Surprise: ASCAP and Music Labels Colluded To Screw Pandora
from the incredible dept
On Thursday, ASCAP -- the American Society of Composers, Authors and Publishers -- will turn 100 years old. ASCAP was the original music collection society in the US, and over the years we've detailed just how out of touch and obsolete it has become, basically harming independent artists to help rock stars. At the same time, it has bizarrely lashed out at Creative Commons, and when Larry Lessig offered to debate ASCAP boss (and famed songwriter) Paul Williams, Williams refused while claiming it was all an attempt to silence ASCAP.Yet, in the last few years, we've been covering the incredible and bizarre legal fight between ASCAP and Pandora, which has seen ASCAP stoop to amazing lows. You can read some of the basic background in some of our previous posts. A key part of this was that the major labels, key members of ASCAP, suddenly started "dropping out" of ASCAP in order to do licensing directly. At first we thought this was a sign of how the labels might be realizing that ASCAP was obsolete and out of touch, but it has since become clear that these "removals" were all something of a scam to force Pandora into higher rates.
What happened was that ASCAP and Pandora had first negotiated a higher rate than Pandora had agreed to in the past -- reaching a handshake agreement. However, before that agreement could be finalized, these labels started "withdrawing" from ASCAP in order to negotiate directly. As part of that, both ASCAP and the labels refused to tell Pandora which songs had been withdrawn, meaning that if Pandora accidentally played one of the withdrawn songs (again, without knowing which songs were withdrawn), it would face massive copyright infringement liability. With its back to the wall, Pandora was forced to agree to much, much higher rates with those labels who had "withdrawn" their songs -- and then those labels magically put their songs back in ASCAP... and then ASCAP claimed that those newly "negotiated" deals represented "true market" deals, and argued that in an open market, it deserved those kinds of crazy high royalty rates. Pandora pointed out that this pretty clearly violated the antitrust decree against ASCAP -- an argument that Pandora won in the first round.
The case is moving forward, and many more details have been revealed, highlighting just how slimy ASCAP and the major labels have been about this. It makes it quite clear that the "withdrawals" were never actually about the labels withdrawing their music from ASCAP, but what certainly looks like collusion to have labels "withdraw," put a gun to Pandora's head, get them to agree to massively higher rates to avoid a lawsuit, and then feed that info back to ASCAP, which would continue "managing" the songs, even though they had been "withdrawn."
This comes clear in Paul Williams' deposition. Given that all these major labels were apparently "withdrawing" all of their digital rights, you might think (1) that ASCAP would be upset since it was losing all its key labels and (2) that Williams might look at reducing the cost of his licenses, since apparently they would no longer have all these important songs. Not so. From the trial transcript, here's Pandora's lawyer explaining how Williams responded when they asked him about it at his deposition:
"Did you ever consider that ASCAP could charge a lower price and try to get more people to use the works left in ASCAP rather than have users use the higher priced EMI repertoire?"On top of that, it details how, even as these labels were "withdrawing," representatives from those very same labels/publishers still sat on ASCAP's board. As for that issue of the labels and ASCAP refusing to reveal what songs were being withdrawn, more evidence has come out during the case, showing that this was all part of the plan between the labels and ASCAP. In fact, they joked about it over email, which has now come out. During the opening, Pandora's lawyer told the story of Pandora seeking information about what songs were being withdrawn by Sony.
"Answer: Never once did that occur to me."
In other words, it was all about raising the rates. It was not about competition.
Your Honor, by the time Pandora asked for this information on November 1st, both ASCAP and Mr. Brodsky [Sony Executive VP] had in their possession this very list. The deposition testimony from ASCAP was that this list as is could have been delivered to Pandora within 24 hours were it only to get the go-ahead from Sony to do so. ASCAP never received the go-ahead.There's a lot more in there, but it seems abundantly clear that these labels "withdrawing" from ASCAP had nothing to do with competition or market rates. It appears that it had little to do with even withdrawing from ASCAP. Instead, it seems to have been designed from the start to basically screw over Pandora, in what certainly smells an awful lot like collusion, by forcing Pandora to pay exorbitant rates or suddenly face a massive copyright liability because no one would tell them what songs were being "withdrawn" from an existing licensing agreement. Then, ASCAP and the other labels could turn around and use those "agreements" pretending they represented a "market rate" to argue for higher rates at the Copyright Royalty Board, which is supposed to try to come up with a "market rate" for various licenses (even though the high rates were supposed to have a confidentiality agreement tied to them).
We cited much of the internal back-and-forth on this in our briefs... My favorite is the following exchange between Mr. DeFilippis and Mr. Reimer of ASCAP on December 19th, 2013, PX 193. You see the question being asked by Mr. DeFilippis: why didn't Sony provide the list to Pandora?
Mr. Reimer's response: Ask me tomorrow.
Mr. DeFilippis: Right. With drink in hand.
And the inference here is just incredible. This data was sitting there, your Honor, and nobody was willing to give it to Pandora.
Considering ASCAP's previous antitrust problems, this certainly looks... incredibly sketchy. And then it's ASCAP going around claiming that Pandora is somehow trying to game the system? The whole thing is incredible, and paints a really nasty looking portrait of the highly questionable games that ASCAP and the major labels/publishers played to try to force ridiculously high licenses on Pandora by setting up fake competition, and putting a gun to Pandora's head.
ASCAP has often come across as sleazy in the past, but the details coming out at this trial take it to a whole new level.
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Filed Under: antitrust, collection society, collusion, internet radio
Companies: ascap, emi, pandora, sony
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My level of respect for copyright is zero and with a good reason. My only concern nowadays is how to support those that deserve it either for their work alone (EFF, Mozila, some artists whose works don't suit my taste but they do it right) or because I'm really a fan and they aren't douches (then I'll go way further in trying to throw money at them).
The bright part is that more and more people are recognizing that. The sad part is that there are the likes of ASCAP and the rest of the MAFIAA that will do a lot of damage before these new times are shoved down their throats.
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Typo
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When a company starts behaving like a predator and killing other companies, why do we not, at the very least, revoke their corporate charter?
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The bluff has been called
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That's not "like" a hired thug. That's a hired thug. He gets paid for a continued career of criminal behavior by the current government.
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Re: The bluff has been called
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What year?
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2013... sorry. Fixed.
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Error
Surprise: ASCAP and Music Labels Colluded To Screw Pandora
should read:
Surprise: ASCAP and Music Labels Colluded To Screw the public and the artists they claim to represent
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To make it legal...
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Oh, I'd *LOVE* for them to take this idea
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"What if we tried it again, but this time with a really big train?"
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Re: Re: Re: Oh, I'd *LOVE* for them to take this idea
So there is precedent for trying to burn everything to the ground ;)
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What did they have a magic time machine or something?
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It doesn't really matter if they'd win or not. They'd have the minimal amount of evidence needed to not get the case dismissed immediately. Being the defendant in a copyright infringement suit requires a huge amount of money; even if you win, your legal fees may still be more than a default judgement for infringement.
Settling was simply the cheaper option for Pandora. At least in the short run - and since Pandora already pays half of their income to copyright holders, they're on life support already, and need to think solely in the short run right now.
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Pandora
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Mike Masnick has no problem with Google punishing Rap Genius by changing its search results (while letting obvious other, often-DMCAd bad actors stay put), but he's upset with musicians trying to get paid better by the millionaires over at Pandora.
Too funny.
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LOL
Mike Masnick has no problem with Google punishing Rap Genius by changing its search results (while letting obvious other, often-DMCAd bad actors stay put), but he's upset with musicians trying to get paid better by the millionaires over at Pandora.
Too funny.
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Learn the Basics Before you Open your Pie Hole
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Re: Learn the Basics Before you Open your Pie Hole
So by that logic...
Many artists choose to affiliate with major record labels because it would be crazy to try to go to every individual retailer in the country and negotiate individual deals to sell their music, but that doesn't meant that they shouldn't have the right to negotiate directly. Right?
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Re: Learn the Basics Before you Open your Pie Hole
Now you're just making up words.
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And how do you spin the part about ASCAP and the labels refusing to let Pandora know which songs were pulled and using that as a negotiation weapon against Pandora? That is most defiantly collusion and an antitrust violation, isn't it?
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Stupid autocorrect.
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Re: Learn the Basics Before you Open your Pie Hole
The question here would still be why the threats of withdrawal of an unknown number of works? It seems like they are essentially increasing value of the product by reducing transparency in the collective bargain and using it to leverage individual negotiations. When you do that, you are not even close to letting valuation be carried by free market mechanics!
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Re: Learn the Basics Before you Open your Pie Hole
That is not what happened.
Some publishers - namely, Sony and Universal - did what they called a "partial withdrawal." That is, they did not withdraw from ASCAP altogether - just from ASCAP's dealing with Pandora, and only with Pandora. (They did not, for example, work out separate deals with IHeartRadio, the streaming Internet music service owned by Clear Channel.)
But even this was a sham, for those publishers did not approach Pandora to work out new licensing deals. Instead, ASCAP would still administer these licenses. It's also worth mentioning that the heads of these publishers are on ASCAP's board of directors. (In fact, the court already saw through these "partial withdrawal" schemes and found they were shams.)
Well, you think, that's bogus, but Pandora should have just deleted their material from their service until it could get worked out. And that's where Sony and Universal really kicked Pandora in the nuts. Because they never provided a list of their material to Pandora. And they never asked ASCAP to do so - even though ASCAP had that data sitting and waiting. And they were not shy about doing it.(That's where the "ask me tomorrow with a drink in your hand" comment comes from.)
So, with the "withdrawal" date fast approaching, Pandora had two choices: accept whatever rate Sony and Universal were asking, or face multi-million-dollar damages from copyright infringement lawsuits. No surprise which option Pandora took.
That is not a "market rate" deal. That is blackmail.
All of this is so that ASCAP can charge Pandora for the same rate as on-demand music services - that is, services where users select which particular song is going to be played. A rate that is almost double what they were currently paying - and which is almost double what similar services such as IHeartRadio are still paying.
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Re: Re: Learn the Basics Before you Open your Pie Hole
What about the third option of just going on with it and when charged with copyright infringement use the fact that they hd NO WAY of knowing as defense? After all, ASCAP has gone on record for withholding vital information.
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I'm not sure that your example is analogous. Artists have contractual obligations with their labels, which may limit their ability to negotiate anything outside their contracts. I think you're trying to make a point about labels having all of the leverage in most of those relationships, and getting taken advantage of at times as a result. I won't disagree with you on that front.
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I'm not familiar enough with that aspect of the dispute to weigh-in, but I am highly suspicious of the "truthiness" of that characterization in this article. If, indeed, ASCAP was not forthcoming with Pandora about the songs that were no longer covered in their repertoire, I'd agree that is not defensible as a business practice. But that is an entirely separate issue from whether individual publishers have the right to negotiate their own rates and whether those rates should serve as a relevant benchmark when a collective licensing society like ASCAP tries to negotiate their rates. And as far as the collusion accusation goes, ASCAP and BMI initially fought the withdrawals of their major publisher members, and now with the recent court ruling are at risk of losing a large segment of their members entirely. It's hard to conclude that was their master plan was to increase their royalties by threatening their very existence.
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Trying to spin it the other way seems like a very weak theory.
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Yes, but the contractual obligation is between ASCAP and the publisher. So it should be up to those two parties to renegotiate or enforce terms of the contract, not Pandora. Nonetheless, Pandora has succeeded in convincing a court that publishers must either be all in or all out of ASCAP. So now the major publishers "have a gun to their head" and must decide whether they want to stick with the crappy rates that ASCAP can negotiate under the terms of their consent decree, or negotiate all of their deals in the free market while losing the benefits of having ASCAP as a collective to administer for them. The most likely scenario, in my view, is that the major publishers will eventually pull out of ASCAP and Pandora will end up paying them more, while the independent publishers who cannot afford to negotiate and administer thousands of individual deals will be left with the crappy ASCAP rates.
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To quote Elvis Costello
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shorter tywebb...
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As opposed to the nice and friendly stuff they usually do?
This isn't sketchy, this is business as usual.
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a:) My first point is that Pandora is a relative large operation - big enough that it's receiving the ire of the copyright folk, which in itself is not good. However on the good side it's got the attention of a huge listener count, and in this case, an article from Mike Masnick - who for me has written much invaluable material, much of which I've used for my submission to parliament when proposing a new radio station for Sydney. For the last 15 years, I've been trying to set up a radio station that has over 20,000 tracks on it's playlist, and that advocates for the handicapped. In my case, rather then copyright, it's the rediculous costs of broadcast licenses, collusion with politicians, and corporate greed that has prevented my radio station getting a license - pretty much all the same elements that has screwed over the copyright sector. When I submitted such material to tech-dirt around November last year, there was no reply. So we're not Pandora, but were just a small station trying to do the right thing, and appreciate a leg up every once in a wile, rather then the continuous wall of silence.
b:) As an artist, I can certainly understand the benefits and need for copyright, but I definitely think it is a corrupted mess at the moment, I'm firmly of the belief that copyright fees and expenses should be based on a percentage of the broadcaster profits. In this way, the artists still get their royalties, and broadcasters are then always in a position where they can afford the fees - as a percentage of the revenue rather then going bankrupt.
If for example we say 10%, if a company makes $5,000,000 per year, then they pay $500,000 - on the other hand, if they only make $2,000, then they only pay $200 per year. Everyone pays their fare share here, and nobody get's screwed over. Unfortunately though, the above article has very much deminished any respect I still had for copyright.
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Worth a read
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Perhaps some fact might help.
While the music publishing companies owned by record companies are involved, record companies receive 49 percent of Pandora's revenue while songwriters and their music publishers split 4% - 2% to songwriters and 2% to their publishers.
Pandora wants to drive the songwriter's share down.
Record companies are happy with their current share and don't want to see it diminished if songwriters are paid more. Remember salary bonuses are based on what a company's division makes, not on what the combination of divisions make. The heads of record companies don't mind keeping royalties paid to their publishing divisions and songwriters low as it means more in their personal pockets at the end of the year.
Rather than formulating opinions based on Mike's totally inaccurate and twisted presentation, perhaps a few of you who actually give a damn about what is really going on might want to take a look at:
Pandora Suit May Upend Century-Old Royalty Plan
By Ben Sisario -- from the New York Times
http://mobile.nytimes.com/2014/02/14/business/media/pandora-suit-may-upend-century-old-royalty- plan.html?_r=0&referrer=
Songwriters are the basis for the entire music industry ... without them, there is no music industry ... Think about it, and think about fairness.
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Re: Perhaps some fact might help.
You mention fairness -- what do you consider "fair" here? Are composers getting a raw deal? Maybe so, I don't know enough about the industry to have an opinion on that. However, ASCAP apparently wants to give Pandora a raw deal and call that "fair".
You don't achieve fairness by setting someone else up to replace you as the target of unfairness. That's just being a dick.
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Re: Perhaps some fact might help.
That's Mike Masnick's problem spiced up with a load of inflammatory speculation in order to whip the truly clueless into a torch and pitch fork frenzy - for what purpose is unclear.
It's hard to believe that anyone could hate songwriters (co owners - with music publishers - of ASCAP) that much.
Did you read the NY Times article? This is not about songwriters and record companies ... as Mike states in his flame throwing headline.
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Re: Re: Perhaps some fact might help.
If you want to criticise others, at least stop committing the same sins you're whining about yourself. Stick to facts and address the real opinions stated by others.
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Re: Re: Re: Perhaps some fact might help.
I don't sing. I don't perform. I write songs. My business model is writing songs.
Westergren has sold millions and millions of dollars worth of Pandora's stock and is stuffing money hand over fist into his personal bank account while I can't afford to take my family to McDonald's for dinner.
On top of that, he's spent over $10 million in court and in Washington trying to reduce what I get paid.
Tim has done nothing illegal, of course, but being dedicated to screwing over the people (songwriters) who make it possible for his business - and every other business - in the music industry to exist seems several step down from unconscionable.
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Re: Re: Re: Re: Perhaps some fact might help.
Well, you have one step of a business model.
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Re: Re: Re: Re: Perhaps some fact might help.
Since you don't use your real name, nor tell us what song got played, there's no particular reason to believe you. But, let's say for the sake of argument that you're right.
Also for the sake of argument, I assume you're the sole composer. (If you only own, say, 50% of the copyright on the composition, then you're only going to get 50% of the royalties.) That means that your publisher also got $35.00. That is after the PRO's operating expenses; if you're on ASCAP, those expenses are currently 12.4%. This means that Pandora paid roughly $80 in songwriter's royalties for those plays.
Now consider terrestrial radio. I assume that your song is getting play on some commercial radio station in a metropolitan market. How many times do you think your song was played there? I'll put it in perspective: Radio stations owned by Clear Channel have about 243 million listeners per month. Since they own 840 radio stations, that puts each radio station's listeners at roughly 290,000 listeners (on average). If even a single one of those stations played your song more than four times per month, that radio station has already played your songs more times in that single month, than Pandora did in its entire royalty period.
Do you honestly think that a single radio station pays more than $80 per song per month to songwriters? Did any single radio station, anywhere, pay more than $35 per month to you?
In fact, we know they did not. As per a 2012 legal settlement with ASCAP, terrestrial radio stations pay a maximum rate of 1.7% of their income to PRO's. And so does IHeartRadio. What did they pay you in royalties? I'd bet dollars to donuts that it is a lot less than Pandora. Can you even tell from your royalty statements?
If anyone else who is reading this is curious, I'm not the only one who can crunch the numbers:
http://theunderstatement.com/post/53867665082/pandora-pays-far-more-than-16-dollars
Westergre n has sold millions and millions of dollars worth of Pandora's stock and is stuffing money hand over fist into his personal bank account while I can't afford to take my family to McDonald's for dinner.
Westergren is a former musician and film composer who developed the Music Genome Project, then spent years maxing out his credit cards and eating Ramen before the company he founded was in any way viable. You're complaining that you're not making as much money as he is? Simple: start your own damn company.
If you're going to complain about salaries, you should complain about the CEO's of Clear Channel, who make more than $2 million per year. While we're at it, you should complain about the salaries of ASCAP and BMI executives, who have six-figure salaries that come directly out of your royalties. Or the salaries of the PRO's boards of directors - many of which earn seven figures working for major publishing companies. Said publishing companies being the same companies that own record labels, which have been trying to screw over musicians much more than Pandora ever could, for longer than either of us have been alive.
On top of that, he's spent over $10 million in court and in Washington trying to reduce what I get paid.
As I explained before, Pandora is not trying to reduce what you get paid. They would be more than happy to keep paying you the same amount that they always have (or even slightly more). They don't want to get singled out so they have to pay much more than everyone else.
Also, if Pandora spends money on litigation, it comes out of their pockets, not your royalties. The same cannot be said of ASCAP or the publishers. If the lawsuit goes against ASCAP - and it's looking like it will - then are you going to blame ASCAP for wasting money that is rightfully yours? Because you should.
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How much would you get from terrestrial radio for the same number of listeners (e.g. 2-3 plays on a large radio station)? None of you supposed professional musicians ever bother to answer that question. Nor do you ever bother to identify yourself so people can see who you and and which work you're referring to. I suspect it's because you'll have to admit that the revenue would be the same, or perhaps lower, but since you people never bother to let the rest of us look at the figures I'll have to guess.
Then, how many of those listens converted into other revenue - for example , how many sales happened as a direct result of Pandora recommending the music to people? Despite the lies that often accompany these discussions, it's almost certainly not zero.
Then, how much more money could you get if the labels weren't so devoted to screwing over services like Pandora - and even Pandora specifically (e.g. they're specifically blocked from playing music outside the US while other services such as Spotify are able to do so).
Then, of course, why are you solely depending on royalties for prior work to eat? I have to work today to go to McDonalds tomorrow, why are you depending on work you did years ago for that? Why not work for hire and take an upfront payment for the work you do? Let me guess, the industry promised you riches and now you're complaining that they didn't appear? Tiny violins come to mind.
But, hey, keep whining and taking business decisions personally rather than admitting that it's the entire industry you decided to work in that's screwed up. Helps you sleep at night with someone to blame I suppose.
I'm happy to debate you if you're a real musician, and I'm sorry if you're not making out as well as you'd hoped. But, whining that the owner of a company that's making millions in LOSSES every year managed to make some money on stocks isn't a great argument.
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Re: Perhaps some fact might help.
This is not true. Pandora is not, and was never, trying to decrease the amount that they paid to songwriters.
Pandora has been paying performance royalties since they came into existence. They recently made a handshake deal with ASCAP that increased the amount they would pay to songwriters.
That deal wasn't enough of an increase for two of the publishers - Universal and Sony - and that's when the shenanigans began.
Also, keep in mind that Pandora's songwriter royalty rates were already higher than the rates paid by terrestrial radio - including the internet streams of terrestrial radio stations.
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Re: Re: Perhaps some fact might help.
Because there is a certain amount of choice with Pandora, Pandora and terrestrial radio are not the same product so their rates should not be equal.
And, if you want to talk about shenanigans, Pandora bought a tiny terrestrial radio station in the middle of nowhere so it could claim that it's entire service should be treated like terrestrial radio. The judge threw the scam out in an instant.
Who's zoomin' who?
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Re: Re: Re: Perhaps some fact might help.
Yes, it is true:
- Pandora and Royalties
Some juicy, behind-the-scenes details are revealed in the court proceedings:
So, yeah, exactly as I said.
Because there is a certain amount of choice with Pandora, Pandora and terrestrial radio are not the same product so their rates should not be equal.
Pandora is not an on-demand service. Both terrestrial radio stations and internet services like IHeartRadio have that same amount of choice for their users. That's why ASCAP set up bifurcated rates back in 2002, which Pandora has always paid.
And, if you want to talk about shenanigans, Pandora bought a tiny terrestrial radio station in the middle of nowhere so it could claim that it's entire service should be treated like terrestrial radio.
No, it's because ASCAP sets up different rates for streaming on the internet if you are an owner of a radio station. That's why IHeartRadio pays lower royalties than Pandora, despite the fact that they're essentially the same service. Pandora was just trying to get the same internet streaming rates that Clear Channel has.
Just out of curiosity, if you're so against Pandora's rates, why aren't you up in arms about Clear Channel? They pay, much lower rates than Pandora does for the same service. Why didn't Sony and Universal threaten to walk when ASCAP dealt with them?
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To paraphrase Shakespeare...
Hypocrisy by any other name still smells as rank.
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Which would not surprise most people, though I cannot imagine your RICO act being used against the likes of ASCAP's board or the Labels.. would be a political shit fight to put it mildly.
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Point of view
We are currently amassing a group of "economically significant" indie artists and content creators from all disciplines to discuss these issues, and we need your input. As you know, most of the ones doing the shouting are ignorant or have ulterior motives.
I'd like to find mutually beneficial solutions to these issues so that we can get along.
Tech is not the enemy of copyright owners, but is sure dressed up like it right now.
We need to work together and quit bickering.
And for songwriter/artists, we need to see what our "Advocates" look like behind the closed doors. It ain't all good, as you guys already know.
Love & Light,
Amanda
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Re: Re: Point of view
Not necessarily. There are many ways for a songwriter to a make a living that don't depend on the business model of getting a minute royalty when someone buys it or plays it on the radio.
"If songwriters don't get paid there won't be any songwriters anymore"
You mean like there weren't any songwriters before the record labels appeared? Keep telling yourself that, it only confirms that you are only interested in people who write for the business rather than for art. We're better off without those people, and nobody's forcing them to choose songwriting as their profession.
"Free music means no income."
Only if you're a poor businessman.
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Re: Re: Re: Point of view
It is an entirely different thing, a performance rights organization. And they work to collect royalty payments FOR artists. They're not screwing artists by asking for a higher rate. They are getting a higher rate for the artists they represent.
This article conveniently leaves out Pandora's shady past in dealing with artists. ASCAP is only fighting fire with fire.
Additionally, if we were to eliminate copyright, it is the small artists who would suffer and die out - not the mega stars (people who write for the business). I think you have it backwards.
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Re: Re: Re: Re: Point of view
Sure, ASCAP isn't a record label. Most people know that. That doesn't make them different from hired goons demanding money on behalf of their gang.
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You're Wrong!
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