@TaylorSwift13 Thinks Outside the Stream to Bridge the Value Gap

November 25, 2017 Comments off

There are several myths about streaming, but none so prevalent as the “savior” trope, which streaming services are doing their best to splice into the DNA of the music business.  Without streaming, we are told, then piracy: “Streaming stops piracy”.  Piracy, of course, is a constant, and is factored into sales these days as a limiting factor.  Also factored in is the cost of the faux legality of piracy on DMCA-protected services which also must be managed in order for windowing to work.

Streaming is now baked into the charts, which is the first step to becoming a self-fulfilling prophecy: “Streaming is radio”.  Artists must stream or be lost:  “Windowing punishes fans” (just like selling albums “punishes” fans).

All these myths ignore the basic proposition that windowing, exclusives and other contract based rights are simply ways to divide up our property rights–no more, no less.  And contracts take two to tango–if the deal is bad, no one will take it which undermines the myth.  And like all myths that fall apart when reality diverges from dogma, the curia fights back.

Given Spotify’s monopoly, or certainly dominant, position in their streaming market, it should not surprise that they push all of these myths, and they seem to do it like clockwork whenever Taylor Swift releases a new album.  Why?  Because Taylor Swift has four–count ’em–four albums that sold over one million copies in their first week of US release.  And–she’s the only artist ever to have done so.  And–she windowed every one of them, pre and post Spotify’s US launch.

Title Year Sales
Reputation 2017 1,290,000
1989 2014 1,287,000
Red 2012 1,208,000
Speak Now 2010 1,046,000

Let’s be clear–any distributor getting a Taylor Swift record in the fourth quarter sure makes up for a multitude of commercial sins in their year.  At least that’s true of profit-making companies whose executives actually have consequences for commercial sins.  Loss-making companies, on the other hand, are not motivated by pesky things like profits if they are on the “get big fast and exit” track.  You may say, oh, that’s so 1999, surely they have learned their lessons from the Dot Bomb debacle.

Nah.

The exit is still the thing for these venture backed tech companies.  The problem with exits is that the people who are only in it for the money move on to self-driving cars, climate default swaps, bitcoin or whatever.  People who are in it because they love it are stuck with the consequences.  The music business will be picking up the pieces from the streaming exit for decades because of a simple logic:  You cannot take away something that sold at a $10 price point and replace it with something that “sells” at a $0.005 price point and expect to have a business.  Remember–the trendline since 2008 is predominantly flat so while streaming may be a bigger piece of the pie, the pie itself is not growing much.  That’s cannibalization.  We’ll see how much that trend changes this year–and how much of that change is Taylor Swift.

Recorded Music 1973-2016

Source: RIAA

It must be said that there’s a real question of how many Taylor Swifts the business will sustain going forward if we don’t listen to the lesson she is teaching for those who care to pay attention and think outside the stream.

Remember that salted in the 1,290,000 units that reputation sold in week 1 are quite a few units that were sold as a fan package on an exclusive–there’s that word again–at a higher price point than the general release CD.  That should mean that the gross revenue to the distributor conservatively averages around $8 after discounts or something like $10 million in distributor gross for the week (in the US alone).

Producing that amount of streaming revenue would require approximately 2,000,000,000 streams in a week depending on whose average streaming royalty you buy into.  “Call It What You Want”, Taylor’s first single from reputation, entered HITS song revenue chart at #4 with 9,259,698 streams earning $66,186 (a chart with revenue metrics I have a quibble with due to averaging of free/sub streaming revenue, but that’s another subject).

Regardless of the underlying math, you can see that there is no way that streaming is going to put much of a dent in the revenue from the physical release.  If you are in a future oriented profit making business and not an exit oriented loss making business, you like those numbers.  Why?

Because it tells you that you could probably keep doing this for a while.  That’s called a career, and it’s what managers were supposed to foster.

How was this received at the dominant streaming platform?  Spotify hired the former Lady Gaga manager, Troy Carter, as its “global head of creative services” reporting to one Stefan Blom.  (Mr. Blom was formerly chairman at EMI Nordic, but songwriters will recognize Mr. Blom as the Spotify executive who can’t seem to find millions of songwriters despite Spotify’s vast technical abilities and signs Spotify’s “address unknown NOI” filings with the Copyright Office denying royalties to millions of songs.)

Mr. Carter did not take well to Taylor Swift’s decision to hold the reputation album off of Spotify (notwithstanding reports of Spotify’s recent agreement to accept windowing as a condition of closing its Universal license).  Variety reports:

Taylor Swift’s decision to keep her new album “Reputation” off streaming services like Spotify will drive people back to piracy, said Spotify’s global head of creator services Troy Carter at the Internet Association’s Virtuous Circle Summit Monday morning. [The Internet Association is antagonistic to artists as a general proposition.]  “A lot of it is going to be pirated,” he said. “It kind of sets the industry back a little bit.”

However, Carter also said that he understood Swift’s decision: “Taylor is super smart. We are not mad at her for the decision she made,” he said. Swift and Adele, who sold millions of copies of her “25” album while waiting seven months to release it to streaming services, are among the few artists who can withhold an album from such platforms without significantly impairing its exposure.  [Emphasis mine–note the “among the few” rationalization of the “streaming is inevitable” narrative.  If you shame everyone away from windowing, how will you ever know that it’s a “few”?]

Carter, who managed artists including Lady Gaga and Meghan Trainor before joining Spotify in 2016, was also critical about the music industry’s past business model. “We screwed over consumers for years,” he said, arguing that consumers were forced to buy highly priced albums for years that only included one or two songs they wanted. Carter drew a direct line from this attitude to exclusives on streaming services.

So we have Mr. Carter trotting out several myths at once here–although it must be said that Mr. Carter’s former employer from 2007-2013 is herself not without experience in the rarified air of the First Week Million Club–Lady Gaga herself has one record in that group with her 2011 release, Born This Way.  Of course, with its May 23, 2011 release, Lady Gaga did not have to address the Spotify new release windowing issue as the service had not yet launched in the US at that time.

Even though Mr. Carter was clearly wide of the mark with his advice to Taylor Swift, his messaging was a vast improvement over Daniel Ek’s mansplaining to Taylor on 1989 which was one of the more bizarre public encounters between an artist and a retailer in history.  Can you imagine Tower Records chief Ross Solomon saying any of these things in public?

I still hold the view that the windowing issue changes depending on whether the artist concerned has a fan base that wants their physical record.  If they do, then streaming services become like record clubs.  Nobody ever wanted the clubs to get their record until they’d had at least a 90 day holdback, more frequently 6 months or even a year.  So it is with streaming services, including Spotify.

The bigger questions are what effect windowing has on the ability to sell physical at all.  I’m still waiting to see the consumer research suggesting one drives the other, and based on industry revenues over time, it seems far more likely that streaming cannibalizes physical.  Another question is how much elasticity is there in the subscription price?  If we are expected to welcome low margin streaming as a replacement for higher margin physical and downloads, please don’t tell me that the answer is we’ll make it up on volume, t-shirts or touring.

For now, we have to acknowledge that for artists who anticipate large sales of physical and permanent downloads, singles-only streaming releases combined with physical sales is probably the principal way their distributor can afford to breach the value gap and send enough DMCA notices to keep the album off of YouTube.

 

 

 

The UnitedMasters, the Latest Tone-deaf Artist Exploitation Scam from Silicon Valley

November 24, 2017 2 comments

Yes, they really did brand it the “United Masters”, and no, that’s not a subplot out of Game of Thrones and no, it’s not the MIC Coalition price fixing cartel.

You may have heard about the United Masters, the label services company that Google along with the Silicon Valley VC Andreessen-Horowitz is backing.  “United Masters” which is designed to “upend record companies,” or so the story goes.

The launch was covered extensively in TechCrunch and I confess I stopped reading after this:

UnitedMasters is ready to give musicians an alternative to exploitative record label deals. Artists pay UnitedMasters a competitive rate to distribute their music across the internet from Spotify to YouTube to SoundCloud, and they [meaning the United Masters and the artists] split the royalties while the artist retains the rights to the master recordings.

Ah yes.  The artists take all the risk and on top of that payment they split royalties with the “United Masters”.  Sounds like those notoriously fair venture capital deals, right?  They just left out the warrant coverage and 3x liquidation preference.

Tunecore pioneered shifting 100% of the distribution risk from the distributor to the artist by requiring an upfront payment from their distributed artists.  Tunecore did not have the additional brass to take an additional revenue share from the artist’s earnings on top of what the United Masters call a “competitive rate”.

The narrative was something like why should you share your future earnings with your distributor when you can pay Tunecore upfront?  And, in fairness, cap your distribution fees.  That deal works out better for artists who sell enough to drive that upfront payment below 20% or less of their earnings (usually artists who sell enough to make a tidy profit but not enough to justify an advance from a distributor).  However, for artists who don’t sell that much, it drives the distribution fee well over 20% of earnings and, I would imagine, in some cases 100% of earnings.

But even so, the fee-based distribution model didn’t ALSO take a percentage of revenue which is evidently the plan with the UnitedMasters.  Even though we don’t know exactly what the United Masters terms are yet, we can still find the deal structure nauseating.

Good news:  VC Horowitz brought in a tech team to the UnitedMasters party!  Yay!  Because, you know–it’s all about the data, right?

[W]e recruited a phenomenal technology team with members from distinguished companies such as Facebook, Dropbox, and Pandora. I think that the UnitedMasters engineering team is one of the best in the technology industry, but you can judge for yourself.

This from the VC firm that invested in Rap Genius, or as Marc Andreesson, the partner of Mr. Horowitz reportedly called Rap Genius, the “Talmud of the Internet.”  So these are people who have a very positive view of themselves and who have the answers for how to run the music business.

So naturally, such people would reach out to royalty deadbeats Facebook and Dropbox and Pandora, who most songwriters know as their alter ego–“Plaintiff”.  Pandora who screwed the legends of R&B out of performance royalties in their other alter ego–“Defendant”.

Now imagine this phone call–your band reaches out to a talent buyer in a town you’ve never been to before and you tell that buyer that they should give your band a Friday night because—the United Masters have divined from the data that you’d draw.

Right.

There’s a reason why Amazon is getting out of the ticketing business.

As usual, Google misses the point entirely.  Robert Levine observes in Billboard that the main thing that record companies do that the UnitedMasters evidently will not do is actually write a check to invest in artists:

So far, startups haven’t really replaced record labels because none of them really do what labels do. Almost two decades ago, Napster said that it would replace labels by distributing music, but labels aren’t exactly in the distribution business — truck drivers are. (No one gets invited to cool parties by disrupting long-haul trucking.) Several startups help artists market directly to fans, which is becoming an important part of the music business, but labels never really did that — they’ve always sold music to retailers. From a business perspective, labels invest in artists — which very few technology companies have shown any interest in doing. Because it’s a risky business.

And that’s what labels really do for artists — they amortize risk.

And while you think about that, have a listen to the incomparable Marc Ribot and Ceramic Dog performing his ode to the data lords, “Masters of the Internet”.  I don’t think that was quite the meaning of “masters” that the tone deaf “United Masters” and the data lords intended.

@musictechpolicy: Facebook’s Music Licenses: What’s Not to Like?

November 21, 2017 Comments off

Facebook pays no royalties for the music that gives significant value to the platform. That’s often a surprising proposition for artists and songwriters, much less the general public.

Yet it is true—hitmakers and new artists, pros and amateurs alike do not get a penny from Facebook and the company doesn’t even attempt to license their work. Why should a multibillion dollar multinational corporation that anchors a large piece of the Internet economy and whose founder is planning on running for President of the United States get to pay music makers in exposure bucks?

The answer is that Facebook, like YouTube and many other user-generated content platforms hide behind the legacy DMCA “safe harbor” and its nonnegotiable, unconscionable, adhesion contract that controls the use of its platform.

Rumor has it that Facebook is evidently coming to the table and is in at least semi-active negotiations with at least some labels and publishers.

One may well ask what took so long—but if it were not for Universal Music Group’s pursuit of Facebook’s infringements through DMCA notices, it’s likely that Facebook would be blithely rolling on its monopolist juggernaut.

On the other hand, this is actually a good time to be negotiating these deals give the Congressional scrutiny of Facebook’s involvement in the 2016 Presidential election campaigns. We have the benefit of public statements by Facebook representatives under oath regarding what they can do and what they so far refuse to do which may come in handy in licensing negotiations.

These negotiations with rights owners may result in what will seem like a very big pop of up-front cash—but is it? And whatever the number, how will that money be distributed to the artists and songwriters that make it happen?

The Fallacy of the True Ad Hominum

November 19, 2017 Comments off

It bears repeating that a statement capable of truth value cannot be fallacious.  All too frequently truthful statements about a person are defended by resort to the ad hominem fallacy.  The ad hominem fallacy is intended to defend against a string of qualitative statements, e.g., “he’s so evil you can’t believe anything he says” or the “so-called representative.”

However, calling out failing to disclose or purposely hiding a conflict of interest as astroturf, or otherwise pointing to specific facts that are capable of truth value is not an ad hominem in the normal sense of the term.

For example, when Judge Alsup demanded that Oracle and Google disclose any bloggers it had paid to write about the Oracle v. Google case, Judge Alsup was not engaging in an ad hominem attack on either party.  Rather, he was requiring the litigants to disclose to the Court (and consequently to each other and to the public) what they had or had not done in a desire to shape the outcome of the case.

If you were to take Google’s version of that list (sometimes referred to on MTP as the “Google Shill List”) and say about someone listed on it “that person shills for Google, you can’t believe anything they say”, that would be an ad hominem attack.  If, however, you were to say, “That person is on the Google Shill List” with a link to the court document, I would argue that is a factually correct statement and not ad hominem.  And if you were to say, “That person is on the Google Shill List, therefore be careful about believing what they say as they may be shilling for Google again,” that would also be a factually correct statement and is not an ad hominem attack.  You could substitute “Google Shill List” with “Google’s Response to Order to Supplement” and vice versa, but that is just editorial discretion and a link to the actual document allows the reader to see that document.

While it may make the person or organization about which it said uncomfortable, statements capable of truth value are qualitatively different than the “He is evil so don’t believe him”.

Likewise the sequential antidote fallacy.  Continuing the Google Shill List example, when an organization on the Google Shill List takes a dozen unequivocal and irrevocable actions (such as filing amicus briefs in favor of Google or Google’s positions in court under oath) and then takes one or two actions against Google’s interest, the one or two actions should not be trotted out as disproving or as an antidote for the dozen other actions for which the organization was paid.

Watch Out Toronto, Robocop is coming to Googleville

November 17, 2017 Comments off
prime_directives_2

We started talking about all of these things that we could do if someone would just give us a city and put us in charge

You may have read that Google is building its own city inside Metro Toronto.  As reported by the New York Times:

Google’s founders have long fantasized about what would happen if the company could shape the real world as much as it has life on the internet.

“Years ago, we were sitting there thinking, Wouldn’t it be nice if you could take technical things that we know and apply them to cities?” Eric Schmidt, the executive chairman of Alphabet (now Google’s parent company), said Tuesday. “And our founders got really excited about this. We started talking about all of these things that we could do if someone would just give us a city and put us in charge.”

That is, of course, an outlandish idea. “For all sorts of good reasons, by the way, it doesn’t work that way,” Mr. Schmidt acknowledged. But there he was standing Tuesday before an array of Canadian flags, in front of Prime Minister Justin Trudeau and Ontario officials, to announce the closest thing anyone has seen to a tech company that takes the reins in a major city.

Toronto has about 800 acres of waterfront property awaiting redevelopment, a huge and prime stretch of land that amounts to one of the best opportunities in North America to rethink at scale how housing, streets and infrastructure are built. On Tuesday the government and the group overseeing the land announced that they were partnering with an Alphabet subsidiary, Sidewalk Labs, to develop the site.

They want it to embody the city of the future, a technological test bed for other communities around the world, “the world’s first neighborhood built from the internet up.”

So whether you call it Trudeauville or Googleville, not since the Treaty of Westphalia has a private company more powerful than the British East India Company had quite such a choice opportunity.  (And no, they won’t call it the “Goolag”.)  Google gets a chance to fulfill the dream of every hacker since Peter Lamborn Wilson wrote Temporary Autonomous Zones, Bruce Sterling on pirate utopias, Napster thought of locating its servers on Sealand, or White House aide Susan Crawford sighed about how she aspired to “geek around the nation state.

Yes, Google gets its own city.  And who do you think will enforce the Laws of Google?  Why robot cops, of course.  Cops like Officer Atlas, from Google’s own Boston Dynamics subsidiary.

And of course, Officer Handle for those pesky foot chases:

Google Meltdown Continues With Missouri Attorney General’s Consumer Protection Subpoenas

November 15, 2017 Comments off

One of Google’s worst policy nightmares is that state attorneys general will wake up to their obligation under state laws to protect both consumers and advertisers from Google’s overreach.  This would potentially force Google to answer for its actions in 51 jurisdictions–some state laws that are essentially common to all 50 states plus the federal government.  These state laws include consumer protection statutes and unfair competition or state antitrust rules that are not overriden (or “preempted”) by simultaneous federal jurisdiction.

In case you missed it, this kind of action is unlikely to happen in the typical states where that you would expect to see on the side of the little guy–California and New York, for example–due to Google’s outsized lobbying footprint.  And of course Google famously got a free pass from the federal government during the Obama Administration where it enjoyed extraordinary access, reminiscent of Standard Oil, United Fruit and ITT.

Google White House Meetings

However–it looks like the chickens are coming home to roost, at least in Missouri.  According to the Kansas City Star:

Missouri Attorney General Josh Hawley’s office on Monday issued a subpoena to Google as part of an investigation into whether the tech giant is violating Missouri’s consumer protection and anti-trust laws.

The investigation delves into Google’s collection of data on users and whether Google, the world’s most popular search engine, has manipulated search results at the expense of competitors, according to a release from Hawley’s office.

“When a company has access to as much consumer information as Google does, it’s my duty to ensure they are using it appropriately,” said Hawley, a Republican who is mounting a campaign for U.S. Senate. “I will not let Missouri consumers and businesses be exploited by industry giants”…

Hawley’s investigation also will look at whether Google has misappropriated content from competitors. Yelp wrote a letter to the Federal Trade Commission in September contending that Google has violated a 2012 settlement by allegedly scraping photos from Yelp reviews for its own search results.

Although the Missouri AG seems focused on the privacy aspects of consumer protection, it is also possible that consumer protection statutes may protect advertisers against Google’s sale of advertising against ISIS recruitment videos or sites selling illegal drugs or pirated content.  (Remember that Google paid a $500,000,000 fine under a 2011 non prosecution agreement–even though the then-U.S. Attorney General apologized to the company for the prosecution.)

As General Hawley noted in his press release:

On the state level, Attorney General Hawley is leading the way, holding tech companies such as Google accountable for their actions. However, this is not the first-time Google’s business practices have come into question. In June, the European Union issued Google a record $2.7 billion antitrust fine. Then, in July, the Electronic Privacy Information Center filed a complaint with the Federal Trade Commission regarding a Google program that tracks consumer behavior.

He’s right about that.  In fact, Google’s many, many collisions with the law were recently cited in the first civil RICO complaint filed against the company, an avenue that may also be open to Missourians.

How will Google react?  We should all remember the full-court press that Google and the Shills put on Mississippi Attorney General Jim Hood who also served a subpoena on Google for comparable issues that could have led to a violation of Mississippi’s consumer protection statutes.  In that case, Google heavily leveraged support Hood allegedly received from lobbyists that was disclosed in the “North Korea hack” of Sony Pictures–which resulted in disclosure of many thousands of emails from Sony by Wikileaks (but, if memory serves, fewer than five to or from Sony and Google).

hood2

Google sued Hood to avoid responding to the subpoena, a case that attracted an amicus brief signed by forty–count ’em–state attorneys general supporting an attorney general’s duty to protect their citizens.  Although Google was able to dodge General Hood, it was only a matter of time before another AG took on the Leviathan of Mountain View.

Even so, General Hawley needs to buckle his chin strap.

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That’s miss-iss-ippi…

President Obama’s Farewell Address on Social Media’s Threat to Democracy — Artist Rights Watch

November 13, 2017 Comments off

The good thing about Facebook is that it brings people together in new communities. The bad thing about Facebook is that some of those people previously only met on Death Row. And as Sartre said, hell is other people.

via President Obama’s Farewell Address on Social Media’s Threat to Democracy — Artist Rights Watch

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