Fred Wilhelms to Dick Huey …
p2pnet news view P2P:- Entertainment lawyer Fred Wilhelms (right), of whom CounterPunch’s Dave Marsh once said “If the corporate music industry had any ethics, Wilhelms would be its ‘ethicist-in-chief’,” has for two years been pressing SoundExchange board member Dick Huey for questions he (Huey) had promised to answer.
Yesterday, Huey finally delivered. Below are Fred’s responses »»»
I’ll deal with the substantive portion of your contribution below, but there is one part of your preface that requires comment:
You said “I’m not interested in being a SoundExchange conduit for every question you’d like answered SoundExchange has official communication outlets, which you should engage directly with to answer your questions.”
I have, and they don’t answer me. Probably because they don’t have to.
Take this example:
Over two years ago, I attempted to engage John Simson in a discussion of why SoundExchange does not acknowledge it requires sampling to allocate royalties to artists. I was puzzled because the website didn’t mention sampling, and even said “if you get played, you get paid.” Mr. Simson’s initial response was to tell me that SoundExchange had explained its reliance on sampling in filings with the Copyright Royalty Board, and that artists could read the filings if they wanted to know more. He made no justification for the discrepancy between the website and the actual practice. When I asked him for more information on how SoundExchange actually did the sampling, he promised me an answer multiple times for nearly two months, always telling me I would hear from him “soon.” Finally he referred my inquiries to Neeta Ragoowansi, who picked up where Simson left off and promised me multiple times that I would get my answers “soon.” After six more months of that, I got an email from Simson saying that I WASN’T going to get an answer, but that the subject would be addressed on the website. When would that happen? You guessed it, he said “soon.” And here we are, a year and a half after that promise, and there’s still no answer, and nothing on the website but that inaccurate claim.
Since then, repeated inquiries to various “official communications outlets” have been met with dead silence.
Maybe you can explain why.
Now to what you said in the body of the response.
Artist Reps and RIAA control of the process
With the exception of the two performer union representatives, everyone on the Board owes their presence in the room to the RIAA. Your suggestion about any artist putting his or her name up for board membership seems to overlook the fact that the only way they’ll get on the board is if the RIAA approves of them. You completely ignore the fact that if someone campaigns and gets on the board, my fundamental problem with the system remains; that director is not accountable to artists. Accountability goes further than just “insularity and contact info,” it means having to explain to your constituency what you are doing, and demonstrating to them that you are standing up for them, and them having the right to replace you if you fall down on the job.
It is my belief that SoundExchange’s poor performance in finding and paying artists can be directly attributed to the fact that the “Artist Rep” Directors don’t have to explain that performance to anyone, because there is no penalty if they don’t. All the suggestions about seeking a seat on the Board doesn’t change that in the slightest. If someone actually “wins” a seat that way, there’s still no obligation for that Director to be any more responsive to artists than the current crew. I think it is time to drop the foolishness of anyone successfully campaigning for a seat at the table and to just admit that the Artist Reps will never be accountable to artists, so artists had better learn to live with it. It isn’t going to change, and it isn’t going to get any better.
musicFIRST -
If you go back and read my initial response, I correctly identified it as a 501 (c) (6). We are going to have to disagree on what SoundExchange’s “tax exempt mission” is. You, and the lawyers you’re quoting, appear comfortable with the idea that SoundExchange’s mission is broader than the one granted by the Copyright Act, and, I presume those corporate documents you’re quoting are going to be considered “proprietary,” so we’ll never really know for sure. I can only base my opinion on what I see, and I see SoundExchange overreaching the statute and the Tax Code. Maybe someday someone will force you to show the cards you’re holding, but the fact that you’re hiding them doesn’t say a great deal about a desire for transparency if I have to trust you when you say you’re holding high trumps.
You are going to have to explain if that thing about “members” paying the cost of musicFIRST includes artists as “members” and/or if it includes forfeited money, because what you quoted is doublespeak, and it certainly doesn’t address what I asked about SoundExchange financing musicFIRST..
The unpaid “pool” –
It is a good thing that SoundExchange wants to pay artists what they are entitled to, but that’s exactly what the organization promised to do when it got the job. And it is a good thing that SoundExchange has retained that money rather than absorb it, even if I think that the real reason why is that SoundExchange is not now, and never has been, in compliance with the regulation that that money be held in segregated accounts for three years before being forfeited, and the organization can’t risk someone actually challenging you to prove you comply. (This is another one of those areas where your “official communications outlets” have been strangely silent. I simply asked, several times, where those segregated accounts were being held, and where they were identified on the 990. There’s never been an answer to either part. I think you can start to understand why waiting for a response from a SoundExchange “official communications outlet” is a study in futility.)
You say the reserve is there to pay every artist in full. It pains me to be this blunt, but you can’t point to a nine-figure reserve and tell me you have to have it to pay artists, when the only reason you have it is that you haven’t paid the artists. I warned you not to play me stupid, but this comes awfully close to testing my limit on that warning. $101 million as of the end of 2007, an estimated $186 million as of the end of 2008. That’s a terrible record, and it’s heading in the wrong direction. The size of that fund is not a good thing, and don’t try to make a virtue out of it.
Communications –
If I am wrong about the number of artists who have been removed from the unregistered list, what is the RIGHT number? I don’t need names (although I would love to have them, as I have been tracking that list for nearly three years). Just give me the number so I know how SoundExchange has done in finding people since we ended the last grassroots campaign in July, 2008. You see, Mr. Huey, this is a microcosm of the problems a lot of people have with SoundExchange; we can see one thing (a list with few deletions in the last year), and SoundExchange tells us another (there are a lot of artists who have been taken off the list.) This is the sum and substance of SoundExchange’s image.
Mr. Huey, that list represents SoundExchange’s ONLY public effort to find those artists, and even more embarrassing than the few names taken off is the realization that not one name has been added in nearly three years (January, 2007 was the date of the last supplemental listing). You and I know that SoundExchange hasn’t found everyone who has been played on Internet radio since then, so I know that if you actually updated the list today, you would be adding tens of thousands of new names, and adding legitimate fuel to the argument that I’ve been making about SoundExchange’s failure to do the job it promised to do. I wish to Hell you could prove me wrong about this. I want SoundExchange to do a great job, but there’s no evidence they even want to.
And Mr. Huey, if you have four in house, and four outside people working on the list and can only point to a handful of names coming off, it is a waste of manpower. Take that from someone who volunteered several dozen hours of his time to teach (at the personal request of John Simson and Neeta Ragoowansi) one of your “consultants” how to look for, find, contact and register people, and even gave him a list of over three hundred artist contacts. Sadly, I followed up a number of them six months later (when I noticed the names still on the list) to find that few of them had been contacted by SoundExchange or the consultant, who seemed oddly more excited about finding some of his own musical heroes than reducing the list. And take that from someone who, as part of a grass roots effort without SoundExchange’s resources, or even acknowledgement, consistently have found more people on the list, and found them faster, than the eight people you’ve named.
Small webcasters
My comment was directed to your suggestion that Pandora’s charging for high-volume users was part of their business plan. I noted that it was established to discourage high-volume use and restrict their exposure to deadly royalty rate increases, not to increase revenue. The fundamental problem I have with the royalty rate structure is that SoundExchange has decided that maximizing royalty revenue now is the appropriate thing to do for all Entertainment lawyer Fred Wilhelms, of whom CounterPunch’s Dave Marsh once said “If the corporate music industry had any ethics, Wilhelms would be its ‘ethicist-in-chief’,” has for two years been pressing SoundExchange board member Dick Huey for questions he (Huey) said he’d answer.
Internet radio -
The danger of exceeding revenue/listener caps, with the virtual death sentence of retroactive rate increases, greatly inhibits experimentation with business models by penalizing success. Even if SoundExchange would just do away with that retroactive death penalty would be a lot better for webcasters to innovate. If you really want to address the idea that the discussion is not equally balanced for all artists, you have to acknowledge that SoundExchange’s “one hammer clobbers all” approach doesn’t work either.
Metadata
My primary concern about metadata is that labels will find it a free alternative to the marketing information and analysis they currently spend millions of dollars a year on (can you say “Big Champagne?”), and that artists would be paying half the bill for building it. Normally, there are restrictions placed on the use of this kind of collected data when it comes from a non-profit source, and I would expect a Director of a non-profit entity to know that (or be told that by your counsel). You’ll forgive me if I find it dubious that there will be any effective Chinese wall built between the airplay data and the labels. So, what I see is that SoundExchange creates a very valuable resource it’s labels get for free when the artists have paid half the bill for it and most of them can’t get access themselves. SoundExchange will be providing something of commercial value to others in violation of its tax exemption. If you’re comfortable with that, there’s nothing anyone except the IRS can do about it.
The issue of artists not getting access to the play data is only part of the problem of them not being members. Their general rights in regard to getting information from SoundExchange are extremely limited. Access to play data is only part of it.
My suggestions for artist outreach – I think you’re going to find that I’ve given them all to SoundExchange at one time or another, starting back in 2004 when John Simson first asked for my help in finding artists, then jerked me around for two and a half years every time I contacted him to follow up on his request before SoundExchange finally published the unregistered list.
The website I’ll believe the improvements when I see them. I’ve been told “soon” for too long to simply believe it anymore. Permit my simple skepticism here, but I don’t think letting SoundExchange have a column on the unregistered list where they can say “we’ve already found this guy, so it’s his fault he’s on the list” is really going to help matters. You’ll have to explain why this will be an improvement in service, and not just an excuse.
You see, Mr. Huey, when we get down to it, that’s really a perfect example of the core problem I have with SoundExchange, and I think it is one you can address without having to give away state secrets:
No one from SoundExchange will ever admit there’s ever a problem. You didn’t even do it in your response, carefully avoiding addressing things (like the one-third of the 2006 royalties still undistributed in March 2009) that defy excuse. SX doesn’t come off as credible when it denies what everyone else can see.
“The first step to recovery is admitting there is a problem, according to every twelve-step program I’ve ever heard of,” says Fred adding:
“It’s time for SoundExchange to admit it has problems.”
Stay tuned.
First they ignore you, then they laugh at you, then they fight you, then you win ~ Mahatma Gandhi
November, 2009
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November 20th, 2009 at 1:54 pm
I had a problem with part of your last post, but I couldnât quite put my finger on it until about 4 AM, when the realization finally struck me.
Specifically, this is what you said:
âSX reporting on track level data vs. a sampling of data â the vast majority of SX data *is* reported on track level data. In fact, 95% of the money distributed is based on census data. So the statement in absolute is not correct, but in practice, it is primarily correct. And itâs possible that that the sampled 5% disproportionately affects both the artists you represent, and the artists (and labels) I represent. So naturally, Iâm interested in getting to 0% sampled data, which is one of the reasons Iâve established the metadata committee to review the feasibility of providing software to get past the inherent difficulties small webcasters (especially schools) face in reporting. I expect this committee to get into the trenches of this issue, and I welcome all opinions and suggestions in order come up with the best possible recommendation to the full board.â
This is the line that jumped out at me: âIn fact, 95% of the money distributed is based on census data.â 95% is a great number, and it certainly looks like SoundExchange is doing a great job in getting that all that money out, but this statement is patently misleading, because that great percentage is based on âmoney distributed.â The problem with SoundExchange isnât the âmoney distributed,â itâs with the money NOT distributed. Thatâs the money thatâs building up in that investment account to the tune of nearly $200 million as of the end of 2008.
And thereâs a whole other layer to the rotten onion of that bogus statistic that SoundExchangeâs own data exposes. In filings with the CRB in May of this year, SoundExchange acknowledge that, as of March, 2009, it still hadnât distributed 32% of the collected artist royalties, and still hadnât even âallocatedâ over 16% of that money for money received for the calendar year 2006. Over twenty-seven months AFTER the end of the reporting period, one dollar in every three that artists were entitled to was still sitting at SoundExchange, and SoundExchange still didnât know who was entitled to half of that. You canât foist that off on sampling problems, and that 95% figure becomes a whole lot less impressive when you realize itâs 95% of a number that is far less than what SoundExchange should have paid out.
And before you explain this away as one bad year, the same filing says that, for 2007, you still donât know who was entitled to 25% of the artist money, and you still hadnât paid out over 40% of the artist money, 15 months after the end of the reporting period. For the first quarter of 2008, after one whole year, you still hadnât identified the proper recipient of nearly one-third of the artist royalties, and you had paid out LESS THAN HALF. So, to put your claim of 95% payment in the proper context, for the first quarter of 2008, after one year, SoundExchange had paid out 95% of 48% based on census data. In this light, the number is not as impressive as you wanted it to sound, is it?
This is the problem with SoundExchangeâs attempt to hide what it does from public scrutiny, Mr. Huey. Sometimes the real data comes out, and the attempts to hide are futile.
So, I really donât need the âofficial communication outletsâ of SoundExchange to put a spin on these numbers. I can read them myself, and they leave me with only one question for you;
Do you think not paying out 32% of artist royalties after 27 months is doing a good job?
P.S. I heard from a friend of mine who read your last response and got a real kick out of your claim that SoundExchange is not âbeholdenâ to the RIAA in any way. He reminded me that during the last Webcaster rate setting hearings before the CRB, SoundExchangeâs counsel held repeated strategy sessions with RIAA counsel, in the open, right in SoundExchangeâs office. Now, of course, the RIAA had absolutely no standing to participate in those hearings directly, so do you really think SoundExchange was acting independently or taking marching orders? Did the independent Directors have a representative at the meetings? How about the artists? Were they represented? If you knew about this, why did you leave the SoundExchange strategy up to the RIAA? And if you didn’t know about it, does it make you wonder what else you don’t know?
You see, Mr. Huey, the same thing keeps happening over and over. SoundExchange people like you say one thing, and the things we can see with our own eyes say differently. Who are we supposed to believe?