Category: Art

Motion Picture Unions Opposed to FCC Set-Top Proposals

Photo by ponsulak Pond 5.
Photo by ponsulak Pond 5.

As noted several times on this blog, it takes a lot of highly skilled people to make a film or TV show, and these people generally do not own any copyright interest in the works they help make or any equity in the production companies.  Motion pictures and television production is a project-to-project business. Crew members and performers are not full-time employees of either studios or production companies and may go months between jobs; they’ve been “gig-economy” workers since long before anyone thought that term was a new thing.

Just like most labor in the United States, today’s motion picture craftspeople are the beneficiaries of hard-fought rights—many negotiated decades ago—to share in the financial rewards of successful products they do not own.  Films and TV shows are mostly made by middle-class, freelance workers whose average, annual incomes comprise not only day rates and overtime, but also residuals and health and pension benefits.  These terms are negotiated and managed for most crew and performers by the unions DGA, SAG-AFTRA, and IATSE. These unions are opposed to the FCC “Set-Top Box” proposal because, as it stands, the proposal would break the licensing structure on which their compensation packages are based.

To be a sustainable workforce, performers and crew members generally need to remain on the net-positive side of several averages—average number of days worked, average number of shows worked that succeed, and average number of shows that succeed in the market overall.  By taking the macro view of the ways in which these workers are compensated over time, it’s very much a rising-tide-raises-all-boats paradigm.  The successful show that Props Master A works on feeds the health and pension program of Make-up artist B, who might work a show that doesn’t make it. The spread of investment across multiple shows keeps the pool of skilled labor generally sustained among the various gigs and periods of unemployment between gigs.

Photo by sokolodv Pond 5.
Photo by sokolodv Pond 5.

It should be clear to anyone that if you disrupt the means by which labor is compensated, labor has a habit of not working.  And as stated in previous posts on this subject, the FCC proposal cannot be called a consumer-focused plan to introduce better and cheaper TV options if the plan simultaneously kills the means of production. This is exactly what the proposal can do by enabling companies like Google to create a parallel, commercial video service without licensing any of the programming.

It’s Not About Boxes

FCC Chairman Wheeler emphasizes the amount consumers spend renting set-top boxes from cable companies, and then “digital rights” groups like EFF and Public Knowledge echo the sentiment that this proposal is about innovative technology (just like the VCR) that will give consumers more flexibility in viewing options for programming that we’re already paying for. And it will unleash us, they say, from the rental boxes owned by the cable companies.  But the rental fees thing is a smokescreen for what’s really going on because the box rental part of our cable bill isn’t the biggest line item; there’s nothing in the proposal that would technically lower the cable bill; we’re free right now to go buy boxes and not rent from the cable providers; and the new licensing market is already providing consumers with viewing options way “beyond the box.”

The big talking point that is most likely to confuse consumers is that the new box Google wants to sell us would only make programming available for which “we are already paying” via the Multichannel Video Programming Distributors (e.g. cable companies).  This is the central reasoning why supporters of the proposal claim that it does not implicate a copyright infringement, and it’s the kind of talking point that will sound reasonable to consumers.

But this reference to our subscription fees completely misrepresents how the producers—and therefore all the labor represented by the unions—get paid for the programs they make.  Our subscription fees to MVPDs do not pay to produce multi-million-dollar TV shows; they never could.  The license fees paid by the MVPDs to the producers are what pay for production, and those licenses are predicated on a complex variety of ways the MVPD expects to exploit its limited or exclusive access to the content.

The simplest and most obvious example is advertising. If, under the FCC proposal, the MVPD that has licensed programming is forced to deliver that programming free of charge to Google, which may then re-distribute the content however it wants and then advertise against the programming from its own ad services, the MVPD’s ad revenue will go down almost immediately.  So, when a new slate of shows is produced, the MVPD’s incentive to pay current market-value license fees is diminished while Google, which captured part of the ad market, isn’t paying anything at all.  Secondarily, new-market distribution channels like Hulu would see no incentive to license programming under such a regime, which gives lie to the notion that this entire proposal is about competition to benefit consumers rather than what it is, which is a government giveaway to Google.

I never quite understand why it should be hard to recognize that less is less—that if license fees for programs go down or if new channels for licensing are cut off, there can be no result other than less production or production of lesser quality. And the FCC proposal would appear to create exactly these conditions—possibly more quickly than people think.  The producers and MVPDs aren’t blind.  If the FCC proposal were to pass, they’ll revise their business strategies immediately, and that could include producing a lot less work within just a couple of years.  At a time when we’re clearly seeing a Golden Age of the small screen in quality writing and production—and in flexibility of viewing options—it is unfathomable that the FCC would advocate unraveling the licensing regimes that have made all this bounty possible.

What’s in it for Google?

I know I’ve repeated Google in this post despite the fact that there are other manufacturers hoping to sell boxes under the FCC proposal.  But if the value of getting into this line of business is predicated on advertising and data mining—which it has to be—it’s pretty hard to imagine that Google would not very quickly dominate this space and become the only game in town.  I understand Radio Shack, for instance, plans to make boxes, but as that company doesn’t have an online ad business or a data mining business, their boxes would presumably serve Google’s pipelines for a piece of the revenue.  If that’s how this would shake out, the “competition in boxes” story is pure illusion.

If the producers, the MVPDs, and the unions are all correct that this plan can only undermine the means of production and inevitably reduce production quantity, quality, or both, what does even Google—let alone the rest of us—gain in the long-run?  When variety of quality content is reduced, then advertising value is reduced and so is data mining value.  Google has a long track record of earning revenue by exploiting works it hasn’t licensed; but in this case, its parasitical model can actually limit the means by which the company typically generates revenue.  So, what’s the long-term plan here?  It’s hard to say. But it’s not hard to see in the short term how this proposal is bad for creators in the film industry and bad for consumers who want to see great television continue to thrive.

The DOJ & Songwriters Simplified (mostly)

The performing rights organization (PRO) called ASCAP was formed on February 13, 1914 when a group of about 100 American composers met at the Hotel Claridge in New York City to create a mechanism for collecting “public performance” royalties.  The 1909 Copyright Act had extended the performance right to this class of copyright holders, but it did not define exactly what “public performance” actually meant.  Part of that definition came with the Supreme Court case Herbert v Shanley Co. (1917), in which Justice Oliver Wendell Holmes offered the opinion that music played in a venue like a restaurant constitutes a “public performance” even if the customers are not charged a fee for the music itself.  The premise was, and continues to be, that the venue relies on music just like other products it needs to run the establishment, and so the music plays a key role in the profit interest of the venue.

In a 1923 case, radio broadcasts were determined also to be “public performances,” but the National Association of Broadcasters (NAB) was critical of ASCAP’s monopoly control over the music and its ability to set licensing rates at will.  In response, NAB formed the competitor BMI, and when this failed to have a mitigating effect on ASCAP’s rates, the broadcasters banned ASCAP music from the airwaves.  That’s when the DOJ showed up and told everybody to get out of the pool.  Justice sued ASCAP and BMI, and both national radio networks at the time, for violation of the Sherman Anti Trust Act.  The result of this action was a rate-setting system known as consent decrees—compulsory licenses the two PROs must grant for “public performances” of their music according to rates set by a “rate court” established at the federal court for the Southern District of New York.

Cathedral RadioFor the next 70 years, the PRO licensing system under the consent decrees generally served all parties—the composer/songwriters, venues and broadcasters, and the general public.  Yes, there are anecdotes describing various ways in which the system has failed or overreached to the detriment of a venue or even a member songwriter; and these stories naturally provide grist for the anti-copyright mill that loves to portray all rights-enforcement regimes as universally extortionist.  But many of these stories cited by critics like Mike Masnick pertain to collecting organizations outside the US, and even those associated with ASCAP and BMI are either old enough or nuanced enough to require deeper consideration in context to the overall cost/benefit of the organizations over many decades.

Fast-forward to the digital-age, when “public performance” is a whole new animal.  Streaming services, which are unquestionably a benefit to consumers, simultaneously reduce demand for sales of physical media and digital downloads, and they reduce demand for traditional broadcast radio, which was the distribution format that led to the consent decrees in the first place.  Plus, streaming affects the worldwide music market almost overnight. Unfortunately, for the songwriters and composers, the rates set for a pre-streaming market were suddenly worth doodley-squat in a streaming market.  This is why you hear about a songwriter making about $30 for a million plays of a song.

So, the songwriters and composers campaigned the DOJ to amend the consent decrees in order to allow more flexibility and more efficiency in licensing—a regime that would better reflect the dramatically changed, digital market. In response, the internet industry and its network of pundits complained that the PROs would then be free to capriciously raise rates, which would “stifle innovation” and harm consumers. For copyright watchers, this is a funny one because this same crowd usually argues that existing laws are doing all the stifling, but in this special case, it’s the WWII-era regime that is actually fostering innovation. Gotta hand it to the DOJ of 1941 for anticipating Spotify like that!

By now, consumers should understand that innovation often means money—money in the pockets of OSP shareholders made on the backs of rights holders who are getting hosed.  But last month, DOJ Deputy Director Renata Hesse not only affirmed the consent decrees, but she went a step further by rejecting the practice of “fractional licensing” for works made through collaborations.  When songwriters or composers represented by different PROs collaborate on a musical work, a user has had to obtain licenses from both organizations.  Hesse ruled that either PRO may license 100% of any work in either catalogue—a decision so deaf and blind to understanding the nature of music licensing that observers like music attorney Chris Castle can only conclude that Hesse’s former role as a Google attorney provides the only rational explanation.

Meanwhile, in an August 8th post on Techdirt, Mike Masnick ‘splains how the DOJ decision was not only the right decision, but one that will be “good for songwriters,” even if the songwriters are too naive to realize it yet.  I’ll let that hubris hang there for a moment, and then quote this refrain of one of Mike’s favorite saws:

“It’s kind of insane that we have to point this out over and over again, but the legacy industry always fights against new innovations in the false belief that it will harm revenue — yet when they learn how to embrace the opportunities, it turns out that a larger audience has been created and there are even more ways to make money.” 

I can’t decide which is more arrogant, the unwavering faith that he knows better than all the songwriters what’s best for them, the feigned exasperation at having to explain it again to these dumb songwriters, or the use of the royal we in this statement.  Or was that a revealing slip?  Which we is he speaking for here?

Of course, it may not matter what the pundits think because the DOJ may have opened up Pandora’s Box to let the music fly away.

As David Lowery explains—and David has written like way more songs than Mike Masnick—the DOJ may have spawned an unenforceable clusterfuck, the result of which could be tracks disappearing from streaming and other services.  In a recent blog post, Lowery states that it could cost him thousands of dollars in legal fees to revise the contracts between him and collaborators on a portion of his catalog.  In fact, some of those collaborators have passed away, so he would have to negotiate with their estates, making the process even more complicated. Can the DOJ constitutionally compel Lowery and thousands of other songwriters and composers to incur these legal fees to rewrite these contracts? We should hope not.

So, what will songwriters in this circumstance do?  The most cost-effective thing for them to do would be to pull the tracks from ASCAP & BMI that are more trouble than they’re worth.  That will reduce the music available on streaming services and also create a thorny problem for venues currently paying PRO licenses.  Right now, the coffee house where I’m sitting has all three licenses—ASCAP, BMI, & SESAC—and can play any song without worrying about it.  What happens if portions of the ASCAP and BMI catalogs are no longer covered by their licenses?  This is just a glimpse of the “chaos” the Copyright Office and others warned the DOJ would ensue as a result of their ruling this way on consent decrees.

The entire history of American copyright is one in which the contours of the law have been reshaped to conform to changing market conditions in order to protect artists and maintain the incentive to create and distribute.  As is so often the case today, the DOJ seems to be taking the narrow, Googley-eyed view that artists will continue to create and distribute no matter what happens.  Consumers are free to decide whether the songwriters know what they’re talking about or the copyright antagonists are correct.  But if they choose to ignore the former, I really hope they like the musical stylings of the latter.

“Don’t Use Our Songs”

There was no way I could not share this. I recommend watching all the way through to the end.  Is the message entirely on solid ground copyright-wise?  Not quite.  Is the sentiment in the right place?  I think so.  And it’s funny as hell and includes a nice shout out to one of my favorite bands, The Dropkick Murphys.

Happy Monday.

DN