Historical revisionism is the illegitimate distortion of the historical record such that certain events appear in a more or less favorable light.
You’re No Napster
When I hear or read people discuss the “Napster business model” or “Napster’s visionary business model” or words to that effect, I know that I am in the presence of someone who has either not done their homework and lacks knowledge, or someone who has done their homework and is trying to spin. Or they’re not talking about the original Napster. Or something, but whatever it is, they are not reliable. Because this is something I know quite a bit about.
It must be said that Napster had no business model because Napster never made a nickel. Napster had investors, Napster had debt, Napster took in a lot of money, but none of it was in top line income. At best–at best–Napster proposed one or two business models. One was get big fast, go public, put some lipstick on it and shove it out the door. That isn’t a “business model”, that’s a VC exit strategy, and that never happened anyway. The other was a proposed subscription model that never launched (and that I worked on a second time with SNOCAP).
So you can say a lot of things about Napster but one thing you can’t say about Napster is that the company had a business model. And the biggest difference between Napster and practically everything that came after it is that Napster actually did respect artists, love music and wanted very much to get into a legitimate version of the p2p space–as evidenced by SNOCAP, which is to this day the best solution and was supported by the major labels, indie labels and independent artists. It remains to be seen whether consumers would have embraced it.
That truth does not fit into the narrative, though, so you don’t ever hear about it.
The latest version of this spin is in a recent post by New York Times tech reporter Farhad Manjoo, “Why Movie Streaming Sites So Fail to Satisfy” a long apologia for the illegal application Popcorn Time. His tell is here:
But like Napster in the late 1990s, Popcorn Time offered a glimpse of what seemed like the future, a model for how painless it should be to stream movies and TV shows online….In the music business, Napster’s vision eventually became a reality.
First of all, the principle similarities between Napster and Popcorn Time is that neither application was licensed and neither application paid license fees or royalties to anyone in the chain. That’s where it ends.
The biggest difference between Napster and Popcorn Time is that Napster could shut down and did when ordered by (now retired) Judge Marilyn Patel who was blessed to have the case appear in her court. Napster was not built to be a perpetual infringement machine–another fact that gets glossed over by the apologias to theft in the tech press.
Who ran Napster? As everyone knows it was Shawn Fanning. You know who he was, he appeared in court, he took responsibility for what he created and really tried hard to make it legitimate. He tried so hard that even after the Napster saga he came back for more with SNOCAP and got it figured out.
You know who wasn’t interested in implementing the SNOCAP model? Not the major labels–they all signed up. And unlike Mr. Manjoo, I know they did because I negotiated the contracts. The people who were not interested in implementing the SNOCAP licensed model were the pirates–why? Because they would have to pay royalties and it would cut into their profits. And of course, the way they made the profits was through the advertising agencies and networks.
What about Popcorn Time? Mr. Manjoo describes Popcorn Time (basically a skin for a Bit Torrent seeder by the looks of it) as being:
A team of web designers recently released an astonishingly innovative app for streaming movies online. The program, Popcorn Time, worked a bit like Netflix, except it had one unusual, killer feature. It was full of movies you’d want to watch.
Here’s now Wikipedia describes Popcorn Time:
Popcorn Time is a multi-platform, free and open source media player. Initially created by an anonymous group of developers who identified themselves as being from Argentina, the program is intended as a free parallel to subscription-based video streaming services such as Netflix. The program streams pirated films directly from YTS and other torrent trackers.
And regardless of whether you think Mr. Manjoo is purposely spinning to hide the fact that the app developers are themselves hiding from prosecution, it is clear that Popcorn Time is nothing like Napster. Mr. Manjoo does not get to have his own facts.
She’s So Clumsy She Fell Into a Door
The classic wife-beater excuse is that his wife is “so clumsy she fell into the door”. (You’ll have to imagine the Mafia accent.) And we’ve been hearing this kind of “blame the victim” excuse-making to justify piracy for over a decade.
So how does Mr. Manjoo dip into these treacherous waters? Piracy, you see, is largely “Hollywood’s” fault. And it’s appropriate that Mr. Manjoo is trying to cite to Napster for his justification, because he uses the “blame the victim” argumentation that is sooooo 1999. To paraphrase the current meme, 1999 called and they want their wife beater excuses back.
For those of us with even slightly selective preferences, we’ll have to pick between different rental and subscription services offering different catalogs of programs, none very extensive, at vastly different price points. This sort of hassle and inefficiency sounds antithetical to the ethos of the Internet, where it seems to be your right to get everything cheap and fast. But for now, the Internet has met its match: Hollywood….The main reason you won’t see a comprehensive, all-you-can-eat movie plan soon is something called “windowing,” the entertainment industry term for the staggered way movies are released to various outlets. Like salmon, Hollywood movies are governed by rigid life cycles.
If you find out who “Hollywood” is, please let me know. In the contemporary digital entertainment business, “Hollywood” is usually just a pejorative for “them think theyz have property rights OMG.” But more fundamentally, Mr. Manjoo misses a couple of fundamental points that are quite an oversight for a business reporter.
First of all, there’s probably never been a more exciting time for creators who can work with brands and who work at attracting their own portable audience. This part is doing just fine, largely due to the very windowing that Mr. Manjoo complains of.
Online Entertainment Market Segmentation in 2014
Windowing is also known as “market segmentation”–so Mr. Manjoo is actually attacking a fundamental marketing technique used by all businesses (although he’s in good company–the U.S. Supreme Court recently started a misguided adventure of destroying value in market segmentation in the Kirtsaeng v. John Wiley & Sons case).
So it’s not just Hollywood–a fact that should be very, very obvious to a business journalist, even one who seems preoccupied with the world beating a path to his door. This is a particularly puzzling conclusion in a world of big data when brands and companies like Google spend hundreds of millions every year measuring behavioral, demographic, geographic, lifestyle, sales territories and probably hundreds of other segments that I lack the knowledge to be aware of. In fact, any measurable variable can be a segment. And if a company, say Target, develops a marketing strategy based on these segments, it is essentially engaging in windowing.
And, by the way, it’s not just “Hollywood” which usually implies the big studios. Unlike 1999, there is a dynamic use of windowing for projects completely outside of the studio system like Video Game High School, a scripted Freddie W. project that started on Kickstarter with deficit financing from some brands. Freddie premiered the project on both his YouTube channel and his website (Rocketjump.com). Second window on YouTube, third window on Netflix as a movie. Second season he went back to Kickstarter, then deficit with Dodge, Netflix paid a big advance, Rocketjump and YouTube. Then on to international television as a TV property. And Freddie made money every step of the way and owns the IP.
Notice–none–not one–of those channels existed before the Internet.
The production money has to come from someplace. Most platforms other than YouTube pay an up front license fee for properties they want (Amazon, Hulu, Netflix, Xbox)–you know, TO GET THE SHOW MADE–with YouTube sometimes being the last window. Even YouTube is actually shelling out some cash to produce some original programming.
All of these are windows. YouTube–because it’s a monopoly in its niche, another story–can be a good way to get early engagement for an artist who manages their community. Alternatively, artists like Louis CK can have successful projects that start in an electronic sell through model direct to consumer, then roll into other windows. Market segmentation is fundamental not just to our business, but to all business. And unlike the past, the artist owns the audience–you know, the people being segmented. (See my 2000 article, Why Free Agency Matters: The Coming Changes in Artist Relations.)
In fact, most of the multichannel networks are in one way or another enjoying the ability to extract value from a segment of a global audience that allows the artist to command a price from brands who value those niche markets as the programming rolls through the digital windows. Mr. Manjoo seems to not be aware of Epic Rap Battles, Annoying Orange (transferred to television as interstitials for Cartoon Network), Twitch.TV or actually any multichannel network.
Not to mention shows like the Annoying Orange that do well through MCNs on mobile devices around the world. So sometimes windowing works the other way, too, and is also device based.
And here’s the clincher:
If you want to get access to a lot of content — from top-flight TV dramas to new movies to sports — you’re going to have to pay for several services. You’ll choose between Netflix, HBO, Amazon Prime, basic cable, Hulu or Showtime. Or maybe you’ll just get all of them.
You know what’s also true that Mr. Manjoo leaves out? Many of the services didn’t exist before the Internet. And the way they are competing with the availability or cost of licensing third party content is…[DRUM ROLL] they are creating original programming.
Market segmentation, dude. Look it up, it’s in Wikipedia.
Theme music by Guy Forsyth.
You can also subscribe to the Music Tech Policy podcast on iTunes.
Where can you get smart about the illegal Popcorn Time Bit Torrent seeder? Where else, at YouTube. Brought to you by the Kids Choice Awards.
The #irespectmusic grassroots campaign has a new spontaneous grass roots music video by NY photographer and film maker Taylor Ballantyne–a great example of artists in different fields supporting each other. The director said, “As a photographer and film maker within the industry, there’s nothing more powerful than getting to share a bond and create with musicians. I made this video for IRM because I wholeheartedly respect the artist and their music.”
Looks like there’s also an #irespectmusic YouTube channel I Respect Music TV, so feel free to subscribe and to send that link around!
Sign the petition at irespectmusic.org!
If you’re in the music business, you’d have to live under a rock not to know that many artists don’t like streaming services. You may also be aware that many artists also have issues with digital retailers whose advertising arms sell ads to pirate sites. Well, that kind of narrows it down, I guess, but you get the idea.
It’s gotten to the point where artists need to have control over where their music appears online. Distributors should not be able to force an artist to make their records available on any digital retailer that the artist dislikes. Artist should be able to decide that they want their music on iTunes Radio and not on Spotify, for example.
Another area that artists should be able to get control over is who gets an exclusive track or release. For example, if an artist wants to give iTunes a Beyonce-type release, the artist should be free to do so.
Both these points need to be addressed in the artist’s recording agreement or distribution agreement because if there is no contractual prohibition on the label, there’s nothing to stop the label from agreeing–for a large amount of cash that is not shared with the artists on that label, no doubt–that the label will not cherry pick which releases they make available to particular retailers and that the label can’t give an exclusive to any one retailer.
Another provision you should expect to see is a “mandatory monetization” clause. This means that artists will be forced to “monetize” their music or videos on ad-supported services (also known as whoring the catalog). If you have an artist who doesn’t want to be associated with random advertising, you might have a problem and perhaps you should negotiate a default of “no monetization”. Otherwise your client may find themselves selling something they didn’t anticipate. Something like this, for example (Ads by Google):
Some artists might say, for example, that the retailer cannot have an affiliate that serves ads to any site that is listed on the top 500 sites on the Google Transparency Report. This is a restriction that is rationally related to the purpose of the artist agreement as any company that serves ads on pirate sites profits from piracy and undermines not only the artist, but also other retailers that the artist may choose to approve.
These points could prove difficult to get, but practically every “standard” give in an artist agreement was difficult to get at one point.
These streaming and “free” services remind me of record clubs–and a holdback on record clubs was absolutely standard, anywhere from 90 days to 12 months.
And just think–record clubs didn’t even capture fan behavioral data to resell to the highest bidder. And pocket that data mining money for their own grubby little paws.
Here’s a caption for a picture of Maker Studios founder Shay Carl: Maker to songwriters–yes, I ripped you off and I’d do it again!!
Credit: Reuters/Gus Ruelas
My interview with Keith Bernstein, the preeminent auditor of digital music services. A “royalty auditor” visits digital music services on behalf of artists and copyright owners to make sure they are paying royalties in accordance with the services’ contracts. Keith has conducted these “royalty compliance examinations” (or “audits”) against every major digital music service, frequently multiple times. As he was one of the first to focus on digital services as our future income back in 2000, he’s a leader in his field.
Keith’s companies are Royalty Review Council for audits and accounting, and Crunch Digital for assisting entrepreneurs with servicing licenses and the Crunch Digital Agency to assist entrepreneurs in obtaining licenses from rights holders for the use of music in their products.
Theme music by Guy Forsyth, “Where’d You Get the Music?”