Black Box Royalties Myths, Common Misconceptions Debunked at Music Biz 2018
“‘When those on the panel talk about black box we are talking about the aggregate of unclaimed royalties that occur because of any number of factors,’ and not just limited to one service or one collection society, explained moderator Dae Bogan, CEO of TuneRegistry.” via Billboard.
Read the full piece here: https://www.billboard.com/articles/business/8456271/black-box-royalties-myths-panel-music-biz-2018
5 Ways The Music Modernization Act Could Be Fairer To ALL Music Creators
Today, the Music Modernization Act has passed the U.S. House of Representatives with a unanimous 415 – 0 vote (16 reps abstained from voting at all).
The mega bill — which consists of a bundle of Titles that were previously independently proposed bills — will change the way in which musical works are licensed by digital service providers and provide a safe harbor for infringement under a blanket licensing mechanism (Title One – Musical Works Modernization Act); it will bring recordings made before 1972 under federal copyright protection (Title Two – Compensating Legacy Artists for their Songs, Service, and Important Contributions to Society Act or CLASSICS Act); and it will codify an allocation of digital radio royalties to music producers and sound engineers (Title Three – Allocation for Music Producers Act or AMP Act).
On its surface the MMA sounds amazing, when summarized this way.
Accordingly, the passing of the MMA in the House was widely praised by executives from the most recognizable U.S. music rights organizations and trade associations (e.g. NMPA, RIAA, DiMA).
However, there remains many uncertainties in the language of the bill presenting an opportunity for the Senate to course correct before the bill becomes a law that would take over 20 years to improve, again (the Digital Millennium Copyright Act was the last piece of legislation impacting the music business — it was enacted in 1998).
So, what could the Senate do to make the bill more fair to the tens of thousands of music creators who are not represented (or underrepresented) by the industry sponsors of this bill? Well, there’s at least five issues that can be addressed immediately:
- Ban the practice of distributing by market share unclaimed royalties that rightfully belong to DIY musicians and songwriters.
- Mandate that record companies provide complete and accurate (at the time of release) publishing information for each track within the metadata delivered to distributors/aggregators, and that the latter provides that information to DSPs.
- Do not expunge all past copyright infringement claims, only future claims upon the date of the enactment of the law.
- Maintain a representative MLC board of 50% publishers and 50% songwriters (with at least 1 unsigned songwriter on the board (e.g. Chance the Rapper)) as opposed to the BS 10 publishers, 4 songwriters (who’ll likely come from the major publishers anyway) that has been written in the bill.
- Respect the Berne Convention by not disregarding the musical works of non-US songwriters who have not (and will not) register each of their songs with the USCO or MLC.
How else could the MMA be improved? Or do you feel that it is fair enough? Let’s discuss in the comments.
I Was Interviewed By The Congressional Budget Office Regarding The Music Modernization Act, And Now I’m Even More Concerned For DIY Musicians
I just spent the last hour giving a copyright law and music publishing crash course to a Principal Analyst at the Congressional Budget Office who’s tasked with determining the economic impact of the revised Music Modernization Act (which, by the way, now includes the Musical Works Modernization Act (which is an update to the originally proposed MMA, affecting songwriters and publishers), AMP Act (affecting producers and engineers) and CLASSICS Act (affecting recording artists of Pre-1972 records)) on states, DSPs and music creators.
He emailed me yesterday and asked to speak with me about the magnitude of the unclaimed royalties market, although we ended up discussing much more than that. Apparently he had discovered a presentation that I gave at the Music Industry Research Association’s MIRA Conference last year titled “The State of Unclaimed Royalties and Music Licenses in the United States.”
Email from a Principal Analyst at the Congressional Budget Office
At the top of the one hour call he began by stating that he’s had to learn copyright and music publishing in 2 days (2 days!!!). The guy who’s going to contribute to a recommendation to Congress that will impact whether or not 3 different bills will be enacted and change our copyright law has spent only 2 days learning about the complex web of regulations and customs that govern an entire industry and its millions of constituents. I guess this is how legislation is vetted; economically.
The good news is he had a lot of great questions and had did a significant amount of research prior to our call. To be fair, I meet plenty of music industry professionals who have (or at least demonstrate) less knowledge of what’s going on in the world of music rights administration and music publishing than this gentleman; and they’ve spent years in the industry! It is refreshing to know that the government does inquiry with non-lobbyist from time to time when considering the impact of proposed legislation.
At any rate, he was open to hearing my advocacy on behalf of music creators (specifically songwriters, music producers, and recording artists of Pre-1972 records) as well as my substantiated opposition to some features of the revised MMA (generally those features that would disproportionately benefit music licensees (primarily, DSPs) and major publishers while leaving DIY music creators to fend for themselves).
[This paragraph was omitted on 4/20/2018 as a result of a clarification that I received for Title 3 of the MMA]
Another issue I have is with the ownership of the unclaimed mechanical royalties fund(s). The Musical Works Modernization Act (Title 1 of the MMA) would, for the first time, codify the existence of a mechanical royalties black box in the United States. The current US Copyright Act does not give copyright owners a right to earn or collect mechanical royalties if their musical works are not registered with the US Copyright Office.
After the NOI has been filed, it is then the copyright owner’s responsibility to become aware of and locate the NOI, and then take action in order to receive mechanical royalties. The law states, “To be entitled to receive royalties under a compulsory license, the copyright owner must be identified in the registration or other public records of the Copyright Office.” (17 USC 115(c)(1))The law also makes it clear that the licensee is not required to pay mechanical royalties until after the copyright owner has been identified. “The owner is entitled to royalties for phonorecords made and distributed after being so identified…” (17 USC 115(c)(1)) What’s worse, the law does not require the licensee to pay retroactively for mechanical royalties earned before the copyright owner is identified. “…but is not entitled to recover for any phonorecords previously made and distributed.” (17 USC 115(c)(1))
However, intermediaries (e.g. Harry Fox Agency, Music Reports, Loudr) that process NOIs (Notice of Intent to Obtain a Compulsory Mechanical License) on behalf of their DSP clients do encourage their clients to set aside unattributed mechanical royalties into an escrow account (the so-called “black box”). The royalties sit there until the copyright owner raises his/her/their hand to collect the earnings or until the entity decides to disburse or absorb the uncollected funds.
Generally, this is a “good faith” policy.
Now, since the MMA will codify the black box as a matter of law, this private sector matter will become a government matter. The question, then, is will federal government or state governments have the right to maintain the unclaimed royalties black box?
Currently, unclaimed property laws enable states to receive and hold unclaimed property (such as money) when the property owner can not be reached. For example, California’s Unclaimed Property Law requires corporations, businesses, associations, financial institutions, and insurance companies (referred to as “Holders”) to annually report and deliver property to the California State Controller’s Office after there has been no activity on the account or contact with the owner for a period of time specified in the law – generally (3) three years or more. I’ve had a few refunds from services that I used and cancelled when I moved from one place to another. I did not provide the service with a forwarding address, so my refund became unclaimed property and ended up with the California State Controller. By searching the CSC’s database, I was able to find and then claim the property (pictured below).
If your property goes unclaimed too long (each state has their own statute of limitations), the state has the right to liquidate the property (e.g. sale an unclaimed vehicle) and absorb proceeds as miscellaneous revenue to the state’s budget [lawyers, correct me in the comments if I’m wrong].
Because states unintentionally (benefit of the doubt) benefits from unclaimed property, I could see states with significant music industries (e.g. California (Los Angeles), New York (Greater New York City), Tennessee (Nashville), Georgia (Atlanta)) suing the federal government or the Mechanical Licensing Collective (the entity that would be granted under the MMA to administer a new blanket licensing system along with a centralized database of musical and sound recording copyrights to match works with usage reports submitted by digital services) over the right to collect unclaimed royalties, especially if the black box is hundreds of millions of dollars (which I believe it is).
There are many other issues that I have with the MMA such as the proposed formation, structure (especially the imbalance of representation on its board where there would be 10 publishers and only 4 songwriters (why not 7/7?)), and governance of the MLC and similar unclaimed royalties issues related to the CLASSICS Act; among other issues. I’d be happy to discuss, but this post is already yuge!
In a word, I am all here for improving royalty rates, ensuring the fair treatment of music copyrights and moving towards a more equitable representation of music creators. However, the MMA is not quite there yet and passing it as-is, with all of its ambiguity, would be a shame. I don’t know if the music industry will have another shot to make this kind of update to the Copyright Act in the next 20 plus years (the Digital Millennium Copyright Act of 1998 was the last significant update).
We should probably get it right — now.
My Thoughts On The MMA In Light Of The CRB Mechanical License Rate Decision
In light of the CRB’s ruling today to increase mechancial royalty rates for on-demand DSPs, I would caution against passing the Music Modernization Act without first amending it to include some very necessary guarantees for DIY musicians.
Given the recent ruling to increase mechanical rates, penalize DSPs for late payments, and remove the TCC cap DSPs will be more incentivized to cling to the safe harbor components of the MMA to limit their financial responsibility to songwriters.
I also fear that the blanket license (combined with the elimination of the statutory damages provision against infringement) would hurt more DIY musicians than protect compared to the existing compulsory licensing schema where today an independent can fully self-administer his/her mechancial rights via a service like TuneRegistry or with a third-party administrator like Songtrust. Why? Because the unclaimed/unpaid (aka “black box”) royalty fund will also increase by 44%, giving major publishers a bigger windfall of market share distributed gains from a royalty pool that generally belongs to unidentified independent songwriters.
What incentive does DSPs, who must pay the rates anyway, and major publishers, who will undoubtedly control the mechanical licensing collective body, have to ensure the works of DIY musicians are properly represented and accounted to and what power do DIY musicians have to assert their limited rights?
I could be completely and utterly wrong.
However, the devil is in the details and the MMA, while it does streamline the process of mechancial licensing in the United States for DSPs it also effectively limits the warranties and representations of DIY musicians.
Every article written about MMA is generally written from the perspective of publishers and NMPA members. As an advocate for and service provider to DIY musicians, my perspective is a bit different and more nuanced.
The decision today by the CRB was a win for all songwriters. The MMA is a win for major publishers. It must be amended.
Music Business Association To Host Webinar On Black Box Royalties Presented By Dae Bogan
Music Business Association will host Dae Bogan’s webinar on black box royalties on Thursday, October 26th at 11am PDT / 2pm EST. Open to all.
Description: The global music licensing ecosystem is ripe with inefficiencies, complexities and legal mumbo-jumbo that affects the livelihood of music creators and copyright owners when royalties become trapped. The idea of not being paid when your music earns royalties is frustrating. Some would even call it highway robbery! But there are some practical solutions that every interested party in music royalties can put to use immediately to ensure that your music industry administration operations get you paid. This webinar will demystify so-called “Black Box” royalties and demonstrate how rights-holders can leverage technology to combat this global issue.
Register at https://register.gotowebinar.com/register/5742451649783265539
Dae Bogan Joins Los Angeles County Bar Association’s Panel Event On Unpaid Royalties
PROGRAM DESCRIPTION
In an era of ever-changing revenue streams, how can musicians make sure they receive the royalties they are entitled to? One of the most commonly litigated issues in lawsuits filed on behalf of musicians concerns artists not being compensated for their work. Join us for a lively discussion featuring advice for musicians (and those representing them) from top legal minds Bill Colitre and Eric Bjorgum, and cautionary tales from songwriter/recording artist Tommy Victor, of the rock bands Prong and Danzig. Speakers:
A. Eric Bjorgum, Karish & Bjorgum, PC
William B. Colitre, Esq., Music Reports
Tommy Victor, Prong and Danzig
Dae Bogan, TuneRegistry and Royalty ClaimModerator:
Meghan Moroney, Meghan M. Moroney, Esq.Location:
Lawry’s Restaurant
100 N. LaCienega Blvd
Los Angeles, CA 90211Time:
Registration: 11:45 a.m. – 12:30 p.m.
Program: 12:30 – 1:30 p.m.CLE Credit:
1 Hour of General CLE CreditParking:
Parking is complimentary.Prices:
CLE+ Cardholders with Meal Free ELIP Section Members $55.00 LACBA Members $70.00 All Others $105.00 Law Students $35.00 *CLE+ Members can purchase the meal below for an additional $45.00.
REGISTRATION CODE – 102417ELI
Royalty Claim’s Full Presentation At The Music Industry Research Association Conference
Royalty Claim attended the Music Industry Research Association‘s first inaugural MIRA Conference at the UCLA Luskin Conference Center this week. Royalty Claim’s Founder and Chief Researcher, Dae Bogan, MIA, had the honor of presenting a preview of our in-progress The State of Unclaimed Royalties and Music Licenses in the United States report before an audience of economists, sociologists, and researchers from universities and institutions from around the world, as well as music industry executives representing firms such as Nielsen, Pandora, Universal Music Group, and Warner Music Entertainment.
For the first time, updated statistics regarding the filing of “address unknown” Section 115 NOIs on the US Copyright Office during the first half of 2017 was revealed. Insights included an overview of the organizations that have utilized the procedure, including Amazon, Google, Spotify, iHeart Communications, and Microsoft. However, those large music users were expected. Interesting inclusions to the list were The Recording Academy and the Christian music service, TheOverflow and interesting omissions from the list are platforms that boast millions of tracks — Apple and Tidal — but may not be reaching every independent rightsowner that may have compositions available on those platforms.
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The presentation also discussed the nature and causes of so-called “Black Box royalties”. A black box is an escrow fund in which music royalties are held due to an organization’s inability to attribute the royalties earned to the appropriate payee. Examples were given, including unattributed advances from DSPs to music companies, the US’s limitations on sound recording rights, and other issues.
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The presentation concluded with a video demo of the Royalty Claim Platform, which received positive reviews from conference attendees. The full presentation is here.
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