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 As part of that, both ASCAP and the labels refused to tell Pandora which songs had been withdrawn, meaning that if Pandora accidentally played one of the withdrawn songs (again, without knowing which songs were withdrawn), it would face massive copyright infringement liability. With its back to the wall, Pandora was forced to agree to much, much higher rates with those labels who had "withdrawn" their songs -- and then those labels magically put their songs back in ASCAP...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?"

"Answer: Never once did that occur to me."

In other words, it was all about raising the rates. It was not about competition.

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.

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.

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.

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).

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.

Filed Under: antitrust, collection society, collusion, internet radio
Companies: ascap, emi, pandora, sony

Pandora's Fed Up With The Lies The RIAA Has Been Spreading About It: Presents Some Facts

from the let's-rethink-this dept

We've pointed out that, recently, the RIAA and various front groups and attack-for-hire firms that it funds have been really turning up the attacks on Pandora, the hugely successful internet service that already pays significantly more in royalties than pretty much anyone else out there. This strategy is very much in the RIAA's tradition of attacking any successful internet company in the belief that 100% of the benefits of any successful internet company should flow to the RIAA.

In this case, the RIAA and its front groups have done a masterful job of misleading a group of artists into parroting RIAA talking points pretending that Pandora's royalties are too low, not too high. Most of these claims are based on a either base ignorance, or conscious deception, often focused on comparing apples to oranges. In some cases, this involves comparing totally different businesses (like Pandora to retailers), or, at times, it means comparing Pandora's "per play" royalties to the "per play" royalties of other services like terrestrial radio or satellite radio. Of course, that's insanely misleading, because the real metric is never "per play," but per listener. With Pandora, a single play is to a single listener (or, possibly a few people in a room or a car). But, terrestrial and satellite radio plays are broadcast, meaning that they usually have tens or even hundreds of thousands of listeners per play. Comparing "per play" rates is just a really dumb metric. There's a separate issue in terms of how some have misrepresented the various payments, implying that Pandora's payments are much, much lower than they really are -- something that an eager media picked up on without even the slightest bit of fact checking.

It would appear that Pandora has finally had enough of the smear campaign and the attacks and has posted a detailed response to these attacks, highlighting how wrong almost every talking point has been concerning Pandora, and how this level of dialogue has done a lot more harm than good.

The first falsehood being disseminated is that Pandora is seeking to reduce artist royalties by 85%. That is a lie manufactured by the RIAA and promoted by their hired guns to mislead and agitate the artist community. We have never, nor would we ever advocate such a thing. I challenge the RIAA to identify a statement from Pandora that says we seek to reduce royalties by 85%. On the contrary, all of the key principals including Cary Sherman (the head of the RIAA) and Mike Huppe (the head of SoundExchange) know that we have been advocating for solutions that would grow total payments to artists. The 85% sound bite preys upon the natural suspicions of the artist community, but it is simply untrue. And although we compete directly with AM/FM radio, which pays zero performance royalties, we have always supported fair compensation to artists.

It has also hit back on the claim that Pandora has been seeking to cut songwriter fees, explaining that it had come to a direct agreement with ASCAP on higher fees, and then ASCAP went back on the agreement and started playing games -- such as withdrawing tracks, but refusing to tell Pandora which tracks, such that it risked huge statutory fines if it played the wrong tracks. For all of ASCAP's claims that it is protecting artists, the reality looks like it was harming artists' best interests in trying to kill Pandora:

The next issue concerns the publishing side. Historically, Pandora has paid essentially the same rate as all other forms of radio, a rate established unilaterally by the performing rights organizations, ASCAP and BMI, in the late 1990s. 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. Any characterization of Pandora as being out to cut publishing rates flies in the face of the facts.

And, amazingly, the RIAA and others have been successful in spinning this, falsely, into saying that Pandora was looking to cut back on what it paid songwriters.

The depths to which the RIAA has sunk in its attacks on Pandora are really quite despicable, but it's par for the course for them. Anything successful in the music space created "outside" the record labels is bad and somehow "building on the backs of our copyrights." They won't rest until they've killed each off. The past decade and a half are littered with the remains of internet and tech companies who built great products in the music space that fans loved, each one systematically killed by the major record labels and the RIAA, who demand ever higher royalties.

Filed Under: internet radio, lobbying, music royalties, royalties, songwriters
Companies: musicfirst, pandora, riaa

Michael Robertson Tempts Copyright Fate Yet Again With DAR.fm

from the power-of-the-possible dept

I used to joke that every company founded by Michael Robertson had a very simple "marketing plan": get sued by someone big. So many of his startups ended up in lawsuits with big names, which helped generate even more attention for them. But, of course, part of the reason for that is that he continually stretches the technology to do what it obviously can and should be able to do, well before the law (and legacy companies) adapt to handle such things. It's why many people have been pointing out that for all the hype around Apple's new "Music Match" service, it sounds remarkably like what Robertson did a decade ago with MP3.com.

Speaking of Robertson and lawsuits, Robertson's MP3tunes.com is still engaged in its big legal fight with EMI, which may help determine the legality of online music locker services, but Robertson clearly isn't waiting around for that. Built on top of MP3tunes.com, he's also launched DAR.fm, which is effectively an online DVR for all internet audio/radio. You can just set up what you want to record, and the site records it and stores it in an MP3tunes locker. At first I didn't think there was all that much interesting here -- the world already has podcasts, and did it really need a way to record online radio separately? However, things get a bit more interesting when you dig into the details, and you realize there's an interesting copyright situation... and a potential lawsuit waiting to happen.

As David Pogue pointed out in his review of DAR.fm, beyond just recording the shows, it has an interesting feature:

Actually, maybe this part is even better: Many radio stations transmit the names of the songs and bands they’re playing. DAR.fm captures that information and detects song breaks. In other words, if you record a day or so of a music station, you’ve suddenly got a tidy list of songs, identified (and sortable) by title or band. You can listen to individual songs, skip the turkeys and otherwise enjoy your totally free song collection. It’s crazy cool, like a hybrid of iTunes and satellite radio.

Of course, there have been desktop software products that have done the same thing for ages. But automatically dumping the mp3s into a music locker, which -- unlike the Google's and Amazon music locker that have launched recently -- actually lets you download the mp3s in your locker, is something the labels surely won't like. In fact, lots of folks are predicting that lawsuits are on the way:

Internet entrepreneur Michael Robertson has just launched his own economic stimulus program. He’s going to provide jobs for a lot of lawyers.

That’s because Robertson has created a new online service called DAR.fm, which delivers a new way to listen to Internet radio streams. DAR.fm is a digital recorder for audio streams, capturing your favorite Internet radio shows whenever they’re broadcast so you can listen to them later. It works, it’s wonderful, and it’s very possibly doomed, because the world’s leading music recording companies will probably come after it with every attorney they have.

But, here's the thing: does such a service actually infringe? It's pretty clearly established that basic time shifting, such as with a TiVo, is considered legal. Separately, with the Second Circuit's Cablevision ruling (and the Supreme Court's refusal to hear the appeal), many consider the idea of a remote DVR to now be legal as well.

What it really comes down to is that such a service has the potential to upset the record labels (and radio broadcasters as well), but that, by itself, shouldn't be illegal. Instead this is Robertson demonstrating, yet again, what the technology makes possible, even if it's disruptive to those who don't realize that the distinction between a stream and a download and local and remote storage is basically irrelevant in an era of widespread broadband connectivity. But, being disruptive and demonstrating the power of technology doesn't make you immune from lawsuits... and judges often aren't so savvy on these issues.

Filed Under: audio, dvr, internet radio, michael robertson
Companies: dar.fm, mp3tunes