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Posts Tagged ‘Spotify’

The Ethical Pool Future: Will Fans Cut the Cord to Big Streaming Services if Artists Leave?

November 30, 2018 Comments off

Everybody knows that the boat is leaking
Everybody knows that the captain lied…

From Everybody Knows by Leonard Cohen

I wrote up my take on “user-centric royalties” a few weeks ago in a post titled “Arithmetic on The Internet: The Ethical Pool Solution to Streaming Royalty Allocation.”  The post has been widely read in the artist community and stimulated conversation about the current model of royalty allocation by streaming services that artists like Sharky Laguana have led the debate on.  I argue that the current model results in the hyper-efficient market share distribution of streaming revenues that effectively bypass the independent artists who fans listen to on the subscription streaming services.

Hyper-efficient marketshare distributions can have unintended pernicious effects due to the impact on the per-stream rate.  If you have a big market share, you don’t care much about per-stream rates because you get minimum guarantees and probably non-recoupable “technology fees” that help protect your downside and defray your accounting costs.  (Particularly important to independent labels whose streaming accounting costs may exceed streaming revenue.)  If you are an independent or “niche” artist, the per-stream rate is everything because you won’t be getting advances or technology payments.

Crucially, that hyper-efficient distribution almost guarantees to a mathematical certainty that per-stream rates will decline over time if service revenue fails to increase at a rate that exceeds the increase in the total number of streamed recordings.  The Trichordist has documented that the per-stream rate has declined by 16% over the 2014-16 period–which happened at the same time as we are told that streaming accounts for over 50% of industry-wide recorded music revenues.  If streaming revenue declines on a per-stream basis while expanding to a larger share of over-all recorded music revenues, the negative effects on the per-stream rate will almost inevitably hurt independent artists, as well as genres like instrumental jazz and classical.

As we found in a recent reader poll, many fans–even many MTP readers–are unaware that an overwhelming share of their streaming service subscription revenue is paid for music they didn’t listen to (and performed by artists they don’t care for in some cases).  Assuming that MTP readers may be more aware of these inequities than the average fan, many if not most consumers may be in the dark about where their money actually goes, which may have an effect their buying decisions and a ripple effect through the market.

question 1

question 2

There’s little doubt that the status quo is unsustainable even though the transition from high to low-or-no margin goods may be irreversible.  Recently, Canadian artist and producer Danny Michel wrote a must-read op-ed for the current edition of the Vancouver Weekly that highlights the motivation behind the Ethical Pool.  Titled “The Expiration Date on Music”, Danny describes his own experience, which of course is echoed by a chorus of independent artists and songwriters around the world:

I’ve been a full-time musician for 25 years. It’s been nothing but hard work, but I love hard work. My songs bought my home, my studio, paid the bills and more. Through it all, the conversations backstage with other musicians have always been about music, family, guitars, friends, art, etc… But in 2018 that conversation changed. Everywhere I go musicians are quietly talking about one thing: how to survive. And I’ve never worried about it myself UNTIL 2018. What I can tell you is my album sales have held steady for the last decade until dropping by 95% this year due to music streaming services.

And therein lies the rub:  You cannot trade a high margin sale at a wholesale price of $5-$10 for a replacement with a wholesale price of a fraction of a fraction of a penny without an unrealistic corresponding exponential boost in activity.

The math is stacked.

Based on the Trichordist’s Streaming Price Bible, it takes roughly 1,600 streams on Spotify, 950 streams on Apple Music, or over 10,000 on YouTube to replace one physical or digital album that sells at a venue or retailer with $7 of net revenue to the artist.  (This revenue variation across services is one reason the TEA math doesn’t really work.)   Venue sales are incremental revenue–you’re already spending to market the show.  Due to streaming, venue sales have all but evaporated in the last few years at an increasing rate as Danny Michel observes.

The fan at the show is in direct contact with the artist in real time when the fan comes to a show the artist is already promoting.   If the fan leaves the show empty handed, it will probably be difficult to get that fan to remember to stream the new artist when they launch their service player.

Getting fans to stream the record usually requires additional effort if not expense–a key reason why it’s important at the show to get that fan’s email at least or some other way to get in touch with them outside of the music service.  As one astute independent label put it, “if the devil made me choose between selling 25 CDs at a show or getting 25 fans to sign up to an artist’s email list, I’d have to think about it for 5 minutes.”  The email signups are a hope for future revenue to make up a shortfall that will likely never be made up on streaming.

Absent getting that fan’s email, independent artists are largely at the mercy of playlist gatekeepers to the point that many are asking if they really want to continue to participate in the major streaming services.  As long as those services have little interest in allowing subscription rates to increase or pay royalties at a level that allow independent or niche genre artists and songwriters to sustain themselves, there’s less and less reason to participate.  And hyper-efficient market share distributions are already causing some artists to like cutting the cord with big services–the only question is how to get their core fans to follow them.

 

Must-Read by @LizPelly: Discover Weakly: Sexism on Spotify

June 8, 2018 Comments off

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Liz Pelly demonstrates how Spotify perpetuates gender stereotypes.  Spotify–where A&R stands for “Algorithms and Redirects .” Why are we helping these people again?

“Spotify has actively steered its listeners away from the album as a format and toward playlists. This serves Spotify’s interests: a music culture dependent on playlists is dependent on Spotify, whereas a music culture dependent on albums is dependent on record labels. As Spotify vies to become more powerful and influential than labels, emerging as the music industry’s new center of power, one of its primary strategic focuses has been on playlists—curated by humans, algorithms, and sometimes a hybrid approach—making the process of navigating its platform more convenient and ever more personalized.

As a result, Spotify’s most popular playlists have emerged with outsize influence. After I created a new Spotify account earlier this year for this very listening experiment, when I clicked the “albums” tab on my brand-new account, Spotify responded, “Your favorite albums will appear here,” followed by, tellingly, “Go to your Browse page to find amazing playlists for every mood and moment.” A small but powerful gesture: at every turn the platform encourages playlists over albums. This, of course, raises several concerns regarding how fans relate to music and even this music’s context. Which is all to say: in the realm of Spotify, playlist placement matters. A lot.”

Read the post on The Baffler (h/t Artist Rights Watch)

@musicbizworld: Universal Commits to Sharing Stock Sale Proceeds with Artists

March 11, 2018 Comments off

According to Music Business Worldwide, Universal has committed to sharing profits from the sale of Spotify stock.  The exact quote is:

“CONSISTENT WITH UMG’S APPROACH TO ARTIST COMPENSATION, ARTISTS WOULD SHARE IN THE PROCEEDS OF A [SPOTIFY] EQUITY SALE.”

Sources close to Vivendi-owned UMG suggest it may have been corporately restricted from making a hypothetical public statement on the matter until Spotify officially confirmed its intention to float on the New York Stock Exchange.

This is great news and also is the right thing to do.  The trick is, of course, that someone has to buy Universal’s position in Spotify in the public market.

Selling large blocks of shares in the public markets is always a tricky business, but Spotify may have made it exponentially more difficult given the “direct public offering” structure of its IPO (more properly called a “DPO”).  I suspect that there will be a rush for the exits as holders of Spotify stock try to liquidate, and Universal could find itself selling alongside a fully-vested marketing consultant who left the company three years ago, artists who got shares, and of course all the other majors and Merlin.

If you believe as I do that the world of retail investing is not waiting for a Spotify IPO,  this kind of robust selling could cause the price to tank in the absence of buyers or result in the kind of volume patterns you see with some shares of preferred stock (which have the “z” designation after the share numbers on the day in the stock section).

The Vivendi and Universal treasury folk are very smart people, so I’m sure they will manage the sale of their stock with an eye to avoiding tanking the stock and maximizing profit, so their interests are aligned with their artists (and presumably songwriters, too).

The next problem that we will all have to deal with is the meme that Spotify is already promoting–the reason Spotify loses money is that royalties are too damn high.  I guess that means the royalties they’re not paying?  Followed closely behind (A) the reason they can’t pay songwriters is because songwriters hide from them (true story, read the F-1 at p. 20); (B) Spotify wants to eliminate the “middleman” (i.e., record companies) and good luck with that; and (C) if the music industry had just built a global rights database then, then everything would be fine so Spotify’s failure to pay royalties is really our fault.

And especially those pesky songwriters who hide from them.

Even if it may take a while to liquidate Universal’s position in Spotify, it is comforting that they’re committed to doing the right thing.

@eriqgardner: Spotify Hit With $1.6 Billion Copyright Lawsuit Over Tom Petty, Weezer, Neil Young Songs [Music Modernization Act Fallout]

January 2, 2018 Comments off

In a curious twist, Eriq Gardner reports that the controversial Music Modernization Act has already prompted the inevitible litigation from a publisher seeking to beat the bill’s new safe harbor deadline applicable to lawsuits filed after January 1, 2018.  Wixen Pubilshing filed the new lawsuit on December 29, 2017, two years to the day after David Lowery filed the first class action against Spotify, but before the  Music Modernization Act legislation is even available on thomas.gov.

 

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The new safe harbor on p. 82 of the Music Modernization Act

 

As the new year begins, the music industry could be set for an epochal moment. Hopes are running high for the first significant reform of music licensing rules in decades. The coming year may also see Spotify go public. But before any of this happens, the Stockholm, Sweden-based streaming giant must now contend with a massive new copyright lawsuit from Wixen Music Publishing, which administers song compositions by Tom Petty, Zach De La Rocha and Tom Morello of Rage Against the Machine, The Black Keys’ Dan Auerbach, Steely Dan’s Donald Fagen, Weezer’s Rivers Cuomo, David Cassidy, Neil Young, Sonic Youth’s Kim Gordon, Stevie Nicks and many others.

On Friday, Wixen Music Publishing filed a lawsuit in California federal court that alleges that Spotify is using Petty’s “Free Fallin’,” the Doors’ “Light My Fire” and tens of thousands of other songs without a license and compensation. The plaintiff is seeking a damages award worth at least $1.6 billion plus injunctive relief.

Wixen’s lawsuit is being revealed here for the first time, but the move will come as hardly a surprise to those who have been paying attention to Spotify’s growing copyright problem….

[T]he Music Modernization Act would impact copyright holders suing over mechanical reproduction after Jan. 1, 2018, which helps explain the New Year’s Eve filing.

“We are very disappointed that these services will retroactively get a free pass for actions that were previously illegal unless we actually file suit before Jan. 1, 2018,” said Wixen president Randall Wixen in a statement to The Hollywood Reporter. “Neither we nor our clients are interested in becoming litigants, but we have been faced with a choice of forfeiting rights and damages, or taking action at this time. We regret that this otherwise admirable proposed bill has had this effect, and we hope that Spotify nonetheless comes to the table with a fair and reasonable approach to reaching a resolution with us. We are fully prepared to go as far forward in the courts as required to protect our clients’ rights.”

Read the post on The Hollywood Reporter

Read the Wixen complaint here

Read the Music Modernization Act here

MusicTechPolicy Monthly Newsletter is out! Subscribe here!

November 11, 2017 Comments off

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
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