Category: Law & Policy

Florida “Origin” Bill a bit of Sanity

Quick, name a place where you can be in business without providing basic information like your name and address.  Let’s see. Criminal organizations, corrupt nations, and the Internet.  In a refreshing nod at sanity, the Florida legislature has passed a bill called the “True Origins of Digital Goods Act,” which now awaits signature by Governor Scott.  Basically, if a site owner intends to sell, rent, or publicly provide music as a substantial portion of the content on his website, he’s going to have to provide … wait for it … contact information! I know. Draconian, right?

Well, Google (wait, I mean The Center for Democracy and Technology) has already responded to the proposed bill by saying it will threaten the value of anonymity on the Internet.  To this, any thinking person’s response ought to be, “Uh, whatever.”  Because of course in a free society it’s absolutely essential that a musician, a music blogger, or a music retailer maintain his anonymity.  Because, y’know those roving mobs of atonal neo-fascists, who might storm the gates or something.

I’m having a hard time tracking the Internet industry on this stuff.  They want transparency, they want anonymity.  They want to promote exposure, they want to promote hiding in the shadows.  One might almost get the idea they’re making this stuff up as they go along.

Read OpEd by musician Monte Rosa here.

Pandora wins on appeal. But stay tuned.

This week, the 2nd Circuit Court of Appeals ruled in favor of Pandora, upholding a ruling by Judge Denise Cote in affirming the 1.85 percent of revenue cost set by the rate court as “reasonable.” Maybe, but any way you slice it, songwriters and composers are still getting hosed by streaming services  You’ve probably seen some of the headlines or statements made by songwriters you know saying things like, “20 million plays earned me about two dollars.”  Maybe you didn’t care because you figured the famous person who made that statement was already rich; but setting that logic aside, it ought to be clear that today’s generation of new songwriters and composers will not be building professional careers based on revenue streams that turn millions of plays into pennies.

Music streaming is cool and convenient, but even as the dominant players in the space congratulate themselves for being “innovators,” the reality is that a tiny handful of guys are making millions of contemporary dollars while enjoying the benefit of paying antiquated rates to publishers, who in turn pay songwriters and composers.  This is because ASCAP and BMI (generically called PROs for Performance Rights Organizations), who traditionally negotiate and collect fees on behalf of publishers for public performance licenses are locked into consent decrees whereby a court has set the rate at 1.85 percent of revenue for radio broadcasting.  Spokespeople for ASCAP have consistently pointed out the absurdity that this particular class of artists is more regulated than the corporations that profit by using their work. As such, the PROs back the proposal of the Songwriters Equity Act in an effort to change rate setting to better conform to the new market.

It should be obvious to anyone that a Pandora-like service isn’t exactly radio. The collective earnings of thousands of terrestrial radio stations add up to considerably more than the revenues of a single Pandora.  At the same time, a single Pandora reaches a global audience, even obviating the need for listeners to use terrestrial radio at all.  That’s just technological progress, and nobody hopes or expects to put that genie back in the bottle.  But because the one Pandora is allowed to pay the same percentage of earnings as the collective of all terrestrial stations, that’s the reason millions of plays worldwide translates into pocket change for songwriters and composers.

So, in a nutshell, the appellate court ruled that ASCAP may not raise its rates to new benchmarks that would be aligned with this dramatic shift in the market, and it also ruled that the individual publishers Sony/ATV and UMG may not withdraw only their digital rights from ASCAP  in order to negotiate those specific licenses separately with Pandora.  But consumers should not assume this is a “win” for streaming that will perpetuate their desire to have all the music they want for free for the rest of time.  Because now the major publishers are faced with an all-or-nothing option.  They either leave all their rights with ASCAP and BMI or pull out entirely, which Sony/ATV’s CEO has already indicated may be the response to the courts not allowing them to extricate themselves from the outdated consent decrees. Meanwhile, the Department of Justice is reviewing the consent decrees and may yet recommend that the courts are wrong in their determination that a rights holder may not partially withdraw one of its bundle of rights without withdrawing entirely from the PRO.  Either way, that ruling will likely be the end of that particular debate.

If the larger publishers withdraw from the PROs, they’ll demand higher rates from Pandora no matter what; but attorney and blogger Chris Castle in this post suggests Pandora doesn’t care about that if they can effectively bust the PROs by forcing the big publishers to jump ship and leave the organizations populated with smaller publishers, who have limited bargaining power.  Thus, instead of a system of collective bargaining that represents both large and small publishers, we may see a bifurcated market in which the large players negotiate against one another while the smaller players continue to choke on the crumbs.

There’s no reason to assume this will mean longterm benefits for consumers, either with regard to affordable access or especially with regard to fostering and sustaining the greatest diversity of works.  At the same time, what may happen to public performance licenses other than streaming is unclear.  Presently, your local bar pays an affordable fee to be able to play damn near every song ever recorded, and it pays that fee to no more than three PROs — ASCAP, BMI, & SESAC.  If the major publishers are no longer part of those catalogs, your local bar owner, depending on what music he wants to play as well as other factors like size of the business, may have to pay for all three PRO licenses and also deal with the major publishers, who will be free to charge whatever they want based on any criteria they decide because they are no longer subject to the ASCAP consent decrees.  If nothing else, it sounds like a pain in butt for a small business owner compared to the old system, but it could get rather complicated when you consider the number and types of venues, even websites, around the world that traditionally cover their music needs with one to three blanket license fees.

Whatever is to come, people should be clear that Pandora’s strategy isn’t about consumers, it isn’t about innovation, and it sure as hell isn’t about competition.  Nobody I know dislikes  streaming in principle. What’s not to like?  But it’s not THAT innovative. If you didn’t see it coming at least by the time Napster became a thing, you weren’t paying attention. The companies that have emerged as dominant players in this space aren’t particularly great visionaries; they’re just the guys who were in the right place at the right time to capitalize on a relatively obvious means of distributing music akin to what we historically called “radio.”  So, let’s not beat the word innovation to death when talking about companies like Pandora; and let’s especially not get suckered into thinking this is about competition.

It is the nature of business leaders to want to dominate, which is healthy in a market that doesn’t foster natural monopolies.  Unfortunately, the Internet does foster natural monopolies. Why do you think Google+ couldn’t take, or even share, the market with Facebook?  Because most of us don’t really need two of the same kind of social media environments  in our lives.  Hell, many of us, have to force ourselves to limit the use of just one.  It doesn’t matter how dominant Google is in other areas or how good their programmers are; the Internet generally favors one winner at a time in certain lines of business. And so it may be with music streaming.

On that note, it will be interesting to watch the relaunch of Apple’s entry into the streaming market. Reported to be a subscription-only service, Apple may be in a position to offer the best available terms to all publishers and re-assert itself as the only game in town much as it did with digital downloads in the wake of Napster. Of course that move was directly tied to sales of a little device called the iPod, produced by the company that rules in the arena of attracting customers to new gadgets.  Streaming, of course, isn’t about gadgets, at least it’s not about any one particular gadget.  At the same time, both European and US trade officials are already investigating whether or not Apple is using its still-dominant position in digital downloads as leverage against rivals like Spotify and Pandora.  Sure, but again, I think there are natural reasons why one player at a time will be dominant, regardless of trade regulations.

Whether it’s Pandora, Spotify, YouTube, Apple, or some other company, one downside of digital, worldwide distribution is that consumers may not need more than one service provider when all is said and done. And, if all this is heading toward consolidation of delivery models and consolidation of production models, while limiting the variety of career paths for the next generation of writers and composers, there is no guarantee that either consumers or makers of music are going to win in the long run.  As with other copyrights, the so-called reformers seeking “balance” in the new market are only too happy to leave intact any outdated provisions that favor their own earnings to the detriment of those whose works are essential for their business models to work at all.

Coalition Claims to Seek Balanced Copyright

balanced?.001Once again, a confederacy of the usual suspects has regrouped, rebranded, and relaunched a campaign on copyright in the digital age. They call themselves the Re-Create Coalition. David Lowery on the Trichordist referred to them as “getting the band back together,” and it is true that this familiar list of mostly Google-funded organizations (with bizarrely similar logos) has been trying to get its act together, a bit Keystone Cop-like, ever since the defeat of SOPA in an effort to relive that glory day. Once again, they are eager to rally citizens to their point of view on copyright, though that point of view may be hard to discern if you’re looking too carefully for specifics.  Broadly, the coalition says it wants to balance the rights of creators, consumers, and innovators, which happens to be more or less the goal of every copyright professional since James Madison. So, the only thing that matters is what’s behind those pretty words.

Does copyright need changing in the current market?  Sure. Register of Copyrights Maria Pallante was on Capitol Hill this week offering testimony in the final round of hearings on that very subject.  But like any complex system that might demand revision to conform to a new market, it’s reasonable to assume we’re talking about tweaks, not radical overhaul. Or to paraphrase author and attorney Elizabeth Wurtzel, law requires “granularity” to make it work. Because on the whole, copyright is relatively balanced except in the eyes of extremists and really big Internet corporations, who consider the whole legal framework (not to mention legal frameworks in general) a nettlesome barrier to their dreams of world domination.

Funding source alone does not negate the arguments or a point of view of a group or organization.  Nearly all organizations are funded by private industry in one way or another.  But readers should bring at least a dash of salt to the party when the company that’s been described as the most powerful in the world (i.e. Google) walks into the room and says, “We want a level playing field.”  In general, populist words alone don’t mean anything; mission statements are usually boilerplate.  There are plenty of organizations out there that use terms like freedom and fairness and American ingenuity while behaving as the most industry-serving, right-wing, bigoted group of grumpy white men you ever wanted to meet.  So, cutting through the fog a bit, what does the Re-Create Coalition appear to care about?  Based on their stated agenda, they seem to be focused on two things above all:  fair use and safe harbors. So, let’s look at those …

Take the example of my friend Sarah, cited in my last post, who inadvertently committed copyright infringement on the assumption that her use of a photograph as a supplemental asset on her blog was a fair use.  If we were to, say, broaden the application of the principle to include her use in this instance, that would not be balancing copyright so much as it would erase the purpose of having a fair use exception mean anything at all. It would simply be a free-for-all. If, on the other hand, we review statutory caps on awards for damages so that honest mistakes like hers cannot induce undue financial burden, perhaps there is room for some nuanced adjustment to the law. And admittedly, this appears to be one focus of the coalition. But …

Even the matter of statutory limits might be pretty tricky.  Potential damages function as a deterrent to unlicensed use.  Lower those barriers too far, and it’s not just the big corporations who can get away with anything.  Although it’s not a copyright case, the recent story about the couple whose engagement photo was used without permission on the cover of a cheesy, self-published erotica novella makes a pretty good example of what the market might look like without barriers (what Jaron Lanier calls levees) — rampant violation of several forms of IP rights.  Ironically enough, it probably wouldn’t take too many incidents of personal photos being ripped from social media and used in unpalatable ways like this before people started to think twice about sharing photos on social media.  So, IP barriers play a role in what the Re-Create Coalition folks call the “innovation economy,” too.  And ultimately, why should Amazon earn dime one from the sale of this self-published book (or perhaps hundreds just like it) when those sales involve printing and distributing a couple’s photo without their permission and in a way they find degrading?  So, fair use is good; we all like it.  Is it a doctrine in need of “re-balancing?”  Certainly not if all it does is tip the scales in the favor of one industry.

Perhaps more telling is that this old group with the new name sounds rather keen on calcifying safe harbors within the DMCA (Digital Millennium Copyright Act) and the CDA (Communications Decency Act), both authored in a time when the Internet functioned very differently than it does today.  So, when they say they want to balance copyright to protect the rights of creators without standing in the way of innovation and opportunities provided by the digital age, they don’t necessarily mean they want to update statutes that have protected mass infringers in a manner in which the law never intended.  For instance, YouTube has profited from mass infringement thanks to these safe harbors, yet this group’s call for “balance” in this regard is to leave that puppy alone.

Don’t get me wrong, I’ve said in other posts that these safe harbor provisions are important; they’re important to copyright interests as well.  But what’s happened in the case of YouTube is that the application of these provisions provided a free ride to that company, which in turn enabled market dominance it could then leverage to effectively force, for instance, musical artists to accept their lousy Music Key contracts.  The outcome is not only unbalanced, but it’s a worse deal for creators than some of the most underhanded recording contracts ever written. Yet, this progressive-sounding, forward-looking group isn’t talking about updating these 20-year-old components of copyright law.

Are there abusers of copyright?  Absolutely.  And they are as despised by serious copyright defenders as they are by anyone else. Nobody who believes in a set of principles likes to see those principles misapplied.  But abuse is the exception, not the rule; and laws should be written to support the rule.  Speaking of exceptions and rules, here’s a familiar refrain by Executive Director of the R-Street Institute Andrew Moylan, cited on the press release announcing the new coalition:

“The Internet has lowered the barriers for everyone. As technological innovation continues to advance at a rapid pace, copyright law must catch up. Overregulation protects past success at the cost of future opportunities and allows for exploitation of the current system.”

Sounds reasonable, but allow me to translate.  “Copyright terms are too long and only used to protect corporate rights holders (*wink* Disney), and this stands in the way of new creators entering the market.”

But here’s the market reality:  No matter how long or short copyright terms are, devaluation of works due to mass piracy as well as predatory practices by Silicon Valley interests have reduced investment in viable avenues for professional creators.  Thus, while the Internet does “lower barriers” for creators to showcase their works, the companies that dominate digital space have contributed substantially to the reduction of opportunities for those same creators to turn the prospect of discovery into sustainable entrepreneurism.

Meanwhile, to paraphrase Robert Levine, author of Free Ride, “It doesn’t matter if copyright is life plus 50 years or life plus 70 years. Because on the internet, copyright lasts about ten seconds.”    So, balance that, and then maybe we can talk.