Why Would Google Offer $1B For Music Rights? Because The Return Could Be Much Bigger

from the you-can't-put-a-price-on-freedom dept

It's no secret that Google's music locker service is struggling, but the company still seems committed to making it a success. To do so, they'll need to do big things, and break through the barriers that the record industry places in their path. Music columnist Wayne Rosso reports that an unnamed source told him Google is making bold overtures in that direction, and has offered at least one major record label a $1-billion contract for blanket worldwide rights to their entire catalog (thanks to Colin for sending this in). It's still unconfirmed, but it echos something Glyn wrote last year (which Rosso also refers to) about the possibility of Google or a consortium of internet companies simply buying out the record industry (and noting that Larry Page, Serge Brin and Eric Schmidt could afford to do so with their personal fortunes).

Rosso's source, however, isn't exactly sanguine about the idea:

What, one may ask, is Google thinking? “Who knows,” said the source. “It really doesn’t matter because they would screw it up anyway (referring to the fact that Google’s music service has been less than dazzling). Evidently they have a big content group and they have to have something to do to justify their existence.”

So how have the labels responded? “They’re just shrugging and stringing Google along, trying to keep milking cash out of them”, says the source. “They want the money but on the other hand they hate Google. It really sticks in their craw that Google continues to present links to pirated content at the top of their search results.”

I think that, if true, this says something much different. Google is not trying to "justify" anything—they know that there is tremendous opportunity in the field of online music services if only the labels will loosen the reins a bit. And they are willing to bet billions on that belief. The problem with online music offerings is that the people who design them simply don't think the same way the recording industry does. They want to make cool, useful, engaging services full of both common sense features and innovative ones, deployed on multiple platforms all over the world, fully leveraging the technology that is available—but licensing restrictions interfere with every single step of that process. Design and development are inextricably linked with tedious contract negotiations and the fear of lawsuits. It's extremely difficult to get a good product as a result—and if you do, the labels clamp down to see where they can extract more money from it. If Google is trying to buy blanket licenses with no restrictions at a high price tag, it's because they want to escape that cycle. They want a clear and open playing field on which to build services the way they want to build them, without having to beg the labels for permission at every turn. In a market that has only scratched the surface of the economic possibilities of digital music, such a playing field would be well worth the money.

Filed Under: licensing, music lockers, wayne rosso
Companies: google

Pirate Bay Sale Looking Even Less Likely

from the was-it-ever-real? dept

At the beginning of July, we questioned whether or not the announced purchase of The Pirate Bay by GGF was ever really going to happen. From the statements made by GGF CEO Hans Pandeya, it really seemed quite doubtful. Not only did he do a terrible job of explaining the plan, he contradicted himself multiple times and suggested a few times that the deal could fall through. That may in fact be happening. Two weeks ago, we noted that Pandeya had supposedly hired Wayne Rosso (former Grokster boss) to negotiate with record labels concerning a business model that didn't make much sense to us. Rosso has now admitted that he's no longer working with GGF and doesn't believe the company has the money to make the purchase, and has problems with Pandeya's credibility. So, once again, we're left wondering if this deal will ever happen.

Separately, it should come as little surprise that a bunch of entertainment companies are demanding that the Swedish courts shut The Pirate Bay down. It was noteworthy that in the original ruling against the four people associated with The Pirate Bay, the court did not issue any sort of injunction to stop the site from functioning. The folks at The Pirate Bay are claiming this sudden demand for a shut down is because the entertainment industry is trying to mess with the sale to GGF, but it certainly looks like that's falling apart on its own (as if there was ever any real meat there). Still, for all of the complaining by the entertainment companies, it seems quite premature to shut down the site when the original ruling is still under appeal. But, since when has that ever stopped the industry? In the meantime, it might not matter much even if it is shut down. Since the announcement of the GGF plan, lots of others have stepped up to try to take the place of The Pirate Bay as a key source for torrent searches. It makes you wonder who the entertainment industry will single out next? After all, The Pirate Bay was a relatively small player itself before the US entertainment interests first called it out...

Filed Under: hans pandeya, wayne rosso
Companies: ggf, the pirate bay

Pirate Bay's Plans Too Clever By Half: Arbitrage Consumer Bandwidth

from the this-looks-like-a-mess dept

There's a bunch of news coming out about the sale of The Pirate Bay to GGF, though it's still not making very much sense, I'm still wondering if the deal will really happen. However, it appears that GGF has started working with Wayne Ross, who ran Grokster and Mashboxx, in an attempt to get him to negotiate with the labels. In an interview, he more or less reveals GGF's plans for The Pirate Bay.

Basically, you'll have to pay to leech, but the more resources you "contribute" to the system, the less you'll have to pay, and if you contribute enough resources/bandwidth, then you might actually make some money. Then, on top of that, they believe that some content providers/ISPs will pay for offloading their bandwidth. That explains some of the earlier statements made by GGF. In theory, the idea is that it makes everyone happy. Those who pay for bandwidth on hosting content can pay a lot less. Users who contribute bandwidth end up getting free content (or potentially even making some money). And, of course, the content owners get paid.

Except... that idyllic picture starts to break down when you start to run through the details. The second the paywall goes up, an awful lot of users will abandon The Pirate Bay for friendlier non-barrier-happy sites. That takes away pretty much the entire advantage of The Pirate Bay to make this work. Even the appeal of potentially making money probably won't attract enough users. Second problem? There's no way the economics works out nicely on this one. We've already seen the sort of ridiculous rates that the RIAA wants to charge for individual streams/downloads of music. Put those numbers into this model and start doing the math... and start laughing. There's no way that much money comes into the system. None.

Finally, it leaves out an important party who clearly will not like this setup at all -- even if all the rest of it works: consumer ISPs. The real "ingenious" part of the plan appears to be that some content hosters/service providers are effectively pushing bandwidth costs away from themselves, and dumping them on retail ISPs, who offer flat-rate connections. So the real "costs" are hidden in the typical flat-rate plans of ISPs.

It's effectively a sneaky arbitrage play, whereby The Pirate Bay tries to aggregate all the unused flat-rate ISP bandwidth, and wholesale it to others, paying copyright holders in cash, and downloaders in free/cheap content. But the ISPs whose bandwidth is getting used don't get paid, meaning they're more likely to push back even more against unlimited connection plans. I just can't see how this works.

Oh, right, in the meantime, it's not clear the recording industry has any interest in playing along. They're already demanding that cash from the sale go to them, rather than the founders. Of course, that's a bit misguided, since the founders no longer own The Pirate Bay, having handed the ownership over to others in 2006. So they won't be getting any of the money from the sale. The recording industry basically says it doesn't believe that to be true, and will use the sale as evidence that the founders should pay up. Thus, it's difficult to see them rushing out to embrace this already questionable arbitrage play.

Filed Under: arbitrage, bandwidth, bittorrent, business model, content, file sharing, wayne rosso
Companies: ggf, the pirate bay