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Mystery Redaction in Spotify Filing for Eight Mile Style Lawsuit
“We never get accustomed to being less important to other people than they are to us.”
Holly Martins in The Third Man by Graham Greene
As MTP readers will recall (especially newsletter readers), Spotify is being sued in Nashville by the publishers of a good chunk of Eminem’s extremely popular catalogs (on albums each streamed over 1 billion times on Spotify according to the press). The lawsuit alleges that Spotify has failed to comply with the conditional (and highly controversial) reachback safe harbor under the Music Modernization Act’s Title I. The suit also challenges the reachback element of the Title I safe harbor giveaway as an unconstitutional “taking”. (The case is cited as Eight Mile Style, LLC and Martin Affiliated, LLC v. Spotify USA Inc., Civil Case No.3:19-cv-00736, U.S.D.C. Mid. Dist. Tenn., Nashville Div., Aug. 21, 2019. You can read the complaint here.)
In pre-answer pleadings, Spotify has filed a motion to dismiss for improper venue and has asked the Court to transfer the case to the Southern District of New York failing dismissal. (Spotify was also granted a pre-answer stay of discovery which makes even less sense.) This is because despite the fact that Spotify has a Nashville office and has spent considerable resources for a very long time on a charm offensive directed at Nashville songwriters, Spotify alleges that all of its music publishing licensing operations are in New York. That may be true, but that doesn’t mean that a Nashville jury should be denied the right to hear the case. It’s also unclear why it would be inconvenient for Spotify to be tried in Nashville.
Because the Internet.
But we’ll see. What was interesting about the Spotify motion to dismiss was that it is supported by an affidavit from a Spotify employee describing Spotify’s US mechanical licensing operations for songs. This affidavit was the normal sort of thing you’d see from a defendant trying to give the Court context about why the Court should transfer the case to somewhere else where the defendant was shopping…sorry…where the defendant was based.
And…like most Big Tech multinationals, especially public ones, Spotify wanted part of that affidavit “sealed”, meaning they wanted the Court to prohibit the public from being able to read part of it and most importantly no doubt, they wanted the plaintiffs barred from being able to speak about the sealed part. (Google especially likes that sealed business and has been successful employing that strategy.)
Crucially, this particular case involves critical issues of public policy that strongly militate against secrecy and in favor of complete transparency. The timing of this case is itself of critical importance as the Copyright Office is currently considering regulations to implement the very bare bones federal statute at issue in the case. The Constitutional issue presented alone is of the essence of Title I. Therefore, normal practice on sealing materials in this vitally important lawsuit should be balanced against strong legitimate public interest.
This is particularly true because the redaction appears to address how Spotify is handling mechanical royalties for thousands of songwriters (and potentially many, many more ) both in the U.S. and around the world, all of whom have a strong interest in Spotify’s processes and a right to know where there money is.
It might be important to remind everyone involved in the case that the eyes of the world are upon them and that the money involved is payable under a license that songwriters are compelled by law to grant. Therefore, all information relating to the payment of those monies should be made public. This case is different than your garden variety rate proceeding which is aspirational in nature and where redactions are common and reasonable. This case is brought because it appears that someone screwed up with the money. And if they screwed up with Eminem’s money, they probably screwed up with everyone’s money.
Although it must be said that reading tea leaves about redactions must be a cautious undertaking because there could always be an innocent explanation rather than artifice, here’s what’s odd about the redaction. (You can read the entire affidavit here.)
The affidavit lists some, perhaps all, of the current and former Spotify employees involved in mechanical licensing. We’re not focused on them right now. Who they are is less important than what they do.
After that list comes a heading “Relevant Third Parties”.
Unsurprisingly, Spotify lists its parent company (Spotify AB) as a “Relevant Third Party”. While not “third party” in the normal sense, we can understand why the defendant would want to treat the parent as such as a legal fiction. Spotify also lists HFA, which is equally unsurprising as HFA has provided services to Spotify as Spotify’s agent for many years. (This may be a little confusing to songwriters who thought HFA just worked for them, but that’s a story for another day. For now, suffice it to say that HFA seems to be “on the wall” and works for both sides of the same transaction in some cases albeit providing different services in many cases.)
As an aside, HFA has been, I think, unfairly maligned in the press over its handling of Spotify’s mechanical licensing. I think this is very unfair and I have defended HFA against these attacks. At the end of the day, while HFA may have been the company’s agent, it was Spotify who decided to do what it did and Spotify alone should be held responsible. Criticizing HFA for Spotify’s decision is not only silly and petty in my view, I also think it’s just a bad reading of the law. Having said that, Eight Mile Style has made some serious allegations in its complaint and bears the burden of proving them up which may turn a different direction.
But back to the affidavit–observe the outline form of that redaction. The redaction covers three paragraphs in a separate heading under the affiants’ “Relevant Third Parties” bullet. The redaction aligns with both “Spotify AB” and “Harry Fox Agency” bullets above it. Whatever the redaction says, it appears to be describing a third entity that is neither Spotify AB nor HFA but that provides third party services similar to both.
Maybe nothing but maybe something. If it is something, it appears to be an entity involved with handling songwriters money in yet a sixth lawsuit (including a class action) filed against the same company. One could easily make a compelling argument that this is a lawsuit filed against the very company that drove a major amendment to the licensing practice under the Copyright Act in the form of Title I originating with David Lowery’s and Melissa Ferrick’s class action against Spotify.
And it appears from both the compliant and the affidavit that not much has changed after the passing of the Music Modernization Act. If you look at all the cases against Spotify, they all have one thing in common. Spotify had many, many chances to settle the claim before it became a case. They either ignored the claims before they went legal, or didn’t take them seriously. Expensive oversight for the shareholders, but given Spotify’s governance by dual class voting stock, no surprise that the insiders’ moral hazard cuts against shareholders. Here, Spotify not only had an opportunity to avoid liability, they even amended the Copyright Act to provide themselves a lifeboat.
If something was fixed at Spotify by the MMA, please tell me because I’m missing it entirely. There does seem to be the strong possibility that unless something gets fixed at the company, the pattern will be full again very soon. Eight Mile Style’s attorney Richard Busch must have become something of a bête noire for Spotify–is this the fifth lawsuit against them or are there more? I’ve lost count. Removing the Eight Mile Style case to Timbuktu won’t change the attorney though. And even though it’s a stones throw from Spotify’s luxurious offices in World Trade Center, the SDNY just might be getting tired of seeing Daniel Ek’s smiling face in their chambers. Maybe not yet. But maybe they’d actually be better off staying in Nashville.
Someone should ask this question, so why not us–who is this mysterious third party who does Spotify’s mechanical royalty licensing or accounting that we are compelled to use by the statutory license?
How do they have their mitts on our money? And why so secretive?
@musictechsolve: Is Spotify Stock Quietly Tanking?
UPDATE: This post originally appeared on 9/24 in MusicTech.Solutions before reading that on 9/23 Wells Fargo initiated coverage of Spotify at “Underperform” with a $115 price target. (The stock touched $115 during the trading day on 9/24). As of this writing, the consensus price target is $159 according to NASDAQ’s Marketbeat. And of course, streaming’s massive consumption of electricity is becoming an issue faster than you can say “data center.”
Analyst Mark Hake has developed three different scenarios for where Spotify’s stock price will be in 2021: $125.68, $61.42 and $38.39. He assigns a $114.89 price based on a probability analysis. About where it is at the close today, in other words. His post in Seeking Alpha (“Spotify Has A Valuation Problem”) is a must read if you’re interested in financial analysis. (I predicted about a year ago the stock would retrace to the $120 to $130 range before dropping below $100 and that it would happen sooner than later.)
As analyst BNK Invest noted after the close last Friday (9/20):
In trading on Friday, shares of Spotify Technology SA (Symbol: SPOT) entered into oversold territory, hitting an RSI reading of 26.8, after changing hands as low as $120.63 per share. By comparison, the current RSI reading of the S&P 500 ETF (SPY) is 56.4. A bullish investor could look at SPOT’s 26.8 RSI reading today as a sign that the recent heavy selling is in the process of exhausting itself, and begin to look for entry point opportunities on the buy side.
This chart is from today’s trading and it reveals a couple interesting patterns–they may mean nothing, but then again they might. It’s not so much that Spotify is now trading about $20 below its self-assigned private company valuation of $135. That’s not a comfortable feeling as it says that investors would have been $20 a share better off if the company had never had its controversial direct public offering (or “DPO”) and just stayed private.
Intraday Trading on 9/24/19 Only
What’s interesting about this chart is not so much the price but rather the volume. Spotify is a very thinly traded stock that typically has relatively low volume. When you see larger volume around the opening and the close of trading it may indicate certain motivations of sellers. Particularly if there are holders of large blocks of shares that want to slip out of their position when nobody is (a) noticing or (b) can do much about it.
Because of the nature and “rules” of the DPO, Spotify doesn’t have the typical underwriting syndicate that helps to keep the price somewhat stable to allow the stock to establish a trading range with support levels. Instead of the underwriters selling to the public, Spotify insiders are selling their shares to the public, which then of course can be resold. In an underwritten public offering, insider shares are usually subject to a “lock up” period where insiders cannot sell their shares for a period of time, say 90 to 180 days after the first public offering.
Spotify had no lock up on insiders. So who has an incentive to sell their shares relatively quickly?
It’s hard to know who is doing the selling unless you’re a transfer agent with access to the master shareholder list, and they probably wouldn’t disclose that information for anyone under certain thresholds. But it is odd and it’s been similar patterns for a week or so.
The Curious Timing of “Spotify Untold” the Corporate Bio Book
You may have seen the book reviews of “Spotify Untold” (or in Swedish ““Spotify Inifrån”). The book is currently only available in Swedish, but in a new marketing twist the authors are on a book tour in the US. Must be nice.
The writers seemed to have missed the streaming gentrification part, which is of great consequence to artists and songwriters–but those groups are pretty clearly not their audience.
If their interview with Variety is any indicator, the story line of “Spotify Untold” revolves around (1) music is a commodity (with no discussion of Spotify’s role in the commoditization of what is now openly called “streaming friendly music” not unlike “radio friendly” music–both equally loathed by artists whose name does not begin with “Justin”; and (2) Daniel Ek is a heroic genius (despite the resemblance to Damian in his teen pictures they are also handing out–he thankfully shaves his head).
But most importantly (3) Ek was pursued by Steve Jobs, the evil giant whose company he just happens to have filed a competition complaint against who was aided by the equally evil Sony and Universal as they were all in on it to keep our hero from entering the fabled land of Wall Street. Yes, a yarn straight out of Norse mythology; perhaps a little too much so.
Or the book is a corporatized version of Joseph Campbell’s hero’s journey from The Hero With A Thousand Faces aka Star Wars). You can plug Daniel Ek into the hero’s role pretty easily:
Barely a page into the book “Spotify Untold,” Swedish authors Jonas Leijonhufvud (pictured at left) and Sven Carlsson paint an odd scene. The year is 2010 and Spotify co-founder and CEO Daniel Ek [the hero] is facing a succession of obstacles [the Threshold Guardians] gaining entry into the U.S. market [the region of supernatural wonder] — or, more specifically, infiltrating the tightly-networked and often nepotistic to a fault music industry. [Unwelcoming of the stranger from Asgard, so unlike Silicon Valley.] As stress sets in [Challenges and Temptations], Ek becomes convinced that Apple’s Steve Jobs is calling his phone just to breathe deeply on the other end of the line, he purportedly confesses to a colleague [a Helper].
There’s a saying, “don’t speak ill of the dead.” That’s probably a bit superstitious for the authors, but is good advice. It’s unbecoming and Spotify should denounce it. There’s also a saying, “don’t mock the afflicted,” so before you laugh hysterically at the story, realize that Steve Jobs caring enough about Daniel Ek to do such a thing (which assumes Steve knew Daniel Ek existed) was something that was very important to Daniel Ek
One thing I can tell you is that the Steve legend (a competing hero’s journey myth–a real one) has some choice tales of voice mails. None of them involved heavy breathing, and Variety reports that the authors were not able to confirm this rather insulting and perverse allegation.
What they do say is:
To us, Ek’s claim is as a reflection of how paranoid and anxious he must have felt in 2010, when Spotify was being denied access to the U.S. market, in large part due to pressure from Apple. The major record companies seem to have been quite loyal to the iTunes Music Store, and to Jobs personally….Because Spotify was hindered by Steve Jobs [it’s called competition], it forced the company to sweeten its deals with the record companies [also called competition]….Spotify is challenging Apple on a legal level right now. We address Spotify’s constant struggle with Apple in our book. If Ek were to talk about such sensitive topics in book form, [Spotify would] do it in their own way with full control.
The first thing I thought of when reading the story of “Spotify Untold” was that very competition claim that Spotify is pursuing in Europe right now and pursued with the Obama competition authorities a few years ago. And then of course there was the New York state competition claim that came out the same time as Apple Music launched in the US apparently led by Spotify’s very own Clintonista who was a political ally of Eric Schneiderman the former (ahem) New York Attorney General. While the authors claim that they spoke to many Spotify executives but not Ek, the book still has curious timing as does the disclaimer that the book is not connected to Spotify directly.
And if you believe as I do that Daniel Ek actually hates the major labels (read the Spotify DPO filing an you’ll get the idea), it’s only natural that he would try to twist Sony and Universal into the story. He just didn’t know that his negotiation experience was garden variety stuff and not unusual in any way. They didn’t get stock in iTunes so they damn well would in everything that came after iTunes.
I would be very curious to know why the authors came away from their research thinking that the major labels were “quite loyal” to iTunes and to Steve Jobs. While that may have been true of certain executives, the reason that the labels required licensees to sell in Windows Media DRM (i.e., the format nobody wanted) was because they wanted to compete with iTunes. Even after they dropped that failed idea, the labels large and small did not want a single retailer dominating the digital market.
It’s also possible that the book is an answer to “Spotify Teardown” that came out earlier this year with a much less mythological and much more recognizable approach to a Spotify reality according to an NPR review:
[“Spotify Teardown”] argues that Spotify isn’t a media company per se – and…asserts that it’s structurally much closer to a Facebook or Google, particularly in its digital business model. Indeed, Spotify was never really so much a music company as an Internet brand. “Spotify’s business model never benefited all musicians in the same manner but rather appeared — and still appears — highly skewed toward major stars and record labels, establishing a winner-takes-all market familiar from the traditional media industries.”
You won’t find that in a corporate bio. That sounds like the streaming gentrification reality and definitely wasn’t written by anyone named Justin. So while I don’t know what motivated the “Spotify Untold” authors, I do think that there’s a definite whiff of Astroturf in a book that tells a story that fits almost perfectly with the hero’s journey that Spotify would like to be telling competition authorities. I think the authors are aware of this, hence their disclaimers.
And I’m still waiting for the last leg of Daniel Ek’s hero’s arc, the transformation and atonement. Which is the part that makes the hero a hero. As the authors tell us, “[Spotify] would probably rather tell their story themselves than have us do it for them, but I think they understand our role as journalists.”
I just bet they do.
If you think this is paranoid, watch this video from Sharyl Attkisson. Let’s just say I don’t put anything past these guys.
A Look at Christopher Sprigman’s Recent Record
Sprigman Throws a Definition at Blake Morgan
The Spitting Image of the Modern Major General
MTP readers may remember the name Christopher Sprigman. Most recently, we have identified him as a counsel to Spotify in the “Nashville cases” brought against his firm’s client Spotify by four plaintiffs represented by well-known and successful artist rights attorney Richard Busch. These were cases brought against Spotify in Nashville for claims of copyright infringement by independent publishers who opted out of both the NMPA settlement and the Lowery & Ferrick class actions. (Just to be clear, Lowery had nothing to do with the Nashville cases.)
Professor Sprigman also teaches at the New York University law school in New York and evidently has an of counsel relationship with the distinguished New York law firm Simpson Thatcher. According to his law firm biography:
“Chris is a tenured faculty member and Co-Director of the Engelberg Center on Innovation Law and Policy at New York University School of Law, where he teaches intellectual property law, antitrust law, competition policy and comparative constitutional law.”
Simpson Thatcher is one of those ultra white-shoe corporate law firms, a very conservative reputation and also highly respected around the world.
Pot, meet kettle
Professor Sprigman has a history in copyright circles dating back to at least 2002, i.e., before he worked on Simpson Thatcher client Spotify. His selection to represent Spotify may be explained as simply as Professor Lessig was not available, but it’s more likely that his past work informed his selection as is usually the case. Nothing wrong with that.
Some of Sprigman’s academic writings can be found on his SSRN author profile. At least a few of these papers (that we know of) were co-funded by Google. That Google connection evidently is a topic of some sensitivity with Professor Sprigman as it was that point that seems to have prompted his unprovoked and public comparison of David Lowery to Alex Jones.
Aside from the depressing reliability of the Alex Jones Corollary to Godwin’s Law, this was both a shocking yet curious comparison. Why Alex Jones, of all people? What about Alex Jones is of relevance to David’s role in the artist rights struggle? I am of the view that it carried with it an implied threat–Sprigman could get his buddies in Big Tech to deplatform David just like Alex Jones. Why? My guess is that it is because Sprigman apparently wants you to believe that David’s message was just as toxic to Twitter. (David was not even involved in the initial Sprigman exchange at all and tells me he had no idea it was even going on. He was on the road with Cracker and Camper Van Beethoven, you know, selling T-shirts like a good boy.)
The non denial denial
It All Starts with the Disney Fetish
Professor Sprigman has a long-term connection to Professor Lessig, beginning with a 2002 article “The Mouse the Ate the Public Domain” supporting Lessig’s losing argument in Eldred v. Ashcroft attacking the 1998 Copyright Term Extension Act. (“Most artists, if pressed, will admit that the true mother of invention in the arts is not necessity, but theft.” How very 1999.)
It will not be surprising to learn from the NYU alumni blog introducing Professor Sprigman that Lessig is his “mentor” (“Sprigman set a goal of writing an article within four months that he could take on the job market, if his mentor and the [Stanford Center for the Internet and Society]’s founder Lawrence Lessig deemed it satisfactory. The result was a paper that reintroduced the idea of formalities in copyright law. Its boldness won Lessig’s approval.”) Ah, yes. Fortune favors the “bold.”
A younger and perhaps bolder Sprigman held a 2003 fellowship at Stanford’s Center for the Internet and Society (founded by the very bold Lawrence Lessig III and later funded by the even bolder Google in 2006 with a $2 million gift). This academic fellowship evidently produced his 2004 article “(Re)Formalizing Copyright” boldly published by Stanford and, in a nutshell, advocating a requirement of copyright registration. (My view of this fascination that many of the Lessig crowd have with registrations is to create a giant loophole that would allow Big Tech to use “unregistered” copyrights (especially photographs) as they saw fit. Boldly, of course.)
As a quick aside, MTP readers will recall that the “address unknown” NOI debacle makes clear that even if works are registered and readily available through searchable databases that currently exist, Google, Amazon, Spotify and some others cannot be trusted to look for the sainted registrations. These companies appear not to have looked or not to have looked very hard before attesting that they had searched the Copyright Office records in their 70 million or so address unknown filings. Even allocating 5 minutes per copyright for search time, it would have taken over 350,000,000 minutes (or 5,833,333 man-hours, 243,055 man-days or 665 man-years. Roughly speaking. Feel me? Curiously, Apple never used the address unknown loophole. It is unlikely that a registration-based system (which the US abandoned decades ago) would produce the promised results but would produce a substantial burden on all copyright owners, especially independents–not to mention the productivity loss to the Copyright Office itself.
This registration loophole is also a core Lessig concept that he pushed during the orphan works bills of the 2006-2008 period (see “Little Orphan Artworks”. It is echoed in the Music Modernization Act with the requirements to register with the Mechanical Licensing Collective under Title I (at least if you want to be paid outside of the black box) and the registration requirements under Title II for pre-72 copyright owners imposed by Big Tech’s favorite senator, Ron Wyden. Note neither requirement requires a formal copyright registration so doesn’t go as far as Lessig, Samuelson and Sprigman, but it’s headed that direction.
Sprigman later was co-author with Lessig of the Creative Commons filing to “save” “Jewish cultural music” in 2005 orphan works consultation by Copyright Office.
In 2006, Professor Sprigman was lead counsel with Lessig on the losing side in Kahle v. Ashcroft (later v. Gonzales) which unsuccessfully challenged the elimination of the renewal requirement under the 1992 Copyright Renewal Act. He went on to write “The 99 Cent Question” in 2006 attacking iTunes pricing.
Association with Pamela Samuelson
Pamela Samuelson is another registration fan in the professoriate, so it was not unexpected that Samuelson and Sprigman would find each other. Among his other accomplishments, Professor Sprigman was a member of Pamela Samuelson’s “Copyright Principles” project and co-authored its paper that also advocated registration (see Sec. IIIA of paper, “Reinvigorating Copyright Registration”). (MTP readers will remember Samuelson and her husband the tech maven Robert Glushko from the Samuelson-Glushko IP units at various law schools in the US and Canada that consistently oppose artist rights. A critic might say that the Samuelson-Glushko academic institutes are like Silicon Valley’s version of Confucius Institutes.)
The Copyright Principles Project is especially relevant to Professor Sprigman’s outburst regarding David Lowery because of what I would characterize as the utter failure of Pamela Samuelson to make an impact when she testified before the House Judiciary Committee’s IP subcommittee in 2013. This missed opportunity was, I think, largely due to Lowery’s takedown of the “Project” that appeared in Politico hours before she testified which Chairman Goodlatte asked to be entered into the record of the hearing where it sits to this day.
It’s worth noting that there were no creator members of the Copyright Principles Project, and Samuelson was questioned sharply about this by the IP subcommittee–it sounded like staff had been fed the “Case Study for Consensus Building” without being told that an important group had been omitted from the “consensus”. Her response was that she didn’t need any creator members on the Copyright Principles Project because she was herself an academic writer. I think it’s fair to say that while I didn’t see any of the Members laugh out loud, her response was viewed as rather weak sauce in light of Lowery’s post in Politico. That exchange appears to have led to Samuelson founding the “Authors Alliance” after the hearing evidently to shore up that shortcoming. Too late for the Copyright Principles Project, however.
All Hail the Pirate King
Like his mentor Lessig, Professor Sprigman also seems to have an interest in defending the alleged benefits of piracy and apparently is a leader of the “IP without IP” movement (and co-author of the piracy apologia, The Knockoff Economy: How Imitation Sparks Innovation.) (See also what we call the “pro-piracy” article “Let Them Eat Fake Cake: The Rational Weakness of China’s Anti-Counterfeiting Policy“. “[M]ost of that harm [of counterfeits and piracy], at present and for the foreseeable future, falls on foreign manufacturers”–this means you, songwriters.) He frequently writes on pro-piracy topics with Professor Kal Raustiala of the UCLA School of Law of all places.
It should come as no surprise then, that he represented Spotify in the Nashville cases. He was co-counsel on Spotify’s papers (with Jeffrey Ostrow from Simpson Thatcher) famously making the losing argument that, in short, lead to the conclusion that there is no mechanical royalty for streaming (after the usual Lessig-esque Rube Goldberg-like logic back flips). In Sprigman’s America, his Big Tech clients would not pay streaming mechanicals to songwriters at all, an issue that was emphatically put to rest in the Music Modernization Act. (In a curious case of simultaneous creation, Techdirt came to almost the identically flimsy argument.)
What Did We Ever Do to Him?
But before last week, Professor Sprigman most recently came onto the radar in his chairing of the American Law Institute’s Restatement of Copyright which many (including me) view as a political end-run around the legislative process. Register of Copyright Karyn Temple said the Restatement of Copyright “appears to create a pseudo-version of the Copyright Act” and would establish a contrarian view of copyright under the mantle of the august American Law Institute. It’s unclear to me who, if anyone, is financing the Restatement. (MTP readers will recall The American Law Institute’s Restatement Scandal: The Futility of False “Unity”.)
Aside from the fact that the normal world is not waiting for the Restatement of Copyright, it is hard to understand how a person with such overtly toxic attitudes toward uppity artists like Blake Morgan, David Lowery and David Poe should–or would even want to–participate in drafting the Restatement.
Unless they had a reason. Like providing a citable text holding that piracy is groovy, for example. Originalists come not here.
It’s not difficult to understand the creative community’s unease when taking a closer look at two of the projects leaders. The Restatement was originally the idea of Pamela Samuelson, a Professor of Law at UC Berkeley who is well known in the copyright academy as someone who has routinely advocated for a narrower scope of copyright protection. And while her knowledge and expertise in the field is unquestionable, her ability to take an objective approach to a project meant to influence important copyright law decisions is suspect.
While Professor Samuelson’s academic record reveals that she may not be the most suitable candidate to spearhead a restatement of copyright law, the project’s Reporters—those responsible for drafting the restatement—are led by Professor Chris Sprigman, whose work in academia and as a practicing attorney should undeniably disqualify him from this highly influential role.
Yet as of this writing, the American Law Institute still lists Professor Sprigman as the “reporter” of its Copyright Restatement project.
As one artist asked me of Sprigman, what drives him to be so consistently on the wrong side? What did we ever do to him?
(h/t to Fox of TO)
Guest Post by @poedavid: “Dance Like Nobody’s Paying?” Spotify isn’t
[We’re thrilled to welcome David Poe to MTP!]
by David Poe
Spotify’s disastrous “dance like nobody’s paying” ad campaign has now been demolished in the national press, garnering negative coverage in Newsweek, Billboard, NME, Hypebot, and more. Sometimes big corporations slip up and show us what they really think of us, and this was one of those times.
But what’s Spotify’s plan? Here, Variety’s Patrick McGuire suggests Spotify’s intent is to divide listeners and musicmakers:
Similar to the way many people bite into a cheeseburger with no consideration for the cow and farm of its origin, campaigns like Spotify’s widens the growing divide between listeners and creators. Audiences intellectually understand that music doesn’t magically materialize out of nothingness for the exclusive purpose of entertaining them, but as music continues its irreversible transition to all things digital, listeners are becoming less aware and interested in how artists create, record, produce, and share music. With a 2017 Nielsen Music report showing that, on average, Americans now spend over 32 hours a week listening to music, it’s clear that music is hugely important in the lives of listeners — just not in ways that provide meaningful visibility and support to musicians.
Ever heard that song “Put another nickel in / In the Nickelodeon”? It’s from 1950 (written by Stephen Weiss & Bernie Baum.)
Everyone loves streaming. But more than half a century later, most streaming services contend that a song isn’t worth a penny. I respectfully disagree.
Because a song isn’t really a song until someone listens to it, no musicmaker should be faulted for utilizing all available platforms. But streaming in 2019 forces music makers and fans into the middle of a moral hazard. Music enthusiasts should be able to listen to streaming music without having to compromise their scruples, or that of their favorite bands.
Despite the lack of transparency in the music industry, The Trichordist has managed to cobble together an annual Streaming Price Bible. It is the most credible summary I’ve found on what each streaming service pays, which may impact where Spotify listeners choose to put their dough-re-mi:
How Bad Is it for Music Makers?
You can easily see from the chart what each service pays for recordings. At about $0.003 per stream, Spotify pays little but has the greatest market share. At about $0.0002 per stream, Google/YouTube is even worse.
Very different companies. Their commonality: free music, which has made them rich from ad revenue and data scraping, but mostly from their stock price increasing at the expense of musicmakers.
Let’s put this in context. To earn a monthly US minimum wage, an artist on Spotify would need 380,000 streams by some estimates.
To make the same monthly salary as the average Spotify employee, a songwriter would need 288,000,000 streams.
Frozen Mechanicals
For reference, the statutory rate for a song on a CD or download is 9.1 cents — 4.1 cents more than ye olde Nickelodeon of the 1950s.
You might say that’s better than the old days—but it isn’t as good as it looks, because the song rate was frozen for 68 years before it began gradually increasing … only to be frozen again in 2009, where it will stay until 2022.
Clearly, streaming has all but replaced CDs and downloads, but without replacing revenue from songs to musicmakers.
Money is being made from streaming if you look at it on an industry-wide basis. But—due to the hyper efficient market share distribution of the “big pool” revenue share accounting instead of a user-centric model (or the “ethical pool,”) individual music makers are far worse off. More than ever, streaming revenue is not paid to music makers who don’t share in the big advances or Spotify stock.
You Can’t Compete With Free
The vast majority of Spotify users are in the “free tier”. By offering free access, Spotify artificially distorts the streaming market and disallows competition amongst streaming companies. As musicians have learned the hard way, you can’t compete with free.
Spotify likes to say it’s artist-friendly, a tool for music discovery.
Guilty of chronic copyright infringement, Spotify was founded by a former pirate. It’s a corporate ethos built on theft. The Music Modernization Act essentially gave Spotify a new safe harbor, but its tactics haven’t changed.
There’s additional shadiness here: allegations of gender discrimination and equal pay violation, expensive, state-subsidized offices, executive bonuses, corporate lobbyists, a dicey DPO and of course, the “fake artist” scandal.
Spotify’s ongoing lobbying campaign against artist rights continues despite the unanimous passage of the Music Modernization Act in Congress last year (and the jury is out on the MMA and Spotify’s safe harbor). Shocker—Spotify apparently reneged on agreements it made to accept the Copyright Royalty Board’s mandated increase in songwriter pay. Another bonehead move that was publicly rebuked by songwriters from Spotify’s “secret geniuses” charm offensive, including Nile Rodgers and Babyface.
Spotify was joined by Amazon, Google, and Pandora in “suing songwriters” to appeal the Copyright Royalty Board’s ruling that increased the paltry streaming mechanical rate, which Spotify lawyer Christopher Sprigman argued against in court.
Apple Music does not have a free tier and yet was the only major streaming service that did not challenge the new royalty (44% more, which means 0.004 instead of 0.003, which is still bullshit.)
This may be because Apple recognizes that music helped save its ass from financial ruin 20 years ago. Math is not my strong suit, but numbers indicate music (via the iPod, a now-obsolete door stop) generated nearly half of Apple’s accumulated wealth not to mention introducing a new audience to Apple’s other awesome products.
Or it could just be that Apple understands creators and may actually like us. There’s a thought. We were early adopters—Macs have been in every recording studio and creative department for decades.
Apple Music’s intent to increase artist pay to a penny per side is its best yet, but now long overdue. Which is a shame, because a trillion dollar market cap company could afford to redistribute some wealth. If Apple offered a fair alternative, most would run screaming from the competition.
The Generational Problem
There are many who are more expert than me, some quoted in this post. I’d rather be staring into space strumming guitar and writing a song than here discussing music and money.
But I’m concerned for the next generation of artists, especially the musical innovators. Here’s why:
There used to exist a sort of musical middle class. Artists in all mediums expected financial struggle but there was the possibility of making a living and even growing as an independent artist. That might include a record deal or selling CDs at a gig in order to make it to the next town.
Songwriters could get an album cut and get by or even do well if the album sold (Jody Gerson has a great explanation of this.) Musicians of quality could see a light at the end of the tunnel.
Streaming has “disrupted” all of that.
Light’s out.
Bands’ streaming access may—may—help build an audience that may somehow convince talent buyers to book gigs that route your tour, which is awesome. But sustaining a career is still cost-prohibitive for many.
Thus the Top 40 is full of the children of the affluent.
Not children of millionaires: Stevie. Dylan. John & Paul. Aretha.
Those of us who have been making music for awhile will remember the optimistic, 1990s-era “monetize the back end” argument: bands on the road can make up income lost to streaming by selling merch.
I tour, too. I wish the best to every band who does so.
But not every musician can travel … or got into music to sell a fuckin hat.
Another common sense rebuttal to “shut up and tour:” INCOME FROM LIVE SHOWS WAS NEVER MEANT TO REPLACE THAT OF MUSIC SALES — plus both have investment costs and overhead to produce.
Gas costs what gas costs.
Mics cost what mics cost.
Streaming doesn’t pay what music costs.
Sorry to yell. Just sick of this lie that to make up for streaming losses all recording artists, especially senior citizens, should tour forever. Or the assumption they are all rolling in dough! Tell that to the punk rock drummer, alto player, the cellist, the songwriter.
Note: It’s almost impossible to buy a new car or laptop that plays a CD. Low income streaming has effectively replaced higher income physical sales.
So if streaming is to be the primary method of music distribution — if not the only one — then pay artists fairly. Or it really will be lights out, if not for the huge artists who regularly celebrate stupidity then for the ones whose songs you want played at your funeral.
Without musicmakers, Spotify has nothing. When Spotify says “dance like nobody’s paying,” it’s because they don’t.
Given support from listeners and lawmakers, this era of economic injustice via streaming may one day be a footnote. Fans should not be paying for music they don’t listen to which is what has been happening and is a hallmark of streaming gentrification.
Now, listeners must demand fair pay for musicians they claim to love, whether it is higher streaming royalties or a user-centric royalty allocation—or both.
Another Bad Artist Relations Week for Spotify
Spotify released one of their groovy ad campaigns last week. This time celebrating their freebie subscription campaign.
You really do have to wonder where they find the people who come up with these things.
Blake Morgan, David Lowery and David Poe all laid into Spotify with their own tweets. Just like Lowery’s seminal “Letter to Emily” post, but much faster, social media began driving traditional media with the story.
Billboard, Newsweek, Variety and New Music Express all picked up the story in 24 hours, and many others are also picking up the story. I did a short post that Hypebot connecting the dots from the giveaway campaigns to user-centric royalties.
But the capper was the Godwin’s Law moment when Spotify’s lawyer and NYU professor Christopher Sprigman went after both Blake and David Lowery on Twitter for reasons that are frankly lost on me. Professor Sprigman had something of a bizarre moment when he compared Lowery to Alex Jones which culminated in this exchange (recall that Alex Jones was deplatformed):
It should not be lost on anyone that Professor Sprigman supported Professor Lessig’s losing argument in the Eldred v. Ashcroft case and apparently was co-counsel with Lessig in another losing argument in the Kahle v. Gonzales case. It also must be said that David Lowery and Melissa Ferrick’s class action against Sprigman client Spotify and Lowery’s case against Rhapsody were probably among the most consequential copyright cases (along with BMG v. Cox) in the last five years. Some would say that the Lowery cases set the table for the Music Modernization Act (and it should come as no surprise that David was asked to serve on one of the committees).
So while Professor Sprigman may find that Lowery “isn’t important”, there is a crucial difference between Professor Sprigman’s big copyright cases and David’s. Want to guess what it is?
Some are speculating that Sprigman is retaliating on Blake and David Lowery for their successful commentary on his client Spotify–but I’d want to see a lot more proof. Until then, you’d have to say Charlie has a point when he says that Sprigman is kind of an academic Bob Lefsetz.
And Spotify stumbles across the finish line of another bad media week of dissing artists. Whew. Thank God it’s Monday, right?
Happy Monday: The MTP SPOTify Chart
Happy Monday–here’s the Spotify chart update. Spotify is in its second downside breakout of the consensus trading range ($145-$132). Unless it retraces back over $132, it would appear that the next downside support level is $106 where the stock closed on 12/21/18 or thereabouts.
The company just had its second “death cross” in less than 6 months where the the 50 day moving average crosses the 100 day moving average to the downside.
It would appear that the $1 billion stock buyback that Spotify announced (because that’s a good thing to do with the investor’s money) hasn’t worked very well so far. But pay no attention to that man behind the curtain.
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