Home > Uncategorized > Digital Myths & Facts #1

Digital Myths & Facts #1

August 24, 2007

As I go through my day, I frequently encounter folk in the online community who make statements about practices in the music industry as though they were facts, i.e., true. In keeping with the Cult of the Amateur that attempts to persuade by means of “flaming” and other mob activity, no one is too interested in getting the facts right because the lie feels so good to say. To paraphrase Cult of the Amateur, too much Drudge and not enough Dostoyevsky.

When you know what the facts are, it rankles to hear these misstatements repeated as though they were true. These become “myths” after a while, and sometimes even become the cornerstone justification for further actions or further myths. Anyone who questions the myth can be excluded from the conversation in the ad hominem attacks favored by the mob.

More importantly perhaps—opportunists can take advantage of these myths to motivate people who don’t know any better. Certain members of the professoriate would be in this category, for example.

Versions of this propaganda technique come under different names, such as the “Big Lie”. As Adolph Hitler wrote in Mein Kampf:

….[I]n the big lie there is always a certain force of credibility; because the broad masses of a nation are always more easily corrupted in the deeper strata of their emotional nature than consciously or voluntarily; and thus in the primitive simplicity of their minds they more readily fall victims to the big lie than the small lie, since they themselves often tell small lies in little matters but would be ashamed to resort to large-scale falsehoods. It would never come into their heads to fabricate colossal untruths, and they would not believe that others could have the impudence to distort the truth so infamously….For the grossly impudent lie always leaves traces behind it, even after it has been nailed down, a fact which is known to all expert liars in this world and to all who conspire together in the art of lying. These people know only too well how to use falsehood for the basest purposes.

Of course, knowing whether someone is actually lying requires laying bare their soul, which, as they say, doesn’t scale.

So I will assume that there it is possible that the prominent folk who repeat these myths are just as much victims of the falsehood as the faceless originators. In the words of David St. Hubbins, there’s a fine line between stupid and clever.

I thought that it would be worthwhile to write down these “myths” with the corresponding fact debunking the myth. Where I can, I will give the name and place of the myth giver, or if the statement was made in an off-the-record environment, I will honor the off-the-record promise and stick to statements that are obviously attributable to any one of a number of people. If I’m able to carry this on for a while and get enough of these myths and facts, I will aggregate them into a separate posting so that they’re all in one place. These may come in drips and drabs as I encounter them, but I encounter them frequently enough that I think there will be quite a few after 6 months or so.

Since the point of this is to try to provide facts, I will, a la Dr. Strangelove, try my best to force myself to not poke fun at anyone along the way, or at least not in a way that colors the facts.

Myth: Each of the major labels forces entrepreneurs to give up 80% of their company’s stock in order to get a content license. So, entrepreneurs are forced to give up over 100% of their companies in order to get a content license. This creates a situation like “The Producers”, and is yet another reason that Hollywood should be forced to accept a compulsory license. (Andrew Bridges, counsel to Google, at Seattle conference August 16, 2007.)

Fact: Record companies do ask for equity in many instances, but the stock is usually common stock and is well under 10% of the then-current number of outstanding shares. To my knowledge, no record company has ever asked for 80% of the equity of a licensee, and also to my knowledge, few of these stock deals have amounted to a hill of beans.

Fact: Since these licenses are typically granted early in the life of a startup, the shares granted to the labels are typically common stock that are subject to dilution, the liquidation preferences and other rights of the venture capital investors in the startup’s preferred stock. Meaning that if the licensee is sold, the label stockholders are subordinate to the rights of venture investors, meaning that the labels are usually in the same boat as the founders.

Fact: It is not unusual for there to be an equity component of licensing arrangements (other than routine licenses) between technology companies, particularly when the license will “make” the startup company, i.e., confer value that the startup cannot afford to pay for in cash. Now go back and reread the Myth, and see if you think it means the same thing given these facts.

Myth: Content companies have an obsessive desire to control each copy made of a copyright they own, and if they would just give up that restriction, they’d have a much better chance of developing a new business model that might succeed.

Fact: Unlike technology companies that are largely non-union and own all code written by their employees (as a work made for hire or otherwise), distributors of sound recordings (or motion pictures) have contractual obligations to pay royalties for each “unit” that is sold, and may only have a distribution right in these sound recordings. Those payees may be artists, producers, unions, or other record companies in the case of samples or licensed works.

Myth: Artists have no right to control what exploitations are made of their recordings.

Fact: This kind of statement attempts to extrapolate major record label agreements to all artists. Fewer than 10% of all recording artists are signed to major labels.

Fact: Artists are typically able to negotiate marketing restrictions in recording agreements that give them control over certain types of exploitations of their recordings. These are typically approvals over certain types of film and television licenses, advertising and compilations.

Myth: Artists “assign” away all rights in their recordings to record companies.

Fact: While this myth is not entirely untrue, the facts are much more nuanced. In a typical major label deal, the record company owns the recordings made by the artist during the term of the recording agreement.

Fact: Some record companies sign artists whom they record but do not release records, and agree that the artist may buy back their masters in these situations.

Fact: Artists are typically able to negotiate marketing restrictions in recording agreements that give them control over certain types of exploitations of their recordings. These are typically approvals over certain types of film and television licenses, advertising and compilations.

Myth: Only superstars can get marketing restrictions in major label record deals.

Fact: While it is true that superstars get more (because they’ve earned it), new artists are usually easily able to negotiate at least basic marketing restrictions. Advertising is usually the easiest to give on (so when Google sells artist names as keywords, it should be easy to understand why record companies won’t sanction such actions).

Myth: Los Angeles shouldn’t tell San Francisco or Seattle what to do. (Corynne McSherry of the EFF, Seattle, August 16, 2007.)

Fact: I have no idea what “Los Angeles” is trying to say to anyone, dude (aside from “Beat SC”). I think that copyright owners are “telling” anyone who will listen that they would like people to stop using their works without permission. Which is their right.

  1. September 18, 2007 at 04:19

    I remember reading in a major periodical a one page description of “how much money an artist really makes.” It had a huge 1/2 page pie chart with nice graphics and a breakdown of how much money went to whom, how much was an advance, what had to be repaid. I honestly don’t remember which journal, nor which issue it was (I have an itching feeling it was in the August issue of Ebony, but I’m not sure). The example they used was that of a recent hip-hop artist, although I have no idea if the numbers are real or invented­. You may have come around that example. People come up with such numbers to show how little money recording artists really make. I tried to find online the article I was talking about and, instead, came across this. How about discussing such scenarios? Are they myths or generally representative of the financial reality of artists out there?The conclusions of the article I vaguely remember were (at least in my memory) rather similar to what’s in that blog post, albeit in much nicer words. In any case, the conclusions was that even if you sign a contract and sell a lot of “units” (be they CD, DVD, track downloads or what not), you may well not be as rich as people would think.I’d be interested in an insider’s opinion with numbers and facts.

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