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Another Royalty Forfeiture From SoundExchange

Maybe they though no one would notice with all the furor over the Internet Radio rates. And maybe they just don’t care about artists as much as they want you to believe.

The wonderful folks at SoundExchange have apparently decided that they need more ready cash to fund their publicity campaign in favor of the universally despised CRB Internet Radio royalty rates. They’ve decided to drain more money from the accounts of artists they haven’t been able to find.

That’s right. There’s another forfeiture scheduled, and this time they didn’t even bother to issue a press release about it.

On June 30, 2007, less than sixty days from now, artists who have managed to evade that super-efficient SoundExchange dragnet up to now will stand to lose all royalties collected on their behalf for broadcasts between April 1, 2000 and October 31, 2002.

There are 8,353 of them. This still represents better than 20% of all the artists they collected for during that period. About 6,000 are carryovers from the last forfeiture, when SoundExchange sucked up the royalties for broadcasts up through March 30, 2000. That forfeiture happened last December. Those artists probably had performances broadcast in the new period, too, even though SoundExchange now gets to spend the earlier money.

Or, as it now appears, they get to spend 70% of those royalties. Buried on the SoundExchange website, right after the announcement of the new forfeiture (you have to look hard, it’s printed in 8-point type in the middle of a paragraph), is an announcement that SoundExchange didn’t completely rob those artists in the earlier forfeiture.

According to the statement, SoundExchange has established a reserve with 30% of that money which is available on a first-come, first-served basis to artists and labels that lost money in December. I guess taking 70% of a musician’s money, and then holding the rest to pay out to some artists, is so much more “artist-friendly” than taking it all at once, especially as they are only able to take the money because they couldn’t find the musician in the first place.

I don’t see how the percentages make much of a difference to the artists who aren’t getting any of the money. If you get mugged, it is cold comfort to discover the thief left your shoes when he took your wallet. Under this new arrangement, you’re going to lose your shoes eventually unless you figure out who the mugger was on your own.

That fine print is the only formal announcement regarding the creation or existence of the reserve. Of course, you only know about the reserve if you read the fine print. You only read the fine print if you go past the home screen on the SoundExchange website to get to the list of artists they can’t find. And, of course, you only bother to go the SoundExchange website to check the list of artists you can’t find if you know it is there.

But then, John Simson has explained that it really isn’t SoundExchange’s job to find all these people, anyway. You see, according to Simson, SoundExchange is like a bank, and it is up to the depositors to inform the bank where they are, and the bank isn’t obligated to go looking for them. Of course, banks don’t get to open accounts for people who don’t know the bank exists, and banks haven’t promised the government they would find the people they collect money for. These are obviously minor details for Simson.

And we all know how much effort SoundExchange has put into getting this news out. SoundExchange very helpfully posts every one of its press releases on its website. There isn’t one hint that this money is there. You might think that SoundExchange really doesn’t want to make much of an issue about their inability to find artists, especially right now when they are trying to convince everyone that driving thousands of Internet radio stations (that play a lot of the artists that SoundExchange can’t find) is really good news for artists.

Obviously, SoundExchange would obviously rather focus their public relations efforts on stuff that maximizes the money they get, like the new royalty rates, rather than increasing the money they pay out. The charm of this philosophy, of course, is the more money they take in, and the fewer artists they actually find, the more money they get to absorb into their own operational budget. From there, it will go to such pro-artist activities as more press releases saying how pro-artist they are, more lobbying efforts to counteract the near universal outrage at the CRB rates, and more of that brilliant “statistical analysis” by their own executives that can’t even establish how many paying Internet services there are.

One of the strangest aspects of this whole “unfound” artist mess is what SoundExchange hasn’t tried as part of their campaign to locate people who are owed money SoundExchange is holding. They say they have 26,000 artists signed up. They have never asked them, in any organized fashion, to help find their peers. I know that because I have clients who send me every communication they get from SoundExchange.

Given that all those royalties SoundExchange is holding are derived from Internet broadcasts, it strikes me as odd that all the “outreach” they say they are doing doesn’t involve reaching out to those communities on the Internet where musicians, and fans of musicians can be found. There are websites, forums and message boards that focus on every conceivable creative niche. There are literally millions of people who would love nothing more than to help the artists they love get paid. I saw this happen in hundreds of cases last fall during the first forfeiture, but SoundExchange has completely missed the boat on this. Maybe that’s just the way they want it. There certainly isn’t any evidence they are making a real effort. Those 8,353 names on the new list tells me they aren’t.

And how much are those “missing” artists owed?

Well, SoundExchange COO Barrie Kessler, the author of that “statistical analysis” says the average annual payout to artists is $360. The period subject to default is 30 months long, or two-and-a-half years.

8,353 x $360 x 2.5 = $7,517,700.00.

Of course, that number requires you to believe the average annual artist payout is $360. As SoundExchange doesn’t release any of that information, and Kessler has proven herself capable of delivering conflicting information within a single press release, you can believe that total at your own risk. But even if SoundExchange, in another artist-friendly frenzy, decides to take only 70% of that money, that will still come to more than $5 million taken from artists and put in their own pocket.

So, except for the fact that they are keeping everything a secret this time, we’re back exactly where we were last September, when SoundExchange announced the first forfeiture for “unfound” artists. Thousands of artists are going to be deprived of money they’ve earned because SoundExchange hasn’t been able to find them. SoundExchange gets to keep the money they don’t pay to the artists they can’t find.

It has to be fuel for great summer daydreams at SoundExchange. Thousands of webcasters driven away. The unfettered ability to strike deals with the surviving outlets so that the RIAA labels get paid directly and even the artists that have registered won’t get paid. Thousands of other artists ignored. Millions of dollars in forfeited funds available to spend as they want. The future looks bright for John Simson and company.

It is time to stop listening to what they say they are doing, and time to start paying attention to what they are actually doing.

FRED WILHELMS is a lawyer who represents musicians and songwriters. He can be reached at: fred.wilhelms@gmail.com

 

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