Who’s Coming to Lunch? What Do Personnel Changes at Copyright Office Mean for MLC?

If you’ve been following the news lately, you’ll have heard that President Trump has made some personnel changes at the Library of Congress and the head of the U.S. Copyright Office (styled as the “Register of Copyrights”). When the dust settles we’ll see if these changes stick, but my bet is they probably will. This is because the President was probably within his authority to replace the Librarian of Congress (a presidential appointee). Remember that the Librarian is a “principal officer of the United States” who ultimately reports to the President. We’ll come back to that point.

Because the Librarian appoints the head of the Copyright Office for an unspecified term and can terminate that person, there’s probably an argument for the President being able to terminate the “Register” directly if there’s a vacancy in the Librarian’s office especially if there’s urgent business before the Copyright Office. Alternatively, there’s definitely an argument for the replacement Librarian, “Acting” or otherwise, to be able to terminate the non-Senate confirmed Register. (See a similar argument from Professor Volokh.)

So whatever the sequence, the result is likely the same. Was it prudent? No. Was it well-handled? No. Is it enforceable? Quite probably. That doesn’t mean that those who are terminated can’t or shouldn’t pursue claims, but I think it does mean that their respective replacements are going to take over. The topic that is front and center in most discussions of these movements is Big Tech’s lobbying on AI and that is well to be concerned about because today is Wednesday and Big Tech is still trying to screw us. In that regard it is a day like any other.

But there is other pending business before the Copyright Office that will now be supervised by a Department of Justice lawyer with an entirely different background and set of relationships to all prior Registers. My bet is that the culture at the Copyright Office is about to change. I would say change radically, but I’d be skeptical that anything in Washington changes radically. For example, remember that the Library of Congress/Copyright Office public database apparently uses an older Oracle database system and/or COBOL or PL/SQL for data processing.  The user interface is HTML with embedded JavaScript, and uses CGI or early Java-based web tools for query submission. That’s right–1998 technology. Helloooo DoGE.

One item of pending business is the 5-year redesignation oversight review of the MLC’s operations and a review of the MLC’s investment policy on the $1.2 billion black box (or more) that is gradually inching its way toward a market share distribution with little or no explanation.

For reasons known only to the lobbyists who wrote Title I of the Music Modernization Act, the Copyright Office was given oversight of the MLC and its hedge fund.   As anyone could have predicted who’d studied the culture of the Copyright Office for five minutes, that oversight is effectively meaningless.  The MLC has just refused to allow any transparency over their hedge fund—over a billion dollars of other people’s money—and the Copyright Office so far has let that happen.  As Guy Forsyth wrote, Americans are freedom loving people and nothing says freedom like getting away with it.

So there’s a deeper structural issue with the MLC’s oversight: the Copyright Office is required to review the MLC every five years, but it has no real enforcement powers other than refusing to redesignate the quango which would create a huge disconnect between the sunny narrative of aspirations for the “historic” Title I of the MMA that created the MLC and the dark underbelly of the utter failure of that legislation that no one talks about at parties. Unlike executive agencies like the DOJ, FTC or SEC, the Copyright Office can’t subpoena records, issue fines, or force compliance. Its first five-year review—launched in January 2024—is now grinding on in its second year, with no public recommendations or reforms issued to date despite the requirements of the moment.

With an emphasis on regulatory accountability, the Trump administration might push for more rigorous oversight of the MLC’s operations, including its data practices and how it invests the black box OPM funds. Oversight could be enhanced through a combination of Copyright Office audits and a potential executive branch role—such as a streamlined agency focused on government efficiency. The goal: protect creators’ money and ensure the MLC’s compliance without increasing taxpayer burden. Costs for such oversight could, and arguably should, be charged back to the MLC which is funded by the richest corporations in commercial history.

In fact, beefing up the Copyright Office’s oversight role may actually be required. As Professor Volokh observes:

The answer appears to be that the Library of Congress is actually an Executive Branch department for legal purposes [and not in the Legislative Branch], though it also provides some services to Congress. Indeed, I think it has to be such a department in order to have the authority that it has over the implementation of copyright law (via the Register of Copyrights): As Buckley v. Valeo (1976) made clear, in a less famous part of its holding, Congress can’t appoint heads of agencies that exercise executive powers.

Of course the Librarian has to be confirmed by the Senate, although under vacancies rules, an acting Librarian has pretty much the full authority of the office for 210 days without Senate confirmation. The Register is not Senate confirmed, so there’s an odd juxtaposition where Trump’s Acting Librarian could be replaced, but the Register is not subject to the 210 day clock.

This is all down in the weeds in Appointments Clause land. But you get the idea. Paul Perkins, who was serving as an Associate Deputy Attorney General at the U.S. Department of Justice, will soon be looking at the MLC. My understanding is that Mr. Perkins is the deputy of Todd Blanche, who is now taking over as acting Librarian. (Todd Blanche who currently serves as the 40th United States Deputy Attorney General, having been confirmed by the Senate. He was formerly a partner at Cadwalader and former federal prosecutor in the SDNY.)

And just wait til DoGE gets a load of that COBOL programming and a billion dollar hedge fund at a quasi governmental agency. Remember, the Presidential Signing Statement for the Music Modernization Act–signed by Trump 45–specifically designates the MLC board members as inferior officers of the United States. That means on a certain level that they report to the Librarian, a new twist for music business executives. If it comes to a showdown between Trump and the MLC, my money is on Trump. So there’s that.

Time will tell. But one thing is certain: The DOJ lawyer coming in to supervise the entire situation is unlikely to care whether he’ll ever have lunch in that town again.

How Google’s “AI Overviews” Product Exposes a New Frontier in Copyright Infringement and Monopoly Abuse: Lessons from the Chegg Lawsuit

In February 2025, Chegg, Inc.—a Santa Clara education technology company—filed what I think will be a groundbreaking antitrust lawsuit against Google and Alphabet over Google’s use of “retrieval augmented generation” or “RAG.” Chegg alleges that the search monopolist’s new AI-powered search product, AI Overviews, is the latest iteration of its longstanding abuse of monopoly power.

The Chegg case may be the first major legal test of how RAG tools, like those powering Google’s AI search features, can be weaponized to maintain dominance in a core market—while gutting adjacent industries.

CheggvGoogle-complaint02242025Download

What Is at Stake?

Chegg’s case is more than a business dispute over search traffic. It’s a critical turning point in how regulators, courts, and the public understand Google’s dual role as:
– The gatekeeper of the web, and
– The competitor to every content publisher, educator, journalist, or creator whose material feeds its systems.

According to Chegg, Google’s AI Overviews scrapes and repackages publisher content—including Chegg’s proprietary educational explanations—into neatly summarized answers, which are then featured prominently at the top of search results. These AI responses provide zero compensation and little visibility for the original source, effectively diverting traffic and revenue from publishers who are still needed to produce the underlying content. Very Googley.

Chegg alleges it has experienced a 49% drop in non-subscriber traffic from Google searches, directly attributing the collapse to the introduction of AI Overviews. Google, meanwhile, offers its usual “What, Me Worry?” defense and insists its AI summaries enhance the user experience and are simply the next evolution of search—not a monopoly violation. Yeah, right, that’s the ticket.

But the implications go far beyond Chegg’s case.

Monopoly Abuse, Evolved for AI

The Chegg lawsuit revives a familiar pattern from Google’s past:

– In the 2017 Google Shopping case, the EU fined Google €2.42 billion for self-preferencing—boosting its own comparison shopping service in search while demoting rivals.
– In the U.S. DOJ monopoly case (2020–2024), a federal court found that Google illegally maintained its monopoly by locking in default search placement on mobile browsers and devices.

Now with AI Overviews, Google is not just favoring its own product in the search interface—it is repurposing the product of others to power that offering. And unlike traditional links, AI Overviews can satisfy a query without any click-through, undermining both the economic incentive to create content and the infrastructure of the open web.

Critically, publishers who have opted out of AI training via robots.txt or Google’s own tools like Google-Extended find that this does not block RAG-based uses in AI Overviews—highlighting a regulatory gap that Google exploits. This should come as no surprise given Google’s long history of loophole seeking arbitrage.

Implications Under EU Law

The European Union should take note. Article 102 of the Treaty on the Functioning of the European Union (TFEU) prohibits dominant firms from abusing their market position to distort competition. The same principles that justified the €2.42B Google Shopping fine and the 2018 €4.1B Android fine apply here:

– Leveraging dominance in general search to distort competition in education, journalism, and web publishing.
– Self-preferencing and vertical integration via AI systems that cannibalize independent businesses.
– Undermining effective consent mechanisms (like AI training opt-outs) to maintain data advantage.

Chegg’s case may be the canary in the coal mine for what’s to come globally as more AI systems become integrated into dominant platforms. Google’s strategy with AI Overviews represents not just feature innovation, but a structural shift in how monopolies operate: they no longer just exclude rivals—they absorb them.

A Revelatory Regulatory Moment

The Chegg v. Google case matters because it pushes antitrust law into the AI litigation arena. It challenges regulators to treat search-AI hybrids as more than novel tech. They are economic chokepoints that extend monopoly control through invisible algorithms and irresistible user interfaces.

Rights holders, US courts and the European Commission should watch closely: this is not just a copyright fight—it’s a competition law flashpoint.

How RAG Affects Different Media and Web Publishers

Note: RAG systems can use audiovisual content, but typically through textual intermediaries like transcripts, not by directly retrieving and analyzing raw audio/video files. But that could be next.

CategoryExamples of Rights HoldersHow RAG Uses the Content
Film Studios / ScriptwritersParamount, Amazon, DisneySummarizes plots, reviews, and character arcs (e.g., ‘What happens in Oppenheimer?’)
Music Publishers / SongwritersUniversal, Concord, Peer/Taylor Swift/Bob Dylan/Kendrick LamarDisplays lyrics, interpretations, and credits (e.g., ‘Meaning of Anti-Hero by Taylor Swift’)
News OrganizationsCNN, Reuters, BBCGenerates summaries from live news feeds (e.g., ‘What’s happening in Gaza today?’)
Book Publishers / AuthorsHarpersCollins, Hachette, Macmillan Synthesizes themes, summaries, and reviews (e.g., ‘Theme of Beloved by Toni Morrison’)
Gaming Studios / ReviewersGameFAQs, IGN, RedditExplains gameplay strategies using fan walkthroughs (e.g., ‘How to defeat Fire Giant in Elden Ring’)
Visual Artists / PhotojournalistsArtNet, Museum Sites, Personal PortfoliosExplains style and methods from exhibition texts and bios (e.g., ‘How does Banksy create his art?’)
Podcasters / Transcription ServicesPodcast transcripts, show notesPulls quotes and summaries from transcript databases (e.g., ‘What did Ezra Klein say about AI regulation?’)
Educational Publishers / EdTechKhan Academy, Chegg, PearsonDelivers step-by-step solutions and concept explanations (e.g., ‘Explain the Pythagorean Theorem’)
Science and Medical PublishersMayo Clinic, MedlinePlus, PubMedAnswers medical questions with clinical and scientific data (e.g., ‘Symptoms of lupus’)

Jim Hood Was First and He Was Right: Japan Serves Google with Anti-Monopoly C&D

Does “Publicly Available” AI Scraping Mean They Take Everything or Just Anything That’s Not Nailed Down?

Let’s be clear: It is not artificial intelligence as a technology that’s the existential threat. It’s the people who make the decisions about how to train and use artificial intelligence that are the existential threat. Just like nuclear power is not an existential threat, it’s the Czar Bomba that measured 50 megatons on the bangometer that’s the existential threat.

If you think that the tech bros can be trusted not to use your data scraped from their various consumer products for their own training purposes, please point to the five things they’ve done in the last 20 years that give you that confidence? Or point to even one thing.

Here’s an example. Back in the day when we were trying to build a library of audio fingerprints, we first had to rip millions of tracks in order to create the fingerprints. One employee who came to us from a company with a free email service said that there were millions of emails with audio file attachments just sitting there in users’ sent mail folders. Maybe we could just grab those audio files? Obviously that would be off limits for a host of reasons, but he didn’t see it. It’s not that he is an immoral person–immoral people recognize that there are some rules and they just want to break them. He was amoral–he didn’t see the rules and he didn’t think anything was wrong with his suggestion.

But the moral of the story–so to speak–is that I fully believe every consumer product is being scraped. That means that there’s a fairly good chance that Google, Microsoft, Meta/Facebook and probably other Big Tech players are using all of their consumer products to train AI. I would not bet against it.

If you think that’s crazy, I would suggest you think again. While these companies keep that kind of thing fairly quiet, it’s not the first time that the issue has come up–Big Tech telling you one thing, but using you to gain a benefit for something entirely different that you probably would never have agreed to had you known.

Take the Google Books saga. The whole point of Google’s effort at digitizing all the world’s books wasn’t because of some do-gooder desire to create the digital library of Alexandria or even the snippets that were the heart of the case. No–it was the “nondisplay uses” like training Google’s translation engine using “corpus machine translation”. The “corpus” of all the digitized books was the real value and of course was the main thing that Google wouldn’t share with the authors and didn’t want to discuss in the case.

Another random example would be “GOOG-411”. We can thank Marissa Meyer for spilling the beans on that one.

According to PC World back in 2010:

Google will close down 1-800-GOOG-411 next month, saying the free directory assistance service has served its purpose in helping the company develop other, more sophisticated voice-powered technologies.

GOOG-411, which will be unplugged on Nov. 12, was the search company’s first speech recognition service and led to the development of mobile services like Voice Search, Voice Input and Voice Actions.

Google, which recorded calls made to GOOG-411, has been candid all along about the motivations behind running the service, which provides phone numbers for businesses in the U.S. and Canada.

In 2007, Google Vice President of Search Products & User Experience Marissa Mayer said she was skeptical that free directory assistance could be viable business, but that she had no doubt that GOOG-411 was key to the company’s efforts to build speech-to-text services.

GOOG 411 is a prime example of how Big Tech plays the thimblerig, especially the “has been candid all along about the motivations behind running the service.” Doesn’t that phrase just ooze corporate flak? That, as we say in the trade, is a freaking lie.

None of the GOOG-411 collateral ever said, “Hey idiot, come help us get even richer by using our dumbass “free” directory assistance “service”.” Just like they’re not saying, “Hey idiot, use our “free” products so we can train our AI to take your job.” That’s the thimblerig, but played at our expense.

This subterfuge has big consequences for people like lawyers. As I wrote in my 2014 piece in Texas Lawyer:

“A lawyer’s duty to maintain the confidentiality of privileged communications is axiomatic. Given Google’s scanning and data mining capabilities, can lawyers using Gmail comply with that duty without their clients’ informed consent? In addition to scanning the text, senders and recipients, Google’s patents for its Gmail applications claim very broad functionality to scan file attachments. (The main patent is available on Google’s site. A good discussion of these patents is in Jeff Gould’s article, “The Natural History of Gmail Data Mining”, available on Medium.)”

Google has made a science of enticing users into giving up free data for Google to evolve even more products that may or may not be useful beyond the “free” part. Does the world really need another free email program? Maybe not, but Google does need a way to snarf down data for its artificial intelligence platforms–deceptively.

Fast forward ten years or so and here we are with the same problem–except it’s entirely possible that all of the Big Tech AI platforms are using their consumer products to train AI. Nothing has changed for lawyers, and some version of these rules would be prudent to follow for anyone with a duty of confidentiality like a doctor, accountant, stock broker or any of the many licensed professions. Not to mention social workers, priests, and the list goes on. If you call Big Tech on the deception and they will all say that they operate within their privacy policies, “de-identify” user data, only use “public” information, or other excuses.

I think the point of all this is that the platforms have far too many opportunities to cross-collateralize our data for the law to permit any confusion about what data they scrape.

What We Think We Know

Microsoft’s AI Training Practices

Microsoft has publicly stated that it does not use data from its Microsoft 365 products (e.g., Word, Excel, Outlook) to train its AI models. The company wants us to believe they rely on “de-identified” data from sources such as Bing searches, Copilot interactions, and “publicly available” information, whatever that means. Microsoft emphasizes its commitment to responsible AI practices, including removing metadata and anonymizing data to protect user privacy. See what I mean? Given Microsoft takes these precautions, that makes it all fine.

However, professionals using Microsoft’s tools must remain vigilant. While Microsoft claims not to use customer data from enterprise accounts for AI training, any inadvertent sharing of sensitive information through other Microsoft services (e.g., Bing or Copilot) could pose risks for users, particularly people with a duty of confidentiality like lawyers and doctors. And we haven’t even discussed child users yet.

Google’s AI Training Practices

For decades, Google has faced scrutiny for its data practices, particularly with products like Gmail, Google Docs, and Google Drive. Google’s updated privacy policy explicitly allows the use of “publicly available” information and user data for training its AI models, including Bard and Gemini. While Google claims to anonymize and de-identify data, concerns remain about the potential for sensitive information to be inadvertently included in training datasets.

For licensed professionals, these practices raise significant red flags. Google advises users not to input confidential or sensitive information into its AI-powered tools–typically Googlely. The risk of human reviewers accessing “de-identified” data can happen to anyone, but why in the world would you ever trust Google?

Does “Publicly Available” Mean Everything or Does it Mean Anything That’s Not Nailed Down?

These companies speak of “publicly available” data as if data that is publicly available is free to scrape and use for training. So what does that mean?

Based on the context and some poking around, it appears that there is no legally recognizable definition of what “publicly available” actually means. If you were going to draw a line between “publicly available” and the opposite, where would you draw it? You won’t be surprised to know that Big Tech will probably draw the line in an entirely different place than a normal person.

As far as I can tell, “publicly available” data would include data or content that is accessible by a data scraping crawler or by the general public without a subscription, payment, or special access permissions. This likely includes web pages, posts on social media like baby pictures on Facebook or Instagram, or other platforms that do not restrict access to their content through paywalls, registration requirements, or other barriers like terms of service prohibiting data scraping, API or a robots.txt file (which like a lot of other people including Ed Newton-Rex, I’m skeptical of even working).

While discussions of terms of service, notices prohibiting scraping and automated directions to crawlers sound good, in reality there’s no way to stop a determined crawler. The vulpine lust for data and cold hard cash by Big Tech is not realistically possible to stop at this point. Stopping the existential onslaught explains why the world needs to escalate punishment for these violations to a new level that may seem extreme at this point or at least unusually harsh.

Yet the massive and intentional copyright infringement, privacy violations, and who knows what else are so vast they are beyond civil penalties particularly for a defendant that seemingly prints money.



Machines Don’t Let Machines Do Opt Outs: Why robots.txt won’t get it done for AI Opt Outs

[Following is based on an except from the Artist Rights Institute’s submission to the UK Intellectual Property Office consultation on a UK AI legislative proposal]

The fundamental element of any rights reservation regime is knowing which work is being blocked by which rights owner.  This will require creating a metadata identification regime for all works of authorship, a regime that has never existed and must be created from whole cloth.  As the IPO is aware, metadata for songs is quite challenging as was demonstrated in the IPO’s UK Industry Agreement on Music Streaming Metadata Working Groups.

Using machine-readable formats for reservations sounds like would be an easy fix, but it creates an enormous burden on the artist, i.e., the target of the data scraper, and is a major gift to the AI platform delivered by government.  We can look to the experience with robots.txt for guidance.

Using a robots.txt file or similar “do not index” file puts far too big a bet on machines getting it right in the silence of the Internet.  Big Tech has used this opt-out mantra for years in a somewhat successful attempt to fool lawmakers into believing that blocking is all so easy.  If only there was a database, even a machine can do it.  And yet there are still massive numbers of webpages copied and those pages that were copied for search (or the Internet Archive) are now being used to train AI.  

It also must be said that a “disallow” signal is designed to work with file types or folders, not millions of song titles or sound recordings (see GEMA’s lawsuits against AI platforms). For example, this robots.txt code will recognize and block a “private-directory” folder but would otherwise allow Google to freely index the site while blocking Bing from indexing images:

User-agent: *

Disallow: /private-directory/

User-agent: Googlebot

Allow: /

User-agent: Bingbot

Disallow: /images/

Theoretically, existing robots.txt files could be configured to block AI crawlers entirely by designating known crawlers as user-agents such as ChatGPT.  However, there are many known defects when robots.txt can fail to block web crawlers or AI data scrapers including:

Malicious or non-compliant crawlers might ignore the rules in a robots.txt file and continue to scrape a website despite the directives.

Incorrect Syntax of a robots.txt file can lead to unintended results, such as not blocking the intended paths or blocking too many paths.

Issues with server configuration can prevent the robots.txt file from being correctly read or accessed by crawlers.

Content generated dynamically through JavaScript or AJAX requests might not be blocked if robots.txt is not properly configured to account for these resources.

Unlisted crawlers or scrapers not known to the user may not adhere to the intended rules.

Crawlers using cached versions of a site may bypass rules in a robots.txt file, particularly updated rules since the cache was created.

Subdomains and Subdirectories limiting the scope of the rules can lead to not blocking all intended subdomains or subdirectories.

Missing Entire Lists of Songs, Recordings, or Audiovisual works.

While robots.txt and similar techniques theoretically are useful tools for managing crawler access, they are not foolproof. Implementing additional security measures, such as IP blocking, CAPTCHA, rate limiting, and monitoring server logs, can help strengthen a site’s defenses against unwanted scraping.  However, like the other tools that were supposed to level the playing field for artists against Big Tech, none of these tools are free, all of them require more programming knowledge than can reasonably be expected, all require maintenance, and at scale, all of them can be gamed or will eventually fail. 

 It must be said that all of the headaches and expense of keeping Big Tech out is because Big Tech so desperately wants to get in.

The difference between blocking a search engine crawler and an AI data scraper (which could each be operated by the same company in the case of Meta, Bing or Google) is that failing to block a search engine crawler is inconvenient for artists, but failing to block an AI data scraper is catastrophic for artists.

Even if the crawlers worked seamlessly, should any of these folders change names and the site admin forgets to change the robots.txt file, that is asking a lot of every website on the Internet.

It must also be said that pages using machine readable blocking tools may result in pages being downranked, particularly for AI platforms closely associated with search engines.  Robots.txt blocking already has problems with crawlers and downranking for several reasons. A robots.txt file itself doesn’t directly cause pages to be downranked in search results. However, it can indirectly affect rankings by limiting search engine crawlers’ access to certain parts of a website. Here’s how:

Restricted Crawling: If you block crawlers from accessing important pages using robots.txt, those pages won’t be indexed. Without indexing, they won’t appear in search results, let alone rank.

Crawl Budget Mismanagement: For large websites, search engines allocate a “crawl budget”—the number of pages they crawl in a given time. If robots.txt doesn’t guide crawlers efficiently, that may randomly leave pages unindexed.

No Content Evaluation: If a page is blocked by robots.txt but still linked elsewhere, search engines might index its URL without evaluating its content. This can result in poor rankings since the page’s relevance and quality can’t be assessed.

The TDM safe harbor is too valuable and potentially too dangerous to leave to machines.

ARI Comment in IPO Consultation v F 2Download

TikTok Extended

Imagine if the original Napster had received TikTok-level attention from POTUS?  Forget I said that.  The ongoing divestment of TikTok from its parent company ByteDance has reached yet another critical point with yet another bandaid.  Congress originally set a January 19, 2025 deadline for ByteDance to either sell TikTok’s U.S. operations or face a potential ban in the United States as part of the Protecting Americans from Foreign Adversary Controlled Applications Act or “PAFACA” (I guess “covfefe” was taken). The US Supreme Court upheld that law in TikTok v. Garland.

When January 20 came around, President Trump gave Bytedance an extension to April 5, 2025 by executive order. When that deadline came, President Trump granted an extension to the extension to the January 19 deadline by another executive order, providing additional time for ByteDance to finalize a deal to divest. The extended deadline now pushes the timeline for divestment negotiations to July 1, 2025.

This new extension is designed to allow for further negotiation time among ByteDance, potential buyers, and regulatory authorities, while addressing the ongoing trade issues and concerns raised by both the U.S. and Chinese governments. 

It’s getting mushy, but I’ll take a stab at the status of the divestment process. I might miss someone as they’re all getting into the act.

I would point out that all these bids anticipate a major overhaul in how TikTok operates which—just sayin’—means it likely would no longer be TikTok as its hundreds of millions of users now know it.  I went down this path with Napster, and I would just say that it’s a very big deal to change a platform that has inherent legal issues into one that satisfies a standard that does not yet exist.  I always used the rule of thumb that changing old Napster to new Napster (neither of which had anything to do with the service that eventually launched with the “Napster” brand but bore no resemblance to original Napster or its DNA) would result in an initial loss of 90% of the users. Just sayin’.

Offers and Terms

Multiple parties have expressed interest in acquiring TikTok’s U.S. operations, but the terms of these offers remain fluid due to ongoing negotiations and the complexity of the deal. Key bidders include:

Bytedance Investors: According to Reuters, “the biggest non-Chinese investors in parent company ByteDance to up their stakes and acquire the short video app’s U.S. operations.” This would involve Susquehanna International Group, General Atlantic, and KKR. Bytedance looks like it retains a minority ownership position of less than 20%, which I would bet probably means 19.99999999% or something like that. Reuters describes this as the front runner bid, and I tend to buy into that characterization. From a cap table point of view, this would be the cleanest with the least hocus pocus. However, the Reuters story is based on anonymous sources and doesn’t say how the deal would address the data privacy issues (other than that Oracle would continue to hold the data), or the algorithm. Remember, Oracle has been holding the data and that evidently has been unsatisfactory to Congress which is how we got here. Nothing against Oracle, but I suspect this significant wrinkle will have to get fleshed out.

Lawsuit by Bidder Company Led by Former Myspace Executive: In a lawsuit in Florida federal court by TikTok Global LLC filed April 3, TikTok Global accuses ByteDance, TikTok Inc., and founder Yiming Zhang of sabotaging a $33 billion U.S. acquisition deal by engaging in fraud, antitrust violations, and breach of contract. The complaint alleges ByteDance misled regulators, misappropriated the “TikTok Global” brand, and conspired to maintain control of TikTok in violation of U.S. government directives. The suit brings six causes of action, including tortious interference and unjust enrichment, underscoring a complex clash over corporate deception and national security compliance.

Oracle and Walmart: This proposal, which nearly closed in 2024 (I guess), involved a sale of TikTok’s U.S. business to a consortium of U.S.-based companies, with Oracle managing data security and infrastructure. ByteDance was to retain a minority stake in the new entity. However, this deal has not closed, who knows why aside from competition and then there’s those trade tariffs and the need for approval from both U.S. and Chinese regulators who have to be just so chummy right at the moment.

AppLovin: A preliminary bid has been submitted by AppLovin, an adtech company, to acquire TikTok’s U.S. operations. It appears that AppLovin’s offer includes managing TikTok’s user base and revenue model, with a focus on ad-driven strategies, although further negotiations are still required.  According to Pitchbook, “AppLovin is a vertically integrated advertising technology company that acts as a demand-side platform for advertisers, a supply-side platform for publishers, and an exchange facilitating transactions between the two. About 80% of AppLovin’s revenue comes from the DSP, AppDiscovery, while the remainder comes from the SSP, Max, and gaming studios, which develop mobile games. AppLovin announced in February 2025 its plans to divest from the lower-margin gaming studios to focus exclusively on the ad tech platform.”  It’s a public company trading as APP and seems to be worth about $100 billion.   Call me crazy, but I’m a bit suspicious of a public company with “lovin” in its name.  A bit groovy for the complexity of this negotiation, but you watch, they’ll get the deal.

Amazon and Blackstone: Amazon and Blackstone have also expressed interest in acquiring TikTok or a stake in a TikTok spinoff in Blackstone’s case. These offers would likely involve ByteDance retaining a minority interest in TikTok’s U.S. operations, though specifics of the terms remain unclear.  Remember, Blackstone owns HFA through SESAC.  So there’s that.

Frank McCourt/Project Liberty:  The “People’s Bid” for TikTok is spearheaded by Project Liberty, founded by Frank McCourt. This initiative aims to acquire TikTok and change its platform to prioritize user privacy, data control, and digital empowerment. The consortium includes notable figures such as Tim Berners-Lee, Kevin O’Leary, and Jonathan Haidt, alongside technologists and academics like Lawrence Lessig.  This one gives me the creeps as readers can imagine; anything with Lessig in it is DOA for me.

The bid proposes migrating TikTok to a new open-source protocol to address concerns raised by Congress while preserving its creative essence. As of now, the consortium has raised approximately $20 billion to support this ambitious vision.  Again, these people act like you can just put hundreds of millions of users on hold while this changeover happens.  I don’t think so, but I’m not as smart as these city fellers.

PRC’s Reaction

The People’s Republic of China (PRC) has strongly opposed the forced sale of TikTok’s U.S. operations, so there’s that. PRC officials argue that such a divestment would be a dangerous precedent, potentially harming Chinese tech companies’ international expansion. And they’re not wrong about that, it’s kind of the idea. Furthermore, the PRC’s position seems to be that any divestment agreement that involves the transfer of TikTok’s algorithm to a foreign entity requires Chinese regulatory approval.  Which I suspect would be DOA.

They didn’t just make that up– the PRC, through the Cyberspace Administration of China (CAC), owns a “golden share” in ByteDance’s main Chinese subsidiary. This 1% stake, acquired in 2021, grants the PRC significant influence over ByteDance including the ability to influence content and business strategies.

Unsurprisingly, ByteDance must ensure that the PRC government (i.e., the Chinese Communist Party) maintains control over TikTok’s core algorithm, a key asset for the company. PRC authorities have been clear that they will not approve any sale that results in ByteDance losing full control over TikTok’s proprietary technology, complicating the negotiations with prospective buyers.  

So a pressing question is whether TikTok without the algorithm is really TikTok from the users experience.  And then there’s that pesky issue of valuation—is TikTok with an unknown algo worth as much as TikTok with the proven, albeit awful, current algo.

Algorithm Lease Proposal

In an attempt to address both U.S. security concerns and the PRC’s objections, a novel solution has been proposed: leasing TikTok’s algorithm. Under this arrangement, ByteDance would retain ownership of the algorithm, while a U.S.-based company, most likely Oracle, would manage the operational side of TikTok’s U.S. business.

ByteDance would maintain control over its technology, while allowing a U.S. entity to oversee the platform’s operation within the U.S. The U.S. company would be responsible for ensuring compliance with U.S. data privacy laws and national security regulations, while ByteDance would continue to control its proprietary algorithm and intellectual property.

Under this leasing proposal, Oracle would be in charge of managing TikTok’s data security and ensuring that sensitive user data is handled according to U.S. regulations. This arrangement would allow ByteDance to retain its technological edge while addressing American security concerns regarding data privacy.

The primary concern is safeguarding user data rather than the algorithm itself. The proposal aims to address these concerns while avoiding the need for China’s approval of a full sale.

Now remember, the reason we are in this situation at all is that Chinese law requires TikTok to turn over on demand any data it gathers on TikTok users which I discussed on MTP back in 2020. The “National Intelligence Law” even requires TikTok to allow the PRC’s State Security police to take over the operation of TikTok for intelligence gathering purposes on any aspect of the users’ lives.  And if you wonder what that really means to the CCP, I have a name for you: Jimmy Lai. You could ask that Hong Konger, but he’s in prison.

This leasing proposal has sparked debate because it doesn’t seem to truly remove ByteDance’s influence over TikTok (and therefore the PRC’s influence). It’s being compared to “Project Texas 2.0,” a previous plan to secure TikTok’s data and operations.  I’m not sure how the leasing proposal solves this problem. Or said another way, if the idea is to get the PRC’s hands off of Americans’ user data, what the hell are we doing?

Next Steps

As the revised deadline approaches, I’d expect a few steps, each of which has its own steps within steps:

Finalization of a Deal: This is the biggest one–easy to say, nearly impossible to accomplish.  ByteDance will likely continue negotiating with interested parties while they snarf down user data, working to secure an agreement that satisfies both U.S. regulatory requirements and Chinese legal constraints. The latest extension provides runway for both sides to close key issues that are closable, particularly concerning the algorithm lease and ByteDance’s continued role in the business.

Operational Contingency:  I suppose at some point the buyer is going to be asked if whatever their proposal is will actually function and whether the fans will actually stick around to justify whatever the valuation is.  One of the problems with rich people getting ego involved in a fight over something they think is valuable is that they project all kinds of ideas on it that show how smart they are, only to find that once they get the thing they can’t actually do what they thought they would do.  By the time they figure out that it doesn’t work, they’ve moved on to the next episode in Short Attention Span Theater and it’s called Myspace.

China’s Approval: ByteDance will need to secure approval from PRC regulatory authorities for any deal involving the algorithm lease or a full divestment. So why introduce the complexity of the algo lease when you have to go through that step anyway?  Without PRC approval, any sale or lease of TikTok’s technology is likely dead, or at best could face significant legal and diplomatic hurdles.

Legal Action: If an agreement is not reached by the new deadline of July 1, 2025, further legal action could be pursued, either by ByteDance to contest the divestment order or by the U.S. government to enforce a ban on TikTok’s operations.  I doubt that President Trump is going to keep extending the deadline if there’s no significant progress.

If I were a betting man, I’d bet on the whole thing collapsing into a shut down and litigation, but watch this space.

Can Streaming Price Segmentation Avoid the Malthusian Trap?

When you see artists and songwriters getting starved out of the music business while at the same time fighting over scraps from streaming, that’s unusual. When you see more and more labels caring almost as much about acquiring ever more catalogs rather than helping artists in developing long-term careers, that’s unusual. Why is this becoming the norm? Could it be we are in a “Malthusian trap”?

Remember “nice price” CDs? The budget bin? Top line, mid price, budget price points? That’s called “price differentiation” or “price segmentation.” It’s common in pretty much any consumer good. The idea is that people will pay more for stuff they really want and less money for the nice to haves–the 10 second MBA, buy low sell high. Pretty much any consumer good except–of course–streaming music. One big difference between streaming and physical records is that with streaming, the retailer controls both the wholesale price and the retail price. Want to bet that Wal Mart would just love that model? That should explain why so many artists and especially songwriters are gasping for air. And it should explain why so many are suffering from the streaming pandemic.

Price segmentation in streaming music could be an effective way to avoid the economic concept of the “Malthusian trap.” Simply put, the Malthusian trap occurs when demand for resources outpaces the supply of available resources. This is most likely to happen when buyers with cash exploit sellers who want that cash by using price fixing and market allocation. Like the big pool method of manipulating wholesale prices.

Adopting a more sophisticated approach required by segmentation could allow the music business to move away from the “big pool” program of price controls that has been adopted by every streaming service for both songs and sound recordings.  Notice that blowing up the big pool has nothing to do with a compulsory license.

Remember that the “big pool” method allocates a “pie” which is roughly 50ish% of a defined revenue pool calculated each month for the sound recording and about 14ish% of a slightly different revenue pool for the song. Those two “pies” are then divided up based on market share or said another way, popularity. I say “defined revenue” because it is a negotiated number, not all revenue. Want to bet that defined revenue is less than actual revenue? Sure as there’s gambling at Rick’s. So there’s nothing inherent in the pie, and if you wanted to bet that share price and market valuation is not included in that defined revenue, you’d be a winner.

That “big pool” formula is calculated every month (call that Time X or “Tx”) which is essentially:

(Defined Revenue x [Your Total Streams ÷ All Streams]) = Your Revenue @Tx

and then

Your Revenue ÷ Your Streams = Wholesale Price Per Stream

There are a few bells and whistles to this calculation, but it’s easy to see why this method of price fixing is attractive to the streaming services–it’s just that it’s killing the artists and songwriters stuck in the Malthusian trap. It’s also easy to see that unless Your Total Streams are increasing at a greater rate of increase than the increase in All Streams at T1, T2, T3 and so on, or if the Defined Revenue is not increasing at a greater rate than All Streams, then whoever gets the cash called “Your Revenue” is getting screwed blued and tattooed. Why?

Because they cannot control the wholesale price. That sets into motion the big pool downward spiral and that’ downward spiral can also be called the Malthusian Trap in honor of the 18th Century economist Thomas Malthus who you’ve probably have never heard of.

The Malthusian Trap and Faux Democratization of the Denominator

The “Malthusian Trap” occurs in streaming when wholesale prices determined by the “big pool” method of price caps is overtaken by the services’ open invitation for the supposed “democratization of the denominator.” That surge in tracks uploaded to music streaming services is sometimes estimated at 120,000 per day. (I doubt that it’s exactly that number but let’s go with it on the assumption that whatever the correct number is, it’s a lot compared to what a single artist or even a single label would put into commerce.). You are not uploading 120,000 tracks per day. I doubt that the biggest labels are uploading 120,000 tracks per day and they are definitely not uploading 43,800,000 tracks per year. Granted, those tracks are not all streaming, maybe 25% never get played at all.

But that still means that the only number in the big pool formula that is increasing essentially exponentially is the denominator. And when you consider that streaming revenues are growing less than 10% or so annually, the result of the big pool formula is steadily declining. High school algebra, right?

This faux “democratization” uses artists as human shields to put control of wholesale pricing squarely in the hands of streaming services due to wholesale price caps on both the sound recording and song payouts.

When the growth of a service’s sound recording offering outpaces available revenues, the “big pool” method effectively transfers control over wholesale prices from rights holders to services and causes diminishing returns for both labels and publishers. Regardless of the terms of any one artist’s record deal or the convoluted compulsory mechanical royalty for songwriters, these diminishing returns will hit artists, producers and songwriters because returns are diminished to the labels and publishers, particularly on a per-artist basis.  Particular deals may make the decline even more or less pronounced, but the race to the bottom is baked into the model. High school algebra.

By introducing a more dynamic and differentiated pricing segmentation model, rights holders could regain control over their own wholesale prices, streaming services might better align revenue payouts with actual usage and consumer preferences. We could all potentially avoid the scenario where a fixed revenue pool gets stretched too thin across an ever-expanding catalog.

It must also be said that because performance on Spotify is closely tied–so to speak–to other commerce such as talent buyers for live shows that constantly check how a new artist has performed on Spotify before giving them a show date, a relatively simple economic decision becomes complex. A demonetized artist may be economically indifferent to continuing to support Spotify by driving fans to the platform, but removing themselves from Spotify may hurt them in booking live shows. So the big pool needs to get blown up for yet another valid, if not actionable, reason.

Blowing Up the Compulsory?

On the songwriter side, there is a sense that what we really need to do is blow up the compulsory license particularly given the reaming songwriters are taking from Spotify’s exploitation of the “bundle” loophole that has foolishly been in the Copyright Royalty Board’s regulations for many, many years.  But even so, I suggest that the path dependence of 100-plus years of reliance by a wide variety of music users on the U.S. compulsory mechanical license is unlikely to get “blown up” and abandoned by lawmakers.  But what may get “blown up” is the hated “big pool” royalty payable under that compulsory.  It may turn out that it’s the big pool that is the culprit, not the compulsory license. (And by the way–be careful what you wish for with all this “blowing up” of the compulsory. You may really not want who comes next.)

Why are we still suffering under this ancient regime? Unfortunately, when the handful of people who forced through Title I of the Music Modernization Act got done with it in 2018, they made bad choices.  For example, they had a golden opportunity to do something simple like shorten the rate period from five years to a realistic duration that more closely matches the term of direct license agreements.  It’s simply bizarre to use a five year term during a contemporary era marked by relatively high inflation when rates during the 1988-2004 period were adjusted every two years. 

They also had a chance to choose between perpetuating the DMV-style model of licensing administration in favor of creating an Apple Store-style model and they went for “more DMV please” like carp on bait.  And here we are, more screwed than ever.  Gee thanks, thought leaders!

Understanding the Malthusian Trap in Streaming

In the current “big pool” model, royalties are divided among artists based on the proportion of streams their music receives relative to the total number of streams on the platform. Songwriters are paid in a similar version of the “big pool.”  This system leads to diminishing payouts as the catalog expands and the user base grows, since:

  1. The total revenue pool remains relatively static due to slowing streaming growth and frozen subscription prices, while the denominator (the total number of streams) grows larger;

2. The more content added to the platform, the less valuable each individual stream becomes (regardless of particular artist deals); and

3. Artists or songwriters with fewer streams get demonetized by Spotify or are paid but fall outside the mainstream struggle to receive meaningful payouts.

The “Malthusian trap,” in this context means there is an imbalanced relationship between increasing content and relatively static revenue pools. That imbalance results in declining payouts over time for artists and songwriters. This especially true for those creators whose total streams (the numerator in the ratio) are relatively constant or declining due to falling off in fan engagement for whatever reason (including bands that break up or artists who pass away).

In other words, the big pool’s fixed cap on aggregated streaming prices creates its own scarcity despite the infinite shelf space of a streaming service. (See Chris Anderson’s rather tarnished “long tail” theory that still reigns supreme at streaming services which demonstrates once again there is no free lunch.)

“Malthusian” refers to the sometimes controversial ideas of Thomas Robert Malthus (1766–1834) the British economist, scholar, and demographer, best known for his theories on population growth and its relationship to resources, particularly food. His most influential work is “An Essay on the Principle of Population” (1798), where he argued that populations tend to grow exponentially, while food production grows at a much slower, linear rate.

This mismatch, according to Malthus, would eventually lead to overpopulation and resource scarcity, resulting in widespread poverty, famine, and social instability.  Malthus called this the “surplus population” or what the AI accelerationists call “useless eaters.” Surplus population leads to famine just like streaming leads to Discovery Mode and demonetization.  Mr. Malthus has a fairly gloomy view of the world, so no Spotify stock options for him.  He wouldn’t have his pompoms out as a streaming cheerleader our Thomas, but his ideas are very relevant to the streaming analysis.

Key Concepts of Malthusian Theory:  Also see Malthus critic Charles Dickens (“may I have some more”), England’s response to the Irish potato famine and Gangs of New York.

Exponential Population Growth: Malthus believed that if left unchecked, populations grow exponentially (doubling every 25 years), which would outpace the resources needed to sustain them.  Comparatively, the total number of tracks on Spotify has doubled approximately every four years. (This is like Sergei’s Corollary to Moore’s Law–royalties decline 50% with every two year increase in computing power.)

Limited Food Supply: Malthus argued that food production could only grow at an arithmetic (linear) rate because of the finite land, labor, and capital available to produce it. Over time, the availability of food per capita would diminish just like the per-stream rate on streaming platforms–that’s why Spotify continues to deny a per-stream rate even exists (ludicrous propaganda).  That is, populations tend to increase geometrically (2, 4, 8, 16 …), whereas food reserves grow arithmetically (2, 3, 4, 5 …). I’d say this is like a vast number of under performing recordings lead to competition for the artificially capped revenue under “big pool” and the relatively frozen subscription prices. This helps to explain Daniel Ek’s–very Malthusian–comment that artists need to work harder to keep up which was straight out of Oliver Twist.

The Malthusian Trap: The theory suggests that any improvements in living standards (through better agriculture, technology, or economic progress) would eventually lead to population growth, which would, in turn, bring the standard of living back down to subsistence levels. Essentially, population pressure would cause periodic famines, diseases, or wars–you know, demonetization–that would control population size and maintain balance with available resources. The trap helps to explain why we need to blow up the big pool model and its fixed wholesale prices.

Preventive and Positive Checks: Malthus identified two types of checks on population growth:

Preventive checks: These are voluntary actions people can take to limit population growth, such as delayed marriage and celibacy.  In the streaming analogy, this would occur if Spotify were to limit the number of royalty bearing tracks (like demonetizing under 1,000 streams).

Positive checks: These occur when the population exceeds the capacity for sustenance, leading to famine, disease, and mortality, which ultimately reduce the population.  In the streaming analogy, this occurs when artists or songwriters quit the music business or abandon streaming platforms.  Given the close ties between traction on Spotify and validation for talent buyers, for example, it is unlikely that a working artist could abandon the platform entirely no matter how much it costs them to stay on Spotify–although there are limits.

Can Price Segmentation Address the Malthusian Trap in Streaming?

Price segmentation allows streaming platforms to differentiate pricing based on different user segments, content types, or usage behaviors, which can provide several key benefits to avoid the Malthusian trap. We’ll see if the thought leaders have some other suggestions–that I cynically (I admit) think are most likely to be continuing to put bandaids on the status quo.

The Delay’s The Thing: Anthropic Leapfrogs Its Own November Valuation Despite Litigation from Authors and Songwriters in the Heart of Darkness

If you’ve read Joseph Conrad’s Heart of Darkness, you’ll be familiar with the Congo Free State, a private colony of Belgian King Leopold II that is today largely the Democratic Republic of the Congo. When I say “private” I mean literally privately owned by his Leopoldness. Why would old King Leo be so interested in owning a private colony in Africa? Why for the money, of course. Leo had to move some pieces around the board and get other countries to allow him to get away with essentially “buying” the place, if “buying” is the right description.

So Leo held an international conference in Berlin to discuss the idea and get international buy-in, kind of like the World Economic Forum with worse food and no skiing. Rather than acknowledging his very for-profit intention to ravage the Congo for ivory (aka slaughtering elephants) and rubber (the grisly extraction of which was accomplished by uncompensated slave labor) with brutal treatment of all concerned, Leo convinced the assembled nations that his intentions were humanitarian and philanthropic. You know, don’t be evil. Just lie.

Of course, however much King Leopold may have foreshadowed our sociopathic overlords from Silicon Valley, it must be said that Leo’s real envy won’t so much be the money as what he could have done with AI himself had he only known. Oh well, he just had to make do with Kurtz.

Which bring us to AI in general and Anthropic in particular. Anthropic’s corporate slogan is equally humanitarian and philanthropic: “Anthropic is an AI research company that focuses on the safety and alignment of AI systems with human values.” Oh yes, all very jolly.

All very innocent and high minded, until you get punched in the face (to coin a phrase). It turns out–quelle horreur–that Anthropic stands accused of massive copyright infringement rather than lauded for its humanitarianism. Even more shocking? The company’s valuation is going through the stratosphere! These innocents surely must be falsely accused! The VC’s are voting with their bucks, so they wouldn’t put their shareholders’ money or limiteds money on the line for a–RACKETEER INFLUENCED CORRUPT ORGANIZATION?!?

Bartz v Anthropic ComplaintDownload

Not only have authors brought this class action against Anthropic which is both Google’s stalking horse and cats paw to mix a metaphor, but the songwriters and music publishers have sued them as well. Led by Concord and Universal, the publishers have sued for largely the same reasons as the authors but for their quite distinct copyrights.

Concord and Universal v Anthropic ComplaintDownload

So let’s understand the game that’s being played here–as the Artist Rights Institute submitted in a comment to the UK Intellectual Property Office in the IPO’s current consultation on AI and copyright, the delay is the thing. And thanks to Anthropic, we can now put a valuation on the delay since the $4,000,000,000 the company raised in November 2024: $3,500,000,000. This one company is valued at $61.5 billion, roughly half of the entire creative industries in the UK and roughly equal to the entire U.S. music industry. No wonder delay is their business model.

However antithetical, copyright and AI must be discussed together for a very specific reason:  Artificial intelligence platforms operated by Google, Microsoft/OpenAI, Meta and the like have scraped and ingested works of authorship from baby pictures to Sir Paul McCartney as fast and as secretly as possible.  And the AI platforms know that the longer they can delay accountability, the more of the world’s culture they will have devoured—or as they might say, the more data they will have ingested.  And Not to mention the billions in venture capital they will have raised, just like Anthropic. For the good of humanity, of course, just like old King Leo.

As the Hon. Alison Hume, MP recently told Parliament, this theft is massive and has already happened, another example of why any “opt out” scheme (as had been suggested by the UK government) has failed before it starts:

This week, I discovered that the subtitles from one of my episodes of New Tricks have been scraped and are being used to create learning materials for artificial intelligence.  Along with thousands of other films and television shows, my original work is being used by generative AI to write scripts which one day may replace versions produced by mere humans like me.

This is theft, and it’s happening on an industrial scale.  As the law stands, artificial intelligence companies don’t have to be transparent about what they are stealing.[1]

Any delay[2] in prosecuting AI platforms simply increases their de facto “text and data mining” safe harbor while they scrape ever more of world culture.  As Ms. Hume states, this massive “training” has transferred value to these data-hungry mechanical beasts to a degree that confounds human understanding of its industrial scale infringement.  This theft dwarfs even the Internet piracy that drove broadband penetration, Internet advertising and search platforms in the 1999-2010 period.  It must be said that for Big Tech, commerce and copyright are once again inherently linked for even greater profit.

As the Right Honourable Baroness Kidron said in her successful opposition to the UK Government’s AI legislation in the House of Lords:

The Government are doing this not because the current law does not protect intellectual property rights, nor because they do not understand the devastation it will cause, but because they are hooked on the delusion that the UK’s best interests and economic future align with those of Silicon Valley.[3]  

Baroness Kidron identifies a question of central importance that mankind is forced to consider by the sheer political brute force of the AI lobbying steamroller:  What if AI is another bubble like the Dot Com bubble?  AI is, to a large extent, a black box utterly lacking in transparency much less recordkeeping or performance metrics.  As Baroness Kidron suggests, governments and the people who elect them are making a very big bet that AI is not pursuing an ephemeral bubble like the last time.

Indeed, the AI hype has the earmarks of a bubble, just as the Dot Com bubble did.  Baroness Kidron also reminds us of these fallacious economic arguments surrounding AI:

The Prime Minister cited an IMF report that claimed that, if fully realised, the gains from AI could be worth up to an average of £47 billion to the UK each year over a decade. He did not say that the very same report suggested that unemployment would increase by 5.5% over the same period. This is a big number—a lot of jobs and a very significant cost to the taxpayer. Nor does that £47 billion account for the transfer of funds from one sector to another. The creative industries contribute £126 billion per year to the economy. I do not understand the excitement about £47 billion when you are giving up £126 billion.[4]  

As Hon. Chris Kane, MP said in Parliament,  the Government runs the risk of enabling a wealth transfer that itself is not producing new value but would make old King Leo feel right at home: 

Copyright protections are not a barrier to AI innovation and competition, but they are a safeguard for the work of an industry worth £125 billion per year, employing over two million people.  We can enable a world where much of this value  is transferred to a handful of big tech firms or we can enable a win-win situation for the creative industries and AI developers, one where they work together based on licensed relationships with remuneration and transparency at its heart.

[1] Paul Revoir, AI companies are committing ‘theft’ on an ‘industrial scale’, claims Labour MP – who has written for TV series including New Tricks, Daily Mail (Feb. 12, 2025) available at https://www.dailymail.co.uk/news/article-14391519/AI-companies-committing-theft-industrial-scale-claims-Labour-MP-wrote-TV-shows-including-New-Tricks.html

[2] See, e.g., Kerry Muzzey, [YouTube Delay Tactics with DMCA Notices], Twitter (Feb. 13, 2020) available at https://twitter.com/kerrymuzzey/status/1228128311181578240  (Film composer with Content ID account notes “I have a takedown pending against a heavily-monetized YouTube channel w/a music asset that’s been fine & in use for 7 yrs & 6 days. Suddenly today, in making this takedown, YT decides “there’s a problem w/my metadata on this piece.” There’s no problem w/my metadata tho. This is the exact same delay tactic they threw in my way every single time I applied takedowns against broadcast networks w/monetized YT channels….And I attached a copy of my copyright registration as proof that it’s just fine.”); Zoë Keating, [Content ID secret rules], Twitter (Feb. 6. 2020) available at https://twitter.com/zoecello/status/1225497449269284864  (Independent artist with Content ID account states “[YouTube’s Content ID] doesn’t find every video, or maybe it does but then it has selective, secret rules about what it ultimately claims for me.”).

[3] The Rt. Hon. Baroness Kidron, Speech regarding Data (Use and Access) Bill [HL] Amendment 44A, House of Lords (Jan. 28, 2025) available at https://hansard.parliament.uk/Lords%E2%80%8F/2025-01-28/debates/9BEB4E59-CAB1-4AD3-BF66-FE32173F971D/Data(UseAndAccess)Bill(HL)#contribution-9A4614F3-3860-4E8E-BA1E-53E932589CBF 

[4] Id. 

Blowing up the Compulsory in Washington DC

There is loose talk these days about something called “blowing up the compulsory” license for songs in the US under Section 115 of the Copyright Act. This is odd. It is particularly odd given that a lot of the same people now trying to find a parade to get in front of were the very people who championed–barely five years ago–the bizarre and counterintuitive Title I of the Music Modernization Act (aka the Harry Fox Preservation Act). Title I was the part of the MMA legislation that created the Mechanical Licensing Collective and invited Big Tech even further into our house. (Don’t forget there were other important parts of what became the MMA that were actually well thought out and helpful.)

The geniuses who came up with Title I are also the same people who refused to include artist pay for radio play in the package of bills that became the sainted MMA back in 2018. So at the very least before anyone takes seriously any plan to “blow up the compulsory”, the proponents who want buy-in on that change in policy can get right with history and atone by declaring their support–vocal support–for artist pay for radio play. This would be supporting the American Music Fairness Act recently introduced in this Congress by our allies Senator Blackburn and Rep. Issa and their colleagues.

It is important to realize that “blowing up the compulsory” cannot be a shoot-from-the-hip reaction to Spotify taking advantage of the gaping bundling loophole left wide open in the highly negotiated streaming mechanical settlement under Phonorecords IV. There are too many factors in that big a shock to the system. Songwriters around the world should not get caught up in throwing toys out of the pram along with 100 years of licensing practice just because they made a bad deal. This is particularly true given that the smart people handed over the industry’s bargaining leverage against Big Tech as part of the MMA debacle in return for what? Allowing Spotify’s public stock offering to go forward on schedule? Another genius move by the smart people. I wonder what they got out of that deal? I mean this stock offering, you know, the one that made Daniel Ek a billionaire:

A good thing we didn’t let another MTV build their business on our backs.

It is also important to recognize the obvious–the compulsory is not really a compulsory, it’s a compulsory in the absence of a negotiated direct agreement such as the one that Universal recently made with Spotify. Copyright owners have always been free to make direct deals with music users. The compulsory is not just a license, it is also a compulsory rate that casts a long commercial shadow over even the big industry negotiations and certainly over rates in the rest of the world.

And for reasons of historical accident those rates are not determined in Nashville, or New York, or Los Angeles, or even Austin, but rather in Washington, DC in front of the Copyright Royalty Board–an agency that itself is on pretty shakey Constitutional grounds after a Supreme Court decision in the 2020 Term. So if we’re going to “blow up the compulsory”, maybe a good place to start is not having lobbyists make these decisions.

Even if the former opponents of artist pay for radio play come to their senses and support fundamental fairness for artists, that’s just a good start. We have to acknowledge that “blowing up the compulsory” is not going to be well received by the streaming services for starters. (Not to mention the labels.) Those would be the same streaming services that the smart people invited into our house by means of underwriting the costs of the Mechanical Licensing Collective.

I don’t know how others feel about it, but I for one am not inclined to go to the mattresses to assuage the multimillion dollar whiplash that the services must feel. We should understand that Big Tech are being asked to abandon their intensely successful lobbying campaign that led songwriters and publishers right down the garden path with the MMA. Not to mention the millions they have spent creating the MLC so the MLC could pass through some of those monies to HFA.

Before Congress goes along with blowing up Title I of the MMA, they’re probably going to want an explanation of why this isn’t just another fine mess in a long string of fine messes. That will probably involve a study by the Copyright Office like the one the Office was asked by a songwriter to conduct as part of the MLC’s five year review (but declined to undertake at that time). Fortunately that five year review is still dragging on over a year after it started so this would be a perfect time to launch that study. Perhaps Congress will instruct them to do so? At this rate, it will be time for a new five year review before the first one gets completed, so as usual, time is not a factor.

Even if the services and Congress would go along with “blowing up the compulsory” what does that mean for the MLC and the sainted musical works database? Remember, the lack of a database was the excuse that services relied on for years for their sloppy licensing practices. The database was the fig leaf they needed to avoid iterative infringement lawsuits for their failure–or the failure of the services outside licensing consultants.

It also must be said that the services were invited by the same smart people to spend millions on setting up the MLC. In fairness they have a right to get the benefit of the bargain they were invited to make by the same people who now want to blow it up. Or get their money back. Plus they have to like the leverage they were handed to go to Congress and complain, and complain quite believably with great credibility.

And perhaps most important of all is what happens to the $1.2 BILLION in publicly traded securities that the MLC announced on their 2023 tax return that they are (or at least were) holding in their name? Does that get blown up, too?

What Must Be Done in CRB 5?

We are rapidly approaching the next rate-setting proceeding before the three-judge panel at the Copyright Royalty Board for the royalty payable to copyright owners (and ultimately to songwriters) for exploitations of songs. These proceedings set rates for the next five year period and are numbered to tell them apart. The last proceeding, for example, was styled “Phonorecords IV” or sometimes “CRB 4” for those who struggle with long words. (Using the “CRB” acronym instead of “Phonorecords” is actually misleading because the CRB sets a number of rates.)

The proceedings will likely be divided in two: One proceeding for songs exploited in physical records like vinyl, CDs and permanent downloads and one proceeding for streaming mechanicals. These hearings are simultaneous and not sequential, so each hearing will be conducted side by side.

One reason for these simultaneous hearings is that the participants in each of the proceedings differ–the physical/download participants are songwriters and publishers on one side and the record companies on the other. The streaming participants are (often) the same songwriters and publishers on one side, but the streaming services are on the other.

The participants are incented to reach a voluntary settlement that they then present to the Copyright Royalty Judges for approval. The settlement negotiations are largely conducted in secret and no one on the songwriter side except a couple of participants knows anything about the terms of the settlement until it is presented to the Judges and the Judges make it public.

At this point, the Judges are required to entertain comments from the public as to whether the public supports the settlement (as required under a federal law applicable to all of the administrative state agencies from the Environmental Protection Agency to the Social Security Administration to the Copyright Royalty Board).

No matter how much some of the publishers would like to spin it, it is this public comment step where it all began to fall apart during the last proceeding styled “Phonorecords IV”, particularly over the “frozen mechanicals” issue. Signally, this disintegration of the initial physical/downloads “settlement” attracted a prairie fire of public comments that rejected the authority of the NMPA and NSAI to speak on behalf of all songwriters and publishers and also rejected the side deal that these groups had negotiated with the labels. The Judges listened, and the Judges rejected that settlement–I believe for the first time in the history of the rate setting proceedings.

The same was not true of the streaming mechanicals piece, however. I never did read a well-reasoned explanation for why participants lacked authority to speak on behalf of all songwriters, i.e., beyond their own members, in the frozen mechanicals proceeding, but that authority could not be questioned in the streaming proceeding. It should have been apparent to anyone paying attention that any consensus behind the time-encrusted “Big Pool” royalty calculation method for streaming mechanicals was rapidly crumbling apart. The Judges’ “39 Steps” royalty calculation is as mysterious as a Hitchcock movie and many did not trust it. And more importantly for our discussion today–still do not trust it at all.

As we approach Phonorecords V, there are some fundamental questions that all involved need to be asking themselves. The first is whether we want to go back to the same tired process of secret meetings with the big reveal resulting in public hostilities in the comments–against what is ostensibly our side. This before we even get to the negotiation with the other side.

The powers that be had the chance over the last few years to bring in some different viewpoints. Had they done so, they would have both diffused the inevitable collision, but could also have gotten the benefit of those viewpoints when there was still time to build alliances. There’s an idea–an integrative negotiation with a collaborative outcome.

Another fundamental question is whether we can reach a fairly quick deal with the labels on the physical/download side so that all concerned can turn their attention to bringing the streaming rates into some semblance of reality. Because the songwriters did such a persuasive job of raising the frozen mechanicals rates from 9.1¢ to 12¢ plus a COLA, that minimum statutory rate has now increased to 12.7¢. Given current inflation projections, it’s likely that the statutory rate will increase to about 13¢ and change by the end of 2026.

If a settlement could be reached quickly, it would not surprise me if someone came up with the idea of simply taking the then-extant minimum rate (for 2027) as the new base rate for the first year of Phonorecords V (2028) plus extending the annual COLA to protect songwriters in the out-years of PR V. Wherever the actual penny rates end up, if the songwriters and labels could reach an agreement quickly, it would save a bunch of effort and allow everyone to turn their attention to the streaming rates.

I wonder if it’s even possible to reach a negotiated settlement with the streaming services on the streaming mechanical. The entire concept of the “Big Pool” royalty rate is failing for streaming on both the sound recording and the song side of the deals. It was, frankly, a silly idea to begin with–and that takes us back to the beginning of streaming when deals were poorly negotiated with little to no accountability because physical still paid the bills. The general idea was that “superfans” would rule according to Thomas Hesse in Billboard who was around at the time: “If you get to superfans, who listen to music all the time, you get to all the money — not just from those people, but you get all the money from everybody.”  The reality is that you can replace “superfans” with “superstars” or more simply, “market share”, and you would have a much better understanding of the “Big Pool” concept. The Big Pool is actually just a hyper efficient marketshare distribution of a pool of money.

What Spotify has demonstrated with their short sighted move on bundling is simply all the reasons why they are disliked and untrustworthy. They said the quiet part out loud–we have no idea what we are doing in this business but we–and not songwriters or musicians–are getting stupid rich at it. It is unlikely that anyone is going to welcome more of the same in Phonorecords V.

What is becoming apparent to an increasing number of songwriters is that there is one metric that matters to Spotify’s CEO–stock market valuation. That is what has made him a billionaire. That is what has made plenty of people at Spotify into millionaires. That is also the one metric that songwriters and artists have never participated in. Our negotiators have had their eye on the wrong ball.

I say if we’re going to spend millions on the government’s rate proceedings anyway, let’s get something for it for a change, shall we?