“I’ll gladly pay you Tuesday for a hamburger today.”
J. Wellington Wimpy
New boss royalty deadbeat Mark Zuckerberg is suddenly getting serious about “premium” content licensing, but is bringing pre-1999 thinking to the table. He’s proposing what’s called the “Wimpy Deal” that takes ones and zeros to a whole new level. Zeros to the right of the decimal place, that is.
Yesterday, in an earnings call with investors, Mark Zuckerberg gave the music business yet more reason for [false] optimism.
The Facebook founder once again confirmed his company’s increasing focus on video – while making specific reference to ‘premium content’….
“But there’s also a whole class of premium content. The creators need to get paid a good amount in order to support the creation of that content, and we need to be able to support that with a business model, which we’re working on through ads to fund that.
And the Facebook CFO confirmed the rev share “burger today” approach:
Zuckerberg and Wehner were then asked by Brian Nowak of Morgan Stanley whether Facebook’s content investment would be “more driven on revenue share – or do you see yourselves going out and writing and doing licensing deals?”.
Wehner replied: “Our goal really is to kick-start an ecosystem of partner content in the video tab… and our model is really oriented towards revenue share with creators. We are funding some feed content to get the ecosystem going, but the focus is on rev share.”
Is There Any Future for Revenue Share Royalty Deals?
MTP readers will recall that we have questioned the continued utility of the Dotbomb era legacy Wimpy revenue share deals that both songwriters and artists currently suffer under. There are many examples of the absurd costs of accounting and reporting on a revenue share basis for per stream rates that don’t have a positive integer before the third decimal place to the right. Suffice it to say that the transaction costs of receiving and distributing revenue share payments likely exceeds the total revenue paid in almost every case. And if the mere accounting doesn’t, then the first label audit will, particularly since there is practically no recourse against music services to know how the advertising revenue was calculated.
A revenue share structure is not a business–unless you’re into burger futures. This got into the house back in the days when nobody paid too much attention to what they were getting up to over there in New Media Land until suddenly streaming was cannibalizing higher margin sales.
We now are seeing cannibalization come home to roost as pre-IPO streaming services gleefully try to convince us that trading a lot of sales of a high margin good for a lot of streams of a very, very low or no margin good is actually healthy for “the music business”.
Services may try to convince everyone that flat money, breakage, technology payments or the IPO shares will make up for the absurdly low royalty rates–aka glass beads and blankets–but artists are less and less interested in selling Manhattan on the cheap. And I don’t know anyone named “the music business”. I do know that there are lots and lots of artists and songwriters concerned about cratering royalty checks.
So–if you are wondering why streaming renegotiations have tended to stall, the changing of the guard in New Media Land may not be the only reason, but it’s certainly one of them. And don’t be surprised to see New Media Land executives recruited by digital services for the big bucks–which probably was the plan all along. It certainly works for lobbyists.
Nowhere is this phenomenon more pronounced that with the ridiculous YouTube royalty deals which are all based on rev share.
In the middle of this, Facebook has yet to even acknowledge that they need licenses for the music they play on their platform. Their strong move is to hire a licensing person from YouTube–probably to float the idea of doing the same revenue share deals that are cannibalizing our business.
We know what’s wrong with perpetuating the YouTube debacle with Facebook (or anyone else). The question is, will new boss Facebook be able to jam this absurd new boss legacy revenue share structure down our throats.
They have now told us they will try, so this might be a good time to tell them we’re not gonna take it.
What Should A Facebook Deal Look Like?
Like any of these situations, Facebook needs to address the past and then pay a license for the future. Given Facebook’s cavalier attitude about music rights, they’ll not be taking this too seriously. Unless they’re made to.
Given the opportunity to book a dollar on Tuesday, there are many big rights holders who might look at a payment from Facebook as “found money” or even perhaps as an employment lifeboat. It wouldn’t be the first time a music executive jumped ship after making a deal with a digital service that suddenly became their employer.
The absolute worst move would be to allow Facebook to make a token payment of what they will view as chump change–literally change paid to chumps–and then let them drag out using recordings and songs with no meaningful compensation or record keeping.
In other words–don’t let them create yet another black box with no transparency.
How much for the past is enough? Facebook’s Sheryl Sandberg has told us that the $500,000,000 payment Facebook was ordered to pay Oculus is “nonmaterial”. Good–maybe that’s a place to start, then.
How much for the future? Whatever it is, it should not be less than Spotify’s free service. Why? First of all out of fairness to Spotify. Why should Facebook get a better deal than Spotify? But mostly out of fairness to us! Remember–the focus has been on labels having all this supposed leverage over Spotify who will have a hard time registering an IPO (assuming they haven’t already registered a confidential IPO under the JOBS Act).
Well–if Facebook gets let off the hook at a crucial point in the Spotify renegotiations, then why should Spotify take a worse deal than Facebook? Maybe the leverage shifts the other way and who could blame Spotify (and others) for piling on at that point.
So Don’t Blow It
Why should it always be Tuesday at Facebook?
A Facebook music license portfolio is a golden opportunity to at least start to get out of the shite revenue share world once and for all, a world we were condemned to long ago by the New Media idiotocracy who bargained away the creator’s birthright. Facebook is stealing recordings, videos, song titles and artist names. Why should they get a pass without some serious zeros attached to it?
Zeros to the left of the decimal place for once.
The question is–do you want fairness and transparency or a fast buck with a black box?