During a hearing on Friday (Dec. 1) in the U.S. District Court for the Southern District of New York before Judge Alison J. Nathan, lawyers for Spotify and the putative class argued for final approval of the settlement, while two other rightsholders filed objections that the damages for each composition streamed were insufficient. Under the terms of the settlement, the writers of compositions that have been streamed between zero and 100 times would receive a minimum payment, while the rest of the money would be divided on a pro rata basis.
The basic issue is fairly straightforward: Spotify didn’t license mechanical rights for the compositions it streamed, even when it had rights to recordings of them. Although the company says that poor record keeping makes it very difficult to identify and find rightsholders, it also failed to issue the appropriate NOIs — Notices Of Intent — with the U.S. Copyright Office. In March 2016, Spotify agreed to a $30 million settlement with the National Music Publishers Association. Rightsholders can choose to opt out of the settlement and sue on their own, as several have already done.
Dealing with the issue is proving more complicated, especially since Spotify hasn’t said — and no one else knows — exactly how many compositions the company has infringed. That means lawyers for the putative class couldn’t say how much each class member would receive. “It’s hard to give a precise range,” said a lawyer for the putative class.
“How about an imprecise range?” Judge Nathan asked.
This, too, was difficult, apparently, although a lawyer for Spotify, Andrew Pincus of Mayer Brown, suggested a “ballpark” estimate that the company had infringed 300,000 songs. That would mean each rightsholder would get an average of about $100, although the actual numbers would vary widely. Statutory damages for willful copyright infringement range from $750 to $150,000.
Late last month, Mark Zuckerberg wrote a brief post on Facebook at the conclusion of Yom Kippur, asking his friends for forgiveness not just for his personal failures but also for his professional ones, especially “the ways my work was used to divide people rather than bring us together.” He was heeding the call of the Jewish Day of Atonement to take stock of the year just passed as he pledged that he would “work to do better.”
Such a somber, self-critical statement hasn’t been typical for the usually sunny Mr. Zuckerberg, who once exhorted his employees at Facebook to “move fast and break things.” In the past, why would Mr. Zuckerberg, or any of his peers, have felt the need to atone for what they did at the office? For making incredibly cool sites that seamlessly connect billions of people to their friends as well as to a global storehouse of knowledge?
Lately, however, the sins of Silicon Valley-led disruption have become impossible to ignore.
Facebook has endured a drip, drip of revelations concerning Russian operatives who used its platform to influence the 2016 presidential election by stirring up racist anger. Google had a similar role in carrying targeted, inflammatory messages during the election, and this summer, it appeared to play the heavy when an important liberal think tank, New America, cut ties with a prominent scholar who is critical of the power of digital monopolies. Some within the organization questioned whether he was dismissed to appease Google and its executive chairman, Eric Schmidt, both longstanding donors, though New America’s executive president and a Google representative denied a connection.
Meanwhile, Amazon, with its purchase of the Whole Foods supermarket chain and the construction of brick-and-mortar stores, pursues the breathtakingly lucrative strategy of parlaying a monopoly position online into an offline one, too.
Now that Google, Facebook, Amazon have become world dominators, the question of the hour is, can the public be convinced to see Silicon Valley as the wrecking ball that it is?
These menacing turns of events have been quite bewildering to the public, running counter to everything Silicon Valley had preached about itself.
Spotify’s counsel Christopher Sprigman recently made the argument in Bluewater Music Services v. Spotify that the service isn’t required to pay mechanical royalties to songwriters because they aren’t really making copies except for those covered by “fair use” and “ephemeral” exceptions. This extremely aggressive argument seems to many (but not all*) music publishing experts to be dubious and more than a little “piratey.”
IMHO this is because piracy is in the DNA of Spotify. First Spotify CEO Daniel Ek made his first millions as founder of torrenting client uTorrent. Second, one of Spotify’s early investors Sean Parker of Napster fame declared “Spotify would finish what Napster started.” Third, until 2014 Spotify in the US operated as a peer to peer service copying and distributing millions of files using the devices of their customers (and BTW this completely undermines Sprigman’s copy argument).
Now there is this from Torrent Freak:
“Spotify Threatened Researchers Who Revealed ‘Pirate’ History”
September 22nd, 2017
Content Creators Coalition (c3) Warns Congress About Artist And Songwriter Opposition To “Transparency in Music Licensing and Ownership Act”
Washington, D.C. – The Content Creators Coalition (c3) today sent the following letter to the leaders of the House Judiciary Committee warning that consideration of H.R. 3350, the so called “Transparency in Music Licensing and Ownership Act,” would spark a backlash in the artist community and could derail the Committee’s work to create a consensus copyright reform legislation:
The Honorable Bob Goodlatte, Chairman
The Honorable John Conyers, Jr., Ranking Member
House Committee on the Judiciary
2138 Rayburn House Office Building
Washington, DC 20515
Dear Chairman Goodlatte and Ranking Member Conyers:
As an artist and songwriter-run advocacy organization, we write to express our strong opposition to H.R. 3350, the “Transparency in Music Licensing and Ownership Act.” Recognizing the importance of this issue to our constituents, this letter is signed by every member of our Executive Board.
The Content Creators’ Coalition (c3) strongly supports the Committee’s continual efforts to find consensus around broader copyright reform and to ensure that music licensing is more transparent, particularly to third party beneficiaries of recording contracts. There is little dispute among stakeholders that music licensing, in particular the licensing of musical works, is needlessly opaque. Publishers and record labels agree on this point, as do songwriters, performers and musicians, as well as music servicers and businesses who use music and musical works. There is clearly an opportunity for the Committee to find consensus on these issues.
However, H.R. 3350 does not further efforts to reach consensus – instead, it represents a one-sided approach that would fail to simplify music licensing. We are deeply concerned about the bill’s onerous registration system and financial penalty (forfeiture of statutory damages and attorneys’ fees) for songwriters or publishers who fail to register their works in a new database, created and run by the government.
As a matter of principle, an intellectual property right, like any other property right, should not be subject to forfeiture and the law should help creators understand and protect their rights – not create obstacles courses for them to navigate on pain of losing control over their creative work. This bill, by contrast, actually incentivizes the appropriation of creators’ work based on technical or other often innocent shortcomings, removing key deterrents that should discourage music services from doing so.
The record keeping mandates in the bill are voluminous and incredibly vague. Terms like “catalog number” are undefined and could mean a number of things. Other requirements are intricate, time consuming and in many cases, appear impossible to satisfy. How is an artist supposed to register every album on which one of her songs has been recorded, including recordings by other artists they may not even know about? If these requirements are time consuming and uncertain for successful and well-known songwriters and publishers, they will be impossible for independent songwriters.
Most importantly, the bill also thwarts the Committee’s to create a consensus copyright reform legislation. Both the “Fair Play Fair Pay Act,” creating a terrestrial performance right in the United States, and the “CLASSICS Act,” have support from music creators and digital service providers. While we respect the long standing and good faith efforts of Chairman Sensenbrenner to address these issues, H.R. 3350 only enjoys the support of businesses that use music and is so lopsided it would be a toxic “poison pill” in any copyright reform legislation effort.
We urge the Committee to reject H.R. 3350 and to press ahead at full speed with more genuine music licensing reform. Thank you for considering our views.
Melvin Gibbs, President
John McCrea, Vice President
Tommy Manzi, Treasurer
Jeffrey Boxer, Executive Director
cc: The Honorable Daryl Issa
The Honorable Jerrold Nadler
[Editor Charlie sez: Mr. Ek, meet Commissioner Vestager….we’ve been hearing this from the “quiet angel” for a while now.]
While competition online starts the same way as that in offline markets, my research shows it often settles very differently online.
Both have seen lots of competitors emerge in a new area underpinned by new technologies. But online, consolidation ends in a high-stakes winner-takes-most “title fight” between the two strongest players.
In search this was AltaVista vs Google, in social media it was MySpace vs Facebook and in business networking Spoke vs LinkedIn. The result is that the victor at this critical juncture goes on to dominate their corner of the market and becomes almost unassailable in that space.
The evidence is mounting that Swedish music streaming company Spotify is on the verge of seizing the crown in music.
Pandora has been for some time the dominant real-time streaming service in the United States. Three years ago it had a clear lead but competition from Spotify appears to be stronger than ever. Pandora was a mass market pioneer in the online “radio” style streaming format where users pick stations and the music is compiled for them, whereas Spotify adopted an on-demand model which has prevailed.
What appears to be a backdated NOI sent to the author. If this was intentionally backdated this is fraud. Note MRI is simply a third party that sent the notice on behalf of the service. All legal responsibility rests with the service.
Digital music services are trying to end songwriters ability to ever sue broadcasters and digital music services for copyright infringement with this bill. In order to sue for copyright infringement you have to mount a case in a federal court. Not your local district court. This is extremely expensive. I would estimate you need about $250,000 to effectively fight a case. This bill takes away statutory penalties and legal fees, even when the songwriter prevails. This makes it impossible for independent songwriters to exercise their legal rights. NAB Broadcasters and digital services like YouTube and Spotify can safely ignore songwriters, especially independent songwriters with no resources. Songwriters and publishers would have never been able to achieve the recent settlements against Spotify, without statutory penalties and legal fees.
So this may surprise you but I say “fine!” Take away our ability to mount copyright infringement lawsuits? We still have plenty of other (sometimes much more severe) remedies available. Most songwriters don’t really care about the money. The royalties are pretty paltry to begin with. This is really about the principle. This is about justice.
I’m no lawyer but the more I learn about the predicament of songwriters in the US, it feels like something more than just copyright infringement seems to be going on. My layman’s reading of the situation makes me wonder if this isn’t exactly what the authors of the RICO laws had in mind. [RICO stands for “Racketeer Influenced and Corrupt Organizations Act”. Copyright infringement has long been one of the RICO “predicates”.]
After the money, one of the most important parts of a recording artist negotiation is the “marketing restrictions”. These are restrictions on what the record company or music publisher can do with your work–what type of licenses they can, or more frequently cannot, grant to third parties, for example. Essentially, whatever is not prohibited is permitted.
Marketing restrictions also have a temporal element–during or after the term, recouped or not recouped. There are some restrictions that are acknowledged to be verboten and are usually easy and unrestricted concessions. An example of these would be licensing for certain types of commercials such as tobacco, firearms, grooming or hygiene products and alcohol.
Stewart Dredge has an excellent article this week in the Guardian which brings to mind Laura Kobylecky‘s post on MusicTechPolicy drawing comparisons between Spotify’s “fake artist” problem and “The Next Rembrandt” with echoes of the fictional “versificator” operated by Big Brother’s “Music Department” in 1984. According to Stewart, there are dozens of AI music startups getting funded that all essentially do the same thing. Using a library of recordings (sometimes called a “corpus”), the algorithms “create” new recordings based on the songs and recordings in the corpus. Google is, of course, a leader in the space (not that different from how they used Google Books to train their translation algorithm, a process called “corpus machine translation”–the librarians will be next).
Those recordings can then be sold or licensed at a very low price which, as Laura and others have noted, can be used to drive down the royalties payable to all other artists on digital music services.
This is, of course, not dissimilar to Silicon Valley companies hiring lower paid foreign workers and ordering the employees who they are to replace participate in training their replacements. The difference is, of course, that those recordings have to come from somewhere.
It’s time to start adding to the list of marketing restrictions that the song or recording cannot be licensed for AI purposes of any kind.