If $500 million is “nonmaterial” then why does royalty deadbeat Facebook refuse to pay artists and songwriters?
MTP readers may have seen that Facebook’s Oculus virtual reality division lost a copyright infringement case in a $500,000,000 jury verdict for a variety of claims. While that seems like a lot of money to me, the verdict was far short of what was at stake. What is interesting about the case for our purposes was not the details (covered by the Hollywood Reporter and a bunch of other outlets if you want to read up on it).
What is interesting is how Facebook reacted to having to pay $500,000,000 for rights. Particularly since Facebook currently pays zero for music.
According to the Hollywood Reporter:
Facebook COO Sheryl Sandberg on Wednesday told CNBC, “The verdict is non-material to our business.”
A $500,000,000 rights payment is “non-material to our business.” This really is how the other half lives. Without going down the rabbit hole on materiality (see the SEC statement on materiality in financial statements here), let us take Ms. Sandberg’s rather breathtaking statement as true, or at least truthy.
What Ms. Sandberg suggests to me is that any rights payment that Facebook might make for songwriters and artists is also likely to me “non-material” to their business, even if that payment were hundreds of millions annually on an industry-wide basis.
It also makes you wonder why a public company for whom a $500,000,000 copyright infringement verdict is “non-material” prefer to be unlicensed royalty deadbeats rather than pay their fair share? People who have enriched themselves in the public markets that protect their property rights in securities transactions just as the law protects intellectual property–as demonstrated by the Oculus verdict.
Who are these people?
Americans are freedom loving people and nothing says freedom like getting away with it.
From Long, Long Time by Guy Forsyth
Facebook is unlicensed. Let’s be clear about that. We all know that Facebook profits from music, and some of us know that Facebook not only profits in a general sense from having music on their platform, but they actually sell the artist’s name.
Here’s the evidence from a screen capture of the Facebook “Boost” interface that sells you the names of a seemingly endless number of artists through the “Edit Audience” button:
According to the blame deflectors at Complete Music Update, Facebook is developing its own version of YouTube’s highly porous ContentID file identification tool:
[I]f Facebook is going to rely on those safe harbours…it needs a decent takedown system that allows content creators to control their videos as third parties upload them. The social network has been developing this for a while now, and yesterday formally unveiled Rights Manager, which is basically its version of YouTube’s rights management set-up Content ID.
So there it is–Facebook is joining the “DMCA license” crowd–meaning that by relying on the hopelessly out of date “notice and shakedown” provisions of the U.S. and European copyright law, they help themselves to free “content”. All the while selling advertising keywords of the names of artists who they don’t pay.
Because that’s the tricky bit–Facebook is 100% unlicensed.
The important bit that is currently missing, however, is the monetisation option that is core to Content ID – ie, if someone uploads your video and has a decent following that might watch it, as a rights owner you can let the video stay but take a cut of any ad revenue subsequent streams generate. Which means Facebook is basically ensuring itself safe harbour protection here – safe harbour law rewrites permitting – while not actually offering a new revenue stream to rights owners in return.
Let’s not perpetuate a myth that CMU perpetuates in this post–that taking a rev share actually means anything if it is coupled with the cost of monitoring Facebook’s billion-plus users 24/7. Right now, Facebook can use its DMCA license coupled with its market power to depress the desire of the few rights owners who can afford it to send takedown notices in the first place.
That means anyone who doesn’t accept the shakedown is immediately losing money. And it still doesn’t explain why Facebook should be able to sell artists names as keywords, which is misappropriation and a violation of moral rights. Neither of which are protected by the safe harbor.
Here’s another myth about ContentID–it doesn’t work very well, can be defeated by pitch bending (which is why YouTube has speed controls on their player) and is only available to the elite. Compared to the massive volume of videos uploaded to YouTube, a very, very small percentage of copyright owners have direct access to Content ID. According to YouTube:
YouTube only grants Content ID to copyright owners who meet specific criteria. To be approved, they must own exclusive rights to a substantial body of original material that is frequently uploaded by the YouTube user community.
So if this is how Facebook is going to roll, that will be yet another disaster.
From the songwriter perspective, if there are settlements to be done or class actions to be brought against unlicensed uses of music, Facebook has to be on the list. It’s really just the Wild West over there, if the Wild Bill Hickok lived in a Harvard dorm room.
If we can’t get paid fairly by the so-called “legitimate” companies, then how are they different than Megavideo?
The truth is that Facebook is simply using its vast market power to get away with it.
And that’s also known as…well, something you’d normally like some affection while experiencing.
So, Mark Zuckerberg, give us a kiss then.