The US Copyright Office solicited comments from the public about the operations of the Mechanical Licensing Collective. Those first round of those comments (called “initial comments”) were due in November and the second round of those comments (which are called “reply comments” because they essentially comment on the initial comments) were due December 20.
The Songwriters Guild of America filed initial comments and also filed reply comments. We’re going to post SGA’s reply comments in three parts and then we’ll post other commenters who we think made really good points (like CISAC and BIEM among others). Note that SGA’s comment includes a post by Chris Castle, but we are going to link to that post rather than reproduce it as you may have already read it.
All the comments focus on some central themes that seem to be on everyone’s mind which can be boiled down to oversight, oversight and more oversight. While the DLC controls the MLC’s purse strings, the MLC has been given largely uncontrolled power over songwriters that needs to be checked by the government on behalf of the governed. SGA’s comment can be boiled down to its motto: Protect Songwriters.
Reply Comments of the Songwriters Guild of America, Inc.
Re: Notice of Inquiry Issued by the United States Copyright Office Concerning the Orrin
G. Hatch-Bob Goodlatte Music Modernization Act of 2018 Titled “Blanket License
I. Introduction and Statement of Interest
These Reply Comments are respectfully submitted by the Songwriters Guild of America, Inc. (“SGA”), the longest established and largest music creator advocacy and copyright
administrative organization in the United States run solely by and for songwriters, composers, and their heirs. Its positions are reasoned and formulated solely in the interests of music creators, without financial influence or other undue interference from parties whose interests vary from or are in conflict with those of songwriters, composers, and other authors of creative works.
Established in 1931, SGA has for 88 years successfully operated with a two-word
mission statement: “Protect Songwriters,” and continues to do so throughout the United States and the world.
SGA’s organizational membership stands at approximately 4500 members, and through its affiliations with both Music Creators North America, Inc. (MCNA) (of which it is a founding member) and the International Council of Music Creators (CIAM) (of which MCNA is a key Continental Alliance Member), SGA is part of a global coalition of music creators and heirs numbering in the millions. Of particular relevance to these comments, SGA is also a founding member of the international organization Fair Trade Music, which is the leading US and international advocacy group for the principles of transparency, equitable treatment, and financial sustainability for all songwriters and composers.
These Reply Comments are meant to supplement the initial comments (“Initial Comments”) filed by SGA in its submission dated November 8, 2019 (see Attachment A), the full content of which is hereby repeated and reconfirmed.
The two most important points stressed by SGA in those Initial Comments were as follows:
1. The obvious and overwhelming necessity for inclusion of music creator information in
the Mechanical Licensing Collective’s (“MLC”) musical works database; and,
2. The equally imperative necessity for robust US Copyright Office oversight of the MLC’s
carrying out of its statutory duties, commitments and activities, especially regarding the
identification of unmatched works and royalties.
It was originally anticipated that SGA’s Reply Comments would focus chiefly on the recommendations submitted by other individuals and organizations as part of the initial round of inquiry. Intervening events concerning the activities of the Mechanical Licensing Collective (MLC) since SGA’s initial submission, however, have caused SGA to recalibrate its focus. Due to the importance of conveying to the US Copyright Office (“USCO”) and the Librarian of Congress some of the very concerning information that has come to light over the past several weeks, SGA believes its Reply Comments must now of necessity deal principally and forthrightly with those issues rather than with the critiquing of submissions filed by its colleagues.
II. Additional, Recent Developments Illustrating the Necessity for Close Scrutiny and Oversight of the MLC by the USCO and the Library of Congress
A. The Resignation of Recording Artist/Songwriter/Music Creator Activist David Lowery from the MLC, and the Process of Replacing Music Creator Members on the MLC Board and Committees Prior to its designation by the USCO and the Librarian of Congress as the organization that would serve as the MLC, the entity established principally by the major music publishing conglomerates and known as the NMPA/MLC conducted an extensive campaign aimed at gaining industry support for its MLC candidacy.
As part of that campaign, it and its affiliated music creator and publisher organizations frequently raised the participation of recording artist/songwriter/music creator activist David Lowery on the Unclaimed Royalties Oversight Committee (“URO Committee”) as potentially the most compelling proof of the entity’s commitment to ensuring that the voice of the independent music creator would always be heard.
Throughout his career, Mr. Lowery has been an outspoken advocate for the rights and interests of musical artists and creators. His mere presence within the NMPA/MLC’s proposed Committee structure legitimized for many the group’s candidacy among independent songwriter and composer groups. Those organizations might otherwise have objected more strenuously to an entity controlled in large part by the multi-national music publishing conglomerates being designated to serve as the MLC.
On July 5, 2019, the NMPA/MLC was indeed selected as the official MLC, and Mr. Lowery was simultaneously approved to serve on its URO Committee. Within a few short weeks after that announcement, however, Mr. Lowery resigned from the URO Committee and disassociated himself from the MLC with the statement that he “lacked the bandwidth” to carry out the watchdog role he had hoped to fill. Shortly thereafter, Mr. Lowery began to publish commentaries highly critical of certain decisions and activities being carried out by the MLC (and highly revealing of his apparent reasons for resigning), the gravity of which issues will be discussed further, below.
Mr. Lowery’s sudden and unexpected departure from the MLC and the URO Committee,
however, has raised even more immediate concerns within the independent music creator community, not only as to the reasons why he might have resigned, but also over the process by which he will be replaced. It is the position of SGA that a system which would allow the MLC board of directors (consisting of ten music publisher representatives and just four music creators) to select and/or approve replacement directors and committee members on behalf of the creative community, without meaningful input from creators or approval by the Librarian of Congress and the Register of Copyrights, is an absurdity. Such an unbalanced, unchecked process would virtually guarantee the removal of what little influence actual music creators have over future MLC activities and decision-making—a result wholly inconsistent with Congressional and Executive intent (especially as regards the crucial work of the URO Committee).
As SGA pointed out in its comments to the US Copyright Office dated April 22, 2019 concerning the original designation of the MLC (see Attachment B):
With the knowledge that ‘permanently’ unmatched royalties will eventually be
distributed on a market share basis to them, [the] largest music publishers will almost certainly do all they can to influence, hamstring and obscure the search process…. It will take highly experienced, non-conflicted and strongly independent-minded board members of the Mechanical [Licensing] Collective to resist this pressure, and to act in ways that fulfill their duties up to the mandated standards of fairness, transparency and accountability set forth in the Act.
The necessity for those characteristics in board members is amplified by the fact that the Mechanical Collective board may even override the recommendations of its own, statutorily established Unclaimed Royalties Oversight Committee if it sees fit to do so. It thus falls to the Register of Copyrights to serve as investigator, analyst and arbiter concerning this crucial, threshold issue of appropriate board and committee member selection as part of its evaluation of the competing candidates for designation as Mechanical Collective.
In honing in on its concerns regarding that specialized duty of the Register, members of Congress took the opportunity in both the Senate and House Reports to elaborate on their expectations regarding the qualifications of board and committee members proposed for service by any Mechanical Collective candidate, and the obligation of the Copyright Office under the direction of the Register to use its own, appropriate judgement in independently evaluating and verifying the credentials of those directors and committee members proposed. That Congressional posture was undoubtedly taken to ensure that all board and committee members of the Mechanical Collective possess the proper background and abilities to execute their duties to protect the rights of creators and other interested parties without conflict, pursuant to the terms of the Act.
Specifically, the applicable section of the Senate Report reads:
The Board of Directors of the new collective is required to be composed of individuals matching specific criteria. The detailed requirements concerning the overall framework of the Board of Directors of the collective and its three committees, the criteria used to select individuals to serve on them, and the advance publication of their names and affiliations all highlight the importance of selecting the appropriate individuals. Service on the Board or its committees is not a reward for past actions, but is instead a serious responsibility that must not be underestimated. With the advance notification requirement, the Register is expected to allow the public to submit comments on whether the individuals and their affiliations meet the criteria specified in the legislation; make some effort of its own as it deems appropriate to verify that the individuals and their affiliations actually meet the criteria specified in the legislation; and allow the public to submit comments on whether they support such individuals being appointed for these positions. It has been agreed to by all parties that songwriters should be responsible for identifying and choosing representatives that faithfully reflect the entire songwriting community on the Board.” (emphasis added) S. Rept. 115-339 at 4-5.
The otherwise identical section of the House Report concludes on the following note:
During the entire discussion of the legislation, it has been agreed to by all parties that songwriters should be responsible for identifying and choosing the songwriter representatives on the Board. The Committee strongly agrees with such an approach. (emphasis added) H. Rept 115-651 at 5.
Further, it seems of particular importance that the Executive Branch also regards the careful, post-designation oversight of the Mechanical Collective board and committee members by the Librarian of Congress and the Register as a crucial prerequisite to ensuring that conflicts of interest and bias among such members not poison the ability of the Collective to fulfill its statutory obligations for fairness, transparency and accountability. The Presidential Signing Statement, in fact, asserts unequivocally that ‘I expect that the Register of Copyrights will work with the collective, once it has been designated, to ensure that the Librarian retains the ultimate authority, as required by the Constitution, to appoint and remove all directors.’(emphasis added)
Pursuant to such clear guidance from both Congress and the White House concerning the selection and replacement of music creator board and committee members, SGA urges the adoption by the USCO of regulations mandating inclusion in the MLC by-laws of a process that includes meaningful music creator participation in the selection process without music publisher interference, with further review and approval by the USCO and the Librarian of Congress of all music creator candidates for MLC board and committee service. To do otherwise would be akin to empowering the wolves to select the watchdogs that purportedly guard the sheep. And that is a result that is not only emphatically in conflict with Congressional intent, but one that is also guaranteed to produce exactly the opposite, long-term results Congress and the Executive Branchwere seeking by passage of the Music Modernization Act (“MMA”): remunerative fairness and justice for creators consistent with the principles set down in Article I, Section 8 of the US Constitution.
To be continued in Part 2.
[Editor Charlie sez: Can we have that in dollars, please? Ujo Music has plans to take over PRO general licensing as well as streaming mechanicals. Never heard of Ujo? You will. Ujo is a “spoke” of MLC vendor ConsenSys (kind of like being a portfolio company of MLC partner ConsenSys). The plan is to pay everyone in the Ethereum cryptocurrency promoted by Consensys founder, Joe Lubin. See how they did that? Puts the $50 handshake into the Ether.]
When it comes to the $15 billion recorded music industry, the artists rarely come out with a big payoff. The recorded music industry began in the late 1800s with the invention of Thomas Edison’s phonograph and benefited greatly from the rise of radio broadcasting in the 1920s. However, back in those days, for the artist, it meant that in order for their music to be heard, they would have to make deals with a series of intermediaries, such as record labels, publishers, and distributors. Almost 100 years later, musicians still must go through this archaic system of intermediaries developed before the advent of the internet, where the artists lose up to 86% of the proceedsfrom their music.
[Here’s an “About” from UjoMusic, an artist tipjar service where the payments seem to all be in the Ethereum cryptocurrency promoted by ConsenSys:
And some insight from Bitcoin Magazine–move over Billboard:
Bitcoin Magazine listed PeerTracks and Bittunes, as well as Ujo, as blockchain startups intent on enabling performing artists and others to have a freer hand in safeguarding and commercializing their assets, while speeding up payments to all who have rights to proceeds.That same story included comments from founding Ujo team member, Phil Barry, a legacy industry veteran who played an instrumental role in advancing Ujo Music to prototype, but then exited that team early this year.
Thank goodness the smart people have this covered for the “legacy industry.” Because it’s never quite hard enough, is it? But the Lord never made a burden too heavy to carry, did he now?]
“There’s a sucker born every minute.”
Technology company ConsenSys and mechanical licensing administrator Harry Fox Agency (HFA) received unanimous approval from the MLC Board to become the primary vendors responsible for managing the matching of digital uses to musical works, distributing mechanical royalties, and onboarding songwriters, composers, lyricists, and music publishers and their catalogs to the database.
Thompson said, “Knowing that we would be operating with tight deadlines proscribed under the new law, we began a rigorous review process of potential vendors to build our infrastructure well before we were tapped by the Copyright Office to be the official mechanical licensing collective. In fact, since last November when the Request for Proposals process began, the MLC has invested thousands of hours investigating the options to create the core technology and public interface that will comply with the less than seventeen-month implementation timeline and specific directives of the Music Modernization Act.”
Yes indeed, and this is what they came up with, which seems like a pretty risky bet, even for a betting man.
In other great news for songwriters, it turns out that ConsenSys, the cryptocurrency “blockchain venture production studio” (whatever the fuck that means) anointed as an MLC vendor, is into asteroid mining. No, seriously, the company paid money (or scrip or ether or something) for a company called “Planetary Resources” and they are just ebullient about the whole thing:
Blockchain venture production studio ConsenSys, Inc. has acquired the pioneering space company Planetary Resources, Inc. through an asset-purchase transaction….Ethereum Co-founder and ConsenSys Founder Joe Lubin said, “I admire Planetary Resources for its world class talent, its record of innovation, and for inspiring people across our planet in support of its bold vision for the future. Bringing deep space capabilities into the ConsenSys ecosystem reflects our belief in the potential for Ethereum to help humanity craft new societal rule systems through automated trust and guaranteed execution. [How about the pending and unmatched? Hmm? Isn’t that what MLC hired them for?] And it reflects our belief in democratizing and decentralizing space endeavors to unite our species and unlock untapped human potential. We look forward to sharing our plans and how to join us on this journey in the months ahead.”
So if you understood a word he said, you won’t need this explanation from the ConsenSys Wikipedia page:
Right. Asteroid mining and deep space capability. Using ether for power. Doesn’t that just read like a bad Hollywood science fiction movie where the deep spacers rebel against their corporate overlords or something?
But if you want to stay on this side of the looking glass, here’s a 12/5/18 post from Forbes entitled “Cryptopia In Crisis: Joe Lubin’s Ethereum Experiment Is A Mess. How Long Will He Prop It Up?”
A year ago, Joe Lubin seemed like one of the most prescient people on the planet. Cryptocurrencies like ether were in the midst of a hockey-stick ascent, and Lubin, a cofounder of the Ethereum blockchain and one of its most articulate pitchmen, was scheduled to speak at events from Davos to SXSW. At his firm’s “Ethereal Summits,” it was standing room only, with crowds hanging onto his every utterance, no matter how bizarre…. [If you think there’s a “but” coming, there is.]
Back in late 2014, a few months after ether launched via crowdsale at 30 cents per token, Lubin created ConsenSys, a holding company he grandiosely describes as a global “organism” to build the applications and infrastructure for a decentralized world. In actuality, it is the first crypto conglomerate, comprising a network of for-profit companies supporting bitcoin’s biggest blockchain rival, Ethereum. More than 50 businesses were quickly spawned out of its Brooklyn headquarters, ranging from a poker site [again with the poker–Nesson and Lessig will be so pleased. What about you know who?] and a supply-chain company to a prediction market, a healthcare-records firm and a cybersecurity consultancy.
But there were no fundraising rounds or debt offerings. In Lubin’s version of the decentralized future, he is the architect, CEO and central banker, funding all of ConsenSys’ “spokes” from his personal cryptocurrency stash.
Lubin has yet to veer significantly from this master plan, despite serious cracks in its foundation. …The crypto landscape is littered with the carcasses of ill-fated Ethereum-based ICOs [“Initial Coin Offerings” yes, that’s right], and now the SEC and other regulators are targeting some of them for enforcement action. In November, the SEC settled actions against two Ethereum-based startups, Airfox and Paragon, which had effectively sold $27 million in unregistered securities when they issued their ICOs in 2017. Both tokens are now basically worthless…But almost all blockchain technologies remain glacially slow. Ethereum can process only about 20 transactions per second. By contrast, Visa can handle 24,000. [So trillions of streams should be no problem, right? Why go to Visa when you can get the ether?]
Yet Lubin’s organism keeps growing. ConsenSys has 1,200 employees [now 900 according to Wikipedia], and some 200 job openings are posted on consensys.net. Though ConsenSys declined to comment, Forbes estimates that almost all of its businesses are in the red, some with little hope of profitability. Lubin’s global organism appears to be burning cash at a rate of more than $100 million a year. [So cash infusions from MLC are just the ticket.]
When worried staffers have questioned Lubin about ConsenSys’ sustainability, Lubin has always had a pat reply: “Joe would say, ‘This is definitely not something you need to worry about. We can go on at this pace for a very, very long time,’ ” recalls Carolyn Reckhow, a former director of global operations who left ConsenSys in May.
And it goes on. And on. And on. This might be the kind of thing you read before you give them money. Like Noah built the ark before the rain.
According to CoinDesk (yes, that’s right, CoinDesk), Mr. Lubin began rethinking his business model last December:
Beginning last month [December 2018], layoffs have swept across nearly every corner of the distributed, 1,200-person [ConsenSys]. Lubin announced that “ConsenSys 2.0” would seek efficiencies – and a broader reliance on outside partners and investors. “Spinning out” these ventures has gone from an aspiration to a mandate.
“We have been interacting much more with external investors, mostly VCs, over the last nine or 12 months,” Lubin told CoinDesk during an interview in early December. “We’re gonna be ramping that up significantly.”
But even if ether prices recover and ethereum-based tokens come back into vogue across the broader marketplace, former employees and prospective investors tell CoinDesk they worry the road ahead for these projects may be rocky.
Simply put, because of the unusual way ConsenSys structured its investments, it will be hard persuading outsiders to put money into them.
Sounds kind of like they found a mark at MLCI?
CoinDesk tells us that ConsenSys seems to get consensus from employees the hard way: Promise them stock but don’t give it to them. Kind of like some people approach black box.
Out of seven current or former ConsenSys employees interviewed by CoinDesk, four said they felt misled about the company’s employee share options. Although most employees are verbally and contractually promised they will soon have an opportunity to obtain ConsenSys shares, few receive it or are able to use it, said the sources, all of whom spoke on the condition of anonymity.
Now, after a year of discontent, ConsenSys is imminently expected to announce an official policy regarding employee share options, according to one of the sources. ConsenSys declined to comment for this article. We will update if we hear back.
“People would bring it up in town halls and Joe would say, ‘We’re working on it,’” one source said about Lubin’s repeated verbal assurances. “I didn’t know how important equity was or that I should fight for it. I definitely felt taken advantage of in that sense.”
With regard to shares for ConsenSys proper, which slightly over 100 early employees have allegedly received but few have tried to sell, another source who did receive equity added:
“If there’s no public offering and there’s no buyback program from the company, then that equity is not valuable.” [Spotify calls this a DPO.]
But then there’s the Istanbul Hard Fork on the horizon according to Brave New Coin:
The next hard fork, Istanbul, will contain several EIPs and is due for mainnet activation at block 9,069,000. Istanbul is currently live on the Ropsten, Kovan, Rinkeby, and Gorli testnets. Collectively, the EIPS are designed to increase chain scalability and decrease transaction and smart contract costs.
The approved EIPs include; adding the Blake2 hash function to the ETH virtual machine (EIP 152), reduced alt_bn128 precompile gas costs (EIP 1108), adding a ChainID opcode (EIP 1344), repricing for trie-size-dependent opcodes (EIP 1884), a transaction data gas cost reduction (EIP 2028), and rebalanced net-metered SSTORE gas cost with consideration of SLOAD gas cost change (EIP 2200). ProgPoW is now likely to be included in Istanbul part two, sometime later next year.
Right. No idea what they just said? But regardless we wouldn’t touch it with an Istanbul Hard Fork.
Does any of this say “long term” to you? What if these guys aren’t around for the five year review by the Copyright Office? Are the bankruptcy experts taking a good look at what ConsenSys will or will not own in the way of data necessary to operate MLC if they go under?
Not to worry, songwriters. Your future is in their hands right next to their deep space capabilities. Whether you like it or not. And “deep space capabilities” will come in handy for the black box distributions.
Why do we think they are laughing their butts off over at the DLC?
Fee, fi, fo, fum, I smell fee simple from a brother in law…
A friend that has long been involved in the technology startup world refers to any and all cryptocurrencies as “LaunderCoin.” The point being that some significant portion of cryptocurrency activity is simply money laundering. So it was no surprise when I saw the headline above come across my newsfeed. Yawn.
A few paragraphs in though I nearly spit out my coffee. This isn’t any old cryptocurrency expert this is the Ethereum Foundation’s “research scientist” Virgil Griffith. Griffith is a well-known internet radical. The NY Times called once called him a “cult hacker.” “Internet zealot” might be a better description.
From the press release accompanying the complaint:
“As alleged, Virgil Griffith provided highly technical information to North Korea, knowing that this information could be used to help North Korea launder money and evade sanctions. In allegedly doing so, Griffith jeopardized the sanctions that both Congress and the president have enacted to place maximum pressure on North Korea’s dangerous regime.”
Assistant Attorney General John Demers said: “Despite receiving warnings not to go, Griffith allegedly traveled to one of the United States’ foremost adversaries, North Korea, where he taught his audience how to use blockchain technology to evade sanctions. By this complaint, we begin the process of seeking justice for such conduct.
So what does this have to do with the new Music Licensing Collective? Well one of the two digital vendors announced by the MLC is ConsenSys. ConsenSys is headed by Joseph Lublin who is the co-founder of Ethereum and COO of Ethereum Foundation.
[Editor Charlie sez: This week in MMA drama….just in time for turkey.]
The newly-minted — and funded — Mechanical Licensing Collective has just awarded a plum contract to the Harry Fox Agency, owned by private equity firm the Blackstone Group. Critics are quickly pointing to a ‘no-bid contract’ based on political horse-trading, with HFA assailed for serious licensing problems in the past.
For context, the DMN reference to “crooked” may refer to an apparent “snag” to passage of the Music Modernization Act reported on July 23, 2018 by Shirley Halperin at Variety (our emphasis):
[O]n July 17, private equity firm Blackstone, which purchased performance rights organization SESAC in January 2017, submitted a proposal that MMA proponents say would “doom” the legislation by “upsetting the fundamental structure of the bill to benefit its private company at the expense of the entire music industry.”
At the heart of the issue for Blackstone is the nearly 100-year-old Harry Fox Agency (HFA), the rights management and collection entity which was bought by SESAC in 2015 for a reported $20 million. The HFA has acted as a hub for administrating and distributing mechanical license fees on behalf of music publishers. The MMA in establishing its proposed Mechanical Licensing Collective (MLC), to be overseen by a Board of publishers which includes four self-published songwriters, allows the HFA to compete as a vendor in an open market but it could also devalue SESAC’s investment.
Says attorney Dina LaPolt, a key figure in drafting and shepherding the MMA through the halls of Congress: “We worked very hard to get songwriters on the governing board of the Music Licensing Collective so they can be involved in the oversight of properly matching the mechanical royalty income. We cannot have a competing entity. We are in this problem because of HFA’s inability to effectively license. HFA should just shut their doors, fire everyone, and sell off all their furniture.”
Variety also reported a few weeks later that the “roadblock” was quickly resolved apparently by eliminating the complained of competition.