Thread by @future_of_music

Quick thread on Spotify/Google/Pandora/Amazon appeal of CRB rate increase to songwriters. Without letting anyone off the hook, it's more complicated and less binary than "The govt called for a rate hike and these companies opposed it"

The CRB isn't just setting one rate, but ratifying a whole complicated system, and all these services brought forward different proposals and the rightsholders brought their own proposal, and no one got precisely what they wanted; If you don't get what you want, you can appeal.

At the same time, in a crowded streaming marketplace, one way that services can distinguish themselves is by competing to treat creators better, both in how they conduct their business, and in how they make their case in Washington.

And services haven't all done a great job of being responsive and attentive to creators' concerns, at a time when songwriters and performers are all paying greater attention to these issues than ever before.

At issue here is the license paid to publishers under the terms of section 115. Publishers then pay songwriters. For CDs, it was a royalty of 9.1 cents per song. For streaming...there's not just one flat rate.

Why isn't there a flat rate? The CRB (panel of 3 judges) has endeavored to put together a royalty system that can account for different kinds of streaming business models. It can be a complex revenue calculation that includes percentage of revenue as well as a per-user "floor"

Want a fun way to spend a few hours? Try reading the CRB's full determination. Unfortunately, there's lots of redactions, because the judges look at proprietary business information as evidence in making their decision. govinfo.gov/content/pkg/FR…

Digging in to some of the services' specific objections can be instructive; for example, Spotify has a complaint about the rate hike not including lyric rights and sync rights to display music videos. Which is puzzling, because Sec. 115 doesn't include such rights and never has.

Additionally, Spotify raised concerns about how the per-user "floor rate" doesn't get discounted in bundle subscriptions. For a digital NYTimes or Hulu package that includes Spotify, the CRB says Spotify should pay the same floor rate as a standalone subscription.

Spotify's argument is that discounts would allow more bundles, and allow them to "grow the pie". And that's a big question for songwriters and musicians. Who benefits from an approach that prioritizes "growing the pie" above preserving a certain level of per-user revenue?

It's encouraging to see net revenue growth happening in digital music. But the dominant model for on-demand streaming and its pro-rata payout model has meant that not every creator benefits from that growth in the same way. That's a big part of what's fueling the outcry.

And this is why it's important to look at things through an antitrust lens. What's preventing the emergence of a greater diversity of models with different kinds of structures that can be more meaningfully remunerative to diverse artists?

Some have argued "well, the rights holders just want too much money, so new entrants can't get off the ground!" Perhaps sometimes this is the case, especially if they're aiming to offer full catalog but don't have capital to offer big advances, but...

Unfair competition from services that pay below market rate or nothing at all also plays a role in deflating creator compensation and creating barriers to entry for more diverse alternatives.

Commercial FM radio, for example, does pay songwriters, but they pay performers nothing. It’s just a longstanding glitch in copyright law that hasn’t been fixed because of their powerful lobbyists. So streaming services compete with someone not even paying a cent to musicians.

And YouTube leverages its market power and the widespread availability of unlicensed copies of independent artists’ and labels work on their service to achieve rates and terms worse than any digital competitor. Hard for upstart services to compete with that.

The good news is that these problems are fixable! Streaming isn’t going to go away, but it might not always look like it does now. Let’s make it work for diverse creators and diverse audiences.[/thread]