A Good Deal To Do: Pandora Doubles Down Against Creators, Now Strikes At Songwriters

by: Chris Castle

“You work hard, madame,” said a man near her.

“Yes,” answered Madame Defarge; “I have a good deal to do.”

“What do you make, madame?”

“Many things.”

A Tale of Two Cities by Charles Dickens

SFHH Logo 250X250According to Bloomberg News, Pandora has opened a new front in its war on creators–now the $2 billion ”music company” is suing songwriters represented by the American Society of Composers, Authors and Publishers. 

And let’s be clear about exactly who the real defendants are in Pandora’s case.  Pandora and its venture capitalists and Wall Street underwriters may be suing ASCAP, but the people that Pandora is really suing are the songwriters whom ASCAP represents.

Why?  ASCAP is a voluntary association of songwriters in which songwriters pool their resources to grant blanket licenses and collect revenues.  So when you hear these inane statements like “Every Time A Phone Rings, ASCAP Won’t Get Its Wings” from faux copyright experts like the Amerikat, just remember–ASCAP is songwriters.  ASCAP is able to issue licenses because its members authorized it to do so.  The ASCAP board is elected by its members, not anointed like the Creative Commons board.  So when Pandora sues ASCAP it is really suing songwriters.

(And who wants to bet that Pandora’s lawyers (who also represent Google) will make more money off of suing ASCAP than Pandora will ever save in lower license fees even if Pandora is 100% successful? And ASCAP’s cost of litigating the rate court will have to be paid by ASCAP, making the ultimate royalty rate much lower even if ASCAP is 100% successful.  Boy have we seen that movie before.)

They Hate It When You Organize

If it wasn’t clear before, the Pandora lawsuit against ASCAP brings into sharp focus the purpose behind one part of the Internet Radio Fairness Act:  Section 5(a), which allows Pandora, Google, Clear Channel and their fellow travelers to sue any group of creators acting jointly to license their rights.  How can creators be sued by these gigantic companies?  Why under the laws designed to protect us from monopolists, of course.

You caught the irony there, right?  Google and Clear Channel are using Pandora as a stalking horse to sneak through laws that would allow monopolists to sue any group (however small) that got in their way, artists, labels or otherwise.

It will be a short step to get Chaffetz (RINO-UT) to broaden his bill to allow anti-monopoly suits against songwriters who get in the way as well.  So it should not be a surprise that Pandora is now suing ASCAP–Google’s own Madame Defarge has been down this path before, too.   One can just imagine her hissing at Tim Westergren over her knitting.

“Bravo!” said Defarge…”you are a good boy!”

As Tim Westergren told Ben Sisaro of the New York Times (speaking of IRFA), “This is not an argument about going out of business.”  That’s exactly right, it’s an argument about how to profit Pandora by extracting yet more money from songwriters and recording artists.  Pandora, Sirius XM, Clear Channel and many others you see, all enjoy a “compulsory” license for sound recordings under Section 114 of the US Copyright Act (a “114 license”), meaning that the government has taken away the right of recording artists to refuse to participate in Pandora’s offering.

Every license–even compulsory ones like the 114 license–have to have a royalty rate.  In the case of the 114 license, that royalty rate is set by the Copyright Royalty Judges, but has historically been negotiated privately and then submitted to the judges for approval.  At a very high level of generalization, that’s similar process to the rate negotiations in the ASCAP blanket licenses.

What’s interesting about the ASCAP blanket license is that while it is not a compulsory license,  the blanket license, in its own way, is a kind of government license.  This is because ASCAP operates under an antitrust consent decree and its rates are either negotiated, or, if you have particularly intractable people like Pandora and Google, it ends up in a “rate court.”  In ASCAP’s case, that is a federal judge sitting as the decider on whether the rate is fair.  (This particular judge recently ruled in favor of Google in the Viacom v. YouTube case only to be overturned on appeal.)

Google’s own Madame Defarge is no stranger to the rate court, so it should not be surprising that Pandora has thrown in its lot with Google with Mr. Chaffetz’s IRFA bill, and now is following the bloody footsteps of Madame Defarge in suing ASCAP songwriters in the rate court.

The one difference, of course, is that in order to protect companies who want to use the songs under ASCAP’s blanket license–say Google, for example–from the vicious monopolistic tendencies of songwriter groups–you know how they can be, these all powerful songwriters–the consent decree allows songwriters to “opt out” of the blanket license if they file certain paperwork.

One can’t help but notice that opting out of the blanket license for Pandora is the one thing that an artist/songwriter can do to keep Pandora from playing their records if that artist feels like Pandora is jacking them around.  On the one hand, the artist/songwriter cannot stop the use of the recording.  On the other hand, the songwriter/artist can opt out of any license granted by their PRO, which presumably would prevent Pandora from playing the recording.  Or Clear Channel, or Sirius XM.  (It’s likely that a songwriter could opt out of just the Pandora license if they wanted to.)

Alone, Powerless and Broke

These suits against songwriters and legislation against recording artists are the latest examples of the heavy handed approach of the new boss in the digital animal farm.  Definitely worse than the old boss.  Some commentators seem to think that the Chaffetz legislation is “good for the music business” because–and you can just hear it coming–a rising tide carries all boats.

If the Pandora lawsuit against songwriters tells you anything, it tells you that some boats are more equal than others and Pandora is throwing songwriters and artists over the side.  What these companies really want is for creators to be (or at least feel) alone, powerless and broke.

But you can just look on in shock and awe at the Pandora juggernaut.  They have a good deal to do.

For them.

If you want to voice your opinion on IRFA, Senator Ron Wyden has a comment page on his Senate website click here.

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