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Thom Yorke on Google the Commoditizer

February 27, 2013 1 comment

Radiohead’s Thom Yorke has a striking interview in the Guardian in which he sums up the band’s realizations about what David Lowery calls the “New Boss” reality:

“[Big Tech] have to keep commodifying things to keep the share price up, but in doing so they have made all content, including music and newspapers, worthless, in order to make their billions. And this is what we want? I still think it will be undermined in some way. It doesn’t make sense to me. Anyway, All Watched Over by Machines of Loving Grace. The commodification of human relationships through social networks. Amazing!”

He is, of course, exactly correct.  What does this “commodification” or the Americanized, “commoditization” mean exactly?

In a prescient 2008 book review of Nicholas Carr’s The Google Enigma (entitled “Google the Destroyer“), antitrust scholar Jim DeLong gives an elegant explanation:

Carr’s Google Enigma made a familiar business strategy point: companies that provide one component of a system love to commoditize the other components, the complements to their own products, because that leaves more of the value of the total stack available for the commoditizer….Carr noted that Google is unusual because of the large number of products and services that can be complements to the search function, including basic production of content and its distribution, along with anything else that can be used to gather eyeballs for advertising. Google’s incentives to reduce the costs of complements so as to harvest more eyeballs to view advertising are immense….This point is indeed true, and so is an additional point. In most circumstances, the commoditizer’s goal is restrained by knowledge that enough money must be left in the system to support the creation of the complements….

Google is in a different position. Its major complements already exist, and it need not worry in the short term about continuing the flow. For content, we have decades of music and movies that can be digitized and then distributed, with advertising attached. A wealth of other works await digitizing – books, maps, visual arts, and so on. If these run out, Google and other Internet companies have hit on the concept of user-generated content and social networks, in which the users are sold to each other, with yet more advertising attached.

So, on the whole, Google can continue to do well even if leaves providers of is complements gasping like fish on a beach.

Thom Yorke clearly feels exactly what DeLong anticipated:

Radiohead have often riffed on the edge of that thoroughly modern disjunction. From their landmark album OK Computer on, the band seemed like evangelists for the revolutionary possibilities of a digital world, self-releasing 2007’s In Rainbows on a pay-what-you-want download. Yorke is a bit more sceptical about all that now.

In the days before we meet, he has been watching a box set of Adam Curtis’s BBC series, All Watched Over by Machines of Loving Grace, about the implications of our digitised future, so the arguments are fresh in his head. “We were so into the net around the time of Kid A,” he says. “Really thought it might be an amazing way of connecting and communicating. And then very quickly we started having meetings where people started talking about what we did as ‘content’. They would show us letters from big media companies offering us millions in some mobile phone deal or whatever it was, and they would say all they need is some content. I was like, what is this ‘content’ which you describe? Just a filling of time and space with stuff, emotion, so you can sell it?”

Having thought they were subverting the corporate music industry with In Rainbows, he now fears they were inadvertently playing into the hands of Apple and Google and the rest.

Or as Lowery famously said, “Congratulations, your generation is the first generation in history to rebel by unsticking it to the man and instead sticking it to the weirdo freak musicians!”

Now there will be those who trot out the old canard of “if you really loved music you wouldn’t care about the money.”  Right.  The point isn’t only whether Radiohead is making money from non-commoditizable activities (like live shows), the point is that companies like Google are (a) indifferent to whether Google (or its labyrinthine ad network partners) serve ads on Radiohead or Pinky Lee, and (b) want to get everyone’s music for free or near free.  As DeLong said–gasping for air.

The MYO: Wearable device that doesn’t track you or serve you ads

February 26, 2013 1 comment

February 26, 2013 Comments off

Please take a minute to read and sign the petition!

The Trichordist

Please sign the letter in the link below to the CEOs of brands that appear on multiple occasions on infringing sites. Ask them to take a pledge to keep their ads off of illegal sites. Keep in mind that this list is not a comprehensive list of brands that appear on pirate sites.

Click Here : Please Sign The Petition to Stop Advertising on Pirate Sites

An Open Letter to the CEOs of Brands Advertising on Infringing Sites:

We, the undersigned, are just a few of the millions of artists and creators living, working, and creating across the United States. It has come to our attention that your companies are advertising on websites that illegally host or distribute creative content. We want to make you aware of the harm your companies do to independent artists and small businesses when you advertise on these sites.

Advertising on these sites encourages…

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Sharing is Caring: What is Google’s Position on Data Sharing with Artists?

February 25, 2013 2 comments

While it remains to be seen exactly what the contours of a deal might be, Zoë Keating‘s advocacy of data sharing with artists by online music retailers is getting some traction.  Beats is making positive noises in that direction and I would expect others to follow shortly.  This is something of a privacy law challenge, but it could be something as simple as a “sign up here” button for the artist’s email list next to the “buy here” buttons to buy the artist’s downloads or CDs.

I’m willing to be educated otherwise, but it seems that an email opt in would be unlikely to present a greater privacy issue at all for the retailer.  This is because the fan would be in control of the opt-in decision, and any privacy rules applicable to the email list would live at the artist site and would (or should) already be in place regarding the existing artist email list.

However–this is a good moment to bring up a subject we have banged the drum about at MTP for years now:  Nondisplay uses of music.  Meaning uses that are made by a Big Data company like Google of information about music use, consumption, sales, distribution (or whatever) that are (1) not reported to the artist, (2) are covered in the cracks of the Big Data user privacy policy, and (3) that are sold, resold, and sliced and diced by the Big Data company like there is no tomorrow, now and forever amen.  And of course–none of the revenue derived from nondisplay uses goes to anyone other than the Big Data company–in this case, Google.

It is very, very unlikely that a Big Data company like Google is interested in a music platform just because they really want to be in the music business and make their cut of subscription, download or webcasting revenue.  No, the real cash cow for Big Data is Big Data.  That’s not a tautology–it was confirmed as recently as last week by the Financial Times (with the hysterically funny title, “Google Looks to Beat Music Rivals“):

Google is in talks with big music labels to launch a streaming service to compete with companies such as Spotify and Deezer, as it looks to expand into one of the fastest growing areas of the music market.

The discussions reflect the technology company’s ambition to extend its influence into new business areas and diversify away from advertising, which accounts for 95 per cent of its revenues.  [Good thinkin’, Dob….]

[But, wait, not so fast…there’s more….] Advertising executives also speculated that by scrutinising consumers’ listening habits, Google could build a valuable database for advertisers.

“It will be another piece of the puzzle for understanding consumers,” said Christophe Cauvy, European head of digital at advertising agency JWT. “This will be very interesting for brands where purchases are emotionally or status driven.”

So…think about that.  Where’s the real value going to lie…so to speak…for Google?  Making a tiny vig off of music, or collecting a bunch of information about fans that can be used in other Google products?  Hmmm?  As Ben Sisario identified it in the New York Times, which of the Two Googles are we talking to?  Aaron or Roy?

The Financial Times is even fuzzy on this issue as their article starts like they think that Google intends to get further into the music business because they want to make money off of streaming.  Given what we know about artist royalties from streaming, that seems highly unlikely.

What seems more likely is that Google Play gets consumers to put a Google entertainment center in their home and then Google monitors them all the live long day to serve advertising to the fans.  Maybe not while the fans are listening to a no-advertising subscription service, but when the fan leaves that environment and uses Google for something else.

Of course, Google will add this information from non-display uses to the data that it has already collected from serving ads to pirate sites offering the identical music, movies and books.

Do you think for one second that Google (or any other Big Data company) would share that information with the artists whose music gave it value?  Much less share it for free?

Hello, Roy.  I thought that was you.

14 Million Flies Can’t Be Wrong: The Chilling Significance of Google’s Two Sided Antipiracy Failures

February 22, 2013 Comments off

 

IAGO

By Janus, I think no…

Othello, Act 1, Scene 2, by William Shakespeare


Information Wants to be Monetized

In an excellent analysis, Ben Sisario of the New York Times almost puts his finger on Google’s problem with professional artists.  He identifies both sides of what would appear to be a kind of split personality at Google, but like Edward Norton’s riveting portrayal of the good “Aaron” and evil “Roy” in Primal Fear, these are actually two faces of the same really smart, but really sick puppy. AKA The New Boss or as we know them, The Man 2.0.

(Sisario’s article is an important read, see “For the Music Industry, A Story of Two Googles“)

Sisario observes:

In August, Google said it would take into account notices of copyright violation — of which the music industry files thousands each week — in determining a site’s search rank. The implication was that infringing sites would fall into obscurity and consumers would “find legitimate, quality sources of content more easily,” as Amit Singhal, a senior Google executive, wrote in a company blog post at the time.

We have been hearing about these “measures” that Google is taking for years now, and no matter when these utterances occur, they all have one thing in common:  Nobody seems to implement the measures, they are ineffective, Google keeps driving traffic to pirate sites and Google keeps profiting from piracy.  Oh, and more recently, Google has been shooting up the squid ink of Google Play and Rightsflow, Google Fiber and YouTube to give themselves the appearance of being team players.  They have even managed to pick off a few people from the music business to dress up this charade, but it doesn’t change anything.  But like Operation Bodyguard, these are largely grand deceptions.

Why would I say that these are deceptions?  YouTube itself is not a deception, clearly.  YouTube exists and is a triumph of infringement in the Age of Google.  YouTube itself isn’t the deception.  Like Norton’s character in Primal Fear, the deception is that there will ever be a time when Roy isn’t calling the shots.  When it comes to Google, Roy is not going anywhere.

14 Million Flies Can’t Be Wrong

The RIAA, which is one of the few organizations left in the music industry that can fund this kind of study, determined what we already knew would be the case–Google was full of it.  As Sisario puts it:

But the recording industry association, which is controlled by the major record companies, said that after testing Google’s searches, it still found plenty of infringing sites. “Six months later, we have found no evidence that Google’s policy has had a demonstrable impact on demoting sites with large amounts of piracy,” the report said.

At one point in the 15-page report, for example, the R.I.A.A. says that for many popular music searches, sites for which Google had received more than 1,000 copyright complaints were “almost eight times more likely to appear in the top 10 search results than a well-known, authorized music download site.” The report also shows, however, that sites for which Google has received more than 10,000 copyright removal requests appear less frequently than those which have received more than 1,000.

Is anyone surprised?  Clearly not at the Cato Institute, which offered its usual brand of bulletproof analysis:

sanchez

Let’s drill down on that erudite commentary, however, and think about the implications of the report in context.

As we noted here on MTP, Google has been desperately trying to keep Roy in check for some time now.  For example, Roy popped out when Google was nearly indicted for selling prescription drugs online in violation of a variety of drug laws.  Joseph A. Califano, Jr. (former Health and Human Services Secretary under President Carter) appealed to Google’s Eric Schmidt in 2008 to stop advertising illegal drugs that could (were and are) easily bought by children online.  When Aaron said, don’t be evil, Roy didn’t care.

When Google got the idea that the US Government was going after infringers in a big way, despite Google planting their own man Andrew McLaughlin in the White House, they came out with a major burst of ink vowing to be well behaved.  None of it happened, we saw the return of Grooveshark, and Roy still ruled the roost at the Googleplex.

Then came the Utoopi sex club app (Android only) that confirmed the worst suspicions of Congresswomen Carolyn Maloney and Marsha Blackburn voiced to Larry Page in the context of the Village Voice Media debacle over profiting from human trafficking ads.  Despite assurances from Google to Maloney and Blackburn, Roy still managed to get the Utoopi app in place to pimp out teens.

In a notable failure of Google’s “conservative outreach” at places like Cato, conservative blog RedState actually broke the story about the Utoopi app (“Google Profits from Sex Trafficking” by Breeanne Howe), followed closely by Firedoglake  (“Google Pulls Sex App Marketed to Students From Google Play” by Jane Hamsher).

Roy said “Waaaah.”

Can We Stop Pretending Google isn’t Intentionally Defective?

So the bottom line is this:  If a company makes a product that causes as much random harm as Google, at some point it stops being “disruptive” and starts being “mayhem”.  Perhaps willful mayhem.  This is particularly the case when a company keeps distributing a product it knows to be defective because it profits them to do so.

When Ford made the Pinto, did the law find that exploding gas tanks were “disruptive”?  Did society allow Ford to escape liability for any exploding gas take because Ford made a lot of them?

Let’s stop kidding each other, please.  Roy is running the tables at Google.  And here’s how you know–whether its profiting from piracy from ad sales or search, the Google response is always a nondenial denial because Roy doesn’t want to get caught.  It’s no fun if you get caught.  What’s fun is “catch me if you can”–you know, the DMCA.

In response to the report, a Google spokesman said in a statement: “We have invested heavily in copyright tools for content owners and process takedown notices faster than ever. In the last month we received more than 14 million copyright removal requests for Google Search, quickly removing more than 97 percent from search results.

In addition, Google’s growing partnerships and distribution deals with the content industry benefit both creators and users, and generate hundreds of millions of dollars for the industry each year.”

But Google can’t quite say they don’t do it–14 million flies can’t be wrong.  Like Norton’s character in Primal Fear, Aaron may make excuses for Roy’s bad behavior, but Roy comes in at the end and reminds creators not to jack with him or he’ll cut off the trickle of money that is increasingly keeping them alive.

And just wait until Google is driving traffic to 3d printing files ripping off the same products being advertised by the Fortune 500 companies that are Google Adsense clients buying advertising inventory from the very same pirate sites.  Very disruptive!

Don’t be evil, ya’ll.

Will Spotify Get IRFA’d? New Boss Spotify Wants to Pay Artists Even Less

February 21, 2013 3 comments

Greg Sandoval is one of the great reporters on tech and music.  While I don’t always agree with him, I think he’s fair and one thing I know for sure–he is old school when it comes to getting facts and sources right.  So when Sandoval says Spotify is going back to the well to drive down artist royalties even further, you better believe that I believe him.

According to his story at the Verge:

About 70 percent of Spotify’s revenues pays music-licensing fees while another 20 percent covers customer acquisition, these sources said. That leaves 10 percent to pay all of the company’s other costs, including its much praised technology platform. Insiders have told The Verge that this cost structure zeroes out Spotify’s profits.

So brace yourself–Spotify is about to do a Pandora-style argument about how artists should take even less because Spotify’s “profits” are consumed by royalties.  (And yes, I do know that Spotify doesn’t pay most artists directly, but I also know that the reason that Adele held back her records from Spotify wasn’t because Beggars or its US distributor Sony weren’t making enough money.)

Since You Brought It Up

Since Spotify has put its profits at issue, then let’s discuss those profits.  The good thing about Pandora is that it’s a public company.  So when Pandora asks artists and songwriters to take less, the creators can look up the CEO’s salary (around $750,000) and can see that Tim Westergren is cashing out of Pandora stock to the tune of about $1 million a month.  Just to be clear, I don’t mind at all if Westergren makes bank on the company’s stock.  That’s they way it’s supposed to be in a free market, entrepreneurs should be rewarded.  That $750,000 salary though…again, none of my business if the stockholders approve it, but it is my business if Pandora pays too much in executive comp and wants to take it out of royalties.

Spotify is a private company, and so we don’t really know what they pay their executives–but something tells me they’re not wanting for much.  Why?  Because Daniel Ek (Spotify founder and CEO) has a net worth of $310 million (or had) and showed up on the Sunday (London) Times 2012 Rich List as the 10th richest person in the music industry.

So since Spotify seems to be putting its profits at issue, perhaps they also need to be transparent about exactly why they make so little money.  Do they have to disclose their executive compensation?  Certainly not.  But artists don’t have to agree to participate in the charade…sorry…license their music, either.  And after all, Spotify are the ones who brought up profitability.

Maybe Their Management Team Is Incompetent

Given all the goodies that Spotify is rumored to have gotten from the labels and publishers, why is it that they are not doing better?   Particularly given their spectacular valuation–while it dropped from $4 billion to $3 billion after the Facebook and Zynga IPO debacles, it’s still $3 billion.  For a company whose sole product is distributing other people’s music.

And let’s not forget–this is an Internet company.  Feeling a little bubbly down in the tummy, maybe?  It’s still probably overvalued at $3 billion–as Peter Kafka put it in All Things D:

Investors already know what a digital subscription business looks like at scale.

That would be Netflix, which has some 27 million subscribers at around $8 a month….Netflix has a market cap of $4.3 billion.

Spotify says it has 4 million paying subscribers at around $10 a month. Bear in mind that if you value Spotify at $4 billion today, you’re really saying it will be worth three times that — $12 billion — in a few years, when it would presumably go public.

The two companies aren’t exactly analogous — Spotify, for instance, also has a nascent advertising business — but they sure look similar from a distance. They’re both international, they’re both dependent on rights deals for their content and they both face the perpetual threat of competition from the likes of Amazon, Apple, etc.

So even at $3 billion, Spotify backers will need to work hard to explain why their digital subscription business is worth so much more than Netflix when it comes time to IPO.

Notice–no crocodile tears from Netflix about mommy saving them from their royalty obligations.

Or Maybe It’s About Brand Sponsored Piracy

There’s another way to look at both Pandora and Spotify’s profitability problems–even discounting the grotesque executive salaries.  Both are dependent on advertising, and both offer advertisers a shot at music fans.  Just like the illegal bit torrent sites that major brands buy advertising from.

Imagine if that illegal inventory wasn’t available?  I think there’s at least a plausible argument based on supply and demand that those advertisers would be buying advertising from legitimate services like Pandora and Spotify in even greater quantities.  Perhaps at higher prices, which is what one would expect.

Is Google shedding any tears over Pandora and Spotify suffering from the ads that Google serves to pirate sites?  Not really.  Lower royalties help Google in its quest to commoditize all culture.  If Google can drive down royalty rates by selling advertising to pirate sites and driving traffic to those sites from search–while skimming ad revenues away from legitimate sites–all the better for them, right?

 

The Most Important Man in Music Has Never Made a Record

What I think should happen here is that Spotify should put its books out into the public.  After all, as Forbes told us, “Spotify’s Daniel Ek [is] The Most Important Man In Music”.  How did we ever get along without him?

Maybe Mr. Ek would like to open his books and show us all what we’re doing wrong?  And why we need to help him make a profit so he can say on the rich list.

Under a Red Flag: The Other Side of Whack a Mole–will it be back to the future for MCNs?

February 21, 2013 Comments off

Après moi, le déluge

Attributed to King Louis XV of France

Right after Google’s YouTube acquisition, Googler Zahava Levine appeared on a bar association panel in Los Angeles and sneered at the assembled entertainment lawyers that even though YouTube was using their clients’ works without permission, YouTube would continue to rely on the DMCA notice and takedown.  Unless, of course, “Hollywood” wanted to stop playing whack a mole and make a deal.

And the assembled room witnessed the birth of an urban legend: The Notice and Shakedown.

And what  many told me they thought (after where do they find these people) was why would Google want to play whack a mole.  Surely this game of “catch me if you can” is going to come back to bite them?  (See Parlophone.)

Fast forward a few years and enter the multichannel network (or MCN), somewhat shadowy groups of content producers and aggregators on YouTube.  If I had to bet, my bet would be that when Google contract with MCNs, Google place a fig leaf on clearances for music used in MCN programming–they place the burden on the MCN.  If Google then gets a claim for infringement, they simply tender it to the MCN as an indemnity claim.

Enter the Very Successful MCNs.  These MCNs make real money and attract real investment, sometimes from Google itself.  Based on the announcement of the Universal deal, it now becomes apparent that there must be a significant amount of uncleared music on these MCNs.  And, of course, if Google invests in an MCN that has a contract with YouTube…Google will have diligenced the MCN as part of its investment (or certainly had the chance to do so).

So what does that mean for Google’s “see no evil” version of its Notice and Shakedown defenses?  I think it’s called “actual knowledge” that appears under a red flag.

Why is this meaningful?

Hard on the heels of the news of Universal’s deal with Fullscreen and Makers, the National Music Publishers Association made it clear that just because one publisher made a deal with two MCNs doesn’t mean that those two MCNs don’t have a problem with other songwriters, and that other MCNs don’t have a problem with all the songwriters.

‘Recent news that two large multi-channel networks (MCNs), MakerStudios and Fullscreen, have reached a licensing deal with Universal Music Publishing Group is an important first step in compensating songwriters.  But let me be clear – all MCNs must be licensed for the use of all songs. This agreement between two MCNs and one music publishing company does not solve the entirety of the problem.  As the popularity of digital entertainment has grown, MCNs have significantly profited, often without compensating the songwriters whose work is being used.

Those who use the works of songwriters in videos must fairly compensate those songwriters and music publishers, and NMPA is committed to finding a complete solution.”

So let’s crystallize that for the MCNs:  If you get down on your knees and beg to be sued, don’t be surprised if someone sues you.

And your good buddies, you know, your “partners,” at Google?  They will throw you under the bus in a heartbeat.  If they haven’t already.

Listen up–Google advertised the sale of prescription drugs to kids.  They distributed sex club apps that exploit teens.  Do you really think people who can do that give a damn about an MCN?

And ask yourself this Mr. MCN investors–why do you want to play whack a mole?  What possible motivation could you have?  Because you don’t make as much money as Google, so your profit motive is radically different than theirs.

I’d say there’s another element of brilliance to the Universal deal–they got their songwriters’ money out first.

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