If you’re an indie publisher or songwriter, you’re probably going to hate Facebook’s music publishing contract.
So far, we’ve been covering a string of licensing deals between Facebook and music industry rights owners. That includes multiple publishers, starting with the largest. The signing derby started with Universal Music Publishing Group, followed closely by Sony/ATV and Warner/Chappell, among others.
We haven’t seen those specific contracts, but we do have the agreement for everyone else. That is, independent music publishers and songwriters.
At first glance, the terms of this agreement are a bit strange — and pretty disadvantageous for independents.
We’re sure attorneys and industry experts will have a lot to add here. But these are our first impressions — so please add things, correct details, whatever.
At a top-level, Facebook has allocated $45 million in total indie publishing payouts. That’s designated as the ‘Independent Pool’ (see page 6 below). The term of this contract is approximately two years (ending March 12th, 2020).
There’s also a ‘Major Pool,’ but we don’t know that number.
Sounds like a lot of money, but payouts are not based on actual plays.
Instead, they are calculated by total marketshare among all music publishers, at least those measured by the National Music Publishers’ Association (NMPA).
Indie publishers think that’s strange, especially considering that the NMPA is largely focused on major publishers (like UMPG and Sony/ATV). That’s because those are their core members. Accordingly, the accuracy of their marketshare measurements on independent publishers seems a little uncertain.
Another detail for concern is that the Harry Fox Agency (HFA) will be administering all of the publishing royalties.
That’s not the greatest news, given that Harry Fox Agency was recently embroiled in a massive controversy involving unpaid mechanical royalties. The company was blamed for failing to account for potentially billions in mechanical licenses from streaming platforms, though the company (and its former owner, NMPA) claim no responsibility for those issues.
In fact, Apple flat-out replaced HFA given the growing liabilities.
Regardless of who should be blamed for that mess, the confidence rolling into another HFA deal is understandably low — at least according to the indie publishers speaking with DMN.
Here’s how Facebook will specifically handle publishing payouts, per its contract (see page 6 below):
If Publisher has an NMPA Market Share greater than zero, Facebook shall calculate Publisher’s Fee as Publisher’s pro-rata share of the Independent Pool (i.e., Publisher’s relative share of the independent publishing market) based upon Publisher’s NMPA Market Share.
For purposes of calculating the Fee, Publisher authorizes NMPA to communicate Publisher’s NMPA Market Share to Facebook and HFA.
If Publisher has zero NMPA Market Share or no reported NMPA Market Share, Publisher’s Fee shall be calculated as Publisher’s pro-rata share of the Non-Member/Affiliate Pool based upon Publisher’s HFA Market Share.”
Again, we’re perplexed as to why Facebook can’t simply pay based on actual plays.
After all, this is one of the most sophisticated and wealthy tech companies in the world. And, they most certainly have the capability to track plays and pay royalties based on those plays.
But wait: later in the contract, it turns out that Facebook is matching recordings in a database. Just on the recording side (see page 7):
“‘Matched Sound Recording’ means a sound recording matched to the audio fingerprint of a sound recording reference file delivered by a record label pursuant to a commercial agreement with Facebook and that is available in the Rights Manager reference file database.”
That makes the share-based publishing approach confusing — but maybe there are more puzzle pieces ahead.
Also, there won’t be any reporting on actual publishing itself (see page 4).
“Facebook will not be in a position to provide track-level or composition-level reporting during the Term. It shall be Publisher’s responsibility to determine how to allocate, if necessary, any Fee it receives to all downstream royalty participants in respect of Publisher Compositions.”
Indie publishers suspect a highly-complex maze of calculations that will ultimately pay the wrong people.
For example, if an indie publisher isn’t tracked by NMPA (with a market share of 0), then Facebook will take a look at HFA’s calculated market share.
Or… something like that?
Neither option sounds like a recipe for accurately tracking indie publishing and songwriter plays. Accordingly, indie publishers are strongly suggesting that this deal is a ploy to misappropriate royalties by poaching royalties on songs whose ownership is not properly accounted.
Either way, if you’re not being tracked by HFA, you’re not getting paid by Facebook. That was made abundantly clear in the contract. In fact, Facebook will correspond with publishers using emails contained within HFA’s database — again, just hope you’re listed properly.
Also worth nothing: ‘background music’ while multi-tasking will not be permitted by Facebook.
The contract clearly states that any music uploaded and subsequently played in the background by a Facebook user will be blocked. That eliminates direct Facebook engagement, so Facebook will prevent that behavior.
Here’s the language in the contract that spells this out (see page 7):
“Facebook will not enable “background mode” for Matched Sound Recordings on mobile – i.e. placing video in the background so only the music of a video can be heard while a user multi-tasks in other apps. For clarity, the Parties acknowledge that this limitation will not apply to feature sets (e.g., at an operating system level) that Facebook cannot control;”
Additionally, the social network will block uploads that pair a static image with a song. All of which clearly draws a distinction between Facebook and YouTube.
Actually, that makes a lot of sense given the broader aims that Facebook has with music.
And in the contract itself, the company succinctly lays out its plans for the service (see page 1).
“Facebook is interested in exploring a partnership with the music industry to, among other things, empower user communication, connection and creativity through video on the Facebook Properties. That partnership will enable users to:
• upload to and/or stream via the Facebook Properties videos that contain musical compositions (including Publisher Compositions) (“Organic User Videos”);
• create clips of sound recordings that embody musical compositions (including Publisher Compositions) (which functionality is offered as part of a library of music with other tools or filters for expression (the “Audio Library”)) and to incorporate such clips into user-uploaded videos or slide shows, whether simultaneous with or following creation of the video recording (“Audio Library User Videos”), on the Facebook Properties; and
• transmit and/or receive transmissions of live streams that contain musical compositions (including Publisher Compositions) (“Live Streams”), via the Facebook Properties.”
And, without further adieu, here’s the full Facebook publishing contract for your review.