Archive for December, 2015

The MTP Interview: David Lowery on the CRB Webcasting Rates

December 21, 2015 1 comment

This post is the second of a two part interview with Blake Morgan and David Lowery about the newly announced webcasting rates as determined by the Copyright Royalty Board.

MTP: How do you feel about the CRB decision in general as far as rates go?  

Well it’s a mixed bag.  Leans bad.  The rates went up marginally for Pandora, and that seems to be the lead in the press.  But it looks like rates went down for other webcasters.  You saw Pandora stock popped on the CRB news?   Sometimes markets tell you what no one dares say.  The markets are saying that this is good for webcasters and bad for artists.  Of course you won’t see that in the tech or music business press.  [Billboard posted one story on the wave of negative reactions at press time after David’s interview.]

MTP: Was this more of a victory for the Pandora/Clear Channel/Google MIC Coalition or for artists?

Definitely more of a victory for the MIC Coalition, and here is why:  The CRB allowed the Merlin-Pandora and WMG-IHeartRadio [Clear Channel] deals as evidence of free market deals.  I believe that at least the Merlin deal is illegal because it is payola.  IN CONSIDERATION OF ADDITIONAL AIRPLAY value went from Merlin labels to Pandora [now an FCC broadcaster].   Possibly the WMG deal is the same.  I’m less familiar with that deal.  How can an illegal contract be the basis for CRB rates?  What happens if the FCC gets off its ass and rules that Merlin/Pandora deal illegal?  Does the CRB go back and reset rates? Uncharted territory here. Whats next? Multinational corporations contracting to bribe executives to get a lower per stream rate?  Would that be allowed as evidence?  I really think artists need to contest this with the Copyright Office. 

MTP: Do you feel compensated for the value lost from the last CRB when Pandora got the CRB rates cut substantially?  Do you think that the CRB had in mind restoring what was taken away in the last rate setting five years ago?

Well first we have to pretend that micro pennies are a form of compensation. Second the CRB has no business “taking” value from anyone.  They are supposed to be setting rates at market rates.  But, no,  they haven’t made up for the amount that they took from artists last time.  

MTP:  How about no rate increases in the out years other than indexing to the Consumer Price Index?  I saw someone online suggesting that indexing essentially froze the 2016 royalty rate and just adjusted for inflation so that artists essentially would be paid 2016 value for the next five years.

This makes me really mad. This is federally mandated wage stagnation.  Basically this says if there is any “upside” in the value of streaming music over the next 5 years performers won’t participate.  If you think of songwriters and performers as being the public, this is the classic federal scam:  socialized costs/privatized profits.  It’s stunning that people in Washington can’t see their policies create the income inequality they decry.

MTP:  The press seems to always refer to the fact that Pandora “hasn’t turned a profit” yet, and tries to create this impression that Pandora is an otherwise well run company with $1.1 billion in revenue, zero debt, government mandated below market vendors, SG&A over 40% that’s going on an acquisition binge for unrelated businesses with no regard for integration costs—that also can’t manage to “turn a profit”.  Does anything bother you about that press profile?

Welcome to Web bubble 2.0!  I would say I’m looking forward to the coming crash, but I have a feeling that our pension funds will get left holding the bag.   SG &A you mean the Selling, General and Administrative costs right [in Pandora’s income statement]?   This is where they hide obscene executive salaries.  Pandora has paid out over 1/2 billion dollars in executive stock compensation since going public.   Does anyone else find this insane?  No. If you read the press, and I mean The New York Times or Wall Street Journal all you ever hear is how much Pandora is supposedly paying to artists.   I can’t wait for the New York Times to report that GROCERY STORES PAY A SIGNIFICANT AMOUNT OF THEIR GROSS REVENUES FOR GROCERIES!  Where is that headline?  When do we get to hear that sound bite on NPR? 

Seriously, we should offer a prize to MBA students.  Best plan for making Pandora a profitable company.   How many of those plans would start with that 40% SG&A.  

MTP:  How does this MIC Coalition rate from the CRB affect licensing for any streaming service that Pandora may want to launch out of the ashes of Rdio?

Well this doesn’t directly effect the on demand rates, but I’ve always maintained that the artificially low rates paid by services like Pandora, has allowed them to offer music free, which in turn allows the on-demand services to argue for free tiers.   It’s a race to the bottom. Let’s put it this way: This CRB ruling certainly doesn’t help us get better rates from on-demand services. 

Say It Ain’t So, Bob: Google Extends Government Capture to Congress

December 21, 2015 1 comment

It’s no secret that Google is conducting “agency capture” at scale in the United States.  Reporting by The Guardian reveals that Google is using its influence to try to dominate the House Judiciary Committee, including its Chairman Bob Goodlatte who wrote letters trying to help Google get out of a corner in the European Commission’s massive antitrust investigation into Google that some have suggested should result in breaking up Google.

Since the House Judiciary Committee controls legislation like Fair Play, Fair Pay to create a broadcast royalty for artists for the first time in history–legislation opposed by Google and the MIC Coalition–any undue influence over the Judiciary Committee and Chairman Goodlatte is of crucial interest to artists.  This is particularly important right now as Chairman Goodlatte has been conducting a long series of hearings on copyright reform that don’t appear to be resulting in any legislation any time soon.

The European Threat to Google

Google–especially through Eric “Uncle Sugar” Schmidt–is entirely in control of the White House and many executive branch agencies, particularly the Federal Trade Commission that famously dropped its investigation into Google’s monopolist practices in search.

That didn’t work out so well for Schmidt and Google when it came to the European Commission.  Google and Schmidt tried a rope-a-dope charm offensive with Spanish politician Joaquín Almunia, the outgoing competition regulator in Brussels, which failed miserably in a blaze of lobbying malpractice when Google tried to run out the clock on Mr. Almunia’s term with no points on the board.

After a lot of lunches and tapas, Mr. Almunia, the EC regulator Google had been romancing Silicon Valley style, left Schmidt standing with his sugar in his hands.  Welcome to negotiation, Southern-European style, Mr. Schmidt.

Mr. Almunia rode off into the sunset to be replaced by Margrethe Vestager, Almunia’s no-nonsense Danish successor.  Ms. Vestager believes she has a case against Google, and–shocker–filed that case.  All of a sudden, everything changed for Uncle Sugar.  Google is still playing the agency capture or regulatory capture game in Europe–even though it’s now moved on from mere regulatory capture to whole of government capture in the U.S.

After calls in the European Parliament for Google to be broken up, it became clear that a combination of major blunders by Google had taken deep root with Europeans, and Google was suddenly faced with a pernicious thought:  Google can’t buy every legislature in the World.  At least not yet.  What to do?  Well, since it already owns the U.S. Executive Branch, why not buy the Congress, too?

Love for Sale

MTP readers will not be surprised to learn that Google, having bought the executive branch, has moved on to snap up the U.S. Congress as well and Google is calling on its investment in controlling the U.S. government to help out with Ms. Vestager.  Because we all know that if you just speak American louder, more Europeans will understand you.

In “Revealed: how Google enlisted members of US Congress it bankrolled to fight $6bn EU antitrust case“, The Guardian tells us that:

Google enlisted members of the US congress, whose election campaigns it had funded, to pressure the European Union to drop a €6bn antitrust case which threatens to decimate the US tech firm’s business in Europe.

The coordinated effort by senators and members of the House of Representatives, as well as by a congressional committee, formed part of a sophisticated, multimillion-pound lobbying drive in Brussels, which Google has significantly ramped up as it fends off challenges to its dominance in Europe [by Ms. Vestager].

Google reacted very predictably with a rehash of the tactics that have worked so well for the company in the U.S. (although I doubt seriously that anyone is really buying into it in Brussels):

Google has employed several former EU officials as in-house lobbyists, and has funded European thinktanks and university research favourable to its position as part of its broader campaign [like the Berkman Center and Stanford University’s Google-funded Center for the Internet and Society].

So how does all this affect artists?  The Guardian reveals that members of the House Judiciary Committee–including Chairman Bob Goodlatte–received over $200,000 from Google during the 2014 election cycle.

[T]he US House judiciary committee wrote to MEPs concerning the antitrust case against Google. The committee’s chairman, Bob Goodlatte, said the committee was “troubled to learn” some MEPs were “encouraging antitrust enforcement efforts that appear to be motivated by politics” that would ultimately undermine free markets.

Google has consistently donated to Goodlatte’s election campaigns, while members on the judiciary committee that he chairs collectively received more than $200,000 (£133,000) from the company during the 2014 election cycle.

Google declined to comment on the letters or its ties to the committee, including the fact one of its senior lawyers in Washington had joined the firm straight from the judiciary committee where he served as an antitrust counsel to its Republican members. A spokeswoman for the committee did not respond to the Guardian’s requests for comment.

Say It Ain’t So, Bob

Chairman Goodlatte’s involvement with Google leaves many of us scratching our heads.  Goodlatte has been someone whom most of us thought of as being a fair-minded man and judicious in his demeanor.   If Google has extended its government capture campaign to the chair of the Judiciary Committee, then we would start to see the Judiciary Committee’s failure to act on the absurd DMCA, Fair Play Fair Pay and other legislation in this and past sessions of Congress in a new light.

Given the way court decisions are going on what is largely Google’s absurdly self-serving interpretation of the DMCA, it would give everyone comfort if Chairman Goodlatte gave some indication that he’s not in bed with Uncle Sugar.

Things have a strange way of going Google’s way in the Congress.  For example, Senator Mike Lee was supposedly going to investigate the FTC’s handling of its Google antitrust investigation that was pretty obviously corrupt.  After one press opportunity, we haven’t heard a peep from Mike Lee.

As The Guardian concludes:

Once again the clock is ticking for Google [in Europe]. Vestager is treating her investigations as a high priority and has indicated EU regulators will actively pursue its new parent company, Alphabet, on multiple fronts.

The clock is ticking for the U.S. Congress, too.  This would be a good time to investigate corruption at the Federal Trade Commission and even the U.S. Department of Justice.  Or perhaps for Public Citizen to extend its investigation of Google’s influence peddling to the U.S. Congress.

Like the overwhelming majority of the American people, artists can’t hope to compete with corporate money to get the attention of Members of Congress.  We just vote.  We have to hope that Members do the right thing.


Just to recap, here’s a few examples of Google’s government capture:

President’s Council of Advisors on Science and Technology: Eric Schmidt (call sign “Uncle Sugar”)

Director of Google Ideas (and co-author with Uncle Sugar of The New Digital Age): Jared Cohen (formerly a member of the Secretary of State’s Policy Planning Staff and as an advisor to Condoleezza Rice and later Hillary Clinton).

Director of United States Patent and Trademark Office: Michelle Lee (formerly Google’s Head of Patents and Patent Strategy)

U.S. Chief Technology Officer: Megan Smith (formerly at Google[x])

Deputy U.S. Chief Technology Officer: Alexander Macgillivray (formerly Google’s point man on orphan works)

Director of Google Advanced Technology and Projects Group: Regina Dugan (former director of DARPA)

Director of U.S. Digital Service aka savior of (in case you couldn’t tell): Mikey Dickerson (former Site Reliability Manager at Google)

Special Assistant to Chairman, FCC: Sagar Doshi (Google Product Specialist)

YouTube Global Communications and Public Affairs Manager:  Chelsea Maugham (former U.S. State Dept. Chief of Staff)

Google Lobbyist: Katherine Oyama (former Associate Counsel to Vice President Joseph Biden)

Google Head of Global Development Initiatives: Sonal Shah (Advisory Board Member, Obama-Biden Transition Project)

Deputy U.S. Chief Technology Officer (White House): Nicole Wong (former Google Vice President & Deputy General Counsel)

And then there are dozens if not hundreds of former Hill staffers now working for Google’s DC shillery.


What Does BMG v. Cox mean for the Copyright Alert System

December 17, 2015 Comments off

A Virginia jury today handed down a $25 million judgement in favor of BMG for willful contributory copyright infringement by Cox Communications following what was apparently a very brief deliberation.  There will be much written about the case, but let’s think for a moment about what it means for the Copyright Alert System.

The judge in the case ruled earlier in pre-trial motions that Cox had failed to maintain an effective repeat infringer policy and procedure.  What seems to have been most compelling to the judge was that Cox didn’t do enough in terminating repeat infringers although the company did temporarily suspend access to a users Internet connection.

That is interesting because the Copyright Alert System (which involves the largest US ISPs) is essentially a system of notices and alerts that never results in what seemed to be important to the court in Cox–termination.  Which is actually just plain old common sense.

Given that the Memorandum of Understanding that created the Copyright Alert System is about to expire, the verdict in Cox and Judge O’Grady’s ruling denying Cox the safe harbor are likely to give artists and copyright owners pause when considering whether to extend or renew.  It’s also well to remember that music publishers and songwriters are not part of the Copyright Alert System.  There’s nothing stopping a songwriter or publisher from using the Cox precedent to proceed against any ISP.

Now that there is a sensible precedent, it’s easy to understand how you could look at the Copyright Alert System and ask why bother.

Jury Rules For BMG on Cox Media P2P Piracy

December 17, 2015 Comments off

The Trichordist

Details are still slim, but it looks like a victory for artists and rightsholders.  Court agrees ISPs are supposed to have real policy for disconnecting repeat infringers.  Cox basically had a “fake” cutoff  policy and lost DMCA protections. Fox is now liable for user’s infringement.

Law360, Washington (December 17, 2015, 12:38 PM ET) — Internet service provider Cox Communications must pay music publisher BMG Rights Management $25 million for turning a blind eye to illegal music downloads by its subscribers, a Virginia federal jury found in a verdict Thursday, holding the ISP guilty of willful contributory copyright infringement.

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The MTP Interview: Blake Morgan and David Lowery on the CRB Rates

December 17, 2015 1 comment

MTP had a chance to catch up to Blake Morgan and David Lowery for an interview about the CRB rates announced yesterday.  This is the first of the two posts with Blake Morgan, read David Lowery’s interview here.

MTP: How do you feel about the CRB decision in general as far as rates go?

While I’m happy the Copyright Royalty Board raised Pandora’s non-subscription royalty rate by 21%, I can’t celebrate fully. The fact that webcasting rates were cut by 25% makes this mostly a wash, and flies in the face of basic respect for music makers.

MTP:  Was this more of a victory for the Pandora/Google MIC Coalition or for artists?

Overall, Pandora is going to have to pay 15% more than they have been paying, so it’s certainly not a victory for Pandora/MIC. Artists are going to get more, so that’s a win. However, it could have been a slam-dunk victory for artists, and I feel this is more of a squeaker.

MTP: Do you feel compensated for the value lost from the last CRB when Pandora got the CRB rates cut substantially?  Do you think that the CRB had in mind restoring what was taken away the last time around?

It’s hard for me to climb inside their heads, but it does feel like the CRB decided to make a “some for them over here, and some for them over here” kind of decision. This is a significant cost increase for Pandora, but it’s still less then what we wanted––so it’s like the CRB tried to drive right down the middle. If they were trying to restore what’d been taken away last time, and that’s all, then that would be really disappointing to me.

MTP:  How about no rate increases in the out years other than indexing to the Consumer Price Index?  I saw someone online suggesting that essentially froze the 2016 royalty rate and just adjusted for inflation so that artists essentially would be paid 2016 value for the next five years.

Yeah, that’s a little how I feel. But, I hope it doesn’t matter because there’s such a strong possibility that Pandora won’t even be around in five years. At least if they continue to run their business the way they have been recently.

MTP:  The press seems to always refer to the fact that Pandora “hasn’t turned a profit” yet, and tries to create this impression that Pandora is an otherwise well run company with $1.1 billion in revenue, zero debt, government mandated below market vendors, SG&A over 40% that’s going on an acquisition binge for unrelated businesses with no regard for integration costs—that also can’t manage to “turn a profit”.  Does anything bother you about that press profile?

I have yet to meet a music maker who isn’t bothered by this. Far too many people have noticed that Pandora’s founder, Mr. Westergren, has bought and is building what’s being widely reported as a “massive” mansion, with 14 bathrooms. Not turning a profit? How full of shit do you have to be to need 14 bathrooms in your house, man.

MTP:  What’s the reaction in the #irespectmusic community to this latest move by the MIC Coalition?  Do the new CRB rates make getting a royalty for terrestrial more or less important?

Securing a terrestrial radio royalty for artists remains the singular issue in this fight for music makers’ rights and respect that everyone I talk to supports. They agree it’s embarrassing that we have to even talk about it, that it’s embarrassing for us as a nation to not have it, and it’s critical in winning. Simply put: it couldn’t be more important. It’s a century overdue, and it’s time to get this done for American music makers.

SNAFU: Poor Quality Reporting on Pandora Financials

December 16, 2015 Comments off

We’ll have more on the quirky CRB decision shortly, but let’s get something out of the way about the reporting.  Even the so-called business press doesn’t seem to be able to look past one item on Pandora’s financials:  royalties.  (Or as Pandora defines it, “content acquisition costs).)

If you read any–and I mean any–of the coverage on the CRB decision, you will come away with the impression that Pandora is both being crippled by royalty payments AND has the cash to buy over $525 million in non-core assets.  But Pandora “has never turned a profit”.

Nobody mentions the fact that Pandora has actually managed to do pretty well on the revenue side–over $1 billion in the last 12 months with a gross profit over $400 million.  So why can’t Pandora “turn a profit”, meaning a net profit?

It’s not that they’re paying so much in royalties for music, their only product as far as we can tell.  It’s because they’re spending too damn much money running the company.  Not to mention stupid Valley tricks like buying a radio station in South Dakota to try to loophole their way to screwing songwriters.  (Has anyone on Pandora’s executive team ever been to South Dakota?)  Not to mention stiffing old guys and dead cats on pre-72 royalties, only to have to cough up $90 million in settlement–plus millions in legal fees.  Stupid, stupid, stupid.

Don’t you expect to see analysis of how the company’s executive team spends money and makes decisions from business reporters.  Dig into the income statement, slash through the balance sheet.  Do some analysis.

But no–despite $1 billion in top line revenue Pandora has poor mouthed for so long that the business press don’t even bother looking past the one issue.  Much less question the judgement.

When will these journalists start doing their job?



Must Read #irespectmusic Bloomberg Op-Ed: Deregulate the Music Industry

December 16, 2015 Comments off

As we wait to see what the federal government decides we are worth, take a look at an excellent op-ed from the Bloomberg editorial board entitled “Deregulate the Music Industry.”

In 1941, after major radio stations refused to pay the fees that the American Society of Composers, Authors and Publishers was charging to broadcast its songs, the federal government filed an antitrust suit. After all, how could Americans do without hearing the nation’s biggest hit, Glenn Miller’s “Chattanooga Choo-Choo,” on the box? A consent agreement followed, which was also signed by ASCAP’s chief competitor, Broadcast Music Inc.

The agreement set a payment structure and an arbitration process that has lasted, with various modifications, to the present day. Last year, a rate court ruled that ASCAP is entitled to 1.85 percent of Pandora’s revenue, and this year, a court ruled that Pandora must pay 2.5 percent of its revenue to BMI. Pandora is appealing the BMI decision.

This consent agreement should have been lifted decades ago. Instead, it has spawned a convoluted regulatory bureaucracy that micromanages nearly every aspect of the music industry’s finances, often with no rhyme or reason.


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