How The NBA's New Deal With Disney/TNT Takes One Step Forward, One Backward On Streaming

from the almost-there dept

For as long as I've had the privilege to write for Techdirt, I've had a special interest in sports leagues and their methods for broadcasts, with a particular eye towards blackouts and internet streaming. My motto has always been: just let me watch the damned game! It's never made sense to me how the major pro sports leagues seem to pass on opportunities to expand streaming options, particularly given the trend towards cutting the cable cord that continues to this day. In conjuction with this is the fact that sports broadcasts remain one of the few things keeping cable television relevant and preventing subscription numbers from absolutely tumbling. The moment sports become easily accessible via the internet, with local blackouts removed and ad revenue driving the costs down, it's over for cable.

That's what makes the new broadcast deal the NBA recently signed with ESPN and Turner Broadcasting somewhat exciting, as the league has insisted on expanding the streaming availability in certain areas, even while keeping the streaming operations with Turner. The landmark deal, which is for $2.6 billion annually, should mean expanded viewing options for fans. But first, the bad news.

Turner currently runs NBA.com, NBA Mobile, NBA TV, and NBA League Pass, and will continue to do so. This runs counter to the recent trend of leagues clawing back digital operations that they'd originally outsourced. In the early 2000s most sports leagues decided they didn't have the expertise to deal with digital and mobile, so they let somebody else pay them to do it. But as this revenue stream has grown, so has the leagues' desire to bring digital back into the fold. This will not be the case in the NBA.

Which is unfortunate for a number of reasons. First off, the NBA.TV product is pretty sub-par compared with what the other major leagues are doing in streaming. MLB.TV in particular has set the standard, with all kinds of options for different broadcasts, camera angles, and announcing calls. Even what the NFL does in putting many of their games on the websites of the broadcast partners for free is a decent platform. Turner, for its part, has never seemed up to the task. The other reason why it's important for leagues to take back ownership of their streaming product is because it severs one of the ties to a broadcast partner with an interest in driving most viewers to the television product. Once leagues expand their streaming product and begin monetizing the ad revenue that can come from it, they need television far less, and streaming will really open up. That can't happen under this deal.

But that doesn't mean the NBA doesn't see the writing on the wall long-term. To understand the following part of the new contract, you have to also understand that the NBA insisted on expanded nationally televised games. The new deal means no less than roughly 14% of the games will be televised by either ESPN/ABC or TNT. It may not seem like a huge number, but this is a significant move, something like a 20% increase in games available nationwide. Couple that with the following and it should be easy to see what the NBA has planned for the next time it negotiates a broadcast contract.

You'll be able to stream nationally televised games without needing cable: Currently, the NBA's only streaming option is NBA League Pass, which is a steaming pile of garbage. One of the biggest problems is that the 142 nationally televised games, 96 NBA TV games, and all playoff games aren't available, meaning you can't actually watch the most important games. The NBA fan still needs to have cable.

But per today's announcement, the league has "established a framework" with ESPN to "negotiate the launch of a new over-the-top offering in which the league would receive equity interest." In this context, over-the-top means "internet and mobile streaming." According to the Wall Street Journal, this streaming service will be separate from ESPN's WatchESPN app, which is a walled garden you can access only if you already pay for cable. The details are far from finalized, but it looks like fans will soon be able to watch nationally televised games without having to pay for cable, a major consumer win.

Bigger than most even realize, I suspect, because this is a move designed to expand the streaming product as a standalone from cable subscriptions, such that the next contract will have an even larger streaming option provision, if it includes the broadcast partners at all. If the NBA can hook fans on streaming for free, it can use that to reclaim the streaming product the next time around and build an ad-revenue base off of the viewership numbers.

If you're wondering why Disney and TNT allowed for this at all, the answer is easy: they had to. As I said, sports broadcasts are driving an insane amount of the cable business being done today and none of the other major sports leagues have deals up for renewal any earlier than 2020. The NBA was a huge commodity. What's interesting is seeing the obvious positioning of streaming the NBA is presenting for their future.

Filed Under: nba, streaming
Companies: disney, nba, tnt

How The Sirius XM Ruling Upsets Decades Of Copyright Law Consensus

from the activist-judges... dept

We recently wrote about district court judge Philip Gutierrez ruling against Sirius XM on the issue of streaming pre-1972 recordings. As we noted at the time, the ruling appeared to upset what was considered more or less a settled issue. Pre-1972 sound recordings are not covered by federal copyright laws, but rather by a hodgepodge of state laws (and common law), but those have been entirely focused on reproduction/distribution and not on public performance. But this ruling changed all that. Sirius XM, of course, has already made it clear that it's appealing the ruling, and on the other side, the victors in last week's ruling, Flo & Eddie, have already moved to sue Pandora as well.

While I tried to express how much this ruling upsets what had been considered pretty much solid law, law professor Tyler Ochoa does an astounding job actually detailing the history and just what a big change this ruling is, calling it a "seismic" ruling on the scale of the 1906 San Francisco earthquake. Here's just a snippet, though you really ought to read the whole thing, detailing historical case law that this ruling totally upends:

...in the early days of radio, sound recording copyright owners also tried to use state law to restrict unauthorized broadcasts of sound recordings (which, as explained above, were not eligible for federal copyright).  In 1937, in Waring v. WDAS Broadcasting Station, 194 A. 631 (1937), the Pennsylvania Supreme Court held that state common law prevented the unauthorized broadcast of phonograph records (when the legend “Not Licensed for Radio Broadcast” was printed on the records); but in 1940, in RCA Mfg. Co. v. Whiteman, 114 F.2d 86 (2d Cir. 1940), the U.S. Court of Appeals for the Second Circuit, in an opinion by Judge Learned Hand, held that common-law copyright prevented only the duplication of a sound recording, and that sale of phonograph records exhausted any common-law property right to prevent the unauthorized broadcast of the recording (notwithstanding the same restrictive legend).  The Supreme Court denied certiorari, which effectively meant that broadcasters did not have to pay royalties to sound recording copyright owners to play their records on the radio.  (Broadcasters still had to pay royalties to musical work copyright owners, under federal copyright law.)

... when sound recordings were added to the federal copyright act in 1972, Congress likewise limited the exclusive rights that were provided to sound recording copyright owners. Authors of most copyrightable works receive five exclusive rights: the right to reproduce the work, to adapt or prepare derivative works based on the work, to publicly distribute copies of the work, to publicly perform the work, and to publicly display the work. But broadcasters had enough lobbying power to block any action in Congress if it required them to pay more royalties. As a result, Congress gave sound recording copyright owners only the right to reproduce and distribute copies of the sound recording, and to prepare derivative works (by electronic manipulation of the sounds recorded, not by imitation or simulation). Congress did not give sound recording copyright owners any right to publicly perform their works. (The policy argument was that radio airplay served as free advertising for the sale of phonograph records.)

In other words, contrary to what you'll hear today from the record labels and copyright maximalists, this ruling was not obvious or about Sirius XM, Pandora and others ripping off artists. This was actually about them upending what had been considered completely settled law. It was only in 1995 that Congress first established that copyright had any sort of "public performance" exclusivity -- and then only for post-1972 recordings (remember, the recording industry itself has fought quite hard to exempt pre-1972 sound recordings from other aspects of federal copyright law) and only on digital streaming. So, to argue that pre-1972 state and common law somehow was intended to cover such a public performance right is almost impossible to fathom. Yet that's what the court ruled.

And the impact could be immense. Beyond just Sirius and Pandora, it could hit a lot of others as well. In a big way, in part by undermining the very foundations of the DMCA safe harbors.

The ruling is a huge victory for sound recording copyright owners, which can use the ruling not only to negotiate higher negotiated rates for public performance of pre-February 15, 1972 sound recordings, but may also use such older recordings as leverage for negotiating higher rates for post-February 15, 1972 sound recordings. (Such negotiation tactics might be deemed to be copyright misuse, but it is unclear whether state law will recognize this federally-recognized defense.) Moreover, nothing in the decision limits the state-law violations to public performance by means of digital audio transmission, so the decision gives sound recording copyright owners the general public performance right in pre-February 15, 1972 sound recordings that they have always craved, but that was previously denied to them under federal law (and was assumed not to exist in state law under Whiteman). That means that traditional AM/FM broadcasters and television broadcasters, who are expressly exempt under federal law with respect to post-February 15, 1972 sound recordings, can expect to be sued next.

Sound recording copyright owners can also use the ruling to go after internet service providers. Section 512 of the federal Copyright Act provides that internet service providers are not liable for infringements committed by their users, so long as the service provider promptly complies with the “notice-and-takedown” provisions of that section. But because Section 301(c) states that pre-February 15, 1972 sound recording copyrights are not preempted by the federal act, sound recording copyright owners have been suing internet service providers under state law, arguing that service providers are liable for reproduction and electronic distribution of pre-February 15, 1972 recordings under state law, and that the limitation of liability provided by federal law does not apply. Existing court decisions so far are split, with the New York Appellate Division holding that Section 512 does not apply to pre-February 15, 1972 sound recordings, because of the express terms of Section 301(c); while the U.S. District Court for the Southern District of New York has held that Section 512 does apply to pre-February 15, 1972 sound recordings, notwithstanding Section 301(c).

In the meantime, Ochoa notes, expect "oldies" to start disappearing from lots of different services as companies seek to limit their liability. Funny how yet another copyright ruling is likely to make music even more scarce.

Filed Under: california, copyright, history, pre-1972, pre-1972 sound recordings, public performance, radio, streaming
Companies: flo & eddie, pandora, sirius xm

MPAA Tries To Ignore The Fact That The Study It Paid For Reveals Very Few Top Films Are Available On Netflix

from the missing-the-point dept

One of the key points that many people have been making for decades is that copyright infringement likely wouldn't be such a big problem if they actually made works more available in convenient and reasonable ways. This was never an excuse for infringement, but an explanation and a suggestion on ways to minimize the amount of infringement happening. For the past few years, the big legacy copyright holders have been trying to spin things, claiming that they've made stuff "available," and since there's still "infringement" they obviously need new laws to better "protect" their works. They're basically claiming that because the works are now available in some format, the whole "availability" argument is debunked. Except, of course, they're ignoring the full equation. It's not just about making it available, but making it convenient and reasonably available. Instead, the MPAA frequently touts annoying and inconvenient offerings no one uses, claiming disingenuously that this proves the availability argument is untrue.

The latest is that NBC Universal (the driving force behind many MPAA efforts) has commissioned a study from KPMG on the availability of film and TV titles. The clever folks at KPMG have hidden the important factors in the aggregate stats, looking at a big list of 34 services, and saying that as long as a film or TV title are available on one of them, it's "available." But this conveniently buries the more important stat, dug out by TorrentFreak, that the study actually shows over 80% of top film titles are not available on Netflix, which is, by far, the most popular streaming movie service.

Rather than admit this, of course, the MPAA instead has decided to trumpet its friends' misleading coverage of the misleading report (pretty sure nearly everyone in its list has received money from the MPAA). Many of the MPAA's friends insist, incorrectly, that the report shows that these films are widely available, rather than admit the truth -- which is that they're narrowly available, often in inconvenient ways, separated from how people want to watch (and pay for!) those films.

It would be nice if the MPAA were legitimately interested in reducing infringement by improving innovation and allowing more services to flourish. But it has yet to show any honest intentions on that front, preferring bogus and misleading reports like this one.

Filed Under: accessibility, conveniences, copyright, movies, streaming
Companies: kpmg, mpaa, nbc universal, netflix

Judge Rules Against Sirius XM On Pre-1972 Recordings

from the this-could-be-quite-a-mess dept

Last year, we wrote about the growing list of lawsuits against Sirius XM concerning the legal rights over pre-1972 recordings. As we've discussed, pre-1972 sound recordings are not under federal copyright law (for historical reasons too convoluted to go into now), but are covered under a hodgepodge of messy state copyright laws. Historically, those state laws have been focused on reproduction and distribution and not public performance. Furthermore, terrestrial radio stations have always been allowed to broadcast music without paying performance royalties (though they do pay songwriters/publishers). Post-1972 recordings can be streamed at statutory rates for non-interactive streaming (interactive streaming is a whole different game). It's a bit of a mess, but based on all of this Sirius XM (and Pandora and others) felt fairly confident that they did not have to separately license public performance rights for pre-1972 recordings. There had been no issue about this at all, until the lawsuits started flooding in last year.

And, in a ruling this week, the judge has... ruled against Sirius XM in a manner that may force Sirius and Pandora to eventually have to pay out big. This lawsuit was the first one against Sirius, filed by Flo & Eddie, claiming that their California state copyrights were violated. The court basically found that, because California copyright law says that the copyright holder has "exclusive ownership" of the copyright, that includes public performance rights, despite no further explanation in the law designating that as an exclusive right under California's copyright.

In short, the judge takes a very expansive "property rights" view of the situation, and assumes that California's copyright law basically restricts everything.

Commonly, to have “exclusive ownership” in something is to possess and control it and to not share that right to possess and control with others. See THE AMERICAN HERITAGE DICTIONARY OF THE ENGLISH LANGUAGE 619, 1260 (Houghton Mifflin Harcourt, 5th ed. 2011) (defining “exclusive” and “ownership”). The California legislature defines “ownership” generally in the Civil Code in a manner consistent with the word’s usual and ordinary meaning—“the right of one or more persons to possess and use [a thing] to the exclusion of others.” Cal. Civ. Code § 654. Thus, at base, Flo & Eddie has the right to possess and use its sound recordings and prevent others from possessing and using them. The plain meaning of having “exclusive ownership” in a sound recording is having the right to use and possess the recording to the exclusion of others. There is nothing in that phrase to suggest that the legislature intended to exclude any right or use of the sound recording from the concept of “exclusive ownership.”

The legislature does include a limitation on the ownership right in the statute’s text, “the most reliable indicator of legislative intent.” See Esberg, 28 Cal. 4th at 268. An author has exclusive ownership in his or her sound recording “against all persons except one who independently makes or duplicates another sound recording that does not directly or indirectly recapture the actual sounds fixed in such prior recording, but consists entirely of an independent fixation of other sounds, even though such sounds imitate or simulate the sounds contained in the prior sound recording.” Cal. Civ. Code § 980(a)(2) (emphasis added). In other words, ownership of a sound recording does not include the exclusive right to make “covers” (i.e., recording the song with new instruments) – any person can make a sound recording based on a copyrighted recording, without the permission of the owner, so long as they produce the sounds independently rather than recapture the actual sounds in the copyrighted recording.

Construing the meaning of “exclusive ownership” in context with the rest of § 980(a)(2), which lists the above exception to the ownership right, the Court infers that the legislature did not intend to further limit ownership rights, otherwise it would have indicated that intent explicitly. Because the statute lists an exception, the Court should enlist the “familiar rule of construction…[that] where exceptions to a general rule are specified by statute, other exceptions are not to be implied or presumed.” Geertz v. Ausonio, 4 Cal. App. 4th 1363, 1370 (1992) (citing In re Michael G., 44 Cal. 3d 283, 291 (1988). Courts should “presume the Legislature included all the exceptions it intended to create.” Id. (citing Reynolds v. Reynolds, 54 Cal. 2d 669, 681 (1960)). If § 980(a)(2) had granted “exclusive ownership” in sound recordings without a listed exception, the argument that some limitations on property rights were already inherent in the concept of sound recording ownership might have been more persuasive to the Court. See Opp. 6:21-7:4, 8:25-9:2. However, by finding it necessary to specify an excepted right to ownership in a sound recording, the legislature conveyed that limitations on ownership did not live within the concept itself, rather they required elucidation.

Accordingly, the Court’s textual reading of § 980(a)(2), giving the words “their usual and ordinary meaning and construing them in context[,]” is that the legislature intended ownership of a sound recording in California to include all rights that can attach to intellectual property, save the singular, expressly-stated exception for making “covers” of a recording.

Sirius XM pointed out the legal problems with this, in that California law did not have a public performance right, and thus the court is effectively making up a new right under to bolt onto California's copyright law, but the judge isn't buying it. Sirius further pointed out that California's copyright law was designed to highlight what rights remained under its copyright law after the federalization of copyright for sound recordings, but again the judge isn't buying it.

It's inevitable that Sirius will appeal this ruling so it will be a while before we see where this actually ends up. Furthermore, in one of the other cases against Sirius, brought by the RIAA, it appears that the judge is leaning in the exact opposite direction. So, this situation is far from over.

Filed Under: california, copyright, flo & eddie, pre-1972, pre-1972 sound recordings, public performance, streaming
Companies: pandora, sirius xm

Canada Appears To Be Split On Whether To Extend Culture Tax To Internet Services

from the the-internet-is-not-television dept

As you may or may not be aware, Canada, similar to many European countries, has what is commonly referred to as a "culture tax." The idea is that Canadian broadcasters must pay into a platform specifically used to fund Canadian content, lest Canada be overrun with the sweet, delicious programming offered by 'Merica. I mean, we've got, like, eight different shows that revolve around singing/dancing competitions, and some of them even include celebrities you've never heard of! You can't resist that kind of thing, right? Well, as you can imagine, the television broadcasters to our north have noticed how much content is now delivered on the internet, having previously asked for regulators to likewise tax ISPs. Now, they, as well as some in government, have their sights set on companies like Netflix as well.

At the “Let’s Talk TV” hearings now underway before Canada’s broadcast regulator, provincial governments like Ontario and Quebec have argued that Netflix should be subject to the levy. The country’s powerful cable industry and the national broadcaster, the CBC, have made the same arguments, arguing that companies like Netflix and iTunes should not get a free pass when their own services must pay for Canadian content.

It's a good point because...wait, no, it isn't a good point at all. The internet isn't television, Netflix isn't a "channel", and iTunes isn't radio. Are they places where culture, both foreign and domestic, are distributed? Well, sure, but then again so are a great many other things. Shall we tax Steam to help Canadians produce more Canadian video games? Amazon for more Canadian books? Hell, some of those levies may already be in place, but that doesn't mean they make sense. Frustratingly, the Canadian broadcasters aren't making the argument they should be making: in a hyper-connected world where content distribution is varied, global, and fast, taxing anyone to prop up local content is at best a losing battle and likely entirely worthless. How about just making good content that Canadians and (gasp!) international communities want to get?

Fortunately, some important folks aren't on board with a Netflix tax.

Canada’s Prime Minister, however, has been denouncing the idea of a “Netflix tax” and some, including internet law professor Michael Geist, have suggested the idea is too politically toxic for the broadcast regulator to implement.

I'd say the entire theory behind the tax is wrong, but attacking internet services, the very services that lower the barrier for all content producers, makes the least sense of all.

Filed Under: canada, cultre tax, internet, movies, streaming
Companies: netflix

As Expected, Aereo Pleads Its Case For Survival

from the cable-company dept

Aereo is back in a district court trying its "okay, fine, you say we look like a duck, we'll act like a duck" explanation so that it can stay in business and pay the statutory rates for a cable company. As you hopefully know by now, this is in response to the Supreme Court's "you're a cable company!" ruling. The broadcasters, of course, just want Aereo to die, so they claim that even if the Supreme Court declared it a cable company, the company still can't pay statutory rates. Aereo tried to skip the district court and go straight to the appeals court, but that attempt was (probably rightfully) rejected recently, so now it's back at the district court, once again making the case for it being a cable company.

Its key argument is, basically that, during oral arguments, Justice Sotomayor more or less said if the Court finds Aereo to be a cable company, then it could just pay Section 111 statutory fees and be legal.

JUSTICE SOTOMAYOR: . . . But I look at the definition of a cable company, and it seems to fit. . . . [Aereo] [m]akes secondary transmissions by wires, cables, or other communication channels. It seems to me that a little antenna with a dime fits that definition. To subscribing members of the public who pay for such service. I mean, I read it and I say, why aren't they a cable company?

MR. CLEMENT: Well, Justice Sotomayor, a couple of things. First of all, I mean, I think if you're—if you’re already at that point, you’ve probably understood that just like a cable company, they’re public—they’re publicly performing and maybe they qualify as a cable company and maybe they could qualify for the compulsory license that's available to cable companies under Section 111 of the statute.

JUSTICE SOTOMAYOR: But it just gets it mixed up. Do we have to go to all of those other questions if we find that they’re a cable company? We say they’re a c[]able company, they get the compulsory license.

At the time, most folks kinda wondered why Sotomayor was going off on this tangent, rather than on the key issues related to the case, concerning the public performance right. What people didn't expect was that the Court would come up with its wacky "looks like a duck" test. But since it did, it certainly seemed to imply that Aereo could just get the compulsory license -- which it's now seeking to do. The company further argues that Justice Breyer, who authored the majority decision, fretted during oral arguments that it would be problematic if Aereo were not allowed to get a compulsory license:

JUSTICE BREYER: Once you take them out of the compulsory licensing system, they're going to have to find copyright owners, who owns James Agee's pictures? Who owns something that was written by—like a French silent film in 1915? I mean, the problem is that they might want to have perfectly good things that people want to watch and they can't find out how to get permission. That is a problem that worries me and it worries me again once you kick them out of the other systems.

Aereo also counters the broadcasters argument that the ivi ruling says that online streaming services can't qualify as cable companies for statutory rates doesn't apply here. Earlier, Aereo argued that the Supreme Court ruling effectively overturned the ivi ruling -- an argument that makes a lot of sense. But here, Aereo goes even further, noting some key differences between ivi and Aereo, including a pretty big one: ivi was "geographically unbounded." That was a key part of why ivi lost, and Aereo notes that its service is different, in that it offered a geographically-specific service.

First, the technology at issue in ivi involved geographically unbounded transmissions, which the Second Circuit noted was “vastly different” from the technology in Fortnightly and Teleprompter.... By contrast, the Supreme Court found that, with respect to “Watch Now,” Aereo is “overwhelming[ly] like[]” and “highly similar” to the technology in Fortnightly and Teleprompter.... As a result, this case is factually distinguishable from ivi on the very point that drove the Second Circuit’s decision. Indeed, the unrestricted nature of ivi’s transmissions was the determinative fact for the Second Circuit, which noted that Section 111’s compulsory license scheme was intended to support local market—rather than national market—systems.... As a result, the court found that ivi’s nationwide retransmission did not seek to address the important issues of availability of local over-the-air television signals, and it was therefore not the type of service Congress intended the compulsory license to cover.... Because Aereo’s “Watch Now” technology does not give its subscribers access to broadcasts outside of their home DMA, and instead gives only geographically-restricted access (with and through corresponding local physical antenna facilities), and because (as the Supreme Court found) the technology is “virtually identical” to the technology Congress addressed in the 1976 Amendments, Aereo’s “Watch Now” technology is not governed by ivi.

Aereo makes another interesting argument for survival as well. Even if it doesn't qualify for Section 111 compulsory rates, it should still be allowed to keep its "Watch Now" feature working, because of the DMCA. Basically, it's saying that even if the DVR functionality is deemed infringing, it has a stronger argument around the live streaming, based on the DMCA. All the parenthetical quotes supporting this are from the Supreme Court's ruling...

If the Court concludes that Aereo is not entitled to a Section 111 license, a preliminary injunction should still not enter because Aereo is entitled to the 17 U.S.C. § 512(a) [DMCA] safe harbor because its “Watch Now” function is a “transitory digital network communication.” Each of the Section 512(a) elements is satisfied and undisputed. First, the transmissions of the material are initiated by or at the direction of a person other than Aereo.... (“Aereo’s system remains inert until a subscriber indicates that she wants to watch a program.”). Second, the transmission, routing, and storage of material are carried out through an automatic process, without selection of the material by Aereo.... (“in automatic response to the subscriber’s request”); ... (agreeing with dissent that Aereo does not “select” the content). Third, Aereo does not select the recipients of the material, except as an automated response to the user.... (“When an Aereo subscriber selects a program to watch, Aereo streams the program over the Internet to that subscriber.”). Fourth, no copy of the material transmitted is made accessible to anyone but the user who made it, and no “Watch Now” copy is kept for a longer period than is reasonably necessary.... (“It streams the content of the copy to the same subscriber and to no one else.”); ... (“If the user does not press ‘Record’ before the program ends, the copy of the program created for and used to transmit the program to the user is automatically deleted when it has finished playing.”);... (“The file saved to the hard disk using the ‘Watch [Now]’ function is not automatically retained unless the user clicks ‘Record’ while the show is still open on the user’s web browser.”). Fifth, the material is transmitted without modification of its content....

As a result of satisfying this safe harbor provision, Aereo cannot be liable for the claimed “public performance” of Plaintiffs’ claimed copyrighted works. And, Plaintiffs’ requested preliminary injunction cannot be entered because it is outside the scope of a permitted injunction under the DMCA.

That could lead to some interesting legal questions going forward.

Finally, Aereo argues that no injunction is necessary, because there's no evidence of "irreparable harm." Here it probably hurts that CBS and other networks more or less admitted that even if Aereo had won the "harm" would be minimal.

The Section 111 arguments about whether or not it's a cable company will continue to make the headlines, but the DMCA argument here may be the most interesting one of all (and one that the broadcasters will most freak out about).

Filed Under: broadcast tv, cable company, copyright, dmca, dvr, networks, section 111, streaming
Companies: abc, aereo, cbs

Performance Rights Organizations Again 'Protecting' Artists By Killing Off Revenue Streams

from the this-revenue-opportunity-has-been-destroyed-for-your-protection dept

While attempting to do nothing more "infringing" than listen to (fully licensed) music, I ran into the sort of bizarre, pointless restrictions I thought only German citizens had to deal with.

Alec Empire, founder of Digital Hardcore Recordings and leader of Atari Teenage Riot, recently compiled a list of his 13 favorite albums for UK music site, The Quietus. Along with this, he put together a three-hour mix of tracks from these albums and posted it to Mixcloud. It seemed to be the natural companion piece so I headed to Mixcloud and ran straight into a wall set up by several music licensing services.

For reasons that only make sense to a host of PROs (performance rights organizations), this upload is "unavailable in my country." Why? Good question. Fortunately, Mixcloud has an answer, but not one that will make anyone (but performance rights groups) happy. (And even then, how? But that's a question for later).

In America Mixcloud has blanket music licences with SoundExchange, ASCAP, BMI & SESAC.

These licences stipulate certain rules around how you can listen to a service like Mixcloud:

- The tracklist must be hidden until you hear it
- You cannot scrub or rewind backwards within a Cloudcast, only forward
- Cloudcasts with more than 3 tracks by the same artist may not be available for listening

As music lovers ourselves, we understand that this may be frustrating at times, and we hope that in the future the rules will evolve to be more open to new types of services like Mixcloud.

The problem here isn't artists or labels. The problem here is middlemen that collect performance rights on behalf of artists. But what exactly are ASCAP, BMI and SESAC going to collect if no one in the US can stream these tracks? Even the top 5% of artists that receive the majority of collections are earning nothing if the tracks (by such non-top 5-percenters like Duke Ellington, Shizuo, Goblin and Pharoah Sanders) can't be played. So, this collection of PROs (not that SoundExchange is completely faultless either…) is "assisting" its roster in making a slim percentage of… nothing.

And look at all the technology that's being disabled in order to satisfy this motley collection of acronyms. No skipping tracks. No replaying tracks. Nothing over three songs by the same artist. You can't even view the tracklist in the United States, so there's no way of seeing what Empire chose to include in his mix. It's two-thousand-fucking-fourteen and a bunch of PROs have turned a streaming site into the equivalent of an unlabeled C90 being played on a malfunctioning tape deck. Or, in this case, not played.

Sure, licensing agreements for streaming tend to have all sorts of specific terms delineating interactive and non-interactive services, but a license that "permits" no interaction at all? If this is all that's "allowed" by Mixcloud's licensing agreement, why even bother? It might as well just route affected users to a static page saying "Not For You" and save itself the hassle of supposedly pro-artist groups like this that so severely kneecap a service that it has all the functionality of a bitmap.

Once again, this is helping artists how? People unfamiliar with the artists Empire is showcasing (which would be most people) won't have any idea if they like them or not, which isn't really going to increase sales. Running into such an inherently stupid, counterproductive wall is also likely to put off people from a) searching for these artists on their own, and (more importantly), b) using Mixcloud as a platform for listening and/or uploading.

The saddest part is that Mixcloud has blanket licensing agreements with these entities and despite that, it can't even offer a functioning service to a country that would likely provide it with its largest user base.

Do these PROs view this sort of abject ridiculousness as some sort of victory, one that sacrifices its artists in order to maintain absolute control of Mixcloud's platform? How does this help anyone sell more albums or earn more streaming revenues? I doubt anyone at the acronymous (and acrimonious) agencies have any idea. I doubt further that they care.

Filed Under: alec empire, atari teenage riot, limitations, performance rights organizations, streaming, the quietus
Companies: mixcloud

Twitch Begins Silencing Videos With Audible Magic: Making Everyone Worse Off, Because Copyright Law Sucks

from the not-how-to-do-it dept

As a whole bunch of people on my Twitter feed are letting me know, video game streaming company Twitch* (read disclosure below!) has announced that it has turned on Audible Magic to begin silencing "Video on Demand" videos that make use of copyright-covered music -- including in-game music. This only covers the video on demand (stored) videos, rather than the live streams that Twitch is probably most well known for. As Twitch's General Counsel Boo Baker explains:

We’ve partnered with Audible Magic, which works closely with the recorded music industry, to scan past and future VODs for music owned or controlled by clients of Audible Magic. This includes in-game and ambient music. When music in the Audible Magic database is detected (“Flagged Content”), the affected portion of the VOD will be muted and volume controls for that VOD will be turned off. Additionally, past broadcasts and highlights with Flagged Content are exportable but will remain muted.

The Audible Magic technology will scan for third party music in 30 minute blocks — if Audible Magic does not detect its clients’ music, that portion of the VOD will not be muted. If third party audio is detected anywhere in the 30-minute scanned block, the entire 30 minutes will be muted.

This, quite reasonably, has many folks up in arms -- with Felicia Day making the point in the most humorous of ways: "So Twitch has become a silent movie company now?" That's because pretty much every video game has some music, and it's unlikely (at best) that users of Twitch cleared that music. In the past, we've seen some similar issues with YouTube's ContentID system flagging similar "Let's Play" videos on that site.

Really, what this seems to demonstrate is the failure of the "one-size filter fits all" world that the legacy content industry lives in. The music and movie industries have long demanded such filters, sometimes arguing (though failing) that the current DMCA requires filters like Audible Magic or Content ID. US copyright law currently does not require such a thing, though you know that the industry is pushing hard to get that into any copyright reform bill. And, for all the problems of ContentID (and there are many), it's the kind of solution that you can see often does make sense in a YouTube world (though it has way too many false positives).

However, when it comes to Twitch, this kind of solution seems to make no sense at all. People are not going to Twitch to hear music. They're going to see video games. In fact, this kind of solution on Twitch seems inherently counterproductive for just about everyone. These days musicians want their music in video games because it's fantastic for those musicians, both making them money and giving them a ridiculous amount of exposure. There are even entire discussions for indie musicians about how to get their music into video games because it's such an important promotional avenue.

Those musicians aren't hurt by Twitch videos. They're hurt by silent Twitch videos, meaning fewer people hear the music.

A fairly strong case can be made that in-game and ambient video game music on Twitch is fair use. It seems to be clearly transformative in the same sense that scanning whole books to create a searchable index is transformative fair use or that a book of magazine covers of movie monsters is transformative fair use, or that a book of concert posters is transformative fair use. In each case, while the entire work is used, and the original may have been licensed, the use here is for an entirely different purpose.

And yet, with this move, Twitch seems to be inherently stating that fair use for the audio is an afterthought, rather than a key component to what it's doing.

Given the various lawsuits against other video sites, it's quite likely that Twitch was facing serious legal pressure to make this move. As we've noted, the music industry has repeatedly made arguments in other lawsuits that such filtering was necessary. Just recently, video site Vimeo announced it, too, was using Audible Magic. And, for years, legacy content players have insisted that using such a tool was required.

But it's not. There's nothing in the law that requires a site to do this. And even if you can make the case that it makes sense for general interest user-generated video sites, that's simply not the case with Twitch, whose whole purpose is to stream video from video games. It's yet another case of taking a broad maxim ("video sites should use automated filtering to silence or take down "copyrighted" material") to extreme and ridiculous ends where it doesn't make sense at all.

In other words, it's another example of the pressures and risks of today's copyright laws getting in the way of a useful innovation, leading to a result that is actually worse for everyone.

From a pure "avoiding liability" position, you could see why Twitch would make this decision. Assuming that some recording industry lawyers were pressuring the company, arguing that continuing to allow those videos without a fingerprinting solution put it at risk of losing its DMCA safe harbors. Because that's the kind of argument an RIAA or an ASCAP might make. And this is really a big part of the problem with copyright law today (and especially statutory damages). Even if Twitch believes that not having such a tool is okay, it might still get taken to court and could face a massive judgment if a court decides the other way. Thus, all of the ridiculous incentives of copyright law today push Twitch to make use of this solution that, without any question, makes everyone worse off. It harms musicians. It harms Twitch. It harms video game fans. It harms Twitch's users. It harms video games. Who does it benefit besides Audible Magic and maybe some lawyers?

Copyright remains totally broken.

* Disclosure: As you may know, just a couple of weeks ago, Twitch announced that they were providing matching donations for our net neutrality crowdfunding campaign, something we are quite thankful for. That said, the company's support of that effort doesn't change our views at all on this being a dumb move that harms everyone.

Filed Under: copyright, fair use, filtering, fingerprinting, lets play, music, streaming, video games
Companies: audible magic, twitch

Killing The Golden Goose: Copyright Holders Demand More Cash Even As Streaming Music Services Struggle To Be Profitable

from the because-that's-how-it-always-works dept

For years, we've pointed to the legacy entertainment industry's history of trying to kill the golden goose any time a new and successful service has come along that actually helped drive them into the modern era. These services never actually come out of the industry itself, and thus are almost always hated (often with a passion) by the legacy players who failed to innovate, and now fear the potential alternative power in their industry. It's no secret that the legacy record labels and studios maintain their position by trying to control every aspect of their market, rather than by innovating to what the public wants.

In the music space, there have been a growing number of complaints from industry insiders about just how unfair it is that companies like Pandora and Spotify are successful. You see complaints that these services don't pay enough and a search for regulatory changes to demand more cash from these companies. And yet, Pandora and Spotify are both having tremendous difficulty reaching anything approximating profitability -- in large part because the existing costs of the music they stream is so ridiculously high.

John McDuling at Quartz has a good overview of the state of the streaming music space, which (among many other points) highlights this problem:

Spotify, by contrast, needs to negotiate directly with content owners (record labels and publishers) and maintain a huge library to satisfy all of its users’ different tastes, even though a large proportion of those songs are apparently never played. So its royalty costs are fixed at a high proportion of its revenues.

Ultimately, this means Pandora has a much leaner cost base than other services do. It paid out around 50% of its revenue in royalties last year. For Spotify, that figure is closer to 70%.

And yet, Pandora is still not really making money. Since its IPO in mid-2011, the company has eked out a quarterly profit just twice (Wall Street is expecting another small profit when it reports earnings on Thursday, July 24). Over the last two financial years it has racked up more than $75 million in losses. And despite these losses, content owners (record labels and publishing companies), perhaps envious of its growing user base and elevated share price, have been aggressively trying to squeeze more out of it in royalties. For some, this offers evidence of structural flaws in the Pandora business model.

It doesn't seem like a structural flaw in the business model, so much as the legal regime that assumes that it's the content alone that is the value, and that the service has no value at all. The legacy content guys see any profits at all as a sign that they're somehow being screwed over and underpaid, and thus they have to angrily demand more and more. It's happened over and over again. Remember how popular ringtones were? Part of the reason they went out of style was that the industry desperately saw it as a place to get ever more money from. Ditto for music video games.

The industry systematically overvalues the content and undervalues the service. That's not to say that the content shouldn't be paid for. But it's incredible how long a history we have of the legacy recording industry consistently smothering innovative new services with oppressive costs, frequently driving them out of business. They consistently kill the golden goose because they hate the idea of any outsider having success, even as they fail to innovate.

Filed Under: compulsory licenses, cost of goods, golden goose, music industry, overvalue content, profitability, streaming, undervalue service
Companies: pandora, spotify

Epiphany: Rep. John Conyers Realizes Mid-Hearing That His Copyright Position Contradicts His Stand Against Overcriminalization

from the when-reality-sets-in dept

It's hard to imagine looking at the absurdly excessive copyright penalties on the books and thinking, "Hey, maybe these should be a bit higher." But Congress has shown itself to be exceedingly imaginative when it comes to cranking up copyright, so perhaps it is no surprise that in yesterday's hearing on those penalties—covering statutory damages and criminal sanctions—a number of witnesses and Representatives alike seemed to think that those remedies are insufficient.

More surprising, though, was an unexpected moment of clarity from Michigan's Rep. John Conyers, a staple of the Judiciary Committee's reform hearing process and a reliable supporter of ratcheting up copyright enforcement capabilities. Conyers broke the first rule of copyright exceptionalism club by actually talking about the fact that this discussion would seem pretty unreasonable—even by Congressional standards—in areas outside of copyright.

Specifically, Conyers referred to the very real problem of overcriminalization, which absolutely afflicts copyright policy. This, after all, is the area of law that has made us an "Infringement Nation," routinely racking up millions of dollars in hypothetical damages throughout the course of an average day. Conyers generally pushes back against this overcriminalization, but here he is arguing for misdemeanors to be made into felonies—what gives?

If you can't see that, here's the key clip, though it helps to watch the video:

Conyers: Mr. Assistant Attorney General, what else can we do besides addressing the felony streaming issue? It seems like... uh... once we get that going... uh... {long pause}... Well, it seems to me like there's an underprosecution. Normally, I... {pause} come to the committee complaining about overcriminalization. {Looks around} And now I find myself in the awkward position of saying... uh... let's make a felony of somebody's misdemeanors. Can you give me some comfort in some way? {awkward smirk}

David Bitkower, the witness from the Department of Justice, basically says that from the DOJ's perspective there is no overcriminalization problem, which is unsurprising. Then Nancy Wolff, a witness from the law firm of Cowan, DeBaets, Abrahams & Sheppard, adds that the ridiculously high damages helps plaintiffs force defendants to settle. Finally, Public Knowledge's Sherwin Siy notes that Conyers's question was spot on: our current excessive penalties do encourage certain plaintiffs to pursue non-meritorious claims, and that's something to be concerned about.

You can see on Conyers' face that he was looking for some resolution to his cognitive dissonance, but he couldn't find it. Copyright exceptionalism is simply inconsistent with fact-based policy—so when it comes time to reconcile the two, you're going to have a bad time.

Let's hope this moment was a lawmaker beginning to see the light. As EFF lays out in our brand new copyright whitepaper, "Collateral Damages", excessive and unpredictable penalties can chill free speech and stifle innovation. On such an important issue, it's encouraging to see lawmakers breaking from the standard script.

Filed Under: copyright, copyright remedies, david bitkower, doj, felony, house judiciary committee, john conyers, nancy wolff, overcriminalization, streaming