p2pnet news view P2P:- Lets “make this green shoot of a dialogue count for something”, said Dick Huey recently.

Huey’s Toolshed company “provides new media promotion, digital licensing, online strategy services, and state-of-the-art digital promotion tools to a select list of Media and Entertainment clients,” says his site.

He’s is also on the board of SoundExchange, the RIAA spinoff which now describes itself like this:

“SoundExchange is a non-profit performance rights organization that collects statutory royalties from satellite radio (such as SIRIUS XM), internet radio, cable TV music channels and similar platforms for streaming sound recordings. The Copyright Royalty Board, which is appointed by The U.S. Library of Congress, has entrusted SoundExchange as the sole entity in the United States to collect and distribute these digital performance royalties on behalf of featured recording artists, master rights owners (like record labels), and independent artists who record and own their masters.”

We say ‘now’ because its front page has a brand new look and for the first time we see, up front:

• Performers Registered – 43,501
• SRCOs Registered: Sound-Recording Copyright Owners – 5,322
• Royalties Paid in Millions – $305.2

It’s also saying it’s now willing to openly and publicly answer questions about what it does and how it does it.

Is it coincidental that Nashville entertainment lawyer Fred Wilhelms (right) has for years been single-handedly battling with the organisation to do precisely that, but with a marked lack of success — until this month?

New Year’s resolution

Huey and Wilhelms met on p2pnet via a series of comment posts stretching back to 2007 and which this month culminated in SoundExchange and the ‘unpaid pool’, a unique invitation from SoundExchange to, in effect, let it all hang out, and online at that.

It may be the first time a major corporate music industry organisation has been ready to engage in this kind of P2P dialogue.

“Since this is my first foray into P2Pnet, instead of leaving you with wishes for a happy holiday, let me instead leave you with a New Year’s resolution from all of us at SoundExchange,” says Laura William, promising, “We’ll do better keeping the lines of communication open … ”

Below, Wilhelms takes her up on that >>>

Thank you for your post. You provide a lot of interesting information, however many of the questions I originally put to Dick Huey remain unanswered, and I am hoping that you will take the time to respond to them. I don’t want this exchange to degenerate into simply being a series of press releases. I would love to see actual dialog take place. To promote that goal, I’m going to deal with point you make in the order in which they appear in your post. I am going to edit out a lot of the self-congratulatory stuff and focus on some specific points you make in the hope that you will clarify where necessary, expand where possible and justify where needed.

You said:

“This year, I hope you’ll agree, we’ve been moving toward the goal of opening ever broader and clearer lines of communication. The new SoundExchange.com is an exemplar: not only is the information arranged in a more intuitive, user-friendly way, but there’s more information available there than ever before.”

I really don’t know what you’ve been doing about “broader and clearer” communications. There’s been a definite uptick in the frequency of press releases. I’ve also noticed more “we’re working hard” interviews on blogs and such. As far as actual interchange of ideas, I haven’t seen it.

The new website is a lot cleaner and easier to use, but there’s one thing the old site had that the new site doesn’t; the unregistered artist list.

As of now, there’s no way for anyone outside the organization to assist in the effort to locate artists that SoundExchange has been unable to register since 2006. Despite your glowing reports on how many artists SoundExchange has been finding, you and I both know that, before the list disappeared, no names had been removed from the published list in over seven months, and only a couple dozen in the last 18 months. I’ll take your subsequent assertion that the full and updated list will appear on the website at face value. Is there any schedule for that? Please don’t tell me “soon.” That’s a devalued coin in the SoundExchange treasury.

I’ll be upfront in telling you why I am interested in the new list. Once it is there, I intend to crank up “Project Unfound Artist” again. Check the archives here if you don’t know what that was. You’ll see that past grassroots campaigns resulted in the overwhelming majority of names removed from the prior lists. To be blunt, getting artists paid is too important a job to leave to SoundExchange’s own devices. It worked before, and I expect it will work again.

I will also be upfront in telling you that I have the full contents of the list that used to be on the site. I’ll be looking to see how many names are still on the new list. You see, Mr. Huey and others told me that artists on the list were being found, but the list was just not being updated. You’ll have to accept my dubiety, but folks from SoundExchange have not been very honest about this stuff in the past. If there have been more than a relative handful of those 7,550 names taken off, I’ll be the first to applaud. If not, I’ll be the first to let you know that, too.

There’s another thing that is missing from the new website which was repeatedly promised to me by John Simson and Neeta Ragoowansi; an explanation of how SoundExchange uses samples to determine which artists get what share of the royalty revenue when complete census data is not available. I was told two years ago that this information would be provided on the website, but I find that, no only is sampling not mentioned, SoundExchange continues to say things like “Get Paid When You Get Played.” That’s the header on the Featured Registered Artist page.

I have clients who have gotten a lot of play, but haven’t gotten paid, and they’ve been told it was because their plays were not in the sample playlists provided by the webcasters who play them. Perhaps you can explain why SoundExchange has decided not to mention sampling on the website. I come back to related problems later on in this letter, but I would like to know if SoundExchange is ever going to explain how it samples, or even that it relies on sampling at all.

You went on to say:

“SX is committed to being available to answer questions, and much of what folks ask is publicly available. My phone number is up on the website, and I invite you to call and chat if there’s anything I can do to help. Also, I’d like to repeat John Simson’s open invitation – if you’d like to stop by the office and talk through, or see how things work around here, you’re always welcome. Just name the date – we’ll be here.”

It’s not that I don’t want to see you, it’s just that when I go to DC, my objective is to do what I came to do and get out of town as quickly as possible. I’d rather that I could see what you are doing from where I sit rather than have you tell me face to face how good you’re doing when the other evidence doesn’t quite match up. I’ll believe you’re doing a good job when I see a good job being done.

About the unpaid pool, you said:

“First of all, let me clarify that we’re actively working to reduce the size of our unpaid pool, and we’re not satisfied with the progress in getting money out to artists. That said, I submit to you that the existence of the pool is, at least in part, a credit to SoundExchange, reflective of a determination to do hard things the right way, not the easy way.”

I’m going to dismiss that statement as self-serving claptrap. I say that because you make it based on a unwarranted presumption, that SoundExchange had a choice to do things the “easy” way. You seem intent to make it seem like SoundExchange was drafted to perform this duty, when, in blunt point of fact, SoundExchange VOLUNTEERED for the job. And the point is not whether the job is done the “easy” way or the “right” way. The point is that the job is not getting done.

Beyond that, it isn’t the simple existence of the pool that’s the problem.

As I acknowledged in my earlier correspondence with Mr. Huey, there are always going to be artists who will not register with SoundExchange, for any number of reasons. The real problem, and the one you pointedly fail to address in your post, is the SIZE of the pool, which is well over $200 million as I write this. Your new homepage proudly proclaims that you’ve paid out over $300 million in royalties since you started. When you consider the amounts that have been spent in operational costs, it appears you’ve paid out in royalties only about half the money you’ve taken in. As proud as you are of SoundExchange taking the “right way,” the organization has failed to do what it promised to do with hundreds of millions of dollars. That is nothing to be proud of.

You said:

“Even though regulations permit us to release funds after 3 years, we’ve only done that once, long ago – we’re still holding a reserve of funds to cover claims all the way back to our first collection in 1996 (half that reserve remains).”

Having conducted that forfeiture once, after a shameful lack of publicity except for that generated by outsiders, is also nothing to be proud of. The fact that you felt it necessary to create that reserve is an acknowledgment that the forfeiture process was flawed, but the reserve is also nothing praiseworthy. As I have pointed out previously, SoundExchange points to the reserve as evidence of being artist-friendly, when, in fact, the entire affair is the equivalent of stealing money from an unconscious person and then promising to pay part of it back if he wakes up before it’s all gone.

Frankly, if SoundExchange was worthy of praise for establishing that reserve, one might think they would make a bigger deal out of it. But they didn’t. They kept it a secret for months. There was no publicity about it, anywhere, until it received a glancing mention on your own website. You’re trying to spin the existence of the reserve into a positive thing for artists, but, when you peel back the façade, the truth remains: SoundExchange took money from artists who never knew it was there. They set up a reserve so they could say they didn’t take all of it at once. I don’t think they give a Nobel Prize for that.

And let’s be blunt. SoundExchange may have only conducted one forfeiture, but it tried a second one, right after the first. Nobody might have noticed it because SoundExchange only announced it in small print on the website, but word got out. I have been told privately that the public embarrassment was one reason it wasn’t completed. So please don’t tell me that SoundExchange wouldn’t do it again if it thought no one would notice, because there’s no evidence to support that claim, and there’s evidence to show you are ready, willing and able to try it again, if you can get away with it in private..

You said:

“We are first and foremost artist advocates.”

Sorry, Laura, but you are not “first and foremost” artist advocates. You are, first and foremost, an entity established to negotiate, collect and distribute statutory royalties from Internet and satellite broadcasters.

SoundExchange has assumed the posture of “artist advocate” completely without any authority to do so. It is a long recognized truism that any organization that purports to represent the interests of record labels AND record artists is more of a food chain than an alliance. Everybody outside SoundExchange knows who runs SoundExchange and why they run it. Saying you are “first and foremost artist advocates” is an insult to artists.

You said:

“If we sought only to minimize criticism, we would long ago have done a pool release or liquidated the funds, as other societies do.”

This makes no sense on several fronts.

• Firstly, you stopped the forfeitures to minimize criticism, because going forward with the forfeitures would have created more, not less. True, wiping out the accounts of all those unregistered artists would have eliminated the need to look for them, and from all outward appearances, that had to be attractive to SoundExchange as an alternative. But let’s be honest about this, do you really think SoundExchange could go to Congress as part of musicFIRST and ask to be the collector and distributor of terrestrial radio royalties at the same time it was throwing the rights of thousands of artists to Internet royalties into the trashbin? Wasn’t it easier to pretend you were still looking for them while you looked to expand your authority?
• Secondly, we need to examine what you mean by “other societies?” The only “society” with a parallel forfeiture right is PBS, which isn’t really a performance right society at all. The forfeiture regulation SoundExchange works under is based on the provision allowing PBS to release funds being held for performance rights on “orphan works,” those performances where entitlement to payment is unclear.
• Thirdly, there’s a really funny thing about the PBS and SoundExchange regulations. They both require that the money be segregated in a separate bank account and held there for that three years. I know PBS has that account, because I asked them about it. I asked SoundExchange where that account is held, and nobody could tell me. Maybe you will.

Maybe the failure to follow the provisions of the regulation is the real reason, despite the claims it is out of love for artists, why SoundExchange hasn’t gone through with a second forfeiture of artist funds. Nobody has been willing to discuss this in public. Are you up to it? Can you tell me where the money is being held in a segregated account, and how much is in there?

You said:

“But having a balance of zero isn’t our only goal – our primary goal is to make sure that money makes it to those who rightfully earned and are owed it. A premature release of the funds just to show a lower balance is counterproductive.”

I don’t think anyone is suggesting that you actually pay money out before you know who earns it. I just have a hard time believing you can’t figure out who has earned such a large portion of the money.

You said:

“But finding, registering, and properly paying artists and SRCOs means overcoming a massive industry data deficit – there is no no central registry of track data, and no registry of artists and rights holders.”

There’s a disconnect here. Dick Huey was very proud of the fact that SoundExchange got identification data on music generating 95% of the collected royalties. If you actually get that information, you should be able to figure out who to pay. Now you seem to be suggesting that there’s a “massive industry data deficit” that prevents you from making a substantial amount of those payments. You can’t have it both ways. People are watching.

And that “registry of artists and rights holders?” Isn’t that what you were designed to create?

You said:

“It means an unbelievable education campaign to inform and register artists, many of whom don’t register even after five and six contacts to tell them they’re owed money.”

I simply don’t believe this happens to “many” artists, as SoundExchange has steadfastly claimed since the first unregistered list was published. The reason why I don’t believe it has happened is simple. In the last three years, I have personally contacted over 400 artists on your unregistered list.

ONE of them has admitted to prior contact from SoundExchange. She shared the letter with me, and, to be blunt, it sounded more like it came from a Nigerian email scam than a legitimate organization, so I understand her reluctance to give out their Social Security Number. If “many” artists had repeatedly failed to respond, you would think I would have come across more than one.

You said:

“We’ve been executing database matches with other organizations, and asking them to help us reach artists who don’t yet recognize SoundExchange’s name or purpose. Check out recent coverage of the ReverbNation, CDBaby, and iLike matches. More than 15,000 artists for whom SX currently has money have been notified this way in the past few months, and many more matches are coming (watch for SonicBids!).”

This is a positive step, indeed. I only hope that SoundExchange realizes that there is an entire world of music and musicians out there who are not served by any of those services. I don’t say that to diminish the importance of the efforts, only to suggest that the unregistered list contained thousands of names that wouldn’t appear in any of those databases.

You said:

“Better yet, we are now able to post the entire current unregistered list public on the website – something we hadn’t been able to do since 2006.”

When it gets there. It isn’t there now.

You said:

“To help illustrate the scope of the challenge, let me quote liberally from John Simson’s recent letter in our quarterly newsletter, which reaches out 43,000+ registered artists and 5,000+ copyright holders:”

Quoting Chairman Simson is hardly proof of anything. When it suited his purpose, John Simson has said that SoundExchange was getting accurate information, so it is clear he needs to make a different point here. Of course, John Simson also claimed it was the artist’s responsibility to contact them because SoundExchange was just like a bank, so there’s a credibility problem from the outset. From personal experience, John Simson is not the best witness you can call to prove your point here.

The sad point here, from you and Simson, seems to be to blame everyone but SoundExchange itself for the fact that it has accumulated over $200 million in undistributed royalties. The artists don’t register or the webcasters don’t give you good information. According to all this, the problem isn’t with SoundExchange at all.

I am sure there are problems with the data, and with some artists who don’t respond once they’ve been contacted, but let’s look at the scope of the problem.

By SoundExchange’s own statements to the CRB, as of March, 2009, you still hadn`t distributed 32% of the collected artist royalties, and still hadn’t even allocated over 16% of that money for money received for the calendar year 2006. That tells me you didn’t know who should have gotten 16%, but that you DID know who should have gotten the rest, but hadn’t paid it out, 27 months after the end of the reporting period.

In sum, you still had nearly one dollar in every three of artist royalties. Would you be willing to tell us how SoundExchange stands on 2006 distribution and allocation today?

And 2006 isn’t the worst of it. The same filing says that, for 2007, you still don’t know who was entitled to 25% of the artist money, and you still hadn’t paid out over 40% of the artist money, 15 months after the end of the reporting period.

So, 15 months after the end of the reporting period, SoundExchange still didn’t know who was entitled to one dollar in every four of artist money for 2007, and hadn’t paid out TWO dollars of every FIVE.

And there’s more.

For the first quarter of 2008, after one whole year, you still hadn’t identified the proper recipient of nearly one-third of the artist royalties, and you had paid out LESS THAN HALF.

These number speak to a performance that is not getting the job done, either the easy way or the right way. Saying this is the result of indifferent artists and inaccurate data beggars the imagination.

You said:

“We’re advocates, committed to doing a job which is much bigger than we are. Our board (including those who stand to benefeit from a pool release) continue to defer that release and support our efforts to find the rightful recipients of those funds.”

Firstly, let me thank you for acknowledging something that no one else at SoundExchange has been willing to in the past three years, that a forfeiture of artist money works to the benefit of the copyright holders, and especially to those copyright holders who sit on your board. Beyond that, I’ve already discussed why I believe you are deferring forfeitures, and I still fail to find it admirable that SoundExchange has declared a moratorium on taking money from artists out of love for the people they aren’t finding.

SoundExchange’s informational tax return showed that the total amount of royalties retained exceeded $100 million at the end of 2007, and I am told was north of $180 million at the end of 2008. I’m sorry, Laura, but you can’t blame that number, and that increase, on artists who don’t answer their mail or webcasters who misspell an artist name.

Even if it IS their fault, you folks, as the self-proclaimed artist advocates you are, should be moving heaven and earth to get that money to the right people. And if you’re the effective artist advocates you say you are, that number should be dropping, right? Is it going to drop this year?

But beyond that, saying you are committed to do the job is not the same as doing the job. Telling me you are advocates doesn’t ring as true as seeing actual evidence of your advocacy.

And I’ve seen your advocacy at work. I’ve received those mailed and electronic missives from SoundExchange asking me and my clients to contact our Congressional representatives asking them to support the Performance Rights Act on terrestrial radio royalties, and asking for support of the CRB webcaster rates. That’s advocacy for sure. What I haven’t seen is any effort at all to reach out to the same members to find artists on the unpaid list. Not one request.

SoundExchange has PROVEN it is willing to ask artists to help get more clout at the bargaining table. It HASN”T proven it cares enough to see the artists get paid. It’s time SoundExchange stop telling me it is an advocate for artists and show me some real artist advocacy on the hoof.

“Service providers, Internet radio, and WSA agreements”

I really have no quarrel with anything you say in this section, save for one thing. We appear to have a different definition of “one size fits all.” SoundExchange is established on the premise that every copyright holder should get paid for the use of their copyrighted recordings. My position is that every copyright holder should have the right to decide if they want compensation for the use of their works. The current law accomodates you, but doesn’t accommodate my position. Furthermore, I said that no one should presume to speak for all artists, yet that is exactly what SoundExchange claims to do.

My earlier correspondence with Mr. Huey hit a couple snags where he was unwilling or unable to answer several questions I put to him. I’m hoping that you, signing your name as a representative of the organization, will not feel the same reluctance. I will not overload you with questions. I want to focus on one issue:

Under Section 114 of the Copyright Act, and the regulations promulgated by the CRB, SoundExchange has the authority to collect and distribute statutory performance royalties. The Copyright Act gives copyright holders the right to enter into direct license agreements with webcasters and satellite broadcasters, but, in such an arrangement, the statute says the royalty payments will be made directly to the copyright holder, who will then pay the artist according to the artist’s contract with the copyright holder.

It has come to my attention that SoundExchange has, through the adoption of a device known as the “Manager’s Amendment,” agreed to act as the collection and distribution agent for these direct license agreement. Such an arrangement appears to be in contradiction of the Copyright Act, which, as noted, limits the authority of an entity like SoundExchange to dealing with statutory licenses.

So here are my questions:

1. Does the Manager’s Amendment exist?
   
2. Why has SoundExchange failed to publicize it?
   
3. Under what authority does SoundExchange purport to amend the Copyright Act regarding the limitations on its power and authority?
   
4. What safeguards are in place to assure artists receiving royalties under statutory licenses (and paying their share of administrative expenses out of those receipts) that they are not subsidizing the administration of collection and distribution of direct license receipts?

I’m really not interested in trading comments that don’t address what the other person says. Simply talking in my presence isn’t a dialog. Either you can answer these questions, or you can’t. You can tell me all you want to about the swell job SoundExchange is doing, despite what it looks like from the outside, but unless you can provide information on the “Manager’s Amendment,” there’s not much point in it.

And just one more note in passing. I understand your appearance here is partly due to my “demand” that SoundExchange answer my questions. I never made such a demand, and I’m in no position to do so. For the past couple years, SoundExchange completely ignored my questions, and I was fine with that. As far as I was concerned, SoundExchange’s silence was supremely arrogant, but at least it wasn’t misleading. If you are going to step up for the organization you work for, the only thing I expect is honesty.

Fred Wilhelms

Stay tuned, and for now, below are the p2pnet posts to date.

• Soundexchange ‘green shoot of a dialogue’, December 28, 2009
• SoundExchange and the ‘unpaid pool’, December 23, 2009
• Fred Wilhelms to Dick Huey -  November 18, 2009
• Dick Huey to Fred Wilhelms -  November 17, 2009
• Wilhelms, Huey, SoundExchange exchange -  October 19, 2009
• Dear Dick Huey -  October 8, 2009
• Has SE’s Dick Huey gone missing? – July 12, 2007
• SoundExchange’s Huey to Wilhelms – July 5, 2007
• SoundExchange’s Huey v Fred Wilhelms – July 3, 2007
• SoundExchange: making up numbers – June 28, 2007

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First they ignore you, then they laugh at you, then they fight you, then you win ~ Mahatma Gandhi

January, 2010

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This entry was posted on Tuesday, December 29th, 2009 at 9:51 am and is filed under P2P. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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