How Our Convoluted Copyright Regime Explains Why Spotify Chose Joe Rogan Over Neil Young

from the one-of-them-is-a-lot-more-costly dept

Spotify’s decision to hitch its star to podcaster and font-of-COVID-misinformation Joe Rogan has sparked a wave of pushback from musicians, some of whom--among them Neil Young, India Arie, and Joni Mitchell--have pulled their music from Spotify in protest. Spotify, for its part, has stood firmly by Rogan. 

That Spotify would stand by a show that consistently undermines vaccines and blithely spreads misinformation is disappointing--but, financially, it’s perfectly predictable. 

The short version: 

The law and economics of music streaming lead to one inevitable result: Spotify pays money when it streams music. It makes money when it streams podcasts. Therefore, Spotify has an incentive to keep people using Spotify -- just not for music. 

The legal regime around music licensing makes breaking even -- let alone turning a profit -- nearly impossible. Because the industry is notoriously secretive about its financials (a problem in and of itself), raw data is hard to come by. But the fact remains that investors (and industry observers) agree that music streaming as a loss-leader -- something that incurs a net loss for the service doing it, in the hopes of potentially looping consumers into the parent company’s product ecosystem. Apple Music and Amazon Music, the second and third largest streaming services by market share, both operate at a loss. Spotify, which has been in the US market since 2011, turned its first profit in 2021. It is still unclear whether it will manage to repeat the achievement. 

In short, experience indicates that a streaming service that plays only music will consistently lose money. And while this is a complex issue with many moving parts, one of the biggest is the law -- the market it creates, and the behavior it incentivizes. 

But First, How Does Music Copyright Work?

Each track involves not one, but two copyrighted works; the recorded performance (the “sound recording”), and the underlying composition (the “musical work”). Legally, these are two distinct things. This is partly a historical artifact; songwriting hit its stride in the very early 20th century, before mass distribution of recorded music was even a glimmer in anyone’s eye. Compositions got copyright protection in 1906 (and were thus given the now-confusingly-vague designation of “musical work”). Over the first half of the century, publishers and performing rights organizations sprang up to promote, distribute, and license songwriters’ work. It wasn’t until mid-century that the recording industry began to flourish on its own, and sound recordings didn’t even gain copyright protection until the late 1970s.

Because of this history, the two industries – songwriting and recording – operate under wildly different licensing structures. Copyright is, at its core, a government-granted right to exclude; when one player starts to accumulate a high volume of those rights, the risk of abusive market behavior rises. The composition side of the equation messed around and found out early. By the 1940s, the government had intervened and set up a complex system of antitrust enforcement, rate-setting, and mandatory licensing regimes. The result was a market that, for all its faults, remains relatively stable and predictable for licensees (and, as a side benefit, provides some transparency on how songwriters are paid).

The recording industry, by contrast, gained its copyright (and thus its monopoly power) in the mid 1970s. By then, antitrust law was in the middle of a Chicago school backlash that considerably narrowed its scope and purpose and regulators had lost the taste for the kind of vigorous enforcement that marked the early part of the 20th century. While regulators in the 1940s were willing to go after the songwriting industry’s bad behavior (cartels, extractive pricing, strong arm tactics, etc) their counterparts in the late 1970s were less enthusiastic. And so, unlike their composition-side brothers, labels exist in an unconstrained free market. 

Why It’s So Hard For Streaming Services to Make Money

As mentioned above, we have very little hard and fast data about how much labels are charging and what kinds of side deals they are striking to extract value from these services. But given what we do know about the industry -- and what the U.S. government has outright assumed is going on when doing things like setting royalty rates -- we have a pretty good idea.

Because labels have no meaningful guardrails on their licensing practices, they are free to maximize their own profit however they see fit. When it comes to streaming, their ideal situation is to extract as much value as possible without forcing the service completely under. This means that licenses are priced with the assumption that the streaming service will have to take on some (ideally sustainable) amount of debt to cover their licensing obligations. The alternatives to this aren’t a whole lot better, either; things like equity stakes, sweetheart deals, and algorithmic preferencing or promotion are commonplace. 

The result of all this is that it is structurally impossible for a streaming service to turn a profit using standard music deals alone. Labels are rational economic actors. Profit is value that is not being captured by labels; labels will rationally set prices to ensure that none of that value goes un-captured. Labels have the power to shut a service down simply by walking away from the table. 

Why Spotify Can’t Quit Joe Rogan 

It means that, despite being a music streaming company, music is (and will always be) a revenue loss for Spotify. To have any hope of turning a profit, it needs a low-cost, high-revenue offering. Enter podcasts – specifically Rogan’s podcast, which commands a minimum ad buy of $1M, along with a commitment to buy other ads on Spotify-hosted podcasts. 

So, when forced to choose between retaining portions of its legacy music catalog and keeping one of the only offerings that actually makes the service money, Spotify made the obvious (if morally objectionable) choice. It chose Joe Rogan.

And barring a major overhaul of music licensing law, starting with sound recordings, this will keep happening. We’ll either end up in a world where all mainstream streaming services will be backed by deep-pocketed tech giants (such as Apple, Amazon, and Google), or where music services are stuck relying on non-music content to stay afloat--even when that content is harmful.

Meredith Rose is Senior Policy Counsel at Public Knowledge

Filed Under: business models, copyright, joe rogan, licensing, loss leaders, neil young, podcasts, streaming
Companies: spotify

Trump Campaign Was Legally Allowed To Use Neil Young's Music At Rally, But Doing So Was Kind Of Dumb

from the yeh-fired dept

It seems like every presidential election cycle, which comes around far too often and lasts for far too long for my taste, there inevitably ends up being some kind of row between some musicians and some politicians over music used at campaign events. The targets of these disputes tend to be Republican candidates, due to the political demographics of musicians as a general thing, but Democrats have been targeted as well. And, as we've mentioned in the past, other than creating a stir in the media and hoping the target campaign relents, there's roughly shit-all these musicians can do about it. But that stir can often times be enough, especially if the musician uses the opportunity to pimp a rival candidate.

Like Bernie Sanders, for example. Apparently when walking ego Donald Trump decided that he was going to announce his candidacy for President of these United States, his campaign decided to use Neil Young's "Rockin' in the Free World" at the event. Neil not only wasn't pleased, but he used the opportunity to boost the candidate he does endorse.

"Donald Trump was not authorized to use 'Rockin' In The Free World' in his presidential candidacy announcement," said Young's manager in a statement. "Neil Young, a Canadian citizen, is a supporter of Bernie Sanders for President of the United States Of America."

As it turned out, as it usually does, Trump was authorized to use Young's music through an ASCAP license. That said, maybe it's time politicians learned to take the extra step and clear things with musicians before using their music, if for no other reason than to protect against the backlash becoming an advertisement for a rival campaign. Campaigns are very much like brands, after all, and the last thing a brand wants to do is get a competitor's name in circulation. That's got to be doubly so when the rival "brand" is someone like Bernie Sanders who, think whatever you like of him, is starving for more name-recognition on the national level. A couple of simple phone calls from the campaign office would likely inoculate against this sort of thing happening, where now every quote from Young on this dust-up mentions Young's support of Sanders.

All that being said, Young has somehow managed to make Trump the sympathetic figure in this whole story.

A press secretary for the real estate mogul said Wednesday that Trump would respect the wishes of Neil Young and no longer use "Rockin' In the Free World," which Trump featured Tuesday during his announcement that he was seeking the Republican Party's nomination for president. Trump press secretary Hope Hicks said Wednesday that "despite Neil's differing political views, Mr. Trump likes Neil very much."

It's a good way to spin the ending of this story for Trump's team, appearing so reasonable and agreeable to Young's antics, which come off looking petty. Still, no reason to let your campaign's music choice give the artist an opportunity to pimp Bernie Sanders. There are enough conservative musicians out there making music.

Filed Under: bernie sanders, donald trump, endorsements, music, neil young, presidential campaigns, rockin' in the free world
Companies: ascap

Is There Any Merit To Neil Young's Plan To Improve The Quality Of Digital Music?

from the the-(record)-needle-and-the-damage-done dept

Neil Young has been unhappy with the state of digital audio for a while, and he's made various overtures about fixing it. Now, some trademark applications found by Rolling Stone suggest his plans are in motion, though details on those plans are scarce. The only real clue comes from a tangential mention in an unrelated press release:

A press release issued last September by Penguin Group imprint Blue Rider Press, which is publishing Young's upcoming memoir, may have revealed the working title of Young's entire project. In addition to the memoir, says the release, "Young is also personally spearheading the development of Pono, a revolutionary new audio music system presenting the highest digital resolution possible, the studio quality sound that artists and producers heard when they created their original recordings. Young wants consumers to be able to take full advantage of Pono's cloud-based libraries of recordings by their favorite artists and, with Pono, enjoy a convenient music listening experience that is superior in sound quality to anything ever presented."

But does Young actually have a new idea? There are already lossless formats like FLAC that some audiophiles swear by, not to mention uncompressed formats like WAV and AIFF. But there is theoretically room for improvement: most uncompressed digital audio is sampled at a rate of 44,100 Hz, but some pro studio equipment can record at twice that, and technologies like DSD can go much, much further. Moreover most consumer audio consists of 16-bit samples, which could be bumped up to 24-bit. So on the technical side, there is the potential for new formats to popularize higher-quality digital audio. Who knows if that's what Young has in mind.

That, however, leads to the bigger question: is there really a market for such a format? The digital audio debate has been raging for years, and it has a lot of contours—not just the strengths and weaknesses of digital and analog formats, but also changing approaches to sound engineering and the debates over loudness, audio compression and overprocessing. While some audiophiles insist they can tell the difference, blind listening tests have proved they rarely can. For the average listener, convenience, selection and price surely trump such a negligible (and possibly undetectable) quality difference—and since it sounds like Young hopes to develop a proprietary, cloud-only format, I'm guessing those other factors aren't high priorities. Moreover, since most people are listening to their music on earbuds and other low-definition systems, the quality bottleneck exists much further down the line than the file format—and since an increasing amount of music is recorded with consumer tools like GarageBand that operate at the standard sampling rates for uncompressed AIFF/WAV files, there's another bottleneck above the file format too. Though, in theory, these factors are part of what Young wants to change with his push towards higher quality—and there may be some potential in that direction over time as bandwidth and storage space increases, and even some sort of immediate market among audiophiles. But it's hard to see what he could offer that existing formats don't already provide.

I know some people will insist that digital audio sucks, and that they can tell the difference—but frankly that's a meaningless assertion if they haven't done a controlled test. There are simply too many biases to account for. But even if it is a real problem for some people, it is likely to be a very small niche market, not a cultural sea-change like Young seems to envision. Some of his proclamations about the effect of music sound eerily close to Prince's insane ramblings about how audio interacts with the brain, which is hard to swallow. Music may create transcendent human experiences once it's inside your head, but your ears are still made of flesh and bone, not magic. And evidence suggests that most people's ears can't tell the difference.

Filed Under: digital music, flac, neil young, quality

Neil Young: Piracy Is The New Radio (But The Quality Sucks)

from the well,-there's-that... dept

Neil Young apparently isn't too concerned about copyright infringement these days, according to his comments at the D: Dive into Media conference:

It doesn't affect me because I look at the internet as the new radio. I look at the radio as gone. [...] Piracy is the new radio. That's how music gets around. [...] That's the radio. If you really want to hear it, let's make it available, let them hear it, let them hear the 95 percent of it.

Of course, that's a bit of a reverse from back when he was angry that YouTube wasn't paying him money when people uploaded his songs. Still, it's good to see him come around to the view that infringement is, basically, a new form of radio. Artists like Chuck D have been making that argument for over a decade.

Young is still concerned... but about the fact that the quality of MP3 files sucks. He'd prefer technologies that provide a much fuller sound:

Steve Jobs was a pioneer of digital music, his legacy was tremendous. [...] But when he went home, he listened to vinyl.

Filed Under: neil young, piracy, quality, radio

Neil Young (And Warner Music) Should Learn To Respect YouTube... And Music Fans

from the this-is-getting-tiresome dept

After Warner Music got greedy and demanded money from YouTube that the company is under no legal obligation to pay (safe harbors, people), Google and YouTube demonstrated to Warner Music how little leverage the record label has by taking down all Warner Music videos. This is making plenty of Warner musicians quite angry with Warner Music for pissing off their fans and in some cases breaking the artists' own websites. So, rather than back down and admit that it overplayed its hand, Warner Music is pulling out the old school strategy it has used for years to win such arguments: trot out some well-known musician to whine about how it's just not fair that he's not getting the "respect" he deserves.

This time around, it's Neil Young, who has taken to his own website to claim that he and Warner Music aren't getting the proper respect from YouTube, and that YouTube needs to pay up to provide that proper respect. And what about all the musicians who Warner Music's policy is harming right now? What about all those musicians whose fans are pissed off that they can't see videos with the music they like? The problem isn't that YouTube isn't respecting Warner Music -- it has no legal obligation to do so. The problem is that folks like Neil Young and the execs at Warner Music don't respect their fans at all, and fail to realize they want to access their music through YouTube, and doing so provides those musicians with a great benefit in terms of better connecting with their fans and opening up new opportunities to create valuable relationships that will pay much more money in the long run.

In the meantime, when you look at the actual statement on Neil Young's site, it seems like a a pretty blatant copy of the NY Times. We're guessing he didn't pay the NY Times anything. So why isn't anyone demanding that Neil Young "respect" the NY Times?

Filed Under: business models, copyright, music, neil young, respect, videos
Companies: google, warner music group, youtube