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Is YouTube The Lyor Show?

June 21, 2018 Comments off

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 its 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 algorithmic 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.

The Google Toilet Redux: Humor for the Value Compromised

October 26, 2017 Comments off

HITS shows us that YouTube is the perfect medium for messaging about….YouTube.

YouTube Will Drive Lyor Crazy

October 2, 2016 Comments off

…there was lunch in the larger, first floor cafeteria where, in the corner, on a small stage there was a man, playing a guitar, who looked like an aging singer-songwriter Mae’s parents listened to.

“Is that….?”

“It is,” Annie said, not breaking her stride.  “There’s someone every day.   Musicians, comedians, writers….We book them a year ahead.  We have to fight them off.”

The singer-songwriter was signing passionately…but the vast majority of the cafeteria was paying little to no attention.

“I can’t imagine the budget for that, ” Mae said.

“Oh god, we don’t pay them.”

The Circle, by Dave Eggers

Lyor Cohen is going to run YouTube Music.  My prediction is that in a year, he will not have been able to accomplish much of anything.  This is not because of Lyor who is one of the best we’ve had in the music business.  It’s because of the way Google operates and who is really in control.

First, remember that YouTube has made a point of telling us how unimportant music is to their business.  I’m so sure that was part of their pitch to Lyor–you’re not going to be doing anything that’s very important to us or contributes much to our bottom line.  So forget that fifth assistant and any revenue based bonus.  Because, you know…you’re just not that big a deal to us.

Oh, to have been a fly on the wall…

But seriously, like any large organization, Google has competing bureaucracies and therefore its wholly-owned subsidiary YouTube does as well.  (Google is now the largest media company in the world.)  YouTube’s organizational independence is additionally blurred because it is the #2 producer of revenue inside Google relative to search and advertising sales.  But not the music part, let’s get that straight now.

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You’re going to need a bigger boat.

There seems to be a three-legged stool of competing interests in dealing with YouTube which we can describe with generalized labels–the “engineers”, the “policy people” (essentially Fred Von Lohmann) who are mostly lobbyists and lawyers, and the “business people” starting with Robert Kyncl and now with Lyor.  It’s unclear who has the upper hand in this triumvirate, but it’s pretty clear that the business people do not control their destiny.

That leaves jump ball for control of YouTube’s deals between the engineers and the policy people who seem to compete with coming up with the solution that is the worst for anyone with a passing acquaintance with private property rights in general, and artist rights in particular.  My hunch is that this will drive Lyor nuts in short order.

YouTube’s ineffective negotiating power with Big Google is particularly confusing because YouTube is both a search engine and an advertising publisher.  (Let’s call the larger Google “Big Google”.)

We sometimes forget that YouTube is the largest video search engine in the world–but don’t let that go to your head because we all know how unimportant music is to YouTube.

What’s obvious is that the engineers and policy people do not understand a fundamental point about dealing with the creative community.  They are every bit as much of ambassadors to the creative community–the entire creative community, not just the YouTubers who essentially are entirely dependent on YouTube for their success.

Why it is that YouTube has such little clout internally is anyone’s guess.  My bet is that if YouTube didn’t have to check with a host of bureaucrats at Big Google, it would be much, much easier to do business with YouTube.  However, if past is prologue, I seriously doubt that Fred Von Lohmann is going to take any guff from Lyor.  Although I would buy tickets to watch.

To state the obvious, unlike the YouTube lottery winners, professional artists who are not dependent on YouTube are not dependent on YouTube.  If pushed, there very well may come a day that they move on.  En masse.  Given YouTube’s recent change in monetizing only “advertising friendly” content and asking for a cut of brand integrations–Google’s version of 360 deals–even the “YouTube stars” may also move on–and how Lyor will relate to these folks is anyone’s guess.  I think he could do pretty well with managing that artist relations problem, if the YT Stars will let him.  Whether that happens remains to be seen.

But the mass artist exit may happen sooner than you might think, despite YouTube’s monopoly on video search.  YouTube is currently taking a beating from artists and songwriters.  Note that the beating is administered to YouTube–not to the engineers and the policy people at Big Google.  Or not yet, anyway.  Most professional creators don’t know these bureaucrats exist.  Those bureaucrats at Big Google are largely faceless (with the exception of Fred Von Lohmann) and take no heat when YouTube gets roasted alive by key opinion makers in the music business (such as Irving Azoff).  Lyor will have something of a honeymoon period, but regardless he can’t make the “value gap” disappear.

 

So how could Lyor repair the problems with YouTube?  I think that it’s going to be a heavy lift, but it would start with Big Google telling their engineers and policy types to back off.    Then we’d at least have an idea of whether YouTube can ever be a good partner.  I suspect we could have at least much better relations with an independent YouTube.  Whether Lyor agrees with that or could make it happen if he does remains to be seen.

Google hasn’t experienced an angry artist taking a baseball bat to their royalty department yet despite the $0.49 royalty checks.  Someone with Lyor’s experience could definitely help out with that if it ever happens.

YouTube should try to shake off the control of their internal masters at Google.  Then at least we’d know who we are dealing with.  Right now it looks like Lyor is going to get a lot of blame simply because he has the name ID.

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