SiriusXM Finally Wins A Case Over Pre-1972 Music... And Promptly Settles Such Cases With RIAA

from the well-how-about-that... dept

We've written plenty about the mess around pre-1972 sound recordings and online streaming services. Technically, federal copyright law does not apply to sound recordings from before 1972. And while that might make you think they're in the public domain, that's not true at all. First, the compositions are still under copyright and much more importantly, a jumble of state laws did protect some aspects of those sound recordings -- and that's made a huge mess, including locking up some recordings for way, way longer than would be possible under today's federal copyright. On the flip side, however, it meant that certain aspects of federal copyright law that were not covered by state copyright law were fair game -- or so people thought.

This included in music streaming services. It had long been believed that you could publicly perform such pre-1972 songs without a license because, even under the various state and common law copyrights, there was really no concept of a "public performance" right anyway. Thus, services like SiriusXM and Pandora did not need to pay a performance fee to play those songs (for post-1972 recordings, both pay compulsory rates -- which are for different reasons that have to do with lobbying power). This whole mess could be settled by just moving pre-1972 sound recordings under federal copyright law -- which would make them subject to the same compulsory license fees as modern songs, but would also free up those old songs that state copyright law has locked up. It's a tradeoff, but probably the best result. However, the RIAA has fought very hard to block this.

Instead, it wants to have things both ways. It wants to keep those songs locked up for as long as possible, but still wants to get the benefits of federal copyright rights, such as public performance exclusivity. The reason, of course, is that it wants a big weapon -- to force SiriusXM, Pandora and others to pay much larger fees by not allowing them to rely on compulsory rates, but rather to have to come to a negotiated deal.

In order to make this happen there have been a series of lawsuits in different states. In both California and New York, courts ruled against SiriusXM, saying that the state law in California and the common law in NY could be seen to cover performance rights, and thus SiriusXM had to pay up.

However, just a few days ago, a court in Florida went the other way entirely, saying there was no such right in Florida. The state law had nothing and the common law was not established in that area, thus ruling against SiriusXM (and in favor of Flo & Eddie, the organization that brought the suit) would be creating a new right out of thin air (something some copyright experts noted that the other courts had done).

So.... that started to make things interesting. Except... just a few days later, the RIAA and SiriusXM have announced a massive settlement over pre-1972 recordings with SiriusXM agreeing to fork over $210 million. This is going to put enormous pressure on Pandora to come up with a similar settlement. But it's not actually going to answer many of the questions here. First, the settlement only covers the cases brought by the big labels (so not the Flo & Eddie cases...). Second, it only covers through the end of 2017, at which point, it's right back to the negotiating table.

Oh, and in case you're wondering, this line in the Hollywood Reporter story is probably the most important one:

The agreement announced today also doesn't deal with if and how the big record labels will share proceeds with its artists.

Because of course it doesn't.

Filed Under: compulsory, copyright, pre-1972, pre-1972 sound recordings, public performance, streaming
Companies: pandora, riaa, sirius, siriusxm

RIAA Claims That It Is 'Standing Up For' Older Musicians That It Actually Left To Rot

from the wtf? dept

The RIAA is not exactly known for its positive treatment of musicians. If you're at all familiar with the art of RIAA accounting, you'd know about how they structure deals to totally screw over musicians, doing everything possible to make sure they never get paid a dime. Yes, many are given advances, but those advances are "loans" on terrible terms in which the labels add on every possible expense that needs to be "paid back" before you ever see another dime. Very few musicians ever "recoup" -- even after the labels have made back many times what they actually gave the artists. For the most succinct example of how the labels make out like bandits, profiting mightily while still telling artists they haven't recouped, here's Tim Quirk, who a few years back explained how it worked with his band, Too Much Joy (TMJ):

A word here about that unrecouped balance, for those uninitiated in the complex mechanics of major label accounting. While our royalty statement shows Too Much Joy in the red with Warner Bros. (now by only $395,214.71 after that $62.47 digital windfall), this doesn't mean Warner "lost" nearly $400,000 on the band. That's how much they spent on us, and we don't see any royalty checks until it's paid back, but it doesn't get paid back out of the full price of every album sold. It gets paid back out of the band's share of every album sold, which is roughly 10% of the retail price. So, using round numbers to make the math as easy as possible to understand, let's say Warner Bros. spent something like $450,000 total on TMJ. If Warner sold 15,000 copies of each of the three TMJ records they released at a wholesale price of $10 each, they would have earned back the $450,000. But if those records were retailing for $15, TMJ would have only paid back $67,500, and our statement would show an unrecouped balance of $382,500.

In other words, musicians don't get paid anything in most cases, while the labels can earn a tidy profit for years and years, still insisting the band hasn't recouped. It's why a band can sell a million albums and still owe $500,000.

I bring this up, because of the latest ridiculousness from the RIAA, claiming that it "stands behind" artists who aren't making enough money. We've already written about the latest lawsuit against Pandora, in which the RIAA/Soundexchange are saying that Pandora isn't paying pre-1972 artists (despite the fact that the RIAA itself refuses any attempt to put those recordings under federal copyright law, which would mandate compulsory licenses). We've also covered the ridiculousness of the RIAA releasing bizarre statements from artists like Steve Cropper, pretending that programmers still get paid for code they wrote in 1962.

But now it's reached truly ridiculous levels. musicFirst, a lobbying group put together by SoundExchange and the RIAA (potentially violating some laws), has put out an astoundingly ridiculous blog post, in which it discusses these lawsuits over pre-1972 sound recordings, by arguing that it is standing up for pre-1972 artists and not letting them "fade away" (a weak reference to a Buddy Holly song).

What a shady move. Fans will go to record stores to pay for this timeless music, but billion dollar corporations won’t pay a dime. And these services sell those same fans stations like the “60s on 6” and the “Buddy Holly station” yet refuse to give one dime of subscribers’ payments to the artists that made the music on those stations.

No matter what the outcome is in courts of law, Sirius XM and Pandora will pay a hefty price in the court of public opinion and in Congress. We love and respect our pre-72 artists and we will stand up for them. We will not let them fade away.

Oh really? You won't let those artists fade away? Then I assume you'll be going back and paying all of those artists you screwed over for decades, right? Let's start with Lester Chambers, for example, who got some attention a couple years ago, for how the RIAA totally fucked him over and let him fade away: Of course, it wasn't the RIAA, SoundExchange or musicFirst who helped him out. It was the internet, led by Reddit founder Alexis Ohanian, who helped Chambers raise over $60,000 on Kickstarter for a fantastic new album (it really is great, if you haven't yet heard it) -- and that money went to Chambers, not to a label who then refused to pay royalties. Or how about all of those artists who are seeking to take back their copyrights thanks to the copyright termination clause, which the RIAA is fighting tooth and nail against -- the same copyright termination clause that the RIAA's number two guy tried to secretly delete from copyright for musicians, while he was a Congressional staffer (months before taking his $500,000 salary at the RIAA, where he's remained until today).

So, whether or not Pandora and Sirius XM are right or wrong in how they handle the streaming royalties on pre-1972 works, the idea that the RIAA is somehow out there "protecting" older artists and not letting them fade away is a sick joke.

Filed Under: artists, lester chambers, musicians, royalties, support
Companies: musicfirst, pandora, riaa, sirius, soundexchange

How Sirius' Move Towards 'Direct Licensing' Is Bad For Artists

from the labels-will-receive-the-Big-Bonus-and-artists-will-receive-The-Shaft dept

When people like myself hear the term "direct" being used in relation to artists and their fans, it often conveys a better deal is being struck for the artist(s) in question. Unfortunately, Sirius' desire to ditch SoundExchange and strike "direct licensing" deals with the labels will result in a loss of revenue for nearly every artist involved. The Hypebot Blog points us in the direction of an excellent editorial written by Kristin Thomson of the Future of Music Coalition, detailing exactly how much these new licensing deals play right into the best interests of the labels (and Sirius itself):

Currently, Sirius/XM pays digital public performance royalties to SoundExchange for the music it plays; SoundExchange then distributes 50 percent of the royalties to the sound recording copyright owner (usually a label) and 45 percent to the featured performer. The non-featured performers receive the remaining 5 percent.

Under the current structure, the money doesn't pass through the record labels first; payments to performers are made directly and simultaneously, which means the performer gets his/her money for the digital performances whether they've recouped or not. And in some cases, performers are receiving checks with four or five figures on it, and the money keeps growing with each distribution.

If labels start to license to Sirius/XM directly, guess who gets all the money? The labels. Artists will no longer be paid directly and simultaneously via SoundExchange. Instead, their money would be passed through their label.

Perhaps the most beneficial aspect of the current agreement with SoundExchange is that it gives unrecouped artists (and that's most of them) an ability to earn money from their music, rather than just seeing the royalties disappear into the labels' opaque accounting system. On top of that, royalty rates paid to artists (if they're recouped) could actually decrease:

How much Sirius/XM pays SoundExchange is based on a rate set by the Copyright Royalty Board with input from stakeholders, in compliance with federal statute. Currently, Sirius/XM pays 7.5 percent of its gross revenue...Then there's this. Billboard reported in August:

The question arises if the labels will pay the artist half the royalty, or 50 percent, they receive for each time a song is played, or will some labels choose to pay them their artists the regular royalty rate, which typically ranges between 15 percent and 20 percent.

Obviously, Sirius (like any business) would like to cut its costs. The labels are likely interested in doing the same thing. However, direct licensing would allow the labels to, first of all, gather all royalties up front without a simultaneous distribution to the artists and then redistribute those royalties, most likely at a much lower rate.

There's simply nothing good for artists in this new arrangement. The SoundExchange board is made up of 9 artist reps and 9 label reps, ensuring some sort of equitable treatment for everyone involved. Bypassing this setup means that all future negotiations will be between the labels and Sirius, leaving the artists without any say in the matter. Furthermore, this new setup would allow Sirius to alter its offering, aiming to compete with Rhapsody, Spotify, etc., all without positively affecting the licensing payout.

In moving to directly license masters, the company is seeking expanded licenses that will allow for more functionality. For example, it wants to allow subscribers to record programming blocks and be able to rewind and fast-forward that segment. It also is seeking to allow music to be cached locally on devices and applications that have that capability. In seeking the former, it is in effect asking for a waiver from the sound recording performance complement of the Digital Millennium Copyright Act, which limits how many times songs from an artist can be played within an hour.

That would make satellite radio much closer to on-demand services like Rhapsody, MOG or Spotify, which operate under an entirely different licensing structure. Even non-interactive services like Pandora currently pay a different rate than satellite radio. By bypassing SoundExchange, Sirius/XM could up paying an even lower fee for expanded offerings.

Clearly, Sirius would benefit the most from this new arrangement. But the labels will benefit as well, regaining control over the incoming royalty stream as well as controlling the entirety of the disbursement. This explains why the labels would be willing to accept 100% of a smaller payout, rather than 50% of a larger sum. Any way you slice it, the affected artists are on the losing end of the bargain.

While many will point out that Sirius is looking out for only its own bottom line, it would be disingenuous to place all the blame at its feet. Most labels have no desire to equitably share revenue with their artists, especially unrecouped signees. If the labels decide to follow through with this, the licensing deal will only reaffirm the status quo at the expense of the actual performers.

(Additional note: Jeff Price at the Tunecore blog makes an important point. Artists who are their own label (unsigned) will actually receive less through SoundExchange.

[I]t's causing an uproar for artists who have transferred their copyrights to labels (i.e. artists "signed" to a label), not for the millions of artists that are their own record labels. It all depends on which side of the coin you're on.

Under the current law, an artist who is also the record label (which the hundred of thousands of TuneCore Artists are) could make less money (and get paid less often) if their Sirius satellite radio payments go to SoundExchange...

[W]hat happens if you are both the lead performer AND the record label (like 95% of all TuneCore Artists)?

For the sake of conversation, assume an entity like TuneCore enters into a deal with Sirius to go direct (we have not, but bear with me so I can make the point), and the rates Sirius pays are not so low that the artist/label would make more money, not less, by getting paid directly.

As the artist is both the label and the lead performer, the artist gets MORE money then he/she would if he/she went via SoundExchange, as 5% of their money is not being given to unions. I have no idea if this TuneCore-like entity would charge an administrative fee like SoundExchange (never thought about it), but if it did, and it was less than 6.7%, the artist would make even more money. In addition, the artist would most likely get paid more quickly and more accurately then if the money went through SoundExchange.

So, all in all, SoundExchange is not a "one-size-fits-all" solution. Truly independent artists would likely see gains if direct licensing were put into place. However, artists whose music is controlled by labels would see a tremendous dropoff.)

Filed Under: licensing, music
Companies: sirius, soundexchnge

Should Satellite Radio Ditch The Satellites And Go Online Only?

from the kill-two-birds dept

In discussing the troubled satellite radio business, we noted that two of the major difficulties faced by the industry were the huge capital costs required to build and maintain the business, combined with the rise of (somewhat unexpected) competition in the form of internet radio and internet downloads combined with portable MP3 players like the iPod. Over at Slate, Farhad Manjoo has a suggestion that would solve both of those issues: Sirius XM should ditch the satellites and become a web only broadcaster. It's an interesting idea, but it seems unlikely (even though they offer online streams currently). Sirius XM still remains so car focused, it still thinks that being in automobiles is a competitive advantage. However, as Manjoo points out, it's actually damaging the company, because it's had to pay large sums to automakers to get the devices installed in cars. Instead, if it went to an internet-only solution, and cut the subscription prices, it could reach a much larger audience, much more easily and cheaply. Build mobile apps, and people can use their phones to listen to content. Add downloadable podcasts of popular shows, and anyone with a portable device can time shift. It's so reasonable that it'll never happen.

Filed Under: bankruptcy, competition, failure, satellite radio
Companies: sirius, sirius xm, xm

Was Sirius' Bankruptcy Inevitable?

from the possibly,-but-it-had-help dept

Back in 1999, when plans for satellite radio were first talked about, I thought it was destined to fail. I had two reasons for why: I didn't think there really was that much demand and having just closely watched the disaster known as Iridium, I was intimately familiar with the massive and business-strangling capital costs associated with running a satellite-based business. It just seemed so capital intensive that any underestimate in terms of demand would kill you. And, in fact, Sirius has a pretty long history of being on the verge of failure.

With the news of Sirius XM preparing for bankruptcy, it's worth revisiting those original thoughts. While I'd love to claim credit for calling this a decade ago -- I think my reasoning turned out to be wrong. I vastly underestimated the number of folks willing to sign up for satellite radio (though, I think I was correct in recognizing that the number of subscribers would need to be massive and that would be difficult to achieve). And, while the capital expenditure costs were large, it seems like they, by themselves, may have been imaginable. What I hadn't fully expected, was the massive expenses the companies (now company) would ring up trying to lock up "talent" to drive subscriber numbers up. Also, I didn't expect ridiculous regulatory restrictions. The 18 months it took federal regulators to approve the merger between XM and Sirius, combined with the ridiculous restrictions that were put on the combined company significantly contributed to satellite radio's troubles. And, finally, additional competition in the form of internet radio and podcasts/portable media really have put pressure on satellite radio -- none of which I foresaw at the time.

While the company is clearly looking to restructure and keep going, you have to wonder if it even makes sense at this point. With those alternatives increasingly becoming popular in the market, it's difficult to see how satellite radio can possibly provide enough excess value to pay for the increased capital costs compared to the competition. Even if the company restructures and comes out of bankruptcy, who's willing to bet it will have to through this whole process again in a few years?

Filed Under: bankruptcy, competition, failure, satellite radio
Companies: sirius, sirius xm, xm

Howard Stern Learns: Going Behind A Paywall Is A Good Way To Lose Influence

from the the-price-of-influence dept

We've talked for years about the danger any media makes in focusing on setting up a paywall. In an age where openness and the ability to get others to spread and promote the content for you is often a key barometer of success, locking yourself up behind a paywall takes you out of the wider conversation, and by its very nature, decreases your overall ability to influence. The LA Times has an article noticing that this seems to be exactly what's happened with Howard Stern, who famously made the jump from terrestrial radio to satellite radio -- and in doing so, appears to have lost a large percentage of his audience, and with it much of his influence. Of course, he was paid handsomely for doing so, but Sirius almost certainly expected Stern to bring a larger percentage of his audience with him. Yet, as the article notes, Stern's waning influence due to the switch means that even he's having trouble getting the level of celebrity that he used to command to even bother coming on his show. Amusingly, the article also notes that the very reason why Stern claimed he was moving to satellite -- his troubles with the FCC -- may be contributing to his lack of influence with the new show. In the past, every time Stern got in trouble with the FCC, it boosted ratings, giving him plenty of free publicity. Without that foil, he loses much of the free publicity. Such is life behind the paywall, apparently.

Filed Under: howard stern, influence, paywall
Companies: sirius, xm

Radio Companies Try To Force Satellite Radio Devices To Play HD Radio Too

from the let-us-tag-along! dept

Well, the terrestrial radio companies failed to stop the XM-Sirius merger from a happening with a rather ridiculous campaign against the merger, but that doesn't mean they can't continue to try to cause problems. The latest is that they've convinced Representative Ed Markey to introduce legislation requiring all satellite radio devices to include the ability to play HD Radio (terrestrial radio's attempt to provide a better quality product to compete with satellite). The FCC had just begun investigating whether or not such an HD Radio mandate made sense, but apparently Markey can't wait and is pushing to have the mandate pushed through as law before the FCC can study the issue. Is it worth mentioning that the NAB, the lobbying arm of the terrestrial radio stations (and the group that resorted to all sorts of questionable actions in trying to prevent the Sirius-XM merger), is one of Markey's biggest campaign contributors? Oh, and that XM CEO Mel Karmazin contributed to Markey's campaign back in 2001 (when Karmazin worked for Viacom), but apparently hasn't contributed more recently? Feel free to express your thoughts on the bill with this voting widget (if you're reading in RSS, click through to see it):

Filed Under: ed markey, hd radio, mandates, mel karmazin, satellite radio
Companies: fcc, nab, sirius, xm

Is The FCC Just Toying With XM And Sirius Now?

from the and-next...-we-want-you-to-clean-our-offices-with-just-a-feather! dept

The 18-month saga of XM and Sirius trying to merger just keeps getting more and more ridiculous. Yesterday, we pointed to all of the silly hoops the FCC was trying to make the companies go through, that often had absolutely nothing to do with antitrust issues, and today comes the news that the FCC has fined the companies nearly $20 million for technical violations as some sort of precursor to merger approval. What do these technical violations have to do with the antitrust questions the FCC is supposed to be deciding? Absolutely nothing. Instead, it appears that the FCC is simply using its position as the decider over whether or not the merger goes through to get whatever licks in that it can against the two satellite radio companies, knowing that they'll have to obey quietly. Its like hazing. Because XM and Sirius need the approval of the FCC, it can just do anything it wants to them, such as adding bizarre requirements or even asking them to hand over $20 million.

Filed Under: antitrust, fcc, merger, satellite radio
Companies: sirius, xm

FCC's Adelstein Drags Out XM-Sirius Review Even More

from the unbridled-discretion dept

As we predicted last month, the FCC's approval process for the XM-Sirius merger continues to drag on. This is becoming absurd. The merger was announced almost 18 months ago, which should have been more than enough time for the FCC to reach a decision, or at least come up with its merger conditions for the companies to consider. Yet it was only last month that Chairman Martin came up with his initial proposed conditions, and now Commissioner Adelstein is proposing even more restrictions as a condition of approving the deal. As I've pointed out before, the way antitrust law is enforced is problematic because of the unbridled decision it gives to government bureaucrats.

Adelstein's laundry list of merger conditions appears to have no particular connection to preventing the abuse of monopoly power, the supposed purpose of antitrust law. For example, he would require a 6-year freeze on price increases. If he believes the merged company would have too much market power, then he should vote to deny the merger. If, on the other hand, the merged company would not have too much market power, then a price freeze isn't necessary because competition will be sufficient to keep prices down. But the idea that they have too much monopoly power today, but won't in 6 years, doesn't make a lot of sense. His other major requirement, more minority-owned and non-profit channels, has even less connection to limiting the firm's market power. More minority-owned radio stations may or may not be good policy, but it has nothing to do with antitrust law, and it seems problematic for the FCC to impose those sorts of requirements as part of the merger review process.

Filed Under: antitrust, fcc, merger
Companies: sirius, xm

FCC Setting Conditions For XM-Sirius Merger (Finally)

from the what-took-so-long? dept

It's not clear exactly what Kevin Marin and the FCC have been doing over the last year and a half since XM and Sirius announced plans to merge. The Justice Department gave its approval of the deal back in March. That had already taken over a year, and then everyone turned to the FCC to get its approval. From the length of time it took, perhaps the FCC had just figured that the DoJ wasn't going to approve the merger, and had to scramble to figure out the details before granting (or not) its own approval. FCC boss Kevin Martin has now sent around to the other commissioners his recommended concessions to approve the merger, and it includes things like a temporary ban on raising prices (for a few years) as well as requirements for some channels to be turned over to noncommercial and minority programming. While XM and Sirius eagerly agreed to these concessions (after all this time, they just want the damn thing to be over), other commissioners may try to impose additional requirements as well -- so this might not be over just yet.

Filed Under: fcc, mergers, satellite radio
Companies: fcc, sirius, xm