Judge Highlights Bogus Collusion By ASCAP, Publishers In Rejecting Their Attempt To Jack Up Pandora's Rates

from the mafioso-techniques dept

Tue, Mar 25th 2014 9:26am — Mike Masnick

Last month, we wrote about the rate court fight between ASCAP and Pandora as ASCAP attempted to massively increase Pandora's rates through moves that were quite clearly collusive. ASCAP had already lost an earlier ruling showing that it had violated its consent decree by letting publishers selectively remove certain works in order to force Pandora into paying much, much higher rates. However, the details of ASCAP and the publishers' deception became much clearer during the rate court battle. Last week, the judge handed ASCAP a huge loss, keeping the rate where it had been, at 1.85%, rather than jacking it up to ASCAP's requested 3%.

The ruling clearly highlights just how obnoxious the publishers and ASCAP acted throughout this process, and how their actions not only were intended to harm Pandora, but also the very songwriters that ASCAP pretends to represent. ASCAP has done an amazing propaganda job of pretending that it's always looking out for songwriters -- when the simple fact is that it focuses on benefiting its giant publishers, often at the expense of songwriters. The key issue in this whole action was how ASCAP allowed publishers to selectively "withdraw" their rights from ASCAP and then effectively hold a gun to Pandora's head, saying that if Pandora didn't accept a new license directly with those publishers, it would be infringing (to make this work, the publishers also refused to even let Pandora know which songs had been withdrawn). ASCAP effectively encouraged this to happen, knowing that it could use this to jack up its own rates, even though, on its face, publishers withdrawing rights from ASCAP should be seen as bad for ASCAP. But withdrawing from ASCAP (even though ASCAP effectively encouraged it) is also bad for songwriters because the publishers aren't exactly good at paying songwriters (shocking), whereas at least ASCAP has some level of transparency. Even the judge highlighted the songwriters and publishers' interests here were not aligned, but ASCAP was still siding with the publishers.

But the really damning stuff comes from the things we highlighted earlier during the trial -- and the judge found those points quite damning. There was clear collusive behavior between the publishers and ASCAP, meaning that ASCAP's claims that those "independently" negotiated deals were not done in a true marketplace. It started with ASCAP boss, Paul Williams, trying to calm down angry songwriters, but flat out admitting that these "withdrawals" were all really about getting higher rates for everyone:

The large publishers were well aware of the discomfort that at least some writers felt with the new media withdrawals and made the following argument to convince them to come on board: if the major publishers could get higher license rates by direct negotiations with new media companies outside of ASCAP then those rates could be used in rate court litigation to raise the ASCAP license fees. The publishers found an ally on this issue in writer and ASCAP chairman Williams, who agreed with the new media rights withdrawal strategy. His email illustrates the strategy he pursued to get writers to support the publishers’ partial withdrawal of rights from ASCAP:
My job is to make this transition as smoothly as possible in the board room . . . to assuage the fears of the writers who may see this as an ASCAP death knoll . . . . [W]e are in fact giving [the major publishers] the right to negotiate. The end result being that they will set a higher market price which will give us bargaining power in rate court.

In other words, far from real competition and a market rate, Williams was flat out admitting that he was encouraging publishers to leave his own organization, making life more difficult for the songwriters he claims to represent, just so they could set up these sham agreements (negotiated with a gun to Pandora's head) and then pretend there was a higher "market rate" to use at the rate court.

This kind of behavior went to extreme levels, with Universal Music more or less threatening Pandora's lawyers with mafioso like claims, and then immediately emailing ASCAP folks, to talk about how the strategy of jacking up the rates was working, and how ASCAP should be strong, since Pandora was supposedly running scared and would settle quickly. This, you'll note, is not the behavior you'd see in a competitive market. It's the behavior of organizations colluding against Pandora.

The day after the rate court filing, UMPG’s Horowitz called one of Pandora’s attorneys at Greenberg Traurig. As Horowitz promptly memorialized in an email to ASCAP’s LoFrumento, Horowitz
told [Pandora’s outside counsel], as a “friend” of the firm, that I thought both the firm and Pandora are completely tone deaf. That whether his firm has the legal right to rep Pandora in litigation, the firm has lost huge goodwill with writers and artists by doing so. And that filing now for a rate court proceeding against ASCAP . . . had the effect of unifying artists, writers, and PROs against Pandora.
Horowitz also gave some advice to LoFrumento regarding ASCAP’s negotiating stance with Pandora. His advice boiled down to two words: be strong. Horowitz wrote:
My take: [Pandora’s outside counsel] and Pandora are scared. They just want to settle with ASCAP and settle fast. Be strong. Time is on your side. Pandora is now under intense pressure to settle with ASCAP. They have to put this behind them. You can really push Pandora and get a much better settlement as a result. They are reeling. They will pay more, a lot more than they originally intended, to do that.
Horowitz forwarded this same email to other ASCAP board members, including Sony’s Martin Bandier, and BMG Music Publishing’s Laurent Hubert. Besides these ASCAP Board members, Horowitz sent the email to David Israelite of the National Music Publishers Association (“NMPA”), which is a music industry trade group based in Washington, D.C. LoFrumento assured Horowitz that he was approaching Pandora with the mindset Horowitz advocated.

In other words, this was all a coordinated effort, rather than actual market competition. The ruling further confirms the fact, as Pandora had publicly stated, that ASCAP and Pandora had actually agreed to terms on a rate, and then ASCAP backed out of the deal, suddenly demanding much, much higher rates, leaving Pandora in a difficult spot at the last minute on some negotiations.

Either way, the judge makes it quite clear that he views ASCAP's activities as "coordinated" with the major publishers, rather than any sort of independent competitive market, as ASCAP had tried to tell the judge. Furthermore, the judge notes that the publishers, along with ASCAP, put Pandora in an impossible "gun to the head" kind of situation to agree to massive increases to the publishers, by withholding the list of songs that would soon be "infringing" if Pandora didn't agree to a much higher deal.

With only a few business days remaining in the year 2012, ASCAP refused to provide Pandora with the list of Sony works without Sony’s consent, which Sony refused to give. Without that list, Pandora’s options were stark. It could shut down its service, infringe Sony’s rights, or execute an agreement with Sony on Sony’s terms. Then, despite executing a confidentiality agreement with Pandora, Sony made sure that UMPG learned of all of the critical terms of the Sony-Pandora license. And LoFrumento admitted at trial that ASCAP expected to learn the terms of any direct license that any music publisher negotiated with Pandora in much the same way.

[....] What is important is that ASCAP, Sony, and UMPG did not act as if they were competitors with each other in their negotiations with Pandora. Because their interests were aligned against Pandora, and they coordinated their activities with respect to Pandora, the very considerable market power that each of them holds individually was magnified.

The judge certainly finds Sony and ASCAP's behavior in withholding the list of songs it was withdrawing from Pandora incredibly suspect, and further that the testimony from Sony's representative was simply "not credible" on this issue.

Brodsky received this request for a list of the Sony works, but never responded. In their telephone conversations during the month of November, Rosenbloum reiterated the request for a list of works on several occasions but never got any response. Rosenbloum repeated the request once more at a breakfast meeting that he and Pandora’s Kennedy had with Sony’s Brodsky and Bandier on November 30. Again, Sony did not respond.

The list of Sony works was potentially important for several purposes, and Pandora referred to those several purposes in its discussions with Sony. In addition to wanting to be able to remove the Sony works from its service if Pandora and Sony could not come to terms, Pandora needed the list so that it could understand how to apportion any payments between the EMI and Sony catalogues since the payments would apparently be made at two different rates. Pandora also wanted the list so it could evaluate whether the substantial, non-refundable advance that Sony was demanding would likely be recouped.

Sony had a list readily at hand, since the Compendium required that a publisher and ASCAP work together during the 90 day period before the effective withdrawal date to confirm precisely which works were being withdrawn. Sony understood that it would lose an advantage in its negotiations with Pandora if it provided the list of works and deliberately chose not to do so. Brodsky’s explanation at trial that he did not provide the list because he believed that negotiations were proceeding smoothly and did not want to impose an unnecessary “burden” on Sony’s staff is not credible. The negotiations were not going smoothly; the list had already been prepared and its production imposed no burden. As Brodsky recognized in his testimony, the list was “necessary” to Pandora in the event the parties did not reach a deal. Sony decided quite deliberately to withhold from Pandora the information Pandora needed to strengthen its hand in its negotiations with Sony.

The judge recounts how Pandora also tried to get the list from ASCAP directly, and ASCAP after conferring with Sony similarly refused to give Pandora the list. The ruling also details how when ASCAP broke the handshake agreement it had with Pandora, it basically left Pandora less than a week to come to terms with Sony or be at risk for huge liability for playing Sony songs that it couldn't remove since no one would give it a list. In other words, Pandora was given effectively less than 5 days to negotiate a deal with Sony, without even knowing the basic information it needed to know. When Pandora further asked for the list just so it could figure out how much of its music database would be covered by Sony's license, Sony again refused to give the list, but just said that about 30% of the music consisted of Sony and EMI combined.

Then there's the fact that Sony officials then leaked information about the deal terms all over the place, despite a confidentiality agreement.

By mid-January 2013, and despite the existence of a confidentiality agreement, Sony leaked the key terms of the Pandora license to the press. The headlines in three articles said it all: “Sony/ATV ‘Now Has the Power to Shut Pandora Down…’”; “Sony/ATV gets 25 percent increase in Pandora royalties”; and “Sony/ATV’s Martin Bandier on new ‘quite reasonable’ Pandora deal.” A New York Post article featured a photograph of Sony’s Bandier in shirt sleeves with a large cigar in his mouth, as it reported that Sony had “wrangled a 25 percent increase in royalties” for a one year license.

The judge also notes that it's quite clear that, despite denials, Sony broke the confidentiality agreement and leaked these deal terms:

Although Brodsky denied knowing that anyone at Sony had leaked the terms of the license to the press, the evidence is that Sony did just that. Despite reporting dutifully that Sony had “declined” to comment on the terms of the deal, the articles referred to anonymous industry insiders as their source and quoted Bandier’s analysis of the deal. While Pandora had absolutely no interest in seeing the 25% hike in its rates known to other licensors, Sony hoped that its rate would be a jumping off point for the next publisher’s negotiations with Pandora, and it was. Pandora had its attorneys call Sony to complain of the breach of their confidentiality agreement.

The whole ruling is quite a read. It shows over and over again how ASCAP and the big publishers basically did everything possible to collude and screw over Pandora, potentially harming songwriters in the process, by giving those songwriters less clarity and less information about licensing rates and how much they were owed. The claim from Universal that Pandora would regret going to rate court doesn't seem to have come about, as it's the publishers and ASCAP itself that have come out of this whole process with a massive black eye.

213326561 ASCAP Pandora Rate Decision (PDF)213326561 ASCAP Pandora Rate Decision (Text)

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Filed Under: collusion, paul williams, rates, streaming
Companies: ascap, emi, pandora, sony music, universal music

66 Comments

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DannyB (profile), 25 Mar 2014 @ 9:43am

So basically . . .
So basically, ASCAP and Publishers, doing business as usual.
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DannyB (profile), 25 Mar 2014 @ 9:44am

Will there be any penalty?
Will there ever be any penalty for this kind of deliberate, organized bad behavior?
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bob, 25 Mar 2014 @ 9:46am

If you don't like ASCAP's rates, work with other artists.
It's that simple. If I listen to the ballyhoo around here, I'm constantly told that the world is full of creative individuals who are kept from singing by the major players in the industry. So start your own royalty organization or set up a non-union shop so anyone can waltz through the door.

My guess is you'll find that the artists won't be running to join. The rates paid by Pandora are already much too low for anyone. The artists aren't going to say, "Gosh, if I could only throw off these ASCAP lawyers, I could run back to the clutches of Pandora who will pay me 21 cents a month."

My guess is that Pandora is turning a pretty penny and ASCAP would like to get some of that for the people who did the work and made it all possible. They're experienced lawyers and they know you can't get blood from a stone. They wouldn't be doing this if they didn't think there was some money that wasn't being fairly allocated to the artists.
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Anonymous Coward, 25 Mar 2014 @ 9:46am

I'm going to ask a stupid question...AGAIN.
...Why are none of these people in jail for extortion and racketeerring? At the very least, four people involved have directly and intentionally perjured themselves in a court of law.
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bob, 25 Mar 2014 @ 9:48am

Re: So basically . . .
Actually, it's the Silicon Valley crowd acting as usual giving as little to the artists as possible. And before you raise the usual blather about the major record labels sharing only a small percentage, it's dramatically larger than the percentage shared by the tech world.

Pandora is not a start up. Pandora is not innovative any more. It's time for them to share with the artists who do all of the work that makes it possible. If they can't do that, they should leave the business. You can't screw over your source of material forever.
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Anonymous Coward, 25 Mar 2014 @ 10:00am

Re: Re: So basically . . .
So, basically you never even bothered to read the article
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DogBreath, 25 Mar 2014 @ 10:03am

Re: If you don't like ASCAP's rates, work with other artists.
They wouldn't be doing this if they didn't think there was some money that wasn't being fairly allocated to the artists.

This is all I have to say about that.
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Crusty the Ex-Clown, 25 Mar 2014 @ 10:07am

Shocked!
Shocked, I say! Who would have ever thought that the bean counters at ASCAP would shaft the artists they represent!

Obviously, the bean counters are the important people. The artists, not so much.
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Justin, 25 Mar 2014 @ 10:10am

Well, bob ....
Based on this article:

http://www.radiomlc.org/pages/4795848.php

it appears that Pandora is actually paying out at a rate that's about 10% higher than what ASCAP gets from the radio stations.

Would you also suggest that the radio industry is "giving as little to the artists as possible" and it's "time for them to share with the artists who do all of the work that makes it possible" because to do otherwise would "screw over your source of material"?
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jupiterkansas (profile), 25 Mar 2014 @ 10:10am

I think I just became a pirate.
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John Fenderson (profile), 25 Mar 2014 @ 10:10am

Re: Re: So basically . . .
You mean the same Pandora that gives as little to the artists as possible by willingly agreeing to licensing terms that has them paying out more than other businesses in the same line of work are doing?

The same licensing terms that the content producers agreed to and then backed out of purely to destroy Pandora through illegal collusion?

You mean that Pandora?
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Paul Reid, 25 Mar 2014 @ 10:14am

Re: Will there be any penalty?
Exactly. The lawyers were clearly negotiating in bad faith. How is this not cause for disbarment.
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John Fenderson (profile), 25 Mar 2014 @ 10:16am

Re: If you don't like ASCAP's rates, work with other artists.
"My guess is you'll find that the artists won't be running to join."

Perhaps because smart artists often don't need such organizations at all. They can, and do, get along just fine without them.

"who will pay me 21 cents a month"

You're misrepresenting the fee structure here to an extent that it borders on lying.

"My guess is that Pandora is turning a pretty penny"

You don't have to guess, you can see the financials for yourself. You know what? The vast majority of the money that Pandora takes in is paid right back out to the content providers.
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Anonymous Coward, 25 Mar 2014 @ 10:19am

So why are there no criminal charges?
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Anonymous Coward, 25 Mar 2014 @ 10:21am

Actually its time for the record labels to share the profits with artist that they are standing in front of. The profits are there they are just being sucked up by greedy talentless middle men as they always have.
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Karl (profile), 25 Mar 2014 @ 10:30am

Re: Re: So basically . . .
Actually, it's the Silicon Valley crowd acting as usual giving as little to the artists as possible. And before you raise the usual blather about the major record labels sharing only a small percentage, it's dramatically larger than the percentage shared by the tech world.

Provably false. In fact, that's part of what this lawsuit was all about.

The rates that Pandora paid (and, now, will continue to pay) are higher than the rates that traditional radio stations pay, for streaming on the Internet.

Pandora's rate is 1.85%. IHeartRadio, run by Clear Channel (the owner of the majority of radio stations), pays just 1.7% for its Internet streams.

And as far as comparison with "the major record labels:" No, they do not share a "dramatically larger" percentage of their income. Pandora pays more than half their income to sound recording rights holders. Major labels pay around 15% of the income from records, to the artists (depending upon contract). And that's only after the artists have paid back the recording costs, packaging costs, some of the marketing or video, etc.

So, no. Pandora pays a dramatically larger percentage to artists than any traditional label or publisher.

You're lying, once again.
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JEDIDIAH, 25 Mar 2014 @ 10:32am

Re: So basically . . .
> Actually, it's the Silicon Valley crowd acting as usual giving as little to the artists as possible.

Nope. That's the role of ASCAP and the individual labels. As others have repeated time and time again, Pandora actually pays a pretty penny for the content.

It's the middlemen that are soaking up all the money here.

If you really care about the talent, it's the labels and ASCAP that you should be skewering.
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DogBreath, 25 Mar 2014 @ 10:34am

Re:
Oh, the middlemen have a talent. If you call "robbing the candle at both ends" a talent.

~-[ Artists / $Middlemen$ / Pandora ]-~
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Ninja (profile), 25 Mar 2014 @ 10:37am

Re: So basically . . .
Hopefully with punishment now?
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Mason Wheeler (profile), 25 Mar 2014 @ 10:52am

Seems to me, if the publishers refused to provide the list, Pandora could have used their behavior as evidence of bad faith in any court proceedings:

"They were playing our music illegally."

"Not at all. We had a license to play their music. They told us that the licenses for certain songs was no longer valid. We asked repeatedly for a list of which songs, and got no response each time. And so we removed all of the songs that they told us were no longer valid from our catalogue--which was nothing. We were fully in compliance with all the information we had been given by the publishers throughout the process."
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Anonymous Coward, 25 Mar 2014 @ 10:53am

Re: If you don't like ASCAP's rates, work with other artists.
"My guess is that Pandora is turning a pretty penny"

A. You could look that up, you know.

B. ASCAP is turning a pretty penny, too. Or rather: its executives are. Quoting from http://www.mosesavalon.com/why-you-should-think-twice-before-joining-ascap-bmi-or-sesac-part-ii-non- profit-nonsense/ for example:

The CEOs of both ASCAP and BMI receive annual compensation well into the low seven-figures. Executives are paid quite well too.

Both have offices in prime real estate in Manhattan and Los Angeles whose cumulative rent approaches in the millions per year.

Both throw lavish and expensive parties designed to rally new members and give away huge cash award.

Everything above costs each PRO about $100,000,000 a year in �expenses.�

A hundred million a YEAR. To pay bloated, greedy non-musicians to sit in plush, expensive offices, throw parties for themselves, give themselves awards, and (occasionally) toss a few scraps to the musicians and composers who actually create music.

A hundred million a YEAR. While some of the aging geniuses of pop, rock and soul are in such desperate circumstances that charitable organizations like https://www.sweetrelief.org/ have been formed to try to provide just a little bit of care and comfort for them. (Disclaimer: I've contributed.)

A hundred million a YEAR. To quote one more time from the article above:

Big parties? Huge salaries? Fancy offices? A hundred million bucks a year in overhead? Does this sound like a charity or any nonprofit you are familiar with? Are any of these expenses truly �necessary� to collect performance fees that are due them by law?
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DV Henkel-Wallace (profile), 25 Mar 2014 @ 11:00am

Re: Will there be any penalty?
I assume you�re referring the judge�s rather direct appeal to the Justice Department to take a look on the basis of collusion or racketeering:
Either way, the judge makes it quite clear that he views ASCAP's activities as "coordinated" with the major publishers, rather than any sort of independent competitive market,
Sadly, the Obama/Biden administration (referring in particular to Biden) appear to be strongly in favor of supporting the old guard in preference to the upstarts.
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Peter (profile), 25 Mar 2014 @ 11:07am

... and after all this, ASCAP gets to keep the original rate of 1.85 %? No damages, no fine, no compensation.

A kid downloads a single MP3 file worth 50 cents, and pays $160.000 just to teach him respect for the law, and the guys who break all sorts of laws and agreements on a massive, commercial scale get no sanction at all? They'll be stupid not to do it again!
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Anonymous Coward, 25 Mar 2014 @ 11:15am

Re: Re: So basically . . .
"Nope"? LOL

Look at how Google screws artists via piracy links and shitty YouTube royalty rates.

It's hilarious that you tech dbags think anyone is still believing your bullshit.
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Baron von Robber, 25 Mar 2014 @ 11:20am

Re: Re: Re: So basically . . .
Wow so much stupid in so little text.
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Lowestofthekeys (profile), 25 Mar 2014 @ 11:23am

After reading this, I could have sworn I could hear the distant sound of David Lowery's butt crying out in pain.
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Lowestofthekeys (profile), 25 Mar 2014 @ 11:25am

Re: If you don't like ASCAP's rates, work with other artists.
http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=P

"pretty penny" huh?

Do your research bob.
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Lowestofthekeys (profile), 25 Mar 2014 @ 11:32am

Re: Re: Re: So basically . . .
Sorry, no one can hear you with your head in the sand.
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Anonymous Coward, 25 Mar 2014 @ 11:36am

Re: Re: Re: So basically . . .
Well, obviously someone does, otherwise you wouldn't post here.
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Anonymous Coward, 25 Mar 2014 @ 11:36am

considering how the whole entertainment industries have been/are doing the same type of things just to keep control of music and movies, why is it that the courts have never come out against them? look at the start ups that have been shut before getting off the ground, along with those that still just managed to get going, only to be shut after a short interval. these industries are as cutthroat as they come in doing whatever they deem necessary to not just break new companies but to ruin them financially as well, just so they can show their dominance. no court has ever sided with another industry when trying to fight the industries yet their colluding behaviour is exactly the same as ASCAP! absolutely disgraceful behaviour by both the industries and the courts!!
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Anonymous Coward, 25 Mar 2014 @ 11:39am

Re:
Were I the judge, I would reverse the royalty rate to the labels paying Pandora 1.85% of their net profits as a punishment for the collusive behaviours.

But I know that that would just come out of the vast majority of the label artists' pockets.
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Anonymous Coward, 25 Mar 2014 @ 11:39am

Re: If you don't like ASCAP's rates, work with other artists.
I made it a habit to boycott any artist who is signed with the major labels and organizations like ascap and GEMA, as well as any major movie studio.

If artists decide to support this organized crime, they deserve to go bankrupt along them. I don't shed a tear for any single one of them, good riddance.
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Anonymous Coward, 25 Mar 2014 @ 11:39am

Re: I'm going to ask a stupid question...AGAIN.
because money, duh...
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Karl (profile), 25 Mar 2014 @ 12:02pm

Re: Re: Re: So basically . . .
Look at how Google screws artists via piracy links

Ah. You mean those links that come up in searches that almost nobody does, and for which Google does not make any money?

Yeah, they're really "screwing artists."

and shitty YouTube royalty rates.

You mean the royalty rates that YouTube negotiated with PRO's like ASCAP and BMI, despite the fact that they didn't have to by law?

Or the new "sync license" royalty rates that they negotiated with the Harry Fox Agency, despite the fact that they didn't have to by law?

Or do you mean the ContentID system, where rights holders keep more than half of the advertising income on YouTube videos, and which Google spend over $50 million developing, despite the fact that they didn't have to by law?

Yeah, they're really "screwing artists."

It's hilarious that you tech dbags think anyone is still believing your bullshit.

It's hilarious that you big media "dbags" think anyone ever did believe your bullshit.
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Karl (profile), 25 Mar 2014 @ 12:22pm

Re: Re: Re: So basically . . .
how Google screws artists

...In addition to my other comment, I must point out that Google had nothing whatsoever to do with this ruling.

So, even bringing them up in this context is a complete red herring.
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Karl (profile), 25 Mar 2014 @ 12:37pm

So much for that "handshake deal"
I should point this out.

According to Pandora, ASCAP had already made an agreement with them that increased the royalties ASCAP received:
In November of last year, following a lengthy negotiation, Pandora agreed with ASCAP to a new rate, an increase over the prior amount, and shook hands with ASCAP management. Not only was our hand-shake agreement rejected by the ASCAP board, but shortly thereafter we were subjected to a steady stream of "withdrawals" by major publishers from ASCAP and BMI seeking to negotiate separate and higher rates with Pandora, and only Pandora. This move caused us to seek the protection of the rate, also recently negotiated, enjoyed by the online radio streams of broadcast radio companies. It�s important to note that these streams represent 96% of the Internet radio listening hours among the top 20 services outside of Pandora (talk about an un-level playing field). We did not enter this period looking for a lower rate � we agreed to a higher rate. But in a sad irony, the actions of a few small, but powerful publishers seeking to gain advantage for themselves has caused all songwriters� royalties to go down.

Additionally, who pays for the legal fight? The artists. The costs for the legal fees that ASCAP paid come directly out of artists' pockets, in the form of "administration costs." Those costs rose this year to about 14% of the royalties ASCAP collects, and the increase is generally attributed to the legal fight with Pandora.

So, congratulations, ASCAP. Thanks to you and the major-label publishers, you've just wasted artists' money to make artists' royalties go down.
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Anonymous Coward, 25 Mar 2014 @ 12:50pm

Solution
End State "intellectual monopoly" law in it's entirety (i.e., copyrights, patents, trademarks) as it is all immoral and antithetical to inherent self-ownership derived property rights.

Ideas are not property.

I prefer consensual relationships and voluntary exchange.
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anon, 25 Mar 2014 @ 12:54pm

Re:
I think if everyone had to read and understand the tactics the music and movie and book industry used nobody would ever buy content again online or off, it would all be pirated and the only way content creators would make money other than that paid by big business would be either creating a donate button or selling directly through bittorent sites.

The industry has committed so many serious crimes, it is amazing they are still allowed to actually exist.
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Anonymous Coward, 25 Mar 2014 @ 1:29pm

Does anyone else see Universal as the little devil sitting on ASCAP's shoulder edging them on, Or did I watch to many cartoons as a kid.
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Mike Masnick (profile), 25 Mar 2014 @ 1:46pm

Re: So much for that "handshake deal"
According to Pandora, ASCAP had already made an agreement with them that increased the royalties ASCAP received:

You don't have to rely on Pandora's version of those events. They're discussed in great detail in the ruling above by the judge.
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Anonymous Coward, 25 Mar 2014 @ 2:33pm

Re: So much for that "handshake deal"
Pandora bought a radio station just so it could then qualify for the same rates terrestrial radio stations pay. It was a direct result of the ASCAP/SONY fight. This is why the rates decreased from what Pandora had agreed to before ASCAP reneged on the deal.
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That One Guy (profile), 25 Mar 2014 @ 3:59pm

Re:
In this case if would be a shoulder devil egging another shoulder devil on, both of them were quite guilty here.
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That One Guy (profile), 25 Mar 2014 @ 4:02pm

Re: Re: Will there be any penalty?
Saying it is one thing, but if he really wants to punish them he should(assuming he hasn't) refer the case up the chain, to the DoJ or whoever it is that handles cases like this.

Not that I expect anything would happen of course, the system is so corrupt they'd likely get a slap on the wrist and a 'Now don't get caught doing that again!', but it would at least prove that the judge was serious about his accusations, and not just tossing out words at random.
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Karl (profile), 25 Mar 2014 @ 4:08pm

Re: Re: So much for that "handshake deal"
Pandora bought a radio station just so it could then qualify for the same rates terrestrial radio stations pay. It was a direct result of the ASCAP/SONY fight. This is why the rates decreased from what Pandora had agreed to before ASCAP reneged on the deal.

That had nothing to do with the final rate that the court decided. If it had, Pandora would be paying 1.7%, the same rate that IHeartRadio pays, and not the higher 1.85% rate. (And, in fact, that purchase hasn't gone through yet - ASCAP opposes the purchase). The judge rejected that rate ("The answer to that question, while close, is no") because that rate applies to Clear Channel generally, not just its internet streams (interactive or not), and the internet portion of its business is tiny in comparison to terrestrial radio.

No, the rate is set because that's the rate that Pandora has historically been paying since 2004. It's not paying the higher rates because those rates were not negotiated fairly, and Pandora was essentially blackmailed into accepting them.
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Anonymous Coward, 25 Mar 2014 @ 5:44pm

bob and average_joe just can't stand it when due process is enforced.
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my name here, 25 Mar 2014 @ 6:55pm

competitive market
What I don't understand here is that there is no potential way to create a competitive market that would be in the interests of anyone in the creative marketplace. Competition would only benefit those who seek to pay less for content.

However, content is not by it's nature a competitive market, There are not two or three of every artist, there is only one. By definition, that artist is his (or her, or their) own monopoly. You only have one Coldplay, as an example, or one Radiohead. I cannot imagine a situation where they would want to compete with themselves to drive down their own income.

Competitive markets assume that two or more suppliers can provide the exact same product, and they compete on price. Music is a monopoly at it's very root. You can select other artists, but you cannot select the same artist at a lower rate. Since the artist rate wouldn't change, the only differences would be perhaps differences in the administration fees. Even this would become moot very quickly, as everyone would just sign up with the low cost player, driving the higher cost player out of business, once against re-establishing a monopoly.

The real competitive market here is the companies like Pandora, Sky.FM, and other streaming music companies. They are the ones bidding to obtain content. They are all trying to have access to a limit resource. There are only so many popular music acts in each category.

You cannot force a monopoly to compete with itself. That would be silly.
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bugmenot (profile), 25 Mar 2014 @ 7:06pm

Re: I'm going to ask a stupid question...AGAIN.
"Why are none of these people in jail ... four people involved have directly and intentionally perjured themselves in a court of law."

Just like James Clapper, except that he's a more visible higher up in the system?

HAAAAA HAAA HA Ha ha. _You're_ funny. I would like to subscribe to your fantasy newsletter where laws are actually enforced.

(techdirt.com/articles/20130701/12494623683/james-clapper-admits-he-lied-to-congress-even-h is-excuse-is-misleading.shtml)
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That One Guy (profile), 25 Mar 2014 @ 7:41pm

Re: competitive market
As it stands now, no, true competition is going to be very hard to get, as any newer, up and coming company would quickly find themselves buried under the 'attention' from the current players, leaving only those larger companies(like Pandora) able to fight back and survive.

Now, I will disagree with your statement that '...content is not by it's nature a competitive market, There are not two or three of every artist, there is only one, as that assumes that someone will only be interested in a single band/author, rather than willing to try alternatives.

You're right that there is only one Coldplay, only one Radiohead, but most people are more interested in a style, a genre of music than a particular band all on their own, so while a band isn't competing with themselves, they are competing with others for potential customers, listeners and fans, and if the terms they offer for their content is too much, people will go elsewhere, as there's always more options.
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Anonymous, 25 Mar 2014 @ 7:50pm

I'm surprised....
You'd think the RICO Act could be applied here, especially to ASCAP.
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Anonymous Coward, 25 Mar 2014 @ 8:08pm

Re: Re: competitive market
I agree with you, but I think that you are forgetting that we aren't talking widgets here, we are talking about both the unique experience and the shared experience that is music. The mass market that is music has a lot of space for various acts, but there are generally certain acts who are more in demand. That demand for what is effectively a monopoly product is what drives the market in reality.

Pandora could sign nothing but unheard of bands, they could use only creative commons licensed music or what have you, but then their end product that people pay for would not be what the public expects. It really isn't any different between a radio station that plays hit music, and one that plays obscure music from unknown artists. You know which one will generally have more people tuned in.

Musical artists generally understand that competing with other similar acts is not beneficial. They really do need each other to support a vibrant community around their type and style of music, and generally a rising tide floats all boats. A station isn't going to play all Coldplay all the time, it needs a selection and breadth of material to keep things interesting and keep listeners tuning in. The real competition is there, to have the most in demand music to drive the most listeners to drive ad or subscription business. Putting unknown artists or playing music that is not in demand leads to failure on down the line.

Maybe in simpler terms, Pandora needs the popular artists way more than the artists need Pandora. There can be plenty of competition in the player market, which drives demand for the product and thus drives the price up, not down. Popular music remarkably is a scarcity, even though it is often transient in nature. Understanding that this is the truescarcity and the true in demand item makes it so much more understandable. In a true competitive marketplace for this stuff, the rate for the truly popular stuff might be 50%. That a rate is applied globally (and is very low) helps make many more things possible, and helps all artists (even the struggling ones) to make a bit of income on their work.
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Bergman (profile), 25 Mar 2014 @ 8:32pm

Re: Re: So basically . . .
Apparently you blew your Spot Propaganda skill check. Nobody (including Pandora) is saying Pandora shouldn't pay for what they get...but why should Pandora pay two times, three times, four times or five times what anyone else pays?

Pandora isn't asking for something for nothing, nor are they asking for a discount. They just want the same rate anyone else would pay, and were willing to pay more than that, until ASCAP decided no money was better than twice the going rate.

How does that help the artists?
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Karl (profile), 25 Mar 2014 @ 8:32pm

Re: I'm surprised....
You'd think the RICO Act could be applied here, especially to ASCAP.

That's kind of why the Consent Decree exists in the first place. Except it's not RICO, it's the Sherman Antitrust Act.
http://en.wikipedia.org/wiki/American_Society_of_Composers,_Authors_and_Publishers#Antitrust_law suits

As for ASCAP themselves, I have a tiny bit of sympathy for them. If they had signed a deal with exactly the same royalty terms as the court set, they would have gotten sued by both Sony and Universal. The sad, sordid story is in the ruling; it's worth a read.
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Anonymous Coward, 25 Mar 2014 @ 8:33pm

Re: Re: If you don't like ASCAP's rates, work with other artists.
I made it a habit to boycott any artist who is signed with the major labels and organizations like ascap and GEMA, as well as any major movie studio.

The trouble is, if an artist (including songwriters here) isn't a member of ASCAP or BMI, they're going to have to deal with collecting royalties themselves. Radio station by radio station. Since any given radio station might produce US$0.35 royalties in a month, and there are a zillion radio (and online) stations, that isn't going to work very well.

I'm not sure what the answer is. Working musicians don't really need the royalties, they make their money doing performances and selling swag. But songwriters don't get much (if any) of that.
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Bergman (profile), 25 Mar 2014 @ 8:37pm

Re: If you don't like ASCAP's rates, work with other artists.
It's possible you're just a troll or shill. But on the off-chance you're not, have you ever looked up how much of the money ASCAP absorbs versus how much they pass on to the artists?

Have you ever actually looked up the actual numbers on it? I doubt it, because if you had you'd have to be a troll or shill to take the stand you do on the matter.
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Karl (profile), 25 Mar 2014 @ 9:14pm

Re: competitive market
What I don't understand here is that there is no potential way to create a competitive market that would be in the interests of anyone in the creative marketplace. Competition would only benefit those who seek to pay less for content.

You're forgetting that "those who seek to pay less for content" are just as much part of the "creative marketplace" as copyright holders.

In any case, exactly the same thing could be said for any form of labor. "Competition would only benefit those who seek to pay less for labor." If you believe that, then you are arguing against capitalism itself. (You can do this if you wish, just be aware that this is what you are doing.)

There are not two or three of every artist, there is only one. By definition, that artist is his (or her, or their) own monopoly.

Not exactly. "By definition," an artist has a monopoly on his (or her, or their) labor. They do not, "by definition," have a monopoly on the products of their labor - that is, on copies of their songs.

That is why copyright exists in the first place. Congress was granted the ability to create copyright laws precisely because artists do not, by definition, hold a monopoly on their published works. Copyright is that monopoly, created out of whole cloth by Congressional statutes.

Competitive markets assume that two or more suppliers can provide the exact same product, and they compete on price. Music is a monopoly at it's very root. You can select other artists, but you cannot select the same artist at a lower rate.

Were it not for copyright laws, you could do exactly that. Two or more suppliers could provide exactly the same product (a copy of a song), and they would compete on price.

Essentially, there is no such thing as a "competitive market" when copyright is involved. This is actually made very explicit in the ruling:
Section IX of AFJ2 requires the rate court to set a "reasonable" fee for a requested license, but that term is not defined in AFJ2. Governing precedent dictates, however, that in determining the reasonableness of a licensing fee, a court "must attempt to approximate the 'fair market value' of a license -- what a license applicant would pay in an arm�s length transaction." MobiTV, Inc., 681 F.3d at 82. "In so doing, the rate-setting court must take into account the fact that ASCAP, as a monopolist, exercises market-distorting power in negotiations for the use of its music." The Second Circuit has recognized that, because music performance rights are largely aggregated in the PROs which operate under consent decrees, "there is no competitive market in music rights." ASCAP v. Showtime/The Movie Channel, 912 F.2d 563, 577 (2d Cir. 1990). Consequently, fair market value is a "hypothetical" matter. In such circumstances, "the appropriate analysis ordinarily seeks to define a rate or range of rates that approximates the rates that would be set in a competitive market."

The real competitive market here is the companies like Pandora, Sky.FM, and other streaming music companies. They are the ones bidding to obtain content.

They are competing for more than that. They are also competing for advertising dollars and user subscriptions. And they are not just competing with other streaming services, but with terrestrial radio as well.

The difference between that market and the market in which rights holders operate is night and day. If the music market was truly competitive on the rights holders' end, then rights holders would compete against each other to provide Pandora, Sky.FM, IHeartRadio, and so on with content. And they would lower their rates due to this competition.

That clearly didn't happen here, and it generally doesn't happen among rights holders. They have a long and sordid history of forming cabals.

You cannot force a monopoly to compete with itself. That would be silly.

You can, however, bust that monopoly. That's what the Justice Department was going to do to ASCAP and BMI in the 1930's and 1940's. Instead, as a settlement, they created the consent decrees that both PRO's currently operate under.
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Anonymous Coward, 26 Mar 2014 @ 3:53am

Re: Re: Re: Re: So basically . . .
"You mean those links that come up in searches that almost nobody does"

Non Techdirt/Google cite?

"for which Google does not make any money?"

Non Techdirt/Google cite?

" royalty rates that YouTube negotiated with PRO's like ASCAP and BMI"

Non Techdirt/Google cite?

"rights holders keep more than half of the advertising income on YouTube videos"

Non Techdirt/Google cite?

BTW, what, exactly, is the advertising income? Hmm? Karl?
Yes indeedy, please point us to the link where Google discloses ad income.

Uh huh.

That's what I thought.

Everyone knows...

Google screws artists.

And you're a buffoon, Karl.

Waterboy for billionaire fatcats.
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Anonymous Coward, 26 Mar 2014 @ 5:07am

Re: Re: Re: Re: Re: So basically . . .
The one link in the message you reply to isn't even Techdirt/Google, and you ignore it anyway.

average_joe just hates it when due process is enforced.
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jupiterkansas (profile), 26 Mar 2014 @ 9:40am

Re: Re: Re: competitive market
Services like Pandora need access to ALL music to be functional. The listener should be able to look up any artist - popular or not - and find them on Pandora. Limiting any service to just the labels the service makes a deal with is detrimental to the service, the listener, and the artists. It only benefits the publisher - although if people turn away from a service because of its limited roster of artists, then it doesn't benefit the publisher either.

Of course, they don't really want more money from Pandora. They want Pandora to go away, so that something like Spotify can be more popular (since the labels have a stake in Spotify).
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John Fenderson (profile), 26 Mar 2014 @ 9:47am

Re: Re: Re: Re: competitive market
" Limiting any service to just the labels the service makes a deal with is detrimental to the service, the listener, and the artists."

Indeed. Particularly for people like me who refuse, to the best of my ability, to give any money at all to RIAA labels.
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John Fenderson (profile), 26 Mar 2014 @ 9:56am

Re: Re: Re: Re: Re: So basically . . .
So you're asking for information (none of which is actually hard to find) about Google, but you disingenuously exclude the only source that can provide the information you're asking for?

Your tactic is far too transparent here. Try being more subtle next time.
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That One Guy (profile), 26 Mar 2014 @ 12:12pm

Re: Re: Re: If you don't like ASCAP's rates, work with other artists.
Or they can just sell their songs directly. Or work out a deal where a radio station pays them a certain amount, and in exchange is granted a license to play their music as much as they care to. Or realize that royalties from radio is more a perk than a goal, with the main benefit from radio play being more people are aware of you, and can become fans of your music.

There are a whole ton of new options available other than 'sign all rights to label, hope they pay the radio to play your stuff, hope enough people buy your stuff to pay off what you owe the label' that it used to be, and more options are opening up as time passes.
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John Fenderson (profile), 26 Mar 2014 @ 1:16pm

Re: Re: Re: If you don't like ASCAP's rates, work with other artists.
Is radio even relevant anymore?

Regardless, whenever I hear the radio I hear the same 10 songs on rotation. Regardless of how you manage royalty collection, the odds of you getting to be one of those 10 are infinitesimal.

A non-megastar musician or songwriter who wants to eat regularly needs a different business plan than "get on the radio" in the first place.
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Karl (profile), 26 Mar 2014 @ 6:14pm

Re: Re: Re: Re: Re: So basically . . .
First of all: no, I'm not going to exclude citing Google when they explain how their own services work, just because you're a hatemonger. I won't avoid getting information from the horse's mouth merely because you bet on the wrong horse.

"You mean those links that come up in searches that almost nobody does"

Non Techdirt/Google cite?

Who Looks For Infringing Content With Search Engines? Infringers, Not So Much.

But you can do this yourself with Google Trends, which shows the number of times people searched for a particular term. Search for some content, then search for that same content with the phrase "torrent" (or whatever) appended. The volume of the second search will inevitably be much, much lower than the first.

"for which Google does not make any money?"

Non Techdirt/Google cite?

Google makes its search engine money from AdWords. This is how AdWords works:
1. Companies bid for keywords
2. People search with those keywords
3. In Google's search results, advertisements are displayed from the winners of the bids of those keywords
4. If a user clicks on a winner's ad (a "clickthrough"), the company pays Google according to their bid

For example: I do a search for "car insurance boston." At the top of the page, there are links saying "Liberty Mutual Insurance� - libertymutual.com‎," "$19 for Car Insurance? - GEICO.com‎," and "Progressive Car Insurance - Progressive.com‎." Down the right hand side, there are links saying "Allstate Car Insurance‎," "Amica Car Insurance‎," and a bunch of others. All of these are clearly marked as ads.

These are the links that AdWords generates, and they are how Google makes the vast majority of its money, and how it makes all of its money from search.

This tells you two things:
1. If no sponsored ads come up on Google after you do your search, Google does not make any money from that search
2. Companies pay for clickthroughs, not views, so if nobody clicks through on any of those ads, Google does not make any money from that search

So, since I didn't click on any of the links above, Google didn't make money from the search I just did. (And in fact, I usually don't even see those ads, since I have an ad blocker enabled on my web browser.)

Information confirming this can be found all over the web:
http://www.google.com/adwords/how-it-works/ads-on-google.html
http://www.investopedia.com/stock-a nalysis/2012/what-does-google-actually-make-money-from-goog1121.aspx
http://www.wired.com/culture/cul turereviews/magazine/17-06/nep_googlenomics
http://www.channel4.com/news/if-google-is-free-how-does-i t-make-so-much-money

" royalty rates that YouTube negotiated with PRO's like ASCAP and BMI"

Non Techdirt/Google cite?

How about from ASCAP itself? From its press release about the new synch royalties:
Keep in mind that this agreement does not extend to any right of public performance. In other words, this is completely separate from ASCAP performance royalties from YouTube. ASCAP publishers that choose to participate are still eligible for ASCAP performance royalties based on YouTube streams. [Emphasis in original.]
- http://www.ascap.com/playback/2011/11/action/license-your-youtube.aspx

(Of course, this didn't stop ASCAP to attempt to double-dip, and demand additional royalties from people who embedded YouTube videos on their own sites.)

"rights holders keep more than half of the advertising income on YouTube videos"

Non Techdirt/Google cite?

What Does YouTube Pay?
YouTube pays out 55% of what advertisers pay them.
- http://www.digitalmusicnews.com/permalink/2014/01/21/jeff-price-audiam

as the Wall Street Journal first reported in 2011, YouTube channel partners can collect up to 55% of revenues from every monetized view on the site, with a sizeable chunk of that 55% going directly to the owners of the song�s publishing and masters.
- http://www.billboard.com/biz/articles/news/branding/1539260/harlem-shake-the-making-and-monetizing-o f-the-latest-youtube

The process is simple. YouTube has an ad system, which places ads on videos. 55% of the revenue that the advertisers pay to YouTube is then accounted towards the copyright holders of the content.
- http://thisindustrythingofours.wordpress.com/2014/03/04/now-you-know-everything-about-music-publishi ng

BTW, what, exactly, is the advertising income? Hmm? Karl?
Yes indeedy, please point us to the link where Google discloses ad income.

Well, Google is publicly traded, so they have to file quarterly reports...
http://investor.google.com/financial/tables.html
https://investor.google.com/earnings/2013/ Q4_google_earnings.html
http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001288776& amp;owner=include

VentureBeat can break it down for you, if you're lazy:
http://venturebeat.com/2013/10/17/googles-strong-q3-2013-14-9b-in-revenue-and-higher-earnings-t han-expected/

Uh huh.

That's what I thought.

That you're a liar?
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Anonymous Coward, 27 Mar 2014 @ 7:43am

Re: Re: Re: Re: Re: So basically . . .
so every source that comes from the financial files of google is automatically disqualified and your asking for proof that can only come from that source.

google sec files and financial statements prove every one of those statements

but of course they don't count because they came from google
never mind that they have to follow very specific and strict disclosure rules designed to prevent puffery and fraud (SEC filing rules)

none of that proof is valid because of your non google source rule.
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Anonymous Coward, 30 Mar 2014 @ 5:51pm

Re: Re: Re: Re: Re: Re: So basically . . .
average_joe just really hates it when due process is enforced.
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Anonymous Coward, 13 Apr 2014 @ 10:09pm

Re:
horse with no name just hates, hates, hates it when due process is enforced.
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