The smell of extortion

13 05 2008

A lot of people on the Net got uppity when the record labels and publishing rights organizations wanted to up the royalty rate on Net radio broadcasts (in a more vehement and widespread fashion than they did the last time this happened, round about 2002 iirc), and in part they had good reason to do so, although I’m not sure it was adequately documented *why*. Allow me to partially illustrate.

I work for a company that sells music online. Like everybody else and their brother, we allow people to listen to samples of what they’re buying beforehand. These samples are frequently over 30 seconds long, and thus technically count as performances / broadcasts / whatever you want to call it. Though we’ve been doing this for quite a long time, only one publishing rights organization (one of the smaller ones) has approached us about paying royalties for said “performances”.

Being prepared for that initial approach, we retained records of every listen to a sample clip on our site, showing the full user agent string and IP address, as well as the composition to which that user listened. (This is pretty simple stuff to glean from webserver logs.) When the PRO asked for the first account of our listening for a specific quarter, we sent spreadsheets of all relevant information–down to the individual listener’s IP address, the publisher and composer of the work in question–organized by month, with a number of aggregated hours of music encompassed by all those listens. (They call this “aggregated tuning hours”.) These spreadsheets were several million rows long for each month, but they detailed the publisher of works so the PRO could at least find out whether the work in question was one they represented.

After two rounds of this, both times with me providing desktop support to the business staff on the other side who had no idea how to cope with spreadsheets this large, the PRO explicitly asked us to stop sending detailed accounts of listens, and just provide the aggregate tuning hours. We were informed that a calculation had been made of approximately what percentage of our catalog of music was represented by the PRO, and a multiplier figure extrapolated from that so we could simply multiply our aggregate tuning hours x [ a number ] and it would show how much we needed to pay in U.S. Dollars. This multiplier was so small that the typical payment from those millions-of-rows-long spreadsheets usually tops out at less than $100 per quarter.

So the basic attitude from this small PRO was “we don’t care what specifically you’re streaming, or even whether any of it belongs to our catalog. Our numbers men say this is our piece of the pie. Just add it up and pay us.”

Let’s imagine this in another scenario: say I’ve received a patent on a product design, and you want to produce consumer goods based on my design. I grant you a patent license to use my design, where you pay $1 for every physical item you produce based on my design. After your first run of production, you tell me exactly how many items were produced in all your factories, showing which patented design each item reflects. Instead of adding up the number of items with my patent number in them, I tell you “oh it looks like my products are about 3% of your market share. I’ve generated a number that represents my $1 share combined with that percentage, but I can’t tell you how it was calculated. Multiply the total number of items you produced by that number, and pay me the result.”

Now picture this same situation, except where the patenting inventor (me) is not involved in the process at all, but the number comes from an inventors’ trade organization to which I pay dues, with the organization (in theory) paying me for sales of my design.

The lack of involvement of the controlling party here is more indicative of our times than anything else, but above the arbitrarily-offered multiplier, the real rub of this comes in a consideration of how PROs make their money. They collect fees structured like that described above all the time, and apply the same “market-share” calculations to the artists they represent, taking any “extra” money and either spreading it around or keeping it. According to PROs and conventional music industry wisdom, the “kept” or “spread-around” money is for performances and royalties “not directly attributable” to any artist in their roster, or unable to be collected (an extreme example would be publishing rights unclaimed in probate). This implies some sort of attribution of individual performances to specific artists, which as I’ve just illustrated, doesn’t always happen! It’s a bald-faced lie to keep up organizations and civil precedent that aims to punish those who infringe on artists’ intellectual property but levy no punishment whatsoever toward industry organizations that do the exact same thing.

In other words, extortion aimed specifically at those who have not the golf buddies / undying legal teams to fight off larger entities.




One response

9 02 2009

Then why’d you get in the game homie?

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