Image adapted from LMun81 (CC0)
Last week, the largest music publishers in the world disclosed plans to create a centralized song database. Seriously?
It’s getting harder and harder to feel sorry for music publishers.
In July, we wrote about an extremely suspect deal that major music publishers arranged with Spotify, back when streaming was still taking off. The deal involved the National Music Publishers’ Association (NMPA) and its then-owned Harry Fox Agency, which oversees mechanical publishing licenses.
The premise of the negotiation was simple. You sign a deal with Harry Fox Agency, and they’ll take care of your complicated mechanical publishing licenses. Problem solved!
Several years later: Spotify, Apple Music, and every other streaming music service is holding a billion-dollar bag of liabilities on unpaid mechanicals.
Turns out none of the licenses were getting paid. Nobody really knows WTF was happening, in reality. Which might explain why there are now hundreds of millions of dollars — or more — in claimed legal damages against Spotify.
And that’s just the beginning.
+ Spotify Is Now Fighting 10 Different Copyright Lawsuits — at $1 Billion-Plus In Possible Damages
The HFA deal was a sham because there wasn’t a reliable database for paying mechanical rights licenses. There wasn’t a clear process or explanation of what was going on. Songs weren’t getting matched, paperwork wasn’t getting mailed, and people weren’t getting paid.
So is now the time to start creating a centralized database?
Apparently, it is. Looks like it might be called ‘SongExchange‘. Like SoundExchange, but for songs. And yes, it’s going to be hatched in 2018. Not 2003.
On Friday, Billboard reported that “a structure would be set up, possibly called SongExchange, which would be similar to SoundExchange but it would have publishers pool their song information. That way, each digital service doesn’t have to match every recording in its service to every songwriter and publisher.”
Bingo!
But wait: this appears to be part of a broader piece of proposed Congressional legislation to re-balance music copyright payments.
+ The Easiest Way to Fix the Streaming Mechanical is to Get Rid of It
According to the Billboard piece, the proposed legislation will be sponsored by Doug Collins (R-GA) in the House, and Orrin Hatch (R-UT) and Lamar Alexander (R-TX) in the Senate. We haven’t seen any bills, but the goal will be to create a fair royalty structure that balances the needs of everyone: publishers, songwriters, record labels, PROs, and the streaming services themselves.
Which is exactly why this bill is D.O.A.
For starters, it’s unclear if guys like Collins, Hatch, or Alexander will even be standing after 2018. But even if they’re still around, our ‘do nothing Congress’ is practically guaranteed to let this one fail.
And why would any major recording label support legislation that ‘balances’ their payments? The labels are killing it, right as this jumbo jet is taking off. They are earning multiples over publishers and songwriters — for the same songs!
Does the guy living in a 16-bedroom Beverly Hills mansion want legislation to ‘balance’ living accommodations with the rest of Los Angeles?
No f—ing way!
But wait: ‘SongExchange’ is now one of 4 different efforts to create a ‘centralized song database’!
First, there’s an effort helmed by Congressman Jim Sensenbrenner (R-WI) and various tech special interests. Then, there’s a rival effort spearheaded by ASCAP and BMI on the publishing side. They’re officially at war with one another, by the way.
Lastly, there’s a dangling effort by the RIAA and the NMPA. Or maybe that one’s dead — who knows!
Meanwhile, the music industry is still years away from having a unified, comprehensive music rights database. And that’s being generous.
All of which continues to exact massive costs for upstart digital music platforms. Like Spotify, which is facing potentially $1 billion+ in licensing liabilities. And a bunch of companies you will never hear of, because investors didn’t want to finance them.
The onus should be on the distributors to have this stuff documented for any recording released through their channels BEFORE it is released. Allowing them to release music that is undocumented should be punishable by fine or jail time.
Should Tower Records or Sam Goody or HMV have been required to do the same before they distributed music?
Of course not. It was always handled by the sound recording company, as it should be going forward.
If you make a sound recording, you should handle the use of the song you chose to record, and you should be free to make whatever arrangement both parties sign, including a flat-fee one-time payment or no payment or even the song owner paying the sound recording owner.
This gets the world closer to a price for music as opposed to fragmented rights inhibiting commerce.
The labels did indeed create this whole mess. They’re the ones who keep saying “Let’s release the album now, and worry about the publishing rights later”. That’s the reason everything is so fucked up, and so much of the publishing information out their is unknown. Labels should not be allowed to release albums until 100% of the publishing rights are determined and licensed, and every songwriter is getting paid from day one. If everyone were actually following the mechanical licensing rules, the labels would be forced to do that. But they don’t want publishing to create friction in releasing an album. I believe we need that friction to ensure songwriters are getting paid.
It would be better if labels licensed to services inclusive of publishing rights. Apple was the only company that could get them to do this. When that happens, the labels are the ones on the hook if the publishing isn’t properly licensed, instead of, say, Spotify. The labels just don’t want to deal with ensuring songwriters are getting paid properly. This is where change needs to be made, and this bill doesn’t do anything to address this. The labels must be forced to ensure the songwriters are getting paid for the songs on an album before an album is released.
Not label’s fault when songwriters don’t resolve splits, attribution, credits, permissions, registration. US law is clear: No mechanical royalties owed until properly registered, after which they can pursue statutory damages for failure to pay.
Agreed: Better for labels to license music inclusive of publishing. More unity, less fragmentation = greater value.
This assumes, of course, that the labels actually pay publishers their royalties, and not just put it into their own black box.
From what I can tell, this isn’t much better than the Sensenbrenner bill. Like Sensenbrenner, publishers would still have to register their music in a centralized database in order to get paid, and services who enter into this new blanket mechanical license would be able to stream any song they wanted to without fear of litigation (at least with respect to mechanical rights), even if the copyright owners are unknown and unregistered. The difference is that instead of holding black box royalties in reserve, services would pay those black box royalties to this new “SongExchange” entity, and they would be the ones holding them in reserve. If the copyright owner of those royalties isn’t identified and registered within 3 years, those royalties get liquidated to those publishers who do register, based on market share. In other words, royalties get paid to companies who don’t actually own the songs. And the people they intend to run “SongExchange” are the ones who will get that money that’s not actually theirs.
I do like the proposed changes to how the mechanical rate would be determined, based on “willing buyer, willing seller”. But I would prefer that the songwriters who actually write the songs benefit from such a rate. There needs to be incentive to locate the copyright owners and pay royalties to their rightful owners. Maybe that incentive doesn’t have to be the threat of $150k in statutory damages per song for failure to comply with Section 115, but it’s gotta be something. A market share based solution to liquidate black box royalties just won’t do.
That’s a great idea, other than the fact the stauatory infringement should be $150,000 PER SONG PLUS FUTURE ROYALITES.. this about is reasonable for a song writer.. this amount will fear these companies like spotify not to infringe songwriters songs. Or else you will pay.. and the the rate for streaming, and downloading should be a higher value something like in the range of $5 PER SONG IF mechanical licenses are infringe.. these Giant companies such as Spotify are making a killing off of the fruit of the labor of the songwriter, and they should be held accountable for their willful act.. it’s call stealing, thrift in a more elaborate way.. and now it’s time too pay.. back and there’s no exception to the rule.. Karma has hit Spotify..and the songwriters are vindicated.. any Judge in the court of law, will rule in favor of the songwriters . And t hats getting off cheap, when you have a net worth, of $20 billion, and climbing.. it won’t hurt Spotify, they are going public because , they can afford to, and also, so they can make more billions of $. However, some songwriter, struggle day by day. and while their life struggles, and testimonies, our being manipulated through the selling if their songs, and billions are be made, as the songwriter sleeps in the alley of a street..Are we serious.. SPOTIFY SHOULD NEVER GET AWAY WITH THEIR WILLFULL RAW ACTION OF NOT HAVING MECHANICAL LICENSES YET PROCEEDED TO infringe upon the songwriters rights, this is a gross violation.. and songriters, should be vindicated with the $150,000 stauatory infringement.. thats the law..
Paul: You nailed it.
I really wish Digital Music news wasn’t so negative. There is a negative, disgruntled slant on almost all the topics. I really like subscribing because of the content but don’t like the negativity. I’d like the news reported without the attitude.
This development warrants skepticism, just not for the reasons described in the article.
Just made a quick correction to the piece. I mentioned ‘SoundExchange’ when I meant its (possible) companion, ‘SongExchange’. Phew, getting confusing but apologies if I added to it.
And thanks Ash Kernen for the correction.