trade–larceny. In this case, the common law would struggle to cover a playlist as property, but I don’t think it’s all that difficult. I’m just a country lawyer from Texas and I’m not as smart as these city fellers, and even I can see the analogy.
The more obvious and much simpler explanation is that Spotify did it themselves. They had access and moreover had a financial incentive as Laura pointed out in her 2017 post. Here’s how it works…
Spotify makes it easy for the “artists” on these tracks to upload their recordings. Spotify may buy a batch of these recordings from the “artists” for a flat fee. Laura covered this issue and quoted a Music Business Worldwide op-ed by Vick Bain about Epidemic Sound. As Laura said:
There is another problem with the, hypothetical, “fake artist.” In a second article, (4) Music Business Worldwide addresses the issue of how these “fake artists” could be driving down the “per-stream income for everyone, while lowering the negotiating power of the labels/publishers/collecting societies.” The following chart illustrates that issue:
The problem depends on the “allocation ratio,” or how people are getting paid. The bigger the “total plays” the smaller the “per play rate”. If the total pool of monthly revenue available for royalty payments is divided equally over the total number of plays, that determines the “per play” rate for that month. Each artist or songwriter would get paid for each of their plays based on that rate. (There may be complexities like minimum payments and country variations depending on negotiation power, but the basic math is pretty consistent.)
In other words, artists who are paid a flat fee are included in the allocation ratio, but even though their tracks are not royalty-bearing, they pull down the overall payout. This is one of the oldest tricks in the book and may account–so to speak–for the stickiness of fake artists. It’s also probably prohibited by at least the major label contracts by the insertion of the qualifier “royalty bearing” or similar words on what can be included in the “total plays” denominator in the equation above.
As long as the nominal per play rate for flat fee artists costs less than the per play rate, Spotify has an incentive to play this game.
Particularly if they can chalk it up to a “glitch” on the audit that may never come.
While Mr. Griffin’s explanation is appreciated, there may just be a simpler explanation, and you know what William of Ockham had to say about that.
Ah, Cancun, where the elite meet and the US Consulate is located next to the jail.
Spotify is currently hosting a pricey offsite meeting in Cancun, Mexico, with dozens or more executives and employees participating.
Of course, Cancun isn’t usually associated with getting work done — unless that work involves repeatedly lifting rum cocktails. But this offsite is reportedly focused on assembling content groups from various global offices. Beyond that, we’re not sure of the exact business purpose.
One Spotify executive referred to this as a ‘Spotify Music Conference’. Another source noted that the ‘entire content org’ at Spotify is attending the getaway. Sounds like a lot of people.
There seems to be a strong Latin emphasis among the performers (more on that below), which makes sense given the location. But at this stage, this looks like a broader global content and curator meet-up.
According to one source, the action is happening at the Ritz Carlton Cancun, which is surrounded on all sides by white-sand beaches and light blue waters. According to the resort’s website, room prices start at $439 a night for an ‘Ocean View Guest Room,’ and quickly climb to $1,329 a night for the spacious ‘Club Master Suite’.
Two of the artists performing at the Spotify soiree…sorry, I mean working conference… are Nicky Jam and ChocQuibTown. What’s strange about that is that Spotify can’t seem to find the songwriters for these two artists:
Now Spotify can explain to these artists why their songwriters aren’t getting paid. Good thing we have that Music Modernization Act safe harbor that will put everything right as rain.
January 22nd is #HiHowAreYou Day – a celebration of the music and art of Daniel Johnston and a day of #mentalhealthawareness. We’re celebrating with a free livestream featuring @theflaminglips, @Built_2_Spill, Yo La Tengo + many more! Learn more at http://www.hihowareyou.orgToday is the day. We are all doing our part to upend the stigma around mental health issues. Our challenge to you is to connect with someone and actively listen. The conversation starter is easy, yup you guessed it, “hi, how are you?”. Learn more about how to get involved at hihowareyou.orgWe’ve got an all-star line up and you’ll have the best the seat in the house. On Jan 22nd we’re live streaming Hi How Are You Day featuring special sets from Gavin DeGraw, The Flaming Lips, Built to Spill, Bob Mould, and many more! Tune in for free and rock on for a cause. Check out the lineup and see what we have in store for you: hihowareyou.org#hihowareyou
[This is a July 30, 2013 summary from The Hill of my series that first appeared in the Huffington Post on July 26, 2013–lets see how I did now that music is all modern and chrome.]
1. Create an Audit Right for Songwriters for Compulsory Licenses: One of the oldest compulsory licenses in the Copyright Act is the “mechanical license”, the statutory mandate forcing songwriters to license songs that dates from 1909. The government mandates the license and also mandates the rate that songwriters are paid—from 1909 until 1977 that rate was set at 2¢ per recording. Although that rate was eventually indexed to inflation leading to the current 9.1¢ minimum, songwriters had to dig out of a deep hole.
Getting paid is another story. This statutory license requires songwriters be sent “statements of account” for royalties—but songwriters are not allowed to conduct a “royalty compliance” examination (called an “audit”). The law requires a company officer and a CPA to certify the company’s statements—a practice rarely complied with. As recently demonstrated by Aimee Mann’s lawsuit against Medianet, if songwriters don’t get paid there’s not much they can do except sue—a costly process.
The government tells the songwriter “trust—but don’t verify.” This is an easy fix. Congress could give songwriters an audit right as they did for stakeholders in the contemporary digital performance compulsory license for satellite radio and Internet radio.
2. Allow Artists and Songwriters to Opt Out of the Compulsory License: The recent blow-up regarding the so-called “Internet Radio Fairness Act” and the related ASCAP and BMI rate court proceedings should let the Congress know that there are many artists and songwriters who want to be able to decide who gets to license their songs. Again, the digital performance compulsory license allows copyright owners to control “interactive” uses of their works—why not at least do the same for the mechanical license as well?
- Require Digital Royalties for pre-72 Sound Recordings: Sound recordings did not receive federal copyright protection until 1972. When the Congress established the digital performance royalty, it seemed to clearly apply to all recordings and did not arbitrarily exclude recordings prior to 1972. However, this “gotcha” is used by SiriusXM and others to avoid paying great American artists whose records were released before 1972—jazz, R&B and rock legends get nothing. Congress could fix this “gotcha” and secure a fair share of digital performance royalties to these authors of our musical heritage.
4. Require All Unpaid Statutory Mechanical Royalties Be Paid to the State Unclaimed Property Offices: As Aimee Mann’s alleged in her lawsuit against the white label provider Medianet, witnesses stated that 23 percent of the songs used by Medianet are unlicensed—which could easily be millions of songs if true. And there are likely a number of digital music services that are arbitrarily holding unpaid royalties in an unauthorized “escrow.”
It seems that there could be substantial royalties controlled by the very retailers who must pay songwriters under the law, a potentially significant moral hazard. Congress could require that any “escrowed” royalties be paid over under State unclaimed property laws—a lawful “escrow.”
5. Require that Online and Offline Videos Follow the Same Rules: As online video platforms become available through Internet enabled home televisions, attention should be paid to a frequently overlooked category of songwriter—the film and television music composers. Current reporting by online video platforms makes it difficult for score composers to be paid for their work. The Congress may well ask whether those who seek to replace television should be held to the same licensing standards as television.
These are but a few ideas the Congress could be addressing that might make a difference in the lives of artists and songwriters and would cost the taxpayer very little. All leverage existing structures and bureaucracies, eliminate “gotchas,” and help to reduce the unintended consequences of government mandated compulsory licensing.
[This series first appeared on the Huffington Post 2013–lets see how I did now that music is all modern and chrome.]
The US is alone in the world in maintaining a compulsory license for songs. The government forces songwriters to license their songs at a rate approved by the government and then has rather flimsy rules about how songwriters actually get paid. These flimsy rules, I suggest, have resulted in unknown amounts of royalties not finding their way to songwriters, particularly under compulsory licenses used by on-demand digital music services.
There’s an easy fix for this — the same rule that was applied against record companies and music publishers for unclaimed royalties in the past: Pay the money to state unclaimed property offices. If songwriters are getting ripped off by brand sponsored piracy on the unlicensed sites, then let’s at least make sure they get paid on the licensed services.
The Compulsory License for Songs
When the Congress established the compulsory license in 1909, the legislative body was concerned that granting exclusive rights in “mechanical royalties” for songs in piano rolls might create a monopoly if a single publisher could buy up the market in songs. However real that concern might have been at the time, the most common complaint from digital music services about songs is that the music publishing market is too fragmented, so it seems that argument is no longer relevant.
One of the big users of compulsory licenses is, of course, Google Play. Concern about the antitrust lusting of songwriters is particularly difficult to comprehend in a world in which the same government allows Google to buy and subsidize YouTube with monopoly rents, buy Double Click to achieve a dominant position in online advertising, and is given a pass by the FTC for antitrust violations. But those songwriters…boy, we have to keep a close eye on them.
Unsupervised Digital Music Services
So what appears to be happening is this: Digital music services use the compulsory license and its labyrinthine regulations — often with notices that are too late, accountings that are noncompliant and data that is just incorrect. To give you a sense of scope, digital music services often offer 20 million or so recordings, all of which contain the co-equal copyright in the song being recorded. Songs and recordings of songs have to be separately licensed for on-demand streaming services (especially the popular “cover recordings”). Songs are frequently co-owned — so the service using the compulsory license must notify a minimum of 20 million songwriters of their use of the song and often two or more writers per song. So let’s just call it tens of millions of licenses.
The digital music services must then track the use of these songs and recordings and match the usage to licenses obtained. There inevitably will be songs for which the writers cannot be found. So even if you assume that these companies can get to the matching stage without making any mistakes at all, what happens when there is usage — and therefore payable royalties — for songs that the service is unable to match — even for the most honest of reasons.
How Digital Music Services Pay Themselves Free Money
Add to this problem another problem — digital music services frequently try to dupe songwriters — the ones they have found — into agreeing that the service need only account to them if the songwriter has over a certain amount in payable royalties — somewhere between $50 and $250 depending on the service. (Google Play, for example, has a $100 minimum threshold — unilaterally imposed — on all international and “friction free” electronic payments.)
To put some math on this, realize that there are about 20 million songs typically available in a broad based retail offering such as Google Play or Spotify. Assume that on average 50 percent achieve $25 in earnings in a given calendar quarter accounting period. (This is consistent with both the “long tail” power law type sales distribution and the miniscule royalties paid to songwriters by these services.)
If a service holds royalty payments from songwriters until payable royalties exceed $25 (such as Google Play’s $100 default threshold as stated in their “Publisher Statement of Account Preference”), this means that the service could then be sitting on up to $250,000,000 in interest-free money. Free money that they theoretically may never have to pay out and only have to pay out when the service determines that the songwriter’s account is payable. Free money that is not permitted under the compulsory license rules for songs.
And that’s one service.
This policy of withholding royalties is fraught with moral hazard and practical problems: The heirs of one songwriter recently tried to sort out these payments and were told they needed to hire a lawyer to deal with the highly litigious digital music service. They couldn’t afford a lawyer so guess what happens to the unclaimed monies? And then there’s the statute of limitations.
Unmatched and Unclaimed Royalties
But there’s another problem with the digital music services — if they service cannot match usage (and earnings) to a royalty recipient in their systems, what happens then? Particularly with monies based on a share of advertising revenue that is distributed proportionately based on usage?
In this example, if in one month all songs were played 100 times and your song was played 10 times, then you would get 10/100 (or 10 percentt) of the advertising pie for that period. But — if there were actually 120 songs played during that period but only 100 could be matched, what happens to the other 20 that were unmatched? There is a growing belief that what happens is that the services don’t count the 20 unmatched songs, and divide the pie up based on the 100 they are able to match.
That means — there are 20 songs that were exploited but that are never paid and are not on the books. Even though there should be no songs on the service that were unlicensed because the compulsory license applies. If this seems high, remember that MediaNet’s lawyers acknowledged in a declaration cited in the current case by Aimee Mann against MediaNet that 23 percent of the millions of songs on the service are unlicensed.
By not counting the unmatched (and probably also unlicensed) songs, a service could argue — albeit fallaciously — that it had no “unallocated” royalties as it allocated all payable royalties to songs it could match and did not accrue any unpaid royalties. If I’m right about this, services are overpaying the matched songs with a share of revenue from the unmatched songs (in our example, 10/120 or 8-1/3 percent instead of the overpayment of 10/100 or 10 percent).
Because the Congress does not allow songwriters to audit the digital music services, there is no real way to know whether this is happening or the degree to which it is happening. If 23 percent of the MediaNet songs are unlicensed, royalties payable on any activity on these songs seems like it should at least be accrued until the songwriters can be found.
This is, of course, why states have unclaimed property statutes. In 2004, then Attorney General Eliot Spitzer chased record companies and music publishers for unpaid royalties for artists who could not be found for a variety of reasons, some plausible, some not so plausible. Spitzer forced the royalties to be paid—like utility deposits, dividends, abandoned bank accounts, the works—to the state unclaimed property office where the monies are held forever and where somebody eventually tries to track down the rightful owner.
Of course — there is a chance that if the digital music services did this voluntarily they might be admitting that they were using unlicensed songs and they want to keep a good eye on those kinds of admissions. So they will come up with many excuses for why they should not be subject to the same laws as everyone else. It is, after all, the Internet, and you know how that can be.
An Easy Fix for Congress: Pay unclaimed money to people who deal with unclaimed money
Even if the Congress does not establish an audit right for songwriters for mechanical royalties as they have for rights holders under the more contemporary webcasting compulsory license and the Audio Home Recording Act, it would be quite simple for the Congress to clarify once and for all that unpaid royalties — whether for the unmet minimum thresholds unilaterally imposed by digital music services, unknown addresses for songwriters, or any other reason — should be paid to the state unclaimed property offices in the state of the songwriter’s last known address or at least the state where the company does business.
Companies that want to take advantage of the compulsory license rules for songs shouldn’t also get to make their own rules to take advantage of songwriters.