The Ridiculous Concept Of The 'Value Gap' In Music Services... And How It Could Harm Both The Tech Industry And The Music Industry
from the be-careful-what-you-wish-for dept
Over the past few months, the legacy recording industry has coalesced around a new talking point -- a so-called "value gap" between different kinds of music services. In particular, the phrase is used to attack YouTube and to claim that it's somehow unfair that the ad rates and money made from the ad supported YouTube is much lower than purely subscription services. This has lead to the repeated false claim from the RIAA and others that revenue from vinyl records is more than from ad supported streaming.Unfortunately, this value gap phrase has caught on in certain circles -- including over in Europe where the European Commission has mentioned it as it puts in place plans for copyright reform. Tragically, and incorrectly, EU officials have started referring to reasonable intermediary liability protections and other things as a "loophole" within copyright law that somehow allows platforms to "unfairly benefit." It allows them to claim that they're just trying to "level the playing field" when that actually means tilting the playing field heavily in one direction.
Maud Sacquet, from CCIA and Project Disco, has a good blog post about why this concept of the value gap is so problematic. As she rightly points out, differentiated pricing in music is not a new concept:
The claim that this difference is “unjustified” or somehow “unfair” should be challenged. The music industry’s revenues have always differed depending on the sources (i.e. the sales of sheet music and phonograms, live performances, radio and TV broadcasts). Online services have become additional sources of revenue, with different business models and technologies generating different incomes – reflecting the current situation in the offline world.And that's true, but even that underplays the reality of the situation -- which is that there are good reasons for differentiation here. It's not just about differences in sources, but differences in how people consume music and the money that changes hands reflects that. Terrestrial radio is free and ad supported -- and it's an easy low-barrier entry point for people who aren't necessarily huge music fans. Then as you travel up the ladder of musical fandom, and people get more committed, they may use a subscription service, or have their own locally stored music.
Sacquet further points out how the ideas that the EU is apparently considering would create a massive disaster for internet services that provide platforms for music:
Among the potentially very harmful measures considered by European policymakers to solve this “value gap” is the “clarification” of the right of “communication to the public” – i.e. both user and online hosting services would be “communicating to the public” each time a user is uploading a content online. Online platforms, today only indirectly liable for copyright infringement, would become directly liable. All online hosting services would de facto fall outside of the scope of the liability protection regime of the E-Commerce Directive.But, perhaps even more importantly, is that it would end up harming the very musicians clamoring for such a solution. We're still in the very early days of figuring out how music services should best work online. The whole concept of the "value gap" and "leveling the playing field" really are all about deciding that there is "one true business model" for all music services to live under, and EU technocrats (heavily pressured by the legacy recording industry) are going to tell the world what that is. That's a recipe for disaster not just for the tech sector, but the very musicians who rely on these services to make money today.
Such a measure would have far reaching consequences.
Firstly, it could cause online services to shut down their upload and sharing services, thereby chilling innovation.
Secondly, this would severely restrict users’ freedom to impart and receive information, something that policymakers have struggled to grapple with in the past.
Thirdly, it could cripple the growth of the digital economy – when the purpose of the Digital Single Market is the exact opposite.
Most importantly, they will completely lose out on the differentiated ways in which fans enter the music ecosystem. When you have a one-size-fits-all model, it pushes towards a world where the vast majority of casual music fans are left out, in a misguided effort to try to force more money out of stronger music fans. Years ago, music economist Will Page pointed out that the industry was wrongly focusing on share of wallet that they were able to extract from people, rather than trying to expand the population that was listening to music and contributing to the music ecosystem in some way. That is, there's a large percentage of the population that doesn't support the music ecosystem in any way. They don't subscribe to anything. They don't go to concerts. They're casual music listeners at best. And there's a real opportunity to offer low barrier entry points to those people, allowing them to "move up the ladder" to become bigger and bigger music fans.
But you lose all of that with a forced "level playing field." The "value gap" is not a value gap at all. It's simply showing differentiated pricing to help bring in more casual music fans and create new opportunities going forward. So the end result here would be not just harming technology companies and leading to fewer services with less innovation, but, even worse, a significantly smaller population of music fans who are willing to support the industry -- and the ones who remain will be getting squeezed harder and harder by the industry, eventually probably shoving many of them out of the market as well.
The talk of a "value gap" is not only misleading and wrong, but it's dangerous. And it's dangerous to both internet services and musicians -- which shouldn't be a surprise because, despite all the rhetoric, the two are pretty closely aligned in their overall interests.
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Filed Under: copyright, music industry, piracy, price differentiation, streaming, value gap
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The wrong value gap
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Re: The wrong value gap
Something that also seems to go right over their head is that it's possible to get more money even if you charge less, simply by increasing the number of people paying, but it would seem that they want to have their cake and eat it too, charging the same amount as before and expecting the market to just adapt to their wants, rather than them having to adapt to the changing market.
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Re: Re: The wrong value gap
In todays market, online publishing has almost zero upfront costs, making it much easier to predict propertional income and where the money are going, by having a modicum of inside knowledge.
The "value gap" being talked about is the value of the loan that the music companies were generating revenue from. With significantly lower upfront economic costs for publishing music online and the lack of needing to scale the printing according to predicted sale, the music companies have lost a significant bargaining-chip and that bargaining-chip is called "value gap". As optimistic as you make it sound, the music companies will never recover that value gap with the current ease of publishing online. They are facing a transition towards a new world where the economic return of the past will never return. That value gap is real, but it should never be compensated by hampering technological publishing opportunities by making further unwarrented regulatory special cases like this. Arguably that value gap is a sign of the free market forces working as intended.
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Re: Re: Re: The wrong value gap
Barring turning back the clock such that they destroy the current services and are once more the only distribution route(something they keep trying to manage but have thankfully failed at so far), no, they aren't likely to ever reach the same levels of profitability that they managed in the past, as the market and how people interact and use the services have changed too much.
They could shift from gatekeeper to facilitator roles though to stay relevant, and as such profitable, even if not as profitable. Instead of holding all the cards and being able to dictate terms to the musicians working for them they'd instead be in the position of working for musicians, helping them get their music on different services, promotion, that sort of thing. Musicians would pay them to avoid hassles that the musicians themselves don't want to deal with, and/or use their more developed networks for promotion beyond what the individual artists can easily manage on their own.
They could do this, but their actions so far has indicated that they'd rather be dragged, kicking and screaming into the new market and learn to deal with it the hard way, so I don't expect them to make the change until they absolutely have to, hopefully to the point that several of them go under and leave the field more open for more flexible facilitators.
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Re: Re: Re: Re: The wrong value gap
No. Not really. The top of the heap from yesteryear made their bones by being skilled at hustling, not by being good musicians.
It doesn't matter if they hire people to "nerd harder". The problem isn't the technology, it is the fact that they suck, always sucked, and now we all have enough freedom knowledge and variety to know that for ourselves.
And that is true across the board. It isn't just music, it is also cinema, tv, politics etc. The bar for modern consumers was raised in the late 90's, and all of this market constraint is an attempt to divest people of the freedom and liberty that was unlocked by the collaborative efforts of thousands of programmers and engineers.
The modern Internet is the most collaborative and largest wonder of the world in all of history. The pyramids of Giza, the great lighthouse all pale in comparison. These guys are robbing bricks out of the thing, and are under the impression that nobody notices.
Wrong...
Thanks TD, for shining the light.
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The gap...
The answer is a worldwide tax, payable by everyone, whether they listen to music or not, and have a 10% increase in the tax every year, and prison for those that do not pay.
Then they take their meds...
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"I got a candy bar yesterday, you owe me a candy bar today."
Secondly, this would severely restrict users’ freedom to impart and receive information, something that policymakers have struggled to grapple with in the past.
Thirdly, it could cripple the growth of the digital economy – when the purpose of the Digital Single Market is the exact opposite.
Take a wild guess as to which groups stand to benefit the most from the above and you'll have a pretty good idea as to the source behind the absurd 'value gap' idea and their motivations for spreading it.
In addition to that I think a big part of it is the massive sense of entitlement the recording industry tends to exhibit.
They were the gatekeepers but a few years back and now that they're not, now that it's entirely possible to completely bypass them they're throwing fits. Rather than adapting to work with musicians on more equal terms they're lashing out at the tools and services that those musicians can use, trying to undermine them at every turn and force people to come back to them on their terms.
They also seem to operate under the idea that they are owed the same level of profits in perpetuity. If they made X last year then they are owed X this year, no matter what may have changed in that time period. If they made out like bandits selling plastic discs, able to charge X per song in that format then clearly they deserve X per song no matter what format or how it's accessed, with anything less being 'unfair'.
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Re: "I got a candy bar yesterday, you owe me a candy bar today."
The RIAA and MPAA whose membership include a lot of music and film industries biggest companies still want the days of old when they controlled how, when, where, what format and what you payed to get the media from the end destination, thus they controlled the monies before they got distributed out after deductions for various accounting, production, distribution and advertising and of course if there was anything left over giving whoever their pittance.
Now that artists and film makers have a say and can put out their own albums thru various methods of release and even cut the studios and labels out of the equation troubles the RIAA and MPAA as they see their take of the pie become less and they have less control where an artist, band or film is not under their thumb.
Honestly Google and every other company that sells dvd or MP3's, cd's, or media for download or to stream online could give the RIAA/MPAA 99 cent out of every dollar and they would still scream it isn't enough and how they are being cheated.
The RIAA/MPAA with their studio's and Labels as clients have said the same thing time and time again. When casette and casette records came out they said it would be the death of music labels and artists and they needed a levy to survive.
When VHS and Beta recorders came out the same refrain was screamed again at how it would be the death of the industry and a levy was needed.
When CD's and DVD's came out and the record able media methods were once again purported to be the death knell of their industries... unless a levy was added
Over and over again we have seen the same mantra over and over again from the RIAA/MPAA crying out the same complaints.
No matter how much Google, Youtube, Apple increase either the MPAA or RIAA aligned clients a better percentage it will never be enough and it will only placate them till the next time they fell they deserve even more.
They do not give a shit about the consumer and are uninterested in what the consumer will pay or in what way the consumer can get the media they desire.
It has always been this way for the MPAA/RIAA and its clients, it always will be and wont change. The consumer will always be the one held hostage to the whims of the clients of the RIAA /MPAA and they could care less what the consumer see's as fair and convenient
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Complaining about a Choice...
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Re: Complaining about a Choice...
it's the exact same reason that make news companies complain that Google "pirate" their content, ask lawmakers to make Google pay them for the "stolen content"... and have an explicit rule in their robots.txt that allow Google in.
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I noticed how you said MUSICIANS instead of labels/gatekeepers/middlemen. Because those would benefit greatly.
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give them everything they want.
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Re: give them everything they want.
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Re: Re: give them everything they want.
they are already taking massive innovation to the grave, at this point there is no real additional damage that cannot be absorbed in letting them die a violent death, taking whatever casualties with them.
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Re: Re: Re: give them everything they want.
They control the legislation, and they are using it to ensure they keep getting paid. Growing or maintaining their audience isn't necessary for their plan. As long as they control the laws, they aren't going anywhere.
It will hurt the musicians and music industry as a whole, sure but not the legacy labels lobbying for these laws.
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Re: give them everything they want.
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Re: give them everything they want.
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Re: Re: give them everything they want.
agreed, if everyone in the world stopped buying movies and music completely, the MAFIAA would run to the gov and get laws demanding money from everyones wallet irrespective of reality.
I changed my consumption habits 22 years ago, never looked back. I still stand my my statement, give them everything they want, adapt or die.
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I mean since clearly it's impossible to disagree with the recording industry without being paid to do so it only makes sense that it's impossible to agree with them unless you're getting money from doing so, so I'm wondering how much they're paying you?
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I think he forgets sometimes.
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My Value Gap
/s
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Idea
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Re: Idea
That's not a new idea. That's just copyright with a different time limit.
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Good article
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With YouTube the *IAA has sorta got a point
YouTube is, for many of my peers anyway, a regular jukebox. I don't subscribe to any streaming service, and when I want to hear music I don't already have I go to YouTube. Sometimes, if I can't find a decent torrent, I'll download a copy from youtube and strip out the audio. But YouTube pays less than Spotify or Pandora or whoever, and it sorta feels like It YouTube is using the law as a sword, not a shield.
I don't care about the studios or recording companies. Sony Music & friends can go DIAF. I do care about the artists and techs and workers -- the key grip or whatever -- but they're pretty much tangential to this discussion. Whether it's $0.01 or $0.005 per stream won't matter much to them.
I don't know what the solution is. It sure as hell isn't to get rid of safe harbor provisions. It's just starting to look like youtube is becoming the bully here (if only the other guy wasn't so evil, I might be more concerned with this)
Anyway, I haven't paid for a CD since 2001 or 2002 and haven't bought a DVD since maybe 2006, so this is more of an intellectual exercise than anything :)
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Re: With YouTube the *IAA has sorta got a point
"Sometimes, if I can't find a decent torrent, I'll download a copy from youtube and strip out the audio."
But, YouTube are the bad guys because they don't offer enough, even though you deliberately stop them from paying anything at all after your first play?
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Re: Re: With YouTube the *IAA has sorta got a point
And as for me using youtube to pull a couple of songs: 1) I never claimed to be a beacon of consistency or righteousness 2) We're I not oppressed and exploited by America's capitalist oligarchy I'd have more disposable income to spend on music and 3) I'm more interested in how the law should work.
Most important, it just sort of feels like youtube is being a bully. Funny how quickly they became the incumbent with the power. Again, if it was anyone besides the members of the RIAA they were slapping around, I'd be outraged. As it is, I'm sorta meh.
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Re: Re: Re: With YouTube the *IAA has sorta got a point
This usually translates as "I pulled the claim out of my arse, but have fun looking". No thanks.
"And as for me using youtube to pull a couple of songs: 1) I never claimed to be a beacon of consistency or righteousness"
No, but you whined about YouTube not paying enough to artists in the same breath as admitting to pirating. Which would be bad enough if you were just torrenting, but you openly admitted to directly removing revenue from YouTube. Do you not see the open hypocrisy?
"I'm more interested in how the law should work"
Which would be how, exactly?
"Most important, it just sort of feels like youtube is being a bully"
So, your personal feelings are worth more than verifiable facts. Got it.
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Re: Re: Re: With YouTube the *IAA has sorta got a point
More they are fighting back against those who bullied them into implementing contentid, which is certainly damaging them because of false take-downs., which have driven some people to competitors of YouTube.The RIAA's real beef is with those who self publish, and cut them out from the income from music, but they cannot go after them directly because that really would turn people and the politicians against them, so they keep on hammering the enablers of self publishing by crying piracy, and they are not giving use enough for what little of the music we control that they host.
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...which has always been the case. I'm not sure what imagined world these people grew up in, but I know I grew up in a world where most people didn't pay for music directly and got it for free via radio, friends, parties and later TV. Most people only bought a handful of albums and singles each year, if that. Yet, that was the time when they made the most money.
The idea that the "free" music is suddenly wrong because it's online is strange to me purely because I can't remember a time when casual fans didn't get most of it for free. Trying to simply force those people who do pay to pay more is a losing tactic.
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hahahaha this is the Techdirt mindset in a nutshell.
But at least there's one honest person here.
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It's less recording industry and more music industry these days. Less 'give us money and all the rights to your music and we'll sell plastic discs and take most/all of the money' and more 'Post your music on our service, we'll take a cut from sales/revenue and give you the rest'.
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Tech Failed Music
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Re: Tech Failed Music
I used to subscribe to them, before the majors stepped in a killed its value and usefulness. I hope blithering incoherent idiots like you weren't the ones I paid money to during that period.
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Awesome insights.
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nice share
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