Category: MLC

Chronology: The Week in Review: MLC Redesignation Proceeding Highlights Ownership Issues for the Government’s Musical Works Database; TikTok’s SOPA Problem; Google’s Nonindemnity Indemnity for AI

One of the few things Congress got right in Title I of the Music Modernization Act is the five-year review of the mechanical licensing collective. Or more precisely, whether the private company previously designated by the Copyright Office to conduct the functions of the Mechanical Licensing Collective should have another five years to continue doing whatever it is they do.

Impliedly, and I think a bit unfairly, Congress told the Copyright Office to approve its own decision to appoint the current MLC or admit they made a mistake. This is yet another one of the growing list oversights in the oversight. Wouldn’t it make more sense for someone not involved in the initial decision to be evaluating the performance of the MLC? Particularly when there are at least tens of millions changing hands as well as some highly compensated MLC employees, any one of whom makes more than the Copyright Royalty Judges.

What happens if the Register of Copyright actually fires The MLC, Inc. and designates a new MLC operator? The first question probably should be what happens to the vaunted MLC musical works database and the attendant software and accounting systems which seem to be maintained out of the UK for some reason.

I actually raised this question in a comment to the Copyright Office back in 2020. In short, my question was probably more of a statement: ‘‘The musical works database does not belong to the MLC or The MLC and if there is any confusion about that, it should be cleared up right away.” The Copyright Office had a very clear response:

While the mechanical licensing collective must ‘‘establish and maintain a database containing information relating to musical works,’’ the statute and legislative history emphasize that the database is meant to benefit the music industry overall and is not ‘‘owned’’ by the collective itself….Any use by the Office referring to the public database as ‘‘the MLC’s database’’ or ‘‘its database’’ was meant to refer to the creation and maintenance of the database, not ownership. [85 FR at 58172, text accompanying notes 30 and 31.]

So if the current operator of the MLC is fired, we know from the MMA and the Copyright Office guidance that one thing The MLC, Inc. cannot do is hold the database and its attendant systems hostage, or demand payment, or any other shadiness. These items do not belong to them so they must not assert control over that which they do not own.

Which would include the hundreds of millions of black box money that the MLC, Inc. has failed to distribute in going on four years. I’ve even heard cynics suggest that the market share distribution of black box will occur immediately following The MLC, Inc.’s redesignation and the corresponding renewal of HFA’s back office contract which seems to be worth about $10 million a year all by itself.

What would also have been helpful would be for Congress to have required the Copyright Office to publish evaluation criteria for what they expected the MLC’s operator to actually do as well as performance benchmarks. Like I said, it’s a bit unfair of Congress to put the Copyright Office in the unprecedented position of evaluating such an important role with no guidance whatsoever. Surely Congress did not intend for the Copyright Office to have unfettered autonomy in deciding what standards to apply to their review of a quasi-governmental agency like the MLC, yet seems to have defaulted to the guardrail of the Administrative Procedures Act or some other backstop to sustain checks and balances on the situation.

But at least the ownership question is settled.

Breaking the Internet Yet Again: TikTok’s SOPA Problem

TikTok users swarmed over the Capitol to protest and impede a Congressional vote that would force the sale of the ubiquitous TikTok. Can Camp Pelosi redux be far behind? Well, no, because this was a digital swarm which is just different, you see. It’s just different when Big Tech tries to protect an IPO.

TikTok’s tactics are very reminiscent of Google’s tactics with SOPA or Napster’s tactics with Camp Chaos.

But not even Napster had the brass to go to full on papal indulgences. Yes, that’s right: NunTok will save the IPO.

Nuns good, TikTok bad!

I wonder which Washington lobbyist thought of NunTok? Perhaps this guy:

Google’s Nonindemnity Indemnity for AI

Some generative AI platforms are trying to make users believe that the company will actually protect them from copyright infringement claims. When you drill down on what the promise actually is, it’s pretty flimsy and may itself be consumer fraud.

Is MLC Getting it Right in a Post-MMA World?

It’s becoming more obvious that the Mechanical Licensing Collective is not succeeding in its Congressional mandate to build the definitive music rights database so that all songwriters get paid. We often hear about MLC match rates being consistent with the “industry standard,” but this is pre-MMA thinking and is no longer relevant in a post-MMA world. (Not to mention the fact that it was these very “industry standards” that produced gigantic levels of unmatched payments that the MLC is mandated to fix.) As we will see, any match rate less than 100% is inconsistent with the MLC’s Congressional mandate which will be relevant when those in control of the MLC’s operations are reviewed by Congress in the not too distant future. Remember, The MLC, Inc. may be a private company in the traditional sense, but the MLC (different than The MLC, Inc.) is a statutory creation whose functionality is awarded to the current operators if they do a good job giving effect to the Congressional mandate. Congress can take that deal away and essentially “fire” The MLC, Inc.

It’s also becoming increasingly apparent that the Copyright Office has no stomach for its Congressionally mandated oversight role as they have been silent as the tomb so far no matter how absurd the results coming from MLC. The difference in post-MMA planning is that every royalty audit of MLC should be accompanied by a FOIA request to the Copyright Office regarding what they knew and when they knew it. Neither of those remedies were available in combination to songwriters in a pre-MMA environment. (If you took the king’s shilling and signed up for HFA you got a piece of an audit recovery of unknown providence for the most part often based on projections.)

Thankfully, due to the services paying for MLC operations as well as cost-shifting combinations of direct licensing, modified compulsory and service-supported blanket (and significant non-blanket) licensing, cost will never be a factor for The MLC, so the only consideration should be the benefit to all songwriters from getting it right. 

Not everyone sees it that way. I raised this point on a Copyright Office roundtable about the MLC and was immediately jumped on by both the Head of Government Relations for Spotify and the head of the Digital Media Association (neither of whom have rendered a royalty statement in their lives in all likelihood). They rejected my position that the MMA requires that there should be no cost benefit analysis in matching–remember, the services are supposed to pay for that matching functionality as part of their deal for the MMA safe harbor giveaway.

Now I’m sure that these DIMA companies are perfectly capable of getting a match rate that’s in the limit. Just because they’ve never done it before doesn’t mean they can’t ever do it. They just need a little guidance.

Fortunately we have Congressional guidance on this issue in the legislative history of Title I of the Music Modernization Act which states:

Testimony provided by Jim Griffin at the June 10, 2014 Committee hearing highlighted the need for more robust metadata to accompany the payment and distribution of music royalties….In an era in which Americans can buy millions of products via an app on their phone based upon the UPC code on the product, the failure of the music industry to develop and maintain a master database has led to significant litigation and underpaid royalties for decades. The Committee believes that this must end so that all artists are paid for their creations and that so-called ‘‘black box’’ revenue is not a drain on the success of the entire industry.

H. Rep. 115-651 (115th Cong. 2nd Sess. April 25, 2018) at 8. (my emphasis)

I realize that the Head of Government Relations for Spotify would want to protect her employer as would the head of DIMA and immediately try to kill the idea that the MLC had to set new industry standards and that the services would pay for it. And that’s a reasonable deal in exchange for the safe harbor giveaway.

But that wasn’t the deal they made. Now you can well say that the services are not required to give a blank check, that the costs should be reasonable, and that the services have something to say about how the money is spent particularly given their expertise with supporting the world’s intelligence agencies in finding things and people, or so says Mr. Snowden. But we already see that the services got a rube deal for their tens of millions in MLC costs if the match rate is simply as bad as it was before MMA (or worse). That wasn’t their deal, either.

The deal they made was to see to it that “all artists are paid for their creations”. No qualifiers.

All means all.


Please take our Songwriter MLC Awareness Survey

Please take a few minutes (4 or so) to help us understand how the Mechanical Licensing Collective and the Copyright Office is doing getting the word out about signing up with the MLC and getting paid royalties (including your share of the $424 million black box/unmatched payment that has been sitting at MLC for months).

Your response are anonymous and we’ll post the results when we get a threshold number of responses. We’d really appreciate your help!

To take the survey on Survey Monkey, click here.

The Sound and the Fury: The Copyright Office Unmatched Report’s Confused Thesis

One of the first world problems with the Copyright Office unmatched report (and frankly the legislative history) is that the Office seems to confound matching transitory royalty payments with building a permanent asset. There is an inherent tension in utilizing a cost benefit analysis to decide which songs are “worth” identifying and paying compared to which songs are “worth” identifying to build the Congressionally mandated core asset of the Mechanical Licensing Collective–the public’s musical works database.

These are two entirely different projects. The unmatched report misses the opportunity to properly distinguish them and emphasize the priority that must be given to building the gold standard musical works database–for which the services pay and in consideration for which the services received a Congressionally mandated retroactive safe harbor for the legion of past infringements. It now becomes apparent that the services were not really serious about doing the hard work and wanted to do just enough to be able to get their safe harbor.

But what about the $424 million in black box, you say? Didn’t they pay beaucoup bucks to settle up with songwriters? Yes, it’s true–the services paid songwriters with what services said was the amount of the songwriters own money that the services owed them due to extraordinarily sloppy licensing practices. Hopefully when the accounting data is made public, we will have a better idea of whether this $424 million makes sense as the semi-accurate number. If, however, it turns out that the vast bulk of the retroactive payment of $424 million accrued over the last few years, that is, since the passing of the MMA Title I safe harbor to benefit those who need it least, it will become apparent that the “historic” retroactive payment was neither historic nor particularly retroactive. Watch the Eight Mile Style case in Tennessee for some answers on this where both Spotify and the Harry Fox Agency are being sued by Eminem’s publishers.

Yet this confusion over the difference between complying with the Congressional mandate to build an authoritative musical works database and some line in the legislative history that the lobbyists inserted about “play your part” is another reason why using a cost benefit analysis for identifying long tail royalty payments makes no sense.

The MLC is charged by Congress with creating the public musical works database–an asset. The MLC is also charged with accounting for royalties–a payment. The report says “The MLC should take reasonable steps to ensure that its data is of the highest possible quality, meaning, among other things, that it is as complete, accurate, up-to-date, and de-conflicted as possible, and is obtained from authoritative sources.” But not if the cost of quality data exceeds the royalties payable in a particular month?

Payments change, assets do not. The MLC are either building a “highest possible quality asset” or they are doing the usual 80/20 “industry standard” slop that is already becoming the MLC’s go-to excuse for failure. Because rest assured–it will always be someone else’s fault. Who do you think caused that “industry standard” to exist? One of the MLC’s principal vendors, mebbbie?

The services like the Title I safe harbor just fine, but obviously no one is interested in actually building an asset of the “highest quality” which is a different enterprise than royalty accounting.

Which is it going to be? I think we all know the answer. If we let it, it will be a lot of sound and fury signifying nothing.