As the European Commission returns from the August break, Joaquín Almunia will be getting back to work. Top of his agenda as the Vice President of the European Commission responsible for Competition Policy has got to be the Commission’s Statement of Objections against Google that seems to grow by the day. This week, we saw the latest abuse of Google’s monopoly power: Intimidating artists into silence by muzzling critical press coverage about Google’s lopsided deals. Deals on splits of advertising revenue that cannot be audited by anyone–including the advertisers themselves.
We have long encouraged Mr. Almunia to take a close look at YouTube, an often overlooked but extraordinarily significant vertical in the Google search monopoly. YouTube is a company that thrives on infringing or grey area material–Google’s Eric Schmidt reportedly paid a $1,000,000,000 premium for YouTube based on documents produced in the Viacom lawsuit. Why? I think it should be pretty clear that Google paid the premium to take YouTube off the market. That’s fine, that’s capitalism.
But what happened next is not fine. Google then proceeded to subsidize YouTube with monopoly profits from its other verticals. Google used its litigation muscle to intimidate artists and songwriters by using the “notice and shakedown” technique and disinformation campaign to make artists feel that there somehow was something wrong with them if they didn’t give YouTube what it wanted.
Google tried to pass off the YouTube Content ID system as some sort of gold standard, when in fact it is no different than Google’s other attempts at assembling artist databases and faux royalty systems (see Professor Geoffrey Nunberg’s excellent piece, “Google Book Search: A Disaster for Scholars” and Google and the Myth of Universal Knowledge by Jean-Noël Jeanneney, president of France’s Bibliothèque Nationale).
If you have ever heard of Content ID, recall that it is the technology that Google uses to identify recordings on the YouTube platform–especially for blocking purposes. Meaning that Google would have you believe that if you don’t want your work to be on YouTube all you have to do is give Google a copy of your recordings and they will block it. (This is called, crowdsourcing a database of sound recordings that Google will use for other purposes, but that’s another “Tale of the Mechancial Turks.”)
However, it turns out that this is not quite true according to the guest post at issue in Digital Music News by Emmanuel Zunz, founder and CEO of ONErpm.com, a digital distribution company focused on DIY and indie artists and labels. ONErpm also has a Multi-Channel Network (MCN) on YouTube specializing in music–MCNs are high traffic YouTube channels that are very much inside the YouTube power structure. Mr. Zunz tells us more about Content ID:
The other way to make money on YouTube is through Content ID, YouTube’s fingerprinting technology that identifies your music and/or videos that are partially or entirely used by other YouTube users on their channels. This special technology is NOT available to everyone, and is only awarded to PREMIUM partners that depending on their deal with YouTube have different benefits and tools available to them. In order to monetize those CONTENT ID videos on your behalf, YouTube automatically generates a CLAIM at which point the advertising revenue flows to you instead of the other channel.
Mr. Zunz revealed this fact as well as some other interesting details about YouTube’s income splits. This is all good information for artists to have and is not exactly going to bring down the company. But what happened next is what Mr. Almunia should focus on, because it is indicative of other behavior by Google that he has seen well documented in the competition proceedings against Google.
The day after Mr. Zunz’s post appeared on Digital Music News (yesterday), the website wrote “YouTube Demands the Removal of a Digital Music News Guest Post...”
YouTube is now threatening to completely sever its relationship with digital distributor ONErpm, thanks to some ‘over-sharing’ of information in a recent guest post on Digital Music News. According to ONErpm founder Emmanuel Zunz, YouTube is unhappy that certain payout details and percentages were disclosed, with a complete blacklisting being threatened.
In a story today, “YouTube Successfully Intimidates a DMN Guest Contributor…“, Digital Music News
Despite serious threats, YouTube has been unsuccessful at removing an earlier article on Digital Music News about confusing royalty payouts and specifics. But what they have been successful at is preventing the next one: a 4,000+ word, highly-detailed essay on YouTube best practices and royalties, from [Mr. Zunz’s ONErpm,] a company highly-specialized in YouTube distribution. [ONErpm] simply got spooked, and asked that we not print the piece for fear of having their MCN status revoked by YouTube.
What Mr. Almunia should investigate is exactly how often this kind of thing happens with YouTube–even with very large companies that one might think could defend themselves.
What YouTube’s suppliers and advertisers fear is doing something that would anger Google and cause them to be cut off from online videos–because Google effectively has a monopoly on video search. And Google uses that monopoly to control many aspects of online videos from deal terms to its public image.
Bear in mind that Google won’t do this to artists with big hits driving traffic to YouTube that Google then monetizes to its own benefit. But thanks to Google’s search monopoly driving traffic to pirate sites and selling keywords like “Lady GaGa torrents,” there are fewer artists in this hit category every year.
Protection from this kind of monopoly leverage over advertising, video distribution and promotion is exactly what citizens look to their government to accomplish.
Five Things Congress Could Do for Music Creators That Wouldn’t Cost the Taxpayer a Dime Part 2: Update the Compulsory License for Songwriters
[This post originally appeared in the Huffington Post]
House Judiciary Committee Chairman Bob Goodlatte (R-VA) is holding hearings on a potential revision to the Copyright Act. One area he might want to take a fresh look at is whether we still need a compulsory license to protect the public from the antitrust ambitions…of songwriters.
A “compulsory license” is a government-mandated requirement that someone license property on terms set by the government. Very often, the government also mandates the price that the property owner may charge for the rights she is forced to license. Americans enjoy protection under the “takings clause” of the 5th Amendment of the Constitution, so these compulsory licenses are fairly rare. The Constitution also requires that “takings” require “just compensation” to the property owner.
Did you know that the Congress established a compulsory license for songs? Yes, they did in 1909. This compulsory license is often called the “mechanical” license because it covers the “mechanical reproduction” of the song, a somewhat arcane concept better understood as a copy. The contemporary version of the 1909 license covers permanent downloads and certain categories of on-demand streaming as well as compact discs and vinyl.
The government royalty rate for songs is a “minimum” rate–of course, no one should be surprised to know that if the only rate anyone is required to pay is the minimum and the songwriter cannot decline the license, the minimum may as well be a maximum. And that is what has happened.
Does this sound like the kind of government action that is required to protect the public from songwriters in the time of the Internet?
For over a century, songwriters have been forced to give up control over who records their songs. They also have to accept the royalty rate that the Congress determines to be “just compensation” in a market already distorted by the compulsory license. (The Congress determined 2¢ a copy was “just compensation” from 1909 to 1977–the rate then was indexed to inflation and the minimum rate is currently 9.1¢.)
One might ask why do we need a compulsory license for songs? At a time when the dominant big tech companies drive around the world snorting up private data and taking pictures of your house, have scant attention paid to them when they gobble up companies to increase their market dominance or even monopoly, and employ an unprecedented number of lobbyists to influence governments around the world, why are we still worried about compulsory licenses for songs? To protect the public from the anticompetitive ambitions of songwriters?
Nearly 10 years ago, former Register of Copyright Marybeth Peters told the Congress that abandoning the compulsory may be an idea whose time has come:
[T]oday all…countries, except for the United States and Australia, have eliminated such compulsory licenses from their copyright laws. A fundamental principle of copyright is that the author should have the exclusive right to exploit the market for his work, except where this would conflict with the public interest. A compulsory license limits an author’s bargaining power. It deprives the author of determining with whom and on what terms he wishes to do business. In fact, the Register of Copyrights’ 1961 Report on the General Revision of the U.S. Copyright Law favored elimination of this compulsory license.I believe that the time has come to again consider whether there is really a need for such a compulsory license. Since most of the world functions without such a license, why should one be needed in the United States?
Let Us Know How That Turns Out
The compulsory license essentially destroys the market for mechanical licenses–one reason that preserving a strong market for other forms of song licenses has become so important to songwriters. Yet the Congress still mandates that songwriters must license their songs and tells songwriters the price they can charge–but they do not allow the songwriter to determine whether the government mandated rate has been paid correctly under the government mandated license.
You probably assumed that once the government intervened in the market to mandate a license and a royalty rate, that they would feel obligated to make sure that their government royalty was actually paid to the songwriters whose bargaining rights were cut off.
But the government doesn’t do that. If songwriters don’t get paid, it is up to the songwriter to terminate their statutory license and bring a copyright infringement claim for statutory damages against someone they did not want to record their songs, who didn’t pay the bill, and who probably will either be difficult to find or is a Big Tech company that is oblivious to the claim of any one songwriter because the company can crush them like a gnat in litigation.
In this situation, the government tells songwriters, “let us know how that turns out.”
What Is Good About Uniform License Terms
The potential fix is actually relatively easy. Just as we have uniform laws like the Uniform Partnership Act, there is a value to having certain terms of a mechanical license set in the Copyright Act. The standard negotiated mechanical license is a private contract that typically starts with something like “this license incorporates by reference the mechanical license in the Copyright Act except as set forth herein”. The problem is not that there is a uniform set of terms that copyright licensees and licensors can reference.
The problem is the compulsory part.
The easy fix would be to allow songwriters either to opt in to the existing statutory license terms or to opt out of it. The better route might be to phase in an “opt out” so the market could develop more gradually, and implement the “opt in” a few years down the road.
Either way, the change would probably best be implemented prospectively–there are a host of statutory licenses in use, either stand alone or private agreements granted by artist-songwriters in record deals that rely on the statutory license. Simply eliminating these existing licenses entirely would likely be extraordinarily disruptive.
Maintaining an optional “uniform mechanical license” seems to make good commercial sense.
Communicating the Opt In Decision
As we are often told, the Internet has brought unprecedented democratization to creators. A songwriter could communicate her decision to opt in or opt out of the statutory license in a host of ways, from Twitter to blogs. But as a more formal matter, the good news is that there is already an existing methodology for communicating legal notices regarding the disposition of copyrights.
The U.S. Copyright Office has a document repository that has been in place for decades (See “Recordation of Transfers and Other Documents” described in Copyright Office Circular 12). For a modest fee (starting at $105) anyone can register a document and “to encourage document recordation, the law confers certain legal advantages, including priority between conflicting transfers and “constructive notice”…if certain requirements are met.”
So an opt in notice could easily be recorded in the Copyright Office and take advantage of the existing jurisprudence around document recording. Those who find the fees burdensome should be authorized to give notice on their websites, Facebook pages, or other ways to leverage the democratic benefits of the ever popular social media.
Abandoning the government mandated compulsory license would free songwriters to participate in the market for reproductions of their songs, and would be a great step forward. However, this still doesn’t deal with the problem of getting paid on existing compulsory licenses where the government has largely abandoned the songwriter after forcing her to get into the situation in the first place. I’ll address a couple ideas for fixes in Part 3.
Here’s a little free advice to the power mad rich kids at YouTube: Always anticipate the “cocktail party conversation” between your artists. Except now the cocktail party occurs in social media. You know, “transparency.”
The idea that Google is an open and transparent company is simply laughable to anyone who has actually dealt with the company. Given Google’s monopoly over video search, when Google threatens artists with being cut off off from YouTube, those threats are amplified with what is called a “force multiplier” in some circles (or an “A-hole multiplier” in others). An amplification that varies directly with the effectiveness of YouTube’s monopoly over online search, a monopoly perfected for years by Google subsidizing YouTube with profits from its other monopoly businesses.
And I feel pretty confident that even the people Google has hired to be the velvet glove with its artist relations either don’t have sufficient internal control to keep Google from stepping on their own dongles or are just ignored. Of course–you have to understand you have an artist relations problem in the first place even if you clearly have no idea how to deal with it.
Companies like Apple and Microsoft have long histories of addressing exactly these kinds of concerns, and they’re both really good at it. They don’t have to pay artists to show up at their parties.
So here’s the problem: Apparently in the spirit of David Lowery and Zoë Keating, there’s been some open discussion about how YouTube pays out royalties that resulted in this headline in Digital Music News today: “YouTube Demands the Removal of a Digital Music News Guest Post…” As the guest writer ONErpm founder Emmanuel Zunz is quoted to have said:
“[YouTube] is threatening to cancel our agreement,” Zunz emailed. “It’s a very serious issue for us.”
Why? Because Paul Resnikoff at DMN was out there stirring the pot? No–because YouTube channel producers (aka artists) were talking about their deals for YouTube. And producing helpful information for artists. (Original post is here: Why Jeff Price Is Horribly Misinformed About YouTube Monetization…).
We recommend that any artist with a video on YouTube read both posts: Emanuael’s so you can see the numbers, and Paul’s so you can see the beast at YouTube actually show itself.
However informative these posts may be, like every other scrap of paper with Google’s name on it outside of the Googleplex bidets with seat warmers, those artist deals no doubt had a confidential information clause that could allow Google to flex its litigation muscle on the artists who did the disclosing that YouTube didn’t like.
Remember the bad old music business with the “out of date business model” a/k/a the “old boss”? No such confidential information clauses. Do you know why? Because you can’t stop artists from talking about their deals so why bother trying? Unless you want a full fledged palace revolt on your hands. Such ideas went the way of the “morals clause.”
And given that Maker Studios and some others are making noises about competing with YouTube, that may be exactly what is going to happen. Then Google would have…competition. No more shaking down companies for a piece of the action. Or said another way, competition that would be hard for them to compete with.
I’m reminded of when Maceo Parker took a hike from the James Brown band and created Maceo and All the King’s Men. Do not jack with musicians, fellas, it never works out well.
But we stand in shock and awe of how the new boss is going to show us how it’s done. I don’t know why they’re so touchy–after all, as Google’s own Tim Quirk said, royalties are a fetish.
Maybe not so much after all.
NP “As Evil as They Wanna Be”
As anyone knows who has dealt with YouTube, the much ballyhooed Content ID database really is horrendous. This is particularly true on the music publishing side. And of course, Google uses its market power to refuse the industry standard audit right to independent songwriters–you know, those songwriters who are subject to compulsory mechanical licenses and whose performance royalties are subject to government oversight. To protect Google from the antitrust lusting of songwriters.
Witness the typical Google royalty statements which many of the songwriters and publishers among you received recently. That statement comes with a cover letter asking the songwriters to fix Google’s skanky data:
As you can read for yourself, Google is asking that the music publishers and songwriters to fix their data–essentially to act as “mechanical turks” to crowdsource the job of building an asset for Google. This is the usual Google-style shakedown. Build a monopoly on the video search vertical that they subsidized for years with monopoly revenues from their advertising business (now the subject of another major antitrust investigation by the Federal Trade Commission). Then strongarm artists and songwriters into “DMCA licenses” (which, of course, are no licenses at all and are dependent on scaring rights holders with a bottomless litigation budget Google raises in the public markets). Then get artists and songwriters to “fix” the bad data for free and offload transaction costs onto music publishers.
What do you suppose they intend to do with that asset if it’s ever fixed?
Replace the PROs who are forced to operate under an FTC consent decree–the same FTC that gave Google a pass on violations of the antitrust laws.
So Google could try to operate a new PRO without the constraints of the consent decree that current PROs are subject to.
Permissionless innovation, baby.
Is your band registered to vote? You ride in the van with these people, you probably know way more about them than you ever wanted to know, but do you know whether they are registered to vote? You can find out what the rules are in your area on this website “Can I Vote?” (click here) The site is run by the National Association of Secretaries of State and it has a complete guide to every US state. Each state includes its voter registration website that will allow you to check in your home state to see if you (or your band) are registered already, and if you’re not, it will tell you how to get registered. You can also use the National Mail Voter Registration Form available through the U.S. Election Assistance Commission.
After you get your band registered, you’ll be able to vote, so check the election calendar for your state to see what elections are coming up.
Get your nation-wide election calendar here, or see it below. Election Calendar August-Nov 2013
According to the Copenhagen Post, recruitment for the jihad in Syria has come to Denmark. And the recruiting “poster” of choice for al Queda?
While the internet is awash with Islamists advocating jihad in the Middle East, this week marked the first emergence of video targeting a Danish-speaking audience.
Danish-speaking jihadist Abu Khattab has uploaded a video on YouTube, calling on his “brothers” in Denmark to participate in the Syrian civil war. The video, which appears to have been recorded in Syria, features Khattab next to a masked warrior with a rifle as he speaks of jihad as “the forgotten implication” and encourages Danish Muslims to join him in a holy war.
”We were given everything in Denmark. Our parents paid everything for us, we were given bread and milk for free, but the [the infidels] could not deceive us,” he says in the video. “My dear brothers, jihad is the greatest reward. Your blood will smell sweet. Your imam will appear before you as a luminous bubble. My dear brothers and sisters in Denmark, you should come too. This is the best thing to do, to strengthen the Islamic people and the Islamic state,” Khattab proclaims in the video.
And sure enough, the video was easy to find in a search for “abu khattab”–with search results brought to you by eBay (one of the Gang of Four, of course).
Yes, and one click away, here is the al Quaeda recruiting video, complete with a “featured video” of “Russian girl on bath salts”:
This came as no surprise to those who follow the progress of the jihad on YouTube–the “martyrdom video” (or in Danish “martyrbiografi”) of Danish jihadist Kenneth Sørensen was also posted on YouTube (one of the benefits of a video search monopoly, I guess):
According to the SITE Intelligence group, the video was released on “jihadi forums” (which I guess includes YouTube) the Muhajireen Brigade (Emigrants Brigade), which is allied with the Al Nusrah Front, al Qaeda’s affiliate in Syria, announced the death of Danish citizen Kenneth Sørensen. The video was obtained and translated by the SITE Intelligence group.
Yes, the jihad will be monetized.