Free speech! (for everybody else.)

bittorrent

Let’s have a look at Bit Torrent, shall we?

Now there’s a company that deserves the spotlight. BitTorrent is the protocol that allows users to steal content, pick the pocket of artists and producers, freeload while other people work to pay the rent. You might say, well, it’s not BitTorrent that has responsibility here, they don’t control what their users do, and yes, the company does hide behind the gossamer-thin excuse ‘We’re only following orders.’ Nonetheless, you might ask how many of BitTorrent’s 170 million users use BitTorrent to steal? The answer appears to be 100%.

Okay, so here it comes, might as well deal with it. “Entertainment companies have to change their business model.” Or my favorite, the succinct and at this point hackneyed “Adapt or Die,” a Darwinian cry from folks who’d rather steal than pay an artist a tenth of a penny.

How about I cliche fire back “If it ain’t broke don’t fix it?” For all the twisted pretzel logic applied by legions of thieves to justify their petty digital larceny to an industry none them have even the first clue about, I’d say there wasn’t all that much wrong with the entertainment industry before you guys decided to take up shoplifting for a hobby. Yes, there were issues and the people who worked in the industry were addressing them. We actually didn’t need advice from the cheapskate set, thank you very much.

Okay, now back to BitTorrent. The company recently announced they’re going to start producing a new science fiction series. I kid you not. Their plan is to ask their millions of users to pony up $9.95 and drop it in a crowd-funding bucket. Now this is beautiful. Exactly how many of the thieves will pay? I mean we’re talking about the BitTorrent mob here, the penny-pinchers who’d rather eat glass than drop a buck in a musicians’s hat.

This is not the first time BitTorrent has tried to go all Warner Bros. on the digital world. In 2008 they launched an entertainment network that had a maiden voyage remarkably similar to the Titanic. You see, free doesn’t exactly work, no matter long your tail is.

We could go on, couldn’t we? But we’re still waiting to see how these new business models turn profit. The top infinitesimal percent of digerati? Those guys are doing pretty well. But the rest of the exploding digital middle class? It’s going to be really hard to send the kids to college on free.

How neutral is net neutrality?

thNet Neutrality! Man the barricades! Our liberty is threatened! Protect your Freedom of Speech!!! Can we squeeze any more hyperbole in there?

This from the Electronic Freedom Foundation:”If laws can censor us to limit our access to certain information, or restrict use of communication tools, then the Internet’s incredible potential will go unrealized.”

That’s the fight in a nutshell, and it certainly is a worthy one. What’s interesting to me is the depth and vitality of the arguments surrounding an area of our world that didn’ even exist ten years ago. When did the viability of open link architecture become a lynch pin in our core humanity? How did all this become so important in such a short span of time, so important that we now routinely co-op the language of human rights and apply it as a matter of course to the business of the internet?

The Man vs The Nerd! The rights of all peoples is on the line! Write your congressman! Emergency!

Okay. I get it.

However . . .

We had a world before 1998. It functioned pretty well as these things go. We had a creative industry too. We had ways to communicate. We fought for freedoms. If we waved a wand and the internet went away – what difference would it make? Would we be any less free because of it?

The presupposition here seems to be we are MORE free with the internet? Is that true?

The internet has gutted creative industries. It has severely compromised our privacy. It has destabilized our global economy. It has given rise to a severely dysfunctional divisive culture. It has uncovered an unbridled meanness in our humanity. If the internet wants to march behind a banner of Liberty, it also needs to account for these things.

Perhaps the most insidious accusation in the center of the Net Neutrality fight is this insistence that is is the corporations trying to control us that is the problem. Well, the corporations already control us and the internet. Can you just walk outside, lift your face to the sky and get a good dose of internet?

I’m writing this on an expensive Apple computer, hooked into an internet delivered to my door by Cablevision, maybe revising it in a Starbucks, sipping a beverage shipped to me in tankers fuled by Exxon-Mobil and served with a healthy dollop of Time-Watner wi-fi.

Yeah, that sounds neutral.

The 100 Year War: ASCAP battles on

money-mic2014 marks a very significant and special moment for the human race: the 100th anniversary of World War One. We began to perfect war in 1914. There’s something so human about our use of all the new technologies created in the Industrial Revolution being honed and mastered and then deployed for mass slaughter. But as the world began to preoccupy itself with mustard gas and trenches dug in killing fields, another type of enterprise began to take shape.

Barely nine months after the start of the war, a group of men in New York began to meet and draw up the organization that became know as ASCAP. There’s something significant in the polar opposites of those two moments. As humanity tore itself apart, it also decided to protect one its most valuable assets–music.

Among the founders of ASCAP were legends: Irving Berlin, Jerome Kern, John Philip Sousa. They made most of their money from the sale of sheet music. Even though their work was protected by  U.S. copyright law, they pushed for more. They created ASCAP to “assure that music creators are fairly compensated for the public performance of their works, and that their rights are properly protected.” It was a novel idea and one that built the foundation of an industry that generated trillions of dollars of revenue for the global economy, helped define our culture and changed the world in ways more far reaching and significant than dropping bombs out of planes.

It’s been 100 years now, and yet the assault on the rights of creators is still a fiercely fought battle. Big Internet seems to have a proprietary approach to content. The greatest distribution channels in history have yet to fully embrace the concept that intellectual property is real. Stealing became cool. An ‘open and free’ internet was not just sloganeering, it was literal interpretation. Nobody wanted to pay for anything and suddenly musicians, of all people, became cast as greedy bastards.

A couple of weeks ago a decision was handed down in a suit Pandora vs. ASCAP. The judge essentially punted the ball down field, opting for a status quo. Nobody got what they wanted, but at least ASCAP didn’t lose.

ASCAP CEO John LoFrumento commented: “Streaming is growing in popularity – and so is the value of music on that platform. We are pleased the court recognized the need for Pandora to pay a higher rate than traditional radio stations. But recent agreements negotiated without the artificial constraints of a consent decree make clear that the market rate for Internet radio is substantially higher than 1.85%.”

The issue of the consent decree is key and that’s an issue that needs to be dealt with in Congress. Our nation needs to ask a fundamental question: Which has contributed more to the well-being of humanity? Guns or music? In a nation where the rights of gun owners consumes our politics, shouldn’t the rights of creators be of greatter concern?

Is Spotify the Music Messiah?

Streaming Jesus

Streaming Jesus

How do streaming services fit into the overall business of making and selling music? How important are they?

Sean Parker, maintains Spotify achieves what no one else has– an answer to piracy wrapped in a tasty social envelope. The way he sees it, Spotify:

  • Artists are happy because people discover new music from friends.
  • Sharing revitalizes music industry, record companies happy again.

Spotify is like some kind of Napster reincarnation for the 21st Century.

Spotify CEO, Daniel Ek, sees it more or less the same way.

There are half a billion people that listen to music online and the vast majority are doing so illegally. But if we bring those people over to the legal side and Spotify, what is going to happen is we are going to double the music industry and that will lead to more artists creating great new music.

So the idea is Spotify creates a global market for music and musicians will have more opportunities to sell music.

Even hardcore anti-music file sharing desperado Lars Ulrich of Metalica joined the Spotify tribe.

“Spotify has solidified itself not just as the leading music service, but, as far as I’m concerned, the only one. Spotify is a global entity and Metallica works on a global basis, too.”

Spotify currently is a losing proposition. According to Privco, a consultancy that analyzes private ventures, Spotify has big questions on their balance sheet.

Musicians, providing Spotify’s entire product at a low return, become angel investors in this scenario, waiting for a global market of premium subscribers to materialize. Meanwhile, Spotify pays a disproportionate portion of their revenue to royalty and bleeds serious cash.

It’s hard to imagine all this working. The mission states:

Spotify’s goal is to convince millions of people around the world to become Premium subscribers and by doing so to re-grow the music industry.

And there’s no doubt the service is growing.

Growth trajectory

They hang their plan on data showing premium listeners buy more music than their non-premium listeners, so the simple formula becomes, get more premium listeners.

Once Spotify has ‘premiumed’ the world, the magic revenue fairy shows up. It makes sense people who are fans of music will pay subscriptions and buy more music. But it feels as if there may be a finite pool of potential subscribers, no matter how global you go.

Besides the almost messianic mission to save the world of music, how does Spotify rank in the revenue stream of musicians? And not only in terms of royalty, but in terms of importance?

A quick glance at the total business picture of  a musician’s career quickly shows the number one way to make money is sell music. Nothing’s changed in a hundred years. Create music, sell music. Sell vinyl you do really well. Sell CDs you do pretty good. Sell digital downloads, a lot less money, but still revenue.

Next up after that are live shows and merchandise. After that maybe you get lucky every now and then and have thirty seconds of a tune appear on TV or in a movie.

The bottom feeders in the revenue stream are streaming services. Best to think of them as places to discover music. You want to be there, but it’s never going to be a gold rush.

I think Spotify would be better served by toning down the save the music rhetoric.

In an effort to be more transparent in how royalties are paid, Spotify released their formula.

Royalties in detail

It’s easy enough to see how labels and publishers end up the bad guys. They are still in a position to take the largest cut and distribute the royalty in a deal written in their favor. It’s also easy to see why as streaming services grow, it might be better for independent artists to steer clear of Mr. Middleman.

When you consider eliminating middlemen and subscription services, consider the TV industry. TV subscriptions services now aggressively create original content. HBO, Netflix, Amazon all see original content as a key path toward profitability.

Perhaps if Spotify truly wants musicians to sing Hallelujah, they might consider creating original music. This would effectively eliminate half their royalty detail and increase revenue directly to artists.

And there’s no doubt Spotify’s been feeling artist heat. Aware that bad PR from top-rank players in the music industry harms their image, they announced a new site, Spotify Artists, a site to increase transparency on how the service works, what it pays and how it calculates those payments. It also provides event information, tickets and key metrics on how an artist’s streams are performing.

Some model of streaming service will play a critical part in the future of music. And yes, expanding global markets can only mean increased royalty revenue, no matter how low the rate. But I suspect it might shake out differently. Just like the current state of global economics, the players in the top 1% flourish like never before. The rest?

Spotify has a place in an artist’s tool kit, but it’s more like a pair of wire strippers, than a hammer–a useful tool but not something you need to get the job done.

Sean Parker is right, Spotify is like the file sharing service Napster, only legal, but that does not necessarily mean listening to music on streaming sites supports artists. If you want to support artists, help artists, be a fan, buy their music.

7 in vinyl single

7 in vinyl single (Photo credit: Wikipedia)

Can ASCAP survive? Should it?

elevator

elevator (Photo credit: Jose R. Borras)

Have you ever taken an elevator? Everybody has, right? And the term ‘elevator music? That probably means something to you as well. But what many people don’t know is the light, invisible, harmless, beige, heard but not heard music playing in the background of elevators is big business. Same thing with music you hear in stores, supermarkets, gas stations, airports, even on those endless ‘we’’ll be right with you’ phone holds.

Exactly how big a business is the background music business?

Global mega-muzak powerhouse, Mood Media reports $129 million in revenue in the 3rd quarter of this year. Not gigantic, but in the nickel and dime world of music publishing, significant.  Recently, Mood Media acquired several of these ‘sensory branding services.’ Muzak for one. DMX for another.

At the end of 2010, a federal court decided DMX only had to pay about $13 per location to ASCAP, instead of the $50 ASCAP sought. Brutal. DMX aggressively made direct licensing deals with publishers (the big boys, Sony, etc.) and then used those deals to whip ASCAP royalty rates into shape.

The court decision given by federal judge Denise Coates, might have let a big horse out of a big barn. The major publishing companies began pushing for more direct licensing deals, especially digital music rights, downloads and streaming. The publisher say these deals are also good for writers, but the jury is still out on that idea.

Many publishing deals have a clause saying writers are paid from their affiliated PROS, not the publishers, so if the publisher makes a deal directly, what guarantees does a writer have they’ll get paid? In fact, what right does the writer have to even know WHAT deal the publisher made?

PROs are organized to insure fairness and transparency to writers AND publishers. It’s been working for a century. Why change?

Well, things change, and yep, these days things change pretty fast. In fact, you could easily make a case we live in a state of accelerated and constant change. We wake-up every morning expecting change. Maybe we’re even a little disappointed if things are the same as when we went to bed.

Welcome to the brave insane new world.

More direct licensing means PROs have less clout in negotiations. But maybe PROs need increased flexibility. Streaming rates are a fluid, growing market. Services like Spotify and I-Tunes Radio are still new. Gigantic global markets are enticing and perhaps in 50 10 5 years we’ll be in the middle of a golden age of royalty for music creators.

There’s no going back, no Marty McFly moment. PROs like ASCAP need to fight everyday for new turf, new relevancy in a rapidly expanding field. Writers need the PROs. And even if right now they act like they don’t, so do publishers.

Why?

Because in an unstable market of daily change, deals made today might mean nothing tomorrow. Constant change means constant negotiation. And in a global market, that means constant negotiation on a global scale.

An icon from icon theme Crystal Clear.Writers and publishers must be in a partnership, not at odds. Ultimately, in a robust, complex, volatile global economy, there’s more power in a unified deal, than a million separate deals. And if publishers don’t agree, they should wait a minute. By next week everything will change again.

Pandora vs. The World

Pandora RevenuesThere’s always been a sense of importance to the purpose of Pandora. Its roots are in the grandly named Music Genome Project, an effort to “capture the essence of music at the fundamental.”

The fundamental being, apparently, over 400 attributes, everything from gender of the lead vocalist to type of distortion on the guitar. Payment to the creators of the music, however, seems to have been overlooked.

This is complicated. Or maybe it isn’t. Some numbers: On an i-Tunes download, a musician might earn 7 cents. On Pandora, a musician might get a fraction of a cent per play. Let’s say the streaming device plays your song 1.5 million times. Run to you mailbox, there’s a check waiting, about $1700.

If your doing it ‘Gangham Style,’ no problem. The rest of the musical world, decide now, do you pay your rent, or do you eat?

Pandora defends its royalty rates aggressively. In fact, Pandora’s on record as wanting to lower its rates.

Now there is a difference between a download, buying a piece of music, and listening to it on an internet radio station. However, something is happening to our little world. People are listening to music on streaming services. It’s so easy these days. People are listening, listening, listening and not buying. Internet radio is not the same as terrestrial radio. It doesn’t promote music in the same way. It used to be you’d’ hear a new tune on the radio and run and out buy it. You did that because you could listen to it again and again, learn it, digest it, grow with. It went with you everywhere. It was yours. You bought it, you owned it.

Streaming services give you the same types of listening freedom, only you don’t buy the music, you rent it, and the musician, the gods we all adore and follow and build our culture around, well those guys don’t get much.

Meanwhile, Pandora is currently valued at 2 billion dollars.

We’re entering a critical period in all this. By the end of 2015 fundamental agreements between Pandora and royalty societies expire. Rates will change. ASCAP/BMI want them to go up. The three BiG Publisher sometimes act as if they want to cut out the performance royalty societies altogether. Pandora’s position appears to be unless they get a break, i.e. lower rates, they will have hard time staying in business.

The music creators? The composers and song writers? Well, do they even fit into the algorithm?

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