It's Not Exploitation If You Chose To Take Part
from the repeat-after-me dept
Well, the buzz of the weekend seems to be around a New York Times op-ed by musician Billy Bragg upset about the sale of Bebo to AOL earlier this month. Bragg's complaint is an old one that we've heard before: Because musicians chose to put their music on Bebo and that helped attract users, don't they deserve some of the $850 million that Bebo got from AOL. Not surprisingly, Nick Carr, who has been pushing this obviously false notion that "user-generated content" is exploitation, comes to Bragg's defense with his usual technique: sound smart, make some interesting points, and then wrap it up with a conclusion that is in absolutely no way supported by the facts.Let's break this down. The first complaint is that somehow Bebo was "using" this music for "free." This is false. There was a fair trade in an open marketplace that made this happen. Bebo offered musicians a chance to promote themselves (for free) to its community. Musicians accepted this offer, and in exchange, provided their music for free. No one was forced into it. No one was compelled to do it. If either party felt the other was unfair they could choose not to engage in the trade -- and they could also vocally complain. In fact, Bragg did just that when he felt MySpace's terms were unfair, and they changed them. So by choosing to accept Bebo's terms, clearly they were perfectly acceptable. It was a fair trade.
Bragg goes on to assert: "The musicians who posted their work on Bebo.com are no different from investors in a start-up enterprise. Their investment is the content provided for free while the site has no liquid assets. Now that the business has reaped huge benefits, surely they deserve a dividend." Actually, they're very different from investors. Investors made a very different trade. They traded money for equity. Again, it was the fair and open market that allowed that. If Bragg had wanted to trade music for equity, he should have discussed it before... not after. You can be sure that any investors in Bebo didn't ask to change the terms of the deal after the buyout went through.
Complaining after the fact about what happened is like selling a bunch of wood to a builder for a few thousand dollars, and then complaining when he turns that into a million dollar house. Was the wood seller exploited? No. He made the fair trade, and the builder was then free to do what he wanted.
Nick Carr's response to all of this is especially wrong. He writes: "When challenged in this way, the plantation owners counter that they are doing musicians a favor by providing them with a place to promote their work." That is incorrect in so many ways it would take another whole post to get through them all. But let's take the simple point: no one is saying they are doing musicians "a favor." They are saying that there's a fair trade. You give music, we give promotion. No favors at all.
Carr and Bragg go on to use radio as an example, noting that it pays royalties, so why shouldn't social networking sites. This is incorrect for a variety of reasons. First, in the US at least, radios do not pay musicians royalties. This was a decision made by the government that since musicians benefit from airplay, no royalties are needed for the musicians (other royalties are paid for composers and publishers). However, much more to the point was that for most of the history of popular music, those royalties have been meaningless -- as record labels went through all sorts of contortions to have the money go in the other direction. What's sometimes called "payola" has gone on for years, with the record labels effectively bribing radio stations to get music on the air -- recognizing that the promotional value greatly outweighed the royalties coming in.
In other words, a free market will let the benefits to both sides balance out. If payment needs to even up one side, then the market will determine that. But, many musicians made a fair trade decision to take up the offer that Bebo made. It's their own fault if they feel they got the short end of the stick, but they clearly were happy to go along with the deal originally. Buyer's remorse and sour grapes are no excuse. If anything, this sounds quite similar to Doug Morris' ridiculous belief that no one else can make money.
To understand this most simply, it goes back to the psychological explanation we discussed earlier this year, where relevancies matter. People dislike seeing someone else made much better off, even if they are better off themselves. These musicians felt they were better off by using Bebo, but they're now upset that Bebo's founders are relatively better off than they are at the end of the deal. It's a weird world when someone would prefer to be worse off, rather than seeing someone else be even better off. In the meantime, if you'd like to read an ongoing debate between Billy Bragg, myself, Tim Lee and Joe Weisenthal, check out the post on Joe's blog where we all discuss this in the comments.
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Filed Under: billy bragg, copyright, music, nicholas carr, royalties, social networks
Companies: bebo
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the cost of infinitely reproducible digital goods
but artists can't think like economists, they would rather have "1000 true fans" than 50,000,000 pennies.
http://txtat.blogspot.com/
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It's Not Exploitation If You Chose To Take Part
I wholeheartedly agree with Bragg and Carr that the music industry needs to radically rethink basic concepts such as the value of promotion. Mike Arrington's comment that "Recorded music is nothing but marketing material to drive awareness of an artist" seems very backward looking. Artists attempting to capture a revenue stream from sites like Bebo, if the market will sustain it, sounds like a perfectly reasonable solution for the future.
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Re: It's Not Exploitation If You Chose To Take Par
In my reading of his post it seemed to me he was advocating musicians begin to demand a more accurate payment of fair value of their content, not that musicians should be paid ex post.
But they ARE getting a fair value exchange, otherwise why would they take it?
I see your point, that Carr's not asking for changing the terms, but I don't get this notion that the musicians were somehow exploited, as Carr suggests.
Bragg is a bit caught up in sour grapes and settling an old mistake, I believe that Carr is advocating musicians — and content providers in general — stop making the same mistake in the future.
I guess I don't see it as a mistake. They made a fair deal at the time. If it wasn't fair, why did they do it?
I wholeheartedly agree with Bragg and Carr that the music industry needs to radically rethink basic concepts such as the value of promotion. Mike Arrington's comment that "Recorded music is nothing but marketing material to drive awareness of an artist" seems very backward looking.
Arrington's comment is dead on (working on another post about that). It's the same thing we've discussed here for years. The economics is pretty straightforward. The music will only become promotional. It's not backwards looking at all. It's forward looking.
Artists attempting to capture a revenue stream from sites like Bebo, if the market will sustain it, sounds like a perfectly reasonable solution for the future.
It's not sustainable. Others will quickly discover that they can do better without adding that royalty payment into the mix, which adds unnecessary friction to the market, and then the issue goes away.
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Re: Re: It's Not Exploitation If You Chose To Take
I guess I don't see it as a mistake. They made a fair deal at the time. If it wasn't fair, why did they do it?
I think you've fallen into the one of the major traps of neo-classical economic thinking, namely the assumption of perfect information. The musicians who distributed their music on Bebo may have thought they were making a good deal at the time, but in hindsight wish they had different terms. Clearly that is the case with Bragg. One would assume (hope?) that when Hi5 comes calling he will be a bit wiser. That said, I don't see the logic in assuming since musicians made a deal in the past that it was a good deal at the time, or will be going forward.
It's the same thing we've discussed here for years. The economics is pretty straightforward. The music will only become promotional.
I generally agree that giving away music is probably a good way to cross-subsidize concert tickets, merchandise, and god knows what else, and I think your past articulations of that idea are sound. However at this point we have no idea if that is a sustainable model. Other than a few examples here and there of short term trials (Radiohead, Prince, NIN, BNL, etc.) no one can say for sure if there is enough money there to survive. If Bragg and anyone else wants to try to open up another revenue channel from the likes of social networks I say God's speed and more power to them. Is it sustainable? Beats the heck out of me, but its probably worth a try. Now the idea that musicians are owed something out of a sense of fairness is a totally different issue . . .
Unrelated, but I just finally moved out to SF. We should grab a drink and argue music sometime soon. Maybe we could call it the "Techdirt Music Industry Conference" invite the rest of the readers and get some sponsorship!
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Re: Re: Re: It's Not Exploitation If You Chose To
Not at all. I'm actually one of those who argues (rather vehemently) against the idea that anyone has perfect information in these decisions. But I do think that when people enter into transactions that both sides believe are fair, it's bad to go back and try and reneg on the deal later.
The musicians who distributed their music on Bebo may have thought they were making a good deal at the time, but in hindsight wish they had different terms. Clearly that is the case with Bragg. One would assume (hope?) that when Hi5 comes calling he will be a bit wiser. That said, I don't see the logic in assuming since musicians made a deal in the past that it was a good deal at the time, or will be going forward.
Well, Bragg claims he never even did anything with Bebo in the first place, so I *really* don't see what he has to complain about.
But, I agree, on the next deal they can change the terms if they want. I just don't think that Bragg is realizing how much of a fair trade musicians got. They got plenty of promotion up front for free. They didn't have to pay for hosting. They didn't have to build a community. They got all that for free.
And what did Bebo get? Well, they took a big risk. The whole thing was costly to host, and it was a highly competitive market. It worked out for them in the end, and with risk comes reward. But the musicians got a very fair trade when they did it.
I generally agree that giving away music is probably a good way to cross-subsidize concert tickets, merchandise, and god knows what else, and I think your past articulations of that idea are sound. However at this point we have no idea if that is a sustainable model. Other than a few examples here and there of short term trials (Radiohead, Prince, NIN, BNL, etc.) no one can say for sure if there is enough money there to survive. If Bragg and anyone else wants to try to open up another revenue channel from the likes of social networks I say God's speed and more power to them. Is it sustainable? Beats the heck out of me, but its probably worth a try. Now the idea that musicians are owed something out of a sense of fairness is a totally different issue . . .
As I've pointed to elsewhere, it's absolutely sustainable, and for that you just need to look at the history of economic growth. Economic growth is driven by the introduction of infinite goods, so the more there are, the more growth there is -- and that will grow every other aspect of the market. We're already seeing this. Every single scarcity that touches on "music" has grown larger and larger. This isn't a theory where I'm just guessing. It's based on a ton of economic research. I've been trying (and failing, it appears...) to figure out a way to explain all of it without forcing everyone to dig through the same set of economic research.
Unrelated, but I just finally moved out to SF. We should grab a drink and argue music sometime soon. Maybe we could call it the "Techdirt Music Industry Conference" invite the rest of the readers and get some sponsorship!
Heh, meant to ask if you had made it out here. Would be great to get together, with or without sponsorship.
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Re: Re: Re: Re: It's Not Exploitation If You Chose
Excellent point, though at the end of the day we'd have to run the actual numbers to figure out if this was a profitable deal. For Ghostface Killah it clearly was not: http://www.youtube.com/watch?v=rnKGLVAKkXs (WARNING: coarse language and hilarious).
Economic growth is driven by the introduction of infinite goods, so the more there are, the more growth there is -- and that will grow every other aspect of the market.
Infinite goods and the idea of technological innovation pushing the boundaries of economic growth is sound (the article in today's WSJ about Malthus and the world's carrying capacity skirted that issue leaving me very frustrated) but to assume that music works in the same way may be a mistake. In your unified theory post you make two very important statements:
1. those new opportunities may not all be capturable by the creator of the content. Indeed, there will be some externalities created by the free flow of an infinite resource.
2. It's certainly true that there are some externalities -- where some people will enjoy the music for free without ever taking part in paying for the scarce components.
Unless you've seen some fantastic studies I have not, these two externalities are not yet quantified. It seems very possible to me that these market quirks, and especially the latter, may be too much for musicians overcome with the scarce products they still have to sell while continuing to make a living. My guess is that they are not, but frankly I don't know, and I don't fault any musician who is not willing to risk his or her livelihood to find out.
What the music industry needs more than anything else is some creative thinking around business models, value creation, and monetization. While I generally agree with your stance I think we should encourage as much experimentation as possible, even trying to capture value from sites like Bebo (going forward anyway).
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Re: Re: Re: Re: Re: It's Not Exploitation If You C
Hilarious, yes, but he didn't embrace what we're talking about. He's complaining about people downloading instead of buying the music. That's the whole point, though. Of course people are going to download. That's why you give them something else of value to buy. The problem is that he didn't do that. The downloads increased his market, but he didn't position himself to collect on it.
Infinite goods and the idea of technological innovation pushing the boundaries of economic growth is sound (the article in today's WSJ about Malthus and the world's carrying capacity skirted that issue leaving me very frustrated) but to assume that music works in the same way may be a mistake.
Heh. Well I've wasted all day discussing this stuff, and so I haven't had any time at all to write up the post I've been intending on that very WSJ piece (or to get my REAL work done). Hopefully will have something tonight or tomorrow on it.
But I don't think it's a mistake to assume that's the way music works as well. Paul Romer's research showed this pretty clearly (though I think he eventually pulled the wrong conclusion out of it at the end). It's all infinite goods. You don't assume infinite goods work differently if they're an idea or a song.
Unless you've seen some fantastic studies I have not, these two externalities are not yet quantified. It seems very possible to me that these market quirks, and especially the latter, may be too much for musicians overcome with the scarce products they still have to sell while continuing to make a living
Well... I'm going to be a little coy, but I will say yes, I've seen some fantastic studies (and there are a few more that will be out soon). I just can't say anything about them yet.
My guess is that they are not, but frankly I don't know, and I don't fault any musician who is not willing to risk his or her livelihood to find out.
It doesn't seem like a risk to me. It seems like a bigger risk not to...
What the music industry needs more than anything else is some creative thinking around business models, value creation, and monetization. While I generally agree with your stance I think we should encourage as much experimentation as possible, even trying to capture value from sites like Bebo (going forward anyway).
Sure, I'm all for experimentation -- and discuss all sorts of different experiments around here. But, there's no reason not to explain the basic economic framework of market growth, so that musicians can capture that growth. Suggesting models that are based on artificially limiting a resource limits growth. It just doesn't seem reasonable to me.
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carr?
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Re: carr?
Hmm. How about always? My posts are always about how the content creators can do better by embracing certain trends. I don't support infringing on anyone's rights.
The problem is that you seem to believe this is a zero sum game.
from time to time, i see this blog mentioned and i click over. it's always the same rant, regardless of the facts.
Actually, I'm quite careful to include the facts and the relevant research. Which facts did I get wrong here? You can complain, but it would help if you actually backed up your statement. Simply saying I ignored the facts isn't particularly compelling when you don't show which facts.
imho, he's forgotten more about this stuff than any little marketing pr guy ever learned. but i'm wasting my time here. enough
I am not, and never have been, a "marketing pr guy" but, weren't you the one just claiming the importance of facts and not twisting stuff?
As for Nick, if he's forgotten more about this stuff, he'd better start remembering at least some of it quickly.
In the meantime, since you seem so upset by all this, would you mind pointing out what I actually got wrong? I find it amusing that someone would criticize me for leaving out facts and then not provide a single one himself (and the one that he tried to claim, about me being in PR, is completely wrong).
Try again.
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Re: carr?
Besides, in this case the content producer has no legs to stand on, just as all the submitters to Digg and Slashdot have no leg to stand on when they want payment. The terms of service for both sites are very clear. If you want to get paid become a professional blogger. If you agree to give away your content for free stick to the deal. Trying to change the deal later is just plain dishonest. The same holds true when the "freeloaders" try to change the deal... which seems to be very rare.
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Nope. I do the same thing, check this blog occasionally, and have reached the same conclusion as you have regarding Mike's stance. Just the fact that musicians have been degraded to "content providers" says it all.
I initially thought that the internet would be a boon to musicians and bring down the evil major labels, who I always hated. The old-style music business may have screwed artists over, but at least there was a pretense of paying them. Sure, the contracts may have been horribly one-sided and the accounting was never fair or accurate, but at least they bothered to make excuses when they screwed you over!
The new version of "the Man" doesn't even have to bother with lying about royalty statements. You'll just never get paid! Hell, you're LUCKY to even get your stuff given away for free, because after all it gives you EXPOSURE! If you don't like it, well, there's a sucker someplace else who'll post his stuff for free, so who cares. Youtube or any other similar site PAY for content? SHARE the proceeds of the ad revenue with content providers? Nah, that's the OLD way of thinking!
The new "Man" is even worse for artists than the scheming, sleazy, coked-up, old school record executives ever were.
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Re:
Heh. When I discuss musicians people get mad and say "what about songwriters" or "what about authors" so I say "content providers" and now you get mad that I'm not saying musicians.
Please. There's plenty to debate over. Calling people "content providers" isn't degrading.
I initially thought that the internet would be a boon to musicians and bring down the evil major labels, who I always hated.
Um. Have you noticed that more people than ever before in history are making music? Have you noticed that more people than ever before in history are making money thanks to their music. Have you noticed that more people than ever before in history are making money without having a major label contract?
The old-style music business may have screwed artists over, but at least there was a pretense of paying them.
Again, more people are making money. There's very much a pretense of getting paid -- it's just not for the music directly, but for the additional products that the music makes more valuable.
I have made it clear from the beginning that the models we discuss allow the artists to make MORE money, by embracing free to make OTHER stuff more valuable. It seems that some people get to the "free" part and stop thinking.
BMW gives its commercials out for free, and it helps sell more cars. You don't hear people whining about that.
The new version of "the Man" doesn't even have to bother with lying about royalty statements. You'll just never get paid!
Again, more people than ever before in history are making money from their music. How can you say you'll never get paid?
Hell, you're LUCKY to even get your stuff given away for free, because after all it gives you EXPOSURE! If you don't like it, well, there's a sucker someplace else who'll post his stuff for free, so who cares. Youtube or any other similar site PAY for content? SHARE the proceeds of the ad revenue with content providers? Nah, that's the OLD way of thinking!
Considering people used to have to PAY to get their songs on the radio or PAY to host and stream it from their own sites, I'd think you'd be thrilled that others were offering you a chance to take that cost away from you.
The new "Man" is even worse for artists than the scheming, sleazy, coked-up, old school record executives ever were.
Again, I repeat: more musicians than ever before...
But why bother with facts when you want to shut your mind down?
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Royalties
Anyone who has ever invested time and effort into creating something (anything) that is valued by others should be able to relate to Bragg's sentiments on some level.
That said, I agree with the post. The artists were not investors. If Birch had lost $700 million instead of profiting by that amount, Bragg would not be making a plea for the artists' share.
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Another way of looking at Mike's point of view
The evidence suggests that some pieces are shrinking (music sales), but that others are growing phenomenally (concert revenues, merchandise, exclusives appearences and limited items...).
Now, this evidence is very strong and is proven right again and again. This doesn't mean it is 100% right, but it means that Mike's model is a very good one for musicians to follow. For the average musician, evidence suggests it is a better model to follow than the "old" big label model.
Musicians are still free to choose to do what they will with their music. Mike believes that the aforementioned model will provide them the most benefit.
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Yes it can be.
That being said however, I don't believe that's what happened here.
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Billy Bragg is wrong
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Bebo, Bragg and
"what Bragg is articulating in essence is this simple thought - the only real difference between the New Music Aggregators and the (automatically despised) Olde Aggregators is that the Olde Industry actually paid the artists something."
http://broadstuff.com/archives/808-Should-Social-Nets-pay-musicians,-and-other-Quixot ic-windmills.....html
Big picture is that paying content creators nothing is unsustainable economically.
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Re: Bebo, Bragg and
Ugh. They are not paying content creators nothing. Repeat: THEY ARE NOT PAYING CONTENT CREATORS NOTHING.
They are *paying* them promotional value. It's a fair exchange. The musicians want promotional value, Bebo gives it to them and is able to sell ads.
If it wasn't a fair exchange, musicians wouldn't go for it. So a payment has been made. Just because it's not done monetarily doesn't mean they're not getting paid.
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Re: Bebo, Bragg and
Again:
"Big picture is that paying content creators nothing is unsustainable economically."
The emphasis is on the word "paying" - that means giving them cash to spend!
In other words, if the SocNet pays them no money - cash - then they are unable to fund the rest of their miserable artistic existences of freezing garret, absinthe and stale bread because one can't pay for that in distribution links.
There is a fundamental misunderstanding of the "Free Economy" by non economists ( Web 2.0 dreamers and techies especially ), and it all boils down to this - all *sustainable* "free" economics are in actual fact "offset" economics - ie you are getting the money somehow else.
But in music's case you won't get it from the "rest of the sales opportunities" via trad media outlets, because endgame that is all gone. The total market size of Concerts, ringtones and T shirts does not equal the consumer music spend, is also not an easily leverageable market (unlike software), and is in any case hugely skewed to a small % of very famous acts.
Sadly, many of the "Open Model" offset options are not open to the Talent - Ad revenues are hoovered up by the distributor, Bragg cannot sell SLA's and Services around his free musicware, and he cannot sell his music as a loss leader while making money elsewhere because - well because the free model has decimated that.
So where do you propose, given very few (and much smaller) alternative options, and zero income from the New Model Distributor, that the creative musician gets the pennies to live on?.
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Re: Re: Bebo, Bragg and
They are getting paid. The additional attention from being on Bebo, helps get them paid in other ways: more concert revenue, more demand to see them live, more downloads, more t-shirts sold, more demand for a new album, more more more... all of which equals more cash.
Read this: http://www.techdirt.com/articles/20070503/012939.shtml
In other words, if the SocNet pays them no money - cash - then they are unable to fund the rest of their miserable artistic existences of freezing garret, absinthe and stale bread because one can't pay for that in distribution links.
Again, do NOT confuse giving away your music with not being able to make any money.
Since the music acts as a promotion, it helps them sell MORE of everything else. So I'm saying that they make MORE money this way by giving away their music for free.
But in music's case you won't get it from the "rest of the sales opportunities" via trad media outlets, because endgame that is all gone. The total market size of Concerts, ringtones and T shirts does not equal the consumer music spend, is also not an easily leverageable market (unlike software), and is in any case hugely skewed to a small % of very famous acts.
Er. You are wrong. You DO get that from the rest of the sales opportunities, and note that all of those opportunities GROW because the free music makes them all more valuable.
In fact, most bands today make nothing from actual music sales (the labels take all of that) and live performances are where the money comes from anyway.
And, actually, you're wrong in saying it's highly skewed. It's becoming less and less so. The top acts did less well last year, but the overall revenue from concerts grew dramatically -- with most of that being on the "long tail" of acts.
Sadly, many of the "Open Model" offset options are not open to the Talent - Ad revenues are hoovered up by the distributor, Bragg cannot sell SLA's and Services around his free musicware, and he cannot sell his music as a loss leader while making money elsewhere because - well because the free model has decimated that.
Again, not at all. You seem to not understand the model at all. I have pointed to musical act after musical act that has made this work, small and large. Why do you suddenly think it doesn't work.
So where do you propose, given very few (and much smaller) alternative options, and zero income from the New Model Distributor, that the creative musician gets the pennies to live on?.
Again, this is simply incorrect. There are MORE options for them to make money. The music makes every scarce good around them (concerts, access, new albums, t-shirts) more and more valuable.
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However, most Silicon Valley tech thinkers are under the misapprehension that social networks have value in and of themselves, or worse, think that some "killer app" in the form of a widget or Facebook application will emerge to make these social networks useful. Outside of the techset myopia, it becomes really apparent that the killer application for many of the social networks is, in fact, music. What the bloggers who have rushed to attack Bragg have simply accomplished is to make sure that artists will from here on in enter into an adversarial relationship with any social network and these artists will increasingly be forced into the arms of the music labels the tech bloggers so detest because those labels are the only ones who will have any sort of leverage to protect their and their clients financial interests.
And don't get me started with this inane marginal cost argument people are parroting...
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Re:
I've never said such a thing. Why would you assume that?
What the bloggers who have rushed to attack Bragg have simply accomplished is to make sure that artists will from here on in enter into an adversarial relationship with any social network and these artists will increasingly be forced into the arms of the music labels the tech bloggers so detest because those labels are the only ones who will have any sort of leverage to protect their and their clients financial interests.
Are you new here? First of all, I made it clear that there's no "adversarial" relationship at all. Both sides benefited from the transaction. And also I don't hate record labels. What gives you that idea?
I just wrote about why record labels were still necessary:
http://www.techdirt.com/articles/20080318/173833576.shtml
Please don't put words in my mouth.
And don't get me started with this inane marginal cost argument people are parroting...
If by "inane" you mean widely accepted economic truth, then perhaps you might be on to something. So, please, do explain why this simple fact of economic history is not worth pointing out?
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Re: Bebo, Bragg and
And I suspect what we would probably also disagree on the sale value of a Bebo or whatever if it had no music on it.
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Re: Re: Bebo, Bragg and
Ok. Well, as I noted to Oliver, look at the history of economic growth. Look at the research of Paul Romer. Look at the research of Eric Schiff. Start doing the math, and build a few economic models, and you'll begin to see that the market can't help but grow. I recognize that I need to come up with a better way to show why, but it does. There is not a market in history that didn't grow when you introduce more infinite goods into it, and further monetize the scarce parts. In fact, the numbers are stunning. I'm not one for absolute statements, but there is simply no way the resulting market is smaller.
And I suspect what we would probably also disagree on the sale value of a Bebo or whatever if it had no music on it.
Would we? I don't know. I tend to think that the music had a fair amount to do with the value. In fact, that's part of the point. The music makes everything else more valuable.
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Re: Re: Re: Bebo, Bragg and
Absolutes always scare the crap out of me. If you can share the models I'd love to see the numbers.
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Re: Re: Re: Re: Bebo, Bragg and
Not yet... but it's coming. :) Tragically, I'm working like 3 full time jobs at this point, so it may be a little while before it's ready to go.
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And the otherside of the coin....
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