New trade deal between Canada, Mexico and the USA creates a more aligned copyright framework

By Emmanuel Legrand

 

Canada, Mexico and the United States' copyright regimes are moving towards a more unified framework following the decision by the three parties to sign and ratify the new Canada-United States-Mexico Agreement (CUSMA), which will replace the former trade agreement known as NAFTA.

 

  The US ratification was made possible by a last minute deal between the Speaker of the House of Representatives Nancy Pelosi and President Donald Trump. Following years of discussions, representatives from the three countries signed the new agreement on December 10 in Mexico.

  The agreement must now be ratified by the country's respective Parliaments. In the US, a vote in the House could take place before the year-end recess, while the Senate could vote in January or February. Mexico’s Senate approved the agreement on December 12 by a vote of 107-1. The Canadian government is expected to propose the House of Commons to ratify the accord at the same time as the US.

 

Life plus 70 years

 

  The agreement includes an updated, comprehensive chapter on intellectual property, with obligations on copyright and related rights, trademarks, geographical indications, industrial designs, patents, data protection for pharmaceutical and agricultural chemical products, trade secrets, and intellectual property rights enforcement.

  Specifically, the agreement calls for a general term of copyright protection of “life plus 70 years” for works of authorship. This means that Canada, which currently has a term of “life plus 50 years”, will have to change parts of its current intellectual property legal and policy framework in this area. Mexico does not need to adapt its law as it already has since 2003 a term of copyright of a 100 years following the death of the author.

 

  The document also recognises "the important role of collective management societies for copyright and related rights in collecting and distributing royalties based on practices that are fair, efficient, transparent, and accountable, which may include appropriate record keeping and reporting mechanisms."

 

  The new agreement includes provisions on Internet service provider (ISP) liability to address online infringement. In particular it paves the way for a US system of copyright liability exemptions via "safe harbours" in the other two countries, although Canada will be able to maintain its current “notice-and-notice” regime. Mexico will have to adapt its legislation.

 

Support local creators

 

  From Canada's perspective, the modernised agreement preserves Canada’s cultural exception, which, according to the government, gives Canada "flexibility to adopt and maintain programmes and policies that support the creation, distribution and development of Canadian artistic expression or content, including in the digital environment."

 

  "This was a key element in NAFTA," noted the Canadian government in its 'Summary of Outcomes'. "It helps protect Canada’s unique identity and provides greater security for the 650,000 Canadians who work in industries such as publications, broadcasting, and the distribution or sale of books, magazines, film, video and music."

 

  Representatives of the creative community welcome the agreement's provision on copyright extension, but objected to the adoption of USA's system of copyright liability exemptions via "safe harbours".

 

  "A significant impasse has been overcome," said John Phelan, the Brussels-based director general of the International Confederation of Music Publishers (ICMP). "This deal is as crucial for the music industry as it is complex. We would warmly welcome the prospect of copyright term in Canada – it's vital that term there arrives at a level which is standard worldwide. Copyright is the bedrock of creative sectors."

 

Build a stronger sector

 

  Phelan added that the copyright exemptions for certain online services "are a troubling trait of trade talks. The industry has made every effort to provide digital music and drive its value for songwriters and composers. So-called ‘safe harbours’ risk real regress on music’s value – something we’ll continue to be vigilant about.”

 

  For David Israelite, President and CEO of the Washington, DC-based National Music Publishers Association, CUSMA "includes important copyright provisions that will greatly affect songwriters. We are encouraged by the term expansion for Canadian copyright law that is included in the deal, but remain concerned that the DMCA safe harbours in the agreement continue to devalue creators' work and protect Internet service providers who should be doing more to prevent piracy and infringement."

 

  Music Publishers Canada's Executive Director Margaret McGuffin said that "enacting the term extension provisions of the Canada-US-Mexico Agreement will ensure that Canadian songs and scores continue to be heard daily on the radio, on streaming services, in video games and in film, television and other screen-based productions around the world." 

 

  Prior to the signing of the agreement, several Canadian organisations – including rights society SOCAN, Music Publishers Canada, Quebec' music publishers' association APEM, among others – wrote to members of the Parliament, urging them to ratify the agreement. The letter reads: "Adding another 20 years to the life of a copyright means a robust creative sector, more Canadian cultural exports, and the growth of many innovative businesses that have embraced the digital market. It is long past time for Canada to catch up to its international trading partners in this respect."

Boomplay licensing deal with Merlin sends indie repertoire to Africa

By Emmanuel Legrand

Boomplay, one of the leading music streaming platforms in Africa, and Merlin, the global digital rights agency for the independent label sector, have signed a licensing partnership that will make independent music repertoire available to potentially 62 million users in Africa.

  Boomplay claims to have a catalogue of 10 million songs and videos. The company said that the partnership with Merlin "will increase substantially the range and depth of repertoire available across the service."

  "This is an important partnership, and offers our African listener base a stronger opportunity to access and enjoy a greater range and depth of music," said Boomplay Head of Marketing Africa, Tosin Sorinola. "Boomplay’s vision is to build the largest and most reliable music ecosystem in Africa, and working with Merlin brings us significantly closer to that goal.”

  Merlin Chief Commercial Officer Charlie Lexton commented: “Merlin is a globally-facing business, and I am delighted that our independent members will now be at the heart of Africa’s exciting and fast-evolving music market. We look forward to working closely with Boomplay, to further developing this partnership, and building deep and lasting connections across the continent.”

Pan African Licensing Hub seen as key factor in Africa's digital royalty growth

By Emmanuel Legrand

The Pan African Licensing Hub, set up by several African collective management organisations to license their joint repertoire to digital platforms, has been described as a key factor in the future development of digital royalties on the continent.

  South Africa's mechanical rights licensing agency Composers, Authors and Publishers Association (CAPASSO), which has been instrumental in the creation of the project, said the hub is now “the most comprehensive repertoire license available in the region” and is “making access to the region simpler.” 

  The multi-territorial licensing hub currently comprises 17 CMOs across the African continent from countries such as Algeria, Burkina Faso, Nigeria, Kenya, Ghana, Senegal, Rwanda, Cape Verde and Namibia, amongst others. To date, the Hub has entered into multi-territorial agreements with various global digital services such as Apple Music, YouTube, Facebook and Spotify, as well as regional DSPs such as Boomplay, Udux, Music Time, and Mdundo. 

  The International Confederation of Societies of Authors and Composers (CISAC) recently released statistics showing that Africa’s digital collections grew 32% over the last four years. CAPASSO Chief Operations Officer Wiseman Qinani Ngubo believes that the growth will continue in the foreseeable future due to growing smartphones penetration and the increasing number of people adopting subscription services. 

A streaming boom

  “We are of the belief that Africa is on the brink of a streaming boom,” he said. “Our numbers indicate that streaming revenue across multiple territories in the region, excluding South Africa, has had an increase of over 62% year on year. This signals the readiness and the appetite for streaming thus we, as CMOs, must gear up to facilitate that access. This growth is directly attributable to the consolidation of rights and repertoire via the hub. Even in South Africa where there is positive penetration, there is still huge potential for growth.”

  David Alexander, founder of South African music publishing house Sheer Music Publishing, tells Creative Industries Newsletter that the idea of the hub dates back to 2013 at the World Creators Summit organised by CISAC in Washington, DC, when African societies got together to provide a single license to Apple's iTunes Store, and has evolved ever since. Initially, said Alexander, the majority of African CMOs had limited success in licensing digital platforms, but the hub changed the situation. 

  “At that point our deal was only with iTunes for the 14 African countries that they were opening their store in and the income was 99% for South Africa and only 1% for the other countries,” recalls Alexander. “Now, of course, the biggest source is Apple Music and the growth in the countries outside of South Africa is accelerating very quickly. Although Apple Music in South Africa is still growing at 40% compared with the prior year, the pan-Africa growth is around 100%, which is very exciting and is a validation for the work that we did from that Summit till now."

Provide metadata

  For Jotam Matariro, CEO of CAPASSO, the hub is poised for growth but there are still challenges ahead. First it needs to incorporate more CMOs from the region, but it also has to deal with specific issues such as proper metadata. “Setting up the hub and putting licenses in place is only but the first part of the process,” said Matariro.

  He continued: “We now need to encourage all our composers across the continent to provide metadata which is key to collections. Without metadata, we will not be able to benefit from the licenses that we have put in place as collections are based on the works information that we are able to identify from the massive reports that the DSPs provide to us on a regular basis. We therefore call upon all music authors and composers as well as publishers across the continent to notify their works so we can make this process beneficial to all.”

Copyright Office Symposium focuses on MLC's challenges

By Emmanuel Legrand 

Creating from scratch a collective management organisation is “a huge undertaking.” This is how Alisa Coleman described the task ahead of the music publishing and songwriting community, in tandem with the digital music services, in setting up of the Mechanical Licensing Collective, the new entity designed by the Music Modernisation Act that will from January 1, 2021 license and administer mechanical rights in the USA. Alisa Coleman is chair of the MLC and Chief Operating Officer of ABKCO Music & Records.

  Coleman was speaking at the Unclaimed Royalties Symposium organised by the US Copyright Office in Washington, DC on December 6. “We have the unique opportunity to represent songwriters and publishers and make sure that we put into place systems and controls that address the concerns the community has,” said Coleman. “We have to grow a huge corporation overnight, we have to hire a CEO, a COO, a CFO and a CIO, we have to find underlined staff, build community outreach, a web site that reaches the masses. And then build the back office that will process all the transactions.”

  Coleman said the creation of the MLC, and its licensee counterpart the  Digital Licensee Coordinator, is taking place in a spirit of cooperation between all stakeholders. “It was great of our teams that they saw the benefit of not extending what could have been an adversarial situation and everybody worked for the greater good of the community,” she said. 

Cooperative mindset

  Coleman's counterpart at the DLC, Garrett Levin, who is CEO of the Digital Music Association (DiMA), confirmed the cooperative mindset by stating that the DLC will “work closely with MLC” on all the issues leading to the creation of the MLC. He added that one of the illustrations of the working spirit was highlighted by the decision from the DLC, which will by law will finance the MLC, to accept broadly the budget presented by the MLC for the start-up costs and the first year running. “We did come to negotiated agreement that we filed with CRB [Copyright Royalty Board] and we are waiting for the CRB to accept the settlement,” said Levin.

From l. to r.: Alisa Coleman (MLC and ABKCO), Garrett Levin (DiMA and DLC), Lisa Selden (DLC, Spotify) and Richard Thompson (MLC).

  One of the key tasks of the MLC is to create an authoritative database of compositions that could be matched with recordings to ensure that all rights holders get paid when the MLC get operational. A few weeks ago the MLC announced that mechanical licensing administrator Harry Fox Agency (HFA) and technology company ConsenSys as "the primary vendors responsible for managing the matching of digital uses to musical works, distributing mechanical royalties, and on-boarding songwriters, composers, lyricists, and music publishers and their catalogues to the database."

  “We are not done yet with vendors selection,” said Coleman. “There's more work to be done. We have to develop things over time. We have a five year plan. We are going to progressively build it out so that it is functional for everyone.” She added that the end goal was to “to get the money as quickly as possible to the people it is owed.” 

A five-year plan

  Coleman said a lot of attention will be put in the database and in its matching capabilities. “It is not just matching the songs to recordings, we need all the information, who are the true owners, whether they are the songwriter, a publisher or an organisation that has the right to collect,” she explained. “And this is not just a US thing, it is a global thing. We don't just listen to music created by US songwriters and we listen to music from all over the world so there's a lot that need to be done to be collected.”

  Richard Thompson, MLC's Chief Information Officer, a former executive from Kobalt, said the MLC will have to work for different communities, from the “hobbyist” songwriter to the established songwriter, from the small independent publisher to the major publishers. “We have to make sure the experience works for all,” he said.

  Thompson said the MLC has to be seen as a project with a five-year plan, with 18 months to start the operation from scratch. “We will move heaven and earth to make it work," he said, "but when we will start it will be version 1.0 of the MLC. A lot of things cannot be achieve in 12 months. So we are focused on delivering core functionalities but our overall performance needs to be judged over three or four years.” 

Reaching out to the creators

  DLC's Levin added that one of his tasks ahead is to reach out to all the digital licensee community. “The DLC is open to any licensee that applies for it,” said Levin. “This is an opportunity to engage in information sharing and operate in this new space. Please reach out and get involved and see how we can grow the DLC through new entrants and existing players.”

  Levin also said that the DLC will “help get to the artist community.” He added that the MLC and the DLC will have to build two educational strategies, one towards creators and another towards the licensee community.

  Lisa Selden, head of publisher operations at Spotify and board member of the DLC, confirmed that the DLC is planning “to have big outreach to drive people to the MLC.” She added that digital services were going to coordinate with the MLC on marketing campaigns to reach out to the community of songwriters.

  Two sessions focused on the involvement of creators in the MLC process. Building the MLC database, in particular, will depend on the involvement of each and every songwriter, said Mark Isherwood of the DDEX secretariat. “You have to engage all the community all the time,” he said, noting that for creators the upside out-weighted the downsides of being involved: “If you don't register, your stuff you won't be paid.” 

Protect creators rights

  Producer and songwriter Ivan Barias said it was important for creators to “be true stakeholders in the discussion” and urged fellow creators to get involved “and make sure we do our part and do it for the next generation.”

  Songwriter and performer Rosanne Cash acknowledged that the digital landscape was complicated for creators to navigate but could also start a new era for the creative community. “We are not victims here, we can empower ourselves in the process,” she said. “We need education, we need support, and we need a community.”

  John Simson, a professor at American University, who was part of the team that built up neighbouring rights society SoundExchange in the early '00s, recalled that they had to overcome “a lot of lot of suspicion” from creators in the early days of SoundExchange. “Some people turned down the money,” he said.

  For Todd Dupler, Senior Director of Advocacy & Public Policy for the Recording Academy, it is important for creators to be involved in the way their business is set up but admitted that “there are people who want to get involved and people who don't get care.” He added: “Information is power, so the more they know the more creators can protect their rights.”

L. to r.: Ivan Barias, Rosanne Cash and Daryl Friedman, Chief Industry, Government, & Member Relations Officer for the Recording Academy at the Copyright Office's Unclaimed Royalties Symposium

US broadcasters and cable services in conflict about the renewal of the STELA Act

By Emmanuel Legrand

 

The National Association of Broadcasters (NAB)'s opposition to the re-authorisation of the Satellite Television Extension and Localism Act (STELA), could create a blackout situation on January, 1, 2020 if the legislation is not authorised for another five years, according to participants at the Phoenix Center's 19th Annual US Telecoms Symposium. 

 
  STELA allows local cable and satellite services to pick up signals from terrestrial channels from outside of their original market and beam them back to consumers under a compulsory license that remunerates the owners of copyrights the programmes. The NAB would like to introduce a system by which cable services and channel operators negotiate directly with broadcasters the fees to redistribute the signals. 
 
  George Ford, Chief Economist for the Phoenix Center, said STELA is "one of the most adversarial policy issue" in the telecom sector at the moment. "If it does not get renewed, it will disappear. Some want it to expire and others not," he said. Ford estimated that the cost of re-transmitting distant signals costs the US cable industry $12 billion a year, but that cost would certainly go up if the act was not renewed.


Running out of time
 
  "If STELA does not get renewed, there will be blackouts, and prices will go up," said Ford. "We are running out of time," lamented Jonathan Schwantes, Senior Policy Counsel for Consumer Reports, who noted that both the Senate and the House have the act ready for the floor, but the broadcasters' opposition makes it difficult to find a consensus on the legislation.
 
  The House version of the bill is known as the Satellite Television Community Protection and Promotion Act of 2019 (the “STCPP Act”) and it has been marked up by the House Judiciary Committee.
 
  Jeff Blum, SVP and Deputy General Counsel for satellite service DISH, said it "would be a shame if it was not renewed. Some communities will stop to receive their broadcast if it is not renewed. We are hopeful that STELA will be extended."

GEMA gets a foothold in digital distribution by acquiring a majority stake in Zebralution

By Emmanuel Legrand

 

In what represents a major shift in strategy, Germany's performance rights organisation GEMA has acquired a majority stake in Berlin-based digital distribution and rights management company Zebralution. GEMA said the acquisition will allow the PRO to "expand its performance portfolio and continue to develop its digital services and technologies."

  Zebralution will continue to operate as an independent business under the GEMA umbrella. It is understood that the investment in Zebralution, the details of which have not been disclosed, has been made through a bank loan and not by using the cash reserves of the society.

  Founded in 2004, Zebralution claims to be the first digital distributor for independent labels in Europe with a portfolio of more than 1,000 labels and audio book publishers from all over the world. Zebralution co-founders Kurt Thielen, Christof Ellinghaus, Sascha Lazimbat and Konrad von Löhneysen, will remain shareholders. Thielen and Lazimbat will continue to lead the company as managing directors.

 

Support creators

 

  “By taking a stake in Zebralution, GEMA has made a targeted investment that secures its future viability,” says GEMA CEO Harald Heker. “Through Zebralution, we will also be able to support our members in the digital distribution of their musical works. GEMA’s relevance in the digital music market will thus be significantly increased.”

 

  Heker explained that the new development is part of GEMA's international development strategy which includes the joint-venture ICE with the UK's PRS for Music and Sweden's STIM. With Zebralution, GEMA expands its range of digital services, and also has a new platform for growth. “In Zebralution, we have the right partner at our side to expand GEMA’s digital reach and unlock new income sources for our members over the long term,” said Heker. “In future, musicians will be able to release their music to a wide range of digital music providers through GEMA and Zebralution.”

  This is not the first investment of a music rights society in the digital world. Canada's SOCAN for example has acquired rights management tools MediaNet and Audiam in recent years. However, it is the first time a rights society partners with a digital distribution company. 

 

Raising questions

 

  A German music publisher and former GEMA board member, told Creative Industries Newsletter that the deal has been negotiated in secrecy with little communication between GEMA's management and its members. "We were not aware GEMA was going to do a deal," said the source. "They did it because they see it becoming part of their future activities. Obviously, in the past, GEMA was always very defensive with digital issues, but they are moving forward through ICE and now this deal.

  "Zebralution is the next step in becoming an active partner in this game. They are aggreagtors, they do not own rights, so GEMA's intention is to look at possibilities for their members to distribute music directly in the digital world by using that channel. In addition, they will have access to monitoring technology and accounting technologies."

 

  The music publisher added that the acquisition also gives GEMA access to "a wider range of data sets and get into neighbouring rights," but GEMA's new entrepreneurial raises a few questions nonetheless: "By becoming owner of a commercial company that needs to make profit you are in the for-profit business, yet CMOs cannot make profits. So what happens with the profits, and how do you finance all this expansion?"

The American Law Institute's proposed Restatement of Copyright Law gets the attention of Congress

By Emmanuel Legrand

Five US policy-makers – Senator Thom Tillis (R-N.C.) and Representatives Ben Cline (R-Va.), Theodore Deutch (D-Fla.), Martha Roby (R-Ala.) and Harley Rouda (D-Calif.) – have sent a letter to the director of the American Law Institute (ALI) outlining their concern about the ALI's proposed Copyright Restatement Project. 

  The ALI is an independent organisation set up in 1923 in the United States to produce "scholarly work to clarify, modernise, and otherwise improve the law." Among other things ALI "drafts, discusses, revises, and publishes Restatements of the Law, Model Codes, and Principles of Law that are enormously influential in the courts and legislatures, as well as in legal scholarship and education,” according to the Institute's web site. 

  Restatement of the Law are meant to clarify some complexities of the law, and also to promote changes to adapt the laws "to the needs of life.” Restatement are used by courts to inform decision and can have a lot of influence, sometimes trumping federal rules and regulations that are already in place.

  The ALI embarked a few years ago in drafting a Restatement of copyright law, covering 18 sections of copyright law that now need to be approved by the ALI’s council. The draft is considered by many in the creative sectors as taking a copyleft view of copyright law that could end up in weakening copyright protections.

Deeply concerned

  In their letter, policy-makers point out to the language used in the proposed Restatement. Reads the letter: "Throughout its almost 100 years of existence, the ALI has never chosen to draft a Restatement of an area of the law that is almost exclusively federal statutory law – until now. We are deeply concerned by the ALI's current Copyright Restatement Project. Courts should rely on that statutory text and legislative history, not Restatements that attempt to replace the statutory language and legislative history established by Congress with novel interpretations."

  The letter goes on with a list of nine questions that policy-makers are asking the ALI, most notably what approach are the ALI's Reporters (authors of the Restatement) taking to assess copyright law and how much weight do they plan to give to statutory text and legislative history. The signatories also ask the ALI how it plans to "address potential conflicts of interest" and "prevent bias from affecting the proposed draft." They are expecting responses from the ALI by January 3, 2020.

The letter received positive reactions from creative organisations such as the Recording Industry Association of America (RIAA), whose chief policy office Morna Willens, welcomed the letter. "It's Congress's job to set copyright policy, not the ALI's," she said. "The letter from Senator Tillis and his House colleagues raises fundamental questions about the ALI's decision to wade into such deep policy waters that should be fully answered before any 'restatement' of copyright goes forward. I want to thank the members for their leadership." 

Circumvent the authority of Congress

  Keith Kupferschmid, CEO of the Copyright Alliance, said his organisation "echo[es] the many concerns expressed, particularly the fact that federal copyright law – which is governed by the 1976 Copyright Act – is ill-suited to a Restatement because it is clearly articulated by Congress, and thank the Senator and Representatives for voicing their concerns."

  The Association of American Publishers, through its President and CEO is Maria A. Pallante, herself a former Register of Copyright, commented: "The ALI’s attempt to reinterpret this critically important federal statute should be seen for what it is: a back door effort to circumvent the authority of Congress and undermine the copyright system that fuels our creative economy. Importantly, the letter amplifies concerns already raised by the US Copyright Office, the US Patent and Trademark Office, the American Bar Association IP Law Section, federal judges, prominent legal scholars, and a long list of industry groups and other organisations.”

  Copyright law expert Pamela Samuelson, who sits on the ALI's advisory board and who is often seen as a copyleft advocate, responded to Pallante's statement on Twitter: "Baloney. Many of the most significant concepts and doctrines of #copyright are common law interpretations; judges will benefit from a restatement, which is more likely to fulfill than circumvent Congressional intent."

Not a one-sided issue

  In a Twitter exchange, industry commentator Neil Turkewitz questioned Samuelson's intentions: "You’re a tireless advocate for a version of © that you believe better serves the public than the one that Congress has passed. You have every right to press your views, but not under the cover of the supposedly non-partisan ALI."

  To which Samuelson replied: "There is broad support for the ALI Restatement of Copyright project as well as broad opposition. So don't act like it's a one-sided issue. I'm just one small member of the advisory board of dozens of #copyright experts who reviews the drafts."

  Legal scholar Devlin Hartline, from the Center for the Protection of Intellectual Property (CPIP) at Antonin Scalia Law School, George Mason University, published a detailed blog on the Restatement issues, in which he concludes: "If the goal is to 'reform' copyright law, then the Restatement will not accurately reflect the law and thus will be of little use to the courts — its intended audience. On the other hand, if the Restatement instead accurately captures the current state of the law, then the Restatement will do very little to move the reformatory needle."

US Department of Justice sides with GMR in its conflict with radio broadcasters

By Emmanuel Legrand 

The US Department of Justice has stepped into the conflict between Global Music Rights (GMR), the music licensing and rights management firm set up by artist manager Irving Azoff, and the Radio Music Licensing Committee (RMLC), which negotiates music licensing rates with content owners, by taking the side of GMR.

  GMR sued the RMLC in 2016, accusing the radio group to act like a cartel. The RMLC counter-sued, arguing that rights societies operated like a monopoly. The two organisations are expected to go to trial in 2020.

  In a filing with the court, the DoJ’s Antitrust Division argued that "competitors’ naked agreements to fix prices are one of the most pernicious forms of anti-competitive restraints that violate Section 1 of the Sherman Act.” 

A win for songwriters

  GMR said the statement of interest from the DoJ was "a setback for the RMLC" and "a significant win for GMR and all songwriters." It added in a statement: "GMR has consistently maintained that members of the RMLC illegally collude with one another to suppress rates paid to songwriters and composers for the public performance of their work." 

Daniel Petrocelli, lead counsel for GMR, said the court filing by the DoJ "reaffirms the legal position of GMR and vindicates the rights of artists and songwriters to be free from illegal price-fixing by radio station."

Added Azoff: “Today is a great day for artists, who have been bullied by the RMLC since the dawn of the modern radio industry. Advocating on behalf of artists is our founding principle, and we refused to allow this unfair status quo to continue. We believe the days of this brazen, long-running cartel are now numbered. GMR has never been prouder to stand with songwriters to fight back.”

Follow-up story: 
RMLC asks California court to dismiss comments made by the Department of Justice in its conflict with GMR

The Radio Music Licensing Committee (RMLC), which negotiates music licensing rates for the performance of music works in the USA with content owners, has rebuked the recent intervention of the Department of Justice in RMLC's conflict with music licensing and rights management society Global Music Rights (GMR).

  GMR has accused to RMLC to act as a cartel and the RMLC counter-sued, arguing that GMR and other performance rights societies were a monopoly.

  On December 5, 2019, the DoJ's Antitrust Division’s December 5 filed a Statement of Interest with the California court, arguing that “competitors’ naked agreements to fix prices are one of the most pernicious forms of anti-competitive restraints that violate Section 1 of the Sherman Act.”

A puzzling statement

  In a filing with the District Court in the Central District of California, the RMLC wrote that the DoJ's Statement of Interest was “puzzling” and argued that the DoJ “does not appear to have an actual interest in RMLC’ spending motion for judgment on the pleadings.” 

  The RMLC said the DoJ “asked the Court to 'reject' arguments that RMLC has not made” and that “without citing any supporting authority, the Division seems to ask this Court to be the first one in history to condemn as per se unlawful a proposal to use arbitration to avoid protracted antitrust litigation in federal  court.”

  Finally, the RMLC added that the DoJ did not address “two of the independent arguments that RMLC has made for dismissal, so none of the points addressed in the Division’s filing is dispositive of the outcome of the motion at issue.”

Dismiss GMR's claims

  The filing continued: “Although there may be cases where the Division’s stated interest in assuring that courts apply antitrust law fairly and correctly could assist federal district judges in resolving novel legal issues of first impression, this case has no such issues. It requires only a straightforward application of the uncontroversial binding law of this Circuit to the allegations of GMR’s complaint. There is nothing unique or difficult about that exercise that requires the court to consider the unsolicited views of a federal agency. And the Court does not owe any deference to the Division’s views on either the law or its application to the facts here.”

  In its conclusion, the RMLC asked the court to “still grant RMLC’s motion for judgment on the pleadings and dismiss all of GMR’s claims.” 

BMI and PRS for Music renew their international reciprocal agreement

By Emmanuel Legrand

The UK's PRS for Music and US performance rights society Broadcast Music Inc. (BMI) have renewed their international reciprocal agreement which provides songwriters, composers and music publishers affiliated with the two societies representation in each others' countries.

  The two societies said the agreement "preserves that shared mission by memorialising those innovative practices and procedures to maintain the highest degree of transparency and accountability in each society." The agreement also covers issues such as limitations on administration fees and consolidates arrangements related to digital rights flow, among other things.

  PRS for Music CEO Andrea C. Martin said the new agreement with BMI "is a huge step towards making our relationship a true business-to-business partnership." She added: “While with BMI we have consistently updated our business practices with the average term of PRS’s other reciprocal agreements being 35 years, it is a high priority for PRS to modernise this aspect of our business and uphold a commercial foundation for our international society relationships.”

High standards of transparency

  For BMI President and CEO Mike O’Neill, BMI and PRS have "a shared commitment of delivering the highest standards of transparency and service to our affiliated songwriters, composers and music publishers. This partnership with PRS embraces that commitment and will continue to benefit music creators from both of our territories.”

  PRS for Music claims to have over 100 representation agreements in place globally. BMI said it represents the public performance rights in over 15 million musical works created and owned by more than one million songwriters, composers, and music publishers.

The MLC picks HFA and ConsenSys as vendors to manage digital uses of music

By Emmanuel Legrand

 

The Mechanical Licensing Collective (MLC), created by the Music Modernisation Act (MMA) to license and administer mechanical rights, has picked technology company ConsenSys and mechanical licensing administrator Harry Fox Agency (HFA), as "the primary vendors responsible for managing the matching of digital uses to musical works, distributing mechanical royalties, and on-boarding songwriters, composers, lyricists, and music publishers and their catalogs to the database."

  HFA is owned by for profit rights society SESAC, part of investment group Blackstone, and ConsenSys is a blockchain software technology company founded by Joseph Lubin in 2014. The choice of vendors "received unanimous approval from the MLC Board." The MLC is due to launch on January 1, 2021.

 

  In addition, MLC announced the appointment of former Digital Data Exchange (DDEX) Chair and former Kobalt executive Richard Thompson as Chief Information Officer responsible "for overseeing the development and launch of the MLC’s revolutionary data platform to distribute royalties payable to songwriters and copyright owners."

 

  "Richard’s impressive experience in building the technology behind Kobalt, as well as his past role as chair of DDEX and his participation in the international music metadata standards group for nearly a decade, make him the ideal person to drive the development of the MLC’s platform," said MLC Board Chair Alisa Coleman.

 

Extensive vetting

 

  In a statement, the MLC said that over a dozen technology companies participated in the intensive Request for Information and Request for Proposal (RFI/RFP) evaluation process that began in November 2018. "Those companies were asked to provide comprehensive information regarding their US business, user platforms, matching, administration and royalty distribution processes, and technological capabilities in response to the RFI and then, for a narrowed group of vendors, to the RFP," said the MLC, adding: "The MLC conducted many hours of meetings with each vendor finalist and required those companies to engage in extensive data matching testing before making final partner decisions."  

 

  Thompson said, “The MLC needs a proven, end-to-end licensing, matching, and royalty processing system that can go live on January 1, 2021. After completing a rigorous evaluation process, HFA in collaboration with ConsenSys is the clear choice to ensure that the MLC has a solid platform to deliver on its mission. These vendors will successfully help the MLC deliver not only what is required under the MMA, but also improve the overall mechanical licensing process in the United States.”   

 

Same as the old boss?

 
  However, the choice of HFA to administer uses of music works raised a few eyebrows in the music community. US songwriter, performer and activist David Lowery quipped on Twitter: "Talk about burying the lede. HFA IS THE DIGITAL SERVICE PROVIDER TO THE “NEW” FEDERAL MUSIC LICENSING COLLECTIVE. Meet the new boss, same as the old boss."

  Lowery initiated a class action suit against Spotify for using his compositions without paying mechanical royalties (the suit was later settled in 2017). In a blogpost, Lowery wrote: "The problem is that HFA was the 3rd party licensing contractor hired by Spotify and other streaming services to obtain licenses from songwriters and publishers. HFA did not properly do their job leaving streaming services exposed to massive copyright infringement lawsuits (from people like me)."

  An MLC representative familiar with the decision-making process that led to the choice of HFA and ConsenSys as vendors told Creative Industries Newsletter that the MLC has spent "spent thousands of hours" reviewing submissions and conducted a "rigorous, fair evaluation process" to select the qualified vendors that will partner with it, and that includes HFA.

 

Technical expertise

 
  The source added that one of the key points in the evaluation was to ensure that the vendors would "competently intake large amounts of data, implement an accurate and efficient matching process, strengthen existing technology, and meet the requirements mandated under the law."

 
  "Given the tight time-frame for implementation, the board need to consider existing players in the marketplace who had the technical expertise to scale quickly," said the source. "HFA is only part of the solution; there will be many vendors that will contribute to the database development process. HFA has partnered with ConsenSys on the scope of work they will undertake, and more vendors will be announced to support our work in the coming weeks."

IMPALA to oppose Universal Music Group's sale of shares to Tencent

By Emmanuel Legrand

IMPALA, which represents European independent music companies, is mounting a legal challenge to the proposed acquisition of a 10% stake of Universal Music Group by China's Tencent Music, with an option to buy an additional 10%. IMPALA said it is also "concerned about who might buy the additional UMG stakes that are up for grabs."

  IMPALA said the combination of the world's biggest music company with Tencent, which currently owns four out of five of the leading music apps in China, with an estimated 90% market share in the growing Chinese market for the retail of digital music, will distort the market and create a situation that would be detrimental to the music sector.

  IMPALA plans to argue before the EU's competition authorities that the impact of such a sale "would change the whole music ecosystem, and smaller companies will be the first to lose out."

Risk of harm for consumers and competitors

   The organisation points out that the Chinese competition watchdog is already looking into Tencent Music’s licensing deals with the majors. This situation "underlines the importance regulators attach to ensuring fairplay, and other regulators have raised the alarm about the power of online services and media giants."

  For IMPALA’s Executive Chair Helen Smith, the Tencent/UMG deal, even at a low level of shareholding, will have an impact on both other companies of the sector and consumers. "We believe the risk of harm for consumers and competitors from such a transaction would be a concern because of the impact in both the digital market and the music sector, with independents being squeezed further and artists also losing out,” said Smith.

  Smith concluded: “We would expect regulators to also be concerned about the Spotify-Tencent link. We believe it would be difficult for Tencent and other companies with power in a vertical market to acquire influence over the world’s biggest set of repertoire.”

European music biz calls for increased EU funding for sectorial actions

By Emmanuel Legrand

Seven organisations from across the music sector – representing songwriters, labels, publishers, collecting societies and live music – sent a letter to European Union member states asking them "to reinforce the focus on music in the sectorial actions of the Creative Europe programme 2021-2027."

  In the letter, signatories explain that music only accounts for 3,9% of the current Creative Europe budget (€57 million in funding out of a programme with a budget of €1.4bn), which they claim "is in no way commensurate with the sector’s contribution and need. This makes it one of the most underrepresented sector in this programme."

  The organisations behind the letter noted that the European Commission and European Parliament "have taken note of this imbalance and decided to address it," through the Music Moves Europe programme, and that the Council of Europe has also included "diversity and competitiveness of the music sector" as a key topic in the Work Plan for Culture 2019-2020. However, the signatories wrote that these initiatives "are great signals towards the realisation of a music policy at EU level, but their impact will be limited if they are not better reflected in the future Creative Europe programme."

Commitment to music

They concluded: "We need to seize this chance now and build on the momentum created with Music Moves Europe to give a much needed boost to the competitiveness and diversity of the European music sector. We hope we can count on the Council to pursue this commitment by reinforcing the focus of the future Creative Europe programme on music."

  Signatories include: ECSA-European Composer & Songwriter Alliance, EMC-European Music Council, EMEE-European Music Exporters Exchange, GESAC–European Grouping of Societies of Authors and Composers, IMPALA-Independent Music Companies Association, Live DMA-European Network for Live Music Associations, and Liveurope-The Live Music Platform for New European Talent.

Charles Caldas (Merlin): “We are very bullish that the streaming growth will continue.”

Charles Caldas, who has led Merlin for the past 12 years, will be leaving the independent music companies' global digital rights licensing agency at the end of the year. Caldas hails from Australia, where he was running a local distribution company. Relocating to Europe with his family, Caldas started at the organisation when it had only a few members, mostly in Europe and North America, and built it into the fourth largest basket of music recording rights in the world after the three majors.

Merlin has since clinched deals with dozens of digital services, including Spotify, YouTube Music, Facebook, Deezer, Alibaba, NetEase and Tencent, to name but a few. In the process, revenues collected by Merlin went from a a few million dollars a year to hundreds of millions, with a cume between two and three billion dollars.

Merlin is registered in Amsterdam, and the organisation has offices in London, New York and Tokyo. Merlin counts over 900 members, representing tens of thousands of labels from 66 countries. Merlin’s board consists of 15 members – five each from North America, Europe and Rest of the World.

Caldas was awarded the Independent of the Year 2019 award from Dutch indie labels' association STOMP for his role as CEO of Merlin. “As CEO, Charles Caldas has been a key figure for Merlin and its independent members for over a decade. Since the very beginning of the agency, Charles has been a driving force, making an immense contribution to Merlin’s success,” said the STOMP Board. Caldas spoke to Emmanuel Legrand a few weeks before leaving the agency.

What was the original promise of Merlin and why did it exits in the first place?

The real impetus for the starting of Merlin was that the independent sector had always worked globally as a network. What I was doing in Australia with Schock as a distributor was mirrored elsewhere in the world. If you were a French label that needed distribution in Australia, especially if you were in electronic music, at some point, you'd be talking to Shock. And vice versa: we had local artists that we thought had potential in Europe and we would start to talk to our network of people in Europe or in the US. And we were all operating on the knowledge of our local markets. Once global retailers started to emerge, and iTunes was probably the first one of those, the independents were at a structural disadvantage compared to majors that already had this global infrastructure, which meant that with one deal with Sony, Universal, Warner or EMI at that time meant that you had access to the world's repertoire they represented with one transaction. To reach the equivalent geographic scope for independents would have meant thousands of individual transactions. It was very difficult for all those platforms to get to all the repertoire, so independents were at the back of the queue when these services were launching. It was also more expensive for these platforms to make business with the independent sector with potential thousands of individual deals, so the initial discussions about Merlin happened around that time.

Wasn't there also an issue related to how much independents were paid compared to majors?

The prices that independents were commanding for their music were lesser than what the majors were getting. I think independent were concerned that they were entering the digital world with the repertoire of the majors worth more commercially than the independents' repertoire. So that was one of the impetus, and the other impetus was that anti-piracy in the physical space was very much an industry issue with organisations like the IFPI combatting physical piracy and shutting down pressing plants of illegal manufacturers of CDs. It benefitted everyone because everyone was at the risk of having their rights infringed in that way. Once infringement became digital – and I think KaZaa was the first instance of this – it became much more profitable for majors to sue these platforms directly and extract damages directly from the platforms rather than doing it as an industry action. In the KaZaa case, it was painted as an industry action, but in reality it was the majors taking the damages and the independents were left in the cold. So the first thing with Merlin was to figure out how do we make easier for these digital platforms that are emerging to get our music and how do we better protect our rights, both in terms of infringement of those rights but also in the commercialisation of those rights. And that was really the key reason why it started.

So fast forward 10 years, Merlin has distributed over $2 billion to its members...

...and we are on the way to out third billion!

Did you expect figures like that when you were making your five-year and ten-year projections?

No. I am actually going through old papers and I found a report from one of the earlier board where we said that if Merlin could turn around 10 million pounds a year it would be a resounding success! I think we are currently turning around 10 million pounds every few days. We would have never expected that we would be paying out the levels that we are paying out now and that we would have distributed so much money from infringement settlements and things like the sale of Spotify shares.

When you were having your first meetings with platforms, were you taken seriously?

It depended on who the partners were. My first involvement with Merlin in the first six months was as a consultant, looking at how this could look like. It struck me very early on that some digital distributors where not going to pay us less because they could but that it was genuinely more expensive for them to deal with independents than with majors, to get all this repertoire and do all those deals. Power in numbers was an important foundation for Merlin but the efficiencies that it brings really allowed Merlin to continue to grow. If we were not able to deliver tangible value to the digital services, they would have had no reasons to pay us the rates that they pay us. Whilst we had a responsibility towards the labels to protect and maximise the value of their rights, we also had a responsibility to our DSP partners to make an offer as valuable, as efficient and as compelling as possible, and there should be no questions as to why they should be engaging with us.

Did it work?

In the early days we had very different examples. One of my first phone calls was to that small Swedish start-up called Spotify that was doing some test with some university students and the tests showed that the students were leaning heavily towards independent music and they realised that they did not have enough of it on their platform. They came to us to see how we could actively help them maximise the users' experience by making sure that all the independents that we represented were on their platform when it launched. At the same time we were having a very public fight with MySpace. They had built this platform mainly off the value of independent musicians and independent labels were using it to interact with their fans at the time; and yet when it came to commercialise the service, they gave major labels deals, equity and commercial deals but they refused to do it with independents. So we took a very different approach to that. In the first year, we made a deal with Spotify, had equity and we were there at the launch of the service, but on the other hand we were also fighting very publicly with MySpace about the value of our music. It does not surprise me to see who prevailed and became a success twelve years later...

How would you characterise Merlin? Didn't it purpose change over the years from an agency representing independent labels to an organisation doing collective management of rights?

We call it a rights licensing agency because at heart this is what we do. Obviously, as the market has evolved and as our membership has evolved, and became globalised, we have added over the years a lot of things to our offering as a response to the evolution of the marketplace such as the importance of access to data, access to real time reporting, fast payments. But it is still essentially a rights licensing agency that collects the most significant rights outside of the three majors for the use of recordings.

Do you view yourself as the “fourth major”?

We know that we are the most valuable basket of rights outside of the three majors. If you look at the Spotify IPO document, they very openly said that the three majors and Merlin represented 87% of all the streams on their platform. In a more recent earnings call, Spotify said that two of the four majors deals have been completed and obviously to say something like that we must be an important partner. It's a nice short way to say that we are virtually the fourth major, in terms of the value that we represent, but the difference is that Merlin has always been empowering our members to do the best for their businesses without having a middleman between them and the marketplace. In that sense we are nothing like a major. We are not aggregating the practicalities of having all those rights on the platforms and how people are using all the tools available to them.

What share of the global market do you claim?

We always say Merlin represents in excess of 12% of the digital marketplace, but that depends on the platform and the territory. It can go higher on some platforms and in some territories.

You regularly say that there is now a significant amount of money coming from territories that were previously were not delivering anything, such as Latin America, Asia and even Africa. How do you explain that?

I think it is partly because the cost of putting products out in these markets is less than it would have ever been in the physical space. Trying to physically move music that has been made available to consumers around the globe was an impossibility in the physical space. Streaming platforms are the most compelling, customer-attractive, cost-efficient ways for consumers to access music, more than it has ever been in the physical space. Taking Brazil as an example – consumers rely so heavily on their telephone and it is such a musical culture that having a music product added to your phone plan and having access to music through the device that's in your pocket at the price that's very reasonable is very compelling. We've seen the growth of Apple Music or Spotify around the world and once they are present in these markets, consumers like it as an offer. If you look at the emergence of mobile technology, alongside streaming platforms, it is then not a great surprise that wherever that population is, there is going to be a segment of that population that will be willing to pay for that offer.

How does it translate financially?

Brazil, Mexico, Chile and Argentina are now in our top 20 markets. Philippines and Indonesia are coming up quickly too. It is extremely exciting from a revenue perspective. And the other thing for us is how much our membership has boomed. If we go back to our launch data 12 years ago, we maybe represented companies from about 20 countries around the world. Now, we are at 66 and it grows all the time. The value is not only great in terms of international labels getting revenues out of these markets but also labels and artists from these countries getting their music out in the global marketplace and bringing value back into those territories. It's a fascinating phase in the evolution in the whole music space.

What was your approach with regards to China?

We sensed that China was a great opportunity and also a market that was structured inherently differently. When we started looking at China, which was quite a while ago, the preferred way to license your music there was to do an exclusive deal with, generally, Tencent, which is the dominant player, and relying on them to get your music to all the other music platforms. But once we started spending sone time on the ground – we worked with some local experts that helped us navigate the market – we realised that having a middleman control how your music is exploited in a market, given what Merlin does, felt inherently wrong. So we spent a lot of time trying to figure out how we could build relationships with the key streaming players in the market, and not do exclusive deals but do individual deals with the key players. We were very clear that if we were to do business in China it would not be by giving control of our music to middleman but dealing with each of the platforms individually. This took a long time to get to that but we felt vey good about where we got to. It's a complicated market. It's a market that still takes a lot of navigating. The way these platforms are structured is much more challenging in the sense that there is much more UGC on them, content can be uploaded and we had to do a lot of cleaning up. Despite all of that we are seeing very positive signs in China.

What are your views on TikTok?

We definitely think they should be licensed. It's an incredibly interesting development in how music gets to consumers, how they interact with it and what they want to do with it. It has incredible implications from a marketing perspective. My personal view is that we are going to see several of these left field entrants come into the market in the next five to ten years, and the way that music is being shared, viewed, exploited, is really fascinating. As for any product using music, we believe they should pay for that music. I am sure that we and the rest of the industry will find a way to license that platform. TikTok is not the only new platform that is going to be there. What is interesting about the value of music in the digital space at the moment is that it is encouraging investment and innovation again, and where there's money there's interesting ideas and I don't think TikTok will be the last of the interesting models that we will see.

The debate in some countries such as France is about the user-centric model. Some of your members are adamant that platforms should switch to such model. What are your views?

We are certainly looking at that issue. I think the only way you can really make a decision on which model works best for the market is to do very deep and very detailed analysis of it. We want to take a very robust research-based approach to really understand what effect the change in that metric would bring to our members, territory by territory, genre y genre. It is probably much more complicated than people are making it up. A lot of what I read in the press is very simplistic, with people making assumptions that are not backed by facts. Like with everything that we do at Merlin, we will look at it from a very fact-based approach before we take any position.

How do you see the streaming market evolve, especially now that it is maturing in markets like North American and Europe?

We are not seeing any signs of a slowdown. Obviously some territories are closer to maturity than others, but I still think that the level of penetration into the mainstream of the market – such a the home, the car, places where music consumers are not fully served – means that there are still a lot of opportunities ahead of us. There also opportunities in the form of convergence between different type of media and devices. At the moment we are looking at growth in the streaming space with the existing models but we are going to see a lot of innovations coming in the future around access to music where the model will not necessarily be the all-you-can-eat model for 9.99. People will find new and interesting ways to offer music which will bring a new wave of monetisation of music. From where we sit we are very bullish that the growth will continue.

And how do you see Merlin evolving is such environment, more as it is or more as a service-driven organisation for its members?

I don't think Merlin will ever replace the role that distributors play in the marketplace. The things that Merlin is looking at now – and that the next leadership will continue – is how do you keep independent in an evolving marketplace. Previously it was all about commercial terms and access to the marketplace. We are now using a much more complex set of measures, in particular how do you use the vast amount of data that comes from the platforms to enhance your business or keep yourself competitive and learn how to best exploit your music in the marketplace? There's still a lot of works for us to do in terms of helping maximising the effectiveness of the global marketplace. There will also be challenges. We talked about TikTok. So how do we help our labels navigate these technological challenges that are happening and make sure that their rights are protected. I think that Merlin will keep evolving in the way that the market will keep evolving. Merlin's principles are still in place and it's about maximise the value in the marketplace, so that will always be about commercial terms, but looking forward this is also going to be about how do you navigate technological challenges, what tools do you need to deploy to remain competitive, maximise your revenues, in order to understand the development of the global marketplace. I don't think there will be any shortage of challenges for the next leadership to look at!

You have on your board people with pretty strong opinions. Was that easy to navigate?

Look, boards are never easy to navigate. Independents are independent by nature. But whilst it can be challenging, to be involved in an organisation like Merlin has also been the most inspiring. You have those occasional differences of visions and opinions, but the thing that an organisation like that does is to keep you on your toes and keeps you thinking. I've appreciated that because to navigate the digital space at the speed that it is changing is a complex task, but those extra voices of people who might see what you don't see or who challenge things that need to be challenged – some might be right and some don't – are all part of the beauty of Merlin. Having fifteen people on the Merlin board that all think the same way would be a disaster. The strong personalities and the geographical differences bring different visions and this is what makes Merlin special.

Why are you leaving Merlin?

It's been an incredible 12-year adventure. The organisation is in very good shape. It has great executives. It is growing both globally and in terms of membership. It feels in some ways that it's a good time for the organisation to enter another phase. As for me, I have very much appreciated this adventure. Having been deep in this for 12 years, it was time for me to start a new adventure, whatever that might be. I feel like I am leaving the organisation in a very good shape and I am in good shape. Really, this is a life choice, not necessarily a professional parting of ways.

Do you have any plans for the future?

It is still a story to be written. I am energised and fascinated by what is going on in the digital music field. I can't imagine I am going to land too far from the tree. But before I do that we are going to have our first Australian summer in 12 years and that's the only firm plan I have at this point.