Update: Copyright Royalty Board Calls for Public Comments on the Frozen Mechanicals Private Settlement–MusicTechPolicy

By Chris Castle

[This post first appeared on MusicTechPolicy]

If you’ve followed the frozen mechanicals debate, you’ll know that one of the asks from commenters was that the Copyright Royalty Board not restrictively parse who could and could not comment on the private party settlement that the settling parties asked the CRB to impose on the world.

In case you’re not someone who reviews the Federal Register or the CRB docket on the Friday before a national holiday long weekend, I’m pleased to let you know that the CRB has published for comment just the draft regulations that private party settlement proposed (with a couple of ministerial changes by the CRB).

Comments are due no later than July 26, 2021. Comments need to reference docket number 21-CRB-0001-PR (2023-2027) and can be submitted online through eCRB at https://app.crb.gov according to the Federal Register notice filed by the CRB–if you have registered with the CRB and been approved for an account.

Of course, if you just click on that link provided in the Federal Register notice, the link just takes you to the landing page for the electronic document system at the CRB. There’s no obvious way to know what you had to do in order to file a public comment. I’m sure this oversight is not designed to confuse you, but just another example of the rarefied air they breath at the CRB. If you are used to using Regulations.gov to comment on regulatory agencies like the CRB, you will find this process a bit more complicated and bureaucratic.

As far as I can tell, you register at this link: https://app.crb.gov/register/index and complete the required fields only. They might have told you that in the Federal Register, but you know, busy people. I emphasize the required fields because when you first look at it you may think that only lawyers can register because the CRB asks for your bar number which you probably don’t have. I don’t know why they do this unless they think that lawyers will be the most frequent users, but don’t be put off. You don’t have to be a lawyer to comment and you only have to provide the required fields and get your email address confirmed in order to start the account registration process.

Eventually your account will be activated allowing you to “File a Document”. Naturally, all the days that you have to wait for CRB to activate your account will count against the 30 day comment period and apparently all calendar days will be counted against your 30 days including the days that CRB are closed like the upcoming national holiday on July 5.

So the punchline there is that if you are planning on filing a comment or think that you might be interested, register for an account right away and do not leave your ability to be heard to the tender mercies of the government’s technical support staff.

It is also worth noting that the CRB clearly states that once adopted by the CRB, the private party settlement will apply to everyone:

If the Judges adopt rates and terms reached pursuant to a negotiated settlement, those rates and terms are binding on all copyright owners of musical works and those using the musical works in the activities described in the proposed regulations.

So they are telling you very clearly that the private party settlement and frozen mechanicals will be the law of the land if the CRB says so. Even though the CRB is all powerful when it comes to your rates, it is important to comment so that there is a full record for appeals.

It is one thing for the CRB to adopt a private party settlement that applies to every songwriter in the world when they reasonably believe that the settlement represents the consensus view.

It’s quite another thing for them to adopt that settlement when they have clear evidence that it does not. And unlike other government regulatory agencies, the way this game is played is that the CRB doesn’t have to have a consultation with anybody, they don’t hold round tables, they don’t do any inquiry. The only people they really have to listen to are the people who can afford to get in front of them which is a very, very expensive process.

These people are referred to by the CRB as the “Participants” and focus on this sentence in the Federal Register notice:

The Judges may decline to adopt the agreement as a basis for statutory terms and rates for participants not party to the agreement if any participant objects and the Judges conclude that the agreement does not provide a reasonable basis for setting statutory terms or rates.

The emphasis on “participants” is in the original–meaning the Judges of the CRB want to make sure you understand that an objection by a mere member of the public is not enough for them to reject a private party settlement under their rules. So any participant in the proceeding who objected in the proceeding should probably also object in the comments just to be sure that they don’t get game-ified.

So what to comment on? Most obviously the frozen rates and that’s a common sense thing given all the reporting on the vinyl boom that entirely undercuts the idea that physical is unimportant (of course Big Tech would like everyone to believe that vinyl is unimportant so they have a carotid crushing stranglehold on songwriters).

But you may also want to ask the CRB to require that the settlement document and the side deal referenced in the proposed settlement also be disclosed so that everyone knows what the consideration is for freezing the rates.

Plus as many commenters astutely raise, how can you approximate a free market rate using a “willing buyer/willing seller” standard when the willing buyer and willing seller are essentially the same entity? This is particularly true when songwriters have publishing deals and have essentially given up their “willing seller” status. Like so many other sloppy drafting glitches in Title I of the Music Modernization Act, this one should have been obvious from the beginning. And maybe it was.

Public comments are a way to get actual market conditions in front of the CRB because there was absolutely none submitted as part of this proposed private party settlement.

More to come on this, but the clock is ticking for any commenters. And if this entire CRB process seems overly complex and bureaucratic compared to even the Copyright Office rulemakings, it does raise the obvious and separate question about why it’s done this way in the first place and why there isn’t an independent advocate for independents.

Riding the Third Rails: Making the case at WIPO for performer streaming remuneration — Music Technology Policy

One potential solution to the crisis with performer compensation from streaming is an expanded remuneration right paid directly to performers and featured artists by streaming platforms. Remember–the session musicians and vocalists you hear on streaming platforms get nothing and all but a handful of featured artists get next to nothing.

Endless babble about how streaming saved music industry is unmoored from reality. And revenue has demonstrably resulted in lower pay to music workers. 

U.S. Recorded Music Revenues Are Still 46% Below 1999 Peaks https://t.co/wmyAiCV9iB— David C Lowery (@davidclowery) June 17, 2021

Thanks to the support of the American Federation of Musicians and the International Federation of Musicians, the World Intellectual Property Organization commissioned a policy study on this subject for consideration by WIPO’s Standing Committee on Copyright and Related Rights that I co-authored with the noted economist, Professor Claudio Feijoo.  (The study is available here.)  WIPO has never before commissioned a study on the economic effects of streaming on performers, and I think we should all be appreciative of WIPO’s response.

I was pleased to see the study quoted in the recent letter to UK Prime Minister Boris Johnson from the Rolling Stones, Sir Tom Jones and many others calling on the PM to support streaming remuneration according to the BBC.

We considered the pros and cons of a number of potential solutions, which are summarized in this table from the study. Streaming remuneration paid by platforms was the main recommendation for a number of reasons:

–streaming remuneration helps to balance the extraordinary growth in share price by companies like Spotify. (Apple is approaching a $2 trillion market capitalization and still pays session players nothing for streams on Apple Music).

–enterprise playlists are increasingly a substitute for radio by Spotify’s own admission yet pay nothing to non-featured performers.

–streaming remuneration does not expand the compulsory license and leaves private contracts in place.

SolutionProConFurther comments
Streaming Remuneration Paid By Platforms Through CMOsDoes not require additional transaction cost as matching and payment information already exists at CMOs; does not require renegotiation of licensing agreements or disrupt current licensing practices; platforms are already paying similar royalties in certain territories; recognizes value transfer from all performers to platforms; helps to preserve local culture by compensating both featured and nonfeatured performersPlatforms may seek to offset streaming remuneration payments against catalog license revenues; platforms may seek to expand compulsory licenses; additional operating cost for platforms; Flexible solution that Member States may elect to implement.  Benefits both featured and nonfeatured performers. Mandate may exclude deduction from existing licenses and may make payments non-waivable.
Status Quo—continue market-centric model unchanged with voluntary experiments in fairness-making royalty methods (SoundCloud and Apple, for instance)No disruption to streaming ecosystem, locks in market-centric royalty model, allows market forces to drive change (e.g., SoundCloud fan powered royalties and Apple messaging pro-artist royalty rates)Favors major labels and their featured performers, nonfeatured performers paid zero, does not respond to grassroots campaigns by featured and nonfeatured performers; burdens local repertoire and local culture (see concerns about streaming music raised by Heritage Canada and Canadian Parliament in current consideration of Bill C-10[1])Do not change and allow market forces to impact royalty rates through grassroots protests against streaming royalties like #BrokenRecord and #IRespectMusic campaigns and potentially litigation
Voluntary change in label streaming rate policy and Beggars (for instance) style forgiveness of unrecouped balancesFairness making move so that producer unilaterally updates all legacy contracts to current rates.  Simple to pay more than contract requires, can be implemented quickly, low transaction costs.  Forgiveness of unrecouped balance occurs after a fixed period of time.  (Beggars model forgives 25% after 15 years).  Does not change the underlying payments to featured performers, does not compensate nonfeatured performers. Might be arbitrary and subject to sudden changes.Labels should consider before legislation requires a change in response to grassroots protests (see DCMS Inquiry). Nonfeatured performers are not benefited. Compatible with other models. 
SolutionProConRecommendation
Mandate review of royalty statements and systems by independent accountants or “special masters”Biggest point of failure in royalty reporting is at the platform, so review of systems by independent accountants and experts would increase transparency and help to reduce third party fraud.  Expert review would be in addition to SSAE 16 type review.  At a minimum, public accounting firms should be required to publicly disclose systems reviews undertaken as part of audited financials.Biggest negative would be cost, but in the long run would potentially reduce the cost and increase the efficiency of individual audits.  Might be accomplished through disclosure and rebalancing of duties of public accounting firms.Member States may consider legislating transparency. Nonfeatured performers are not benefited. Compatible with other models.
Adjust corporate governance at streaming companies to make them more responsive to shareholders (such as eliminating dual class stock in publicly traded companies)Allows shareholders a meaningful voice in corporate governance denied by “supervoting” shares such as Spotify’s 10:1 insider shares, allows fans or users an opportunity to be heard by board of directorsDoes not by itself change underlying payment issues for either featured or nonfeatured performersMember States may consider as a general matter depending on existing corporate governance laws and exchange rules.  Nonfeatured performers may not be benefited. Compatible with other models.
Voluntary User Centric Share of Revenue Royalty methodsLikely to allow users to have transparency as to where their money goes; perceived greater fairness for featured performersCostly to implement due to transaction costs of renegotiating all licenses.  May just reallocate revenue without increasing the pie; does not recognize the value transfer from performers to platforms in market valuation and share price. Does not compensate nonfeatured performers.Allow platforms to experiment with different models.  Nonfeatured performers are not benefited under models tried to date.
Fan-to-performer Direct Digital GiftsDoes not require changing licensing agreements for services and producers; payments to performers can be made directly outside of recording or distribution agreements; if broadly established, could include both featured and nonfeatured performers. Excludes producers from compensation scheme; requires performers to sign up to accept payment; some services take a cut some do (like Tencent) and some (like Apple) do not take a cut if true gift and not disguised in-app purchase Allow platforms to experiment with different models.  Nonfeatured performers could be benefited.  Member States may consider legislation to curtail platforms taking a cut of digital gifts.
Extended collective licensing of the exclusive right of making available on demandRebalance relations between stakeholders; guarantee a remuneration for all categories of performers through collective managementLimited protection for performers when opt-out is possible; needs conclusion of new licensing agreements; will affect the perimeter of licensing agreements concluded between labels and platformsWould conflict with existing contracts, increasing litigation with uncertain results; non-retroactive application with limited effects
Compulsory collective management of the exclusive right of making available on demandRebalances relations between stakeholders; guarantees a remuneration for all categories of performers through collective management; protects all performers from unbalanced transfer of rightNeeds conclusion of new licensing agreements; will affect the perimeter of licensing agreements concluded between labels and platforms; deprives featured performers of their direct capacity to negotiate with labels through individual contractsWould conflict with existing contracts, increasing litigation with uncertain results; non-retroactive application with limited effects

[1] House of Commons of Canada, House Govt. Bill C-10 (43rd Parl, 2nd Sess., Nov. 3, 2020) available at https://www.parl.ca/LegisInfo/BillDetails.aspx?Language=e&Mode=1&billId=10926636&View=1

Please take our Songwriter and Composer Mechanical Royalty Income Questionnaire!

Here’s the latest Artist Rights Watch questionnaire! It’s anonymous, quick and informative. As always we will publish the anonymized results so that everyone can benefit from the knowledge you help to create.

This questionnaire is a few questions about the sources of songwriter or composer income and your best guess about how your song income will grow.

Please take the survey on Survey Monkey by clicking on this link.

Thanks!

@illusionofmore: EFF Petition Language Used in Fake Emails to the FCC

[Editor Charlie sez:  Here’s a blast from the past–For a little context on this excellent post by David Newhoff–Remember the Electronic Frontier Foundation from the “Google Shill List“?

eff-shill

Or Roger Parloff’s reporting in Fortune: “If the Electronic Frontier Foundation, the nation’s preeminent digital rights nonprofit, had disclosed last year that it received a cool $1 million gift from Google — about 17% of its total revenue — some eyebrows might have been raised.”  Not to mention the very, very, very close ties between EFF folk and some Google executives.

And remember that the last FCC Chair who pushed through the current Net Neutrality rules was ably assisted by one Gigi Sohn, formerly of fellow Google Shill Lister Public Knowledge and current fellow of the Soros Open Society Foundation, pictured here with Fred von Lohmann, who led the charge against artist rights while at EFF until he actually returned to the mothership, so to speak, and joined Google:

4264850232_bfe5b39b93_z

And which side of the Net Neutrality debate might Google be on?]

It’s depressing how often one reads news that makes the United States seem as though we’re reliving the 19th century rather than an enlightened 21st.  With that comment, you might think I’m referring to the current administration (and I certainly could be), but at the moment, I refer to Americans across the political spectrum who seem willing to return to the political tactics of Tammany Hall, albeit in digital form.

On May 31, the National Legal and Policy Center, a D.C. watchdog group, reported that an “initial forensic analysis” of the 2.5 million comments submitted to the FCC on Net Neutrality found that over 465,000 of these were fake. It further states that over 100,000 of these comments used language from the Electronic Frontier Foundation’s “Dear FCC” petitioning tool in support of “Net Neutrality.”  Although the NLPC did not accuse the EFF of processing these false emails, the organization was quick to defend itself as though it had been so accused.  It’s June 1 response states …

“NLPC’s report is false. Not one name, email address, or email domain cited in the report matches to any of the comments that came through EFF’s comment tool.”

Then, missing the point and seizing the moment, the statement proposes …

“Throughout the FCC’s comment process, we’ve seen malicious actors attempt to discredit the process by generating obviously fake comments. Their hope is that they can drown out the voices of the overwhelming majority of Americans who support net neutrality.” 

I am in no way qualified to assert that the EFF had any direct hand in the fake emails, but somebody spammed the FCC; and I have no problem saying that the EFF’s rebuttal is preposterous.

Read the post on Illusion of More