Wilhelms, Huey, SoundExchange exchange
p2pnet news view P2P:- In July, 2007, an unsigned Reader’s Write accused Fred Wilhelms (right) of having a vested interest in criticizing SoundExchange for not paying artists.
The author later proved to be Dick Huey, one of the RIAA-appointed ‘label representatives’ on the SoundExchange board of directors.
An exchange of comments ended in Huey agreeing to answer questions put to him, partly in apology for what he acknowledged was an unjustified personal attack on Wilhelms
Wilhelms responded with 11 questions. But Huey didn’t answer them and when this failure was noted, he surfaced on p2pnet to confirm his intention to answer, but claimed he needed to do some research first.
Several months later, Huey posted a note on an email group in which he announced he wouldn’t, after all, follow through with his promise, instead saying he’d use his time and energy to work from ‘inside’ SoundExchange to improve it.
Time — a lot of it — went by and then in discussions on the upcoming launch a2f2a, a new website designed to put artists together with their fans, Wilhelms reminded p2pnet readers that all previous Internet discussions between industry representatives and fans on big issues had always ended the same; big promises and nothing else.
He cited the Huey incident as a prime example, inspiring Huey’s reappearance when he apologized to Wilhelms and p2pnet.
The apologies were accepted. This led to Huey’s latest entry as a comment, to which Wilhelms replied in a Reader’s Write.
Both are reproduced below, starting with Huey. Under them are Wilhelms original 11 questions.
DICK HUEY »»»
So to start the discussion, here`s my promised post. It`s good to start this conversation in a different place than we were last time, thank you Fred for accepting my apology. Fred Wilhelms is right we may not always agree, but at least we`re working toward something. I`ll be as candid as I can be regarding questions, bearing in mind that I have a duty as a board member (as does any board member of an organization) to work in the interest of the organization (of course, that can also include accepting criticism and thinking about how I might change the course of the ship), and not to share information I shouldn`t.
First philosophy. Everyone here likely knows something of the history of Soundexchange, knows that it was started as a collection mechanism by the Majors, and knows that it was spun off into a self-running entity with a board composed of nine artist reps and nine label reps. Of the label reps, three are independent (Rich Bengloff, myself, Tom Silverman) and the rest are major label.
Like any organization, there are battles to be fought, and battles to be left for another day for any number of reasons, including structural issues of the organization and it`s difficult to focus equally on everything. I focus where I feel I have the most expertise, and can contribute the most. My primary focuses in the last year or two have been in the following areas:
- small webcasters I was determined to push through a pureplay definition that would result in a payment structure to keep the small commercial guys afloat, and was able to do it. That took a tremendous amount of time and energy. Don`t take my word for it though I think if you ask around with some of the small guys, you`ll find I was deeply involved (as were others, both on the label side and the artist side, and crossing all bounds). Here`s one such link: http://textpattern.kurthanson.com/kurtsblog/720/behind-the-new-pureplay-webcaster-license
- communications Many at SX agree that the SX corporate website has needed a massive overhaul. That`s in process there`s now a blog, social elements are being integrated (facebook, twitter, etc.), online registration has appeared, and importantly the process of updating the unregistered artist list is being re-done so that the website differentiates between not contacted and contacted, won`t respond, or contacted, haven`t responded for some other reason, which right now skews the list unfairly to appear as though a lot of obvious, big bands haven`t been contacted. The website should differentiate between the two, it`s needed to forever, and that`s the only way that list will really be useful to people who really do want to help tick artists off the list.
- metadata this is where I`m currently focused. Historically, album metadata gets into the SX web database via reported performances. If someone at a local radio station grabs a compilation CD from a movie, throws it on, and logs it as being put out by whichever artist or label put out the compilation, that`s not necessarily the same entity as the owner of the performance rights (since music for compilation CDs is often licensed, rather than owned, with the original music coming out on an album collection of songs, and only one or two tracks subsequently put on a compilation). While the SX database is set up to catch these situations as often as possible, I want to make sure that the current system is the best and most accurate one.
The above scenario at a local radio station also presumes that the radio station logs the plays at all, or submits the plays in the correct format. Some stations do many do not. This has to change and improve now that a rate structure is set for the majority of the market. And personally, I`d like to see Soundexchange consider offering software to assist in the reporting of plays, something that`s linked in to the database in some fashion. To that end, I`m setting up an intra-SX working group to look into this issue, and I`d value anyone`s feedback here that cares to give it. I doubt the right answer will be black and white, there will be pros and cons to this solution.
As far as reducing the unregistered and unpaid artists list, I have a long history at SX of being actively involved on this issue. I was instrumentally involved, as a new board member many years ago, in pushing for SX to pay artists their share directly and not have it be paid to a label where it might become part of a recoupable balance, a fact that any number of board members at the time would confirm. I started in the music biz as a manager (after performing in bars), which should explain why this is an important issue for me.
I`ll also confirm that I was initially one of the skeptics about putting out the unpaid artist list for anyone to review and use to contact uncontacted bands directly. While this may seem counterintuitive given my support as outlined below, my concern initially was that individuals or companies would try to earn money off signing up bands to SX, and that those individuals or companies might represent themselves as being the only route through which an artist could sign up, without the artist knowing any better. Several years down the road, and many press releases and magazine articles, data matchings with major organizations, and phone calls and e-mails later, I`ve voted consistently to provide additional SX funding to bring on the necessary resources to reduce the unpaid artist pool (as well as for funding to report, via the website, more effectively on outreach efforts see my above communication bullet), and I`ve voted consistently to hold the distribution of unpaid artist money until more artists were able to be registered. And I`ve revised my thinking on publishing the unpaid artist list, which of course happened a number of years ago.
Let`s start there? I`m curious for your input, and will do my best to answer questions, just bear in mind that massive lists of questions that require a lot of study/followup on my part often wind up by necessity at the bottom of my priority list, after everything that has to be done that particular day. Please remember that CMJ is up this week, so my responses may be slow.
_________________
FRED WILHELMS »»»
You`ve raised some interesting issues, and I hope you continue to speak frankly in dealing with my take on what you`ve said. You`ll forgive me by starting out pessimistic when you begin by explaining there is information that you shouldn`t share. I`ve already been a couple rounds with SoundExchange people on trying to find out how much artist money was spent on musicFIRST and being told that was proprietary, as if it was SoundExchange`s own money they were spending, and not my clients. It makes sense when you are dealing with trade secrets, or ongoing litigation, or other matters normally covered by confidentiality agreements. It doesn`t make sense when the one withholding information is a non-profit organization that claims to represent all artists, but won`t tell them how it is spending their money. You are going to have to work hard to overcome this, and, to be completely honest, you`re not off to a good start. I`ll break down my response by the same headings you did.
Philosophy Let`s do away with the fiction you repeat that there are nine artist reps on the SoundExchange Board. Those nine were not appointed by artists, they are not answerable to artists and they cannot be replaced by artists. They hold their seats by invitation of the RIAA, andThe ones I know are are nice people, but none of them have any honest claim to represent the interests of artists as a whole. As far as I can tell, not one of them has contributed anything of value to artists via the website, and there isn`t even any contact information for them. You`ll have to convince me this is an accident.
Small webcasters You are to be commended for being part of the negotiation and settlement process. Whether or not you`ve accomplished anything remains to be seen. The first signs aren`t promising, given that Pandora is going to require payment from anyone using it more than 40 hours a month.
Communications The overhaul of the website is good news and long overdue.
I`ll believe the overhaul of the unregistered artist list when I see it. Dick, you`re going to have to admit that, in the past, SoundExchange has often confused the act of announcing it was going to do something with the act of actually doing it, so I am going to hold off on celebrating a new list until it is posted. There have been no names added to the existing list since early 2007, despite it being impossible that no artists have qualified for inclusion. Even worse than that, fewer than a dozen names removed in the last 14 months since the last Unfound Artist Project ended. That record doesn`t really indicated much positive has been done.
Furthermore, SoundExchange has got to be honest about those artists who have been contacted but haven`t responded. You and I know that this has been a standard excuse from John Simson and others to cover the reason why so few artists on the list ever get removed. Over the past three years I have been in touch with hundreds of artists on the list, and I have NEVER had one tell me they had already been contacted by SoundExchange. Those artists always seem to register after being contacted by outsiders, too, so that excuse just won`t wash.
Frankly, SoundExchange is a dismal failure at communication with the public, and I think it is for a very good reason. The public means nothing to SoundExchange. This is where the RIAA genes really come into play; it is the same public be damned attitude that has marked that association`s dealings with the public for decades. You`re going to have to work very hard to convince people that this isn`t so, and I wish you luck, but you had better appreciate you`ve taken on an uphill battle. SoundExchange has had seven years to convince people they are sincere, and they have failed dismally with everyone who has taken a close look at the outfit.
Metadata This is important work, but I am going to voice a very loud and long objection to SX providing software to webcasters. The playlist information being provided to SoundExchange is, as I am sure you realize, incredibly valuable marketing data for the record labels. Especially those labels that comprise the majority of the label reps on the Board, and who named everyone else. At this time, if they want that information, they pay for it. If it is sitting at SoundExchange, it is going to be very easy for them to pick up the phone and ask for it, for free. SoundExchange, in essence, will be working as the marketing research arm of the record industry, and will have used money that could have been distributed to artists to defray the costs of writing that software. Unless SoundExchange is willing to commit to keeping that information behind a Chinese wall and away from the labels, and unless the Board has the guts to defend that wall, SoundExchange has no business standardizing data at artists`s expense. As it is, SoundExchange allows members to review playlist data (and we know that artists aren`t members, so that limits availability to labels), giving it up on a silver platter (half) paid for by artists who can`t see it is a violation of the Board`s obligation to the artists it claims to serve. You may see my skepticism as cynical, but I think we both know it isn`t entirely misplaced here.
The unpaid artist list SoundExchange`s conduct here remains completely unjustifiable. Despite what you portray as all that positive effort being expended, none of it has worked. Forgive my lawyer`s take on things, but when you say that you have voted consistently to provide additional SX funding to bring on the necessary resources to reduce the unpaid artist pool, I have to suspect this phraseology means you`re voting in the minority, because if SoundExchange is actually spending more money on this function, it appears to have been entirely wasted. You know as well as I do that the great majority of names that have come off the published list since it went up three years ago have been removed through the efforts of people outside SoundExchange. You also know as well as I do that these efforts have not cost SoundExchange a dime, and you know as well as I do that SoundExchange`s only response to these private, and completely voluntary and uncompensated, efforts has been to tell people that they really weren`t necessary. (In 2006-2007, Neeta Ragoowansi appeared to spend an inordinate amount of time going to music message boards where I had asked for help in finding people and explaining that SoundExchange was really doing a good job all by itself, despite the existence of the 9,000 names already on the list at that time.) If your votes meant SoundExchange were actually accomplishing something here, the list would have gotten measurably shorter in the last year, and it hasn`t.
And how do I know your personal efforts to correct this haven`t paid off?
SoundExchange`s 2007 IRS-990 form showed it had accumulated over $101 MILLION dollars in undistributed royalty money. I understand that number has, at the least, almost doubled in the 22 months since then, but I`ll wait for the return to be posted online to start quoting that as a fact. To be blunt, if SoundExchange had anything to be proud of in regard to finding artists, that number would be going DOWN, not up, and it definitely wouldn`t be counted in the nine digits. You cannot say SoundExchange is serving artists when you have not yet paid them over $100,000,000 that SoundExchange has collected for them and promised to pay.
If you want me to believe one word of what you say about the good things happening at SoundExchange, you are going to have face this fact, and explain it, and justify it.
_________________
11 QUESTIONS TO HUEY FROM WILHELMS
1. Please explain what you know about the usage limits that are supposedly part of the SoundExchange offers to small webcasters. There has been no public disclosure of what they are, or how they are supposed to work.
2. Richard Ades says that the 7.5% royalty rate called for in IREA is a 75% decrease from the old rate. Please show how he came to that result.
3. Numerous SoundExchange spokespeople have consistently referred to a fact that large webcasters pay 95% of SoundExchange royalties. Of course, SoundExchange has never disclosed anything that actually supports this contention, including the criteria for inclusion as a large webcaster. Can you, as a SoundExchange Board member, get the organization to release the information necessary to verify the 95% number? At the very least, I believe it would require the identities of the large webcaster class, the amount of royalties paid by each and the total amount of royalties received from all Webcasters.
4. What is the current SoundExchange operational budget, and what percentage of royalty receipts does it represent?
5. How much of the SoundExchange operational budget is dedicated to public relations and legal counsel in regard to the Webcaster rates?
6. There have been repeated claims by SoundExchange that artists who received royalties for 2006 are going to have to write substantial refund checks if IREA passes. Please explain how much money is involved in this and how SoundExchange came to the conclusion that refund checks will be required.
7. Explain the sampling metric used by SoundExchange to allocate royalties to artists where census data is not available.
8. Explain why the SoundExchange FAQ doesn`t mention sampling but does include a contradictory statement that SoundExchange can accurately match unique performances with record companies and artists, and pay exactly what has been earned.
9. Explain why SoundExchange chose not to announce publicly that it was going to absorb millions of dollars from unfound artist accounts on June 30.
10. Explain why SoundExchange`s outreach has only resulted in the reduction of the unfound artist list by fewer than 70 names in over three months.
11. According to recent news reports, two new wireless streaming services, Slacker and nuTsie, have both signed direct licenses for performance royalties with major copyright holders.
a. Please explain if SoundExchange is going to be the collection and distribution agency for these agreements, and if so, how SoundExchange justifies participating in any private arrangement regarding terms that do not comply with the statutory requirements.
b. Please also explain how artists who are covered by the statutory licenses will be assured that they will not be defraying any costs related to these privately negotiated agreements, and what steps SoundExchange has taken to insure that all costs related to the privately negotiated agreements are borne by the parties to those agreements alone.
c.If SoundEchange is not involved, please explain how artists can be sure they will be compensated fairly by the labels, and if the possibility that artists are not going to be compensated fairly is of concern to SoundExchange.
Stay tuned.
unjustified personal attack - SoundExchange`s Huey to Wilhelms , July 5, 2007
11 questions – SoundExchange`s Huey v Fred Wilhelms, July 3, 2007
a2f2a – Dear Dick Huey , October 8, 2009
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October 19th, 2009 at 10:37 am
There are many interesting questions here, I for one wont be holding my breath on Fred getting any real in-depth answers but good on you fred for asking them : )
October 19th, 2009 at 11:21 am
In regard to the 11 questions, the first three have been somewhat mooted by the settlements reached with the webcasters. The information I sought was never provided. The questions were pertinent at the time because SoundExchange had already developed a routine of inventing numbers to promote their cause without giving any substantiation to them. Mr. Huey’s promise to answer, and his subsequent failure to answer, was simply an extension of that strategy. The attitude represented by the promise and refusal is symptomatic of SoundExchange’s arrogance in dealing with the public. They are not accountable to the public and do not suffer any penalty by ignoring, or lying, to them. There have been newer unexplained numbers that are unexplained that have replaced these three, and, if Mr. Huey is up to providing answers, I will gladly substitute the new questions for the old.
In 2007 John Simson personally promised me answers to #7 and #8 and assured me they were working on a formal response. After several months of stalling, he handed me off to Neeta Ragoowansi, who also assured me I would see an answer “soon.” In late 2007, I received an email from Simson telling me that I would NOT be receiving a response from anyone at SoundExchange, but that the website was being updated “soon” to give the information I wanted. Of course that was a lie, but SoundExchange has never been forthcoming with information that they aren’t forced to release. Two years have passed and the update still isn’t there. If Mr. Huey can, I would love to hear those answers.
After posting the 11th question, I was advised that only one of the named companies had signed the license I had reported.
Subsequently, specifically related to 11 (a) and (b), I discovered that SoundExchange had established something known as the “Managers Amendment” which supposedly authorized SoundExchange to act as collection and distribution agent for half the money to be paid under direct licenses between copyright holders and webcasters. The Manager’s Amendment is strictly an internal document passed by the Board of Directors, and, as far as I can tell, it has never been made public. In essence, SoundExchange had decided on its own that it could exceed the franchise given to it in Federal law, which limited its authority to collect and distribute statutory royalties only. Because it can be assumed that these direct licenses pay the artists a reduced royalty, the apparent presumption that SoundExchange is better suited than either Congress or the Copyright Office to decided what it should and shouldn’t do. The absolute secrecy surrounding this expansion of authority supports the contention that they knew what they were doing was illegal. On top of that is the not-so-minor point that Copyright law allows SoundExchange to deduct operational expenses from gross receipits, which means that artists entitled to statutory royalties are defraying, in part or in whole, operational costs related to the direct licenses while the copyright holding labels are avoiding their share of the costs. I look forward with great anticipation to Mr. Huey explaining this situation in detail.
October 19th, 2009 at 2:50 pm
I appreciate your answer above Fred, and am glad to have this back on a more productive track. Thank you.
I am going to address some of what you’ve written here. I’ll leave it up to you, and your readers, to determine if I’m being genuine, but I don’t have a particular interest in opening this can of worms again without doing my best to respond on those points I feel qualified to speak on. What I’m not interested in doing is running back to Soundexchange for “statements” on issues I’m only peripherally part of that re-hash what we’ve all been over, because I don’t have the background to speak on them myself. I haven’t asked Soundexchange for permission to speak on the topics below, or even mentioned to them that I’m posting here. I’m engaging as myself, and trying to share my thoughts on these issues and learn from the discourse, which I’m inviting. I would prefer to answer the questions I can answer, and try to use this platform as a more civil discourse point for you to engage with others on topics that I’m on the edge of. To the extent you sense me hiding behind “confidentiality”, it is more likely that I am not personally engaged on one of the topics you’ve brought up. There is plenty for us to focus on that I *am* personally engaged with, and there’s always room to consider whether I should ramp up my involvement in other areas.
This will sound obvious, but appreciate the spirit of what I’m about to say – Soundexchange is a young organization, one that is only relatively recently a self-standing organization and not directly part of the RIAA, and one that is growing and learning and changing the internal dynamics to more fairly represent the interests of *all* board members. This kind of change does not happen overnight, and SX does not do everything perfectly – maybe, you’d argue, even well – but I see evidence every day of improvement in a multitude of areas. I see evidence every day of things that are going well, as well as areas that still need improvement, and I frequently see evidence of indies, artists, *and* majors coming together to solve problems. And it’s not just lockstep. Now don’t lambaste me for this, because I’m not looking for any sympathy here, truly – but for years, getting the rate for music right has sucked most of the air out of the room. That has drained a tremendous amount of resource, that might have been applied elsewhere, out of the organization. Rates are one of the pillars that a performance organization operates on, so I won’t dispute that it was important to focus here in order to try to get things right. I am particularly happy that, with rates established going forward for some number of years with a majority of parties at this point, SX can accelerate its focus on some of the issues you’ve outlined above.
OK, now to the meat:
- Artist Reps – here’s my response to what you said – as far as I know, there is nothing – nothing at all – stopping any individual artist, or artist manager (even yourself!), from working toward membership on the Soundexchange board. If that artist or manager were to pitch each of the nine existing artist reps, and perhaps additionally each of the three independent label members including myself, in conjunction with a seat opening up on the board, well, that math comes out to – potentially – twelve votes for, six against (assuming the “RIAA” was not in favor of a particular appointment). I’m pretty sure that carries the day, correct me if you know otherwise. So while I acknowledge that it’s not the easiest thing ever to accomplish, it is not impossible, and the process is *not* controlled by the RIAA in any more sense than RIAA members represent six of the eighteen board members, and of course has its own interests in who is nominated.
The process I outlined above may not be as easy as having the connections to be nominated from the top…but nothing that’s worth it should be easy, should it? I mean, I’d personally love to be on the Google board. As far as I know, the only thing stopping me is my desire to go the distance and do what it takes to get on the board, meet people, spend money, offer constructive and smart ideas, be respected enough in my industry and by the other board members to actually have them nominate me, wait for a space to open up, etc. etc. etc. I think there are a lot of qualified individuals who might contribute to Soundexchange at a board level. Do you disagree?
Many of the artist board reps are not only colleagues, but friends. They are smart, they display a love for music that’s consistent with the time/energy they put in on issues relevant to the organization, and they are willing to listen. And they have their own opinions, which they frequently voice, as do I, that are not just RIAA tow the line positions.
I have no idea why there is no contact information for board members on the SX website – I actually wasn’t aware that was the case – but I suppose that’s a protection to keep SX board members who are not SX employees, including me, from getting dragged into operational questions, or spam, or hate mail, or whatever that should really be answered by SX staff.
- MusicFirst – let’s break this issue into pieces, I will try not to ramble too much but there’s a lot to discuss here. This issue is not one I am deeply involved with, but I will hit the areas I can. First off – do you disagree that there should be a performance right for sound recording owners? I believe there should be. The US is among five or so countries worldwide (Iran, North Korea, a couple others) that do not offer a sound recording performance right at radio. The implications of no performance right mean a huge pool of lost income right out of the box, both directly (in payments from radio stations) and indirectly (because there is no reciprocal with other countries that currently hold money for US artists, but won’t pay it because the US doesn’t pay them).
Every artist and record label I know personally – mostly small to mid-size artists & labels – need this money to survive the physical to digital transition. Artists and labels – both! – should survive. Labels provide a filter that 100% matters from where I sit and look out at the incredibly crowded landscape of released music. Artists and labels are lurching forward, changing in a relatively short period (compared to the history of the development of, say, the retail industry for music) how they can make money by sharing music, building their own social networks, asking fans to help fund their recordings, etc. It’s not just the majors that are having difficulties. Independent stalwart – and client/friend – Touch and Go closed this year. That shocked me, it shocked TG’s employees (rarely have I found a company whose employees care more about music and the bands they work with), and most of the rest of the independent universe. While there were lots of reasons for this, a very key reason was declining record sales. As the world transitions from a physical music model to a digital and performance-based music model, initiatives such as MusicFirst have to be part of the answer. Don’t they?
Regarding obscurity around funding for MusicFirst, and whether SX should be involved at all in funding that, I’ll debate as much as I can on it, but in the end I’m gonna take a pass. Here’s why. Looking at this from a growth perspective, shouldn’t the organization be about growing potential sources of revenue for its members, especially in an area that’s clearly as unequal with the rest of the world as performance fees for radio? Even if it means spending some money to get there, isn’t that what all organizations do – spend money to make money? That is my read. I cannot focus exclusively on Soundexchange, and the areas that I have outlined in my first post above took, or are taking, an inordinate amount of my time to make happen. I don’t prepare our annual statements, and I’m not on the finance committee, although I do review the statements at board meetings along with everyone else. When I look at those statements, I look at the overall admin rate – which I believe is consistently lower than other performance rights organizations – and individual line items related to my areas of involvement. Maybe there are specific reasons, political reasons, I don’t know what, that require the sharing of this information to be off limits, if it is indeed off limits. It’s for someone else to answer, not me. At the moment, I am comfortable with the organization being involved in funding this initiative, because I think the end result is long overdue, and I think it’s a new revenue source for sound recording owners. Pass.
- small webcasters – yes, we will see what happens. Jury is out, we generally agree. Although I’m not sure what the downside, from a rights owners perspective, there is to Pandora charging after 40 hours of listening. That’s not a flip comment – I need to understand better why, as someone who represents artists, you think it’s a negative that Pandora is starting to monetize their business model in this fashion, which one hopes will result in them getting beyond having to take VC money to stay afloat and be able to actually sustain themselves as a business.
- communications / “the list” – I have a high degree of confidence in the individual who’s project managing the new SX website, and I do online marketing for a living which is all about communication. I feel confident the improvements that’ll be seen here will be ones you’ll agree are useful, and long overdue. Regarding “the list”, and taking artists off it, or reclassifying them – I can say 100% for certain, without any equivocation (just by looking at matching exercises with major organizations such as BMI, ASCAP, CD Baby, etc.), that many more artists have come off the list than are indicated on the website. SX takes a lot of, probably, deserved potshots for not dealing with the presentation of this information earlier. It has certainly come up many times in discussions, often raised by me. The presentation of the information needs to be fixed in a meaningful way, while at the same time being sensitive and careful about how that information is put up online so that it is not misinterpreted. What constitutes a “contact”, and what constitutes a “non-response”? If an artist is ill, and doesn’t respond, should they be put up on the list as “contacted, no response”? Is that fair? What if there’s an artist who doesn’t want to sign up, for whatever reason? There’s not an automated database that allows SX to “check off” artists in one category or another, and then feed that data to the website, so updating “the list” is an entirely manual process. Should there be an automatic process? I think so, and others do to. It is these kind of non-trivial issues that have always stymied efforts in the past to resolve putting an accurate, up to date list on the website.
I personally have gotten past the idea of not enlisting other’s help in finding unregistered artists for fear of creating a “finders fee” system for SX registrations. You asked what it means to have consistently voted to authorize funding expansion in this area since getting to that place. Answer: as I’ve repeatedly voted to push the distribution of unclaimed monies forward (eventually, this process has to stop), many on the board have asked to accelerate funding to hit identified “logjam” areas, in particular within the last year or so as we’ve gotten past a lot of the easier registrations and into some of the more difficult ones. A primary goal of my board participation is to massively reduce the unpaid artist fund. SX management report on their efforts to accomplish this at board meetings. There’s one coming up in the next couple months. I, and the other board members, will make a value judgement on whether this is working, or not, and continue to work to improve distributions. I’m not just saying this, if you’d like to suggest specific ideas for reducing the undistributed fund that are not already in process, I’m very willing to listen.
Just the other day, an artist I’m currently doing online promo for told me they’d just found out about SX, and had registered. I’m sure this artist will have a check waiting for them, probably not a huge one but not tiny either. Really surprised me, because this is a known artist. An artist with several albums, been on various independent labels. How is that possible, I thought? I do understand that, when working through a list the size of this one, there’s a sort of logical process that would include starting at the top and working down. The law of diminishing returns for effort. I very high percentage – north of 90%, I believe, although I haven’t checked the latest figures – of artists still on the unregistered list are owed less than $50, at least based on the reports that have been submitted correctly so far from radio. But clearly, SX isn’t reaching everyone, and equally clearly they need to be. I’m not equivocating on that.
Bear in mind – a portion of the $100M you mention was not able to be distributed until a rate was set. That money is going to start finding its way out, some of it in an impending distribution. This is an issue that I do pay attention to, and one where I want to see SX continually improve.
The last topic for today – because this has already taken me four hours to write and I have to get to work on what pays my mortgage – is going to be metadata.
- metadata – I didn’t expect this particular issue to be a cakewalk, and I genuinely value your opinion on this. I know there are problems with providing software, and spending SX money to do that. But I also know, for a fact, that a portion of data that does arrive from webcasters is incorrectly formatted and can’t be automatically imported – we are talking about a portion of millions of performances here – and that many webcasters simply don’t submit reporting information at all (or money, for that matter), for a variety of reasons including that it is expensive and difficult to put in place a system that works for small webcasters that reports effectively.
As far as data mining – hmm, in my mind it’s a judgement call. Is it more important to actually *get* the reporting and money in, and subsequently distribute it (I realize there are two parts to that – collecting *and* distributing
, or to protect against a marketing use of the database of information? I’m going to put on my label hat for a second (I’m not sure it was ever off, but it’s definitely on now). It’s entirely difficult and confusing – in fact, essentially impossible – looking at SX reports as a rights owner representative, to get any feel whatsoever of which webcasters are playing independent music and paying on it. Why is that a good thing? If I knew that a particular webcaster was playing, and paying, really effectively, vs. another one, why as a rights owner rep (which you are as well) wouldn’t *we* not want to know this to address it? Why isn’t that fair? I’m truly trying to understand your thoughts on this, please write them back.
One other thing I am entirely curious about – you said the following:
>>>As it is, SoundExchange allows âmembersâ to review playlist data (and we know that artists arenât âmembers,â so that limits availability to labels)
Why can’t artists be members? That doesn’t sound accurate to me at all. A member is a sound recording owner who is registered with SX, irrespective of whether they’re an artist or a label. And if that’s the case, then why do the labels have disproportionate access that artists do not to database information? As far as I’m aware, a member is a member, and all members have equal access to services that other members have. Sure, bigger members may have a bigger platform to get things done to benefit themselves, but isn’t that the way the world turns?
That’s all I can delve into today. Let’s start with this subset of responses and see where it goes from here?
x – dh
October 19th, 2009 at 9:39 pm
You once said you were interested in increasing transparency at SoundExchange, This is the chance to suit action to the word. Given that, Iâm not going to ask you for the password to the secure server. I will do my best to limit my questions to those that a Director should know as a matter of course. I donât expect you to have all the answers, but I do expect you to try to answer all of them, and get the information that you donât have from the appropriate people.
Once again, using your breakdown-
Artist Reps – What you are suggesting is that some artist could campaign to be on the board. Of course, his or her campaign wouldnât be aimed at other artists, who have no power to elect him or her, but aimed at the power that appoints members. You seem to believe that the Board has the power, but thatâs just a surmise on your part, because it is pretty clear the RIAA has made all the appointments so far.
The bigger problem with your campaign suggestion, however, is that it doesnât solve the problem I raised. If your campaigner is successful, he or she is just as non-accountable to artists as the present members are. Actual artists wouldnât have had any role in putting them there, they couldnât remove him, and he or she is under no obligation to listen to any of them. Those nine people in those seats have no right to call themselves âartist representatives,â even if they can campaign for the seats.
My complaint about there being a lack of contact information for artist rep board members was offered as a symptom of their insularity from the constituency they supposedly serve. It happens to be the easiest one to rectify. Every one of them could set up a dedicated email account at @soundexchange.com, or you could set up a comment page like the one here, where an artist could expect a comment, complaint or question would be reviewed by one of their ârepresentativesâ on the board. I know that artist reps have served on panels at conferences, but has one âartist repâ gone on his or her own to hold town hall meetings for artists like Tim Westergren did for Pandora to discuss what is going good and bad with the organization? Has any one of them written articles for general publications or contributed to a website, or even engaged in a conversation like this one? Until thereâs evidence that they are more than just nice people or friends, Iâve got to go with what I see; they arenât answerable to artists, they arenât responsive to artists, they donât need artists to keep their seats at the table. This is a matter of legitimacy. They donât have any, and in seven years they havenât made any effort to earn it. If you know of any such effort, youâre the only one.
MusicFirst â Whether you and I think a terrestrial radio performance royalty is a good thing for artists is irrelevant. Whether you and I think the change in the economic environment of the music business demands that a terrestrial radio performance royalty be enacted is irrelevant. Neither of those arguments is sufficient authority for SoundExchange to engage in, and finance, a campaign for a terrestrial radio performance royalty. Forgive me if this sounds harsh, but using these justification for SoundExchangeâs involvement in the campaign demonstrates a dangerous ignorance of the legal restrictions on the organization you purport to lead. If SoundExchange’s Board decided tomorrow that it would be a good thing for every recording artist and copyright holder to own a kitten, they would not have the right to lobby Congress for the right to pay for it. The reason why is that such a campaign is outside the limits of what SoundExchange is legally authorized to do, and the same limits put musicFIRST outside what is permitted.
And here are the applicable limits:
17 USC 114 establishes what SoundExchange can do. It starts with the presumption that SoundExchange is the authorized entity to collect and distribute performance royalties collected from Internet and satellite use of the recordings. The important words there are âInternet and satelliteâ use. Subsection (g)(3) limits costs that can be deducted from the artistsâ share of the royalty proceeds to three types of expenses, the âreasonable costsâ of:
1. the administration of the collection, distribution, and calculation of the royalties;
2. the settlement of disputes relating to the collection and calculation of the royalties; and
3. the licensing and enforcement of rights with respect to themaking of ephemeral recordings and performances subject to licensingunder section 112 and this section, including those incurred inparticipating in negotiations or arbitration proceedings under section112 and this section, except that all costs incurred relating to thesection 112 ephemeral recordings right may only be deducted from theroyalties received pursuant to section 112.
All three provisions are limited to royalties collected from Internet and satellite sources.
All you have to do in this discussion, as a Director, is tell me which of those three areas covers spending a single cent of artist money on musicFIRST, which had nothing to do with Internet or satellite radio. âPassâ is not an acceptable answer. You approved the establishment and funding of musicFIRST as a Director, and I would like to know how you justified it in light of this statute. Which of the three provisions covers musicFIRST?
Furthermore, SoundExchange is a tax-exempt organization, under Section 501 (c) (6) of the IRS Code. This limits the functions the organization can do to those directly related to the reason why it was granted a tax exemption. The reason SoundExchange got a tax exemption was that it was set up to negotiate, collect, and distribute performance royalties for Internet and satellite radio under 17 USC 114.
All I am asking you to do in this discussion is, as a SoundExchange director, explain how financing musicFIRST falls under the allowable activities within the tax exemption. This had to be explained to you by the people who brought the proposal to the Board. I’d love to know who that was, but I bet I already know.
Still furthermore, the authorization forms SoundExchange gets from every artist who registers says that they authorize SoundExchange to deduct reasonable administrative expenses from collected royalties before paying out the remainder.
All you have to do here, Dick, is tell me what makes musicFIRST an allowable administrative expense that registered artists authorized SoundExchange to take. As good a goal as a terrestrial radio performance royalty may be, SoundExchange was not the right entity to lobby for it, because the law under which SoundExchange operated does not permit it to act in that capacity. Expenses incurred in those acts are outside the scope of the organizationâs tax exemptions. Nothing that my clients signed authorized SoundExchange to use any of their share of the royalties for this use.
Iâm sorry, you canât claim a âpassâ on any of this. Youâre not just the SoundExchange director in charge of metadata. Your fundamental obligation is to see that the organization carries out itâs legislatively mandated functions within the limits of the rules and within the limits of the tax exemption it sought and received. You too have an obligation to the artists to see that their money is not spent on something outside the organizational scope. I’d like to know if you are satisfied that musicFIRST was a legitimate SoundExchange project, and why.
Small webcasters â My comment about Pandora is that by charging people who listen over 40 hours is going to reduce the number of people who listen a lot, rather than generate a lot of money. The restriction was put in to keep Pandora from going over the limits that would shoot their royalty payments into earth orbit. As someone who represents artists, I generally find it is in my clientsâ best interests to be heard as much as possible, and not turn off the tap, especially to that segment of the consuming public that is that deeply into music that they listen to one source for more than 40 hours a week. That charge isnât Pandoraâs business model, itâs a safety valve to protect them from a situation where royalty charges exceed revenue. Itâs an artificial limit to avoid the punitive aspects of the royalty schedule. By definition, that kind of limit is never good for artists.
Communications â I simply donât believe your statement that âthat many more artists have come off the list than are indicated on the website.â I usually spend a couple hours a week locating artists on the list and contacting them to advise them they are on the list. I usually find contact information for ten or twelve in an hour. I get responses from nearly a third. In three years of doing this, I have yet to have anyone tell me that they are already registered. Iâm working my way through the list alphabetically. Iâm nearly through the Câs. Surely, if âmany more artists have come off the list than are indicated on the website,â somebody would have told me by now that I was knocking on a door that SoundExchange had already walked through. It just hasnât happened, Dick.
And I really donât care what the format of the updated list looks like. The volunteer efforts that resulted in the successful removal of over 2,300 names in three years were done on the format that is in place now. Breaking it down only seems like a way of making excuses for not getting names off the list. Frankly, I would rather see SoundExchange look for another artist than sit and figure out which column a failure to reply belongs in, but I remain dubious that either duty will be attended to, for the simple reason that names havenât come off the list as it exists because the artists have not been found..
You arenât going to find everyone. No one is asking you to, or expecting you to. I believe there are at least three people that I know of still on the list who are currently fugitives, and Iâm sure there are more. There are others who have been dead for over 70 years and, as far as I can determine, so are their children. Finding the appropriate heirs there is a massive undertaking, and some allowance should be made for that. The fact that some people may not want to participate doesnât excuse not looking for them all. That means I disagree with your statement that âeventually, this process has to stop.â As long as SoundExchange has the job of collecting and distributing money for all artists, the process CANNOT stop. SoundExchange cannot ever justify saying âweâve done enough.â SoundExchange sought this job, and got it. They donât get to put limits on it. Itâs not like it cuts into profits, anyway.
And you really donât get to use the excuse that there are only small amounts involved. If that had been a condition on SoundExchange taking the job, you could have said so before you got selected to do the job, but you didnât. Itâs not your money, anyway (at least until you decide to forfeit it). It takes as much effort to find someone you owe $10 to as it does someone you owe $1000 to, so where do you decide to cut off your effort, and since the obligation to pay is open-ended, once you find an artist, you never have to find them again the next time a check has to be cut, so that value of that $10 account keeps rising. Itâs a weak excuse. I wish SoundExchange would stop making it, and Iâm disappointed you continue to rely on it.
And lets be real about the numbers. If youâre right, and 90% of that accumulated money is owed to artists with claims of $50 or less, that means SoundExchange hasnât found 1.8 MILLION artists to pay that $90 million thatâs 90% of the accumulated stash. The numbers donât work.
I will be looking with great interest when the 2008 IRS-990 is released. If everything you say about your efforts to reduce the unpaid balance is true, that number should go down, right? If your efforts havenât worked, or if you havenât made the efforts you claim, that number should go up, right?
You want specific ideas on how to improve finding artists? I made a bunch of them back when you accused me of âbeing long on criticism and short on suggestions.â
Suggestion #1 I suggest that SoundExchange make the same gesture toward finding artists that it has, repeatedly, asking for artist support for musicFIRST. In my own efforts to find artists on the list, I have found that often the best source for information about artists is other artists. Once I had found one, I always asked if they knew where somebody else on the list was, and they often did. You have a group of 30,000 artists registered, and you havenât used that resource once. You have repeatedly sent them written requests for support of the PRA in with their checks. You have never EVER asked for help in finding artists. You might even consider putting part of the list in the envelope for them to look over. One sheet with 50 names isnât going to raise the postage any. If you find one artist this way with every check you send out, youâve done something good, and youâve done something right, and you’ve done it on the cheap. It has always struck me as clear proof of SoundExchangeâs real priorities that there have been multiple requests for shows of support for the PRA in with every check you send out, but NOT ONCE has SoundExchange asked artists to the website and look at the list. Youâre great on looking for help to get more money in. Youâre not so hot on looking for help in paying the people who earned it. That just looks bad, and let’s be honest, public criticism doesn’t upset anyone inside the organization as long as it isn’t coming from the Hill.
Suggestion #2 As the volunteer efforts should finally have proved to you; thereâs a large community of music lovers who would love to assist SoundExchange in finding artists without any need for compensation. Use them. Reach out to the music blogs and the message groups where these people congregate. Thatâs how I started back in 2006, and the response was remarkable. Despite the proven success of untrained people who sincerely WANT to help, SoundExchange has never lifted a finger to organize all that potential. Put one of your employees in charge of building a virtual street team, and let them rip. Hell, it may cost you a t-shirt or a hat or something that you hand out at conferences, but run a contest or two to see who can register the most artists in a given time. If your own expertise is in marketing, you ought to be able to figure this out better than I can. Once again, if it is so obvious a lawyer can figure it out, someone at SoundExchange, or one of their well-paid consultants should have beat me to the idea long ago.
Suggestion #3 Expand the publicity efforts about finding people to the mainstream press. Get someone to write about you in USA Today. Get coverage in Jet and Ebony. You have to go where the people you are looking for are. And that publicity should be focused on getting help finding people. The NPR and CBS Sunday Morning features were puff pieces that focused on how hard the job was. The fact remains that many artists have no idea the money is there, or that it is there for them. SoundExchange has volunteered for the job of collecting and distributing that money, it is SoundExchangeâs obligation to find these people. Weâve got pretty good proof theyâre not going to find you all by themselves based on what they know now, so make the extra effort to educate them.
Suggestion #4 You arenât going to find these people at SXSW, either, so save the money it would take to staff a booth with interns and buy a full page ad in the AARP magazine to tell the story of the unclaimed money.
There are four suggestions. Make of them what you will. I’ve got more, too.
I didnât ask what it âmeans to have consistently voted to authorize funding expansion in this area since getting to that place.â I asked if the way you put it meant that your votes were in the minority, and that more resources werenât being used. It was a direct and simple question. Your lack of a direct and simple answer tells me what I need to know; a majority of the Board doesnât share your concern. You would think those âartist repsâ would be lined up with you. That is, you would think they would be with you if they had the slightest interest in the people they ârep.â
As to that retained money, donât play me stupid by saying you were collecting money for which there was no rate set, and you were just waiting to figure out the math before sending the checks out. When you set up that embarrassing 40% reserve on one distribution in 2007, it was an admission that you don’t know who that much of the money belongs to. That accrued unpaid royalty number jumped by tens of millions of dollars every year, so the problem is getting worse, not better. In filings SoundExchange made to the CRB in March of this year, they admitted they still had one-third of the artist money collected for 2006 which had not been distributed, and over half the money from the first quarter of 2008 was in the same category. If thereâs some legitimate excuse for not paying this money out, SoundExchange should make it known. Telling me that you have the money, but donât have the rate figured out doesnât cut it. If that number rises from $101 million, and I have good reason to believe it is north of $180 million today, youâve just been blowing smoke about actually getting anything done to reduce it.
Metadata â The fairness issue comes down to this: should a label have access for to information collected by a non-profit entity that was paid for in part with artistâs money. You want a honest way around this? Have the labels agree to pay a fair price for access to the reports for any purpose other than annual audits, with that money going back into the revenue pot. Somehow I believe my suspicions about the utility of that information will only be reinforced by the reaction you get to the idea. (And, youâll discover that there are those pesky legal and tax restrictions on a non-profit can do. Heaven knows they havenât stopped SoundExchange before.) Right now those labels are paying millions for research on who is playing what, where, and when. The availability of that information for free is just too great a temptation for them to overlook. Iâve run non-profits that have collected information like this as part of their function. Thereâs always a big interest in people outside the non-profit getting their hands on it. Thankfully, I had Federal law saying it was off-limits. SoundExchange doesnât have that luxury. All its reputation for fair dealing rests on the ability of the Board to carry out its duties honestly. Thereâs no reason why getting the data should interfere in any way with protecting the data from unauthorized use. You just donât give the labels the data.
And on the membership question, this is from the website:
âCan artists become members of SoundExchange?
SoundExchange members are those who own copyrights in sound recordings. Therefore, artists who own copyrights in sound recordings can become members of SoundExchange. Our membership already includes numerous artists who own their own master recordings. Artists who don’t own copyrights may designate SoundExchange as their Authorized Representative for the collection and distribution of both statutory and nonstatutory performance royalties by signing the “Designation and Authorization” agreement. Artists are encouraged to participate as committee members on our board (which contains an equal number of artist and label representatives).â
A neat thing about that statement is the relatively recent amendment (within the last 19 months) regarding authorization to collect ânonstatutoryâ performance royalties, given that Section 114 of the Copyright Act doesnât give SoundExchange the authority to collect them. That change is rather recent, which also puts the lie to claims that everything on the website is out of date. SoundExchange has changed what is needed for them, and not what is needed for anyone else. It is things like this that only fuel my skepticism about SoundExchange meaning what you say it does.
What that quoted provision means is that artists cannot be members as artists. They can only be members as copyright holders. You and I both know there are tens of thousands of artists who donât own their copyrights. And you and I both know that almost everyone who historically recorded for the majors falls into that category, which, I think, goes a way into explaining why those artists canât be part of the club initially set up by those labels. An artist who, for example, recorded for Atlantic under a standard royalty contract, has no right to view any SoundExchange data relating to airplay of his performances. I think the Director from WEA is completely happy with that arrangement, donât you? Thatâs what I meant about artists not being members, and being afforded the status of second class citizens by SoundExchange and I stand by it. SoundExchange remains a symbol of the old parasitic economic relationship between artists and labels, and I don’t think that was a mistake in the design. You’re going to have to point to something very big and very special to disabuse me of that perception and show me that artists are actually “members.”
Hereâs in part what the website says about the âbenefitsâ of membership:
âAccess to the future ‘Repertoire Registry’ is limited to SoundExchange members only. This database will contain comprehensive data on all performances submitted by licensed music services. Members only can search this database and ‘claim’ any and all performances belonging to them. This will ensure a more accurate and substantial distribution to you.â
Artists canât get that information unless it is on recordings where they own the copyright. Do you care to justify the distinction?
Iâve got to raise one more thing since I went and lifted that last quote from the FAQ on the SoundExchange site.
In the same answer the following claim appears, as it has since the website went up:
âSoundExchange reports on track level data rather than a mere sampling of data. Unlike other collection societies, no performance is left behind!â
You and I both know that is utter bull, and that SoundExchange does not get complete track level reporting. I went around on this with John Simson once, and he told me that SoundExchange had always made it clear to the CRB that they had to rely on sampling, so whatever they said on the website was irrelevant, and that artists could always check the CRB filings to get the correct story. I have clients who point to that provision and ask why they donât get paid for airplay they know they get on stations that only have to provide limited reporting. I should tell them that SoundExchange is lying when they say they report on track level data. That information has NEVER been accurate. What do you think I should I tell them? Why do you think SoundExchange is justified in giving clearly erroneous information?
October 22nd, 2009 at 12:52 pm
Seen this Fred – thinking over your questions…too much here to answer this week during CMJ, but will get my thoughts together for this next week.