Industry information that you can actually use February 2002 - Happy Valentine's Day to all who favor a more honest music industry for
This month SUPER IMPORTANT STUFF FOR WRITERS: a recap of last month's HFA/RIAA evil alliance with NEW inside info
Harry Fox takes a $1M bribe from the RIAA to look the other way for a couple of years.
RIAA cons the musician's union into a shortsighted compromise for "Internet radio" royalties
CD inventor thumbs their nose at the major's attempts to end CD piracy
Suddenly the RIAA wants to be my pal
This is not news...
News is allegedly objective. This is anything but. This is about
interpreting the news into information that you can use. The key to predicting the
future is in interpreting the past. In real terms, this means understanding
how the big players interpret their mistakes and their recent acquisitions.
And they make some big ones of both. Let's take a look. But first:
NEW ON MOSESAVALON.COM
After Miles Copeland bullied MusicDish into taking down my article
which dismantled his argument about the seven year statue, I can now announce
that the MusicDish has decided to come down on the side of the 1st amendment
and repost the article. You can see this controversial piece at this link:
http://www.musicdish.com/mag/?id=4794 Moses V Miles
Also if you're in LA tune into Samm Brown's For the Record every other
Tuesday. 90.7 KPFK at 10PM to hear me talk more about the
controversial
issues that are sparked below.
THE RIAA WANTS TO BE MY FRIEND
After December's Moses Supposes went out I received a letter from the
RIAA saying that my coverage of the HFA/RIAA blanket license agreement for
digital downloads was filled with "gross inaccuracies." I'm not one to stand
firm when I'm wrong, so I asked their correspondent if she would point out
what was bothering her. Days later I was granted an interview with both
CarySherman, the General Counsel for the RIAA and Stephen Marks the Senior
VP of Business affairs for the RIAA. Together they "cleared up a few
misconceptions" by going line by line through the two pieces and
offered comments.
So, throw out the old version of this piece, if you're archiving them.
Now I can present the new and improved (and RIAA "cleared up") reprint with
retractions to last month's stories. Unfortunately for the RIAA, I
think they should have let the older version stand, as you'll see in a
moment, now they look even worse.
(FYI, the correspondent who contacted me has since left the RIAA.)
CD INVENTOR SAYS "SCREW YOU" TO LABELS
Philips Electronics, the multinational corporation that owns the patent
on the CD and, until last year, owned PolyGram records, has announced that
they disapprove of the recording industry's attempts to prevent the general
public from pirating CDs.
Philips earns about 4 cents for each CD manufactured, this includes
blanks. When the Internet and the Napster-like services came alive the new
direction for the company was clear: forget about making money with the CD patent by developing artists, just sell the blank media to those who download
music. Philips promptly sold their record division (PolyGram) to Universal
Music. "They make the same royalty on a patent regardless of weather someone
is using it legally or illegally," said one industry expert.
This month the five major labels are rolling out a new "copy-proof" CD.
The downside is that these new CD's will not play on all CD players. A
death sentence to the product as far as some consumer experts are concerned.
It might go over if it had industry support. But, Philips refuses to
participate in the campaign to get people to accept the new product.
If fact they have barred the majors from using the CD trademarked logo, and
insisted that they inform the buyer that they are not actually getting a "CD"
but only something that looks very much like it.
Not incidentally, Philips also makes one of the few CD players that
will be able to crack the new "CD's" copy protection codes. Philips is a
German/Dutch-owned company who, according to their web site, was the
leading manufactures of radio parts in Nazi occupied Europe during the Second
World War.
THE RIAA THROWS ARTISTS A BONE COVERED WITH FLEAS
(RIAA "improved")
Two months back several news groups reported a "landmark agreement"
reached between some organizations that represent artists and songwriters, and the RIAA et al. which includes SoundExchange.
This "landmark" agreement was regarding the new royalties created by the
Digital Performance Right in Sound Recordings Act of 1995 (DPRA) and
Digital Millennium Copyright Act of 1998 (DMCA), which would insist that those
who stream music over the Internet pay royalties for each stream. The RIAA
has positioned themselves as the gatekeepers of this royalty, claiming that
they should collect and divvy up the estimated millions a year in royalties
because their members make up the majority of the Act's beneficiaries.
The AFM (American Federation of Musicians) and the MMF (Music Managers
Forum--a trade group that forwards artists interests via mangers'
interests) argued that the RIAA has no business collecting the entire royalty
because it is clearly designed to be split equally between the performer and the
label.
The RIAA yielded to both and agreed to allow for those royalties earned
from non-interactive performances on the Internet to be paid DIRECTLY to the
artist, instead of what was proposed: that on-line services pay the
labels all monies from streaming and then have the labels "pay out" the
artists (something many artists doubted that the labels would actually do).
Sounds great, right? So, what's the problem with this "landmark"
agreement? It's only for "NON-INTERACTIVE" services!
What exactly is an "interactive service?" The Legislature hasn't been
able to spell it out to the satisfaction of anyone in the biz. RIAA General
counsel Cary Sherman didn't dodge this bullet when I asked him about it. He
agreed and added, "The industry would benefit from having a standardized
definition of what constitutes 'interactive transmissions.' With luck that could
come about in a year or so."
But this lack of definition has not stopped his boss, Hillary Rosen and
RIAA president from bringing suits this past year against LAUNCH, SonicNet,
ClickRadio and Echo (among others) for being "too interactive" despite
the fact that ALL on-line music services have interactive elements. (It
has not escaped the eyes of their critics that the RIAA's suits seem to be
selectively targeting companies that are NOT affiliated with RIAA
members).
To give you an idea what is DEFINITELY being acknowledged as an
"interactive" service, here are two names: MusicNet and PressPlay. These are the
services connected to the major labels and their campaign to capture the
Internet as a distribution system. All of them operate, more or less, like Napster,
in that you would have the ability to pick and choose what you hear or
download. (Except the Big Five versions will have limited catalogs, tons of ads
andcost about $10 a month.)
WHAT DOES ALL THIS MEAN TO ARTISTS AND PRODUCERS
Basically, the only revenue stream addressed by the "landmark"
agreement are those amounts owed from smaller Internet companies
who are packaging songs in Internet radio-styled, "non-interacive" formats.
The day may come when these services are as prevalent as normal radio
is today, but for some time to come there will be very few of these and
most of them have, or will have, custom licensing deals with each label anyway.
Many will take advantage of the nebulous nature of this lack of definition
in the law and probably claim that they are "interactive" to any artist
sniffing around for a direct license from them, while simultaneously claiming
that they are "non-interactive" to the RIAA to avoid paying the labels.
RIAA General counsel, Cary Sherman said, "Could somebody do that?
Sure." But he is not concerned and simultaneously postulates, "Web casters
will simply pay the royalties that they are required to pay. It will be
very unusual for them to try [to play both ends against the middle] because
they will be sued by both [us and the artist]." Of course Mr. Sherman is
forgetting that the artist may not have the same legal resources that
the RIAA has when it comes to protecting their rights.
Okay, so that covers Internet radio. How can the Majors get out of
paying even the INTERACTIVE royalties (that is to say, the royalties they will
owe from music sales that are downloaded selectively as opposed to streamed
in a radio-like format)? For that they will need to find a way to avoid
paying the required-by-law STATUTORY RATES to songwriters. And those licenses
are primarily administrated by the Harry Fox Agency. Behold the gap closer...
HARRY FOX SELLS ITS PUBLISHERS DOWN THE RIVER
(RIAA "improved")
EXCLUSIVE AND MEGA IMPORTANT
Once they were the great protectors of publisher's royalties. Auditing
record companies, collecting statutory fees and issuing licenses if you
wanted to put a cover song on your CD. Now that the digital future
with direct licensing, downloading and automated accounting is quickly
becoming reality, the HFA (The Harry Fox Agency) senses their days might be
numbered. In a desperate play to shoot life into their beleaguered coffers they
have penned a deal with the RIAA for a blanket license: a one time fee for
all royalties that will become due from the major label's "interactive
music
services" such as PressPlay and MusicNet.
In this agreement the National Music Publishers' Association (NMPA) and
it's collection arm (the HFA) has disregarded the untold millions that might
come from interactive sales and accepted instead an "advance" of $1,000,000
from the RIAA and, for the next two years, then only, an additional $65,200
per month thereafter will be paid by all major labels for ALL digital
downloads.
After the HFA deducts some administrative fees, the division of the
money will be based on what the HFA is calling "market share." This term
should ring a bell with those involved with ASCAP and BMI. It means you get
paid ONLY if they think your music was a significant player in the game that
month. A system that has meet with much controversy over the years for
both societies. In this case the data used to determine if you qualify for "market share" will be generated EXCLUSIVELY by Sound Exchange-- an RIAA
owned affiliate.
LEGAL EAGLEING
I have reviewed the contract between the HFA/NMPA and the RIAA.There
are several MAJOR problems with it. First of all the HFA website has made
it impossible to download. So you have to wade through it's confusing
legalese on your computer screen, but aside from that:
1) The agreement tries to get publishers NOT affiliated with Harry Fox
to agree to this deal through noncompliance: the same way that credit card
companies get you to opt into services by offering them and then making
it really hard to cancel. It even establishes a commission that a major
label will pay to Harry Fox if they can persuade a non-HFA affiliated
publisher to opt into the deal.
2) The agreement makes it very hard for the HFA to sue the RIAA on the
publisher's behalf, because they are now the ones who dole the money
owed the publisher from the blanket license and are therefore a biased party.
3) No statutory rate for non-interactive streaming has been
established. So, this agreement is nothing more than the major label's strategy to lock in a fixed payment before they might be required to pay far more. And its
implications are TREMENDOUS as it could be prevent ALL independent
publishers from charging whatever they want for the licensing of songs and being
forced instead to accept a portion of $65,200 a month (assuming they even
qualify for "market share.")
4) The agreement contains a provision that allows the RIAA to cancel
the deal if the new statutory rate demands a lower payment than $65K a month but
there is no provision that allows the HFA to cancel the deal if the amount is
higher. RIAA Senior VP of Business affairs Stephen Marks says not to worry,
even though he admits that there is no specific clause that allows the FHA to
cancel the deal he claims, "It's implied in the contract." (I asked him if
the RIAA would be clearer and insert a specific clause that states, in no
uncertain terms, that this in not a waiving of the HFA's rights. He had no
comment. Stephen Marks can be reached by phone (202) 857-9637 or email
SMarks@riaa.com.)
5) Even though RIAA General counsel, Cary Sherman told me that
SoundExchage was as separate entity, he admitted that it's only a separate company in principle--not legally. So, we have an RIAA owned operation that is
going to generate the data that the HFA will use to divvy up the blanket license
among ALL publishers, those that are both RIAA affiliated and independent.
Who do you think will get the lion's share?
WHAT THIS MEANS TO YOU
Even if you buy into the concept that the total amount of digital
non-interactive money that publishers will earn over the next two years
is only going to be $1 Million, how can anyone think that that after
digital transmissions are as common as buying a CD in a record store that the
total monthly bill on ALL music will be only about $65K? It's preposterous.
If you are a publisher who is affiliated with HFA (or a writer whose
publishing is owned by a company who is affiliated with HFA) you might
want to get on the phone and voice your concerns about why YOUR collection
agency is lowballing.
You probably will also want to opt out of this deal in favor of cutting
one on your own. (Yes, you can do that). If you don't then you have to hope
that the HFA thinks you're worthy of a large piece of that blanket license.
OBITUARY
Our hearts go out this month to the family of renown singer Peggy Lee.
If you're not a Jazz buff then you will appreciate her as the singing
voice of the sultry dog in Disney's Lady and the Tramp. A movie that helped her
win a landmark lawsuit against the Mouse for about $2 Million. This suit
open the doors for every musician and actor to get money from studios who were
exploiting the video rights of performers without paying them a dime.
Peggy got her props and wrote new law. She was 81.
Moses Avalon
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