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MusicTechPolicy Monthly Newsletter is out! Subscribe here!

November 11, 2017 Leave a comment

The latest email only MusicTechPolicy Monthly newsletter is out!  Sign up by subscribing to this blog.  This month we focus on Spotify board member Sean Parker’s revelations about how the social platforms like Facebook, YouTube, Twitter, Instagram are all consciously based on addiction modalities.  Parker’s revelations are confirmed by Dr. Adam Alter’s shocking book “Irresistible: The Rise of Addictive Technology and the Business of Keeping Us Hooked

Wyden Tobacco

Chris argues that this is national crisis worthy of a Congressional hearing like the tobacco industry’s cultivated addictive powers conducted by consumer hero Senator Ron Wyden. Senator Wyden conducted one of the most famous hearings in history when he asked the CEOs of the tobacco companies to state whether nicotine was addictive.

We also take a look at the tragic humor of Sen. Al Franken’s examination of Facebook, Twitter and Google regarding their inexplicable participation in the 2016 U.S. Presidential election.

Holding the Line on Tradeoffs for Statutory Damages

October 1, 2017 1 comment

It is very likely that we will hear about a move to make significant amendments to the Copyright Act at some point before the beginning of campaign season in 2018.  There are a high number of copyright-related bills that have been introduced in the House of Representatives in the current session, so brace yourself for an “omnibus” copyright bill that would try to cobble them all together Frankenstein-style.

A Frankenstein omnibus bill would be a very bad idea in my view and will inevitably lead to horse trading of fake issues against a false deadline.  Omnibus bills are a bad idea for songwriters and artists, particularly independent songwriters and artists, because omnibus bills tend to bring together Corporate America in attack formation.

MIC Coaltion

The MIC Coalition

When you consider that Google and Facebook are part of Corporate America (not to mention Apple), the odds of the independent songwriter and artist, but really any songwriter and artist, just holding onto the few crumbs they currently have crash and burn.  The odds of actually righting wrongs or–God forbid–getting rid of the legacy consent decrees that protect Big Business vanish into the limit.

Of course, what certain elements of Big Tech would really like to do is push all licensing of music into one organization that they could then control through consent decrees or other government regulation and supervision by exercise of the massive lobbying and litigation muscle of the MIC Coalition and DIMA.  While I realize that may actually sound anti-competitive, it is typical of monopolists to use the antitrust law to destroy competition (as Professor Taplin has taught us).   That’s certainly what has happened with the PRO consent decrees–reduced competition and lower royalties.  Not to mention such a licensing organization would collapse under its own complexity.  This is probably why the Copyright Office envisioned a “Music Rights Organization” that would combine the PROs and mechanical rights licensing but provided the relief valve of an new opt-out right so that songwriters could escape the madness.  (“Under the Office’s proposal, except to the extent they chose to opt out of the blanket statutory system, publishers and songwriters would license their public performance and mechanical rights through MROs.”  Copyright Office Music Licensing Study at p. 9)

If you want some ideas about the kinds of property rights that Big Tech wants the government to take away from songwriters and artists, just read Spotify’s most recent filing in the songwriter litigation in Nashville where their lawyer tries to define away mechanical royalties (unsurprisingly, the lawyer is a long-time protege of Lessig).  Why?  Because they are being brought to a trial by their peers on statutory damages for copyright infringement and the potential for having to pay the songwriters’ lawyers due to a statutory right to recover attorneys fees.  (Statutory damages for copyright infringement has long been an attack point of Big Tech and we get a preview of where they want it to go in Pamela Samuelson’s “Copyright Principles Project”–essentially abolished.)

One way or another, the Big Tech cartel (which includes all the companies in the MIC Coalition and MIC Coalition member the Digital Media Association which itself has members like Spotify and, curiously, Apple) is very likely going to go after statutory damages and try to create yet another “safe harbor” for themselves with no burdens–a “friction free” way to infringe pretty much at will because the actual damages for streaming royalties will be pennies.

If the cartel succeeds in eliminating statutory damages and attorneys fees awards, this will truly make copyright infringement litigation toothless and entirely eliminate the one tool that independent songwriters and artists have to protect their rights.  It will neuter massive copyright infringement as alleged in all of the Spotify class actions, not to mention cases like Limewire.

Oh, you say–did you just switch from song copyrights to sound recording copyrights by referencing Limewire?  Yes, I did–because that’s exactly what I predict the DIMA and MIC Coalition have in mind.  Why do I say this?  Because that’s what these companies are backing in the radioactive Transparency in Music Licensing and Ownership bill (HR 3350).  And if you blow up all the current separate bills into one omnibus copyright “reform” bill, the pieces may reconstitute in forms you didn’t expect.

But realize that in almost all the many copyright bills currently before the House of Representatives, the other side is trying to bootstrap unjust harm into a negotiation chip to shakedown creators.  And it’s not just pending legislation–the shakedown is especially observable with the millions of notices of intention to rely on statutory mechanical licenses for songs filed with the Copyright Office.  That’s a nice song you got there, it would be a shame if something happened to it.

Big Tech’s basic negotiation method is to rely on a loophole, bootstrap the loophole to build up the pressure on people who can’t fight back, then run the shakedown to get concessions that should never be made.  This is what Google has done with the DMCA and is the same shakedown tactic on mass NOIs taken by Google, Amazon, Pandora, Spotify, and others–but curiously not Apple.  Somehow Apple has made it work with the most successful digital music platform in history.

Let’s go down the issue list:

Bootstrapped Issue Fix Bill
Pandora and Sirius stopped paying artists for digital royalties on pre-72 recordings—because of loophole based on federal copyright protection for sound recordings Start paying artist royalties on classic recordings made before 1972 CLASSICS Act
Terrestrial radio created a loophole so they don’t have to pay performance royalties to artists on sound recordings; stop artists from opting out Start paying artist royalties for broadcast radio (with protection for noncommercial and small broadcasters) Fair Pay Fair Play Act, PROMOTE Act
Big tech suddenly started using a loophole to file millions of “address unknown” NOIs with Copyright Office after indie songwriters filed class actions Require Big Tech to use existing databases to look up copyright owners or don’t use the songs or recordings. None
No “central database” that has all songs (but no requirement to actually look up anything), requires double registration If songwriters and artists don’t register, then no statutory damages Transparency in Music Licensing and Ownership Act

Blown up into parts:

–Avoid raising mechanical royalty rate or paying artist royalties on terrestrial at all

–How to use the lack of the mythical “central database” as a bright and shiny object to avoid paying royalties and shirk liability for not doing copyright research, an absurd position for companies that owe much of their wealth to their unprecedented ability to profile people around the world and “organize the world’s information”

–Avoid paying statutory damages

–How to avoid paying royalties that should have paid anyway (pre-72, terrestrial, mass NOI) through distorted interpretations of the law or even safer harbors

–Avoid an obligation to actually look up anything (new databases)

–Use any work they want if all they have to pay is actual damages and no attorneys fees

–Keep songwriters and artists from opting out

–Create biggest black box possible

It should be apparent which way Big Tech is trying to push the creative community.  It is important for creators to understand that any legislative concession that the MIC Coalition or DIMA win against songwriters or artists they will then turn around and try to extract in the next shakedown–authors, photographers, film makers, all the copyright categories.

It is in everyone’s interest to support a healthy creative community that will continue to engage fans and do enough commerce to create value for the tech monopolies.  But–it is crucial to understand that it doesn’t work the other way around.

The purpose of the creative community is not to create value for tech monopolies.  It is to support compelling artists and help them engage with fans, and sometimes it is art for art’s sake alone.  If those artists throw off some commercial gain that the tech monopolies can turn to profit themselves, fine.  But creating profit for these monopolists is not the goal of artists.

Instead of creating fake problems to try to extract concessions that further undermine creators like offering ice in winter, the tech monopolies like Google, Spotify, Amazon and Pandora should identify real problems and work with us toward real solutions–and not a loophole-driven shakedown.

 

 

Hey Alexa, Where’s My Money? Address Unknown Update Courtesy of Paperchain

July 17, 2017 1 comment

We get an update this week on the total “address unknown” mass NOIs filed with the Copyright Office for the royalty-free windfall loophole.  This time we have to thank our our friends at Paperchain in Sydney for doing the work of decompressing the massive numbers of unsearchable compressed files posted on the Copyright Office website.  As you can see, there’s been an increase of approximately 70% since January 2017.   (For background, see my article.)

As you can see, Amazon is still far and away the leader in this latest loophole designed to stiff songwriters, followed closely by Google.  However, Spotify is moving on up.  Spotify does get extra points for starting late in March 2017, but they are catching up fast filing over 5,000,000 as of last month.

To put this in context–the Copyright Office as recently as September 2015 posted these “address unknown” NOIs in a single searchable PDF.  However, the Copyright Office  apparently changed the practice abruptly in early 2016 once the Big Tech hammer came down.  Based on the last PDF I could find, the total number of “address unknown” NOIs filed with the copyright office from January 2010 to September 2015 was approximately 4,800.

NOI 2015 Era Date Detail

Compare that approximately 4,800 in five years to approximately 45 million in 18 months.

Notable in its absence:  Apple Music has not filed a single address unknown NOI.  Somehow Apple seems satisfied with their licensing practice based on an absence of a single NOI.

NOI Table
Licensee Paperchain 4/16-6/17
Total 45,856,225
Amazon Digital Services 23,977,548
Google, Inc. 10,386,238
Spotify 5,020,002
Microsoft 3,522,100
iHeart Communications 1,565,763
Pandora Media, Inc. 1,316,512
The Overflow.com Inc. 66,326

How Accurate are Music Subscription Service Subscriber Numbers? — Music Tech Solutions

March 4, 2017 Comments off

All of you who subscribe to the New York Timesfly Quantasuse any of a number of mobile carriers or who are in the 6th month of your third Spotify 90 day free trial may be interested in this post.

According to Billboard in a story titled “Spotify Officially Hits 50 Million Paid Subscribers“, the “official” announcement came from a tweet:

I found this intriguing–how did we go from “Spotify Officially Hits 50 Million Paid Subscribers” in the headline to a tweet that doesn’t really say the same thing?

via How Accurate are Music Subscription Service Subscriber Numbers? — Music Tech Solutions

The Marginal Value of Infringement in the Wrong Tail

January 11, 2016 Comments off

It looks like Spotify has got hold of the wrong tail.  Spotify is doing back flips to blame others for its manifest failures to lawfully obtain mechanical licenses.  Spotify’s transgressions are currently the subject of two different class actions brought by songwriters.  According to press reports, 10% to 25% of the songs on Spotify “are not properly licensed and/or not distributing royalty payments.”  Spotify also claims to have licensed approximately 30 million recordings (of 30 million songs, give or take for covers).

Based on these assumptions, that means there are three million to 12 million songs that “are not properly licensed and/or not distributing royalty payments”.  This is not a few new releases, a 1/16th of a song for a sample, the odd songwriter who cannot be found or who is non responsive.

Millions of unlicensed songs isn’t an acceptable accident, it’s an unacceptable policy.  In fact, it’s exactly what the compulsory mechanical license was designed to prevent.

At the end of the day, the policy, i.e., the choice, to go forward without licenses, rests solely with Spotify.  The company could have complied with the compulsory license–enacted by the U.S. Congress for this exact situation–but Spotify chose not to.  Whoever Spotify hired to undertake the mechanical process of mechanical licensing, someone at Spotify decided to go forward without complying with the law and they did so on a grand scale.  It appears that the thinking was that the upside value of having “all the world’s music” was greater than the downside risk of getting caught.  The marginal value of another few million songs was greater than actually complying with the law and paying songwriters.

This decision is what is called “business risk.”  Incredible as it may seem, this decision–this willful decision–to accept the business risk of using millions of unlicensed songs was apparently driven by a belief that in order to have an effective consumer offering, Spotify had to have tens of millions of tracks available to consumers.  This policy of using millions of unlicensed songs may well have been informed by the “long tail” theory and thought experiment posited by one Chris Anderson (in case you forgot him).  You can read all about it in Anderson’s counterintuitive utopian book The Long Tail: Why the Future of Business is Selling Less of More which was based on a 2004 article in Wired.

I’d be very interested to know exactly where this consumer research is that shows the marginal value of an additional 12 million songs is so meaningful to a music service that it trumps the infringement exposure.  I frankly have never seen it–aside from Spotify’s reliance on Anderson’s version of the long tail.

Anderson goes down the wrong rabbit hole by relying on anecdotal observations of “Ben” an anonymized (or perhaps fictional) character who is a teenager from an affluent family in Silicon Valley who gets most of his music from “friends” and “Bit Torrent” (recall that Spotify’s CEO was a developer of uTorrent, a key piece of the piracy picture acquired by Bit Torrent in 2006).  So Anderson starts by analyzing a legal market with comparisons to the black market.  That obviously wasn’t going anywhere logical.  Neither is any market of what the New York Times called “pixel-size niches“.

Anderson’s long-tail thought experiment has been criticized by a number of people such as Harvard Business School Professor Anita Elberse in the Harvard Business Review and most famously in the music business by Will Page, the former economist for PRS, the UK performing rights organization.

Any record company production manager could have chimed in–and perhaps would have if it wasn’t so obvious that it did not really bear much discussion.  The corresponding transaction costs of a variety of functions including rendering royalty statements for minuscule unit sales were not worth keeping the title in the catalog.  You know, kind of like sending a royalty statement for three streams.  Preparing the statement may well cost more than the royalty even if the statement is itself digitally delivered.  Not to mention taking the phone call from the angry songwriter who got a statement for $0.19.

Record companies are no strangers to the long tail–that’s often called classical and instrumental jazz.  It is worth noting that record companies have for decades deleted titles that didn’t sell enough to justify keeping the title in the company catalog.  This is consistent with Professor Elberse’s research demonstrating that “the tail increasingly consists of titles that rarely sell and that are produced by smaller-scale players.”  Professor Elberse assumed that there were no infringement costs associated with those “titles that rarely sell” thus exponentially increasing the cost of the tail, or as this particular tail is known in some circles, the wrong tail.

Then-PRS economist Will Page reached a similar conclusion after analyzing PRS royalty payments in 2008.  Those who have had about enough sanctimony from Spotify about how it is God’s gift to fighting piracy will find this nugget of interest when wondering how much the marginal value of the last 12 million tracks that don’t sell really is worth if they are all unlicensed:

Will Page, the former economist for PRS, found in a 2008 study of PRS revenues that famously debunked Chris Anderson’s absurd “long tail” theory, the “long tail” is pretty meaningless for music services:

[PRS] found that only 20% of tracks in our sample were ‘active’, that is to say they sold at least one copy, and hence, 80% of the tracks sold nothing at all. Moreover, approximately 80% of sales revenue came from around 3% of the active tracks. Factor in the dormant tail and you’re looking at a 80/0.38% rule for all the inventory on the digital shelf.

Mr. Page now works for Spotify.  They could have just asked him before taking the business risk of failing to get compulsory licenses.

Was the marginal value of the long tail worth it for Spotify when compared to statutory damages?  Commentators often mock statutory damages, especially for willful infringement, as being over the top.  In the case of the compulsory mechanical license, you can look at this another way.

Congress did backflips to make the compulsory license easy to get.  If a well funded company like Spotify (last valuation $8 billion) chooses to ignore Congress’s efforts, then Congress wants to make sure that the marginal value of ignoring the compulsory license is always less than the statutory damages for choosing to do so.

Useless Streaming Artist Data: You Know Where to Put the Thumb

December 14, 2015 1 comment

Pandora and Spotify (among others) have made a big deal out of providing “data” and “analytics” about streaming uses to artists–and particularly managers–about how the artist is performing on their respective services.  The “artist data” meme is also offered up as a value add to counter complaints of low royalties.  There is a real question of how useful this “artist data” is and a recent CNBC article calls into question just how accurate it really is in the first place.

Of course the most valuable piece of “artist data” that services could at least help the artist acquire–the fan’s email address–they won’t touch.  Obviously, I’m not suggesting that the service hand over the fan’s email address to the artist without the fan’s consent, so let’s not go down that rabbit hole, a favorite of the services trying to avoid this issue.

What I am suggesting is that the service provide the fan with an opportunity to sign up for the artist’s own email list.  This could be as simple as a link that would take the fan outside of the service momentarily to the artist’s email list sign up page.  That way I don’t believe there are any privacy law issues for the service as there would be if the service just handed over the email address.

I have raised this with senior executives at Apple and Spotify and it went nowhere.  The Spotify person rejected the idea outright because it would take the Spotify user (aka the artist’s fan) outside of Spotify.  Strange, because the fan would be offered a choice.  You know–the fan of the artist who most likely was driven to the service by the artist they are streaming.  (This would produce another interesting metric based on the number of email list sign ups by service, but I digress.)

Aside from whether the type of information being provided is even useful to artists, there’s another question of whether the “artist data” is even accurate in the first place.  And how would you even know.

CNBC did a little fact checking on streaming data provided by iHeart Radio analyzing the recent Grammy nominees.  This isn’t exactly the same as the “artist data” being hawked by streaming services, but it is perhaps a good proxy (since it’s hard for artists to see each others artist data results).

iHeartRadio (owned by Clear Channel) gave CNBC the “artist data” for the most popular tracks on Clear Channel’s massive streaming operations.  But CNBC discovered by using simple logic–aka sequential thought–that Clear Channel’s “artist data” was wrong.  Because CNBC concerned itself only with massive hits, data checking was relatively simple (which of course makes the Clear Channel screw ups look even more idiotic).

Keep in mind as you read this that if you’re an artist using the “artist data” for its recommended purpose–discovering nuances about the service’s listening audience–it will almost certainly be more difficult if you’re not Ed Sheeran or Taylor Swift.

 

In a blog post based on the original (aka wrong) data, iHeartRadio said Ed Sheeran took home the honor of “most-thumbed up” track of 2015 with “Thinking Out Loud.” Taylor Swift’s three big songs relegated her to second, third, and eighth place. (Update: the original iHeartRadio blog post was taken down. The link above is a cached version.)

More impressive in the original data was that Drake’s “Hotline Bling” was the most-thumbed up track in 26 states in 2015. That would be amazing because the song only came out in July and didn’t really catch on until the colorful video was released in October. Here is exactly what the blog post said about Drake:

Although the track didn’t premiere until mid-2015, with the unforgettable music video coming out just weeks ago, the last-minute addition of Drake’s “Hotline Bling” surprised and delighted the ears of listeners across the country, leading it to become the No. 1 most thumbed song of 2015 across more than 20 states!

But this didn’t make sense to us. Sure Drake’s song was popular, but how could it be the top song in half of all states even though it was only hot at the very end of the year?

More weirdly: how could Drake’s song be No. 1 in half of the states but not appear anywhere in the top 10 songs nationally.

CNBC pointed this out to Clear Channel, who admitted their mistake and “corrected” their bad data.  Yet that “corrected” data was FUBAR also according to CNBC:

The new data included the actual number of “thumbs up” and “thumbs down” by state. Of note is that Ed Sheeran’s “Thinking Out Loud” is the “most thumbed up” track in only one state — Hawaii. We find it is extremely unlikely that his track was actually the top track in the nation overall. IHeartRadio has not yet responded with further clarifications about the rest of its data set. We can’t check that against its original report, but we’re hoping to find out soon.

Of course, the new data set only included raw “thumbed” numbers for the top track in each state, so it’s possible that “Thinking Out Loud” had enough second-ranked “thumbs” to overcome Taylor Swift’s “Style,” but that seems unlikely.

So the thumbs didn’t have it after all?  Clear Channel miscounted?  Hard to say because we are entirely dependent on Clear Channel to provide the data backing up their work product.  But we know there was some kind of screw up because CNBC had to provide a link to a cached copy of the original Clear Channel blog post with the bad data.  If there’s no agenda here, why would Clear Channel try to hide their mistake from artists?

But good work by CNBC–except for one thing.  They continued the streaming service meme that somehow talent buyers and concert promoters care about how many thumbs you get when deciding to book a gig.

[C]oncert planners and promoters depend on data like this to create touring routes.

No, no, a thousand times no.  Clearly CNBC have never met a talent buyer. This is just simply not true.

Nonetheless, this CNBC post is a great example of how unreliable this “artist data” can be and just how hard it is to verify.  So hard that it may well be simply misleading to ask artists to take a lower royalty rate for what is most likely some species of snake oil.

They can keep their thumbs.  I’ll just settle for asking the fan to sign up on the artist’s site, thank you very much.

 

Ain’t Too Proud to Beg: Did President Obama Just Endorse Spotify During an FTC Investigation of Apple Music?

August 15, 2015 Comments off

The White House now has a Spotify account.  You would know this if you happened to run across the 500 or so stories about President Obama’s Spotify playlist in the news.  Is this a particularly remarkable occurrence?  Not really–except for one thing.  Something you won’t find in any of the earned media.

Spotify is behind an antitrust investigation into Apple Music by the Federal Trade Commission.  That would be the Federal Trade Commission that reports to…President Obama.  In the middle of a serious investigation into Apple, the White House–that is the “people’s house”–endorses Spotify.

WH Spotify

So how might this have come to pass–now.  Curious timing, wouldn’t you say?  Maybe not.  Aside from the fact that Kara Swisher of Re/Code reported that Google’s head business executive Omid Kordestani is on the Spotify board and ex-Google employees are in leadership roles at the White House (starting with Megan Smith, the Chief Technology Officer of the United States and former vice president of business development at Google), Spotify hired Jonathan M. Prince, the Obama Administration revolving doorman and Clintonista.

Jonathan Prince Employment Timeline–Open Secrets

One of Mr. Prince’s duties appears to be running Spotify’s brand new in-house shillery as reported by Tech Times:

Spotify recently hired four outside lobbying groups who have been privately questioning Apple’s practices in meetings with politicians. Specifically, Spotify has been alleging that Apple took advantage of its size and power in creating unfair deals with various record labels. Spotify is also raising the issue of Apple’s standard 30% fee on all subscriptions purchased through its App Store, the fee which Spotify recently notified its users they could cut by cancelling and resubscribing.

Spotify’s global head of communications and public policy, Jonathan Prince, described the company’s political intentions as a more general effort to keep lawmakers up to date on the latest developments in the area.

Right…just keeping “lawmakers up to date”.

Given Mr. Prince’s easy access to the White House, you have to wonder if keeping “lawmakers up to date” included coordinating an announcement and press event around the White House adopting Spotify, starting with President Obama’s playlist.

And it won’t just be President Obama–according to the official U.S. Government blog on whitehouse.gov, there’s going to be more to come.  As the White House tells us–subscribe!  Of course, you can only “subscribe” if you already have a Spotify account.  So what the White House is actually saying is “get a Spotify account!”

WH Spotify 2

How many press releases do you think Spotify is going to milk out of this one?

Not to mention fawning coverage like this from the L.A. Times:

The world’s most popular streaming service revealed on Friday that the world’s most powerful man, President Obama, and his administration have launched an official channel on Spotify, and will be contributing playlists to the service.

Maybe this was some kind of coded message to the FTC?  Is that phrase “the world’s most popular streaming service” a dog whistle for “slam these monopolists”?

What do you think?

Or do you think that this smacks of..whatchamacallit…crony capitalism?

According to the Spotify press release:

Over the years, the White House has continued to grow its social media presences and find new ways to connect with people all over the country through a range of platforms. On Spotify, you can expect to see the White House share playlists created by administration officials, as well as playlists curated around events and issues to engage the public and acquaint them with the people working in the administration.

Maybe we’ll see a playlists created by FTC commissioners?

No?  Oh, why ever not?

Do you think that the White House is participating in Spotify’s chest beating about being better than Apple Music?  That would be the Apple Music that scored 11 million subscribers in less than 2 months, nearly half of what it has taken Spotify 6 years to convert?

Don’t get sidetracked on this–this is not a political issue.  It’s also not a matter of whether President Obama or other White House folk use Spotify.  We all use a host of products.  Not all of us have a platform like the White House from which to endorse a product.

The point is that it appears that Spotify is using its lobbying muscle to (A) go after Apple Music at the FTC rather than just meeting Apple in the channel with their big boy pants, and (B) get the boss of the FTC to pick a winner.

Spotify definitely ain’t too proud to beg.  It smacks of real desperation, and however much artists may be flattered to be on the President’s playlist, I doubt they’ll be that flattered when they realize their music is being leveraged in the name of crony capitalism.

It stinks.  If they’re going to get the President of the United States to endorse their product, they could at least have the White House encourage subscriptions.

But then–he is the leader of the free world.

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