Tag Archives: music royalties

New book: tech elites’ disregard for privacy & IP must be managed

Can Internet monopolies – adept at providing at providing information – be prevented from violating the rights of individuals, businesses and IP holders, and impeding innovation?

They can if they are regulated like utilities, says Jonathan Taplin in his new book, Move Fast and Break Things.

In 2009, Mark Zuckerberg told Business Insider publisher and former Wall Street analyst Henry Bloget, “Move fast and break things is Facebook’s prime directive to developers. Unless you are breaking stuff,” Zuckerberg said, “you are not moving fast enough.”

Eight years later, this Facebook mantra has taken on a darker meaning. A new book by Hollywood producer and former USC Annenberg Innovation Lab director, Taplin (Mean Streets, The Last Waltz), offers a portrait of technology giants without restraints, routinely violating the rights of creatives, consumers and innovators, and propping up their own shares at the expense of investing in the future.

Subtitled How Facebook, Google and Amazon Cornered Culture and Under-mined Democracy, Move Fast and Break Things dissects the inordinate power of a handful of the popular companies and their founders, and what it means for culture, innovation, and personal freedom.

What Taplin does best is connect the dots by distinguishing between true break-through ideas and the ability to provide and mine data, especially personal information, for profit and dominate markets. The confluence of vision, ego, and wealth is for Taplin a dangerous mix that needs to be carefully watched if not closely monitored. Copyright and patent holders need to be especially wary.

Don’t Ask Permission

“The co-founder of YouTube, Chad Hurley, was a PayPal alumnus, schooled in Peter Thiel’s philosophy,” writes Taplin. “He built his company on the same ‘don’t ask permission’ ethic the Larry Page had embraced… ‘Who will stop me?’ [A phrase which can be found in Ayn Rand’s controversial novel, The Fountainhead.] This became the center tenet of Internet disrupters, from Thiel’s PayPal right up to Travis Kalanick’s Uber.”

Taplin writes that Google, who championed the tagline for its corporate code of conduct, “Do no evil,” controls 88% of online searches and search advertising, while Facebook has 77% market share in social media and Amazon a 70% share of e-book sales. He does not consider Apple a monopoly because its main hardware business has many competitors.

“The tech elites jealous guarding of its own monopoly platforms,” says Taplin, “is built upon a blatant disregard for the artist’s intellectual property.”

“More people than ever are listening to music, reading books, and watching movies, but the revenue flowing to the creators of that content is decreasing while the revenue flowing to the big four platforms is increasing. Each of these platforms presents a different challenge for creators. Google and YouTube are ad-supported ‘free-riders’ driven by a permission-less philosophy.”

Permission-less free-riding, or “efficient infringement” in has also come to dominate other parts of the IP workplace, rendering simple patent licenses more arduous than ever.

Consent Decree

How does Taplin propose we prevent Internet monopolies from violating the rights of individuals, businesses and IP holders, and impeding innovation? You regulate them like utilities.

It would be very difficult for many people and businesses to live without Amazon, Google, YouTube and Facebook, but it is becoming impossible for many who produce intellectual property to live with them.

This is not something that their founders and shareholders want to hear, but it may be inevitable. Europe is more apt to regulate BigTech than the U.S. – and it is not mere jealousy. If Google, for example, is indeed a monopoly, Taplin, a former tour manager for Bob Dylan, asks, would a consent decree like the one that the government made Bell Labs enter into in 1956 work? He believes it would.

Easy Ride is Over

The Guardian, the British daily, said “Move Fast and Break Things is a timely and useful book because it provides an antidote to the self-serving narrative energetically cultivated by the digital monopolies. They have had an easy ride for too long and democracies will, sooner or later, have to rein them in.”

It would be very difficult for many people and businesses to live without Amazon, Google, YouTube and Facebook, but it is becoming virtually impossible for many who produce intellectual property to live with them.

My full review of Jonathan Taplin’s new book can be found here, on IP Watchdog.

For more information or to buy Move Fast and Break Things, go here.

For a free preview chapter (via Google), go here.

Image source: jontaplin.com

 

Licensing deal with IP rights group ends YouTube blackout in Germany – “no more red faces”

Tens of thousands of recording artists and musicians in Germany will be receiving payment for their content under the terms of agreement struck last week between YouTube and GEMA, Germany’s leading royalty collection group.

The deal will end a seven-year YouTube ban in Germany, which had previously blocked access to the streaming site over non-payment of performance royalties. It is unclear if the pact is a harbinger of things to come in the ongoing battle between streaming sites, search engines and content providers, such as musicians, or if it includes published works, like books and photographs.

Resolution of the dispute, reports The New York Times, comes “with European officials revamping the region’s copyright rules to give more power to music labels, publishers and other content producers over the likes of Google, which owns YouTube, and Facebook.”

“We remained true to our position that authors should also get a fair remuneration in the digital age, despite the resistance we met,” Harald Heker, GEMA’s chief executive, said in a statement. He added that the agreement covered future royalties, as well as those accrued over the last seven years.

Blocking alert that German YouTube users will no longer see

untitled-9

“This is a win for music artists around the world, enabling them to reach new and existing fans in Germany, while also earning money from the advertising on their videos,” YouTube’s Christophe Muller told TorrentFreak, a publication dedicated to bringing the latest news about copyright, privacy, and everything related to filesharing.

TorrentFreak also reports that “Increasingly, music groups are criticizing YouTube for ‘profiting’ from the hard work of artists without paying proper compensations, so it’s not unlikely that similar deals will follow in other countries.”

A prominent L.A.-based producer told IP CloseUp that the deal (which deal? The deals in other countries? “that such deals in other countries”) “appears to be progress,” but Google (which owns YouTube) is too big for the little record companies to fight. “Whenever they try collective action, Google runs to the anti trust authorities.”

Agreement that the Internet has been bad for the music business is not universal. Factors that influence “free” distribution depend on a label’s size, the popularity of its artists and their point-of-view about how best to generate income. Sony has said that impeding YouTube costs the music industry millions of dollars.

One of the people who embraces this positive view of streaming is Edgar Berger, Sony Music’s CEO of international business. In a recent interview he stressed the importance of the Internet, while noting that the increase in Internet sales almost makes up for the decline in physical sales. See a summary of the interview, here.

“There is absolutely nothing to complain about. The Internet is a great stroke of luck for the music industry, or better: the Internet is a blessing for us,” Berger said.

No More Red Faces

“The [GEMA] deal means YouTube will unblock thousands of clips in Germany for the first time in seven years,” wrote Bloomberg News. “When German music fans in the past tried to watch videos of their favorite songs they only got an youtube-sad-face-300x159error message showing a red YouTube sad face with a line saying the content was banned from the portal for copyright reasons.”

The parties did not disclose financial details of the agreement. YouTube has, in the past, struck similar deals with dozens of groups around the world, including one in 2009 with the U.K.’s PRS for Music.

The groups also did not say if YouTube’s familiar sad red face would be replaced with a happy green one.

Image source: theheureka.com

The bonds that fell to earth – The financial magic of David Bowie

The passing of David Bowie is a reminder that he was an innovator in finance and intellectual property, as well as music and fashion. 

Much has been written about the passing of David Bowie in New York at 69. It’s important to remember that he was a pioneer in music royalty securitization in 1997 with so-called”Bowie Bonds.”

00DavidBowieEsquireRussia1The bonds were a smart move for Bowie, who raised $55 million without giving up ownership of his prized catalog. He had gambled wisely on the future, and while the bonds traded poorly for investors —  a reflection of weakening demand in the music industry at the time — they never defaulted, paying holders in full at ten-year maturity.

First Mover

Bowie was a first mover, parlaying the future cash flow from his copyrighted song catalogue into an early payday just when the music industry was changing. The idea of royalty securitization remains viable today, if somewhat more sobering. As long as the financial modeling is right, and the appetite for risk sufficient, leading artists and innovators will continue to score with royalty deals.

In my 2001 book, From Ideas to Assets, Doug Elliott writes, “What Bowie sold was the present value of his personal intellectual property (song copyrights) – that is, the future expectation of future royalty income, less a discount (p. 462).”

“From 1991 to 1998 nearly $3.5 billion in Bowie-like royalty instruments were sold by other musicians (Rod Stewart), media conglomerates (Disney, Dreamworks, Universal), and branded marketers (Calvin Klein, Borden and GE Capital).”

The cash flows that comprised these securitizations were on a a whole far more reliable than the infamous mortgage-backed issues and CDOs that blew-up en masse and facilitated the 2008 bank melt-down. (See The Big Short, both the book and movie.)

Bowie told The New York Times in 2002 interview that copyright would no longer be viable in ten years and that music was likely to become a commodity “like running water or electricity.” He was not far off.

For a good Bloomberg story about Bowie’s foray into finance, go here. For the Wall Street Journal piece, go here.

Image source: gossipblog.it; vam.ac.uk

Angry musicians are pushing back on royalties – Will inventors follow?

Song writers may have something to teach inventors when it comes to getting a fair share for their intellectual property rights, or not.  

Confusion faced by writers and performers in the recording industry over “legal” downloading of copyrighted work by aggregators like Spotify, Pandora and YouTube have forced a range of musicians to question the logic of an overly complex and chronically opaque royalty payment system.

With most music streaming services using copyrighted content for free, or almost free, confusion has given way to anger and frustration.

Who Said Fair? 

The primary issue right now for many copyright holders is not a matter of the legitimacy of their rights, but how much is fair payment for frequent use? In at least one important way, song writers are way ahead of inventors, who hold more encompassing, but frequently uncertain, patent rights. For them, the first hurdle is whether their invention is innovative in the eyes of the changing law — a challenge, even under the best of circumstances. Then, it needs to be determined if the invention is indeed being used (infringed) and by whom, and how much they should be compensated. (Did you think innovation could be so much fun?)

There are reasons why patent licensing has become synonymous with costly litigation. With high-tech inventions today, virtually no one takes a license unless they are forced to. Why should they? Exactly who are the bad actors is not always clear.

Inventors and patent holders can learn from the tension between recording artists and their intermediaries (publishers and record labels), and distributors (e.g. Spotify). To be fair, most of these streaming services are not very profitable. Still, they are building bold business model and creating value on the backs of musicians and publishers. Both song writers and inventors (or those assigned to hold their patents) do not have much negotiating leverage when it comes to 02byrne-master675collecting a fair share of royalties. For patent holders attempting to out-license for revenue, it is frequently sue or get nothing at all – and that’s no bargaining position.

Historically, there has been little transparency regarding the deals made to use copyrighted songs, and today it is no different. There are few standards and the information provided about deals is asymmetric. Basically, the pricing is what ever the distribution channel (and the labels) can get away with, and they both no longer see a much of need for publishers, who they would prefer to cut out. Headliners have more leverage and can benefit from free exposure (more concerts, merchandise licensing) in ways that less well-known artists cannot.

The Business, as Usual

A recent New York Times article, “Music Artists Take on the Business, Calling for Change,” acknowledged that more musicians are fed up about their participation in benefits of the new distribution technologies and have begun to demand a better accounting. It helped when Taylor Swift refused to take no royalties during a three-month trial period on Apple Radio’s. (Would Apple allow customers to use a new iPhone for free until they deemed it worth purchasing? Oh, you say, doesn’t Apple have an R&D investment and the copyright holders are just pulling tunes out of the air?)

Ms. Swift was probably thinking more about her own interests, but they affected the entire industry, and Apple got the message.

“‘The support that we’re seeing, in terms of the range and number of artists, whether it’s from somebody who’s a working-class musician to somebody who’s very successful, it’s unprecedented,’ said Ted Kalo, the executive director of MusicFirst, a lobbying coalition that includes record labels and musicians’ groups and that helped organize the social media campaign.

“The economics behind downloads is relatively simple: Typically about 70 percent of a song’s retail price goes to a record company, which then pays its musicians according to its contracts. But with streaming, the system is complex and often opaque, as became apparent in May, when an outdated licensing contract between Sony and Spotify was leaked online, showing the elaborate formulas used in computing streaming rates.

“Public relations missteps in the early 2000s kept many musicians from speaking out about economic issues, artists and executives said. Those include the music industry’s lawsuits against thousands of fans for online file-sharing, and the pillorying that the band Metallica received after it sued Napster for copyright infringement. But the shift toward streaming in recent years has prompted many musicians to investigate the changes in the business…”

A Bottle of Wine

“New businesses are being built on this cheap almost free use of copyrights,” said Steve Loeb, a producer of more a dozen albums for Riot, a heavy metal band. “It’s sad but has always been this way. Now we’re all Black blues artists, if you catch the drift. They used to pay those guys with a bottle of wine – now they pay all of us that way.”

“Most artists don’t have the intellect to understand what is going on affects their future and music quality,” continues Loeb, who closed his successful Greene St. Recording in 2001. “Inventors don’t appear to be much smarter when it comes to how their work is used. Royalty payments are a complex process that’s become even more complicated with new technology, and few are willing spend the time to understand it.”

Pandora’s market value is about $3 billion; Spotify’s is over $8 billion. Bank of America analyst Justin Post believes that YouTube’s value on its own is about $70 billion. 

Black Box 

In a Times op-ed, “Open the Music Industry’s Black Box,” David Bryne, a musician and author, said

“Everyone should be celebrating — but many of us who create, perform and record music are not. Tales of popular artists (as popular as
02artists-web4-articleLargePharrell Williams) who received paltry royalty checks for songs that streamed thousands or even millions of times (like “Happy”) on Pandora or Spotify are common. Obviously, the situation for less-well-known artists is much more dire. For them, making a living in this new musical landscape seems impossible… Perhaps the biggest problem artists face today is that lack of transparency.

“Some of these ideas regarding openness are radical — ‘disruptive’ is the word Silicon Valley might use — but that’s what’s needed. It’s not just about the labels either. By opening the Black Box, the whole music industry, all of it, can flourish. There is a rising tide of dissatisfaction, but we can work together to make fundamental changes that will be good for all.”

More Transparency

Patent holders are frustrated with the uncertainly of issued patents, whose validity must be proven repeatedly before review boards, in the courts and in appeals.

Will they respond as an increasing number of musical artists have and demand more certainty and transparency?

It’s important to remember that what makes patent licensing easier for some, makes it more expensive for others. That’s why those well-situated on the corner of technology and brand are compelled to determine what is truly innovative and its value before others do.

Patent holders: Both of the provocative articles above are worth reading.

Image source: nyt.com

 

Copyright Monetization Business is Latest IP Enforcement Play

New IP licensing model is generating opportunity for content providers and investors; obstacles for file-sharers.

Rightscorp is an IP licensing business model of a different stripe. It monetizes copyrights through widespread enforcement of consumers who download music and movies without paying. While some may consider Rightscorp the first public “copyright troll,” others see it as an important business whose time has come.

Rightscorp (OTCQB:RIHT) is a response to unauthorized music and movie downloading that offers record labels and movie studios an enforcement mechanism to address rampant theft that has plagued those industries. It also provides infringers an inexpensive solution to their transgressions. Like this approach or not, targeting end users through ISPs is bound to ruffle a few feathers, which it already has.

Curbing Digital Crime

It’s been reported that 24% of all Internet traffic is used to distribute copyrighted content without permission or compensation to their creators. If that figure is even remotely accurate, IP theft is rampant and broadly acceptable to consumers, who don’t believe they are doing any real harm.

logo-rights-corpRightscorp, whose current market value is about $35 million, provides monetization services to holders of copyrighted intellectual property. The company’s patent pending digital loss prevention technology, says CEO Christopher Sabec, an entertainment industry attorney who has represented the Dave Matthews Band and the Jerry Garcia Estate. It focuses on the infringement of digital content such as music, movies, software, games (and, now, books), and ensures that owners and creators are paid for their work.

Rightscorp is a business model worth understanding. It is a public IP enforcement company that, not unlike patent aggregator RPX, provides a way for large operating businesses to mitigate risk with a market-based solution, in this case by promoting broad enforcement. (It is unclear how frequently have actually sued and collected damages, or shut anyone down.)

Rightscorp implements existing copyright laws to solve infringement by collecting payments from illegal file sharing activities via notifications sent through Internet Service Providers (ISPs). The Company’s technology identifies copyright infringers who are offered a reasonable settlement option (as low as $20) when compared to the legal liability defined in the Digital Millennium Copyrights Act (DMCA).

The company has been working with Hollywood studios such as Warner Brothers and agencies such as BMG Rights Management, which represents such musicians as David Bowie, Kings of Leon, and Will.i.am, to protect intellectual property and copyrights. The company acts on behalf of the studio, artist, or copyright holder, often sending form letters which offer the downloader several options for financial restitution. It is not clear if lesser known artists are represented. 

Typically, Rightscorp sends a settlement notice to the infringing party through their ISP. The settlement notice offers to relieve the legal liability of up to $150,000 per infringement, under the Digital Millennium Copyright Act, the current law. The notice provides a settlement option through Rightscorp for $20 per infringement. If the user chooses not to pay and has repeatedly violated copyright infringements, the ISP may suspend or terminate the subscriber account until a settlement is reached. More than 200,000 people have been sued for copyright infringement on peer-to-peer networks since 2010.

Rightscorp currently represents more than 1,000,000 copyrights with more than 40,000 copyrights in its system, and has received settlements from subscribers of more than 50 ISPs and closed over 60,000 cases of copyright infringement to date. 

Streams on the Internet written by violators who have received letters from Rightscorp, including those responding on Answers/Yahoo and Reddit, have derided the company for threatening to sue or shut them down if they do not comply. Rightscorp provides an innovative business model that will require more education to find broad acceptance. For those who have been file sharing for years asking them to stop or pay up is tantamount to putting a tax on the air they breathe. Many patent infringers are not much different. The abuse is so systematic, it does not seem like anything wrong.

A sample Rightscorp agreement can be found here.

Taking the Innovation Economy Seriously

The United States manufactures very little today. Its economy is based largely on innovation, and relies on inventions, content and know-how to compete. If we expect to continue along these lines we will need to teach people what IP is, how it can be valuable, and why IP laws need to be taken seriously because they not only enrich record labels, rock stars and the like.

Perpetuating IP abuse is non-unlike cheating on your taxes: even if everybody seems to do it, and its easily done, it does not make it right.

IP theft is rampant globally, but especially in the U.S. and directed at U.S. assets. Lack of education is partially to blame. Schools need to teach parents, and parents and schools together need to teach children about the importance of innovation beyond smartphones and hit songs, and the respect it must be afforded.

Headlines that decry patent “trolls” distort the potential impact of a loose IP regulation. For Rightscorp and other IP monetizers to succeed not only will they need to grow by broadly enforcing copyrights and patents, they will need to turn licensing into a high volume enterprise, and to convince the Americans that respect for creative work is good for everyone.

Image source: rightscorp.com


%d bloggers like this: