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Is YouTube The Lyor Show?

MIKE

Christof, let me ask you, why do you think that Truman has never come close to discovering the true nature of his world until now?

CHRISTOF

We accept the reality of the world with which we’re presented. It’s as simple as that.

from The Truman Show, written by Andrew Niccol

You’ll hear a lot of trash talk about Lyor Cohen, but credit where it’s due–he gave an interview that interested me about how he sees his role at YouTube.  I actually think he’s got some old school ideas that may be fundamentally sound, but are not connected to the Google reality.

I submit that his problem is that either he’s getting paid so much money he doesn’t need to be attached to reality or he doesn’t understand that Google does not give a rip about us.  Or maybe it’s a little of both.

Lyor’s main problem is that he either doesn’t understand or chooses to ignore Google’s exploitative business model.  MTP readers will recall a prescient 2008 book review of Nicholas Carr’s The Google Enigma (entitled “Google the Destroyer“), by antitrust scholar Jim DeLong that gives an elegant explanation of Google’s mindset:

Carr’s Google Enigma made a familiar business strategy point: companies that provide one component of a system love to commoditize the other components, the complements to their own products, because that leaves more of the value of the total stack available for the commoditizer….Carr noted that Google is unusual because of the large number of products and services that can be complements to the search function, including basic production of content and its distribution, along with anything else that can be used to gather eyeballs for advertising. Google’s incentives to reduce the costs of complements so as to harvest more eyeballs to view advertising are immense….This point is indeed true, and so is an additional point. In most circumstances, the commoditizer’s goal is restrained by knowledge that enough money must be left in the system to support the creation of the complements….

Google is in a different position. Its major complements already exist, and it need not worry in the short term about continuing the flow. For content, we have decades of music and movies that can be digitized and then distributed, with advertising attached. A wealth of other works await digitizing – [music,] books, maps, visual arts, and so on. If these run out, Google and other Internet companies have hit on the concept of user-generated content and social networks, in which the users are sold to each other, with yet more advertising attached.

So, on the whole, Google can continue to do well even if leaves providers of is complements gasping like fish on a beach.

And that was the truth in 2008 and its still true of Google ten years later because that’s their business model.  So when Irving Azoff says of Google that YouTube doesn’t pay artists and songwriters adequately–even the top songwriters in the world who are members of Irving’s Global Music Rights–that’s entirely consistent with the predatory business model Jim DeLong identified.

And when Lyor tries to flatter and deflect his way around Irving’s criticism, he’s missing the point entirely which is not surprising given that he works there.  But it doesn’t change the fact that Irving is right—Google is built on an exploitative business model that depends on using the DMCA safe harbor to undermine basic private property concepts and complete one of the biggest income transfers of all time to the great detriment of artists and songwriters.

MTP readers will also remember my 2007 post, The DMCA is Not an Alibi, now called “the value gap.”  That was the one that really started criticisms that I had a Google problem.  I can’t tell you the number of times that people have come up to me and confessed that they didn’t see what I was driving at until years after.  Not that it matters, but important years were lost when people in positions to marshal resources to combat them simply failed to do so.

Nothing has changed since Jim and I wrote those pieces and nothing will change until there are tectonic shifts in how Google is permitted to operate and the loopholes it relies on.  We’re thankful of the victory in Europe, but as one loophole closes in Europe, another opens in the US through the Music Modernization Act’s inexplicable and likely unconsitutional reachback safe harbor.

In a recent Billboard interview, Lyor said:

“Prior, [YouTube would] make a deal with the industry, go away for a few years and then come back. And that, to me, is where misunderstandings happen,” he explains. “It’s really hard to find an artist and break that artist — I mean, it’s almost impossible. So if Google and YouTube understand how difficult it is, maybe they could think about ways to improve that part of the business….”

How did you alleviate the disconnect between YouTube and the music industry?

Just going back to back with them. Demystifying our intent. Understanding how hard it is to break artists and to go to work on behalf of the creative community and the labels.

I think Lyor is essentially correct in his old school assessment of Google’s “new boss” problem, but he’s treating the wrong symptom.  It’s not that Google doesn’t understand anything, they understand just fine how hard we think it is to break an artist in the music business.  They just don’t care and to the extent they think about it at all, they think that we don’t understand because they think they “break” YouTube “stars” when those “stars” get corporate sponsorships.

And that is because their business model is based on manipulating loopholes and not on “breaking artists,” if “breaking artists” means establishing artists as able to have successful careers apart from YouTube.  And that dependency has become clearer in the years since Jim wrote his “flopping on the beach” post which makes Google’s commoditization even more insidious.

So while we’re happy that the Europeans have seen the light on the “value gap,” the DMCA is still not an alibi–unless the U.S. government continues to fail to address the underlying cause of the new Darwinian music business that is gradually asphyxiating artists and songwriters.

And while we can appreciate Lyor’s old school view of his role in the Google Nation, no one should be persuaded that his approach will change anything as long as one of the largest corporations in commercial history is allowed to weaponize the DMCA safe harbor.  The artists Lyor is focused on “helping” aren’t just flopping on any beach, they are flopping on Google’s beach, one way or another.

Songwriters Guild President Rick Carnes testifies on the Need for Copyright Small Claims Court

June 18, 2018 Comments off

Strangely overlooked in the hoorah about the mechanical licensing collective is the CASE Act that would finally establish a small claims court for copyright infringement.  If Big Tech is going to give themselves another safe harbor in MMA for the mechanical licenses they failed miserably to obtain, the least that the Congress can do is pass the CASE Act to establish some remedy for copyright infringement that is available to all copyright owners.

Rick Carnes gives an excellent explanation in his testimony.

Save the Date: “Music Publishing After the Music Modernization Act” at Texas Bar Entertainment Law Institute on November 9

June 15, 2018 Comments off

I’m pleased to let you know that veteran music publisher Richard Perna and I will be presenting “Music Publishing After the Music Modernization Act” on November 9 at the 29th Annual Entertainment Law Institute in Austin co-sponsored by the State Bar of Texas Entertainment & Sports Law Section.  You can get more information and register at this link.

If the bill fails by November 9, we will discuss why.

If the bill has become law by November 9 we will discuss:

–the future of voluntary licensing and payment of minimum guarantees after passing;

–how will local repertoire be represented in the U.S. collective;

–practical aspects of transferring all existing NOIs to the collective;

–operational deadlines for collective;

–the reachback safe harbor and valuations;

–hidden administration costs and who bears them (unfunded mandates of the federal government);

–the practical aspects of engaging with the new “mechanical licensing collective” for U.S. and international publishers;

–what kind of publishers and valuations are likely to be most affected by the law;

–what kind of publishers and valuations are likely to be unaffected by the law;

–how songwriters and publishers will collect monies owed to them;

–ethical implications of withdrawals from the black box by the collective’s board of directors;

–ethical implications for CPAs ordered by the government to seek benefits for digital services against their client’s interest.

 

 

Why Won’t Anyone Budget the MMA’s Mechanical Licensing Collective?

June 6, 2018 Comments off

There was an interesting exchange between Chairman Grassley and the CEO of the Digital Media Association regarding the costs of operating the Music Modernization Act’s mechanical licensing collective at the recent Senate hearing on the Music Modernization Act.  (See the video of the exchange here.)

MTP readers will recall that I have a bone to pick regarding the complete absence of a publicly disclosed budget or business plan for the mechanical licensing collective.  I find this particularly annoying because digital music services paying for creating the collective’s operations, data and (we have to assume) royalty accounting was a major sales pitch for supporting the MMA.

I thought for a while that it was simply impossible that the biggest corporations in commercial history (Amazon, Apple and Google) actually didn’t know how much money they were committing to pay (and were essentially committing other blanket license hopefuls yet unknown to pay) pay for the MLC with no idea at all about the operating costs they were signing up for–and essentially signing up everyone else for who wants a blanket license.  This just seems insane to me.

Chairman Grassley evidently thought this lack of a budget was worth a couple questions as well.  Here’s the Chairman’s exchange with the DiMA CEO:

CHAIRMAN GRASSLEY:

Mr. Harrison, I have [two] questions about the mechanical licensing collective….Can you tell us what are the Digital Media Association’s estimate of the expecting cost of the new collective? Are members concerned that they’ll be responsible for excessive and unreasonable costs or does the bill prevent that from happening? And then the second question, do you believe that the oversight and accountability requirements in the bill are adequate, or do you think they can be improved? 

MR. HARRISON:

So, Senator, it’s difficult to know what the cost of operating collective will be. We saw estimates come out of the CBO when reviewing the House [version of the MMA] legislation that said the number was somewhere in the — between $20 and $30 million a year.

So let’s unpack this unsatisfying answer to the Chairman’s common sense question.  First, why is it “difficult to know”?  We know that the failed Global Rights Database cost approximately $70 million and they never processed a payment.  I know what it cost to build the SNOCAP database and tools.

Does anyone really believe that Amazon, Apple and Google can’t apply their collective brainpower to estimating the startup costs of the MLC…because “it’s difficult to know”?  Really?  Is that how it works back at the Googleplex, in Seattle or Cupertino?  Can’t come up with a budget for that moonshot project because “it’s difficult to know”?

Sorry.  Ain’t buying that.

And then notice the deflection–it’s not that DiMA or its members could estimate the costs–no, no.  The Congressional Budget Office came up with an estimate–which by the way was not $20 to $30 million.  Which is it?  20 or 30?  $30 million is 50% more than $20 million.  Is that what they tell the Apple shareholders back in Cupertino?  Too difficult to know, put it down as $20 million.  Or $30 million.  Or something in that range.

And why are we relying on the Congressional Budget Office?  All they did was guess–here’s what they actually said:

H.R. 5447 would authorize the MLC to spend amounts collected under the administrative assessment levied by the Copyright Royalty Judges, without further appropriation, to cover the MLC’s costs. Such expenditures would be considered direct spending. For this estimate, CBO expects that the Copyright Royalty Judges would estimate the operating costs of the MLC accurately and set an assessment rate to equal those costs each year. Using information from industry experts and the administrative costs to operate entities that engage in similar activities, CBO estimates that expenditures by the MLC would average $30 million annually and would total $227 million over the 2021-2028 period.

All the CBO did was ask “industry experts”–who might they be?  Perhaps DiMA members?  But why would the DiMA CEO deflect Chairman Grassley’s question and give a non-responsive answer?  The Chairman didn’t ask what the CBO’s estimate was, he very clearly asked “[W]hat are the Digital Media Association’s estimate of the expecting cost of the new collective?”

I think the Chairman deserves a direct answer to a direct question.  “We didn’t try to find out” or “We intend to negotiate that number into the ground and take all available appeals to all possible forums before we pay a nickel” are both perfectly acceptable answers and are probably pretty close to the real truth.

FDR’s D-Day Prayer

June 6, 2018 Comments off

Then I heard the voice of the Lord saying, “Whom shall I send? And who will go for us?”
And I said, “Here am I. Send me!”
(Isaiah 6:8)

Ron Wyden’s Oregon Updates the Business Plan: Sell Electricity to Data Centers

June 3, 2018 1 comment

Here’s a blast from the past–five years ago Senator Wyden was already demonstrating his fealty to Google, Amazon, Facebook and Rackspace–all members of the Internet Association.

Music Technology Policy

In case you were wondering what the deal is with Palo Alto High School alumnus and Oregon Senator Ron Wyden’s interest in Big Tech, maybe it’s this: Amazon, Rackspace, Facebook and of course Google, all have built massive data centers in Oregon that suck down Oregon’s hydroelectric power.

Yes, according to The Oregonian:

Data centers have become one of Oregon’s biggest industries, with Google, Apple, Facebook and Amazon spending billions of dollars to buy and equip online storage facilities in rural parts of the state. They’re lured primarily by tax savings, which can shave tens of millions of dollars from a server farm’s annual operating cost.

Good thing these Gang of Four members are all supporting the local tax base.  Oopsie!  Wrong!

View original post 591 more words

@TerrenceHart: Does the ACCESS to Recordings Act violate the Constitution’s Takings Clause? — Artist Rights Watch

May 31, 2018 Comments off

“I do believe that the intellectual property that you create is just that.  It’s property and you ought to be protected in the property that you create and that we all enjoy.”

Senator John Cornyn, U.S. Senate Committee on the Judiciary, May 15, 2018.

Unlike the CLASSICS Act and the approach recommended by the Copyright Office, the ACCESS to Recordings Act falls far short of Constitutional requirements and would likely open the federal government up to liability for takings claims.

via @TerrenceHart: Does the ACCESS to Recordings Act violate the Constitution’s Takings Clause? — Artist Rights Watch

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