YouTube Ordered To Pay $1.6 Million To ASCAP

from the making-sausages dept

You may remember last year around this time, a district court set a totally arbitrary royalty fee that AOL, Yahoo and RealNetworks had to pay ASCAP for music streamed over their services. Reading through the details of the decision was immensely troubling, because it seemed to calculate the amounts on a somewhat meaningless formula based on taking a percentage of revenue from the companies that had absolutely nothing to do with music itself. Basically, it looked at almost any revenue that somehow sorta kinda touched on music (including search) and included that as part of the calculation process. Recently, ASCAP and Google went through a similar case in front of the same district court to determine just how much Google has to pay ASCAP for all the music streamed on YouTube. To be honest, I'm still not sure why it makes sense that Google has to pay anything for this, but that's one of the oddities of modern copyright law.

While the decision hasn't received much press attention, last week, the court ordered Google to pay $1.6 million to ASCAP (thanks to Eric Goldman for sending me the decision). The court seemed to take a "split the difference" approach, as ASCAP had asked for $12 million for all music streamed between 2005 and the end of 2008 (and another $7 million for 2009). YouTube, in response, had suggested $79,500 for 2005 through the end of 2008 and then $20,000 per quarter ongoing. The court rejected both proposals, and dinged both companies for weakly supporting their positions, or being somewhat misleading in their assertions. Google, for instance, tried to focus on the number of "music videos" as compared to the total number of videos on YouTube, though the court noted that the music videos seem to get a lot more views than many of those other videos, and it doesn't take into account the time spent viewing each video. ASCAP basically said: "just take that formula you used last year for AOL, Yahoo and Real and apply it to Google revenue."

The court, instead, went into a lengthy justification of trying to come up with a "fair" proposal, involving an awful lot of redacted information on YouTube's revenue (though... if you work through all the numbers you might be able to piece back together some revenue info) and eventually came up with $1.4 million for 2005 through 2008, and then $70,000 per month afterwards, which, when added to the additional fees this year, brought it up to $1.61 million to date (and counting). Of course, this is all supposed to be a temporary sort of thing until the two sides can work out an agreement on their own -- but given the vast differences in proposals (as the court noted, ASCAP was asking for a rate 150 times as large as YouTube's proposal), it doesn't seem like the two sides are close.

Either way, reading this ruling as well as last year's ruling shows what a total mess this process is. Basically, ASCAP gets to go in and demand cash from anyone who benefits from music anywhere, and a judge sorta randomly makes up reasons to give them cash. I know that ASCAP supporters will claim that the money is for songwriters, not the record labels, and it's important and blah blah blah. But the whole system of such collective licenses is a mess that it makes it close to impossible to do anything with music without getting yourself into a huge licensing hole. For more than a century now, Congress and the courts seem to look at every innovation and simply slap another license fee on it, and leave it to the courts to sort out any mess. All of these license fees add up to a massive tax on innovation that divert money from good business models and into the hands of collections societies, who siphon off a piece and often don't do a very good job distributing that cash. It's a massively inefficient model that's simply not needed.

Filed Under: copyright, court, rates, songwriters, streaming
Companies: ascap, google, youtube

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  1. identicon
    TonsoTunez, 22 May 2009 @ 6:30pm

    Well, Mike, Wrong Again

    Mike says: ASCAP gets to go in and demand cash from anyone who benefits from music anywhere, and a judge sorta randomly makes up reasons to give them cash.

    ASCAP operates under a consent decree mandated by the
    Department of Justice.

    Under the terms of the decree, ASCAP must license its catalog to anyone - or any organization - that requests a license.

    Once the request is made the requesting party is licensed and may immediately use the music in the ASCAP catalog subject to the requirement that they immediately enter into negotiations regarding the fees to be paid. If the fees can't be agreed upon, the consent decree requires that the parties must have the rates set by a rate court.

    YouTube requested a license ... negotiations were entered into, but, the parties could not agree upon a fee.

    A rate court proceeding was convened.

    The proceedings are exactly the same as in any other court. Evidence is gathered and presented and witnesses are called to establish each sides position in the matter. Then the judge, after carefully taking everyone's point of view under consideration, comes up with the rules to be followed and the fees to be paid.

    The proceedings can become quite lengthy and intense - not to mention costly - but one thing is without doubt - the results are never because the judge "sorta randomly makes up reasons to give (ASCAP) cash.

    The very first order of business is always to determine whether ASCAP is due anything pursuant to the U.S. Copyright Law. Nothing proceeds unless the answer to that question is 'yes.' Of course, YouTube knew the answer at the outset or they wouldn't have requested a license.

    To head off what would have been an appropriate discussion on this list, you state, "I know that ASCAP supporters will claim that the money is for songwriters, not the record labels, and it's important and blah blah blah ..."

    Well, just so you won't be disappointed, the money collected by ASCAP is for songwriters, not the record labels, and it's important and blah blah blah ...

    Why are you always so dead set against paying anything to anyone who creates music? Your message is always that artists, musicians, songwriters are such worthless human beings that don't deserve to be paid for their innovative creativity.

    Google is a business ... writing music is a business ... ASCAP is the agent for those who are in the business of writing music ...

    Google is a huge business using its might, muscle and money to trample everything in its sight - little guy, big guy any guy that gets in their way ... The use of other peoples music (without paying) has been a huge part of their success story ... However, in the case of songwriters, they have acknowledged - by requesting a license - that something is due the creators of music who are mostly small, independent business people.

    So, it was Google that preferred to have a court determine what that payment should be rather than entering into productive negotiations with the writer's agent, ASCAP.

    The procedure is well defined by the Department of Justice ... The way to a resolution was clear ... there is nothing at all messy or inefficient about the process as you suggest.

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