Strategic Licensing: @CrunchDigital “Sandbox” Offers Music-Tech Startups a Customized Licensing and Reporting Solution

I always impress on music tech startups that their licensing strategy roadmap is just as important as their product development roadmap.  Both are interdependent and neither should get too far out ahead of the other.  This is almost always met with resistance and a recitation of the popular cant that “copyright is broken”, music has a “market failure” or some similar incantation of a Potter-esque invisibility cloak–the end result being a satisfaction of the dopamine induced desire to rush to market.

Not only does that cloak not exist, invoking it does not help you protect your business from devastating claims downstream.  You’re not starting your company to pray for failure so no one finds you and decides if you’re worth suing.

But–you know you have a functioning market when the market itself produces a privately funded entrepreneurial solution to a market misallocation.  Crunch Digital is just that solution–and a solution that could solve through bespoke direct licensing the inefficient cycle of litigation that has become necessary to at least try to force the market back on the rails, especially for songwriters.

As Billboard reported last week:

Crunch Digital, which helps technology companies handle accounting and payments for the music they use, today announced that it’s launching Crunch Digital Sandbox, a platform that will expedite for app developers the process of licensing music from big labels and publishers. The idea isn’t to negotiate the kinds of complicated contracts needed by big online music distributors — just to quickly create what Crunch Digital founder Keith Bernstein calls “an experimental license” so they can prove their concepts.

Crunch will not license music itself. Rather, it will bring together startups with rightsholders that are participating in the Sandbox program, including BMG Rights Management. “Sandbox strikes the perfect balance, allowing startups to properly license music while ensuring that songwriters are fairly compensated,” says Keith Hauprich, BMG general counsel and senior vp business and legal affairs, North America. “This new model squarely addresses a long-standing concern of the industry.”

The problem that most music tech startups have with getting started is almost always the licensing piece followed closely by their accounting obligations.  I often hear complaints of high transaction costs of music licensing that inhibits innovation.  I have just as frequently seen music-tech startups completely underestimate the complexity of royalty accounting for both songs and sound recordings, especially songs.  And unless you are trying to create the black box, that’s bad.

Some startups just ignore the licensing and wait to get sued.  This is unfair to those who seek to do it right, and creates the false impression that licenses cannot be obtained, and that the industry is litigious and a bad investment.  That perception is not good for anyone and almost guarantees that innovation will be smothered.

Once a startup launches at scale without all licenses, the startup has created an unfixable problem and potentially endless litigation in a room of mirrors.  By “without all licenses”,  I don’t necessarily mean that the service has no licenses, just that it has no licenses for a significant number of works, such as songs.  There is a tendency at tech companies to view low earning songs as not being entitled to fair treatment, or at least not as worthy of fairness as the hits.  They often learn the hard way that users don’t get to call that moral hazard and that the law protects all songs, even if the songs happen to be a small percentage of a particular service’s revenue.

Tracking down all those songs creates a problem that is a cross between the stone of Sisyphus and the labors of Hercules.  Crunch’s Sandbox service helps startups solve that complex problem.

Crucially, the rights owners participating in the Sandbox appear to be offering a wide variety of works and not just a handful of lesser known songs and recordings.  The Sandbox could allow startups to launch their business in a safe environment without spending undue resources on licensing and reporting–instead, focusing on their product which I would suggest is what they should be doing.

And the Sandbox brings this equilibrium without any public money, amendment to the Copyright Act or loophole seeking behavior.  If successful, the Sandbox will help startups get launched properly, keep startups from reinventing the wheel on royalty reporting, avoid litigation and get artists and songwriters paid.

I’m pleased that Keith Bernstein of Crunch Digital will be on a panel I am moderating at SXSW next March (2018) “Getting to Beta Without Getting Beat Up“.

 

Mass NOI Charts: An Update from Royalty Claim — MUSIC • TECHNOLOGY • POLICY

An update on the state of the Copyright Office debacle also known as mass filing of “address unknown” notices under Section 115 (you can see the largely unusable posting of these notices at this link on the Copyright Office site). Here’s some charts you won’t see in the trades or even on the Copyright Office site-Royalty Claim’s Address “Unknown” Mass NOI chart that Royalty Claim measured by number of filings January 1-June 30, 2017.

via Mass NOI Charts: An Update from Royalty Claim — MUSIC • TECHNOLOGY • POLICY

Must Read by @adamleealter: Irresistible: The Rise of Addictive Technology and the Business of Keeping Us Hooked

27gillibrand_span

Remember when Senator Ron Wyden (D-Google Data Center) asked the Big Tobacco CEOs whether they thought nicotine was addictive?  In one of the more dramatic moments in the Senate’s history, each of the CEOs denied that nicotine was addictive.

And then it turned out that Big Tobacco had been scientifically engineering tobacco to make it as addictive as possible.  Oops.  If you haven’t seen The Insider you really should, as you will better understand the problem with corporations profiting from stimulating addictive behavior.  And that is the real problem–it’s not that one thing or another is more or less addictive.  It is that corporations know that their product is addictive and they try to make it even more addictive than it already is.  They conduct secret research and make secret product modifications to enhance its addictiveness for one reason and one reason only–to make money off of human misery.

And then they tell us “Don’t be evil.”

Dr. Adam Alter’s new book suggests that the same type of Senate hearing could well be held on another type of addiction–addiction to smartphones, social media and the Internet.  And wouldn’t it be great if Senator Wyden could reprise his Big Tobacco performance from so many years ago, except this time with Eric Schmidt, Jeff Bezos, Mark Zuckerberg, Jack Dorsey and many, many more.

Wyden Tobacco

In Irresistible: The Rise of Addictive Technology and the Business of Keeping Us Hooked, Professor Alter, a professor of psychology and marketing at NYU, documents the rise of behavioral addiction and how Big Tech designs its products to leverage these addictions for profit.

If you doubt the behavioral addiction to social media and your smartphone, try this experiment.  Try only using your phone for phone calls for 36 hours.  Just check your email on your computer.  No email, Facebook, Twitter, Instagram, Google on your phone for 36 hours.  Sleep with your phone in another room, and don’t touch it until after breakfast.  See how you react.

Do you really think that Big Tech hasn’t studied these issues?  Do you really think that this study of addiction is qualitatively or morally different than Big Tobacco’s use of various chemicals to increase the addictive attributes of nicotine?  As Dr. Alter demonstrates, behavioral addictions are just as real–and profitable–as substance addictions.

And don’t forget that Big Tech studies us, their users, in real time and continually.  When the study sample is the size of all the billions of users of monopoly platforms like Google and Facebook, that data is very, very predictive.  For example, Facebook data lord Adam Kramer (more about him shortly) said in an interview that Facebook’s large user base was one of the reasons he joined Facebook:

Q: Why did you join Facebook?

A: Facebook data constitutes the largest field study in the history of the world. Being able to ask–and answer–questions about the world in general is very, very exciting to me. At Facebook, my research is also immediately useful: When I discover something, we can use this to make improvements to the product. In an academic position, I would have to have a paper accepted, wait for publication, and then hope someone with the means to usefully implement my work takes notice. At Facebook, I just message someone on the right team and my research has an impact within weeks if not days.

Q: What are some of the interesting questions you’ve answered since you’ve been here?

A: Do emotions spread contagiously? What do the words we choose have to say about how we are and who we are?

A 2014 study commissioned by Facebook “Experimental evidence of massive-scale emotional contagion through social networks” written by Adam D. I. Kramer of Facebook’s “Core Data Science Team” and two academics from Cornell further demonstrates the power of Facebook’s data set.

The study concluded:

Emotional states can be transferred to others via emotional contagion, leading people to experience the same emotions without their awareness. Emotional contagion is well established in laboratory experiments, with people transferring positive and negative emotions to others….

In an experiment with people who use Facebook, we test whether emotional contagion occurs outside of in-person interaction between individuals by reducing the amount of emotional content in the News Feed. When positive expressions were reduced, people produced fewer positive posts and more negative posts; when negative expressions were reduced, the opposite pattern occurred.

These results indicate that emotions expressed by others on Facebook influence our own emotions, constituting experimental evidence for massive-scale contagion via social networks. This work also suggests that, in contrast to prevailing assumptions, in-person interaction and nonverbal cues are not strictly necessary for emotional contagion, and that the observation of others’ positive experiences constitutes a positive experience for people.

If Facebook is studying something as sophisticated as “emotional contagion through social networks” in a study that we know about, what do you think they are studying that we do not know about?  Is it more or less likely that these huge companies are creating studies like the Brown & Williamson tobacco study on adding addictive agents like ammonia and coumarin to cigarettes, or Ford’s infamous “Pinto memo” analyzing the cost/benefit fixing the Pinto’s exploding gas tank?

Dr. Alter devotes the first few chapters of Irresistable to the history and scientific foundations of the study of addiction.  You may find this exposition a bit dry, but stick with it.  The background is well applied in his detailed discussion of Big Tech’s dependence on addiction.

Alter lays out some of the most important issues of our time that affect both adults and children indiscriminantly.  In one of the first books of its kind, Dr. Alter arms us with the knowledge to combat this attack on our sensibilities.

It is important to note that when Steve Jobs introduced the iPad, he forbade his own children from using it.  If anyone knew what he was doing and what the risks were, it would have been Steve Jobs.  He probably forbade them from smoking, too. My bet is that it was for the same reasons.

As Dr. Alter noted in a recent Business Insider video:

There’s a school in Silicon Valley that doesn’t allow the use of any tech. It’s called the Waldorf School and it’s fascinating because the school has no computers, no iPads, no iPhones. They try to minimize tech altogether and so people enjoy a lot of time face-to-face, they go outside a lot. What’s interesting about this school is 75% of the students there are the children of Silicon Valley tech execs, which is striking. These are people who, publicly, will expound on the wonders of the products they’re producing and at the same time they decided in all their wisdom that their kids didn’t belong in a school that used that same tech.

Holding the Line on Tradeoffs for Statutory Damages

It is very likely that we will hear about a move to make significant amendments to the Copyright Act at some point before the beginning of campaign season in 2018.  There are a significant number of copyright-related bills that have been introduced in the House of Representatives in the current session, so brace yourself for an “omnibus” copyright bill that would try to cobble them all together Frankenstein-style.

A Frankenstein omnibus bill would be a very bad idea in my view and will inevitably lead to horse trading of fake issues against a false deadline.  Omnibus bills are a bad idea for songwriters and artists, particularly independent songwriters and artists, because omnibus bills tend to bring together Corporate America in attack formation.

MIC Coaltion
The MIC Coalition

When you consider that Google and Facebook are part of Corporate America (not to mention Apple), the odds of the independent songwriter and artist, but really any songwriter and artist, just holding onto the few crumbs they currently have crash and burn.  The odds of actually righting wrongs or–God forbid–getting rid of the legacy consent decrees that protect Big Business vanish into the limit.

Of course, what certain elements of Big Tech would really like to do is push all licensing of music into one organization that they could then control through consent decrees or other government regulation and supervision by exercise of the massive lobbying and litigation muscle of the MIC Coalition and DIMA.  While I realize that may actually sound anti-competitive, it is typical of monopolists to use the antitrust law to destroy competition (as Professor Taplin has taught us).   That’s certainly what has happened with the PRO consent decrees–reduced competition and lower royalties.  Not to mention such a licensing organization would collapse under its own complexity.  This is probably why the Copyright Office envisioned a “Music Rights Organization” that would combine the PROs and mechanical rights licensing but provided the relief valve of an new opt-out right so that songwriters could escape the madness.  (“Under the Office’s proposal, except to the extent they chose to opt out of the blanket statutory system, publishers and songwriters would license their public performance and mechanical rights through MROs.”  Copyright Office Music Licensing Study at p. 9)

If you want some ideas about the kinds of property rights that Big Tech wants the government to take away from songwriters and artists, just read Spotify’s most recent filing in the songwriter litigation in Nashville where their lawyer tries to define away mechanical royalties (unsurprisingly, the lawyer is a long-time protege of Lessig).  Why?  Because they are being brought to a trial by their peers on statutory damages for copyright infringement and the potential for having to pay the songwriters’ lawyers due to a statutory right to recover attorneys fees.  (Statutory damages for copyright infringement has long been an attack point of Big Tech and we get a preview of where they want it to go in Pamela Samuelson’s “Copyright Principles Project”–essentially abolished.)

One way or another, the Big Tech cartel (which includes all the companies in the MIC Coalition and MIC Coalition member the Digital Media Association which itself has members like Spotify and, curiously, Apple) is very likely going to go after statutory damages and try to create yet another “safe harbor” for themselves with no burdens–a “friction free” way to infringe pretty much at will because the actual damages for streaming royalties will be pennies.

If the cartel succeeds in eliminating statutory damages and attorneys fees awards, this will truly make copyright infringement litigation toothless and entirely eliminate the one tool that independent songwriters and artists have to protect their rights.  It will neuter massive copyright infringement as alleged in all of the Spotify class actions, not to mention cases like Limewire.

Oh, you say–did you just switch from song copyrights to sound recording copyrights by referencing Limewire?  Yes, I did–because that’s exactly what I predict the DIMA and MIC Coalition have in mind.  Why do I say this?  Because that’s what these companies are backing in the radioactive Transparency in Music Licensing and Ownership bill (HR 3350).  And if you blow up all the current separate bills into one omnibus copyright “reform” bill, the pieces may reconstitute in forms you didn’t expect.

But realize that in almost all the many copyright bills currently before the House of Representatives, the other side is trying to bootstrap unjust harm into a negotiation chip to shakedown creators.  And it’s not just pending legislation–the shakedown is especially observable with the millions of notices of intention to rely on statutory mechanical licenses for songs filed with the Copyright Office.  That’s a nice song you got there, it would be a shame if something happened to it.

Big Tech’s basic negotiation method is to rely on a loophole, bootstrap the loophole to build up the pressure on people who can’t fight back, then run the shakedown to get concessions that should never be made.  This is what Google has done with the DMCA and is the same shakedown tactic on mass NOIs taken by Google, Amazon, Pandora, Spotify, and others–but curiously not Apple.  Somehow Apple has made it work with the most successful digital music platform in history.

Let’s go down the issue list:

Bootstrapped Issue

Fix

Bill

Pandora and Sirius stopped paying artists for digital royalties on pre-72 recordings—because of loophole based on federal copyright protection for sound recordings Start paying artist royalties on classic recordings made before 1972 CLASSICS Act
Terrestrial radio created a loophole so they don’t have to pay performance royalties to artists on sound recordings; stop artists from opting out Start paying artist royalties for broadcast radio (with protection for noncommercial and small broadcasters) Fair Pay Fair Play Act, PROMOTE Act
Big tech suddenly started using a loophole to file millions of “address unknown” NOIs with Copyright Office after indie songwriters filed class actions Require Big Tech to use existing databases to look up copyright owners or don’t use the songs or recordings. None
No “central database” that has all songs (but no requirement to actually look up anything), requires double registration If songwriters and artists don’t register, then no statutory damages Transparency in Music Licensing and Ownership Act

Blown up into parts:

–Avoid raising mechanical royalty rate or paying artist royalties on terrestrial at all

–How to use the lack of the mythical “central database” as a bright and shiny object to avoid paying royalties and shirk liability for not doing copyright research, an absurd position for companies that owe much of their wealth to their unprecedented ability to profile people around the world and “organize the world’s information”

–Avoid paying statutory damages

–How to avoid paying royalties that should have paid anyway (pre-72, terrestrial, mass NOI) through distorted interpretations of the law or even safer harbors

–Avoid an obligation to actually look up anything (new databases)

–Use any work they want if all they have to pay is actual damages and no attorneys fees

–Keep songwriters and artists from opting out

–Create biggest black box possible

It should be apparent which way Big Tech is trying to push the creative community.  It is important for creators to understand that any legislative concession that the MIC Coalition or DIMA win against songwriters or artists they will then turn around and try to extract in the next shakedown–authors, photographers, film makers, all the copyright categories.

It is in everyone’s interest to support a healthy creative community that will continue to engage fans and do enough commerce to create value for the tech monopolies.  But–it is crucial to understand that it doesn’t work the other way around.

The purpose of the creative community is not to create value for tech monopolies.  It is to support compelling artists and help them engage with fans, and sometimes it is art for art’s sake alone.  If those artists throw off some commercial gain that the tech monopolies can turn to profit themselves, fine.  But creating profit for these monopolists is not the goal of artists.

Instead of creating fake problems to try to extract concessions that further undermine creators like offering ice in winter, the tech monopolies like Google, Spotify, Amazon and Pandora should identify real problems and work with us toward real solutions–and not a loophole-driven shakedown.

 

 

Please Vote for SXSW Panel Picker “Getting to Beta Without Getting Beat Up”

We have proposed a panel for SXSW in the Panel Picker with some great speakers I’ll be moderating.  “Getting to Beta Without Getting Beat Up” will emphasize the importance of licensing strategy milestones that overlay a music-tech startup’s product development strategy milestones.

A well-executed licensing strategy is every bit as much a part of the supply chain logistics as any other element of product development, if not more important.

A buggy product can usually be fixed.  Failure to execute a bespoke licensing strategy can subject the entire company to crippling and endless copyright infringement lawsuits.  In fact, if you are unlicensed or insufficiently licensed, one thing is a pretty sure bet:  The more successful you are, the more likely it is you’ll be sued–a proposition ripped from the headlines.

That scenario can waste the stockholders’ money, be defocusing in the extreme for management and severely damage relationships with the creative community–the life blood of any music startup.

On the other hand, “over clearing” while less costly than litigation still syphons off resources that for the most part lie fallow.

Our panel are all experienced hands in the licensing and metadata world and are themselves entrepreneurs:

  • Keith Bernstein, Founder, Crunch Digital
  • Rahul Rumalla, Chief Technology Officer & Head of Product, Paperchain
  • Alan Graham, Co-Founder, Technical Architect, OCL

Please consider voting for our panel in the SXSW Panel Picker at this link, we’d really appreciate your support!

 

Pandora Sells “Radio Loophole” at a Loss, But Sells It

In another sign that the adults may finally be in charge at Pandora, the company sold South Dakota radio station KXMZ for a reported $300,000 (after purchasing the station in 2015 for $600,000).  Why did Pandora buy KXMZ (or as it came to be known, “Radio Loophole”?)

At the time, which was during Pandora’s bad old days of what Billboard called “World War P”, Pandora was suing songwriters to lower royalty rates for their one product–music.   According to Pandora, they were not treated fairly because terrestrial radio paid lower rates to songwriters then did they as webcasters.   Apple, meet orange.  Pandora’s strong move was to buy a relatively inexpensive radio station so it could try to pass itself off as a broadcaster which it clearly wasn’t.   Hence, Radio Loophole.

Some speculated at the time that Pandora’s board might have gotten confused that the station was in South San Francisco rather than South Dakota as it is unlikely any of them had ever been to South Dakota (and it’s almost as equally unlikely they’d ever been off the 101 in South San Francisco, for that matter).

But Pandora plopped down $600,000 of the stockholder’s cash (Old Pandora’s preferred form of tender for acquisitions it seems) and then went to get the blessing of the rate court.  Kind of a knucklehead move that also unnecessarily stoked the battle fires of World War P.

Billboard WW P

Here’s a tip–there’s this thing called a “post closing condition”.  In the case of Radio Loophole, it would go something like, “I’m only buying your station if I can use it to lower what I pay to songwriters and it’s worthless to me unless I can.  So this transaction will not close until I get the rate courts’ approval which I have to accomplish within 12 or 18 months.  And here’s 10% of the purchase price for you to keep for having to stand still long enough for me to find out.  Deal?”  Not that different than a transaction being subject to FTC merger approval.

A post closing covenant (or “post closing condition”) is the precaution you take if it’s your money or you take your duty to your shareholders very seriously.  But what happens to inexperienced management with hundreds of millions of someone else’s money burning a hole in their pocket is hard to explain.

Let the Old Pandora’s disastrous acquisition of Radio Loophole and Ticketfly be examples to entrepreneurs of the honeytrap of cash in the bank.  And that loophole seeking behavior eventually catches up to you, so why do it in the first place?

With Pandora’s endorsement of the CLASSICS Act that would change the law to require webcasting royalty payments to artists whose recordings were released prior to 1972, I have to say that it feels like there’s a far more enlightened leadership at Pandora just in the last few weeks.   Not to look the gift horse in the molars, but it would be really nice if Pandora didn’t wait for the bill to pass and just started paying the statutory rate on a go-forward basis at least.

Either way, three of the gargantuan unintelligible blunders of Old Pandora are being put right–Ticketfly, pre-72 and now the sale of Radio Loophole.  Fingers crossed we have more good news to come.

 

 

Don’t Believe the Astroturf: Yet More Regulations Won’t Help Songwriters or Small Business

“[Government] interference is but the first link of a long chain of repetitions, every subsequent interference being naturally produced by the effects of the preceding.”

James Madison, The Federalist Papers No. 44

There is a bill in Congress backed by the mega lobbying juggernaut called the MIC Coalition that would force songwriters and artists to “register” with the government in order to protect their rights from the biggest corporations in the world.  Failing to do so would take away the stick of statutory damages and an award of attorneys fees to songwriters or artists who are victorious in copyright infringement litigation.  Statutory damages and attorneys’ fees are the only real protection that the government gives these creators–the smallest of small businesses.

Why?  Because the government does virtually nothing to protect the rights of artists.  If it weren’t for statutory damages and attorneys’ fees there would be nothing between a creator and the ravages of mega-corporations.  Try calling a U.S. Attorney and asking them to prosecute a massive infringer.  If it hasn’t happened yet given the rampant piracy we’ve seen over the last 20 years now, it should tell you that it’s never going to happen with rich corporations that run roughshod over artist rights.

Yet songwriters in particular are some of the most highly regulated workers in America.  The government forces songwriters to license their work and sets the price they can license at–yet does nothing to enforce the “compulsory licenses” it imposes on songwriters.  Not only is the government in their lives at every turn, songwriters are poorly treated by their government.  Why?  One reason is that songwriters are among the smallest of small businesses and have little political clout.

That explains why the government imposes wage and price controls on songwriters through consent decrees and rate courts, but forgets to raise their wages for 70 years.  Can you imagine how that would go down if the government tried doing the same to auto workers or even the minimum wage?

The Rate that Time Forgot

The government first established the “minimum” statutory mechanical royalty in 1909 at 2¢ per copy.  When the government enacted the Fair Labor Standards Act in 1938–twenty nine years later–the government-mandated minimum statutory rate for songs was still 2¢ per copy.  The hourly minimum wage was set at 25¢.

The government didn’t get around to raising the minimum statutory rate until 1978–sixty nine years after it was established in 1909–when they raised it from 2¢ to 2.75¢.  The hourly minimum wage had then been raised from 25¢ to $2.65.  Shortly after, the government started indexing the minimum statutory rate from the rate that time forgot–had the government indexed to the rate of inflation from 1909 to 1978, the rate would have been closer to 13¢, a level it has yet to reach over 100 years after it was first set–today the rate is 9.1¢.  And the government has frozen the rate at 9.1¢ since 2006–eleven years ago.

That’s a cruel mess.

What happens if a music user wants to avail themselves of the statutory license but simply refuses to pay the paltry royalty rate?  Nothing happens.  At least not unless the songwriter or their publisher sues for statutory damages and attorneys’ fees.  If you’ve followed the class action cases brought by David Lowery and Melissa Ferrick against Spotify, you’ll know that these cases only involve small songwriters.  Now there’s two publishers suing Spotify in Nashville–again, small publishers suing for statutory damages and attorneys fees.  Publishers who chose to go it alone rather than take a settlement.

If these plaintiffs didn’t have the statutory damages and attorneys’ fees, do you think anyone in the government would care that the government’s compulsory license was being misused?

We’re From Washington and We’re Here to Help

Individual music users like Amazon, Google, Facebook and Spotify have about as much political clout as any of the other notorious monopolists in history from Standard Oil to United Fruit.  As members of the MIC Coalition lobbying group, these companies have the political clout of Big Tobacco, Big Pharma or Big Bombs.

These companies are all part of the MIC Coalition (or are members of other lobbying groups that are).  The MIC Coalition is all about this new “government list” that’s supposed to protect small business by crushing small business.

MIC Coaltion

Here’s the pitch on the government database from the MIC Coalition:

The lack of an authoritative public database creates problems for venues and small businesses including restaurants, taverns, wineries, and hotels. For example, venues are declining to host live musicians rather than risk potential liability due to lack of up-to-date and actionable licensing information. The lack of a database is also a challenge for local broadcasters and digital music streaming services that rely on accurate copyright information to provide music to millions of consumers.

The assumption behind this legislation is that if the government just forced all the world’s songwriters and artists to register in the government’s list, that music users would actually use that database.  If there’s one common theme in the recent lawsuits against digital services it is that the services don’t seem to use the available data–except to file millions of mass statutory licenses using a loophole in the Copyright Act.  The users spend big bucks to claim they can’t find the copyright owner of the songs they use in the current Copyright Office records and seek the government’s cover from lawsuits as if they were legitimate users.

If they put the same effort into finding the songwriters that they do into filing millions of mass NOIs, these services might not have so many problems.  And instead of removing the loophole, the government now floats this “government list” database idea to create an even more complicated loophole at taxpayer expense.

Reject the 11th Century Solution to a 21st Century Problem

It’s important to realize two key causes for the licensing mess the government has created through over-regulating songwriters, one of which is not entirely the government’s fault.

The Government Should Allow Statutory Licensing by ASCAP and BMI:  Because the government imposes a near-compulsory license through consent decrees against songwriters who are members of the two largest performing rights societies (ASCAP and BMI), a perfect opportunity to streamline the compulsory license is simply lost.  The government’s courts that supervise songwriters actually prohibit ASCAP and BMI from engaging in compulsory licensing.  If these PROs were allowed to issue licenses for all the rights digital services need, that would be a meaningful step forward.

This would make ASCAP and BMI similar to SESAC which can issue both performance rights licenses and mechanical licenses after SESAC’s acquisition of the Harry Fox Agency.  SESAC is not subject to a consent decree.  The MIC Coalition didn’t like that either and complained to the Department of Justice seeking an investigation into stopping an idea that could work.

hesse

Require Music Users to Search the PRO Databases for Song Ownership before Serving Address Unknown Mass NOIs at Taxpayer Expense:  There is nothing in the “government list” bill that actually requires music users to search or document that they have searched this new database.  Current law requires a search of at least the Copyright Office records (which Amazon, Google, Pandora, Spotify, Microsoft, iHeart and others are supposedly doing already by the millions) and in some circumstances permits a search of the performing rights society databases as well (see 37 CFR Sec. 201.10 h/t Richard Perna).

It is a short leap to require music users to search the publicly available databases of ASCAP and BMI as well as the public records of the Copyright Office before serving millions of address unknown NOIs on the Copyright Office.  This will be particularly relevant given the recently announced voluntary cooperative effort between ASCAP and BMI to combine their repertory databases (which could include other PROs).  While there is some complaining from MIC Coalition members that ASCAP and BMI won’t indemnify users of their databases for the accuracy of the data, that dog won’t hunt.

That simply isn’t true for parties to the ASCAP and BMI licenses, which after all is why the databases are created in the first place.  Since ASCAP and BMI have no idea what use anyone may make of the data and if that use is even authorized by the song or recording owners, how could they possibly be expected to indemnify all users for any use in any country of any song?  Those databases are not a search engine.  Nobody else does that, especially not search engines, e.g., Google’s disclaimer:

Our Warranties and Disclaimers

We provide our Services using a commercially reasonable level of skill and care and we hope that you will enjoy using them. But there are certain things that we don’t promise about our Services.

OTHER THAN AS EXPRESSLY SET OUT IN THESE TERMS OR ADDITIONAL TERMS, NEITHER GOOGLE NOR ITS SUPPLIERS OR DISTRIBUTORS MAKE ANY SPECIFIC PROMISES ABOUT THE SERVICES. FOR EXAMPLE, WE DON’T MAKE ANY COMMITMENTS ABOUT THE CONTENT WITHIN THE SERVICES, THE SPECIFIC FUNCTIONS OF THE SERVICES, OR THEIR RELIABILITY, AVAILABILITY, OR ABILITY TO MEET YOUR NEEDS. WE PROVIDE THE SERVICES “AS IS”.

SOME JURISDICTIONS PROVIDE FOR CERTAIN WARRANTIES, LIKE THE IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT. TO THE EXTENT PERMITTED BY LAW, WE EXCLUDE ALL WARRANTIES.

If the government wants to tinker with the Rube Goldberg system of music licensing that it has imposed on songwriters, it could start by making these two changes before imposing a 21st Century version of William the Conqueror’s Domesday Book, the Great Survey of England conducted in 1088.

Oh, and if they’re so fired up about forcing people to do things through regulation, why not force music users to license, pay and account in compliance with the law.