Carrying the Flag for Collective Rights Management

In an age when new technology platforms, politics, and changing consumer behavior are posing existential challenges to the music publishing industry’s long-standing practices of collective rights management and blanket licensing, Paris-based Armonia Online is fighting to preserve the collective.

Formed in 2013 in response to the increasing fragmentation of the European licensing landscape — an unintended consequence of a European Union directive meant to encourage multi-territorial licenses — Armonia is an alliance of collective management organizations (CMOs) that offers one-stop, multi-territory licenses to digital service providers (DSPs) while preserving what it views as the important benefits to rights owners of collective management.

To achieve that goal, Armonia built a collaborative back-office technology platform that allows its member CMOs to harmonize their music-usage data processing and metadata management while preserving their own, proprietary payment arrangements with the songwriters and publishers they represent. The alliance now includes 9 CMOs and 3 mandates, representing over 13 million tracks.

In 2017, Armonia became a charter member of the RightsTech Project, and its CEO, Virginie Berger, will be speaking at the RightsTech Summit on September 27th in New York. We a recent Q&A with RightsTech, Berger discussed Armonia’s formation, its goals, and its views on the evolving role of collective rights management in a time of fragmenting markets.

RightsTech Project: What was the impetus for the formation of Armonia Online? What issue in the market are you trying to address?

Virginie Berger

Armonia Online In 2005, a Recommendation from the European Commission encouraged rights holders to grant multi-territorial licenses directly to digital service providers (DSPs) outside the scope of reciprocal agreements between author societies. This prompted many of the biggest publishers to withdraw mechanical rights from the authority of CMOs (Collective Management Organizations) on the Anglo-American works they represent (as well as some Latin-American and Asian works), in favour of direct licensing in European territories.

As a consequence of this repertoire fragmentation, the local CMOs cannot provide licenses with multi-territorial cover and the DSP has to contact the CMOs in all EU-member states as well as those rights holders that have withdrawn their rights. This poses major problems for all aspects of the licensing process such as identifying the repertoire which requires an additional license and the right holders associated with it.

Armonia Online was created to re-aggregate repertoires in Europe and to facilitate the grant of multi-territorial licenses, by acting as a one-stop shop for online music services wishing to enter Europe. Founded in 2013 by the Italian, Spanish and French collective societies (SIAE, SGAE and SACEM), the hub was joined since by SABAM (Belgium), Artisjus (Hungary), SUISA (Switzerland), SPA (Portugal) and AKM (Austria) and also represents the repertoires of three mandating entities: Universal Music Publishing International, Wixen Music, and SOCAN, for a total repertoire of 13 million musical works.

RTP: How has Armonia addressed that issue? What processes and capabilities did you have to put in place to meet your goals?

AO: The first challenge for our members was to organize themselves into a consortium at a time when the overall licensing market was getting more competitive. In the first place, the European collective societies had paradoxically to structure themselves together within a more competitive environment. In the mono-repertoire licensing system resulting from the fragmentation, smaller collective societies feared a loss of value of their repertoire as well as a leak of their members to the benefit of societies having bilateral agreements with the big publishers.

Armonia’s strength is that it maintains the value for all CMOs’ repertoires, since there is a single agreement on rates and tariffs with DSPs. This is mainly what Armonia has been working on during its first years of operation: how to streamline and harmonize processes within the member societies in order to facilitate and accelerate the granting of pan-European licenses for online services and music technologies. Thanks to these efforts, Armonia has signed deals with Deezer, YouTube, Google Play, Beatport, Guvera, or more recently with 7 Digital and Recisio.

Today Armonia is still working to de-mystify pan-European licensing, but the music rights industry is such a complex business that it takes a very long time to educate the market and the players, especially when they come from outside of the EU – and specifically from the US where the rules are completely different.

Finally, Armonia had to put in place a common initiative which resulted in the creation of a collaborative back office platform to process data and ensure a better identification of rights owners’ works.

RTP: Were you able to use existing technology to build your platform or did you need to develop new technologies/applications, etc.?

AO: To answer the challenges associated with the overwhelming volumes of data to process (around 0.5 TB of data in hundreds of files are sent every month by DSPs) and to avoid the redundancy of processes among the different societies, the Armonia members decided in the very early stages of their alliance to initiate a common back office system. In 2014, Armonia chose the Spanish start up BMAT to build this collaborative service platform for sales reports processing, acting as a trusted and neutral third-party.

The service platform built with BMAT takes the best and appropriate technologies available in the market and is fully scalable. As a first step, the technology enabled Armonia to have a common quality check of DSPs’ sales reports, a single repository with 10-year archive of sales reports as well as a mutualisation of business analysis. Then, Armonia developed metadata cleaning and enrichment to improve reports quality and automated matching, resulting in a faster and more accurate identification of works.

Today, the Armonia back office platform is processing at a speed of 2GB per minute and 72 billion of elements are transacted every month. We keep improving our technologies and developing our tools to improve the accuracy and timing of financial streams for rights-owners royalties’ payouts.

RTP: What are Armonia’s principal long-term goals, and how far along do you believe you are in reaching them? Where did you see Armonia Online ultimately fitting within the music licensing system?

AO: Armonia’s main goal is to sustain collective management of rights in an environment where its relevance tends to get undermined, despite being more crucial than ever for protecting authors’ rights.

Indeed, some entrepreneurs claim authors can bypass CMOs and have their rights managed more efficiently by some new innovative players. Yet CMOs are constantly investing in new ways and technologies to improve their processes. Often, the processing of the data for a given digital service cost more than the revenues it actually generates.

The CMOs within Armonia are not-for-profit and their one and only reason for doing business is to get more revenues to distribute to their members. SACEM for example, the French collective society, has never distributed as much money as it did in 2016. And CMOs always are at the forefront of battles with non-paying players such as piracy platforms or web and TV giants.

Armonia ultimately aims at expanding into a strong international community of societies fighting for the protection of authors’ rights and helping them to make a living from their creations. To that end, we have put in place strong licensing agreements with major DSPs to ensure maximum revenues for the authors.

RTP: How would you assess the current state of the music licensing system? Is the industry moving in fast enough to develop the capabilities needed to sustain a healthy music economy? Is if falling behind? Where are we on the learning curve?

AO: The traditional players from the music licensing system took a long time to fully embrace the new consumption habits in the digital realm and to adapt to them. It’s only very recently that we have seen technology initiatives emerge among those traditional players. However, transparency in royalty pay-outs remains a major challenge among all of those new privately-owned technology structures, whereas CMOs must comply with ever-stricter transparency guidelines.

What has been interesting lately, is how the traditional industry has begun to join forces to build common initiatives in the fields of tech and innovations: the ASCAP/BMI joint song database plan, the SACEM/PRS/ASCAP blockchain project, the R&D initiative of the Nordic music copyright societies ‘Polaris Future Lab’, ASCAP/PRS/STIM partnership with the Swedish startup Auddly… CMOs know they cannot move fast enough to adapt if they are on their own: cooperation and exchanges of expertise are keys.

Yet there is still work to be done and processes to be improved since the digital storm is far to be over. New models are emerging every year, regarding both financing structures and types of contents, that do not fit in the boxes of traditional licensing schemes. It is always about finding the right balance between what is fair for artists without asphyxiating the service: a startup still in its infancy today could be the Spotify of tomorrow, and overwhelming licensing fees or advanced payments could nip it in the bud and prevent from significant revenues in the future.

RTP: What are the main challenges the industry still needs to address with respect to licensing, and how effectively are they being addressed?

AO: The number one challenge in the licensing system today is the identification of works. Collective societies rely on metadata to identify works, but very often, the information available is not qualitative enough to properly match a work with its rights owners. Moreover, the international licensing system relies on two types of information: the sound recording data, associated with the International Standard Recording Codes (ISRCs) and the publishing data, associated with the International Standard Work Codes (ISWCs). Today, there is no industry-wide system in place to reconcile the two, and third-party tech providers often don’t have access to it.

Technologies like audio fingerprinting, metadata enrichment or blockchains have been developed to reduce, over time, the number of unidentified works. Still, thousands of new works are added every day to the thousands of music work already in databases within the publishing industry, making the task very complex.

Another very interesting challenge the music rights industry will have to tackle in the very near future is Artificial Intelligence in the many possible ways it could impact our organizations. How could machine learning change the composition of music? When an AI creates a piece of music, who owns the rights to it? And who is liable for copyright infringement in such event? These are questions the industry has to address today if it wants to remain relevant tomorrow.

 

Direct Investments in Rights-Tech Companies Hit $95 Million in First Half of 2017

RightsTech companies have raised nearly $95 million in direct investment so far in 2017, according to data compiled by the RightsTech Project, kicked off by Dubset Media’s $4 million Series A round in February.

That figure does not include outright acquisitions, such as Blackstone Capital’s acquisition of performance rights organization SESAC in January, which included the rights management technology platform Rumblefish along with the Harry Fox Agency.

The bulk of the rights-tech investments this year is accounted for by Kobalt Music’s $75 million Series D raise in May, led by Hearst Entertainment, bringing its total capitalization to more than $100 million to date. As with Blackstone’s acquisition of SESAC, much of the investment in Kobalt is premised on the perceived asset value of the rights it controls. But part of the valuation reflects Kobalt’s ability to monetize those rights using its technology platform.

Growing investor interest in the direct monetization of rights is also reflected in Royalty Exchange’s $6.4 million convertible note offering, which more than doubled the company’s original target of $3 million. Denver-based Royalty Exchange allows artists to offer interest in their future royalty stream to investors through the sale of royalty-backed assets.

Other notable raises this year include blockchain-based rights registry Binded (formerly Blockai), which raised $950,000 in June, bringing its total to date to $1.5 million, and music rights payment platform Stem, which raised $8 million.

Company Description Amount raised Investors
Kobalt Music rights and publishing platform $75 million Hearst Entertainment, Balderton Capital, MSD Capital
Dubset DJ remix rights clearance platform $  4 million Cue Ball Capital
Stem Music rights payment platform $  8 million Evolution Media, Aspect Ventures, Upfront Ventures.
Binded Blockchain-based rights registry for visual arts $950,000  Mistletoe, Asahi Shimbun, and Vectr Ventures
Royalty Exchange Music-royalty based asset exchange $ 6.4 million Convertible debt offering

Notable rights-tech direct investments in 2016, included visual arts registry and authentication platform ascribe, which raised $6 million, rights registration and marketplace platform Monegraph, which raised about $4 million, music rights management platform Revelator, which took in about $3.5 million artCOA, which raised $5 million.

Binded Aims to Make Copyright ‘Seamless’ on Web

San Francisco-based startup Binded on Thursday launched its new, blockchain-based platform to allow artists to register their authorship of their works at the moment of creation. It also announced a $950,000 fundraising round led by Mistletoe, Asahi Shimbun, and Vectr Ventures, bringing its total fundraising to date to $1.5 million.

Formerly known as Blockai, Binded allows artists to upload images to their private “copyright vault,” where it’s given a unique fingerprint identifying them as the author. That information is then saved permanent on the Bitcoin blockchain. The artist then receives a digital certificate with proof of authorship. 

Audiam Wants to Help TV and Film Producers Sync Before They Clip

Over the past decade, music synchronization licensing has gone from the occasional icing on the cake for songwriters and publishers to an important new layer of monetization as the use of music in video games, apps, and other new formats has exploded. But new digital platforms are also creating new avenues of exploitation for traditional audio-visual works like movies and TV show, such as placing clips on YouTube and other user-upload sites, which often also include the use of synchronized music.

EU Appoints New Commissioner to Lead Digital Single Market

European Commission president Jean-Claude Junker this week named Bulgarian minister Mariya Gabriel as his candidate for Commissioner for the Digital Economy and Society responsible for overseeing the commission’s Digital Single Market initiative. Gabriel, whose appointment must still be approved by the European Parliament, would replace Günther Oettinger, who had overseen the DSM strategy since its launch in 2015 but was reassigned the budget portfolio earlier this year, and will report to Andrus Ansip, the commission vice president in overall charge of DSM.

Mariya Gabriel

The appointment of Gabriel comes one week after the EC issued a mid-term review of the DSM strategy, in which it called for swift action by the European Parliament and member states to enact its various recommendations.

“The Commission has lived up to its promise and presented all main initiatives for building a Digital Single Market,” Ansip said in the review. “Now, the European Parliament and Member States need to adopt these proposals as soon as possible, for new jobs, business and innovation to take off across Europe.”

The DSM project has been a focus of controversy from the start, as telecom providers, technology companies and copyright owners have all raised objections to one or more of the commission’s 35 legislative proposals and policy initiatives. Agreement on those proposals among the commission, the European Parliament, and the Council for the European Union has been slow in coming. To date, agreement has been reached on only three:

  • Abolition of phone roaming charges within the EU;
  • So-called portability of online content starting in 2018, under which EU citizens from one country will be allowed to access online services they subscribe to at home while traveling in another EU country, even if the content hasn’t been licensed for release in that second territory;
  • Enhanced data protection regulations

Still pending are controversial proposals to harmonize local copyright regimes among the member states to facilitate EU-wide licensing and distribution of content; an end to geo-blocking that results in consumers paying different prices for digital goods in different EU territories; an update to the cable and satellite directive to facilitate cross-border access to TV and radio programming; an update to the rules regarding content distribution and advertising arrangements; and telecom reform, among others.

Gabriel is currently serving her second term as a member of the European Parliament, where she has focused primarily on visa matters and foreign affairs.

In an interview with Politico Europe Gabriel insisted that her lack of a technical background would not be a handicap in her new position.

Being a commissioner, she told the publication, was “primarily a political job, not a technical one,” adding she was looking forward to working on digital issues because “it’s a field that represents the future.”

 

Competing With Paid

This blog post originally appeared on Concurrent Media.

The rise of subscription streaming services, in both the music and video industries, has given the lie to the old complaint that consumers won’t pay for content online. But to many in the music industry, to say nothing of streaming investors, too many of them still don’t.

Ad-supported free streaming services remain the bête noire of the record labels and music publishers. They rail against YouTube, even as they’re making deals with it, and have fought to restrict the copyright safe harbors that allow YouTube to profit from music posted without license by users. They’ve maintained pressure on Spotify to shift more of its free users to its paid subscription tier, a tune now echoed by potential investors as Spotify eyes an IPO or public listing of its shares, and have begun to restrict when new releases are made available on the service’s free tier.

Pandora, the largest free streaming platform after YouTube, felt compelled to roll out a new subscription tier as it tries to woo investors and potential suitors.

To hear many in the music business tell it, the industry would be better off if free streaming went away altogether.

The video streaming business, however, has lately been moving in the opposite direction, at least on certain fronts. While over-the-top subscription streaming services continue to proliferate, streaming platforms continue to invest in free, ad-supported content.

Ad-supported streaming service Tubi TV this week announced a new, $20 million funding round led by Jump Capital, bringing its total funding since in launched in 2014 to $34 million. While Tubi is targeting the same cord-cutting consumers being catered to by the likes of Hulu, Netflix, CBS All Access and HBO Now, founder and CEO Farhad Massoudi thinks there’s a limit to the amount of paid content consumers will support.

“I think the market is delusional if they think consumers are willing to pay and subscribe to all these apps,” Massoudi told the Wall Street Journal. “In the next year or so these apps are going to disappear, or they’ll see there’s no clear path to significant scale.”

Tubi counts Lionsgate, MGM, Paramount and Starz among its 200 content providers, according to the Journal, and boasts a library of 50,000 movie and TV titles — an indication that TV rights owners are still open to distributing content via free platforms.

Little, if any of the content on Tubi TV is in its first release window, of course, and in many cases has been thoroughly monetized already. So the circumstances are not entirely comparable to the music business. But free, ad-supported video streaming is nonetheless attracting a growing amount of direct and indirect investment in new production.

Facebook, which has made ad-supported video streaming central to its growth strategy, is preparing to debut a slate of original series in June, ranging from mobile-friendly 5-10 minute fare up to more traditional, 30-minute episodes suitable for watching on TV.

Word of Facebook’s plans comes as YouTube is developing its own slate of 40 new original series intended primarily for its free, ad-supported platform. In a recent interview with Adweek, YouTube chief business officer Robert Kyncl made clear the primary role that ad-supported content plays in YouTube’s evolving long-form video strategy:

For many years, [marketers] have been asking me, “When you are going to do big original shows?” Of course, in their minds they mean free [programming] with ads. As you know, two years ago, we started a team to focus on originals, and we created YouTube Red with no ads. At the beginning of last year, we started to think about the fact that advertising is our core business. And big brands and big agencies are our biggest partners. This is something they have been asking for for a very long time, and we should deliver on that…

Secondly, when I started to look at the statistics, they showed a share shift from advertising-supported shows to ad-free shows, which started to increase. I just think that’s a trend that’s not favorable to our biggest partners. We are the biggest video platform in the world. We should play a role in changing that.

Even traditional media companies are eyeing investment in original, ad-supported streaming content, as the list of TV networks and studios lining up to create TV-like content for Snapchat attests.

The reasons for the differences in attitudes toward free, ad-supported channels are both historical and structural. Historically, the music industry’s primary ad-supported business — terrestrial broadcasting — was conducted under compulsory license by broadcasters. Rights owners earned only royalties based on use, under a formula set by the government, or, in the case of sound recording owners, nothing at all.

In contrast, advertising was for many decades the exclusive means of monetization for TV content and the industry’s corporate structure was built around that paradigm. Critically, TV rights owners controlled and conducted the majority of the advertising sales, claiming 100 percent of the revenue it generated.

In the streaming era, music rights owners have been able to tie their earnings more directly to the total advertising revenue pie, but they still don’t control ad loads or prices, and their slice of the pie is still calculated in part by the government. Video rights owners, in contrast, have been able to carry over their direct control of ad sales into the streaming era.

So, could the music business ever accommodate itself to ad-supported business models as the video industry has done? Not without major copyright and structural reforms. But the video industry’s experience suggests that paid and free channels are not inherently incompatible.

Too Many Music Blockchains? Don’t Tell OMI

When news broke last month that the ASCAP is partnering with France’s SACEM and the U.K.’s PRS For Music to develop a prototype metadata-matching system utilizing blockchain, many blockchain proponents celebrated the move as validation of their claims for the technology’s future role in the music business. But the announcement also raised the troubling possibility that blockchain-based approaches to solving the industry’s notorious data problems are already fragmenting into distinct and discrete implementations of the technology, which could end up simply recreating the current fractured data landscape on distributed ledgers.

In undertaking their own effort, with no clear indication of how widely any resulting database would be shared with other industry stakeholders, ASCAP, SACEM, and PRS, will be working outside two other major multi-stakeholder blockchain-related data initiatives, to say nothing of the growing number of smaller efforts being bootstrapped by entrepreneurs.

The Open Music Initiative, spearheaded by the Berklee College of Music’s Institute for Creative Entrepreneurship, is seeking to promulgate a series of API specs that will enable interoperability among disparate music datasets. Although OMI does not intend to create its own database of music rights information, on a blockchain or anywhere else, it does anticipate that some of the solutions utilizing its APIs will be blockchain-based. It’s members include a long list of industry stakeholders, including SACEM, but not ASCAP or PRS.

The dotBlockchain Music project, spearheaded by PledgeMusic co-founder Benji Rogers, has partnered with Canadian performing rights organization SOCAN, CD Baby, FUGA, and SongTrust, all of whom apart from FUGA are also participants in OMI, as it attempts to develop a new, blockchain-based music rights ecosystem starting with a metadata standard it calls Minimum Viable Data.

Numerous entrepreneurial efforts to develop a blockchain-based music data and royalty payment system have also sprung up, from Mycelia to Tao Network to token.FM, all based on bespoke implementations of blockchain technology. In perhaps the most unexpected move to date, last week Spotify announced the acquisition of Mediachain, the VC-funded startup that was developing a universal media metadata system utilizing blockchain. While Spotify’s intentions are not entirely clear — Mediachain’s technology will remain open-source but its principals will join Spotify — the deal indicates that interest in blockchain is coming from the demand side of the music rights ledger as well as the supply side.

Despite all that activity, however, OMI co-founder Panos Panay says he’s not worried about the potential for conflicts or fragmentation.

“I think [the ASCAP/SACEM, PRS project] is a good thing,” Panay told Rightstech.com. “I don’t view these things as competitive at all. Innovation is a relay race, and sometimes you have to take the baton from others.”

Panay is also heartened by Spotify’s acquisition of Mediachain, both of which are members of OMI.

“There really hasn’t been a ton of forums to enable this sort of rubbing of elbows between startups and bigger companies,” Panay said. “Part of our objective [with OMI] is to bring these companies together. We’re actively encouraging these sorts of connections.”

In Panay’s view, all the activity can only help attract more investment into the rights-tech space, leading to more innovation.

“This is not an industry that has attracted a lot of interest from VCs, or seen a lot of successful exits,” he said. “The complexity of music rights, historically, has thwarted investment. So I think the more deals there are, the more activity you see around the efforts to solve that complexity, the more investment you can attract .”

He also thinks it’s far too early to be worrying about blockchain fragmentation.

“We’re just at the beginning of this,” he said. “I think [blockchain] technology is about where the commercial internet was in 1989, when it was just getting started, or maybe the very early 90s. The applications and implications of blockchain are huge, but you want to make sure people don’t get too far ahead of themselves.”

To that end, OMI is not likely to mandate the use of blockchain in its first API spec, which it plans to release at the end of the month or in early June, although “we will encourage it,” Panay said. “This technology is still in its very early days.”

 

Why Rights Organizations Want to Make Music Together

Music rights collection societies can’t seem to get enough of each other these days. Last week’s news that France’s SACEM, the UKs PRS, and ASCAP in the U.S. will collaborate in a project to build a prototype blockchain-based metadata linking system was only the most high-profile example of a trend that can trace its origins back at least to SESAC’s acquisition of the Harry Fox Agency in 2015.

Overshadowed by the SACEM/PRS/ASCAP announcement was confirmation last week that Canada’s main performing rights organization SOCAN is in advanced talks with SODRAC, which licenses reproduction rights in Canada about merging the two organizations. In Europe, meanwhile, the cross-border PRO consortium Armonia Online is now up to nine member societies and is eyeing expansion beyond the Continent, Armonia officials told RightsTech.com,  including to North America.

Not all such moves have the same immediate causes or motivations. SOCAN, for instance, has already swallowed MediaNet (formerly MusicNet) and Audiam as it strives to build an end-to-end rights-management platform with reach beyond the Canadian market and a merger with SODRAC, which in addition to representing Canadian songwriters and publishers is the exclusive representative in Canada for music works from 100 other countries, would be of a piece with that broader strategy.

Armonia Online’s growth has been driven by an EU directive to improve transparency and governance of collection societies and facilitate cross-border licensing.

The SACEM/PRS/ASCAP announcement would seem to be at least partly defensive: If blockchain-based metadata management is coming to the music business anyway, better that it be designed to the benefit and specifications of the PROs than risk having to conform their processes to a system designed by and for others.

To one degree or another, however, all reflect the impact of two underlying and related dynamics. One is the increasing complexity of the market for music rights, as both the number of use-cases for music explodes, creating a demand for more efficient and integrated licensing solutions.

The other factor behind the growing urge to merge among collective licensing organizations is the rapid spread of new rights management technology. The growing availability of DIY publishing tools and independent publishing and rights management platforms (think Kobalt) means that, over time, collective licensing organizations will need to manage ever more payouts and account to ever more clients than they have been accustomed to.

That will require much greater granularity of data and greater transparency into the tracking of uses and payment of royalties — something blockchain proponents tout for the technology. But it also puts a high premium on scale. The need to track more uses, and make more and smaller payments to more and smaller rights owners, will generate pressure to drive down the collection societies’ own costs, through greater scale, shared infrastructure around cost-centers like metadata management, and adoption of technology.

Rather than disintermediating collective rights management organizations, in other words, improved rights management technology could, paradoxically, create an incentive for them to get bigger.

Photo: Jens Thekkeveettil (CCO)

Courts, Congress Put Spotlight on Copyright Office (Updated)

This post originally appeared on Concurrent Media.

The federal Ninth Circuit Court of Appeals handed broadcasters a major win this week in their long-running legal battle with Aereo-clone Film On. A unanimous three-judge panel overturned a lower court ruling, which had held that FilmOn was eligible for the compulsory license under Section 111 of the Copyright Act that allows “cable systems” to retransmit copyrighted programming contained in broadcast signals without needing to get permission from the copyright holders.

In overturning that ruling, the circuit court closed an apparent loophole created by the Supreme Court in its 2014 ruling against Aereo, in which it held that Aereo was infringing broadcasters’ public performance right by retransmitting broadcast signals over the internet. In addressing whether Aereo was “transmitting” broadcast signals as defined in the statute, Justice Stephen Breyer reasoned that Aereo was acting, for all intents and purposes, like a cable system, which unambiguously “transmits” a signal, and therefore Aereo required a license under the statute’s Transmit Clause.

Maria Pallante

FilmOn seized on that reasoning to argue in its defense against a lawsuit brought by Fox, that it should be treated as a cable system for purposes of the compulsory license, which is a related but legally separate issue under the law. Several courts rejected that argument (FilmOn was sued in multiple jurisdictions) but one judge, U.S. District Court Judge George Wu, accepted it, ruling in Aereo’s favor, which led to Fox’s appeal to the Ninth Circuit.

While the Ninth Circuit’s ruling is an important victory for the networks, how the court reached its conclusion could turn out to be important in ways that go beyond its legal ramifications.

Writing for the court, judge Diarmuid O’Scannlain did not accept either Fox’s or FilmOn’s argument in full, acknowledging that the statutory language is ambiguous enough that could plausibly be reach the way each side would have the court read it, but that neither interpretation was compelled by either the language or the legislative history. To resolve the question, therefore, O’Scannlain defers to the interpretation of the provision offered by the U.S. Copyright Office, which favored Fox’s view.

In doing so, however, O’Scannlain felt compelled to establish the legal foundation for such deference.

“Because the statute does not speak clearly to the precise question before us, we must decide how much weight to give the views of the Copyright Office,” O’Scannlain writes. ” The first question is whether Chevron or Skidmore provides the proper framework to structure our analysis.”

O’Scannlain then goes on, in a footnote, to lay out the basic legal distinction between the two standards. Broadly speaking, under the Chevron standard (from Chevron U.S.A. Inc. v. Natural Res. Def. Council), courts should defer to an agency’s construction of a statute it has been tasked by Congress to administer where the language of the statute is ambiguous as to the precise question at hand, so long as that construction is “reasonable.”

Under Skidmore, (Skidmore v. Swift & Co.) the weight given to an agency’s interpretation “will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.”

O’Scannlain then ups the stakes.

“To resolve this issue,” he writes, “we would be required to rule on constitutional questions that could have outsized consequences relative to this case—such as determining whether the Library of Congress is a legislative or executive agency.” If the latter, presumably, the Copyright Office would have a better claim on Chevron deference; if the former, it might only be due Skidmore.

Then comes this footnote:

The Copyright Office is housed within the Library of Congress, and it is not clear whether the Library of Congress is part of the executive or legislative branch. Compare U.S. v. Brooks, 945 F. Supp. 830, 834 (E.D. Pa. 1996) (“[T]he Copyright Office is part of the legislative branch.”), with Intercollegiate Broad. Sys., Inc. v. Copyright Royalty Bd., 684 F.3d 1332, 1341–42 (D.C. Cir. 2012) (discussing why the Library of Congress “is undoubtedly a ‘component of the Executive Branch’”). If the Library of Congress is part of the legislative branch, then the Librarian’s “power to appoint all of the officers who execute the copyright laws” may run afoul of the Appointments Clause of the Constitution.

As it happens, the legal status of the U.S. Copyright Office is very much a live controversy in Washington right now. The Office is currently leaderless, thanks to the abrupt removal of its previous head, Register of Copyrights Maria Pallante, in October at the hands of recently installed Librarian of Congress Dr. Carla Hayden. While theories abound as to the “real reason” behind Pallante’s removal, seen as a blow to copyright owners who viewed her as an ally, one factor appears to have been her outspoken advocacy for separating the Copyright Office from the Library and making it a standalone, executive branch agency, with a presidentially appointed register and its own rulemaking authority — a position Hayden strongly opposes.

Members of both the House and Senate Judiciary committees, many of whom are sympathetic to Pallante’s mission to separate the Office from the Library, expressed bi-partisan dismay over her defenestration, creating a rare rift between the Library of Congress and Congress. Pallante had worked closely with the House Judiciary Committee as it conducted a two-year review of U.S. copyright law with an eye toward reforms, including giving the Copyright Office a measure of independence from the Library.

At a meeting earlier this month, leaders of both the House and Senate committees urged Hayden to hold off on naming a new Register, according to a Wall Street Journal report. But in a letter to the committees following the meeting Hayden stuck to her position and reiterated her intention to make the appointment herself.

The chairman and ranking member of the House Judiciary Committee, respectively, Rep. Bob Goodlatte (R-Va.) and Rep. John Conyers (D-Mich.), struck back this week, introducing the Register of Copyrights Selection and Accountability Act of 2017, which would make the Register of Copyrights a presidentially appointed position with a fixed, 10-year term.

In his opinion in the FilmOn case, Judge O’Scannlain side-stepped the question of the Copyright Office’s status by ruling that even under the less-deferential Skidmore standard the Office’s reading of Section 111 was persuasive, and that internet services like FilmOn and Aereo are distinguishable from “cable systems” and therefore not entitled to the compulsory license.

While that might settle the matter as far as FilmOn is concerned, Judge O’Scannlain’s highlighting of the question of the Copyright Office’s status neatly illustrates what’s at stake in the tug-of-war between Congress and the Librarian over control of the office and the appointment of the Register. Courts have disagreed over the years as to how much deference to give the Copyright Office’s interpretations, particularly in close cases involving the application of an old statute to new technologies.

Clarifying the Copyright Office’s legal status could go a long way toward resolving the question of deference, which could impact cases far beyond Fox v. FilmOn.

Update: On Wednesday (3/29), the House Judiciary Committee approved the Register of Copyrights Selection and Accountability Act (HR1695), which would make the Register a presidentially appointed position but leave the Copyright Office within the legislative branch. The bill now goes to the full House.

More Money for Rights-tech: Dubset Mixes Up a $4M Funding Round

Music remix-rights clearance startup Dubset Media on Monday announced a $4 million Series A fundraising round as it prepares to scale up its platform to address the growing number of licensed streaming and download services looking to include DJ mixes and remixes in their catalogs.

Last year Dubset struck deals with Apple Music and Spotify to add fully cleared DJ sets to those services and plans to announce deals with additional outlets at next month’s SXSW festival, according to the company.

Dubset Media CEO Stephen White

“We’ve delivered thousands of mixes so far and we plan to ramp that up to millions and tens of millions,” Dubset CEO Stephen White told the RightsTech blog.

Dubset’s proprietary MixBANK technology identifies individual tracks within DJ mixes and then links that information with a clearance and payment platform that allows the original rights owners to get paid when those mixes are sold or streamed.

The round was led by venture firm Cue Ball Capital but also included strategic investments from MediaNet and its parent company SOCAN, which currently provide Dubset with rights data and payment infrastructure.

“We’re is excited to be a part of Dubset’s Series A funding,” MediaNet CEO Frank Johnson said in an emailed statement. “We believe MIXBank technology and the services it enables will revolutionize the way electronic music royalties are paid, and will ensure that everyone in the copyright ownership stack is paid for use in emergent listening formats like DJ mixes.”

The raise comes on the heels of private-equity firm Blackstone Group’s acquisition of performing-rights organization SESAC in January for a reported $1 billion, and adds to a growing list of recent VC and private equity investment in rights-tech startups.

The key to opening that spigot, according to White, was to broaden the conversation with potential investors to focus on rights management and clearances generally rather than keeping the focus on the music industry.

“When we started out we were very focused on music and on being a music play. That turned out to be very challenging from a fund-raising perspective,” White said. “VC’s hear ‘music’ and doors just close. They don’t want to hear about it. It was very important for us to shift our story to talk about rights management and rights clearances and not focus on music.”

Investor skepticism toward the music business stems from the industry’s well-documented difficulties in transitioning to digital platforms and the relatively poor track record that venture-backed music-tech startups have racked up over the years — a perception that persists, according to White, despite signs of renewed growth in the recorded music business in the past year.

“There’s still a big overhang in the investment community,” regarding music White said. “Most of the investment you see is in the rights management space and in acquiring catalogs” of rights. “It’s easier to understand, and the revenue is more predictable.”

Johnson added, “We believe that the future of music licensing and royalty administration will be found in strategic partnerships like the one between MediaNet and Dubset, where a combination of investment in exciting new technology combined with long-standing relationships with labels, publishers, rights societies, and artists unlocks new revenue channels for large and small rights holders around the world.”

 

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