ARA Urges Copyright Office To Look Into Diversion of Unmatched Royalties, Underhanded DSP Agreements

Washington, D.C. — The Artist Rights Alliance (ARA) an artist-run, nonprofit fighting for songwriters and musicians in the modern music economy, filed more comments today in response to the US Copyright Office’s Unclaimed Royalties Study.

ARA stated a fundamental principle for there to be no unmatched royalties and for all songwriters that generate royalties to be paid properly. ARA condemned secretive agreements between digital music providers and music publishers, diverting unclaimed royalties before the Mechanical Licensing Collective can match them, resulting in royalty distribution based on market share and an inaccurate count of monies owed. Not only does this breach the Committee’s core principle, it potentially violates the Music Modernization Act and undermines Congress.

In the filing, the ARA states:

Secret, private agreements cannot override this clear statutory command and should not be allowed to siphon or divert unmatched royalties out of the MLC process in violation of the core principle that all efforts must be made to match royalties to the specific compositions and songwriters that generated them… We urge both the Office and the MLC to aggressively investigate these claimed agreements and to use all available means to reclaim any royalties potentially diverted from the MLC process and away from the songwriters and publishers entitled to them.

The entirety of the ARA’s comments can be found here:

US Copyright Office Unclaimed Royalties Study

Notice of Inquiry

Docket №2019–6

Reply Comments of the Artist Rights Alliance

August 31, 2020

1. Core Principle — The Unclaimed Royalties Oversight Committee has properly stated the fundamental principle that must drive all decisions, operations, and policies surrounding the Mechanical Licensing Collective’s collection, matching, and payment of unclaimed royalties: “for there to be no unmatched royalties at all and that all parties on every musical composition ever streamed by the digital music providers (DMPs) [to be] paid correctly and properly.”

2. Defend Songwriters From Private Agreements That Would Divert Unclaimed Royalties Before the MLC Can Match Them — ARA is deeply concerned about indications in another proceeding before this Office that some digital services have been paying purportedly unclaimed royalties to music publishers in ways that breach this core principle, potentially violate the Music Modernization Act, and subvert the clear intent of Congress in establishing a detailed and rigorous process for the MLC to collect, match, and pay all royalties to the songwriters who actually earned them.[*]

The Music Modernization Act establishes a concrete, robust, and mandatory process by which unclaimed or unmatched royalties are transferred to the MLC, extensive efforts are made to find and pay all rightsholders who are owed those royalties, and fallback mechanisms like distribution based on market share are used only as a very last resort. This is critical because using market share to distribute royalties is a terrible substitute for actual matching — since market share leaders are least likely to have any unclaimed royalties of their own in the pool because they have the greatest ability and incentives to find and claim their work.

Secret, private agreements cannot override this clear statutory command and should not be allowed to siphon or divert unmatched royalties out of the MLC process in violation of the core principle that all efforts must be made to match royalties to the specific compositions and songwriters that generated them.

For these reasons, we believe that any assessment of best practices for the collection, matching, and payment of unclaimed royalties must include measures to identify all unclaimed royalties — including any royalties wrongfully deemed “matched” or “claimed” by digital music providers and any paid out by digital music providers pursuant to private agreements or settlements of litigation or any other potential liabilities. We urge both the Office and the MLC to aggressively investigate these claimed agreements and to use all available means to reclaim any royalties potentially diverted from the MLC process and away from the songwriters and publishers entitled to them.

3. Additional Points — ARA wishes to emphasize and lend our support to the following points made by other stakeholders in this docket:

A. Recording Academy — We strongly agree with the Academy’s call for the MLC to “use its statutory discretion to delay the initial distribution of unclaimed royalties if such a delay would result in a measurable increase in the match rate.” Every effort must be made to match royalties to those who have earned them, even if that takes more time than initially hoped. We also share the Academy’s concerns about the potentially cumbersome process around the excel-based Music Data Organization worksheet. We encourage the MLC to make its processes streamlined, intuitive, and user friendly — and to ensure that individual songwriters and independent publishers have access to the same options, tools, and solutions as the major publishers.

B. Chris Castle — Mr. Castle makes a key point here: “I suggest that the Office start with making solving the unmatched a joint effort of the DLC and the MLC together… The Office seems to misapprehend the problem as a burden of the songwriter. It’s not. It’s not even the burden of The MLC. It’s a burden of the Safe Harbor Services and a problem that they created. Let’s not forget whose zooming who here.” Language and attributions of intent aside, it cannot be left to individual songwriters to solve this problem. And, as the growing controversy over private agreements shows, the digital services must have clear and strong incentives to help ensure royalties go to the songwriter that generated them — they must be required to be part of the solution, not a cause of further problems in this area.

C. SoundExchange — We strongly agree with SoundExchange’s observation that “A collective also must keep in mind that it does not serve its stakeholders to reduce its unpaid royalty balance by paying the wrong people.” This is exactly the risk posed by the digital services’ apparent demand to treat royalties as “matched” simply because they have paid out money to somebody, regardless of whether that person or organization has any valid claim to those royalties or even is entitled to license the relevant musical work. The goal is not to empty the black box for the sake of checking an item off a statutory to-do list. It is to ensure royalty monies reach the songwriters and publishers who generated them.

[*] In Docket # 2020–12, the Office reports that “In [The Digital Licensee Coordinator’s] words, certain music publishers ‘negotiated agreements with several of the major digital music providers to liquidate accrued royalties for unmatched works through payments based on market share, or other mechanisms not based on matching to specific compositions that generated the royalties,’ and some of these agreements have continued in force through the MMA’s enactment date.”

Artist-run, non-profit advocating for musicians, performers, & songwriters in the digital landscape. (Formerly the Content Creators Coalition or “c3”)