US copyright proposals: The good, the bad and the really, really bad

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The following MBW blog comes from Jeff Price of Audiam. Jeff is the Founder of TuneCore and the Founder/CEO of Audiam, which gets publishers paid for the digital use of their music.

Yesterday, the US copyright office came out with a 254 page report recommending changes to the current laws and rules to use and license music.

Some things are no brainers, for example, in almost every country in the world when music is played on AM/FM radio, the label and performer get paid. Not so in the US, here the radio station gets to use the recording for free, make money off it and not pay for that use. The US Copyright office suggests this change and have AM/FM radio pay for the use of the recording. I could not agree more.

Another is paying the same amount of money for sound recordings made before 1972 (right now, when they are played on “digital radio” (i.e. Pandora, Sirius Satellite), pre-1972 sound recordings get paid less than sound recordings made post-1972. Yes, this is as bizarre as it sounds and a needed fix.)

But some of the recommendations concern me as they will make things worse, not better.

First, they would like to allow BMI and ASCAP to represent not just the right of Public Performance but also the right of “Reproduction” (i.e. mechanical royalties).

The problems with this idea are as follows:

1) Currently, very few know what the actual BMI/ASCAP negotiated royalty rates are for public performance. As an example, when I asked ASCAP to tell me what royalty rate had been negotiated for the copyrights we represented, I personally spoke with former ASCAP CEO John LoFrumento. He very aggressively stated he would not tell me as the rates are” confidential”. If ASCAP works for its members, its members have a right to know what the negotiated royalty rates are. Add Reproduction rights to this and it makes it even harder to understand what you are being paid compared to what you should have been paid.

2) Very few know what the exact fee is for each service that ASCAP and BMI take. For example, they take one fee for the money they collect from TV and a different fee for money they collect from YouTube. Again, this creates a situation where the rights holder does not know if they are being paid properly.

3) The amount they pay out is based on a highly complicated, proprietary “weighted” math formula. In other words, just because you earned $1 does not mean you get paid $1. The organizations more arbitrarily decide what you get paid based on internal complicated and byzantine formulas created in the age of AM/FM radio. They also “snap the tail” meaning that in some cases they pay money earned by the bottom to those at the top.

4) BMI and ASCAP are non-exclusive by law. This means multiple entities can represent the right of Public Performance at once. Imagine if we add the right of Reproduction to this equation. Now multiple entities can simultaneously represent multiple rights at the same time. You think it was bad before figuring out who represents what, if this happens, it’s going to get worse.

5) ASCAP and BMI are currently challenged with processing digital information that can consist of trillions of lines of data with payments that go out 27 places to the right of the decimal point. Adding an additional right in will add more data and micropayments increasing the inefficiency. If you’re going to take on a job, you need to be able to perform that job and not rely on a lack of transparency and byzantine enigmatic rules to make mistakes.

6) There are already companies in the market that track digital reproduction and digital public performance better than ASCAP and BMI. In addition, these other companies are able to process big data and make micropayments with more transparency more quickly. Allowing ASCAP/BMI into this space without requiring them to be able meet certain regulated standards will not only have artist, songwriters, composers and publishers be paid inaccurately, but it will also remove market competition to build the better mouse trap.

The second recommendation I strongly disagree with is the idea of forcing rights holders to have to license under a government-mandated rate. Right now every download and interactive streaming music service in the US can license the rights to a “composition” (i.e. the lyrics and melody), the rights holder cannot say “no”. This is called a “compulsory” license and it is how things work in the US for songwriters/publishers in regards to their songs (note, most other countries do not have a compulsory license).

The “compulsory license” is one-sided to the benefit of the music service by making it easier for them to take someone else’s property and make money off it. It does this to the detriment of the rights holders.

The problem is the “compulsory license” created a large part of the current mess we are in with bad data and composition rights holders not getting paid money they earned when a recording of their song is downloaded or streamed interactively.

Making more compulsory license only increases the problem for copyright holders not fixes it.

The solution to this mess is to get rid of the compulsory license and remove the consolidation of rights licensing from central organizations thereby forcing the music services to create something of true value.

If they create something of true value, rights holders will opt in to allow the service to use their music.

The music service can pre-set deal terms (i.e. click here) and the rights holder gets to decide if the deal terms are worth allowing the service to use their music.

The music service then builds the technology to ingest and collect the needed data to keep track of things. In addition, it has a one to one pipeline with the rights holder to make direct, clear, transparent monthly payments.

If there is another music service that is more compelling than the first, that music service ends up with more content and creates a competitive market based on providing value

This model scales, allows for voluntary opt in and forces excellence.

Yes, things need to be changed, but my concern is the true problems in the market were not properly represented to the Copyright Board. Instead they heard from those with power and influence on Capitol Hill as opposed to the majority of the industry that will be harmed by some of these recommendations.

Giving the traditional industry that already cannot do the job more of the same job to do is not the solution.

Getting rid of the compulsory license and consolidation of licensing forces excellence and creates one to one transparent and accurate pipelines.Music Business Worldwide

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  • Frankie Nash

    It’s good news and a sign of victory