Yesterday, David Lowery’s The Trichordist published an article by singer/songwriter Blake Morgan—one which the Huffington Post apparently refused to run. In the piece, Morgan describes meeting with Spotify executives to whom he tried to explain that their product isn’t Spotify itself but is in fact music. “And by the way,” Morgan said, “stop calling your subscribers ‘users.’ They’re not ‘users,’ they’re listeners––our listeners in fact. You’re the ‘user.’ You’re using our music to monetize our listeners for your profit.” This apparently confused and frightened the Spotify exec, who became defensive with an arrogance familiar to anyone who follows the internet industry. “You don’t get it at all!” the guy declared before leaving in a huff.
The night before reading Blake’s story, I met with a group of musicians in New York, and one songwriter showed up with a stack of papers in his hand. These were notices of intent (NOI) filed by a single entity on behalf of all the major streaming platforms for the purpose of obtaining compulsory licenses for use of dozens of the writer’s compositions. Based on reporting by Chris Castle, I wrote for the union publication Allegro back in March about major platforms doing this—using their overwhelming computing power to mass-file NOI, exploiting a loophole in Sec. 115 of the copyright law, in order to essentially blanket license all compositions for streaming platforms. This living example of the songwriter with physical notices in hand hit home for me. The songwriter explained that if he goes to the notice-sender’s website and fills out all the forms, there might be as much as $50 in it for him as compensation for thousands of streams of his work across multiple platforms.
American songwriters are unique among copyright holders because they are the only creative artists subject to a combination of compulsory license (i.e. anyone can use their work if they pay the license fee) and a consent decree, with roots in the early 20th century, whereby a federal rate court determines what the license fees will be for various uses, including public performances. And because the average rate for a digital public performance is $0.005, this is why millions of streams are worthless to songwriters, despite the fact that streaming has largely displaced their other sources of revenue.
With Spotify poised to announce an IPO this year and make Daniel Ek and his colleagues even wealthier than they already are, a New Year’s Eve lawsuit with a price tag of $1.6 billion was filed by Wixen Publishing against Spotify for its unlicensed use of hundreds of songs, including famous writers like Neil Young, Tom Petty, Stevie Nicks, and Donald Fagen. The complaint alleges that 21% of the 30 million tracks on the platform are being used without mechanical licenses, and this number seems reasonable given the available anecdotal evidence and the grounds for previous litigation.
In the Lowery/Ferrick class-action suit for this same failure to license, Spotify’s defense amounted to claiming an intent to pay the license fees but for the lack of an efficient means to locate the songwriters due the royalties. That suit settled for a modest $43 million fund, amounting to just a few dollars per infringement. Then, in response to a pair of lawsuits filed in September last year, Spotify came very close in its initial motion to asserting that streaming services were not even subject to mechanical licenses. This drew immediate fire from the music world, notably National Music Publishers Association CEO David Israelite who said that Spotify was asking for a fight with “all songwriters.”
Fast-forward to the end of 2017, and the event that triggered Wixen’s 11th-hour litigation was the release just before Christmas of a draft bill titled the Music Modernization Act. Sponsored by Representatives Doug Collins (R-GA) and Hakeem Jeffries (D-NY), the bill reflects about 4-5 years of legislative work trying to secure the interests of music-makers in the streaming market—even if, as Blake Morgan describes, the bros at the streaming companies don’t understand that they’re in the music business.
The MMA is endorsed by multiple music rights organizations, including NMPA, ASCAP, BMI, SONA, RIAA, A2IM, and several others. The proposed legislation addresses a number of issues have long divided musicians and streaming platforms by creating a new digital licensing collective that has been compared to SoundExchange by some observers. But the reason the bill triggered the Wixen lawsuit is that, if passed this year—and this seems feasible—the law would foreclose any new lawsuits over mechanical licensing infringements (including past infringements) because its core agreement is predicated on a blanket, compulsory license in exchange for an improved system of royalty distribution.
Key improvements include a new database funded by the digital platforms that would, in principle, more accurately identify and locate songwriters and composers to receive; and a new rate-setting process that is expected to raise the overall rates paid to songwriters. Nevertheless, as written to date, the bill contains three areas of concern for songwriters. These have been publicly noted by Rick Carnes, CEO of the Songwriters Guild of America, though my understanding is that other parties share some of these concerns, and they will be raised as amendments to the bill are proposed in coming weeks and months. The issues Carnes raises are the following:
First, the immediate end of all litigation for past infringements seems to unfairly limit the remedy options for independent and small-publisher rights holders. Carnes says he fully understands the need for a safe harbor in exchange for collective licensing going forward, but “why are songwriters who have seen their works infringed hundreds of thousands of times in the past having their right to sue for damages cut off arbitrarily on January 1, 2018?”
Second, the board overseeing this new digital licensing collective would currently comprise eight publisher representatives to two independent songwriter representatives. Carnes argues that representation should be 50/50 just like the board overseeing SoundExchange.
Third, as written, the bill calls for royalties collected and held for songwriters who cannot be located to be distributed on a market-share basis, mainly to the major publishers. Carnes says that it is naturally the independent and small publishers who are most likely to fall through the cracks in the new system, which he describes as “enshrining” a longstanding problem even in old systems whereby music creators are often not properly compensated through royalty-collection practices.
Meanwhile, despite Spotify’s prominent role in this narrative, the reality is that YouTube is the most-visited platform for music streaming, and that platform pays a songwriter about ten percent of what Spotify pays (think $24 for a million plays), when it pays at all. Presumably, any number of tracks a listener will “discover” on YouTube will be unauthorized uploads by users and are, therefore, outside the system that compensates artists even the paltry tip-jar money they’re due. I mention this by way of saying the market itself remains volatile and dynamic, and we should be no more surprised to see Spotify suffer a Pandora-like fall from grace than to see it retain its dominant position.
I am hopeful that issues raised by Rick Carnes can be addressed as the Music Modernization Act moves through the process so that thousands of songwriters, whose names you’ll never know, can begin to benefit from the future of the digital music marketplace—whatever that future may look like. The bill certainly represents the first significant legislative attempt to make streaming work for musicians, but it would be an unfortunate irony if the independent voices—the ones who first advocated the democratization of the internet—were the ultimate losers going forward. And we, as listeners, would lose as well. Meanwhile, kudos to independent voices like Blake Morgan just for reminding the tech geeks with so many dollar-signs in their heads that without the music, movies, TV shows, etc. nobody would give a damn about their bloody apps.
Image by TurboMotion
