Friday, December 21, 2007

Patry: What Do People Actually Think Copyright Is?

My favorite copyright scholar, William Patry, wrote this morning about an experiment by Karl Fogel, in which Fogel interviews folks on the streets of Chicago about their thoughts on copyright.

I thought this particularly valuable to share in light of my depressing post yesterday about how badly artists are getting screwed in their record contracts as a direct result of file sharing. Based on Fogel's findings, if the general public really knew the consequences of their actions, maybe they wouldn't do it - those feelings of guilt should be greatly amplified because, regardless of whether file sharing really hurts the bottom line of the majors, it has done irreparable harm to artists.

Stewart, Colbert to return Jan. 7

Sweet! :)

Thursday, December 20, 2007

NAB Calls It an "Anti-Performance-Tax Resolution"

Legislators long ago realized that swaying public opinion on a matter is oftentimes accomplished with a name. The perfect example is the so-called "Death Tax." People hate death, and hate taxes even more. The idea of a tax on dying is truly offensive. While not an entirely inaccurate name, it is more appropriately called the "estate tax." However, the word "estate" conjures images of wealth, which is a closer representation of what is described, since it is a levy imposed on those with substantial assets and is designed to prevent the mass accumulation of wealth by way of inheritance.

The National Association of Broadcasters has taken its cue and refers to the newly proposed performance royalty for radio as a "performance tax." Nice try, NAB. (Note that NAB also refers to the FCC's relaxing of consolidation rules as "localism rules," suggesting that somehow allowing further corporate consolidation of media supports localism.)

NAB, along with NPR and other broadcast associations, has formed the Free Radio Alliance, aptly named to conjure warm fuzzy feelings. Its sole purpose is to fight against sound recording performance royalties for terrestrial radio, which it calls a "transfer tax on local communities."

Yesterday, Radio Ink reported the introduction of House Concurrent Resolution 224, in opposition to the performance royalty bill. The clever name employed here? The Local Radio Freedom Act. And we thought stuffy big business types weren't creative. The resolution reads:

Congress should not impose any new performance fee, tax, royalty, or other charge relating to the public performance of sound recordings on a local radio station for broadcasting sound recordings over-the-air, or on any business for such public performance of sound recordings.
It will come as no surprise that this resolution, trumpeting loyalty to and defense of local radio, was introduced by two Representatives from Texas, home of Clear Channel. No logical gymnastics are required to conclude that Clear Channel might have had some influence in the introduction of this legislation.

Clear Channel's impact on radio is no mystery - it singlehandedly destroyed local radio in the late '90s. This is perhaps why they had to get so creative with both the title of the resolution and its contents. After all, "Congress should not require major corporations who own radio stations all over the country to pay for using the recordings responsible for making them billions of dollars," just doesn't evoke the same warm fuzzies. (You know, on second thought, maybe we should back the Resolution exactly as it reads and not impose a performance royalty on local radio - only big media companies should pay it.)

The True Impact of Piracy

I was once again reminded this week of the dreadful impact of piracy on the music industry. The most common justification given by most who steal music online via Pirate Bay, et al, is that doing so is a sort of rebellion, sticking it to the man, if you will. Let's face it, screwing the majors out of a few bucks is quite empowering and with it comes a sense of righteousness.

But the bitter truth is that the majors are still in control and are the ones who are calling the shots. They are trying their best to let others (read: artists) absorb the losses from file sharing. Almost no artist has true bargaining power with a major and once the labels start incorporating certain terms into their recording contracts, it becomes almost impossible to remove those terms.

This week I was reviewing a contract for a fairly successful producer and songwriter, who was offered a record deal. My first pass was striking a mountain of language. The calculations on master royalties were atrocious (for those who know, they were basically using retail calculations on a wholesale basis, which effectively cuts the royalty in half, if not worse). However, they were also asking to reduce mechanical royalties (for his songwriting work) in the same manner as the master royalties. In this particular deal, it meant that his mechanical rate, already a 3/4 rate (75% of the statutory minimum) would be reduced even further for so-called "mid-line" and "budget" records, those sold at prices lower than the highest retail price. Other reductions/deductions would push the mechanical even lower.

Then there was what the attorney described as their "standard 360 language." First, 360 deals are only a recent creation and NOBODY has a "standard" yet. Second, 360 clauses should be the exception, not the rule. These provisions basically give the label a share of touring, merchandise, and name-and-likeness rights.

There are a plethora of issues to address when 360 language is incorporated, perhaps most importantly is that revenues from these other activities should not be cross-collateralized, i.e., the label should not be allowed to recoup recording costs, etc, from this money. The label should also be required to earn its share and its share should be commensurate to the label's role.

Despite my and other artist advocates' protest, these terms are becoming increasingly common. The more common they become, the more "standard" they become. The more standard they become, the more impossible it will be to have them removed.

Just like "new media deductions" became standard 20-25 years ago with CDs in order to offset the cost of developing the new medium and packaging, 360 clauses will start off as well intentioned but will become a new home for labels to chisel away artists' rights and income.

And it is all happening because people who obviously enjoy music have opted to get it for free from illegitimate sources. They think they are getting "the man" but the man is too powerful and too greedy to be cheated so easily. For every penny lost by a major due piracy, they take three more from the artists.

Artists were already squeezed dry on the recording side (my producer-client's manager, who represents some of the biggest names in the industry, told me that it's been years since he's seen a royalty check from a label). Therefore, mechanicals and other song royalties were a great way to earn a living for recording artists who wrote their own music. So the labels are sliding in creative language to greatly diminish these income streams. Now they are also grabbing for all of the artists other income, from areas that were once very far from the label's grasp. While many of the deals may look harmless now, the labels will no doubt find ways to reduce the artists' share in these arenas as well.

I know that it will be impossible to change the general public's view, to cause them to rethink the impact of their actions. It just saddens me to no end.

Wednesday, December 19, 2007

The Good, The Bad

Two significant issues were brought to the forefront yesterday, the first regarding the FCC's plan to allow greater media consolidation and the second regarding a bill that would finally require terrestrial radio pay a performance royalty for sound recordings.

FCC Passes New Rule

I have yet to read the new FCC rule but word on the street is that Chairman Martin's plan passed. His proposal is discussed in more detail in previous posts but it will allow a single company to own both a newspaper and TV station in a top-20 market, so long as there are 8 other media holdings remaining after the merger and that the station is not one of the top-4 stations in the market.

I sincerely hope that lawmakers stop the enforcement of the new rule and I suspect that they will. It is a ridiculous rule as it uses fluid benchmarks to make long-term decisions. What if a company wants to consolidate TV and print in the #20 market and that market slips to #21? What happens if the TV station purchased is #5 but, due to the significant ad budget of the parent corporation, the station moves to #4? Will the FCC force an immediate breakup as soon as the conglomerate no longer meets the market requirements?

That is hardly likely. Instead, the FCC will probably grant waivers, just as it has granted waivers to Tribune and others when they sought to consolidate, rules be damned. The FCC will no doubt argue that it would be "unfair" to force divestiture of the media outlet if market conditions change and the owner no longer meets the requirements.

Perhaps the FCC has addressed this question and I am not yet aware of it (as I say, I have not seen the rule yet) but if not, media conglomerates will be able to drive Mack trucks through this loophole.

Congress Proposes Terrestrial Radio Sound Recording Performance Royalty

Finally!!! The only ones who can complain about the Performance Rights Act are Cumulus, Clear Channel, and other major radio outlets. I found it shockingly peculiar that Congress saw the justification for creating a sound recording performance royalty for online radio but did not see the necessity of doing the same for terrestrial radio.

The argument from the stations has always been, We promote the records so people will buy them. The labels response is, of course, But you're making money by playing our music! For me, that's what it should always come down to. While the fundamental purpose of copyright is NOT financial but is to support creative expressions, I certainly think that if someone is profiting from copyrighted works, they should compensate the creator. Radio, instead, snubs its nose at recording artists and says it's doing them a favor - they should be happy that radio is even playing their music! (Yeah, OK.)

Lawmakers have finally stepped up - this is the first time in history (at least that I'm aware of) that a law has even been considered to give a performance royalty. It's about time that the U.S. joins the rest of the civilized world and honors the performance right of recording artists, regardless of the means used to deliver that performance.

Tuesday, December 11, 2007

Newspaper Association Wants to Block Sentate Bill to Delay FCC Vote

According to Multichannel News, the Newspaper Association of America has asked the Senate to "derail any legislative attempts to derail the FCC's Dec. 18 vote."

The FCC is scheduled to decide next week whether to relax cross-ownership restrictions on TV and newspaper in the top 20 markets. The bi-partisan Senate bill would require the FCC to delay its vote for at least 90 days, which would give Congress a chance to investigate the methods used by Chairman Martin to bring the rule to vote and his stewardship of the FCC in general.

Monday, December 10, 2007

FCC Chairman Criticized

What can I say, I'm on a roll with finding articles about Chairman Kevin Martin.

Thursday, December 06, 2007

SoundExchange Comment on New Satellite Royalty Rates

Radio Ink reports that SoundExchange is not happy with the new rates set for satellite music providers. The royalty will be 6% of gross revenues for 2007 and 2008, and will rise to 8% in 2012, while SoundExchange wanted the rates to start at 8% and increase to at least 13%.

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More Tribune & FCC News

I have to dig more into this one but Broadcasting & Cable is reporting that Tribune filed suit against the FCC challenging the waiver it received last week, the pending cross-ownership rule proposed by Chairman Martin, as well as the existing rule against cross-ownership. It appears that the contingency in Tribune's two-year waiver, which allows the waiver to be extended indefinitely while the rule is being litigated, was designed specifically to give Tribune a means to control its own destiny. The contingency gave Tribune legal grounds for filing the lawsuit, which not only means that Tribune's lawsuit will extend its waiver, it also opened up an opportunity for Tribune to challenge cross-ownership rules as a whole. B&C, quoting Commissioner Michael Copps:

"If the majority simply granted a two-year waiver to Tribune -- which would have been the straightforward thing to do -- Tribune would have been unable to go to court because a party cannot file an appeal if their waiver request is granted," Copps pointed out in his dissenting statement. "So what does this order do? It denies the waiver request but offers an automatic (and unprecedented) waiver extension as soon as Tribune runs to the courthouse door. Presto! Tribune gets at least a two-year waiver plus the ability to go to court immediately and see if they can get the entire rule thrown out."

Copps also opined that Tribune would be able to appeal to the "more sympathetic" D.C. Circuit, bypassing the Third Circuit, which remanded the general ban back to the commission, although even that court indicated that the FCC could make a case for modifying or lifting the ban.
What a mess - It's going to take me some time to sort through everything and figure out what might come of all the various factors at work. You have the waiver just passed, a Congressional investigation into Martin and his stewardship at the FCC, a rule proposed by Martin that is supposed to be voted on very soon, a lawsuit against the FCC by the beneficiary of the waiver . . . and the relatively strong possibility that Congress will try to alter the rulemaking process in some fashion, perhaps not even waiting to review the results of its investigation of Martin.

Wednesday, December 05, 2007

FCC Chairman Martin To Be Investigated

There is hope! Variety reports that Rep. John Dingell (D-Mich.), head of the House Commerce Committee, plans to initiate an investigation of Chairman Martin's stewardship of the FCC. Rep. Dingell is questioning whether Martin is using questionable practices in order to push through his (and presumably, the administration's) agenda. I've been none-too-happy about the waiver that Martin sought (and received) for the Tribune, and question his policy in general on cross-ownership. Now it appears that Martin will have to answer for his conduct.

I am curious to see what will result from this investigation. The last time Congress got involved in an FCC matter, it was when Chairman Powell tried to push through new cross-ownership rules when the public at-large expressed strong opposition to the change. He originally tried to pass the new rules without public comment but was forced to change course in the face of public outrage; then, despite an overwhelming number of comments opposing the measure, he passed a measure to relax cross-ownership restrictions. Public opposition was so great, Congress had to step in and reverse the Chairman's new rules.

It seems unlikely that Congress would "undue" Martin's waiver for Tribune, mainly because the Tribune sale is supposed to close before the end of the year. Since Congress could not address the issue before then, it is unlikely that it would require Tribune to divest itself of media properties in order to comply with the law. However, Congress is sending a strong signal to Martin and could help reinstate some since of order in the agency.

Monday, December 03, 2007

Martin One Step Closer to Dismantling Cross-Ownership Rules

As expected, the FCC voted to approve a waiver that will allow the Tribune sale to move forward. See the story from Washington Post.

Look at Chairman Martin's comments from a few weeks ago, justifying the elimination of cross-ownership restrictions in the top 20 markets, then compare them to the Tribune circumstances. Martin's comments sound as though they are meant to protect the poor mom-and-pop local daily papers, the ones without sufficient resources to collect and report on local news. In Martin's logic, allowing newspapers and local TV stations will enable them to combine their news rooms and better serve their communities.

Does anyone - a single person - believe that the Tribune sale represents the plight of local news coverage and is a means to safeguard local interests and reporting? Well, even if our current Republican administration has lost sight of traditional conservative values like small federal governments and reduced spending, at least the 3-2 party line vote shows that the FCC Republicans are unashamedly still supportive of big business, even if it is at the expense of the public at large.