Music Technology Policy

ROOSTER

I don’t believe in fairy tales, sermons, or stories about money, baby sister, but thanks for the cigarette.

From True Grit written by Joel Cohen and Ethan Cohen

The author John Seabrook has written another extraordinary piece on Spotify for the New Yorker that one could charitably describe as struggling with truthiness.  But to paraphrase Mrs. Longworth, if you’re not feeling charitable, come sit next to me.

Of course this is not the first time Mr. Seabrook and the New Yorker have come to the rescue of the Darling of Goldman Sachs.  Who can forget John Seabrook’s puff piece on Daniel Ek that appeared in the New Yorker after Spotify’s Taylor Swift debacle.  That was an article that IPO underwriting syndicates like a whole lot more than…let’s just say reality.

That Daniel Ek piece had some howlers that belied what is increasingly appearing to be Mr. Seabrook’s self-directed military grade overwriting of anything he may have ever known about the music business.  For example:

Swift’s impressive first-week sales of “1989,” which were just under 1.3 million albums, making her the year’s top seller, are still well short of the all-time first-week high, 2.4 million, set by ’N Sync, in 2000. And the sixty-nine-per-cent drop-off in “1989” ’s second-week sales suggests that Swift’s seventy-one million Facebook fans didn’t rush out and buy the album when they couldn’t get it on Spotify. They just streamed whatever was available on YouTube, which pays artists even less than Spotify does, or on other sites. Or they set sail for the Pirate Bay, where the album was also No. 1.

Just to clarify–Mr. Seabrook is talking about this Taylor Swift record, the #12 album in the country this week according to HITS:

That’s the 1989 record that was released last year that had a 100% increase in sales week over week the same week that Adele’s 25 broke ‘N Sync’s record.  So I’d suggest a different interpretation of reality.  Either sales dropped because Universal’s sales team saturated the stores with Taylor so there would be a big first week, or Universal’s sales team didn’t saturate the stores enough so the reorders hadn’t come in yet.  And remember, approximately 50% of sales, particularly for big hits, comes from CDs.

But the passage from Mr. Seabrook’s Spotify profile illustrates how he bends causality to fit the narrative.  One thing you learn if you are actually in the business of finding compelling artists, helping them to capture a great performance in a recording, financing that recording and the marketing of the record to hopefully find and retain an audience, and then developing a sustainable career for that artist over their lifetimes.  Also called being in the music business.

Unlike science, selling records (including streams) is an unpredictable undertaking.  So why did Taylor have a drop-off the second week?  Because she did.  So do a lot of people.  The point is that she came back strong.  Some probably did stream on YouTube as Mr. Seabrook suggests (although the 1989 videos were actually on Vevo which pays more than YouTube), but it’s a bit of a reach to draw a causal connection for the two.  Unless you’re boosting Spotify for whatever reason that resonates well with Wall Street.

Which leads us to Mr. Seabrook’s latest Spotify puff piece concerning Adele.  I confess I have not read the piece yet, so will very likely have something to say about it when I get around to it.  However, I did see Mr. Seabrook’s tweets today which were even more breathtaking than his last outing in the New Yorker in defense of Spotify.

Here’s the quote:

The reason most artists don’t get paid from Spotify is that the labels use their money to pay huge advances to artists like Adele.

First of all, this is something close to an allegation of fraud as I read it, so one would think that a journalist of Mr. Seabrook’s stature would have at least a couple of sources (other than Spotify or BerkleeIce) that this is true.  Of course, he may be quibbling about the antecedent of “their” which could be either “artists” or it could also be “labels”.  It seems most likely to be “artists” given the context.

The complaints most frequently heard about Spotify royalties are not that artists and songwriters don’t get paid at all, it’s that they get paid shite.  So it’s a bit unclear who is alleging the new allegation that labels simply don’t account to their artists for Spotify royalties at all.

Another explanation might be that artists signed to a label, certainly a major label, “don’t get paid” because they have taken advances already against all royalties otherwise payable under their record deals.  If the artist is unrecouped, then the artist won’t get “paid” in the sense of getting a current check with their royalty statement because the artist already has the money–because they got an “advance,” i.e., a prepayment of future earned royalties.  If any.  This is also known as interest-free high risk capital investment.

Of course, the artists who complain the loudest about Spotify royalties are usually the artists who are not signed at all, so they collect both the artist share and the label share, and sometimes the songwriter and publisher royalty as well.

As to Mr. Seabrook’s class warfare swipe at Adele, I fail to see how labels rob from the poor to give to the rich when by definition an advance to Adele is paying her with her own money (all of which is probably recouped say like, I don’t know, today maybe).  Since labels will probably have given advances to other artists whose money they supposedly took from Spotify royalties to pay to Adele, then I’m not even sure that there would be any royalties to “take” unless all these artists would magically recoup all their advances from Spotify royalties.

So if artists are in various states of recoupment and Adele and artists like her are being paid with their own money, then how to square Mr. Seabrook’s allegation?  There’s also the faint possibility that labels might have access to this thing called credit.  But that doesn’t fit the narrative nearly as well as labels stealing billions from artists.  All the labels, all the time and at the same time.  Why?  Because Spotify.

Since Adele probably added a zero to the music business with 21, I think that any advance to Adele was well deserved.  Which is the main difference between label revenues from the sale of Adele’s recordings and Spotify royalties–that zero that Adele added to the industry was to the left of the decimal place.  Spotify adds zeros to the music industry, too–but to the right of the decimal place.

We occasionally post about a topic that has nothing to do with music, tech or policy.  Here’s a few ideas for holiday reading, some new some not.  If these titles seem a bit serious, well we live in serious times deserving of reflective mentation.

Winter is Coming by Garry Kasparov.  An important new book by the former world chess champion who is now one of the most determined opponents of the Putin autocracy.  He was beaten and arrested at the Pussy Riot punk prayer event in Moscow.

Scoop, by Evelyn Waugh.  If you only know Evelyn Waugh from Brideshead Revisited, you’re missing a lot.  Scoop is hands down one of the funniest send ups of modern media ever written, notwithstanding it was first published in 1938.  Waugh chronicles the machinations of Lord Copper, owner of The Daily Beast (yes, that’s right) and a host of others with Waugh’s own magical touch of character reanimation.  You might never know he served with The Blues.

The Future of Violence: Robots and Germs, Hackers and Drones–Confronting a New Age of Threat by Benjamin Wittes and Gabriella Blum.  A fantastic journey into the contemporary world of anonymous violence facilitated by technology.  I got your self driving car right here.

Greenmantle by John Buchan.  An oldie but goodie yarn by the father of the spy novel featuring Richard Hannay in a WWI era clash between jihadis and the stiff upper lip.  The sequel to The 39 Steps.  I’ve always thought Hitchcock should have filmed this one instead.

Ghost Fleet: A Novel of the Next World War by P.W. Singer and August Cole.  Just to show we recognize talent where talent shows itself, a novel co-written by P.W. Singer, the brilliant military strategist and commentator on the ethics of machine warfare who now works for Google at the New America Foundation.  While the book may seem futuristic, there isn’t anything in it that is not a currently existing technology–given that the general theme is China’s attack on the United States, that should give pause.  If you are on your toes, you will recognize some of the “fictionalized” events as based on news stories you may have read.

The Complete Personal Memoirs of Ulysses S. Grant.  If you’re a Civil War student, this is a wonderful if grisly book told by a great strategist and complex man who today would have great difficulty becoming either a general officer or President.  His narrative of Civil War battles at which he commanded (such as the siege of Vicksburg) is illuminating.

The New Nobility: The Restoration of Russia’s Security State and the Enduring Legacy of the KGB by Andrei Soldatov and Irina Borogan.  If you have any desire to understand Vladimir Putin, read this book.  Written by the proprietors of the Agentura.ru website, the authors bring a local perspective and extraordinary analysis worthy of those people who work across the river.  Soldatov and Borogan trace the devolution of the KGB and evolution of the Federal Security Service of the Russian Federation (FSB).  Excellent factual analysis of the Nord-Ost and Beslan school massacres.

Deadline Artists or Deadline Artists: Scandals, Tragedies & Triumphs, each edited by John P. Avalon, Jesse Angelo and Errol Louis.  Every blogger should own and read and reread these excellent collections of newspaper columns.  No writer in these volumes would get a “tl/dr”.  The collections include columns by authors like Ernest Hemingway, Nora Ephron, Mark Twain, Mike Royko, Jimmy Breslin and of course the great H.L. Mencken.  The best example of what good comes of barriers of space and time.

Night Flight by Antoine de Saint-Exupery.  Saint-Exupery’s breakthrough novel from his time in 1929 establishing air mail routes in South America.  The next time you’re on an airliner at night imagine how the experience might differ without the radar and radio, forget the autopilot and fly by wire operations.  And then there’s the gasoline part.  Not to mention flying the Andes Mountains.  At night.  Oh, and the heating.

The Little Prince is his other book.  He disappeared while flying a reconnoissance mission in the Free French Air Force from Corsica in 1944, but has a plaque in his memory in the Pantheon.  Altogether not bad for a college dropout.

Hitch-22: A Memoir by Christopher Hitchens. I always adored the late Christopher Hitchens and love this biographical memoir.  If you don’t know his work or life, just cruise around on YouTube and you will find some of his noteworthy performances.  I recommend as an introduction the Hitchens-William F. Buckley, Jr. debate which is young Christopher at his most devilish.  A confirmed atheist, you get the flavor from this one which might be a bit of blasphemy in the season of hope, but there it is.

In case you missed it (and US readers probably have better things to do today as it’s the Thanksgiving holiday here), Pandora is apparently feeding stories to the business press with that special level of duplicitousness we have come to expect from P.  Unfortunately, this time it involves Adele’s “25” record.  But the manufactured news resulted in a $27 million one-day increase in market cap for Pandora.

Here’s the story from the Wall Street Journal–you know, the venerated business publication, the Bible of Wall Street, relied on for correct information by millions of investors.

Investors are giving Pandora Media Inc. a hearty hello on Wednesday, sending shares up as much as 5.8% after the company confirmed that Adele is bringing her latest album, “25,” to its streaming music service, leaving competitors including Apple Music and Spotify in the dust.

News of the album’s availability on Pandora comes after Adele’s camp earlier said she’d decided against making her record-breaking album available on streaming services. Pandora acts more like a radio station than some of its rivals, in that it doesn’t allow users to select individual songs.

So quick–does the Wall Street Journal’s reporting leave you with the impression that Adele “decided”–because she “is bringing” the album–to give the artist-friendly Pandora the right to stream her new album?

How about Reuters?  Did Reuters report the news correctly?

Pandora Media Inc presented its listeners with British singer Adele’s best-selling album “25”, days after streaming companies said the album would not be available for streaming at release.

The U.S. online radio service said all songs from Adele’s album, which broke records in first-week sales, are now available on its radio service, sending Pandora shares up on Wednesday.

“Since “Hello” was added to Pandora’s platform last month, her total station adds are up 1,200 percent,” the company told Reuters in an email.

MTP readers will remember that must be BS because Pandora gets a compulsory license (applicable to Adele’s US distributor).  So Adele couldn’t say no to Pandora.  So quick–do these news stories make it sound like Pandora some how came out ahead of other streaming platforms in some competitive contest?

Wouldn’t it have been more accurate for the Wall Street Journal  (aka The Bible of Wall Street) to advise Pandora investors that Pandora had no competitive success in “getting” the Adele record?  Maybe The Bible could advise investors that Pandora is getting the Adele record because the government forces all artists to make their music available on Pandora.

Not to mention that Pandora is only permitted to include records in a personalized webcasting stream that bears no resemblance to interactive streaming on Spotify.  So The Bible is actually comparing apples…ahem…to Marmite on toast.

The Bible also fails to mention that Adele has participated in the streaming format even when the government didn’t force her to do so.  Her single “Hello” has been available on iTunes, Spotify and other streaming platforms since October 23.  That’s right–all this press that has been ginned up about Adele and streaming is all about “25”–that’s the album.  Even that isn’t entirely accurate because if you buy the album on Amazon or iTunes, you can stream it to your player.

Not only did Spotify get the single, but according to The Atlantic, the single also:

“…broke one-day streaming records on Spotify and Vevo, and appears on track to set a benchmark in the category of one-week U.S. digital song sales. It easily beat competition from a new Justin Bieber song, smashed a record recently set by Taylor Swift, and has already been viewed on YouTube far more times than the Star Wars trailer released a week ago.

Again, having a record setting single on Spotify should count for something in news reporting for investors about Pandora.  Wouldn’t that have been a relevant fact in the who, what, when, where, why, how business?

The news–or shall we say propaganda–drove Pandora’s stock price up about 5%–or somewhere around a $27,690,000 increase on the day of the value of Pandora’s outstanding publicly traded shares.  Probably more than Pandora paid songwriters all year.

The Verge, no friend of the music business, actually got the statutory licensing part right but stuck to the talking points and laid on the equivocation for the “not on Spotify” part:

Adele’s 25 is the biggest album in the world right now, and it’s made it there all without a single stream on Spotify [see what they did there?  The antecedent of “it” is the “album”.  True aside from record setting streaming of the “Hello” single on Spotify]. In fact, it might have made it there because there hasn’t been a single stream on Spotify: Adele and her label made the decision not to stream 25 anywhere online, encouraging people to actually buy the album or its songs outright. But despite the ban, some services [like Spotify, Apple and Pandora] have songs from 25 up streaming…

Of course, Adele and her label are likely a lot less concerned about Pandora streams than Spotify streams. Pandora is just a radio station [no, it’s nothing like a radio station, Pandora pays royalties through SoundExchange and radio does not–see #irespectmusic], so it’s likely seen a bit more as a promotional tool than as something that will cannibalize album sales….[oh, so streaming does cannibalize sales?]

…Pandora…doesn’t have a deal with labels [except for Pandora’s direct deals]. It relies on a law governing “non-interactive” streaming services….

We could fully expect Pandora to try to pull yet another snow job on the public to drive up their stock price with deceptive information, but it is rather shocking that major business news outlets will let them get away with it.  The Bible is upstaged by The Verge?

Salon posted an eye-popping expose on Google’s influence peddling at major American universities (“Google’s insidious shadow lobbying: How the Internet giant is bankrolling friendly academics—and skirting federal investigations” by David Dayen).  Of course, we’ve been watching this space since 2006 when Google funded Lawrence Lessig’s Center for the Internet and Society at Stanford with $2 million (not to mention the $1.5 million Google gave to Lessig’s pet project, Creative Commons).

Salon uncovered hundreds of thousands going to George Mason University to help Google fight an FTC antitrust investigation:

In June 2011, Google had a problem. The Federal Trade Commission (FTC) had opened multiple investigations into whether the tech giant illegally favored its own shopping and travel sites in search engine queries; restricted advertisers from running ads on competing sites; and copied rival search engines’ results.

To fight this threat, Google turned to a key third-party validator: academia, and in particular one university with a long history as an advocate for corporate interests.

From the beginning of the FTC investigation through the end of 2013, Google gave George Mason University’s Law and Economics Center (LEC) $762,000 in donations, confirmed by cancelled checks obtained in a public records request. In exchange, the LEC issued numerous studies supporting Google’s position that they committed no legal violations, and hosted conferences on the same issues where Google representatives suggested speakers and invitees….

Google’s actions between 2011 and 2013 show how they dodge legal bullets: by molding elite opinion, using the support of experts and academics as a firewall against criticism. The donations to George Mason and professors at other universities reveal that Google purchases that privilege.

Not surprisingly, one of George Mason University’s leading professors authored a paper supporting Google–this is pretty standard stuff with corporate funded academic research.  The difference this time is that the academic was attempting to influence the FTC and was himself later appointed to the FTC by President Obama who has clearly become Google’s best friend in Washington.

In November 2011, future FTC Commissioner Joshua Wright, then still a law professor at George Mason, wrote “Defining and Measuring Search Bias: Some Preliminary Evidence,” where he discounted Google’s “alleged bias” toward its own subsidiaries in searches.

“From an antitrust perspective,” Wright wrote, “differences in own-content references across engines fail to indicate consumer harm,” but instead “imply the existence of intense competition among engines.” This is one of over 70 PowerPoint presentations and white papers featuring Google that can be found at the LEC website, most of which align with the company’s policy preferences….

A professor at George Mason and author of many pro-Google studies, Joshua Wright, even later became an FTC Commissioner [appointed by President Obama]. He had to vow to recuse himself from Google-related matters for two years to deflect concerns about conflict of interest. But before Wright’s confirmation, the FTC already decided against filing charges against Google, overriding its own staff’s recommendations. Google only had to voluntarily agree to alter some of its business practices to resolve the case.

So remember–if Google starts telling you about…ahem…academic studies, you can almost bet they paid for them.

Notwithstanding the predictably boring and misogynist spew about Adele from Bob “Trigger Warning” Lefsetz, Adele’s “25” album sends an unmistakable message.  Her recording reminds us of the one idea that streaming boosters and other Spotify apologists want you to forget. The CD configuration still makes up an average of 50% of sales, particularly for superstar releases, and in Adele’s case, CDs and digital downloads make up 100% of the album product configuration for “25,” at least for the time being.

But not the single–“Hello” has been available on iTunes, Spotify and other streaming platforms since October 23–you know, the commercial single street date.  That’s right–all this press that has been ginned up about Adele “snubbing” streaming is all about “25”–that’s the album.  Somehow few of these stories (and I say “few” but I think if you read all of them you would find that none of them) tell you that Spotify got the single.

Not only did Spotify get the single, but according to The Atlantic, the single also:

“…broke one-day streaming records on Spotify and Vevo, and appears on track to set a benchmark in the category of one-week U.S. digital song sales. It easily beat competition from a new Justin Bieber song, smashed a record recently set by Taylor Swift, and has already been viewed on YouTube far more times than the Star Wars trailer released a week ago.

Remember when Spotify board member Sean Parker said that Taylor Swift was an “anomaly” which explained how Taylor was “still able to sell downloads and she’s still able to sell  [CDs] in some parts of the country” an obvious swipe at country music and flyover states.  Adele will come close to and probably will shatter the previous first week benchmark of 2.4 million sales that was set in 2000, that is, before the real anomaly–piracy destroying the music business.

HITS summed it up:

Early sales [of 25] are unlike anything we’ve seen in the modern era. The numbers are so extraordinary, we don’t have anything to properly benchmark them against. Digitally, 25 should sell over 1m, giving it the biggest-ever digital sales week.

By the look of it, there’s another message that will not go over well in the Spotify Booster Club–with sales like these, nobody cares about your weak streams beyond treating streaming like radio.  This is not to say that Adele’s windowing strategy is for everyone, but it certainly seems to work with superstar releases.  I’ve always viewed Spotify et al as a kind of after market record club operation.

Imagine if you could have given record clubs just the single.

Record clubs always were windowed to protect new releases with club holdbacks ranging from 90 days to 12 months–or in my case, as long as I could get away with.  (You could also throw a spanner in the works by giving artists a full or 3/4 mechanical rate on record clubs rather than the pathetic 3/4 of 3/4 that the clubs seemed to think they were entitled to–that would usually stop at least the Columbia House operation cold.)  Record clubs also had the attitude that they actually mattered to the front line operation, kind of like Spotify and YouTube do today.  The truth, of course, is that they actually hurt front line sales.

Of course in order to be able to prove that streaming cannibalizes sales, you’d have to find some records that are not streaming to compare to those that are.  And that’s what they don’t want you to be able to do or at least not very easily.

It’s not surprising that the tech press completely misses the importance of Adele’s windowing decision (just like they misinterpreted Taylor Swift’s decision, too).  Daisy Buchanan writing the the Telegraph summed it up quite well:

Women are always being told their worth depends on their ability to please, be liked and make life easier for everyone around them. We’re expected to smile, tow the line and avoid any behaviour that might get us branded ‘outspoken’ or ‘difficult’ (a word that Jennifer Lawrence recently used to explain why she’d previously avoided demanding the same salary as her male co-stars).

Adele is giving this sexist standard a two fingered salute, and I love her for it  [Yanks would call that the middle finger]….

Adele knows what she’s worth, and is doing what any smart woman should do when someone dramatically underestimates their value – walking out with her head held high and taking her business elsewhere.

She’s an inspiration to any ambitious woman. And if you still think that you deserve to enjoy her hard work for free [in ad-supported streaming]? You really can’t call yourself a fan at all.

And if our male readers wouldn’t want the women in their lives to do the same and be proud of them for it, there’s really something wrong with you.

What You Won’t See on Spotify

Following what is rapidly becoming standard industry practice, Adele’s “25” will not appear initially on streaming platforms.  Spotify and Apple Music are mentioned as “streaming platform” but I would imagine Rdio is included in the hold back to at least some extent notwithstanding the Pandora acquisition.  (Although it is worth noting that if you buy the record through Amazon, you can stream it right away online and through Sonos–so let’s not say she “snubbed streaming”.)

This is sometimes called “windowing” or “market segmentation” and is driving streaming boosters a bit batty.  For example, Chris Cooke writing in Complete Music Update left a skid mark with this one:

Artists should be allowed to decide where their music appears, of course [oh, of course, thank you very much, no doubt some of his best friends are artists], and bigger acts will always have that right to choose written into any record contracts. Though – from a wider record business perspective – you could argue that Adele isn’t being much of a team player with this move, because those who pay £10 every month to a streaming platform are the industry’s best customers, who have in no small part helped the sector’s revenues stop declining. So the record industry is basically saying ‘fuck you’ to its most important clientele.

That’s right–continuing the mantra of “ask not what Spotify can do for you, ask what you can do for Spotify”.  Or more precisely, what you can do for Daniel Ek’s quest for IPO riches.

But Mr. Cook omits the fact that the single “Hello” has been available on iTunes, Spotify and other streaming platforms since October 23–you know, the commercial single street date.  That’s right–all this press that has been ginned up about Adele “snubbing” streaming is all about “25”–that’s the album.  Somehow few of these stories (and I say “few” but I think if you read all of them you would find that none of them) tell you that Spotify got the single.

Not only did Spotify get the single, but according to The Atlantic, the single also:

“…broke one-day streaming records on Spotify and Vevo, and appears on track to set a benchmark in the category of one-week U.S. digital song sales. It easily beat competition from a new Justin Bieber song, smashed a record recently set by Taylor Swift, and has already been viewed on YouTube far more times than the Star Wars trailer released a week ago.

Again, having a record setting single is not “snubbing streaming”.  Wouldn’t that have been a relevant fact in the who, what, when, where, why, how business?

Let’s talk about that “not a team player” idea.  Adele’s last record–which followed a similar release pattern–was so successful that I would not be surprised if Adele and Beggars added a zero to revenue for the entire music industry.  That’s being a team player.  That happened without Spotify.  (“21” was off streaming platforms for most of its 2011 album cycle.)  Let’s hope Adele does it again.  And I for one would think that the words Mr. Cooke is looking for are “thank you.”

Credit where credit’s due, however.  Spotify so far has handled the public messaging on Adele’s release a whole lot better than they handled Taylor Swift.  My bet is that this is entirely attributable to Spotify’s newly engaged resident triangulator, Jonathan Prince.  First, no quotes from Daniel “My Shoes Are Bite Sized” Ek.  That would suggest that Mr. Prince has convinced Daniel Ek that Mr. Ek’s mouth is Mr. Ek’s own worst enemy–so Mr. Prince seems to have a muzzle firmly in place.

There’s a fair amount of press coverage about Adele’s windowing her album–with no quotes from Spotify other than the one rather mealy mouthed blog post that complains of not getting the album and fails to mention the record-setting single.  That means that someone–guess who–was working the press on background to shape the story in a way that helped Spotify without leaving breadcrumbs that would lead back to the company.  Those stories didn’t write themselves.

I leave it to you to decide if failing to mention the single being available on Spotify is just more kvetching from a company with an $8 billion valuation, or is actually duplicitously misleading press manipulation by the Triangulator.

How can you tell this message massaging is going on?  Aside from being able to smell it a mile off when you see a number of press reports that say more or less the same thing, you see a lot of spin about how Adele is disappointing her fans by keeping the record off of Spotify.  According to the dozens of fan interviews conducted on the record by music industry journalists?  According to quotes from record store clerks saying “Punters are whinging no Spotify for Adele”?

Nope.  Not one quote from an actual fan or a witness of consumer behavior supporting the proposition that hits need Spotify.  Not even an astroturfed trolling comment from a Spotify message board.  I wonder why.  Especially since all this press and speculation about consumer behavior comes on street date before consumers have had a chance to behave measurably.

Something Else You Won’t See on Spotify

It’s a much better job of message manipulation, but it doesn’t hide the fact:  Spotify needs hits and hits don’t need Spotify.  The proposition is playing out right before your eyes.

Now if we could just get the marketing people to understand the same thing about YouTube.