Month: February 2023

Will Songwriters Wish they had Gotten Inflation Protection on Streaming Mechanicals?

When the dust settled after the last mechanical royalty rate setting we saw the Copyright Royalty Board approving two different settlements for mechanical royalties. The royalty rate for physical mechanicals and permanent downloads get a significant rate increase and the royalty rate for streaming mechanicals got a theoretical rate increase. However, only physical mechanicals and downloads got both a rate increase and a cost of living adjustment (or “inflation protection”). Streaming mechanicals did not get inflation protection–could have but did not.

This means that the same writers on the same song in the same recording will get inflation protection when that song is sold in physical formats (such as the surging vinyl configuration) or downloads, but will not when that song is sold in streaming formats. What is the logic to this? One difference is that record companies are paying on the physical and download side and the lived experience of record companies necessarily puts them closer to songwriters than the services. And the lived experience of streaming companies is…well, breakfast at Buck’s, Hefner level private jets, warmed bidets and beach volleyball courts at home with imported sand. (Although Sergey Brin has a real beach in his Malibu home. Surf’s up in geekville. Maybe he’ll send DiMA to represent him at the Malibu city council meetings if Malibew-du-bumbum is ready for Silicon Valley style lobbying to decide who can surf Sergey’s beach and the color scheme of their boards. Kind of like the Palo Alto Architectural Review Board with a tan.)

The Big Google

We heard that inflation was transitory, which may prove true–or not. Transitory or not, that’s not an argument against treating songwriters equally on two versions of the same mechanical license; rather, it’s a reason why it should be easy to afford if you cared about sustaining songwriters at least as much as investing in ChatGPT to replace them.

However, in one of the great oopsies of the 21st Century, it doesn’t look much like inflation is all that transitory. Based on some of the posts I wrote starting in 2020, I think we can see that inflation is way worse on the items that count for songwriters like “food at home,” rent, utilities and gasoline. Very often the number of Americans working a job is used to counter the lived experience of the high number of people who believe the economy is tanking. But what about that jobs report? More jobs equals good times, yes? There’s something weird about the math of the jobs report which should make you wonder about whether that’s such a great argument.

If I still have your attention after the “math” word, there are two standard surveys of the economy used to measure jobs that measure different components of the jobs created in a given measurement period. These data are the “Establishment Payroll Survey” which measures the total number of jobs in the U.S. economy. That’s the number most people refer to with the “jobs report” you hear so much about. (More formally titled the “Current Establishment Statistics (Establishment Survey).”)

There’s another number called the “Household Survey” that measures the total number of jobs per household (more formally titled the Current Population Survey).

Note that the Establishment survey measures all jobs; the Household survey measures jobs per household. If you had two or three jobs, the Household survey would count you as “employed”; the Establishment survey would count the number of jobs you had. Now note that there is currently 2.7 million job difference between the two. Why?

I’m not really sure, but it would appear that there are more jobs than households. That difference may occur from time to time, but it’s quite a big difference at the moment and seems to be a trend that’s confirmed by another statistic: the surge in part-time jobs as shown in this chart:

So what’s missing is how many jobs that are counted in the Establishment survey are held by any one or two household members in the Household survey. If you were to draw the conclusion that every job in the Establishment survey is a full time job held by the primary source of support in a household and that when the Establishment number is rising things are looking up, that may be a leap unsupported by evidence. That may be one of the things you’d want to know if you were trying to predict how well the government’s songwriter royalties would hold their value over the five year rate period.

The sharp increase since June in the number of part time workers may suggest that more people are working multiple jobs and not that more people are working. In fact, the total number of full time workers seems to have declined by a bit over the same period.

That’s not to say that inflation protection is not a serious requirement of everyone who relies on the government for their livelihood. While the inflation rate has declined a bit recently, possibly due to the Federal Reserve abandoning its zero interest rate policy, it is still significant. In my view, nothing in the employment report suggests otherwise and continues to highlight the importance of songwriters being accorded the same inflation protection on streaming as they are on physical and downloads.

Just because the physical rate is paid by the record companies and the streaming rate is paid by the richest corporations in history does not excuse the distinction. Each should be protected equally.

The Enemy Gets a Vote: How will Big Tech respond to “CRB Reform”?

You may recently have heard the term “CRB reform” tossed around by various music industry entities. The term usually means changes to the law or regulations governing the Copyright Royalty Board in the interests of the lobbyists or the big music publishers. And yes, so far it has just been the publishers raising “CRB reform” aside from the odd comment of A2IM filed with the CRB that would, if adopted, create a massive change to the Copyright Act and make controlled composition clauses even more pernicious. (As I explained in my reply comment, I don’t think the CRB has the authority to make the change A2IM asked nor do I think they have the inclination for self-surgery judging by their opinion concluding the “Subpart B” proceeding in Phonorecords IV.)

What you don’t hear, what you never hear, is how the music users will respond, particularly the Big Tech companies that participate in the Phonorecords proceedings for streaming mechanicals. You don’t even hear speculation about that little issue, which ignores the very important fact that the enemy gets a vote. (If you don’t think Amazon, Apple, Google, Pandora and Spotify are the enemy, then ask yourself why they brought 26 lawyers to the Phonorecords IV streaming mechanical proceeding and conducted a scorched earth discovery campaign in that proceeding. Not to mention dragging out Phonorecords III as long as they possibly could without remorse. And then there’s UGC 2.0 called AI and ChatGPT designed to take the human out of transhumanism. That’s not how friends treat each other.)

The fact that you don’t hear anything about how Big Tech views “CRB Reform” suggests one of two things is happening. Either there is no deal in place with the services or worse yet there is a deal but it just hasn’t been surfaced yet. That would be in keeping with the disastrous 2006 S1RA legislation (“Section 115 Reform Act“) the first version of the Harry Fox Preservation Act that failed, but eventually became Title I of the Music Modernization Act.

The way that one worked was Big Tech woke up and said, oh, you want to amend the Copyright Act? We have some things we want, too. (Big Tech in those days mostly Google led by their many proxy NGO front groups including the person of Gigi Sohn who is now unbelievably an FCC commissioner). So not only could Big Tech bring their considerable lobbying muscle to bear on any statutory “reform” (which usually means a further consolidation of power in the ruling class by closing loopholes favorable to the people), but they might make it actually worse.

For example, it would not be difficult for Big Tech to leverage their superior numbers and legal geographical advantage by expanding the discovery and appeal rights in CRB proceedings. That will essentially be the death knell of songwriters ever being able to defend themselves. Both the publishers and Big Tech would probably like to make certain that there is never again a George Johnson figure appearing in the proceedings much less 50 George Johnson’s (apologies for the casual objectification, but you get the idea). The lobbyists and lawyers on both sides share that special Washington moral hazard of wanting everything involving the government to be as complicated and lengthy as possible. Boy have they done that with the impenetrable streaming mechanicals calculations and expensive negotiations to keep it complicated so only the big guys can afford the accounting systems to use the government’s license.

How would anyone keep Big Tech from slurping at that trough if you opened up the CRB statutes and regulations? You can’t stop them–except one way.

If our side in the proceedings found voluntary changes everyone could agree to that would not require amending the statutes, then for better or worse we would be able to operate on the status quo. For example, the publishers could agree that there would be an independent songwriter advocate who would be included in the negotiations. They could agree any one of a number of things that would result in better treatment of songwriters. As long as we are stuck with the compulsory license, we could at least make it more representative.

But what no one wants is to have Big Tech leverage disagreements inside our house over the length of our table to come up with even more limitations and exceptions to copyright. To my knowledge, there is no agreement from the other side to stay out of this issue. If there is such a deal, I’d really like to know what was given up to get it. If there isn’t, I’d love to hear the plan from the smart people.

I’m all ears.