No, RIAA, It's Not The End Of The World For Musicians

from the things-are-turning-out-just-fine dept

Oh no! The sky is falling! Piracy is decimating musicians!

No, it's not. My latest law review article rebuts these cries and shows how new technologies have allowed musicians to participate in every step of the process of creating, developing, and marketing music.

The Recording Industry Association of America (RIAA) has claimed that piracy is "too benign of a term to adequately describe the toll that music theft" takes on musicians. And it has claimed that "there are fewer people trying to make money as musicians today" and that, in 2012, "the number of people who . . . describe themselves as musicians has declined since 1999 by 41 percent."

Although such numbers sound dire, I explain that the 41 percent figure is vastly overstated. Recalculating the figures for Ars Technica, Matthew Lasar found that the decline was only 8.4 percent. The RIAA's response was that it had not compared data between years, but rather had "looked at MONTHLY data: one month in a year vs. another month a year."

Of course, such an exercise allows one to cherry-pick data to achieve desired results. It is no surprise, then, that the RIAA conceded that "different months yield different figures." And, as Mike Masnick pointed out, monthly data "fluctuates pretty drastically" (for example, July figures might be higher because of more weddings).

The remainder of the article provides an overview of tools available to musicians.

The first step in the production process is creation. There are numerous programs that allow users to create their own music, such as Logic Pro X, Cubase, and Pro Tools 11. The most well-known, GarageBand, lets users assemble as many as 32 tracks of instruments such as drum beats, synthesizer riffs, and guitar sounds.

Next comes distribution. Twitter and YouTube are two prominent examples. By shrinking the gap between bands and their fans, Twitter has offered a platform for musicians to connect with their followers. Bearstronaut, for example, used Twitter to release a new single and gain more followers by using a "Tweet for a Track," by which fans retweet a song to their followers and get the single in return.

YouTube is another tool that musicians have used to distribute their works. Alex Day, for example, gained more than half a million subscribers and roughly 100 million views within six years of creating a YouTube channel, and he released three singles at once, which "kill[s] chart placement" but is "better for the fans and for the music."

Musicians also can do their own marketing. Bandcamp provides musicians with "a rock-solid platform for selling your music and merchandise" and offers "up-to-the-instant stats system [that] reveals who's linking to you, where your music is embedded, which tracks are most and least popular, what's being downloaded and when, [and] which search engine terms are sending traffic your way." Other examples include the Coalition of Artists and Stakeholders (CASH) (an open-source, nonprofit organization "focused on educating and empowering artists and their fans") and ReverbNation's Music for Good Program (which allows artists to split their profits with a charity).

Next comes royalty collection. CD Baby Pro offers worldwide music distribution and endeavors to "give independent artists the same royalty collection resources that major label artists" use. TuneCore distributes music to dozens of online services, sends royalties to participating musicians, and provides "detailed sales and daily iTunes, Spotify, and Amazon Music reports."

To carry out each of the above steps, musicians can raise funds from various services. The most prominent is Kickstarter, which, as of this writing, has raised $1.7 billion from more than 8 million people to fund 84,000 creative projects. Indiegogo has looser guidelines that "essentially allow for the crowdfunding of anything—projects, trips, charities, and personal wishes." And Patreon allows users to offer ongoing support for continued work and gives content creators the ability to set rewards such as "giv[ing] out their personal cell numbers, . . . play[ing] an online game with patrons, or even provid[ing] behind-the-scenes production diaries."

In recent years, touring has become an important source of revenue. Market leader Songkick aggregates concert information, allows users to receive notifications of when bands will be in town, and includes a database of fans' accounts of their concert experiences. Bandsintown presents the bands users might be interested in as word bubbles, with the boldness level of the name indicating the app's confidence that the user will like the group. Timbre allows users to enter their location and receive a list of bands playing in their area.

In addition to all these tools, musicians can forge direct connections with fans. Our own Mike Masnick, in this and other fora, has been a pioneer in articulating a business model based on connecting with fans and giving them a reason to buy. Just a few examples:

• Amanda Palmer, who in three experiments in one month totaling ten hours, made $19,000 from Twitter (compared with "absolutely nothing" from 30,000 record sales) after creating a "Friday Night Losers T-Shirt," hosting a webcast auction, and offering access to a recording studio event for the first 200 fans to request access.

• Josh Freese, a drummer who offers, for varying levels of payment, drum lessons, visits to museums or Disneyland, clothes from his closet, his Volvo station wagon, service as a personal assistant, a spot on tour, or personal songs.

• Jill Sobule, who similarly offers, for various levels of payment, access to shows for a year, names mentioned on a "‘thank you' song," concerts at individuals' houses, or the chance to sing on an album.

So don't listen to the record labels. Musicians are not confronting doom and gloom. Unlike the late 20th century, in which record labels played a crucial role, musicians today have the tools to undertake every step of the creation, distribution, marketing, and fundraising processes themselves.

The irony of the labels' flawed arguments is that they ignore that many independent musicians are thriving today, using tools their predecessors could only have dreamed about. No longer is the 20th-century, label-reliant model needed for success. The record labels may continue to witness the decline of their business model, but musicians may find that "the sky is rising."

Michael A. Carrier, law professor and author, Innovation for the 21st Century

Filed Under: business models, music, musicians, recording industry, sky is falling, sky is rising
Companies: riaa

Recording Industry's Latest Plan To Mess Up The Internet: Do Away With Safe Harbors

from the because-collateral-damages-is-foreign-to-you dept

For the most part, the recording industry has been rather quiet of late concerning copyright reform. With labels pulling funding from the RIAA and its international sister operations like the IFPI, the focus on copyright reform has been left mainly up to Hollywood and the MPAA. The recording industry has been much more focused on smaller issues like performance rights and other licensing issues. But, apparently, the recording industry hasn't yet truly given up on the idea of completely undermining key parts of the internet to get its wishes. According to the IFPI, its "top" goal for copyright reform is attacking the so-called "safe harbors" found in copyright law, like the DMCA's Section 512.

If you're unfamiliar with it, copyright's safe harbors are designed to make sure that the internet thrives, by avoiding frivolous litigation that would stifle free expression and innovation. Honestly, the safe harbors are a pretty simple concept: put the liability for infringement on the parties that actually infringe the content, rather than the internet services that they use. Think of it this way: you don't blame Ford for providing the getaway car in a bank robbery, and you don't blame AT&T for providing the phone service used to make a bomb threat. As such, it makes no sense to blame a hosting company because a blogger posted an infringing image.

IFPI's main target, not surprisingly, is YouTube. It makes a strained argument that the DMCA's safe harbor is costing the recording industry hundreds of millions of dollars -- and it does this by comparing apples to oranges.

Which results, the record industry argues, in what the IFPI calls a “value gap”. The trade group says: “An illustration of this can be seen in comparing the share of revenue derived by rights owners from services such as Spotify and Deezer, and those derived from certain content platforms like YouTube or Dailymotion. IFPI estimates music subscription services have 41 million paying global subscribers, plus more than 100 million active users in their ‘freemium’ tiers. This sector generated revenues to record companies of more than $1.6 billion in 2014″.

It goes on: “By contrast, YouTube alone claims more than one billion monthly unique users and is thought to be the world’s most popular access route to music. Yet total global revenues to record companies generated by certain content platforms including YouTube amounted to just $641 million in 2014, less than half the total amount paid to the industry by subscription services such as Spotify and Deezer”.

Note the implicit (and wrong) assumption, though: that YouTube and Dailymotion are the equivalent to Spotify/Deezer. Yet, much of the value in YouTube and Dailymotion is that they are platforms for anyone to upload any content, the vast majority of which is not music. But that point never seems to be considered by the IFPI at all. Instead, it wants to remove the safe harbors entirely from YouTube, by arguing that since the company is also providing services to help artists make money, it should lose its safe harbors:

Calling for action, IFPI chief Frances Moore said: “The value gap is a fundamental flaw in our industry’s landscape which sees digital platforms such as Dailymotion and YouTube taking advantage of exemptions from copyright laws that simply should not apply to them. Laws that were designed to exempt passive hosting companies from liability in the early days of the internet – so-called ‘safe harbours’ – should never be allowed to exempt active digital music services from having to fairly negotiate licences with rights holders”.

She added: “There should be clarification of the application of ‘safe harbours’ to make it explicit that services that distribute and monetise music should not benefit from them”.

But think about the obvious consequences to such a move (obvious to everyone but the recording industry, it seems). Removing the safe harbors from YouTube would have tremendous collateral damage, basically making the platforrm useless for all user generated content. It would effectively require Google to carefully pre-screen every video that goes up (beyond what it does now with ContentID -- which already, problematically at times, goes beyond what the law requires).

Furthermore, the message that Moore and IFPI are saying to the rest of the internet is don't help us monetize because the second you do, you should lose your safe harbor protections and immediately become liable for the actions of your users. How shortsighted can Moore possibly be? The recording industry's plan here is to basically tell the internet: don't build services that help us make money or we'll sue you. How is that possibly a smart strategy?

Filed Under: copyright, dmca, intermediary liability, liability, recording industry, safe harbors, user generated content
Companies: ifpi, youtube

Competition In The Music Space Is Great: Fragmentation In The Music Space Is Dangerous

from the don't-screw-this-up dept

As you may have heard, Jay-Z bought himself a music streaming service, called Tidal, which is now being relaunched with lots of high profile musicians onboard -- in fact as partial equity owners:

The plan was unveiled on Monday at a brief but highly choreographed news conference in Manhattan, where Jay Z stood alongside more than a dozen musicians identified as Tidal’s owners. They included Rihanna, Kanye West, Madonna, Nicki Minaj, Jack White, Alicia Keys, the country singer Jason Aldean, the French dance duo Daft Punk (in signature robot costumes), members of Arcade Fire, and Beyonce, Jay Z’s wife.

So, we have all of these artists, taking on Dr. Dre and Trent Reznor who were the keys to Beats Music, which Apple is getting set to relaunch. Jay-Z is positioning Tidal as more friendly to artists -- though that was also the marketing claim behind Beats, and then it failed to attract too many users, in large part because there was no free, ad-supported tier. Of course, it's one thing if you're one of those megastars listed above, who get some equity stake in Tidal, but what about every other musician? Is it really going to be that good of a deal for them? Jay-Z and crew insist they'll be paying better rates than competitors, but considering competitors still can't get anywhere near profitability, it seems reasonable to question if Tidal can actually make any money at all. It's one thing to say you're going to pay artists more. It's another to defy basic economics.

Tidal also has no free, ad-supported tier, but does have a more expensive $20 tier for higher quality sound, which may attract random audiophiles, but not much more than that. Indeed, the recording industry (and many artists) have been pushing back against the free tiers that already exist. Universal Music has been demanding Spotify cut back on its free tier. And Universal's CEO Lucian Grange has been using every opportunity to complain about "freemium" music plans. Now owned by Apple, Beats wanted to offer service cheaper than the standard $10/month and the record labels said no.

And, of course, now Jay-Z is bashing free music tiers as well:

“The challenge is to get everyone to respect music again, to recognize its value,” said Jay Z, whose real name is Shawn Carter. “Water is free. Music is $6 but no one wants to pay for music. You should drink free water from the tap — it’s a beautiful thing. And if you want to hear the most beautiful song, then support the artist.”

That's kind of nonsensical in a variety of ways. Every time we've heard people talking about getting people to "respect music again" or "recognize its value," the projects have failed (often miserably), because they're not at all focused on what music fans actually want. Rather they're focused on trying to change the behavior of music fans and that's really, really, really difficult -- especially when you're not really offering that much that's different.

But Jay-Z has a plan to get around that: exclusive deals.

Over the weekend, the Swedish blog Breakit reported — citing sources close to the deal — that Tidal’s plan of attack will be to ink first-window deals with the artists, where Tidal would get first releases of tracks from big-name artists ahead of any other digital streaming services. This would be exclusive, but only for a period: Spotify, Deezer and others would eventually also get these tracks, but only later.

At least they'll go up on other services later, but this seems like a dangerous path to go down. Again, rather than focusing on providing more value the focus seems to be on taking away value from other services: ending free streaming deals and doing exclusives to fragment the market and make it harder for fans to actually listen to what they want, when they want it and how they want it.

That's the wrong lesson to get at this stage of the game. We've gone through nearly two decades of the recording industry fighting the internet at every turn, and now that we're finally starting to see some services that actually cater to what people want, the old industry players are jumping in and trying to kill the golden goose yet again. Any time any service shows that it can attract a lot of users, the recording industry tries to figure out a way to bleed it dry as quickly as possible, rather than helping it grow and building out more value for users.

More competition in the online music space is a great thing. But the trend towards locking stuff up, and taking away the value to music fans, while similarly jacking up the prices, doesn't seem like a productive path. It seems like one that is just going to annoy fans and push them back towards unauthorized alternatives.

Filed Under: copyright, exclusives, freemium, jay-z, lucian grange, music, music streaming, recording industry, subscriptions, tiers
Companies: apple, beats music, spotify, tidal

New Study Confirms: Internet Is Contributing To Massive Profit Levels At Legacy Entertainment Firms

from the sky-is-rising dept

Our own research has shown this over the past few years, but contrary to the doom-and-gloom stories from the big entertainment companies about how awful the internet has been for their business, the truth is that it's enabling tremendous growth and profits. A few months ago, a study of the major record labels showed that they remained tremendously profitable. There's some up and down in there, but there's fairly consistent profitability, with pretty massive profitability from the two biggest ones, Universal Music and Sony. The report also notes a big increase in the profit margins that these companies are making, able to squeeze a lot more money out of existing resources.

A new, much larger, study from Ernst & Young shows that this is true across the media business these days -- and that a lot of the profitability is coming... from the internet. A quote from the report's lead author sums it up:

“We are seeing that digital is very much driving profits now, instead of disrupting it. Companies are figuring out how to monetize the migration of consumers to a variety of digital platforms, and this insatiable demand for content is fueling growth throughout the industry.”

Remember how the internet was supposedly killing music? Yeah, about that:

The music sector is driving record growth in profitability from the expansion of licensed digital subscription and streaming services, growth in music publishing and rising smartphone and tablet penetration in emerging markets.

Film?

Film and TV production companies are driving their profitability through increasing revenues from digital platforms and investments in franchise-based films and higher-margin television shows.

But, wait, just weeks ago, one of the copyright maximalist talking heads was telling us that franchise movies were being killed off due to piracy? Maybe not.

Either way, this goes back to the point that many of us made during the SOPA fight. Despite the desire of Hollywood and certain politicians to make this into a "fight" of Hollywood vs. Silicon Valley, it's a bizarre kind of "fight" when it's Silicon Valley providing all the "weapons" to Hollywood that's making them so profitable.

Filed Under: entertainment industry, hollywood, internet, music industry, profits, recording industry

Recording Industry Willfully Misreads The Law In Order To Sue Ford & GM For Having Built-in CD Rippers

from the keep-scroungingn-for-loose-change dept

It's no secret that the legacy recording industry players are constantly searching for new ways to make money. Of course, they don't seem all that keen on actually searching for new business models to make money, but rather they tend to default to new ways to squeeze money out of others through legal changes or lawsuits. That's what happens when you have an industry dominated by lawyers, rather than innovators. It's why so many new music services end up getting sued. It's why ASCAP tried to declare that ringtones were a public performance (ditto for the 30 second previews of songs at iTunes). Basically, these industries just go searching under the couch cushions for spare change to sue for because that's how they operate.

The latest such example is the AARC -- the Alliance of Artists and Recording Companies -- deciding to file a lawsuit demanding $2,500 for every car in which Ford and GM have installed CD devices that will automatically rip CDs into MP3s to store on a local hard drive. The AARC is a smaller and little known collection society. It was created solely to collect fees from the Audio Home Recording Act (AHRA), one of the many (many) laws that the RIAA foisted upon the world in fear over the rise of digital music. It was designed as something of a "compromise" between the RIAA and the computing and consumer electronics industry. The focus was supposedly to better enable personal, non-commercial home copies of music, while putting royalties on devices used to make serial (repeated) copies.

The problem is that the AHRA is basically a deadletter act, with little real standing in the world today, partly because the act itself killed the market for such devices. The RIAA had tried to use it in the late 1990s to ban the mp3 player (or, well, to tax them to death). But, thankfully, a court in RIAA v. Diamond rejected that interpretation of the law, making mp3 players perfectly legal (without the corresponding royalty tax). That ruling, which destroyed the RIAA's (wrong) interpretation of the law, also opened up the wonderful digital music world we have today, where you can store thousands of songs in your pocket. Without the RIAA v. Diamond ruling, it's unlikely that we'd ever have the iPod.

There are still a very small number of things that are supposedly covered by the AHRA, but AARC collects a tiny, tiny amount of money. The Copyright Office's data shows a total of $748,277.72 in 2013. That's down from previous years, but at it's very highest AARC collected $5.3 million, and most years it was closer to $2 million. Oh, and in case you're wondering, almost none of that money actually gets paid out. The last year that the Copyright Office has published details concerning these fees, 2010, it notes that AARC collected $1.75 million... and paid out just $7,894.84. Yes, you read that right. AARC collected nearly $2 million, but gave less than $8,000 to copyright holders (likely the major labels, who probably didn't give any of that money to actual artists). The previous year, it paid out a whopping $16,564.63.

However, suddenly AARC seems to think that these CD-to-mp3 devices violate the law, and the auto companies and the electronics firms that make the devices, Denso and Clarion, must pay. The AARC is pulling out all the stops to explain why the lawsuit makes sense, focusing on claims by GM (in its marketing material) that "the hard drive will not accept photos or other sorts of data" but just music. This is in part because of the Diamond ruling noted (correctly) that a general purpose hard drive doesn't apply. But the AARC appears to be totally ignoring other key parts of the ruling.

For example, the court focused on the fact that the AHRA was targeted towards devices that are making more copies of works, and not on attempts to make recordings for private, non-commercial use. Here's what the court said about Diamond's Rio mp3 player (SCMS is the DRM the AHRA required device manufacturers install -- the Rio didn't have it, because they noted you can't copy works off the device, so it wasn't needed):

the Rio does not permit such further copies to be made because it simply cannot download or transmit the files that it stores to any other device. Thus, the Rio without SCMS inherently allows less copying than SCMS permits.

In fact, the Rio's operation is entirely consistent with the Act's main purpose - the facilitation of personal use. As the Senate Report explains, "[t]he purpose of [the Act] is to ensure the right of consumers to make analog or digital audio recordings of copyrighted music for their private, noncommercial use."... The Act does so through its home taping exemption, ... which "protects all noncommercial copying by consumers of digital and analog musical recordings," ... The Rio merely makes copies in order to render portable, or "space-shift," those files that already reside on a user's hard drive. Cf. Sony Corp. of America v. Universal City Studios, 464 U.S. 417, 455 (1984) (holding that "time-shifting" of copyrighted television shows with VCR's constitutes fair use under the Copyright Act, and thus is not an infringement). Such copying is paradigmatic noncommercial personal use entirely consistent with the purposes of the Act.

In other words, the court recognized that devices that are just recording for home and personal use (and not allowing further copies) fit nicely into the purpose of the act and aren't subject to the royalty rates. It seems likely that the same argument applies to Ford and GM in this case. The AARC coyly claims that "other manufacturers, importers and distributors of comparable music recorders pay the required royalties without controversy," but it doesn't name who actually pays or for what.

Of course, these days, even CD ripping is well on its way to the technological graveyard. If the AARC magically succeeds with this lawsuit, I would imagine it would receive a one-time payout (how much do you think artists will see?), followed by Ford and GM ditching CD rippers from their vehicles, and moving straight to built-in streaming setups via things like Pandora and Spotify. But, you know, these days, the legacy record labels are searching under every damn legal cushion, never once thinking that maybe not trying to demand cash, but rather earning it from willing buyers might make more sense.

Filed Under: ahra, audio home recording act, cars, cd rippers, mp3 players, recording industry, royalties
Companies: aarc, clarion, denso, diamond, ford, gm, riaa

Moby Not Just Giving Away His New Album For Free On BitTorrent, He's Okay With You Profiting From It

from the an-enlightened-view dept

The musician Moby has long been an outspoken critic of the old recording industry. He's been a big fan of giving away works for free (and noting that he's made quite a bit of money from music he's made available for free) and has argued strongly against the old gatekeepers. He's criticized their anti-innovation views, suggested the RIAA should disband for suing music fans, and said he can't wait for the major label gatekeepers to die.

So it shouldn't be too surprising that Moby happily teamed up with BitTorrent to release his latest album as a BitTorrent bundle for free (you just have to provide an email address). But here's the more surprising part. Not only is he happily making it available for free, but he's actually fine with people profiting from potential remixes or other uses of the music. As he explained in a recent interview with Mashable:

Are people really free to do whatever they want? Can they sell their recordings?

I met with the BitTorrent people and they were asking, "What if someone comes up with their own remix and they sell it?" They were wondering what I would want them to do with the money. And my response was that they could take their friends out to dinner or give money to their favorite charity. Even if I make the stems, if they made the effort to make the remix, they should be the ones to profit from it.

This is a really enlightened view. Even among people who are accepting of how to use free in a business model, we still see artists get uptight about "commercial use" -- even though it's often not entirely clear what qualifies as commercial use. We've long advocated that more people should be open to the idea of allowing commercial use of their works, as the potential benefits for everyone -- including the artist and fans -- could be great. I recognize this still makes some artists (who otherwise support remix and open culture) nervous, but I think as we get more examples of artists who allow for commercial use, and see how well it works, that we'll see more artists get comfortable with allowing others to profit as well.

The rest of the Moby interview is worth reading as well. He points out that artists who adapt aren't worried about infringement:

Artists who are adaptable are doing fine. A musician who makes records, tours, DJs, remixes, does music for video games and films is doing fine. If you can learn how to adapt — it's really weird and unhealthy when people talk about restricting progress to accommodate the inability of people to adapt. Every industry has been impacted by [changes in technology] in both negative and positive ways, but I feel like to complain is pointless. I love Thom Yorke, but when I heard him complaining about Spotify, I'm like, "You're just like an old guy yelling at fast trains." I love anything that enables people to have more music in their lives.

He also talks about how great other services like Spotify, SoundCloud and Pandora are -- and notes that he's actively lobbied Congress not to restrict such services. He also talks about how ridiculous it was when his old label, EMI, tried to control everything to prevent infringement:

It was about 7 or 8 years ago when I was on EMI, and someone at EMI business affairs contacted my manager and told him that I wasn't allowed to play my own music when I DJ'ed because they didn't want people in the audience pirating it. This was back in the days of the Nokia flip phone. If someone recorded a song in a nightclub it would be the worst sounding recording you could possibly imagine. You probably wouldn't even be able to identify the song. That seemed like nonsense to me.

Instead, he notes, that wonderful things happen when you stop focusing so much on control, and let creativity and innovation flow:

My approach is to not try and control it at all. I really like the idea of not just giving people finished content. It's giving them something that if they choose to they can manipulate and play with however they want. There's absolutely no restrictions on it and that makes me happy. When people try to control content in the digital world, there’s something about that that seems kind of depressing to me. The most interesting results happen when there is no control. I love the democratic anarchy of the online world.

This kind of stuff is very refreshing after the latest round of artists on the wrong side of history trying to hold back creativity, culture, innovation and progress.

Filed Under: bittorrent, business models, control, free, moby, music, recording industry, sharing

Legacy Recording Industry Claims Pandora Is Playing A 'Sick Joke' In Seeking The Same Rates Others Pay

from the really-now? dept

The ability of the record labels and RIAA front groups to flat out lie about the internet is really quite incredible. There's been some buzz recently about the crazy fact that Pandora just bought a small terrestrial radio station in South Dakota. Now, you might wonder, why would an innovative company that basically seems to be focused on making terrestrial radio stations obsolete need to own such a station... and Pandora is rather upfront in its answer: because the music collections societies, like ASCAP and BMI discriminate against internet companies, in direct violation of an antitrust agreement that ASCAP signed. Furthermore, ASCAP not only won't offer Pandora the same rights, but it engaged in highly questionable negotiation practices, such as refusing to tell Pandora what songs it was pulling the rights to, such that Pandora risked huge statutory awards for copyright infringement:

During negotiations, ASCAP and the publisher increased the pressure by refusing to provide Pandora the list of tracks that were being withdrawn, exposing Pandora to copyright infringement liability of up to $150,000 per work. At Pandora’s scale, such liability would be enormous. Faced with such potential liability, Pandora negotiated an agreement that resulted in increased rates. Shortly thereafter, additional major publishers took steps to withdraw their catalogs from ASCAP, again with respect to Pandora.

ASCAP created additional ways to circumvent its antitrust consent decree. Our motion also describes how ASCAP refused to provide Pandora a license under the same terms as the iHeartRadio service, for only one reason: iHeartRadio is owned by a terrestrial broadcaster.

All of this is in direct violation of the antitrust agreement ASCAP has with the DOJ, in which it's supposed to make sure that ASCAP can't use its monopoly power over compositions to discriminate against certain players. Yet, ASCAP is clearly trying to discriminate against internet streaming services, by charging them significantly higher rates.

So, Pandora has bought the station in order to get the same rates as other streaming radio stations that are owned by terrestrial stations. As Public Knowledge points out:

This is a perfect example of the twisted incentives and strange results we get from a music licensing system that is based on who wants a license instead of just what they want to do with the music they’re using. This makes no sense. The law should treat like uses alike. Regardless of how high or low you think performance royalty rates for webcasting should ultimately be, there is no logical reason to give preferential rates to certain companies just because they arrived at the negotiation table first.

And this is only about composition rates, not even getting into the rates that Pandora has to pay for sound recordings, which is infinitely higher than terrestrial radio. Buying the radio station won't help on that front, because the internet streams are charged differently than terrestrial radio no matter who owns it, but just the fact that it's paying different rates than everyone else seems ridiculous.

And, of course, the incumbents try to twist all of this. First up, we see that BMI has sued Pandora for buying the radio station. I'm not joking. I can't see on what possible grounds a lawsuit would make sense. Are they saying it's illegal for a company to seek to get the same rates that BMI offers radio stations?

But, even worse than that is the reaction of the RIAA front group, MusicFirst, a lobbying group set up by the RIAA and SoundExchange solely for the purpose of lobbying against internet companies and seeking ever higher rates for those companies, to make sure no internet music company can stay in business. That this is short-sighted and stupid never seems to occur to MusicFirst, who is always quick with a blog post arguing that internet companies are up to no good. In this case, it accuses Pandora of playing a "sick joke" in making this purchase:

This has to be some kind of sick joke. Pandora bought an FM radio station to game the system in order to pay songwriters less?

Pandora continues to find new ways to give artists and songwriters a raw deal from the bottom of the deck. In their race to the bottom to see how little they can pay music creators, they have stooped to misleading legislation, bait and switch petitions, and now fronting as an FM radio station.

Oh really now? It's a "sick joke" to try to get the same license rate that ASCAP and BMI offer terrestrial radio stations? How so? It's a "sick joke" that the company doesn't think it's fair for ASCAP and BMI to discriminate against internet streaming radio services? The only "sick joke" is MusicFirst pretending to represent artists as it seeks to kill off new and innovative internet services that are helping artists build bigger fan bases. No wonder the RIAA-funded MusicFirst has to resort to silly claims like this. The RIAA has never wanted to adapt to an internet world, and is, once again, looking to spread completely bogus propaganda in an attempt to stifle internet progress, which tends to help independent artists, such that they don't need the RIAA labels any more. What's incredible is that the RIAA, which set up MusicFirst, has it pretend to represent the interests of "artists" when it's never been anything more than a big-label front group. If there's any "sick joke" it would be MusicFirst's pretend concern for artist's rights, that just so happen to align entirely with the interests of the big labels.

Meanwhile, David Israelite, the lobbyist for the music publishers has piled on as well, claiming that this is about Pandora "going to war with songwriters."

David Israelite, CEO of the National Music Publishers Association (NMPA), tonight interrupted his state-of-the-industry speech at the group's annual meeting in Manhattan to lash out at Pandora's decision to acquire a radio station in South Dakota. "Pandora is going to pursue lawsuits and gimmicks," Israelite told the hundreds of songwriters and composers in attendance. "Pandora is hoping to fraudulently sneak in the back door. Any shred of credibility that Pandora had is gone. They are at war with songwriters "

Once again... huh? Asking for the same rates that radio pays to stream music online is "going to war"? How does that compute? It's as if the music publishers, collection societies and the RIAA can't help but lie because they have such distaste for Pandora actually figuring out a service that people like online, when they've spent so many years trying to ensure that online services fail. If there's any "war" going on here, it's the legacy recording industry against online services that fans seem to love.

Filed Under: discrimination, licensing, lobbyists, music publishers, radio, recording industry, royalties, streaming
Companies: ascap, bmi, musicfirst, nmpa, pandora, riaa

If The RIAA Was Innovative: An Alternate Universe Timeline

from the an-alternate-history dept

1999: Realizing the inevitable, the RIAA convinces member labels to set up all-you-can eat buffets. All music available as DRM-free downloads, $5/mo. 100M of storage, additionally available for increased monthly fee. The RIAA uses superior marketing muscle to "drown out" competing "free" alternatives, insists people should only download from "legitimate" sources to ensure data integrity and security. It recommends the gradual reduction in the production, marketing, storage and sales of CDs, vinyl and tape, keeping only a small reserve capacity*.

2000: RIAA negotiates a small increase in financial support from labels' substantial savings from physical media reductions to create the Online Strategy Group (OSG), hiring engineers, programmers, technologists, musicologists and a futurist or two. The OSG's first suggestion is FoM, Future of Music, which the RIAA incorporates, initially to handle the growing subscription business.

2001: On OSG's advice, the RIAA convinces member labels to cross-offer artists by genre in sites with fun names like, "soultology.com", "hitsnmisses.com", "netrockstar.com", "eargasm.com", etc. A marginally increased monthly fee ($1 more for each sub-site) gets download access and membership in forums, discounts on t-shirts, tickets, posters, etc. FoM takes over all revenue-generating ventures and negotiates equitable profit-sharing deals with the labels and reaches out to independent artists. FoM buys Creative and, with help from the OSG brain-trust, designs and sells a fantastically popular line of MP3 players.

2002: Capitalizing on the psychology of "sharers", OSG introduces memberships that encourage people to find and upload obscure and out-of-print audio. Uploaders compete for discounted memberships, back-stage passes, artist access and the most important prizes: minor fame, street-cred and a custom avatar. The RIAA creates work-arounds for copyright issues removing limits on fan's abilities to upload, modify and share work.

2003 - 2005: Recognizing the growth of social media, the OSG introduces groups and messaging. Higher-access users get expanded pages on OSG sites and are encouraged to rate and critique music. OSG makes available interaction with music journalists, holds contests for album & t-shirt art, gives prizes for mashups with highest votes by the communities. The OSG makes "Locker" space available, 1G free, $1/mo for each additional gigabyte. OSG introduces "Rip Me" - user puts a factory CD in the computer drive tray, and is given the option to rip/upload tracks or have recording company copies put in his/her locker. (Subsequent attempts to upload the same CD from another computer is allowed with a minimum new subscription)

2006 - 2010: FoM buys Pandora, iTunes, YouTube, RIM, Turntable.fm, Facebook and a controlling interest in Sirius. OSG helps FoM branch the Blackberry, creating the "Rockberry", a consumer-oriented "mobile media sharing device". OSG solicits auditions from all musicians everywhere, showcasing the best on YouTube. FoM makes record profits from tours, downloads, streams, hardware, music licensing and merchandise. Cary Sherman becomes fifth richest man in the US.

2011: *FoM introduces choice "retro" vinyl, CD and tape catalogue for hipsters worldwide. OSG and RIAA move into "palatial" FoM office campus in Los Angeles, work begins on 30-story FoM tower in Manhattan.

Cross-posted from botaday.com

Filed Under: alternate history, music, recording industry
Companies: riaa

Universal Music Claims Piracy Justifies Monopoly, Wants The Power To Control Digital Music Services

from the say-what-now? dept

In a short article discussing how European antitrust officials don't appear to be too keen on Universal Music buying up EMI, and turning Universal Music (already the largest music label) into a truly dominant player in the market, there's this little tidbit:

Unnamed sources at Universal have briefed journalists that the competitive threat of digital piracy means consolidation should be permitted. Critics have pointed out that the merged entity's 40+ per cent market share would make it the king-maker for digital music services – and that no service would then survive without Universal's catalogue.

We were just discussing how the labels were looking to turn the screws on Spotify to try to wrench even greater profits out of the still unprofitable company. But really, when you put these two sentences side-by-side, it just shows how ridiculous the major labels -- and particularly Universal Music -- are today. Because of "piracy," it needs to be able to merge to create an even larger aggregator of back catalog music... to restrict that same music from appearing on new and innovative digital music platforms, unless those platforms pay more than is reasonable.

Get it? Universal Music's response to piracy is to create more piracy and limit innovation. The geniuses at the company (and, remember, this is the company whose former CEO once admitted that he was too clueless to even hire someone who might explain how modern digital technology worked -- and who not only didn't get fired for this admission, but was able to leverage his cluelessness into a new job running Sony Music last year) are basically saying that the only way they can compete with "piracy" is to so dominate the market that any company offering a music service has to do a deal on their terms, or not include its catalog. In other words, it wants veto power (and the power to extract ridiculous and unsupportable rents) on music service innovations.

Of course, that's a really stupid plan for a bunch of reasons, but let's call out the two big ones. First, the company's problems are not caused by "piracy", but by a stubborn unwillingness to adapt to a changing market. Second, restricting innovation in the digital music space will actually increase the amount of infringement, by (1) making it unprofitable for most companies to be in that space and (2) limiting true innovation and the necessary competition among services that leads to the kind of new innovations that consumers want. Instead, it'll just drive them to go back to what works: open infringement.

Filed Under: digital music services, monopolies, music, recording industry
Companies: emi, universal music

RIAA Insists That, Really, The Music Industry Is Collapsing; Reality Shows It's Just The RIAA That's Collapsing

from the data-disagrees dept

I'm honored to see that the folks at the RIAA have taken the time to read our Sky is Rising report. Unfortunately, they don't seem to like hearing the news that the wider music industry is actually thriving -- because it doesn't work well with their legislative strategy (and, remember, the RIAA's main focus is on passing new legislation to help legacy gatekeeper record labels -- not in helping artists). And, this is understandable. As we detailed in the report, as well as in my talk at Midem, a popular music industry conference, the real story of the report is that the market is thriving for artists and consumers, but is much more challenging for big, lumbering legacy players. That would basically be the RIAA's membership.

Either way, I have to take issue with some of the RIAA's "criticisms" of the report, because they're pretty laughable.

The one problem? The study is highly misleading and doesn’t present an accurate or complete view of what has been really occurring in the United States in recent years.

Want proof? Instead of looking at actual sales data that is widely available, the paper looks at a global sales metric that includes a much wider range of industries outside of music.

Actually, people should read the full report for themselves, where they'll see that we looked at a variety of different data sources to see what the data said, and noted the various caveats with each of them. Oh, and that "global sales metric" that the RIAA complains about? That's directly from the IFPI -- the sister organization of the RIAA, who basically represents the RIAA's views around the world. If the RIAA does not like the IFPI's own numbers, perhaps it should have a talk within its own organization.

Moreover, we see real world examples that consistently show the importance of the “traditional” metrics for working artists. For example, although the industry has embraced the concept of broadening revenue platforms, recent work by the Future of Music Coalition show that few artists are benefitting significantly from these complementary revenue sources.

First of all, we've been huge supporters of FMC's work here and have urged musicians to take part in FMC's survey. I don't recall the RIAA helping out. But, really, the problem is how incredibly misleading the RIAA is here, and how it's deliberately misreading the results of FMC's report. The details -- as we said in our own discussion -- are that there is a lot more competition. So, for those who do not adapt or do not embrace new opportunities, it's no surprise that they face more struggles. But for those who do adapt, things are better. Even more important is that, thanks to these new technologies, services and revenue streams, we have more people who are actually able to make money from their music.

The real problem here is that the RIAA ignores the zeros. In the past, under the old system, if you weren't some hugely successful label musician, you generally weren't a musician at all. You made zero and you dropped out of the market entirely. So you didn't count. But thanks to the new opportunities, many more people can make music, release music and make money from music. But that means a lot more competition. So, sure, if you don't compete with that wider base of competition, perhaps you're going to make less. But that's not a sign indicating a decline in health of the overall market. It's exactly the opposite.

I'm reminded of the early studies when computers were first introduced into the workplace. For about a decade afterwards, there were studies that showed that, on average, offices that had computers on every desk saw productivity decline. So, some argued, companies shouldn't computerize. But that's a misunderstanding of statistics. The problem was that many companies didn't know how to properly use computers. Those that did were thriving. Those that didn't had negative results -- and when you netted it out, early on, the negative results outweighed the positive, but that turned the corner once people started to figure things out.

The same thing is happening in the music industry. Many artists are so used to the way things were that they don't quite understand how to embrace and use these new offerings. For them, life is definitely more difficult. But as more and more tools have made life easier, there's more and more opportunity, and those who do understand these things are seeing success.

And, the FMC's results seem to support that. Many artists they surveyed have seen new revenue streams from these sources, creating new forms of success. Others, have not. But it's not that the technology or some nefarious "piracy" threat is the problem. It's that they haven't fully understood the opportunities presented by the tools.

As for touring, the paper does accurately state that over a period, revenues from touring did increase. But it oddly omitted the important fact that concert revenues have actually declined since 2009. In fact, in 2010, North American concert ticket sales dropped 15%, according to Pollstar. And in 2011, despite U2 setting a record for the highest grossing tour in history, North American concert sales contracted another 4%.

First of all, the paper didn't just point out that touring revenue "increased," it points out that it tripled. In other words it grew massively at the very same time that the recording industry insisted that the "music industry" was dying. Cute of the RIAA to leave out the scale by which it grew. It is true that we did not include 2010 or 2011 numbers -- and that's simply a function of the fact that we didn't have them. The latest detailed report we had was the 2010 report showing the numbers up until 2009. And we finished the report before the 2011 numbers came out (we finished it before the end of 2011). Furthermore, it's worth pointing out that Pollstar's numbers are not the be all, end all, as they focus on the bigger venues and leave out an awful lot of interesting things happening among smaller venues. We have been working on ways to get better data there as well, but didn't have enough solid data to put anything into the report (contrary to the RIAA's claims, we were quite careful to focus on data that was highly credible, and rejected a number of reports that we saw that were less than trustworthy, even if they supported what we saw in the other data).

As for the decline in concert revenue, that would be an issue if the entire point of our report was "all the money is moving to concerts!" But it wasn't. The report was looking at the overall industry, and showing how consumers are spending more money overall, and that the industry is healthy. Frankly a decline in concert revenue over the past couple years is neither surprising nor a major concern. Some of the bigger touring acts have been experimenting with increasingly high prices for concert tickets, and eventually they were going to hit a ceiling and face some pushback. The latest Pollstar numbers suggest they may have found that ceiling. Separately, the data corresponds with a global recession (remember that?) where people may have decided to hold back on what seems like more of a "luxury" -- which includes things like going out to an expensive concert.

Finally, the original paper by Mr. Masnick included factual errors about SoundScan data. The increase in the number of new album releases only reflects the ease with which sales even in very low numbers can be tracked today (only a single copy needs to be sold to be counted). For example, of the approximately 75,000 new albums released in 2010, about 60,000 sold less than 100 copies each, and a mere 1200 of them (less than 2% of the total) accounted for 87% of all new release sales.

Notice the RIAA does not actually say what "factual errors" were in the paper. And that's because they can't. To claim that the increase in new releases is only because of better counting by Soundscan defies reason. For example, TuneCore does not report results to Nielsen Soundscan and it puts out a hell of a lot of releases. Similarly, CDBaby/Disc Makers points out that Soundscan doesn't count its releases either -- which number around 50,000. But even looking at just the Soundscan data, it's foolish to believe that the increase "only" comes from better counting. The ability to record and release an album today is easier than ever before, and with more musicians doing exactly that, pretending that there isn't more music being made today than in the past is just silly.

As for the "low sales" of certain albums, I'm not quite sure what point the RIAA thinks it's proving there. As we noted, much of the opportunity was in moving away from record sales, and in encouraging other business models. That artists are recognizing that, by relying less on direct music sales, seems to support our position, not go against it.

The problem is that the RIAA is, once again, focusing solely on the revenue stream that the labels earn on, rather than what's actually happening in the wider industry.

Regardless of the metrics you choose, the trends in the United States have been clear, with a market less than half as large as it was 10 years ago and 60% fewer employees in the music business.

Um, but that's wrong. First of all, the "market" that is "less than half" is merely the market for recorded music sales. As the paper shows -- and the RIAA does not dispute -- the overall market and the amount of money being spent, has continued to increase. It's just that it's going into different parts of the industry. The parts the RIAA doesn't control. The 60% fewer employees number we debunked a few weeks ago, when the RIAA made the same claim. It represents employees at the legacy gatekeepers: the major record labels only. The major labels have decreased employment from 25,000 to 10,000 people total. First of all, note just how small this is. And this is all of the major record labels. But that does not represent all employment in "the music industry" not by a long shot.

Also, over this same period, the major labels went from the "Big Six" to the "Big Five" (UMG buying Polygram) to the "Big Four" (Sony and BMG merging) to the "Big Three" of today (Universal buying EMI). With so much consolidation, is it really any surprise that overlapping positions might get killed off? Furthermore, as was the point of the entire report, the music industry is changing. The sale of recorded music is no longer the primary driver, and much of that revenue has moved elsewhere. So, um, duh, there will be fewer jobs at the buggy whip makers major labels. But that's a problem for the major labels. It's not a policy problem for the government nor is it a problem for the wider music industry.

Virtually every neutral academic study (overview here) has concluded that there is real harm to the music community when people download music illegally. 

First of all, that is not a summary of "every neutral academic study." It's become the new go-to talking point for the industry to point to that Liebowitz paper and I've been spending a lot of time going through the details for a future post, but rest assured that it's a joke. And, at best, even if you take many of the claims in that paper at face value (and you shouldn't, because they're laughable), all it discusses is the impact on record sales, which again is just one part of the market. With the money shifting to other parts of the market, the only ones this is a problem for... are the major labels who make up the RIAA.

Either way, we're glad that the RIAA decided to check out our study. If they had attended Midem, they could have enjoyed the rather enthusiastic response the report received from numerous musicians and independent labels I spoke to. Lots of folks are excited about the opportunities the world enables today. It's just too bad the RIAA is looking backwards, rather than forward.

Filed Under: music industry, recording industry, sky is rising, stats