An Open Letter to David Israelite and Anyone Interested in the Music Modernization Act

An Open Letter to David Israelite and Anyone Interested in the Music Modernization Act

March 01, 2018

Dear Mr. Israelite,

I received your point-by-point response that you apparently shared with legislators and interested persons in response to my 10-point critique of the MMA.  Thank you for your perspective.  Perspective is important.  But in my opinion, your letter contains misdirection, many important omissions, and inaccuracies.  I explain this below, and in much greater detail in this letter.   I’m just giving my perspective, but I think it’s an opinion educated by years in the real trenches of the actual music business.

The letter below is long – I know.  But THAT’S how many things are problematic with this bill in my opinion.  I hope we all agree, expediency shouldn’t supersede getting things right for music creators and industry sustainability.  I ask creators, industry people and lawmakers to read this entire letter with a mindset of getting this bill drafted right.  I believe these points aren’t only optimal for achieving success, I believe they’re mandatory for achieving success.  

Mr. Israelite, you used the word “confused” several times in referencing my open letter.  I’m not confused.  But, my perspective is very different than yours.  I’m asking you to read my perspective which I know I share with countless musicians in this country.  I’m asking you to advocate for nine simple “fixes” that will ensure the MMA is a success for music creators, and ultimately, everyone.

We both respect and are deeply grateful for the amazing support we have received from our Congress.  That's wonderful.  But the MMA, as currently written, is not yet wonderful.  Congress is expecting the MMA to directly help music creators who have been severely damaged from the current streaming market, and I’m throwing out my ideas to get us to that goal.  

Here’s a new sobering statistic:  This recent article points out how 99% of all streaming on Spotify involves only 10% of all songs.  If true, that means 90% of music is splitting only 1% of the financial pie.  Who is living on molecules of pie?  Musicians I revere: Pulitzer Prize winners, MacArthur winners, NEA Jazz Masters, Grammy-nominees and winners (those you don’t see on the telecast), musical icons, contributors to American and world culture, masterful musicians revered in local communities but that aren’t widely known, leaders of orchestras and bands, teachers at conservatories and colleges, and selfless mentors.  We are in niche genres: jazz, classical, Latin, world music, as well as hip-hop, folk, gospel, blues, electronic, rock, indie, etc.  It’s a massive and diverse group, the vast majority of musicians in the U.S. 

We, the 90%, are the collateral damage in the digital economy as presently structured.  And much of it has come at the hands of the very same corporations that you are trying to make sure will run this next MMA show.  While the MMA has some strong ideas, it vests WAY too much power in the hands of the biggest publishers and streaming companies.  Why am I so concerned?  Because I and countless colleagues in these niche genres have learned painful lessons we’re not keen on repeating. 

Lesson 1:  The three major music companies that are locked and loaded to run the music licensing collective (let’s call it Corporation A) are the same companies that allowed themselves to be enticed by the self-serving Svengali, Daniel Ek, whose beginnings were built on infringement (uTorrent).  The day Warner, Universal, and Sony bit a huge chunk of poison apple in the form of equity in Ek’s Spotify, they traded their contracted musicians’ and songwriters’ valuable creations for ads.  That tectonic shift gave Ek most of the world’s music, it legitimized “free,” and it created a gaping conflict of interest for the Big 3.  

Musicians and attorneys argue if it was a “fiduciary breach.”  In my opinion it is a massive breach of trust and ongoing conflict of interest.  And as the 90% have suffered a huge collapse in income, inversely, we watch these companies celebrate their earnings from 10% of songs.  That conflict of interest and breach of trust are very relevant to the MMA, and this history absolutely must not be ignored in writing the governance sections of the MMA.  And, if that reality is painful or upsetting for industry to read, I can only answer that they themselves created it. 

Lesson 2:  There’s something else occurring as a result of streaming that's critical to understanding the niche musician’s perspective.  It’s that many, if not the vast majority of record companies, are no longer advancing money for a lot of music on their labels.  It’s now the artists and creators, in countless numbers, who are each sinking tens of thousands of dollars into making their own records.  Many still go with a label despite having to front the costs themselves just to be part of a distinguished label roster. There are many fine small labels doing everything they can to make that a worthwhile trade, and some still struggle to front budgets.  The point is, those niche labels and independent musicians face either a zero, or statistically insignificant, chance of a return on their investment through streaming.  Many report barely paying for a sandwich with their royalties. 

If one only cares about the top 10% of songs and launching superstars to the stadium echelon, and keeps the blinders on for the rest, I suppose one can claim some successes with streaming.  But if one values the wide array of music our country and the world has to offer, then our biggest music corporations have failed us, and failed our culture of music as a whole, by cashing in on Ek’s unsustainable business model.   Spotify’s IPO papers confirm to me the streaming model’s income and wealth inequality as well as unsustainability.  The 90% knew this years ago.

Lesson 3:  As I see it, those set to run the show under the current draft MMA have a terrible track record in this arena:  The NMPA owned the Harry Fox Agency themselves and was already once tasked with solving the Spotify mechanical issue.  In my opinion, that effort failed miserably:  the feuding, in-fighting and finger-pointing that occurred between the NMPA, Spotify, and HFA, and the ugly lawsuits brought by independent songwriters and small publishers resulting from what seems to me to be a collective failure to properly handle and respect mechanical royalties, left these companies acting like the Keystone Cops.  Yet ironically, it is the NMPA and the Digital Media Association (DiMA – companies like Google, Spotify and Amazon) that, in my view, are steering all power under the MMA to the same cast of characters, while conspicuously avoiding objective oversight and reasonable checks and balances. 

I have no problem with the NMPA or its members and Spotify being involved in the solution.  But I have a HUGE problem with them controlling the solution, and controlling the entities that will be formed under the MMA.

These three lessons frame many of our perspectives on the MMA.  It’s a grim reality that explains why I don’t trust certain entities to run the show. 

Below are simple, specific proposals that I think are rooted fairness and common sense that will greatly will improve the MMA’s actual chances of ongoing success for all of us.  

1.  Songwriter.  If you’ve not yet amended the definition of “songwriter,” will you agree to advocate for a rewrite that would requires a “songwriter” to be someone with a recognized and substantial professional career based on songwriting or composition?  By the current definition, even an employee of a publisher who long ago wrote part of a lyric of one song would qualify as a “songwriter.”  A definition that gives songwriters and composers that assurance is necessary. 


2.  Equality.  Imagine that Congress passed an Act that would set up a private entity to tackle the issue of “Women’s Health in the United States.”  Then imagine that the board of directors was crafted to have only TWO women on the board of TEN people.  Pretty outrageous, right?  Now, further imagine that women were offered the prospect of the board being expanded to 14 total members, and instead of 2 out of 10 being women, it was now going to be 4 out of 14 (an 8% increase, but still a very small minority).  Finally, imagine that the 10 male members were all executives at big Pharma, earning big salaries and bonuses from expensive and very controversial women’s pharmaceuticals.  We’d all find that horribly outrageous, right?  Now, imagine how infuriated women (and men of conscience) would be if the trade association for Big-Pharma consoled women who advocated for a balanced board, with the following catchphrase: “don’t let the perfect be the enemy of the very very good.” (your words at the end of your letter)

I hope this spot on analogy offers you and others perspective.  Therefore, can we agree that the “Collective,” (I call it Corporation A) should have governance that, as between publishers and songwriters, has at VERY LEAST, 50% songwriters – songwriters chosen by songwriters themselves?  Independent songwriters deserve an equal presence with publishers on a board that will control OUR works and economic future.  Who wouldn’t support a 50/50 board?

3.  Board Diversity.  Can we agree that the Board for the “Collective” (Corporation A) would be MUCH better if it also had several “outside” totally independent voting board members, especially members who have actual experience and success in leading the development of new software, database and cloud based systems?  There are countless such all-stars and experts.  Corporation A is really a technology company that will be based on system design, program management, and vision in the field of data management and cloud services.  To achieve success with that tall order, technology expertise must be included on the governance board itself, not relegated to some “advisory” committee, or worse yet, to some downstream subcontractor (who could be a conflicted DiMA member like Google).  What on earth are 10 publishers doing at the helm of a technology company?  If our company was tasked to design and build a new artificial heart, we’d want the worlds’ best surgeons and bioengineers on the board, not 10 big insurance company representatives and 4 sick patients.  Independent objective technology experts (e.g., obviously not Google or anybody else from, or related to, Corporation B due to conflicts of interest) will bring more value to this board than the songwriters and publishers combined.  I am confident our elected leaders would agree that this would markedly increase the chance for this “technology company” to be a success.  

4.  Open Competition.  Can we agree that a) the publishers should not have a veto power over who is selected to be Corporation A; and b) the members of DiMA should not have a veto power over who is selected to be Corporation B?  The language in the MMA, “endorsed by, and … substantial support of,” (used for both Corporations A and B, pages 17, line 21, and page 58, line 8 of the Government PDF of the MMA) basically gives outright veto power to the big players.  I am willing to bet that Congress would be more comfortable if the selection of these two entities was done in an open, competitive process, where creative and talented teams of people: small business, minority-owned, women-owned, technology-based collaborative teams could freely assemble and compete, and would be assured of a fair shot at winning this great opportunity.  The Register of Copyrights should be able to pick these two entities through an open market, not have her choice restrained by a closed back room.  Replace the language, “endorsed and supported” with language requiring that each entity: “will be chosen by the CO through an open and competitive process, where selection is based on the strength and merits of each applicant, and where conflicts of interest are disclosed and addressed.”  Our government mandates that same process even for choosing a vendor for toilet paper!  Surely we’d expect just as much when entrusting an entity to guard the economic future of music creators.  Wouldn’t we?  

5.  Business Continuity.  Can we agree that if either Corporation A or B goes belly up, and/or the CO needs to pull the plug, the MMA should clearly state to everyone that none of the software, data analytics, or algorithms, belongs to the entity?  We can all fairly agree that Spotify would not exist if not for the music, right?   So then, considering that this whole investment is basically underwritten by revenue generated by the music that songwriters have written, we need to be assured of “business continuity” should things go sour. 

The MMA is NOT intended as an opportunity for a private entity to build trade secret assets that could further cripple the industry.  We cannot allow this huge investment in technology to be usurped by any party should Corporation A fail in living up to its expectations.  It’s Business Continuity 101 stuff.  So rather than assure us that somewhere downstream, there MAY be regulations that might clarify this as you suggest, let’s build that HUGE point right in the section of the MMA (page 31, line 16) that addresses the Database.  Something simple, like: “All data submitted to the Collective will be owned by those parties submitting the data, and is licensed to the Collective for the sole purpose of fulfilling its duties under the MMA, and will not be assigned to any other party.  All data analytics, algorithms, software, APIs, software tools, resultant data, and aggregated data developed by [the Collective] or its subcontractors will be held in trust by the U.S. Government, and will not be exploited or encumbered by [the Collective] for any purpose other than as authorized under this Act, and will not be encumbered or sold or assigned to any other party.”  Should something unforeseen happen, we’ll all need to be protected.   

6.  Meaningful Audit Rights.  Can we agree that meaningful audit rights for independent music creators are necessary?  After all, the MMA IS stripping away our rights to bring a suit for infringement, so let’s look at the tradeoff:  The current provisions (page 42, line 5, through page 45, line 20 of the government PDF) are great, if we’re talking about Sony, Universal, and Warner, that can afford Deloitte.  But if I want to audit a $25 payment I received from Spotify, I can’t be expected to hire Deloitte for the impossibly complex multi-step process laid out in the MMA.  Two simple requirements wouldn’t hurt anyone: 1) a streamlined audit right for small amounts (details could be ironed out through regulation), and 2) spot audits every six months of random independent music creators’ accounts, just so the CO is exercising some ongoing QA/QC on the Collective’s systems and performance.  Both create great incentives for the Collective to do a good job, saving money in the long run, and increasing everyone’s confidence.   

But there’s something else lurking in those audit rights:  Today, if I sue someone for infringing my copyright, I have the right to recover attorney’s fees in certain cases.  But under the MMA, not only is that absent, but I’d be required to hire a CPA and pay for my own legal and audit fees, even if I win.  That’s not fair in light of what we’re giving up.  We deserve the right to recover our reasonable costs if we’ve been wronged by Corporation A or B.  It’s fair, and keeps entities on the up and up.  That’s the purpose of the attorneys fees provision in the current copyright law.  Why should we give that up? 

7.  Black Box.  Independent creators will most likely be the ones who won’t know to sign up with the Collective, or who won’t have filed a registration with the CO.  Their money, largely, will end up in the black box.  I meet countless musicians who know nothing about mechanical rights or copyright.  

My opening statistic showed that 90% of the music on Spotify shares 1% of the pie.  The black box money will most assuredly be out of that group.  If Corporation A can’t control their budget, why should these unpaid creators unknowingly foot the bill?  Shouldn’t the money be “borrowed” from those that MOST benefit from the MMA?  (If it’s even legal for trustees to “borrow” money held in trust.)  This bill needs to create meaningful incentives like this for the Collective to not overspend.  (Not to mention this “borrowing” right of the Collective seems to be contradicted by the obligation to hold those royalties in a black box for 3 years.)

Secondly, the idea that this black box money should be distributed (after 3 years) to songwriters and publishers according to market share is absolutely abhorrent.  I don’t often bet my life, but I’d bet my life that Kendrick Lamar, Taylor Swift, Bruno Mars, Lady Gaga – name any bigtime music creator – would not want to receive black box money belonging to independent music creators who haven’t received it because they didn’t yet know how to get it, or whose song had a wrong spelling, wasn’t filed at the CO, or whatever.  No music creator would knowingly endorse something so skeevy.  That money should be held until it is claimed, and if after many many years, it’s still unclaimed, perhaps it could go to scholarships or something else worthy.  

8.  Immunity.   Some legal commentators have given “just cause” to be concerned whether parts of the MMA are unconstitutional.  Today, many creators don’t file copyrights: it’s expensive, and it’s not required under international laws.  I have that right under the Berne Convention that the U.S. has signed.  If a band of young kids in Peru, Canada, Nigeria, the UK, you name the country, records 10 of their songs, they submit them to Spotify, and it goes viral, are you telling me that they won’t get paid until they figure out that they need to first file the papers and possibly pay hundreds of dollars in fees to the U.S. CO to register the songs in the U.S.?  That’s the way I read the bill.  Can it be that we’d require the entire world to pay U.S. CO registration fees before they are allowed to get their first dime from Spotify?  In addition to possibly being unconstitutional and in violation of rights under the Berne convention, it smacks of musical colonialism.  I suggest the MMA be fixed so creators aren’t left with the short stick.

9.  Immunity for the “Collective” (Corporation A).  If you hired a financial planner for your mother, and that planner gave you a contract saying, “Even if I am negligent, sloppy or incompetent, and/or even if my services deviate from the standard of reasonable care, you and your mother can’t come after me when I lose all of your money,” you’d be shocked at their nerve.  The same goes for surgeons, accountants, or anyone else in society that owes us a duty of care.  So, I was shocked to read the fine print (page 93, lines 9-24) about the Collective’s lack of liability, should it screw up.  The MMA basically says that the Collective “shall not be liable to any person or entity” for negligence, sloppiness, or incompetence, but can only be liable if proven “grossly negligent.”  “Gross negligence” is nearly impossible to prove.  In fact, “gross negligence” basically requires conduct to be intentionally reckless – conduct so bad, and so rare, insurance companies won’t even insure against it.   

As I read the MMA, the “Collective” (and its board) are basically immune from liability, even if they completely screw up the whole system through incompetence and negligence, and even if there are millions lost.  In my opinion, that’s extremely irresponsible.

Let’s change the tricky phrase “in a manner that is not grossly negligent” to “in a manner that uses reasonable care, and is not otherwise negligent, or grossly negligent.”  Let’s make sure Corporation A would be liable if it acted with incompetence, or negligence.

None of these points are unreasonable or illogical.  Each directly reduces risk of failure.  I would hope we’d all advocate for these common sense, simple language changes to the MMA.  Let’s create a new version of the bill that maximizes the chances of success, minimizes the chances of conflicts of interest and/or failure, and fulfills the fundamental goal of Congress to directly help the music creators.

And for anyone who received David Israelite’s letter and would like to read my point-by-point response, you may read it here.

You can read my original open letter, “The Music Modernization Act – The Devil is in the Details,” here. 

Maria Schneider