For some reason, there’s a focus at the moment on songwriter royalties and in particular for streaming royalty rates. Notice that I said “rates” not “share” or the one I find particularly irritating, “share of the pie.” Let us be clear—there is no “pie” there are only “rates”. Or should be. Let’s investigate why.
To frame this idea (speaking for the U.S. market), let me take you back to a conversation I had with a Nashville session musician and hit songwriter many years ago back before physical mechanical royalty rates were frozen.
He looked at me and said, “Why do I have to take this government cheese royalty rate? I get double scale when I play a date, why can’t I get double stat?”
What he was really saying was why can’t I set my own price as a songwriter for mechanical royalties? And the answer is the same today as it was then: Because songwriters allow the U.S. government to set the price and terms for mechanicals. Or rather the “minimum statutory rate” which is a joke because the “minimum statutory rate” has never been a minimum, it has always been both a minimum and a maximum.
There has also long been an obsession with songwriters and publishers comparing their rates to what artists and record companies get. This comparison was only compounded in the digital era particularly for interactive streaming. If you combine song rates and recording rates, some people get a pie. Other people (like me) get an error message. I’ll explain why.
The end of 2017 and beginning of 2018 has seen a flurry of activity as headlines reveal another $1.6 Billion Dollar Lawsuit against the tech streaming online distribution company, this time by Wixen Music Publishing, who represent compositions by Neil Young, Tom Petty, Rage Against the Machine and others.
This latest lawsuit joins nearly half a dozen other class action / lawsuits against Spotify by independent music creators and rights administrators filed in the past two years.
“The Trichordist” blog collaborator, Cracker and Camper Van Beethoven front man, David Lowery of Athens, Georgia and songwriter Melissa Ferrick successfully sued Spotify and settled with a $43.4 Million Fund for unpaid songwriter and publisher royalties last year.
Around the same time the NMPA (National Music Publishers Association) also stepped in and made their own $30 Million settlement with Spotify as reported by Robert Levine in Billboard in May of 2017.
Nashville / Texas based Bluewater Music Services Corp filed a lawsuit against Spotify in 2017, led by champion of the underdog attorney Richard S. Busch, the same lawyer who represented the victorious Marvin Gaye estate in their “Blurred Lines” infringement case, and helped Eminem successfully stand up to EMI when his rights were being squashed in the name of commerce.
The Bluewater suit and yet another Spotify lawsuit by an independent music publisher, Rob Gaudino are both detailed in this Variety article “Spotify Faces Two New Lawsuits From Music Publishers” by Janko Roettgers in July 2017.
These lawsuits highlight Spotify’s ongoing battle to do business with its suppliers, the songwriters and music publishers who are forced through federal regulation to make their material available to Spotify and other streaming companies against their will through a practice known as Compulsory Licensing, whereby the rights owners are not permitted to deny usage of their intellectual property.
What kind of negotiation can actually happen if one party cannot walk away? Not much, we are proving.
According to Charlotte Hassan writing in Digital Music News, Pandora has announced that it engaged Music Reports, Inc. to handle mechanical licensing on Pandora’s planned streaming service assembled out of the Rdio assets.
MRI is widely known in songwriter circles for “carpet bombing” the notices of intent to use songs (or “NOIs”) similarly to the HFA business practices that got Spotify, YouTube and Rhapsody sued by songwriter class actions. So we can only assume that Pandora intends to use MRI to bombard songwriters with NOIs, penny checks and the other techniques of digital services seeking the protection of the NOI.
As David Lowery has taught songwriters in his allegations in litigation against Spotify and Rhapsody, services often fail to send NOIs properly, don’t pay royalties and can’t be audited without a lawsuit. (And even then songwriters struggle to get a “straight count.”) Whether this will happen with MRI and Pandora remains to be seen, but songwriters should be vigilant that Pandora is not already creating an unauditable black box.
According to the press release:
To review and respond to the licensing offer [from Pandora], music publishers can simply log into their Music Reports account online at www.musicreports.com, where they will be able to access and download a full copy of the agreement, and then directly accept the terms if they choose. Any music publisher can request a Music Reports account, which gives full access to the licensing and royalty reporting details that Music Reports administers for their songs.
Be careful when you log in that you are not required to accept a click through agreement relating to MRI’s own terms. Also check if the “full copy of the agreement” allows you to audit Pandora and perhaps most importantly, what happens if you say no. Not to mention if the “full copy of the agreement” is just a version of the statutory license that’s available anyway before you give MRI more data they can use to send you more NOIs.
On a related point, it still remains to be seen if Pandora will be implicated in Sony Music’s fraud claims against Rdio executives relating to the sale of Rdio’s assets to Pandora. If Pandora gets drawn into that case as a co-conspirator, that could question the legality of the sale of Rdio’s assets to Pandora in the first place.