Licensing

The Copyright Turing Test

As a formal matter, the litigation in People for the Ethical Treatment of Animals v. David Slater, the “monkey-selfie case” is now over. Although the parties nominally settled the lawsuit last year, the U.S. Ninth Circuit Court of Appeals put an exclamation point on it last month by issuing a formal ruling and opinion anyway upholding the district court’s ruling in favor of the human photographer Slater that was under appeal at the time of the settlement.

Naruto

While the court conceded that, under the Ninth Circuit’s peculiar precedent in Cetacean Community v. Bush, animals like Naruto, the crested macaque who took the famous photos and on whose behalf PETA nominally had brought the case, may have standing to bring a lawsuit in human courts, they do not have statutory standing under the Copyright Act to bring an action for infringement:

We must determine whether a monkey may sue humans, corporations, and companies for damages and injunctive relief arising from claims of copyright infringement…Our court’s precedent requires us to conclude that the monkey’s claim has standing under Article III of the United States Constitution. Nonetheless, we conclude that this monkey — and all animals, since they are not human — lacks statutory standing under the Copyright Act. We but therefore affirm the judgment of the district court.

So, case closed.

Yet as some legal experts have pointed out, the Ninth Circuit didn’t really settle the question of who does own the copyright in the photos at issue if not the monkey. Under the settlement between the parties, Slater, whose camera Naruto borrowed for his self-portrait, is free to license their use on the stipulation that he donate a portion of the earnings to a fund to protect crested macaque habitat — a sort of professional tip of the hat to Naruto — neither the district court nor the Ninth Circuit explicitly determined the copyright to be his. Each ruled on the issue of standing, but neither reached ruling reached the merits of the infringement claim.

Slater set up his equipment in the Indonesian forest where Naruto and his fellow macaques live and left it unattended to see how the monkeys might respond to it. But beyond that, he didn’t have any particular creative input to the photos they took. So on what basis would his copyright in them rest? Is mere ownership of the equipment sufficient? Was providing the opportunity for the monkeys to take the photos by leaving the camera unattended a necessary step? We don’t really know.

Another question not directly addressed by the litigation is what made the monkey selfie so compelling in the first place? Had Naruto managed merely to take a random photo of his foot, or the sky, it’s doubtful anyone would have bothered litigating its authorship.

What made the monkey selfie so compelling, I think, was its seemingly human-like intention. Serendipitously well-framed in the shot, Naruto seems to exhibit human-like self-awareness as he appears to smile into the camera, an effect Slater himself recognized  in titling the book in which it first appear Wildlife Personalities.

The whole case, in effect, functioned as a sort of photographic Turing test: Was the photo a creative act of original expression if perceived that way by humans, even if the law does not recognize its proximate creator? If so, how should the law regard it? Who, if anyone, should have an exclusive right to exploit it commercially, and on what would that claim rest?

While the issue may appear abstract and theoretical, those questions are getting less theoretical by the day, as researchers develop ever more machine-based systems capable of producing Turing-sufficient works of expression. Like monkeys, machines would likely lack standing to bring a claim under copyright law. But that doesn’t mean they can’t produce works that humans perceive as expressive.

In a paper published last month, researchers from Microsoft and Kyoto University describe how they trained a neural net to produce original poems, one of which was accepted for publication by the human editors of a literary journal based on a blind, online submission.

Last year, researchers from Google published a paper describing how they taught a neural net to recognize the aesthetic elements of photography. The artificial intelligence system then produced original works of landscape photography that professional photographers had trouble distinguishing from similar works produced by humans (take that, Naruto!).

Computer scientists as Italy’s Politecnico di Milano, last month submitted a paper describing how they used a two-stage artificial intelligence system to create new levels of video game play on the fly that even other A.I. systems could not distinguish from human-created levels.

Copyright law is designed to incentive creativity by giving legal force to the author’s claim on its economic value. Our systems of commercial licensing of creative works rest on exploiting the exclusive rights of authors spelled out in the Copyright Act.

But as the monkey selfie case has shown, works can have considerable economic value even where there is no obvious or legally recognized author.

How that value is to be realized through our existing author-based licensing systems, and how disputes over that value are to be adjudicated within our author-centric copyright law are questions we’re only beginning to grapple with. We’ll be grappling with some of them at the 2018 RightsTech Summit in New York.

Anyone interested in addressing them can contact me at [email protected].

 

The Music Modernization Act: Making the Case for Open Data

The Music Modernization Act (MMA) has been scheduled for a vote in the House Judiciary Committee on April 9th, where it’s expected to pass with bipartisan support, committee chairman Bob Goodlatte’s (R-Va.) office confirmed Wednesday.

Still to be determined is whether it will go to the House floor as a standalone bill, or gets bundled into a package of music-related measures, including the CLASSICS Act, and the Allocation for Music Producers (AMP) Act. Either way, the MMA stands to be the most significant piece of legislation affecting music licensing in a generation.

“It’s also the only significant piece of legislation affecting music licensing in a generation,” quipped National Music Publishers Association CEO David Israelite during a panel discussion on Capitol Hill this week on music licensing issues.

In addition to being a rare example these days of genuine bipartisanship in congress, the MMA has proved an even more rare example of consensus among nearly all the (frequently warring) institutional voices within the music industry, including organizations representing digital service providers, publishers, songwriters, and record labels.

The bill is aimed at solving an enduring problem within the music industry that has grown more acute with the rise of streaming as the dominate mode of distribution for sound recordings: uncertainty and inefficiency in licensing mechanical reproduction rights for musical compositions.

Under U.S. copyright law, songs are subject to a compulsory mechanical license. Once a song is published, anyone can record it by notifying the songwriter or representative of their intent and paying the statutory royalty set by the Copyright Royalty Board. Unlike the performance right for songs, however, where a venue or service provider can obtain blanket licenses from ASCAP, BMI, SESAC, and GRD for their entire catalogs of works, covering nearly every song published in the U.S., and unlike other major territories, there is currently no blanket licensing facility here for mechanical rights. Instead, a service provider like Spotify or Apple Music, with upwards of 30 million or more sound recordings in their libraries, must locate, notify, and pay the songwriters or administrators for each of those recordings individually, many of which have complex, and often opaque fractional ownership structures.

Alleged failures to correctly locate and pay the appropriate rights owners have led to a raft of litigation against service providers for copyright infringement, including the $1.6 billion lawsuit currently pending against Spotify brought by Wixen Music Publishing.

The MMA would address that problem by creating a blanket license for mechanical rights and creating a new entity, selected by the Copyright Office, to administer it. Instead of having to pay each songwriters individually, service providers could write one check to the new entity, which would assume the burden of locating and paying the appropriate rights owners. The costs of operating the new entity would be paid by service providers, eliminating the need for the new entity to charge a commission to songwriters.

Songwriters and publishers would gain greater certainty of being paid, while service providers would be relieved of an enormous administrative burden and protected against the risk of litigation.

It is that alignment of interests that has led to the broad consensus in support of the MMA within the industry. But the MMA’s most important contribution could be to prove the case for open data and open protocols.

In addition to administering the blanket mechanical license, the new licensing entity envisioned by the MMA would, for the first time, create an open, publicly available database matching sound recordings to musical compositions and their authors and owners.

“We’re really changing the paradigm on data,” said NMPA’s Israelite, one of the MMA’s main architects. “Throughout the history of the music business databases have been regarded as proprietary. ..We want to encourage competition.”

By making critical ownership data public, MMA’s backers hope, entrepreneurs will be able to develop new applications and services beyond the current crop of streaming services, bringing new investment and new revenue into the music business.

“I don’t think streaming is the be-all and end-all in terms of business models,”  Panos Panay, VP for innovation and strategy at Berklee College of Music and a leader of the Open Music Initiative, said during the same panel discussion. OMI is working to develop open protocols for the exchange of music rights data, which could achieve some of the same effects as the proposed MMA database.

“With open protocols you can build an ecosystem, you can have innovation” Panay said. “The MMA, hopefully, will let this industry finally move beyond its past. If we get this right, we won’t have to stop at streaming. All sorts of new applications could be developed to create all sorts of new revenue streams.”

If that pans out, it could provide a valuable proof of concept for other rights based industries. An open and verified database of authenticity and provenance for images and artworks, for instance, could help unlock new licensing and e-commerce opportunities that are today held back by high levels of uncertainty and fraud.

Likewise, the lack of an open, comprehensive database of rights to published works makes it difficult for would-be developers to learn what works are available for license in which territories, holding back the creation of potentially new, digital applications and revenue streams for authors and publishers.

Much will depend on how well the new music rights database is maintained. There are companies in the market today, such as Music Reports and Loudr, that have already compiled comprehensive databases matching sound recordings to compositions and their rights owners, and they invest significant money and effort to verify the data and keep it current. Whether the administrators of the new open, non-proprietary database will have the same incentive to maintain it at a high level of accuracy and currency remains to be seen.

“Everyone will benefit from having this, and everyone is hurt by not having it,” Panay said of envisioned new database. “I think the important thing is that puts a focus on the data, and the importance of good data.”

 

Rights Owners Rack Up Victories in EU, Australia

The copyright industries haven’t fared particularly well in U.S. trade negotiations recently, missing out on a chance to extend various copyright-protection measures when the Trump administration pulled the U.S. out of the Trans-Pacific Partner, and facing push-back on efforts to incorporate those provisions into a revised NAFTA agreement with Canada and Mexico. But they’re having better luck in Europe and Australia.

Last week, the Australian government unveiled legislation to extend the current digital safe harbors there to libraries, educational institutions, organizations for the disabled, archives, and other cultural sectors. But in a reversal from a previous government position, the legislation would exclude major commercial platforms like Facebook and Google from such protection.

Under current Australian law, the safe harbors protecting networks from liability for copyright-infringing materials uploaded by their users is limited to ISPs. Earlier this year, the government floated a proposal to expand those protections to cover a wider range or networks, including commercial services like YouTube that rely heavily on user-generated content. That proposal was shelved in March, however, and the government began a series of consultations with the copyright industries leading up to last week’s announcement.

The change in course represents a major victory for copyright owners, particularly the music industry, which has lobbied heavily for steps to help close the “value gap” it claims the safe harbors have created on social media platforms. Keeping YouTube and Facebook out of those harbors will make it easier for rights owners to negotiate favorable licensing deals with the platforms.

In Europe, meanwhile, the European Parliament voted this week to reject most provisions of the European Commission’s so-called Sat-Cab proposal that would have allowed broadcasters within the European Union to include content they had licensed for broadcast in their own territory in their pan-European digital video-on-demand and over-the-top services.

The proposal by the European Commission was intended to advance the EU’s Digital Single Market initiative but was strongly opposed by the film and TV industries that have long relied on exclusive territory-by-territory licensing to maximize revenue and secure financing for production.

The vote by the European Parliament is not the final step in the EU’s complicated procedures. The proposal now goes to the Council of Ministers made up of senior officials from the member countries, where European broadcasters have vowed to continue pushing for expanded distribution. But for now, the vote in the Parliament is a major victory for the film and TV producers, who lobbied heavily against the commission’s proposal.

That win comes on the heels of a similar victory for rights owners last month, when both the European Parliament and Council agreed to exclude most copyrighted works for at least two years from another provision of the Digital Single Market rules that strictly limits the use of “geo-blocking” measures on digital goods. The elimination of geo-blocking was strongly opposed by book publishers, who feared it would allow online booksellers such as Amazon to sell ebooks throughout the EU with a single license, undercutting the industry’s practice of licensing digital rights territory-by-territory or language-by-language.

As with the Cab-Sat proposal, the agreement on geo-blocking is not the last word on the matter. But for now, at least, the regulatory tide in the EU that had been running strongly against the copyright industries’ long-standing licensing practices appears to be turning.

 

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.

 

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)

Video: Developing the Digital Marketplace for Copyrighted Works

On December 9th, the U.S. Patent & Trademark Office hosted a public meeting organized by the Commerce Department’s Internet Policy Taskforce on Developing the Digital Marketplace for Copyrighted Works. The RightsTech Project was pleased to work closely with the department to develop the agenda for the meeting and to help recruit speakers for the panels and roundtable discussions.

The event drew more than 80 attendees from various government agencies and from the copyright and technology policy community, for a discussion of creating standard identifiers and metadata for digital media, interoperability among public and private rights registries, online licensing marketplaces, and the role of government in promoting their development. Shira Perlmutter, chief policy officer and director of international affairs for the PTO delivered introductory remarks. RightsTech Project co-founder Paul Sweeting provided an overview of the current state of the digital licensing market and a preview of the topics for discussion.

Below are videos from the day’s sessions. The agenda for the meeting can be found here, and speaker bios can be found here.

Opening Remarks and Panel Session 1: Unique Identifiers and Metadata
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Panel Session 2: Registries and Rights Expression Languages
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Panel Session 3: Digital Marketplaces
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Plenary Session
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Solving Fractions: Rights-Tech Startup Offers an ‘Alternative’ to ASCAP, BMI

The U.S. Department of Justice last month notified the federal Second Circuit Court of Appeals of its intent to appeal a lower court ruling that effectively overturned the department’s controversial decision barring fractional licensing by ASCAP and BMI.

The appeal all but guarantees that the question of whether the performance rights organizations (PROs) must offer so-called 100 percent licenses to all the songs in their catalogs, rather than only the share of the rights held by the publishers and songwriters each PRO purports, respectively, to represent, will continue to hang over the industry well into 2017 and perhaps longer.

copyright-law-gavel-2016-billboard-650“While we hoped the DOJ would accept Judge Stanton’s decision, we are not surprised it chose to file an appeal.,” BMI president and CEO Mike O’Neill said in a statement. “It is unfortunate that the DOJ continues to fight for an interpretation of BMI’s consent decree that is at odds with hundreds of thousands of songwriters and composers, the country’s two largest performing rights organizations, numerous publishers and members of the music community, members of Congress, a U.S. Governor, the U.S. Copyright Office and, in Judge Stanton, a federal judge.”

The case arose from a request filed with the Justice Department in 2014 by the PROs themselves, for modifications to the consent decrees that have long-governed how ASCAP and BMI grant performance licenses to broadcasters, venues and others outlets that publicly perform live or recorded music. In response to that request — which concerned efforts by some music publishers to withdraw digital performance rights to their catalogs from the blanket licenses issued by the PROs — the DOJ initiated a review of current licensing practices. In the course of that review, the antitrust division unexpectedly broadened its focus to the question of fractional licensing in general, rather than the narrower question of partial withdrawal of digital rights.

In the end, the antitrust division decided not to grant the requested modifications for digital rights. But it concluded that the language and intent of the consent decrees had always required 100 percent licensing and that any current industry practices to the contrary would need to change. It gave publishers and the PROs one year to make whatever changes to their systems were necessary to comply.

“The Division reaches this determination based not only on the language of the consent decrees and its assessment of historical practices, but also because only full-work licensing can yield the substantial procompetitive benefits associated with blanket licenses that distinguish ASCAP’s and BMI’s activities from other agreements among competitors that present serious issues under the antitrust laws,” the department said in a statement issued at the conclusion of its review. “The Division’s confirmation that the consent decrees require full-work licensing is fully consistent with preserving the significant licensing and payment benefits that the PROs have provided music creators and music users for decades.”

The consent decrees at issue in the case date to the 1940s. They were the result of separate lawsuits brought by the Justice Department against ASCAP and BMI, alleging each organization was illegally exercising market power obtained by aggregating performance rights from nominally competing publishers and songwriters in violation of the Sherman Antitrust Act. In the course of that litigation, DOJ concluded that the blanket licenses offered by the PROs brought meaningful efficiencies to the market for performance rights by sparing music users from having to negotiate separately for the rights from tens of thousands of songwriters and publishers. The consent decrees, which settled the cases, were designed to allow music users to benefit from the efficiencies of blanket licensing while putting strict limits on how those licenses could be structured and sold.

But what if there were other ways to achieve the efficiency of blanket licensing without requiring the collective — and thus potentially anti-competitive — management of performance rights?

That’s the premise behind the National Performance Rights Exchange (NPREX), a Nashville-based startup that has built a marketplace platform it claims will enable publishers and record labels to license performance rights directly to broadcasters and digital service providers (DSPs) without going through ASCAP or BMI, and at a fraction of the cost of what the PROs charge.

The NPREX marketplace is modeled on financial exchanges like the Chicago Board Options Exchange and NASDAQ. At its heart is a pricing algorithm that takes in multiple signals from the music performance market regarding supply, demand (popularity), comparable works performance, and other data to yield pricing parameters that both licensees and licencors can use to determine the value of a song and then settle on a final, clearing price based on real-world usage data.

“The problem for publishers has always been, what is my profit-maximizing price?,” NPREX founder and CEO Lee Greer told RightsTech.com. “And in the music business, there’s a large number of other rights owners trying to do the same thing at the same time, with the same set of buyers. So it’s a very complex, interdependent thing.”

The collective licensing system resolves that dilemma, by rolling everything into a single price, but it doesn’t actually solve the problem and doesn’t necessarily maximize publishers’ profit.

“We’ve solved that problem in a way that offers an alternative to the collective licensing system, along with fractional licensing,” Greer said.

An economist and attorney, Greer is a former chief economist for BMI. “I actually proposed to BMI that they build an exchange for direct licensing,” Greer said. “They said, ‘that’s interesting,’ but I was told not to talk about it anymore.”

Greer eventually left BMI to develop an exchange himself, and built the first version of what became NPREX in 2013.

“We solved a pretty ridiculous math problem, but it’s not a new math problem,” Greer said. “It was solved by economists maybe 25 years ago and is now used in financial exchanges and is well understood. The issue was getting the right inputs to make it work for music.”

Along the way, NPREX came to the attention of the Justice Department, which interviewed Greer and his team during the course of its review of the ASCAP and BMI consent decrees. Greer will pay what he describes as a “courtesy call” on the antitrust division on Thursday (12/8) to demonstrate the NPREX platform. He will also be participating in a public meeting organized by the U.S. Commerce Department (with input from the RightsTech Project) on Friday (12/9) on Developing the Digital Marketplace for Copyrighted Works.

This week’s meeting with DOJ is not directly connected to the department’s review of the consent decrees, or to any broader review of the collective licensing system, according to Greer. “This is more about a goodwill gesture on our part,” he said in an email. “I want them to understand that is is indeed do-able to implement a systematic direct licensing mechanism that complies with copyright and antitrust law.”

NPREX is set to begin beta testing is marketplace shortly, followed by an initial capital-raise, “which I think will be fairly notable,” Greer said. “We have NDAs with several publishers and third-party data suppliers to the industry. We have the kind of support that will create an end-to-end solution.”

 

Pandora Nears Deals For On-Demand Streaming 

Pandora Media Inc. is aiming to start expanding its internet-radio service as soon as next month, offering its hallmark free tier as well as two new monthly subscription options that will mark its foray into on-demand music streaming, said people familiar with the matter.

Pandora is close to inking deals with major record companies that will allow it to do so both in the U.S. and in new overseas markets, though the agreements haven’t been finalized, these people said.

Source: Pandora Nears Deals For On-Demand Streaming – WSJ

Please Share, With Gratitude

Lance_Koonce_DWT

Lance Koonce , Davis Wright, Tremaine

A few weeks ago Jesse Walden of Mediachain Labs asked me a deceptively simple question: What would a Creative Commons-type license look like if in addition to requesting attribution (as is required by many open licenses), the license also required licensees to let the author know about any re-use?

This exploration is a thought-piece, designed to spur discussion around new technology and the commons. Nothing I say here has been endorsed by the Creative Commons (“CC”) organization, nor am I advocating adoption of any specific new license by that organization. We are simply using the existing public models as a leaping-off point. We are calling the license Gratitude 1.0 and while I’d urge you to read through the background information first, if you want to jump to the license itself, you can read it in full here. All comments and criticisms welcome!

Source: Please Share, With Gratitude — Mediachain Blog

This Kobalt-managed fund has spent $200m on music rights in 5 years

Kobalt Music Group, the company that’s relentlessly disrupted the music industry since launching at the turn of the Millennium, is still very much based on the principle that its clients – across publishing, label services and neighbouring rights – get to retain their own copyrights.

“Kobalt’s mission has always been to take the music industry into the digital age as a service provider to rights-owners,” Kobalt CEO Ahdritz (pictured) tells MBW. “That’s what we are and what we always have been.”

Source: This Kobalt-managed fund has spent $200m on music rights in 5 years – Music Business Worldwide

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