DOJ Makes Smart Decision On Music Licensing... Music Publishers Completely Lose Their Shit

from the calm-down-people dept

For the past couple of years now, the Justice Department has been exploring the so-called "consent decree" around music publishing. This was an agreement, first made in 1941, and then reviewed in 2001, on how music performing rights organizations (mainly ASCAP and BMI) could operate without violating antitrust rules. Without such consent decrees, there was a quite reasonable fear that the performing rights organizations (PROs) would abuse their monopoly positions. This is not a theoretical argument. If you look around the globe, there are many, many, many, many, many stories of these organizations behaving badly.

In this case, ASCAP and BMI had been whining that because of those darn internet companies not paying enough, they need to get rid of the consent decree, mainly so that they can do more to jack up rates (there's more to it, but the end result is they want to be able to withhold rights to force rates up). Of course, in opening up this can of worms, they also got the DOJ to start looking more closely at other practices, including an exploration into so-called split works or "fractional licensing." The details here can get confusing, but in short: when a work has multiple copyright holders, many have argued that you need to get a license and/or approval from every copyright holder. But if you look at the legislative history of the 1976 Copyright Act, legislators made it clear that under the act, they intended to make it clear that any copyright holder in a work with multiple authors had the right to license the whole work.

And now... the DOJ has agreed. It issued an announcement with two key points: it would not take away the consent decree and it said that the law requires "full work" licenses, meaning a single copyright holder can grant a license for the entire work. This is a good thing. It's a very good thing. The DOJ's explanation for this is pretty straightforward:

In the end, the Division concluded that only full-work licenses could fulfill the purpose and meaning of the requirement in the consent decrees that ASCAP and BMI offer blanket licenses that provide users the ability to play all the songs in the PROs’ repertories. Importantly, this does not mean that ASCAP and BMI are required to provide a full-work license to a work when their members cannot grant them the ability to offer such a license. That is, we do not suggest an interpretation of the blanket license that is inconsistent with the Copyright Act. Rather, if the members of ASCAP or BMI are unable to grant to their PRO the rights to license their works on a full-work basis, those works are ineligible for licensing by ASCAP or BMI.

Both sides in this debate pointed to past practices they believed supported their view of whether ASCAP and BMI licenses were full-work or fractional. We think the evidence favors the full-work side. Our determination begins with the language of the consent decrees themselves, which unambiguously require ASCAP and BMI to offer licenses to all works or compositions in their repertories, and not to interests in works. For example, in the case of ASCAP, it must provide a license to perform “all of the works in the ASCAP repertory.”

Our view is also based on what is required for all participants in the industry to enjoy the substantial procompetitive benefits of the PROs’ blanket licenses – benefits that differentiate the PROs from joint price-setting entities that often present significant problems under the antitrust laws. The Supreme Court described blanket licenses in the BMI case as providing “unplanned, rapid, and indemnified access” to the songs in the PROs repertories. Fractional licenses would not offer the benefits the Supreme Court described.

A full-work blanket license from ASCAP or BMI allows the music user to publicly perform, without risk of copyright infringement liability, all works in the licensing PRO’s repertory. Particularly for music users – such as bars and restaurants – that cannot meaningfully control in advance the music they play in public, this feature of the PROs’ licenses benefits both the licensees as well as music creators in that it ensures that users can and will continue to play the creators’ music.

Fractional licensing would not offer the same benefits to users. If a PRO’s license granted a user something less than a license to play a particular song, music users seeking to avoid infringement liability would face the daunting task of identifying and ensuring they obtained licenses from all fractional owners – a challenge made more difficult by the lack of a comprehensive, reliable, and transparent catalog of rights. Under those conditions, even music users with control over the music they perform would have to curtail their performance of music until they were certain they had obtained licenses from all fractional owners. As BMI itself argued in a recent rate-court filing, a BMI license grants to a music user “insurance against copyright infringement . . . and immediate access to more than 10.5 million works in BMI’s repertoire.” A fractional license could not provide these benefits.

A lot of this was rumored a month or so ago, and a bunch of songwriters and publishers freaked out about it. They shouldn't be freaking out about it. This is actually good for them. Back when the expected result was leaked to the press, even Digital Music News, which frequently sides with the legacy industry, said directly that the songwriters' freak out was wrong and that this was a good thing for the music world -- and also notes that this could help finally create the holy grail in the music industry of a single database of published songs.

This should also help create more useful services that will get consumers to use authorized music sources, rather than unauthorized ones. As we've covered, ASCAP played some ridiculous tricks on music services like Pandora, and got slammed for it. But with full work licensing, such gaming will be even less possible, creating more openings for new music services to thrive.

Of course, the PROs, ASCAP and BMI, immediately lost their shit over this announcement and promised to fight back. BMI also announced that it will go to court to try to overturn this decision, while ASCAP has decided to focus on getting Congress to fix it through the legislative route (there's a reason for this bifurcated approach: in the cases involving both organizations, both BMI and ASCAP recognize that BMI has a judge that seems more willing to accept BMI's version of the story, whereas ASCAP's slimy behavior was so egregious that the judge covering its case actually understands the issues at play).

The end result, though, is the same old story: ASCAP and BMI want to abuse their monopoly position to try to jack up rates. Meanwhile, by not allowing that to happen, most songwriters will actually be better off, allowing more useful services to thrive, creating more opportunities for revenue. It's kind of insane that we have to point this out over and over again, but the legacy industry always fights against new innovations in the false belief that it will harm revenue -- yet when they learn how to embrace the opportunities, it turns out that a larger audience has been created and there are even more ways to make money. But ASCAP and BMI, like the RIAA on the recording side, are so focused on controlling their turf rather than seeing the big picture that they miss this entirely.

Filed Under: antitrust, consent decree, doj, fractional licensing, full work licensing, licensing, music publishing, songwriting
Companies: ascap, bmi

Understanding David Lowery's Lawsuit Against Spotify: The Insanity Of Music Licensing

from the dig-deep dept

We generally don't talk much about musician David Lowery around here any more. We covered a few stories about him a few years ago, and he seemed to take it ridiculously personally, and continues to attack me with false and misleading claims. Every so often someone sends me a link to a blog post he's written and it's almost always laughably wrong (for example, in one recent story he falsely claimed that "Google" is on Spotify's board -- because a former Google exec who is no longer at the company also happens to be on Spotify's board). So, take the following with that caveat in mind. I tried to be objective in the analysis, but some will likely suggest that's impossible given his years-long attacks on me.

Lowery, if you don't know, is a decently successful musician who has ranted against any new service or business model for musicians. When he was first getting attention over this it was about iTunes, but lately it's been things like Spotify, Pandora and YouTube. He appears to pine for the "old days" when there was less competition and a clearer career path for musicians like himself. So his concern is always that these companies are somehow "cheating" him and his friends out of money. Mostly this has been idle, if frequently misleading, whining. But right before the new year, it turned into an actual lawsuit against Spotify that he's hoping to turn into a class action. You can read the whole complaint here (or embedded below), though I warn you: to understand it, you need to go pretty deep into the arcane nature of music licensing.

Here's the thing about copyright law: historically, as new technologies come along, copyright has a lot of trouble dealing with them. And, typically, the pattern is that the industry freaks out and tries to stop the new technology, but eventually someone duct tapes on a new bit of copyright law to cover it. Unfortunately, this means that there are all these weird peripheral sections of copyright law that are supposed to apply to specific circumstances, which then get made obsolete by later technological situations, and it leads to lots of confusion and anger... and lawsuits.

Stick with me through the next few paragraphs. It's going to seem ridiculously impossible to ever do anything that involves licensing music after you get through all of this, in part because it's been made so cumbersome thanks to all this duct tape.

So, everyone knows that music is covered by copyright. And, if you follow these things moderately closely, you may also know that the copyright on a recorded song involves two different copyrights: there's the copyright in the sound recording (for the musicians who recorded the song, but usually held by the record label) and a copyright in the composition which is held by the songwriter. But things get much more complex even beyond that. And that's because there are different exclusive rights under copyright law, such as rights for reproduction, distribution and public performance.

On top of that, there are different types of licenses for these different parts and different rules for how such licenses can be obtained and who can obtain them in which situations. The rules and licensing are different for terrestrial radio than they are for satellite radio than they are for "non-interactive" streaming radio (e.g., Pandora) than they are for "interactive" streaming services (e.g. Spotify). Pandora, for example, gets to make use of compulsory licenses relying on a rate set by a group of old judges known as the Copyright Royalty Board (you may have heard that they just raised the rates, but not nearly as high as some were asking for).

With Spotify, on the other hand, most of the licenses actually had to be negotiated. But because of all the different aspects, there was a lot to negotiate. There are deals to be made with the copyright holders for the sound recordings (mostly the labels, some of whom took equity stakes in Spotify to make those deals happen) along with licenses from the "Performance Rights Organizations" (PROs) like ASCAP and BMI for "performing" the works. Then there are mechanical licenses which are for reproducing or distributing the composition, and cover a variety of things -- and are generally available in a compulsory fashion (i.e., if you want them, as long as you pay, you can get them). They're called "mechanical" licenses from back in the day when reproducing a work actually was a big "mechanical" process. When someone wants to cover a song, they can get a compulsory mechanical license for that (which is why artists cannot stop anyone from covering their songs -- much to Prince's dismay). You also need a mechanical license to reproduce and distribute a "phonorecord" of a musical work.

Most mechanical licenses are managed and sold via an organization called The Harry Fox Agency (HFA), who works on behalf of music publishers (companies who tend to hold the copyrights on the musical compositions, rather than the actual recordings) that teamed up to create the agency a long, long time ago. There is also a complex bit of copyright law, known as Section 115, which gives the specifics on compulsory licensing of mechanical licenses in certain circumstances, if certain rules are followed. But here's the crazy thing: it's 2016 now, streaming services have been around for years, and still no one's entirely sure if Section 115 compulsories actually apply to them. It's never actually been tested and many services (including Spotify) assume they do, but a potentially big question is whether or not they really do. Isn't that kind of insane?

There are actually even more things that go into copyright licensing for music and I simplified some elements of this, but hopefully this gives you an idea of how absolutely insane all of it is. But... it's necessary to understand all of that to figure out what's going on with Lowery's lawsuit. Almost all of the press coverage doesn't delve into any of this, and just says that he's claiming Spotify isn't paying for some of the music that's available on the service. But it's not a case where Spotify is just putting songs on its service willy-nilly. Spotify absolutely is licensing the sound recordings from the copyright holders, and then the performance licenses from the PROs. And it's getting mechanicals via HFA and/or via Section 115.

However -- and here's the big issue -- while Spotify gets the recordings directly from the copyright holder, and thus knows who to pay the royalties to, those songs often do not include the necessary metadata to connect the publishing/songwriting side of things to the recordings. So while the company knows who to pay for some parts of what it needs to pay, for others it has no idea. Under the law, the money for such royalties needs to be kept in escrow to pay at some later time when the details are sorted out -- which is something that Spotify claims to do. The company recently announced that it's building a giant database to connect the publishing/songwriting info with the database it already has on the sound recordings, in order to distribute the $17 million or so it's been holding in escrow. This seems like a move in the right direction, but to some songwriters, they argue that it's "proof" that Spotify didn't properly license songs. That's possible, but unlikely. Spotify is holding the money in escrow because it that's the requirement when you do not have the necessary info to pay the compulsory licenses.

Lowery is arguing that Spotify is simply failing to obtain the necessary mechanical licenses for many of the compositions in its database, including a bunch of his songs. There is, separately, an "unfair business practices" claim that we'll also discuss in a minute. Over the past week or so since the news of this lawsuit came out, I've spoken to half a dozen different copyright lawyers to try to understand the details, and they're all at least slightly perplexed by the lawsuit, with some noting that details need to come out later to further explain the argument.

A few copyright lawyers I spoke to were flat out confused as to why Spotify would even need a mechanical license in the first place, seeing as it's streaming music, rather than "reproducing" and "distributing" it such that Spotify users end up with a full copy to keep. There are two possible responses to this that I (and some other lawyers I spoke to) can come up with, though Lowery's lawsuit does not clarify which of these he's arguing (or if it's something else entirely). One is that Lowery considers merely streaming music to be "distribution" and "reproduction" of a "phonorecord." Indeed, this appears to be the argument that Audiam, a company that has been deeply involved in this issue, makes on its website: every stream requires a mechanical license royalty.

One copyright lawyer I discussed this with called such an argument "meritless" but I actually wonder how the courts would shake out on it. It would get down pretty deep into the weeds of the technology behind streaming, and what counts as a "reproduction" and "distribution" of a work, and whether or not the ephemeral copies that are created in the streaming process require mechanical licenses even though they disappear as soon as they're played. You may recall that one of the key copyright cases a few years ago, regularly referred to as the "Cablevision" case but technically Cartoon Network v. CSC Holdings, found that such ephemeral copies are not copies for the purpose of copyright law. But that's technically only law in the 2nd Circuit, not the 9th Circuit where Lowery's case was filed.

The Supreme Court refused to hear the appeal in the Cablevision case. If Lowery's case does focus on such ephemeral streams, it could reopen that dangerous can of worms, and raise serious questions about copyright for cloud computing (remember, a study showed that the ruling in the Cablevision case was a key driver in jumpstarting the cloud computing industry).

Still, there may be a plausible argument that Spotify is "distributing" a song when it streams it, but again that's not exactly settled law. Either way, Spotify appears to be acting as if that is the case anyway in trying to secure mechanical licenses, so perhaps this won't be a huge deal in the case.

The other, perhaps more plausible, explanation is that the issue is really only in cases where Spotify allows users to actually download a song for offline play (a feature for Spotify Premium users). In those cases, it's much more compelling that Spotify would need a mechanical license, because the copies are not so ephemeral. But, it would also explain why the numbers for the mechanical royalties are so much lower (the fact that set off so much focus on all of this), because the mechanicals wouldn't apply in most streaming situations.

In either case, Lowery might run into a second stumbling block: Spotify can (and likely will) argue that it complied with the rules required in Section 115(b) for a "notice of intention" in order to get the compulsory mechanical license. Basically, Spotify would argue that it did what is necessary to get a compulsory mechanical license when it was unsure of who held the publishing/songwriting rights on a song. If it actually did do this, Lowery's case may be dead in the water -- though I'm guessing Lowery's lawyers will argue that it failed in some aspect of properly using Section 115 -- or, as mentioned above, that Section 115 doesn't actually apply to streaming services. If Spotify did not actually follow Section 115's rules, then Lowery's case suddenly is a lot stronger. Similarly, if a court suddenly determines that Section 115 doesn't apply... well, then a lot of streaming services are in serious trouble. Update: As noted by a commenter, the Copyright Office publishes the list of Section 115 Notices of Intent that it gets -- and it does not appear that Spotify is on it. So that suggests that Spotify may not have followed the rules of Section 115, which may mean the company is in deep trouble.

Separately, Lowery argues that Spotify's actions are "egregious and willful" -- the latter of which is necessary to seek a maximum statutory damage amount of $150,000 per work infringed. Again, assuming that Spotify did in fact do as it has claimed, and followed the rules for Section 115 compulsory licenses, it's going to be much more difficult to convince anyone that the actions were "willful." Similarly, if you read this article by a copyright lawyer who appears to agree with Lowery (though it was written before Lowery's lawsuit), you see that as soon as Spotify was aware of how to pay the money, it did so. That's going to make the whole "egregious and willful" claim an uphill battle. But, we shall see...

Finally, there's the "unfair business practices" claim. Here's the crux of that one:

On information and belief, Plaintiff alleges that Spotify: (a) depresses the value of the royalties owed to Plaintiff and the Class Members’ for use of their Works through an arbitrary and non-negotiated payment structure; and (b) captures and holds funds which are otherwise distributable and earns interest thereon, thereby profiting off its own unlawful conduct. These business practices are unlawful and unfair pursuant to California Business & Professions Code § 17200

This again seemed like a non-starter to a few copyright lawyers I spoke to. First, it seems like it's just another copyright claim, hidden as a state unfair business practices claim -- meaning it might get tossed out. Copyright law is (nowadays) entirely a federal issue, and attempts to bring in state laws are generally tossed out as federal copyright law "preempts" such claims. Furthermore, since copyright law allows holding such royalties in escrow, it seems difficult to argue that this is somehow illegal under California law. And I have no idea what is even meant by "depresses the value of royalties owed."

In the end, there's a lot that's not entirely clear about the lawsuit, and it's left many people scratching their heads. It is possible under a unique set of circumstances (some of which would involve fairly egregious behavior on the part of Spotify) that Lowery may have a case here. Similarly, if a court decides that Section 115 doesn't actually apply to streaming services, that would give Lowery a major win. But there are many, many arguments for why the lawsuit has little chance (Update: see the update above about why Spotify may not have complied with Section 115, which, if true, makes Lowery's case stronger). The one issue that concerns me most, however, is whether or not he will actually start arguing that ephemeral copies represent a "reproduction" and/or "distribution" under copyright law. Either way... stay tuned.

Filed Under: copyright, david lowery, licensing, mechanicals, music streaming, section 115, songwriting
Companies: harry fox agency, hfa, spotify

Unexpected Things: Guy Capitalizing On The Concept Of Music SEO By Recording 100 Songs A Day

from the this-modern-world dept

There's an incredible story that recently played on On the Media's awesome off-shoot TLDR podcast, talking about a guy who basically spends all of his free time writing and recording songs on pretty much every topic imaginable, and then uploading them to Spotify and iTunes, just in case someone is magically looking for a song about any particular topic. He's already recorded 14,000 songs, and says last year he made about $23,000 from royalties. Many of the songs seem quirky, and I'm not sure many people would consider them to be any good, but that's not really the point. The point is to have some music on pretty much any topic.

The more I thought about this, I realized this is yet another unique outcome of the modern digital era. In our Sky is Rising report from a few years ago, one of things we noted was the massive explosion in books (mostly ebooks), but we carefully noted that many of them were these odd automated productions, pulling feeds of information and releasing them in book form. That kind of thing is designed to be created cheaply and never sell many copies, but still might be incredibly useful for the 2 or 3 people who need exactly what's in that book. If you can produce enough things like that, perhaps it's worthwhile.

And, with digital music becoming so common, it's not such a crazy idea to basically try to thrive on search engine optimizing (SEO'ing) music searches. I say this as someone who has created Spotify playlists about trains, bananas and (just last week) "the ABCs" for my son. As I was setting those up, I thought about just how incredibly different the world my son will grow up in is than what everyone else has experienced. When he says, "I want to hear songs about trains!" it's actually not that difficult to do exactly that. This goes beyond just what many people thought the rise of digital music would bring about, which is the breakdown of the need for "albums" as people move to singles, but the opportunity to create songs on a theme or topic for those people who are looking for it. There may not be that many people actually searching for any such particular song, but if you can make enough of them, covering enough topics that when someone needs just any song on a particular topic, there's now an opportunity to do that.

This isn't "the future of music" or anything of that sort. It's just one of those wonderful, tangential things enabled by our digital world, filling a need that is actually quite useful for some, in a way that really wasn't possible not too long ago.

Filed Under: itunes, music, new things, search, seo, songwriting, tldr
Companies: spotify

Beach Boys Make Ridiculous Copyright Claim Over Katy Perry's California Gurls

from the let-me-explain-idea-expression... dept

AdamR was the first of a bunch of you to send in the news that the Beach Boys are threatening to sue Katy Perry and/or her label if they're not given songwriting credits for her song California Gurls. The Beach Boys, of course, did have a famous song back in 1965, called California Girls, with the classic line "I wish they all could be California Girls..." In the Katy Perry song, which is very different than the Beach Boys song, at the very, very, very end, Snoop Dogg says "I really wish you all could be California girls," so the quote isn't even a direct one. I would have embedded the video here for you all to see, but Perry's label is EMI, and EMI is still doesn't understand why embedding videos is a good idea.

Either way, the demands for a songwriting credit are ridiculous. Hopefully EMI and Perry stand up to Mike Love and Brian Wilson over this (amusingly, we were just covering how Love and Wilson were involved in a totally frivolous lawsuit between each other), though I could see EMI giving in so as not to open up the copyright can of worms over lyrics quotations and fair use. The use of the (modified) line here seems like a clear, undeniable case of fair use. It's laughable to think that Love/Wilson deserve writing credits for a throwaway statement at the very end of a totally different song that, in some ways, is just an homage to their song.

Also complicating things? It looks like Love and Wilson have been quoted in the past saying they like the song and are flattered by the homage. Wilson wished her well on the track:

"The melody is infectious, and I'm flattered that Snoop Dogg used our lyric on the tag. I wish them well with this cut."

Love's quote, however, is a little different, and at least hints that he was thinking about this earlier (though, apparently, he now denies that this was his idea to threaten EMI/Perry):

"Initially the subject matter was so unique -- songs about surfing, great cars, being true to your school, California girls. And the subject matter is still in vogue -- just ask Katy Perry.... I think the part she did is pretty cool. There are a lot of writers on it, and I think it's probably a stroke of genius to have the king of canine cool, Mr. [Snoop] Dogg, do his thing. But I think her creative part, her musical part, is pretty hooky. I think it brings the Beach Boys' 1965 classic to mind, that's for sure."

Filed Under: beach boys, brian wilson, california girls, california gurls, copyright, fair use, katy perry, mike love, songwriting