Friday, December 18, 2015

Winners and losers of the CRB's Web IV rate decision

By Emmanuel Legrand

On Dec 16, 2015, the US Copyright Royalty Board (CRB) unveiled its decision regarding the rates applied to digital radio and non-interactive music platforms.

The process, known as Web IV rate-setting proceedings, concerns only sound recordings and its affiliated rights owners, recorded music companies and performers/musicians. It does not include rate-setting for royalties owed to songwriters and publishers. The period during which these rates applies is for four years starting January 1, 2016.

The rates decided for 2016 by the three-judge panel are:
  • $0.0017 per stream for ad-supported services ($0.0014 in 2015)
  • $0.0022 per stream for subscription services ($0.0025 in 2015)

For the years following 2016, the CRB said that rates for both subscription and non subscription services will be adjusted to reflect increases or decreases in price level, as measured by the Consumer Price Index.

What has not been renewed by the CRB is the scheme by which “pureplay” services like Pandora either paid the statutory rate or 25% of their revenues, whichever was the greatest. This is no longer applicable from January 1.

Non-interactive digital music platforms include internet radio giant Pandora, with its 80 million users, and satellite radio service Sirius/XM. Webcasters include all the radio stations that broadcast online their terrestrial output such as iHeartMedia, formerly known as Clear Channel.

The proceeds from the rates are collected from about 2,500 different media outlets by Washington, DC-based collecting society SoundExchange is tasked to collect and distribute the proceeds of the performance rights on sound recordings to performers and record labels.

Following the CRB's decision, we looks at the winners and losers.


The internet radio company said these were “rates that we can work with and grow from,” which reflects Pandora's management sigh of relief that the CRB did not set higher rates than it did. The rate of 17 cents per 100 streams for ad-supported services is slightly higher than the previous rate of 14 cents for 100 streams (a 20% increase), but the rate applicable for subscription service went down from 25 cents per 100 to 22 cents for 100. Pandora – which is still losing money despite revenues exceeding $920 million in 2014 and $828 million for the first nine months of 2015 – also said that the new rates would help provide “much-needed certainty for both Pandora and the music industry.” Pandora, as will the other services are also likely to benefit from the new approach from the CRB for the years 2017-20, during which rates will be subject to review based on the Consumer Price Index.

For the satellite radio platform, the CRB decision was good news as its service is subscriptions only, therefore, the slight drop in rate from 25 cents per 100 streams to 22 cents per 100 should have a significant impact on its bottom line. It still falls short of the 16 cents it was asking for, but it can still live with it.

iHeartMedia and other webcasters
The American radio giant will certainly see its bill to SoundExchange drop significantly as the rate its pays, as an ad-supported service, drops from 24 cents per 100 streams to 17 cents, a 30% decrease. “We believe that the rates the CRB announced will make it possible to spend more and drive more to build volume,” said the company in a statement. “We understand we have a responsibility to use this rate to increase volume, thereby increasing revenues paid to artists and music companies, creating a growth market and supporting services that consumers want and can afford.”

Rights holders
Even if the rates picked by the CRB judges are not as high as anticipated, more money is expected to flow in the direction of SoundExchange, which will benefit labels and performers/musicians. In addition, the ruling “will most likely not dampen the services desire to move toward more direct licensing,” according to former NMPA Legal Counsel Jay Rosenthal, now a partner at Washington, DC-based law firm Mitchell Silberberg & Knupp. “If anything, the ruling will probably drive more deals to the free market.” The ruling is also a victory for indie labels who argued against differential rates between the various set of rights owners, as advocated by Universal, Warner and Sony, who expected higher rates for holders of big catalogues.


Given that the CRB has increased the rate for ad-supported services, and that this segment is the one attracting the biggest percentage of Pandora's users, the bill footed by Pandora to rights holders is likely to grow, eroding even further the potential for profitability of the service. Its “blended” rate per stream of 17.6 cents represents a 15% increase from the previous rate, which would translate, at current subscribers' rate in roughly $60 million in additional payments to rights holders.

The collecting society asked in its contributions to the rate setting process that the rates should be to increase to $.0025 and go up by $.0001 every year until 2020. The CBR did not follow this requirement, and SoundExchange will be certainly losing on potential revenues, which could come as a concern now that for the first time in ages, the society has reported lower than anticipated payments to rights holders for the third quarter of 2015, at $204 million, down 24% from the $267 million paid in the same period of 2014. The growth rate of Pandora and SiriusXM is slowing down with consumers turning to interactive services like Spotify or Apple Music, who do not pay royalties to SoundExchange but directly to rights holders. SoundExchange said in a statement that it will “review the decision closely and consider all of our options…” SoundExchange still has the option to appeal the ruling and ask the CRB to re-open the proceedings.

Songwriters and publishers
Although neither songwriters and publishers are not concerned by CRB's Web IV rate-setting, they have followed with great attention the proceedings, not least because they will soon get into their own round of rate setting. Given that Pandora seems to see publishing rates (roughly 4% of digital services' revenues) as variables worth pushing down, there is a lot to suspect that publishers and songwriters will be collateral damage in the process.

New non-interactive digital services
The new rates set by the CRB make it almost impossible for new entrants to join this sector without incurring from the outset massive costs related to content acquisition. That aspect was not lost on Pandora's management, noting that “it does make it harder for new players. It would be a challenge for a new company to start up and pay these rates from the start.”

Monday, November 30, 2015

Blake Morgan and the story behind #IRespectMusic

How one e-mail from Pandora's founder Tim Westergren turned an artist into an activist. [An edited version of this story was originally published by Music Week]

By Emmanuel Legrand
Blake Morgan at the NMPA AGM

A few weeks ago, the RIAA started legal procedures against a new app, Aurous, that would connect users to free, unlicensed content. The founder of Aurous,
Andrew Sampson, took the issue on social media, asking for people to support him with the hashtag #StandWithAurous. But somehow, his initiative backfired. Sampson fell into a battle of hashtags, especially one that did not exist five years ago when Grooveshark or Kim Dotcom were launching their services. Sampson started trading licks on Twitter with the originator of the #IRespectMusic campaign, the New York-based artist and label owner Blake Morgan.

So because gun manufacturers make guns, and people shoot other people, they’re complicit in murder?” Sampson tweeted. Morgan's answer? "Hey folks at #StandWithAurous! Your leader's justifying his own actions by comparing them to murder. #IRespectMusic". Others tweeted, "Too bad I can’t #StandWithAurous because #IRespectMusic.”

In just a few months, #IRespectMusic has become the flagship slogan about the rights of artists, and has captured an audience that the music industry had never reached before through social networks. The history of #IRespectMusic started as an angry reaction to something the CEO of Pandora said and became one of the most successful organic grassroots initiatives advocating for the rights of creators.

"I try respectfully, benevolently to raise the issues," says Morgan about his actions. Speaking to Music Week in a French restaurant nearby his offices downtown New York, he is enjoying a soup, and he is fully into the conversation. He is precise, articulate and focused. And speaks a lot. 

"Musicians should be paid for their work," he says. "Music is one of the things that America makes that the world still wants. We are the ones who came with jazz, blues, country, hip hop and how come we don't pay these artists? It is not about technology but about a small group of people perverting technology for their own profit."

A spokesperson for artists
Obviously, he relishes his new status as one of the spokesperson for the music creative community, a status that took him to various trade conferences but also got him around the country to spread the gospel. Morgan is also very much aware of the traps he could fall into, not least the backlash on his own career. The world of social media can sometimes be harsh and punitive. But he makes no apologies for standing up and for saying what he says. "A few years ago, I would have been on my own, but not this time," he analyses. "There are people behind me. There are artists like Zoe Keating or David Lowery who are not afraid to speak out. And we have each others' back. You attack me or one of them and you will find us on your way."

If #IRespectMusic did not change the dynamics between creators and the public, it certainly contributed to re-address the narrative. That was pretty obvious in the exchanges between Aurous and Morgan. It was a hashtag punch against another one in a conversation that would have not existed a few years ago.

Morgan says one of his concerns is that the art of songwriting and the class of songwriters might disappear if nothing is done to address the issue of their remuneration. "Songwriting is not a guy sitting at the edge of a bed and coming up with a song, it is a profession," he says. "And it it is the profession that is partly gone. Kids may write songs but they are not going to make a living out of it. I was one of those guys. Playing touch football in central park and being a professional football player is not the same thing. Money is what's required to make a living. In what other profession are we asking that question? There is an assault on the artist and it is unnecessary and counterproductive to society."

He continues, "The creative part is not in question, people will still want to do it. But when uber-successful songwriters are not getting paid, middle class songwriters are decimated. If there is no money in a profession, are people going to want to be part of it? The same applies to the recording side too. There is this idea that artists and songwriters are not on the same page, but it does not reflect the reality. Who's gonna buy your t-shirt if nobody has heard of you?"

When put to him that, according to industry commentator Bob Letsetz, top songwriters never complain so the rest should not be whining and get on with it and try to be successful, Morgan snaps back that Lefsetz sounds like "a Mussolini gesticulating from his balcony." He goes on, "Well, he's factually wrong because Taylor Swift has stepped up about inequality of royalties. The truth is that the vast majority of people who make music are much more interested at polishing their craft than taking public stands about their situation. I have compassion and understanding for the people who haven't got involved and who make music -- the reason is that I was one of these people. I knew what was going on, a little, and that it was unfair, a little, but I was not doing anything about it."

Responding to Pandora's Tim Westergren
So what happened to him to become what he describes as "a blip on the music advocacy radar"? "It's because of this email from [Pandora founder] Tim Westergren," he quips. Two years ago, in May 2013, Westergren and Pandora supported a new legislation, the Internet Radio Fairness Act, and were trying to enlist the support of creators.

"Westergren send a mail that went to thousand of people encouraging us to sign a petition that he would bring to Congress where all these middle-class musicians would say 'Pandora is so awesome for us'," explains Morgan. "Of course, the petition would be used to lobby Congress to get behind the so-called Fairness Act. I do not know what fuelled me at that moment, but I wrote back, and it is one of these mails that got to his address. It said: 'I'd like to believe that your heart is in the right place but this will be used before Congress to lower my royalty rate by 70%. I like Pandora but this is wrong.

"I closed my laptop and went to the gym, and when I came back I sent it to one friend of mine I went to music school with. I said, 'I think you might get a kick out of this.' He said call me back, and said, 'Blake are you gonna blog this,' and I said no, I don't even have a blog. Then he asked, 'can I publish it?' I said sure, so he posted it and it just blew up. It went crazy. That was over two years ago. And before that I had never done anything like this.

"The next day, I got an answer from Westergren. 'Dear Blake, there is a lot of mis-information out there, we are not trying to lower rates at all, and in fact, he said, we are seeking a way for musicians to participate in the business.' That was the line that changed my life.

"I wrote back and said, very respectfully, thanks for the dialogue, but when you say 'seeking a way for musicians to participate in the business', you seem to be forgetting something: Music is our business. Without us, you don't have a business. The purpose of the so-called Internet Fairness Radio Act is to lower our royalties, it is clearly in the bill."

Then came the Huffington Post, asking to publish the exchange of emails between Morgan and Westergren. They also interviewed Morgan and published the details of his royalties statement (30,000 spins, $1,62...). "That on Huff really blew up," enthuses Morgan. "It made the first spike tiny in comparison."

The morning after the publication in the Huffington Post, Pandora lost $100m on the stock exchange market in first half hour. "Trading opens, crash," sums up Morgan. "It was such bad press for them. Every artist that steps up, emboldens others so more started to speak out, especially of the Pandora situation and it started getting a lot of press. It was such a PR disaster for Pandora that eventually they would pull back from the Fairness Act, which they spent million promoting.

"It was such a defeat for them and it got in the bloodstream," continues Morgan. "There is that understanding that big oil companies are not good, and Pandora, not good either! They were tarnished and they deserved it, which is sad because I like Pandora. Some were dubious the bill would really go away and I told them 'you know what, you've been losing for so long that you forgot what victory is'.

"Then I thought that it cannot be a one-off and now we have to fight to win the game. That was the moment when I started putting together what would become #IRespectMusic, something positive, where we talked about what is magical about music, and talk about respect."

Never have a Plan B!
Morgan penned an op-ed in December 2013 for the Huffington Post in which he described his experience at a high school where he was asked to talk about his craft. At some point he said to the kids in the class, "If you want to be an artist, do try and go all the way, and go without a plan B." And the teacher said, "No, always have a plan B." For Morgan, this would have never happened in a room with a lawyer or a doctor, but reflected the status of music in the popular psyche. A few weeks later, a student showed up at a concert with her mother and she handed Morgan her newly-pressed CD.

Morgan recalls, "She told me, 'I am going for it,' and her mother corrected her and she said 'we are going for it'. With that I ended my op-ed, saying: '“My New Year’s resolution is to stand up more, and speak more. I respect my profession. I respect artists. I respect music.' I ended it with the three words, and that piece took off. The next day, a young artist from the Philippines [Joana Marie Lor] took a line from that and put a picture of her with a written board: 'I have something worth fighting for: #IRespectMusic.' That piece went viral. Right before Christmas 2013 I put out video with a card #IRespectMusic. People started spontaneously to use it. People started tweeting and posting photos with #IRespectMusic. People in the thousands followed me.

"Then David Lowery posted #IRespectMusic. It was a sign that this was serious. He is a strong advocate. When he stood up it was an egoless gesture, just a way to say, 'We are in here together and we will have each others' backs and we show solidarity among music creators. When an artist stands up and tries to move the needle, we will have each others back.' I do not know if that was his motivation but that's how it felt to me."
Morgan then put up web site to push for the legislation introducing performance rights for terrestrial radio, the Fair Play Fair Pay Act. "I launched the page and the petition. I had so many visitors. I thought we would have 5,000 followers, we had 10,000 in 30 days. So many people came to the page that they had to wait to add their name. The petition still rolls with thousands signing up."

His relentless activism in the past few years attracted a lot of media attention and has earned him support from powerful people. One of them is David Israelite, the president and CEO of the National Music Publishers' Association David Israelite, who invited Morgan to speak at the organisation's Annual meeting in New York to talk about his initiative on June 17, 2015. “Blake’s simple but compelling message about the value of music has reached everyone from up-and-coming songwriters and artists to lawmakers on Capitol Hill," says Israelite. "I think the #IRespectMusic campaign resonates with people because Blake’s tenacity is genuine and contagious. I asked Blake to speak at our Annual Meeting earlier this year because we are all fighting to be valued appropriately in the Digital Age – artists and songwriters alike – and I think the more people that are familiar with his campaign the better."

Raising awareness
Morgan went to Capitol Hill to meet with legislators. Congresswoman Judy Chu tweeted: 'your voices are been heard, while holding the sign #IRespectMusic. He travelled the US, from Nashville to Pittburg, trying to gain support for the Fair Play Fair Pay Act and the Songwriter's Equity Act. "These two bills can change fundamentally the life of songwriters in the US. This is a benevolent SOPA reaction, no need to yell at anybody and unlike any other social media phenomenon, this has just been growing and growing," says Morgan.

He adds, "Each time I am talking to classrooms of kids, there is a bubble of signatures, but what I like is the awareness. It has become a symbol, I do not own it, a lot of people have offered me a lot of money to do things, but I have refused. That's the feeling about a grassroots movement. There are these #IRespectMusic chapters popping up everywhere and people have their own #IRespectMusic events. Two years ago I did not know anything when I just wrote back to Tim Westergren. What a journey!"

Blake Morgan: An artist-entrepreneur

Known as an activist, Blake Morgan is above all an independent artist, a music producer and an entrepreneur. He set up in 2002 his own company, Engine Company Records, which morphed in 2012 into ECR MusicGroup. He started his music career in the 1990s, after studying at the United Nations school, from 1st grade to high school (although his parents were not connected to the UN), and then graduating from the Berklee College of Music. In 1996, he signed to Phil Ramone's N2K label, distributed by Sony/Red. His first album, Anger's Candy, came out in 1997.

"I had my big record with Phil Ramone," he says. "I had my major record label deal and had the experience that a lot of artist had and fought my way out of here. Phil and I stayed friends. After that, I wondered where to go. I had to pick up myself again. I started producing records for friends. One day, walking with my mother, I said, 'If I had the guts I would set up my label, and all the demos would be masters, and the artists would own their masters.' My mother turned to me and said, 'Yeah if you had guts, you would do it'. That's what became the label ECR Music Group. With that elemental principle in mind, we made it work. All artists own their masters and own their publishing and I have roster of small labels. And I produce these records."

Morgan's last album, Diamonds In The Dark, his fourth, was released in 2013 on ECR. Recent and current albums on ECR include Janita’s Didn’t You, My Dear?, Melissa Giges Just When I Let Go and Terry Manning’s Heaven Knows. Early in 2016, ECR will be releasing the deluxe, bonus-tracks edition of Didn’t You, My Dear? and the debut album from Miles East, called Ghosts of Hope. ECR uses BDC (Burnside Distribution Company) for both physical and digital, globally.

"So far, no one has wanted to leave that eco system," he explains. "I am very proud of that and I am signed to that label too. I play five instrument, I am sound engineer, I produce. We made four records in the last year and a half. The label has been walking the walk and we've survived during what is the worst decade for music industry. As a boutique company our future is as insecure as anybody's. I am passionate and I do not want to go out of business. Our hopes are on the line, our profession is on the line. It's hard but it is a lot easier than losing the struggle, at which point we lose everything."

Wednesday, November 25, 2015

Vive la vie!

by Emmanuel Legrand

[This editorial was originally published in the Nov. 23, 2015 issue of Music Week.]

There are words that you wish you'd never have to write. Because the subjectmatter is too painful and because of what it says about this world we are living in.

The terrorist attacks in Paris last week have affected each and every one of us, but to those of us for whom music is a raison d'etre, what happened at the Bataclan is the darkest of nightmares.

The idea that a concert hall, a place celebrating life and art, could turn into a slaughterhouse at the hands of a trio of disciplined and well trained terrorists, is simply unfathomable. Music is about reaching out, sharing, emotions, transcending all differences. It is what brings people together, not what tears them apart.

Newspapers have published walls of pictures of those who died in Paris. These people we mourn are our friends, our companions, our wives, our kids, even if we have never met them. Reflected in their faces, we can see our own; we can measure how lucky we are to continue to enjoy life; and we can make sure, for their sakes as well as our own, that the music never dies.

Because life will continue. Of course it will. We simply cannot let the barbarians win. We cannot allow a handful of killers -- who cut short their lifetime on earth for the promise of a better afterlife, while inflicting maximum pain before departing for their kingdom of doom -- decide how we want to live our lives. In his HBO show, recorded in the aftermath of the events, the great John Oliver summed it up pretty well: If you want to declare war to France's way of life, bring it on and you ain't gonna win!

Music is embodies tolerance, cultural diversity, creativity -- all these values that those who worship death and detest freedom cannot accept.

So we will continue to go to concerts, we will meet friends in caf├ęs, we will go to football games. We will be slightly different people than before the attacks. We may never go to a concert with quite the same light-heartedness again. But we will treasure the gift of music and the pleasure of just being there, not least in memory of all who have perished because they loved music.

Monday, November 9, 2015

US copyright gridlock

By Emmanuel Legrand

[This story was originally published in Music Week]

For the music community, the past few months have been full of promises in Washington, DC but also full of frustration. A lot of hope was put in the comprehensive reviews of copyright law initiated by the Copyright Office and by the House of Representative's Judiciary Committee, but with little progress so far.

US Register of Copyrights Maria Pallante
Despite hours of hearings, testimonies and action behind the scenes, not one single piece of copyright legislation has passed Congress, let alone being endorsed by any of the houses' committees. The "hollistic" review of the copyright system, in particular music licensing, launched by the US Register of Copyrights Maria Pallante at the Copyright Office, has so far led to nowhere. 

And the two specific pieces of legislation -- the Songwriters' Equity Act, which aims at addressing the way rates are set for the public use of music, and the 'Fair Play, Fair Pay Act', which plans to introduce performance rights for sound recordings for terrestrial media -- have yet pass the floor. Meanwhile, the Department of Justice, which has started to review the Consent Decrees ruling performance rights societies ASCAP and BMI, has yet to render its verdict (see sidebar). 

This is nothing out of the ordinary, explain experienced Washingtonians, who are versed in the shenanigans of the political process in the United States capital and used to navigating around Capitol Hill, where members of Congress are back this week from the summer recess. The politics of Congress are subject to their own dynamics, explains Jonathan Lamy, spokesperson for the Recording Industry Association of America.

"Our sense is that," says Lamy, "at least with regards to Capitol Hill, there is a wait and see approach because there's going to be two significant developments that will influence what Congress may try to do: One is the decision of the DoJ on the consent decrees, and when they will publish their decision; and the other is the Copyright Royalty Board's decision on rates applied to Pandora and similar services due by end of this year. Both are administrative procedures that will happen no matter what, but if they do not involve directly the Hill, they will affect Congress and influence Congress if it decides to move ahead [on copyright issues]."

Central to copyright issues are the House Judiciary Committee and its Chairman Bob Goodlatte. On July 21, Goodlatte and Ranking Member John Conyers announced the next step in the House Judiciary Committee’s ongoing review of U.S. copyright law and issued joint invitations "to all prior witnesses of the Committee’s copyright review hearings to meet with Committee staff and provide additional input on copyright policy issues."

The Recording Academy's Daryl Friedman
This new round of hearing was interpreted with different perspectives by DC observers. "I think it is a good sign," says Daryl P. Friedman, Chief Industry, Government & Member Relations Officer for The Recording Academy. "It is good that they focus back on copyright and keep the issue moving. We like the fact that the Chairman keeps shedding the light on these issues."

But others are less positive. A lobbyist called it "a slow walk and not a process designed to drive things towards a conclusion," adding that the people who have been invited to meet with the Committee are lobbyist and people from the copyright community who they meet every day. "It is not as if we were hearing, 'I am Chairman Goodlatte and I want to move things.' This is relaxed, slow, and not a regimented plan to move forward."

Another source, familiar with the Judiciary Committee's process, says the new round of discussions is more about one-on-one meetings with stakeholders "to get a sense of what their priorities are, and what are the issues that are covered. They have open mind to see where the process takes them. They are not shooting with an end product in mind and want to see where process would take them."

The slow pace of the Judiciary Committee reflects in fact a wider problem facing the music industry on the Hill. As one lobbyist explains: "There are some people who'd want to move things, but the broader copyright world, like movie studios or software companies, doesn't care about the music stuff, and their mindset is, 'In today's world post-SOPA, anything that Congress moves is bad, so we'd like to see nothing happen, because other guys are in order of march'."

The other guys are effectively active. Tech companies, broadcasters and digital services are using all their clout in DC to either block things from happening or trying to reverse some pending legislation. That's the whole point of a new coalition set up to fight the proposed bill on performance rights for sound recordings and any the changes to the copyright law that would give PROs greater bargaining powers with digital services. The MIC Coalition (Music. Innovation. Consumers.) regroups organisations such as the National Association of Broadcasters, Google and DiMA, which represents digital services such as Pandora. The MIC Coalition is "committed to a rational, sustainable and transparent [copyright] system." [Two original members -- Amazon and NPR, the National Public Radio -- have since left the coalition.

In a recent letter to the DoJ, the MIC Coalition called for stronger Consent Decrees applicable to ASCAP and BMI, but also restrictions to the music publishers, and even placing the third PRO, SESAC, which as a privately-owned organisation, under a Consent Decree. "The MIC Coalition's view is that no copyright owner should be able to say no [to license digital services]," analyses a DC lobbist from the creative community. "They have to let their works being used. Just one work and you can have anti competitive power. So every rights holder is a danger of acting in anti-competitive way."

For rights owners, groups like the MIC Coalition illustrates the new balance of power in DC, edging towards the tech community when it comes to the Hill or the White House. Many executives in the creative community believe that tech companies have an undue influence in DC. In a keynote session during the Cutting Edge conference on August 28, former NMPA General Counsel Jay Rosenthal, who joined this summer the Wsshington, DC firm Mitchell Silberberg & Knupp, said that he truly believed that "as content owners, we are losing the battle on the politics of copyright."

He elaborated: "When you look at politics in DC the biggest issue is always money, and in this context it is money that is losing the battle because Google and the rest of the [tech] companies have come to DC in a major major way. They are now more lobbyists on the ground in DC working for Google than for the whole content industry combined. And we are now seeing the end result of this with what's happening on Capitol Hill and with the administration. For many decades, copyright interests have done well. When you needed to have laws, you'd get them. Now, we are dealing with a completely new dynamic in DC [with] folks that want to push back copyright, who want to minimise copyright in all sorts of different ways having the upper hand."

But if all seasoned Washingtonians accept that the game has changed, with a pendulum swinging towards the tech industry, they also suggest that at no point that new found power could lead to anti-copyright or anti-creators' rights legislation. One DC observer explains that although the creative community does not have the financial clout and influence of tech or media companies, there are elected members in Congress who would not want to pass a bill that would go against the rights of the music community. If one side strikes, the other retaliates. "People [on the Hill] care about artist and music and if artists speak up, they can stop it from happening," says the executive. "The same will happen if the music community tries to push a bill that the tech community does not want to see. Not one party has the power to single-handily pass a legislation."

This situation explains in part the current gridlock. "Part of that is just the worry on each side that if you do open it up to get things done, you'll get something worse than what you want to achieve. So that might explain why they put the brakes," says an observer. To make matter seven more complicated, copyright issues are usually not partisan issues on the Hill. What legislators are looking for is some form of consensus between stakeholders, so it takes a long process to get there, says RIAA's Lamy. "Our issues need a consensus between the major parties and at the moment there isn't one," says Lamy.

Another executive is more blunt: "At this point, in this Congress, I don't think anything will pass, so we are building things towards the next Congress, where we will see some crystallisation of broader support for copyright. But not with this Congress."

Key issues awaiting action in DC 

Work in progress...

The Fair Play Fair Pay Act

Congressman Jerrold Nadler, Ranking Member of the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet, and Congresswoman Marsha Blackburn, Vice Chair of the Energy and Commerce Committee, introduced on April 13 this bipartisan legislation, to "harmonise and modernise the outdated rules that currently govern music licensing for digital and terrestrial radio broadcasts."

The legislation would, among other things, introduce a terrestrial performance right for sound recordings on AM/FM radio competes; ensure that all forms of radio pay fair market value for music performances; state that pre-1972 recordings have value and those who use them must pay appropriate royalties for their use.

If passed, this legislation would eventually put the United States on par with most countries around the world, and could result in extra revenues for performers and record labels worth several hundred million dollars. This legislation is opposed by the National Association of Broadcasters, which regroups the major radio and TV operators in the country.

On the Fair Pay Fair Play, RIAA's Jonathan Lamy remains optimistic that it has a chance to pass despite sever opposition. "We believe this is a right issue and we will continue to advocate for it as long as it is necessary," he explains. "Obviously, we are faced with the political clout of broadcasters and the fact that they are in each congressional district makes very challenging to pass a bill over their objections. But it is still the right issue to advocate."

According to Daryl Friedman, the Recording Academy, which organises the Grammy Awards, is in the process of "lighting a bit of fire" on the Fair Play Fair Pay Act by organising a major nation-wide advocacy event. On October 14, over 1600 of its members will visit local policy-makers and representatives around the country. Labelled " Grammys in my district", the initiative aims at informing policy-makers on the issues important to the music community. Taking place for the second consecutive year, the initiative will see 1600 Academy members visit 250 districts, against 100 visiting 77 districts last year. "This is the largest grassroots advocacy initiative of its kind," says Friedman. "The 'Fair Play' bill will be pushed for and [our members] will ask for Congress to deal with comprehensive music licensing reform, but speak in favour of any legislation that helps creators."

The Songwriters Equity Act

The Songwriter Equity Act was been reintroduced in both houses of Congress in March 2015, following a first attempt in 2014. The legislation is sponsored by Senator Orrin Hatch and Congressman Doug Collins. It proposes to amend sections 114 and 115 of the Copyright Act in order to require that Copyright Royalty Judges "establish rates and terms that most clearly represent the rates and terms that would have been negotiated in the marketplace between a willing buyer and seller."

This very simple piece of legislation would effectively allow PROs and other rights holders to benefit from better rates than the current ones set by tribunals. It is supported by PROs like ASCAP and BMI as well as by the National Music Publishers Association.

The modernisation of the Copyright Office

Register of Copyrights Maria Pallante has on several occasion made a case for the Copyright Office to be removed from the tutelage of the Library of Congress. Pallante would like to see the CO set up as a stand-alone government agency serving at the pleasure of the US President, the Congress and other government agencies and with a Register of Copyright directly appointed by the White House. Some DC observers point out that the agenda of the Copyright Office has been somewhat derailed by the announcement before the summer of the retirement of the current Librarian of Congress James Billington, under whose jurisdiction the CO operates.

An observer of DC's political life points out that one of the few topics that have gathered momentum is the future of the Copyright Office. In her testimony at the end of April before the House Judiciary Committee, Register of Copyright Maria Pallante focused most of her time in explaining how she would envisage a modern CO. Explains the source, "One big issue that has emerged [of all these talks] was the need to modernise the Copyright Office, addressing its financial issues and how to deploy a better technology in order to have an IT system that is not outdated like the current system. Lot of opportunities could come from an updated system. It could be an incentive for more people to register they copyrights, it would open to new search possibilities if tied into other databases and incorporating data standards, like ISWC and other [identifiers]. All these ideas are floating around and the pending appointment of a new Librarian adds some complexity to the issues."

The Department of Justice's review of the Consent Decrees

The U.S. Department of Justice's Antitrust Division opened in 2014 a review of the Consent Decrees that have been governing the two leading American performance rights societies ASCAP and BMI since 1941. Both societies and music publishers have been asking for the terms of the Consent decrees to change in order to allow better negotiations with music users and allow music publishers to partially withdraw their repertoire from the PROs blanket licenses. The ASCAP Consent Decree was last amended in 2001 and BMI's in 1994.

A DC-based source believes that "before the end of the year and there will be a deal on the table [from the DoJ] and it will be a take it or leave it." The options considered are the following: Either it is a Consent Decree that works for the parties or does not. If the changes proposed by the DoJ are unacceptable to ASCAP, BMI and publishers, this will be open the door to a real crisis, says the source, leaving them "with the only option to go to the Hill and say, 'Congress you've got to save us.' That level of desperation will lead to more help asked to the Hill. But it could also be the other way around and the user community could very well not see positively changes to the consent decrees too favourable to the PROs, and try to have Hill override the DoJ project."

Tuesday, September 29, 2015

Rosenthal: US copyright reform will take time

Jay Rosenthal
Jay Rosenthal is an experienced player in Washington, DC and one of the US capital's foremost copyright experts. He has been for many years Senior Vice-President and General Counsel at the National Music Publishers’ Association, for which he continues to work with as consultant, and prior to that he was General Counsel to the Recording Artists' Coalition (RAC), set up by such artists as Don Henley and Sheryl Crow.

This summer he joined the Washington, DC firm Mitchell Silberberg & Knupp. He also looks after the interests of Washington, DC-based electronic act Thievery Corporation and of wrestler-turned-actor Dave Bautista (Guardians of the Galaxy, the forthcoming Bond).

The following is an edited version of his keynote conversation with MW US editor Emmanuel Legrand at the Cutting Edge conference on August 28 in New Orleans.

[This story was originally published in Music Week]

Q: We could have titled this session 'Is copyright fucked!'. So I am going to put that question to you: Is copyright fucked?

Jay Rosenthal: Well, it depends on what side of the fence you are. I truly believe as content owners that we are losing the battle on the politics of copyright. When you look at politics in DC, the biggest issue is always money, and in this context it is money that is losing the battle because Google and the rest of the [tech] companies have come to DC in a major major way. There are now more lobbyists on the ground in DC working for Google than for the whole content industry combined. And we are now seeing the end result of this with what's happening on Capitol Hill and with the administration. Copyright has not gone away in terms of being a big issue. But you have to look at where it all started. It started a couple of Centuries ago when the founding fathers wrote in the Constitution that Congress 'shall' make a copyright law. When they said 'Congress shall' they turned copyright into a political struggle. For many decades, copyright interests have done well. When you needed to have laws that covered new types of work, you'd get them. Now, we are dealing with a completely new dynamic in DC [where] folks that want to push back copyright, who want to minimise copyright in all sorts of different ways [are] having the upper hand.

Is it the concept of copyright that is the problem?

Yes, I think that we are still fighting over what is copyright. Let me give you two angles. In the United States the majority of opinions, legally and also politically, is that copyright is an economic theory. There is a balancing between the users and the creators. There is a lot of public interest and public policy that is now focused on the rights of the users and the rights of technology companies, who create technology whether is it a player piano roll or whether it is peer-to-peer technology or YouTube. There's that dynamic that is equalised. In Europe and other places around the world, and as a minority position in the United States, copyright is a property interest. The idea that there is not really much difference between an intangible property interest in copyright and the way we deal with property is a philosophy that is in a minority here but not in Europe where they've always supported authors rights in a much stronger way, whether you want to call them moral right, natural right, or human rights. Whatever this is, they are dealing with this issue in a totally different way.

There is also the issue of semantics. By calling it copyright in the Anglo-Saxon world, you define a functionality: the right to copy. In Europe, it is called authors' rights and it refers to rights pertaining to a person.

And that is a totally different philosophy. The idea that the property interest in inherent, meaning that whatever rights authors had, they existed before we came along and passed copyright laws, is something that is much more accepted in Europe than over here. Over here, we look at it more as positive law: It is not a law until a legislature passes it and it becomes law. Right now, we treat artists like second class citizens and we do this because we do not recognise their property interests in their copyright.

Overall, there seems to be some sort of defiance against the creative world, right?

It has to do with perception. Anybody who has worked for more than 20 years in this industry knows that we had a whole middle class of producers, writers, musicians, and this class has been decimated in the age of piracy. But the guys at the top, many of them are still doing well. That is used against the rights of artists on Capitol Hill all the time. And it's tough. I just don't know how to overcome it. It is really hard to convey the message that the middle class has been decimated.

We have many of pieces of legislation flying over the Hill, the Copyright Office running an extensive review of copyright, the Judiciary Committee in the House doing a similar review. We have lots of discussions, but not one single decision. Any chance to see anything happening in the next months, years?

No. To understand why, we are like in the 60s when they were discussing what became the 1976 Copyright Act. In Washington, everybody is stepping forward including the artists, the trade associations, the tech companies and many more. Everybody is stepping forward saying this is what we want, this is what we need. I think that true copyright reform will happen in five to ten years. What we are doing now is playing around with everyone who has a stake, making a case, and if they keep engaging with Congress, hopefully there will be a balanced copyright reform. But in the next two years? No way! And everybody is also waiting to see what the Department of Justice has to say about the Consent Decrees.

What are the chances of the Fair Play Fair Pay Act to pass?

Minimal. Because of the gridlock in Washington. There's a saying in Washington: 'It takes a lot less to stop a bill than to pass one.' It is easy to stop a bill. All you need is one or two Congressman. And in that particular context, there is not enough real momentum in my estimation to make it pass. It is a fine piece of legislation: there is equity in it and it's a compromise amongst publishers and sound recording owners. The question is why on earth don't we have terrestrial rights for artists and labels? The simplest way to explain why is that in Washington, size matters. And if you go and look at the size of the building of the National Association of broadcasters, you understand the powers that are against the granting of this particular legislation, even though there are many on Capitol Hill who believe in this.

Although there are a lot of proposed legislation or copyright reviews, not much has happened in over a year. What can explain the gridlock? Is there something wrong in the system?

It is not so much that there something wrong in the system, I think that the gridlock is the end result of politicians who do not want to compromise and make laws. It is more important for them to be re-elected based upon their philosophies, and if you pass a law it would be looked negatively upon you, to a large extend. But there are other dynamics at play that can increase the gridlock, in addition to Google being a player and other tech companies as well. One is that you have more and more Congressman and Senators that are coming from the tech community, directly. The other dynamic is that, because of Citizens United, and the easing of election laws, you have people throwing money out there in a way to promote candidates who are going to perpetuate the gridlock and push back any legislation on copyright. When I say push back against copyright, I mean it. It is push back against the term of copyright, it is push back against statutory damages, which allows litigators to settles things and get some remedies, and to expand fair use as much as possible. That is the agenda of the copyright minimalists and it is pretty scary.

What do you make of the fact that copyleft movement, organisations like the EFF, Public Knowledge, or even the MIC Coalition do say that they act on behalf of the consumers to provide them with more access, more freedom?

I don't think that the rights of consumers should be ignored, I don't think that their political positions should be ignored, but not at the same level as the artists. Making sure that the creators can work, that's what copyright is about, that's what the artists' rights movements have been about. These groups take a lot of money for the tech companies that have been taking advantage of them. They say they are pro-artist or pro-consumers when in fact all they want is the ability to have a business where they pay lower rates. That's all that this is about. If they want to show that they are really pro-artists, they should raise the rates!

I guess that you are not one who thinks that copyright gets in the way of free speech?

Not at all! Copyright is free speech. What gets in the way of free speech is the band that gets dropped by a label because their music has been downloaded too much for free, and that instead of continuing to make music they have to go back to McDonald's. Free speech in the end is making sure that everyone has the capability to speak and create. That's what we should worry about. In the Constitution, the issue of getting the artists paid, that's the greatest contribution to free speech.

Do you think that copyright is adaptable to the digital world?

Absolutely. Yes, we can always adapt and figure out how to make it work.

Will copyright survive the attempts to dumb it down? Will it be strong enough to resist?

Yes, I think it will, because the industries involved and the artists recognise the need to go to the capital of the empire and fight for their rights. If the artists fight like the tech companies do, copyright will survive. Being a political animal is very tough: You have to play with the victories, you have to play with the defeats. But as Woody Allen says, life is about 99% showing up. So if the artists show up and the copyright owners show up in DC, which they already do, it will work itself out. But we will have to wait five to ten years to see really meaningful copyright reform.

Rosenthal on 'perpetual copyright'

I am in favour of perpetual copyright as long as there is a legitimate orphan works regime in place. Orphan works is when you can't find the copyright owner. The idea is that if you have a copyright owner out there that you can't find, then you have a safe harbour for music. This to me is a legitimate way to protect the companies and the users. If I need a work, I will go for the copyright owner. If I can't find him, I can use it, as long as I make a good attempt at finding them. The idea that we cut off rights because it is an intangible property, I don't think that's right. The longer you have your rights, and it applies to any artist as it does to Disney, the longer you can be a professional artist and be incentivised to continue to do so. I hear a lot the argument about why should a deceased artist still have a copyright after they die, and passed it to their heirs. I know of no artists who does not think about their heirs. They want to create if they are assured that their heirs will get those rights, and if they don't, they might simply not create, they will do something else that they can pass on, whether it's a corporation or a house or anything. While it may seem crazy to you that we do away with the public domain, I also believe that the founding fathers created the public domain for possibly other reasons than 'oh, lets' enlighten the rest of the world'. There's a lot of reason why there is a limit to copyright, and the Supreme Court has ruled that as long as there is a limit, it could be 50 years or 300 years, it's constitutional, but my point is to say that on a philosophical matter, a perpetual copyright with a sound orphan works regime is the one that gives the most respect to artists. It is a minority position, there is no doubt about it.