Copyright Office Regulates @MLC_US: Selected Public Comments on MLC Transparency: @KerryMuzzey

[Editor Charlie sez: The U.S. Copyright Office is proposing many different ways to regulate The MLC, which is the government approved mechanical licensing collective under MMA authorized to collect and pay out “all streaming mechanicals for every song ever written or that ever may be written by any songwriter in the world that is exploited in the United States under the blanket license.”  The Copyright Office is submitting these regulations to the public to comment on.  The way it works is that the Copyright Office publishes a notice on the copyright.gov website that describes the rule they propose making and then they ask for public comments on that proposed rule.  They then redraft that proposed rule into a final rule and tell you if they took your comments into account. They do read them all!

The Copyright Office has a boatload of new rules to make in order to regulate The MLC.  (That’s not a typo by the way, the MLC styles itself as The MLC.)  The comments are starting to be posted by the Copyright Office on the Regulations.gov website.  “Comments” in this world are just your suggestions to the Copyright Office about how to make the rule better.  We’re going to post a selection of the more interesting comments.

There is still an opportunity to comment on how the Copyright Office is to regulate The MLC’s handling of the “black box” or the “unclaimed” revenue.  You can read about it here and also the description of the Copyright Office Unclaimed Royalties Study here.  It’s a great thing that the Copyright Office is doing about the black box, but they need your participation!]

Read the comment by Kerry Muzzey

The launch of iTunes in 2001 began the democratization of music distribution: suddenly independent artists had a way to reach their fans without having to go through the traditional major label gatekeepers. Unfortunately most of those independent artists didn’t have a music business background to inform them about all of the various (and very arcane) royalty types and registrations that were required: and even if they did, Harry Fox didn’t let individual artists register for mechanicals until only recently.

The result? 19 years’ worth of unclaimed royalties by so many independent artists who have no idea how to access them.

We had hoped that the MMA would fix this, but the “black box” of unclaimed royalties is going to be distributed to the major publishers based on market share. We independent artists don’t have “market share” – but we do have sales and streams that are significant enough to make a difference to our own personal economies. A $500 unclaimed royalty check is to an independent musician what a $100,000 unclaimed royalty check is to a major publisher: it matters. Those smaller unclaimed royalty amounts are pocket change or just an inconsequential math error to the majors but they’re the world to an independent writer/publisher. And that aside, these royalties don’t belong to the majors: they belong to the creators whose work generated them.

Please, please, please: you have to make that database publicly accessible and searchable like Soundexchange does. There needs to be a destination where all of us can point our friends and social media followers to, to say “you may have unclaimed royalties here: go search your name.” They can’t remain in the black box and they can’t go to the major publishers. These royalties must remain in escrow and all means necessary should be used to contact the writers and publishers whose royalties are in that black box: absolute transparency is required here, as is a concentrated press push by the MLC to all of the music trades and music blogs (Digital Music News, Hypebot, et al) and social media platforms encouraging independent artists to go to the public-facing database and search their name, their publisher name, their band name, and by song title, for possible unclaimed royalties.

Please: the NMPA can’t be allowed to hijack royalties that do not belong to them. Publishers are fully aware of how complex royalty types and royalty collections are: they and the NMPA must make every effort here to ensure that unclaimed royalties reach their rightful legal and moral recipients.

Copyright Office Regulates the MLC: Selected Public Comments on MLC Transparency: @zoecello

[Editor Charlie sez: The U.S. Copyright Office is proposing many different ways to regulate The MLC, which is the government approved mechanical licensing collective under MMA authorized to collect and pay out “all streaming mechanicals for every song ever written or that ever may be written by any songwriter in the world that is exploited in the United States under the blanket license.”  The Copyright Office is submitting these regulations to the public to comment on.  The way it works is that the Copyright Office publishes a notice on the copyright.gov website that describes the rule they propose making and then they ask for public comments on that proposed rule.  They then redraft that proposed rule into a final rule and tell you if they took your comments into account. They do read them all!

The Copyright Office has a boatload of new rules to make in order to regulate The MLC.  (That’s not a typo by the way, the MLC styles itself as The MLC.)  The comments are starting to be posted by the Copyright Office on the Regulations.gov website.  “Comments” in this world are just your suggestions to the Copyright Office about how to make the rule better.  We’re going to post a selection of the more interesting comments.

There is still an opportunity to comment on how the Copyright Office is to regulate The MLC’s handling of the “black box” or the “unclaimed” revenue.  You can read about it here and also the description of the Copyright Office Unclaimed Royalties Study here.  It’s a great thing that the Copyright Office is doing about the black box, but they need your participation!]

Comment by Zoë Keating:

Some version of the usage data that the DSPs report to the MLC should be easily accessible to the public so that songwriters do not need to hire a legal team in order to independently verify if their statements from the MLC are correct. Major publishers can and will continue to get usage reports directly from music services. Self-published songwriters must rely on the MLC to collect and administer royalties on their behalf. Given that the major publishers of the NMPA are directing the design of the MLC, transparency of the reported data from DSPs will help eliminate any conflicts of interest.

Related to this, given the past occurrence of and future likelihood of metadata reporting errors*, usage data for compositions that are unmatched to any owner should be publicly searchable. Songwriters and other entities should be able to search for likely misspellings and errors, thereby offering crowd-sourced assistance to the persistent problem of unmatched royalties. (*Anecdotally I have heard of metadata errors preventing the collection of mechanicals and it happened to me. The mechanical royalties for my songs went unclaimed for 10 years until 2019 until I was able to raise an employee of HFA via twitter who then “found” $5000 that had been unmatched due to an unspecified metadata error.)

 

Copyright Office Extends Deadline Suspension and HFA “Transitions” Publishers

The Copyright Office announced that it is extending deadlines for certain filings including the compulsory mechanical license:

The Acting Register of Copyrights is extending the temporary adjustments to certain timing provisions under the Copyright Act for persons affected by the COVID-19 national emergency. The Coronavirus Aid, Relief, and Economic Security (CARES) Act authorizes the Register to temporarily adjust statutory deadlines for copyright owners and other affected parties if she determines that a national emergency declared by the President is generally disrupting the normal operation of the copyright system. Under this authority, the Copyright Office has announced adjustments relating to certain registration claims, notices of termination, and section 115 notices of intention and statements of account [as required for the compulsory mechanical license for songs].

These emergency modifications originally were set to expire on May 12, 2020. Because, however, the disruptions caused by the national emergency remain in effect, the Acting Register is extending them for up to an additional sixty days, or through July 10, 2020. For further details, please visit the Office’s Coronavirus page.

There are a number of deadlines relating to Title I of the Music Modernization Act (the massive amendment to the compulsory mechanical license that created the blanket compulsory license and the MLC which is now “The MLC”).  These deadlines are suspended under the new emergency powers of the Copyright Office.  The emergency powers last for the duration of the declared national emergency as do the suspensions of deadlines.  When do you think the national emergency will get undeclared?  Our bet is that it will last well into at least first quarter of next year because so much stimulus and state economic relief depend on the existence of a declared national emergency.

And what else happens in first quarter of next year?  Wanna guess?

The suspension of deadlines could also apply to the launch of “The MLC.”  Our bet is that the Copyright Office will not extend the hard wired January 1, 2021 “License Availability Date” (which is the date that the new blanket compulsory license is available to music services) but will extend the deadlines that The MLC is required to send statements and payments to songwriters, publishers and potentially foreign authors societies (like SACEM) who theoretically collect mechanical royalties from The MLC and not under a direct license.

There’s also the potential for new deadlines in the regulations that are currently being drafted that may include disclosures for things like whether The MLC can actually function.  Things like that.

It’s unclear if the Copyright Office is also empowered to suspend the payment deadlines from the digital services to The MLC under the “administrative assessment” that involves the payment of $60 million of startup and operating costs or thereabouts.  Even if the emergency powers could include those payments, our bet is that those millions and millions and millions will flow just fine in the time of the virus.  Songwriters may go hungry, but some payrolls will get paid.

According to the Copyright Office notification:

While the MMA’s most significant change is to establish a new, blanket license for digital music providers (DMPs) to be administered by a mechanical licensing collective (MLC), this blanket license is not yet available. DMPs and other licensees must continue to comply with section 115’s conditions on a song-by-song basis during the current transition period. The emergency relief outlined below is directed at obligations accruing during this transition period and is unrelated to activities of the MLC. [So far.]  This relief is also necessarily limited to obligations related to the statutory section 115 license and is unrelated to obligations that stem from direct licensing agreements between private parties….

The Copyright Office has become aware that, as a result of the COVID-19 national emergency, some entities, including at least one DMP and its licensing administrator, may be prevented from serving NOIs and SOAs in a timely manner due to an inability to physically process paper notices and statements resulting from a shutdown of corporate offices….

List of Affected Works and Licenses: Entities making use of this adjustment must track how they use it and must maintain a record of licenses by copyright owner for which they have made use of the adjusted timing provisions. They must also keep a list of the affected musical works. Over time, the Office expects the list of licenses with respect to the number of copyright owners to remain the same, or decrease, as copyright owners opt-into electronic delivery, while the list of affected works may increase as new sound recordings continue to be released.

Hmmm…”at least one DMP and its licensing administrator” eh?  Wonder who that is?  Why wouldn’t they just say the names?  Wouldn’t you need to know that if you wanted to look for this “List of Affected Works and Licenses”?  Particularly because maintaining a “List of Affected Works and Licenses” sounds like a potentially tall order if the DMP would happen to be Spotify and “its licensing administrator” would happen to be HFA.  Our bet is that HFA is the prime beneficiary of this emergency treatment.

(You may be asking why HFA would be Spotify’s “licensing administrator” because you thought that HFA represented publishers.  Well, they do both.  This has been a topic of discussion from time to time, particularly in some of the many lawsuits against Spotify for failing to license songs.  Don’t worry, there’s no conflict of interest there don’t you know.)

But…when you go to HFA’s website you see this new link at the top of the page above the navigation bar:

HFA Nav Bar

We expected that if you clicked on that link it would take you to HFA’s “List of Affected Works and Licenses”.  Not so fast.  Here’s what you see:

HFA COVID Notice

We gather that HFA has no intention of doing the work to post a “List of Affected Works and Licenses” even though posting that list is a key component of the benefit they get from changing the law…sorry…the emergency rules that were announced for their benefit.

Instead, this paragraph says how they’re handling the Copyright Office announcement:

HFA COVID Notice Annotated

So you’ve been instructed little publishers.  That’s all the compliance you’re going to get.

Instead of posting a list, HFA states that they have notified all the affected publishers and have given them instructions on how to set up an online account.  This probably means that the publisher was already an HFA publisher but hadn’t set up an online account to receive NOIs.  Or if you are not an HFA publisher but are a Spotify publisher who HFA services for Spotify, then it’s possible that you got a notice in your Spotify statement that you needed to set up a new HFA online account in order to receive your statements and NOIs in the future.

You will supposedly still get your HFA paper check, you just won’t get the statement for what it means until you sign up (and maybe give HFA your data if you are not already an HFA publisher).

So according to HFA’s website you already know who you are, and HFA will send you notices electronically once you sign up–even though they have already “temporarily transitioned” you to electronic statements and NOIs that you won’t get until you sign up if you happened to notice that you were “notified.”

Our bet is that your last paper statement from HFA probably had a cover letter or other “notice” that you may not have read or read closely because you weren’t expecting it.

And when the national emergency is over–whenever that may be–HFA will transition you back to paper statements.  Particularly if the national emergency ends after the License Availability Date and you get sucked into the compulsory blanket license?

And of course the service’s matching obligations to get their safe harbor under MMA will go forward smoothly and not be affected.  (You know, the one they’re being sued for by Eminem’s publishers?)

Easy peasy, right? What could possibly go wrong?  That entire process will go smooth as glass, we are so sure.  Probably not.  We’re about as sure about that as we are that absolutely no one will do anything about HFA’s failure to comply with the emergency regulations after they got the emergency suspension for their benefit announced to every songwriter and publisher in the world.  For as King Louis XIV of France said, I am the law and the law is me.

Get it? Got it? Good.

@NorthMusicGroup’s Excellent Analysis of MLC Metadata Issues

It has been patently obvious from the first discussions of the Mechanical Licensing Collective several years ago that transitioning from a century of song-by-song licensing was going to be a highly costly and highly complex process.  The MLC was sold to songwriters on the idea that there would be no administrative costs to song copyright owners for participation in the MLC.  Why?  Because the services were going to pay for those administrative costs.  Like the world’s songwriters, we take them at their word.

Zero means zero.

Now that it is time to actually implement the MLC, addressing those administrative costs have become front and center.  The Copyright Office has put a number of issues out for public comment for purposes of drafting regulations covering that implementation including what metadata must be delivered to the MLC.  Those regulations are a significant inflection point for driving the industry toward metadata standards that start in the recording studio and end at the distribution point.

If we fail to seize this opportunity, it is not a very big leap to see a true morass at the MLC.  But before we deal with the prospective solution, the Copyright Office needs to address the retrospective problem.  Remember, the MLC is charged by the U.S. Congress with the task of licensing all songs in copyright that have ever been written or that ever may be written and is exploited under the blanket license.  The first clause of that disjunct is every song in copyright that has ever been written–in any language–and that’s a lot of songs.  And even more metadata.

The MLC “global rights database” is an empty vessel that must be filled and how that vessel is filled–and the cost of filling it–must be addressed now.  It is hard to believe that an organization that in the last nine months has failed to launch a website beyond what anyone could throw up with a Squarespace account is going to hit their January 1, 2021 deadline (the “License Availability Date”).

In addition to public comments, the Copyright Office is arranging for calls with interested parties provided that the party initiating the call document the discussion in a letter that is posted on the Copyright Office website.  You can read the letters here–if you know what to look for.  These calls tend to focus on some of the more bread and butter issues that one would have thought would have been resolved before any entity was designated as the MLC.  This is particularly confusing since the services get the benefit of the MMA safe harbor immediately, but may not be able to account to songwriters for the foreseeable future.  And the blanket license was kind of the point of the whole exercise.  And, of course, the coronavirus is the tailor-made WFH excuse that will mask a thousand failures.

I want to call your attention to an excellent confirming letter by Abby North that hits many of these issues head on.  We’re really glad that she raised these issues with the Copyright Office so that the Office gets the perspective of independent publishers and songwriters who are expecting the MLC to cover the cost of preparing and delivering their metadata.

This passage is particularly illuminating:

Realistically, rightsholders with more than just a few works must have access to batch works registration tools: an excel spreadsheet template must be created and made available, and a method for that spreadsheet to be validated and then imported into the works database must be made available.

For the MLC database to have truly comprehensive, standardized and accurate works data and be compatible with global Collective Management Organizations (CMOs), the MLC must accept CWR as a works registration format. The MLC must also provide or support an affordable tool for creation of CWR files.

Common Works Registration (CWR) is the works registration standard utilized by most collection management organizations around the world.

There are multiple concerns related to the use of Common Works Registration (CWR) by the MLC. The first concern is pricing and availability of CWR software.

CWR is currently available as part of very expensive rights management software used by many mid- sized and large publishers. For rightsholders who do not have the budget or need for such rights management tools, there must be reasonably priced CWR availability to all rightsholders that need to register many musical works.

The second issue relates to whether a publisher IPI will be required by the MLC for a rightsholder to be allowed to submit a CWR file.

Currently, only publishers (as opposed to writers) may receive CWR Submitter IDs and be recognized as submitting parties. To affiliate as a publisher with ASCAP costs $50. To affiliate as a publisher with BMI costs $250. It is not reasonable to require a rightsholder to pay to get a publisher IPI, just so that rightsholder may submit CWR files to register its works.

The CWR specifications indicate a writer may be a CWR submitter. However, according to my research querying many of the world’s largest CMOs, those CMOs do not accept CWR files directly from writers, unless the writer is also a publisher with a CWR Submitter ID.

One reason for this is that the file-naming requirements within the CWR spec require a CWR Submitter ID. Another reason is simply that Writers thus far have not attempted to submit CWR files.

It would be advisable for the MLC to accept works registration files in the CWR data standard, but modify the CWR specified file-naming convention such that a submitter could be a rightsholder with no CWR Submitter ID.

I commend North Music Publishing’s comment to you as Abby North raises may critically important points that I fear will be swept under the rug.

It is important to note that there is a huge difference between ASCAP and BMI charging to affiliate and the costs of complying with the MLC’s registration formalities.  (Realize that MLC registration formality is different than a copyright registration filed with the Copyright Office.)  ASCAP and BMI compete with each other and unlike the MLC neither affiliation is required by the Copyright Act.

Another difference is that ASCAP and BMI are not funded by the music users (or collective licensees) and neither represented to songwriters that the music users would pay the entire cost of administration–including submitting metadata, tax documents, correcting mistaken registrations, and otherwise complying with the MLC’s formalities.  This is particularly mystifying to ex-US songwriters who have quite a different experience with their local collecting societies.

Because if “the services will pay for it” doesn’t include these out of pocket costs taken–there’s that word again–by the Congress by imposing the formality in the Music Modernization Act, then it looks like the only thing that “administration” does cover is the tens of millions of the cost of the MLC’s rather luxurious overhead.  Overhead that looks even more luxurious with each passing day in the time of the virus.

If these issues that Abby North raises do not get fixed, there is really something wrong going on.