Millennials vs the Punk Rock Generation: APM’s Marketplace accidentally illustrates absurdity

Someone has to say this. Might as well be me.

Punk Rock Generation: We rebelled by protesting wars, dictatorships, apartheid, government corruption, the military industrial complex, polluting corporations, the christian right,  the draft, nuclear power, the slaughter of sea mammals, and even other punk rockers.  We were at times tear gassed and beaten by police (See Dead Kennedys Wilmington CA).

Millennials:   We rebel by not paying for stuff.  We want bean bag chairs at work.

I was listening to a story about a pirate streaming service on APM’s Marketplace yesterday and I was surprised that the following statement about “millennials” not paying for stuff went un-mocked:

This is a pretty common sentiment for people born anytime after, say, the early 80s. Millennial Michael Krynski is 29. Here’s how he sums it up: “We’re like the Napster Generation. We just expect things to be available (free) online. Everything we’re looking for.”

Krynski runs a blog all about how to stream content for free. Most of his readers are under 30, and he says, “They have money, but they don’t want to give money to companies that are still in this old school distribution model.”

Old school distributions model?  You mean paying?  Cause illegal and legal streams are all distributed the same way.  You know that right?  You do understand how the internet works?

So what you’re really saying is:  Millennial rebellion is rooted in some pseudo moralistic justification of theft based on which businesses use the discredited web 2.0 “freemium” business models?

That’s where you take a stand?

++++++++++++++++++++++++++++++++++++++++++++++++++++

(Personally I don’t buy this crap. I don’t believe there is a “millennial” generation with a different set of values than any previous generation.  Every generation has it’s selfish lazy assholes who are willing to justify any sort of behavior by claiming to speak for their generation.  And every twenty years or so marketers invent a new generation so they can pitch their consultancies, books, analytics and speaking tours.  But since the media seems determined to cram this current fiction down our throats we might as well have some fun with it by following the fiction to it’s logical conclusion.)

 

Save the Date, July 8 at @thecsusa in Austin: Panel on the New Grassroots, #irespectmusic and the Fair Play Fair Pay Act

image

NOTE TIME CHANGE:

The Copyright Society of the USA Texas Chapter and the Austin Bar Association Entertainment & Sports Law Section have are co-sponsoring a panel with Chris Castle and Austin manager Ray Flowers with this title that pretty much sums it up:

“We’re Not Going To Take It”

The New Grass Roots,
#irespectmusic, and
The Fair Play Fair Pay Act

Wednesday, July 8 2015

12:00 pm-1:30pm

Jackson Walker L.L.P.

100 Congress Avenue, Suite 1100
Austin, TX

This event is particularly timely given the expanding campaign to get artist pay for radio play.  Don’t forget to join 13,000 of your friends and sign the #irespectmusic petition at IRespectMusic.org!  If you’re in Austin, follow IRespectMusic Austin @irmaustin and online at www.irespectmusicaustin.org.

Breaking: Source Claims Spotify & Google Fund “Independent” Music Managers Forum and Featured Artist Coalition

Image courtesy Digital Music News.  See full DMN story here.

Music Managers Forum and its sister organization The Featured Artist Coalition are two UK based organizations that purport to advocate for managers and artists. These two organizations have in the past done some excellent work for artists.   But over the last few years they seem to have become the PR mouthpiece for Spotify and to a lesser extent YouTube.   One can confirm this judgement by going to the MMF website and searching “Spotify.”   Some sample search returns:

“MMF and FAC Welcome Spotify Artists As A Big Step Forward”

“Recommended Reading: Spotify’s Financial Viability and Pernicious Fallacies (Op-Ed)”

“MMF event: Get the most from Spotify”

“Love Spotify?”

We were particularly concerned when they posted this piece which at times matches word for word press releases and comments from Spotify flacks.   It also carefully creates the false impression that Taylor Swift withheld her album from Spotify, but irrationally DID NOT withhold her album from YouTube.   (Swift DID withhold her album from YouTube and other free streaming platforms, she did not single out Spotify.)  But mostly it was shocking to see an organization like MMF/FAC  come out against an individual’s right to choose where their work appears and under what conditions. Instead MMF/FAC came out  in favor of a streaming corporation’s “right” to have everyones music.  I guess this is the UK version of “corporations are people.”  Very odd.

Well, now we know why.

We have a high level source that is willing  to confirm our long held suspicion that Spotify and Google are funding the Music Manager Forum and its dependency the UK’s Featured Artist Coalition.  According to our source Spotify’s contribution is significant, ongoing  “and quite a lot of money at that.”

This is very important because neither MMF nor FAC have sufficiently disclosed the financial support, yet have presented and continued to present events on Spotify and streaming AS IF THEY ARE NEUTRAL OBSERVERS.  Last year MMF and FAC sponsored a round of public forums on Spotify in the US.  They did another round this last month.   On the flyer for last years events (see above) there is no mention that MMF and FAC are taking money from Spotify and Google.

While this non-disclosure and fake partiality is a problem,  what really concerns us is that Spotify and YouTube appear to be setting the agenda now.   Below is the official agenda of the Music Managers Forum.  Like most artists I am in agreement with virtually every point.   Except #4: “No windowing”.  A “no windowing” policy would hurt artists and help only two companies, Spotify and YouTube.    Let me explain.

Screen Shot 2015-06-29 at 12.42.55 PM

“Windowing” can be used in many different contexts.   Windowing can mean that an album is only available for sale and not streamable for a certain period of time.  Windowing may mean that an album or song might be available exclusively on one service but not others.  It may mean it’s only available behind a paywall.   Regardless of what is meant by windowing, they are all important monetization and promotional tools for artists.    For instance my last Cracker album Berkeley to Bakersfield was a two disc set, with the second disc being a country disc.  Cracker “windowed” this album in two different ways:

1) Since we are not normally considered a country act we gave Rolling Stone Country the exclusive right to stream a track from the country disc for a month in advance of the album release.   In exchange we were prominently featured on the website and gained valuable exposure in the country music world.

2) Similarly in exchange for prominent positioning (ie advertising), we allowed Amazon an exclusive “window” to stream/sell the album 1 week early.

Both of these in-kind trades are widely used by cash poor independent artists who can’t afford to put up cash for advertising.  This important promotional tool would likely fall afoul of a “no windowing” policy. Meanwhile  Apple and Amazon do not seem to have a problem with this kind of windowing, however Spotify and YouTube actively try to restrict this practice.   Spotify has been especially vocal on the topic.   It is not unreasonable to assume that this agenda item is there to please MMF’s and FAC’s  financial backers.

But we don’t have to speculate, MMF and FAC could easily explain how this agenda item got there. For instance were the 4,000 artists that are members of the Featured Artist Coalition allowed to vote on this item?  Were they even consulted?   How about the rank and file managera in the MMF? Were they consulted?  How exactly did this come about?   And why is the Featured Artist Coalition now run by a former city banker not a featured artist?

Has MMF/FAC become just another in a long line of fake artist advocacy groups secretly funded by technology companies?

Why .002 is Greater than .001 and Why 90 Days is Better than Forever…

There’s been a lot of talk and understandable dissent surrounding Apple’s free tier payment of the reported .002 per play during each consumers 90 day free trial period. We now live in a world of lessor evils.

Here are three things that we may want to keep in mind…

One:

Eliminating the Unlimited Free, Ad-Supported, On-Demand Access to Music is Job #1. Apple Music and Tidal are both positive steps in that direction.

Two:

.002 is DOUBLE .001 which is what Spotify is paying on it’s ad-supported free tier (see chart below). Yes, we’d love Apple to pay the full ride. Yes, Apple can afford to pay the full ride. Yes, we support any action that influences Apple to pay the full ride – but as a compromise we could be doing worse, and in fact we have been for over five years since the Spotify launch.

Three:

90 Days is Limited. Ad-Supported is forever. This is the big problem. Even if  Spotify was limiting their ad-supported free tier to 90 Days, Apple is still paying DOUBLE. But the real problem is that Spotify is FREE FOREVER. It’s time to keep the eye on the prize here.

Three Steps to a Sustainable Digital Music Ecosystem:

1) Eliminate the Unlimited Free, Ad-Supported, On-Demand Access to Music

2) Windowing

3) Tiered Pricing, based on Access and Consumer Value Proposition

That’s really it. It’s not really any harder than this and we can already see these models working for the Film and TV businesses.

 


 

Streaming Is the Future, Spotify Is Not. Let’s talk Solutions.

 

Why Spotify is not Netflix (But Maybe It Should Be)

 

Why Digital Exec’s ARPU is Bad Math and also Bad Philosophy for Artists.

New Study Explains Why YouTube is Always at the Top of Google Search Results

Originally posted on MUSIC • TECHNOLOGY • POLICY:

For years now–since Imeem days at least–I’ve been wondering why it is that the top videos in Google search results were always from YouTube (or from Vevo through YouTube).  Like many others, including…let’s see…Senator Mike Lee and the European Commission for starters…I just assumed that Google was stacking the deck to favor YouTube, its wholly owned subsidiary.

According to Brad Stone writing in Bloomberg, a newly released study by Tim Wu (“Is Google Degrading Search?  Consumer Harm from Universal Search”) explains the phenomenon and further backs Google into an antitrust corner.  The study’s thesis is that “Google is able to leverage its dominance in search to gain customers for [Google’s competing] content.  This yield’s serious concerns if the internal content is inferior to organic search results.”  Brad Stone reported:

Google is facing a new high-profile adversary in the roiling fight over whether its monolithic search engine violates antitrust law: Columbia…

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David Discusses NPR’s Membership in the MIC Coalition with Adam Ragusea on The Current

One Of These Things Is Not Like the Others

We’ve taken National Public Radio to task for joining the “MIC Coalition” (or as we call it the “McCoalition”), a group of megacorporations and lobbying groups formed to oppose the Fair Play Fair Pay Act.  Here’s all the logos of the McCoaltion members (Amazon has dropped out already):

mccoaltion - Amazon

As soon as we saw that NPR was a member, there was something about NPR’s membership in this group of some of the biggest corporations in the world that just felt bad.  Thanks to Adam Ragusea’s interview with David, we can articulate that bad feeling much better.

In his introduction to the episode, Adam asks the question, “Should musicians finally be paid for radio play?  Should public radio stand in the way?…I too find it very weird that I find myself on the opposite side of NPR on a big issue.”

But the really insightful part of Adam’s lead in to David’s interview is the way he contrasted for-profit radio and non-profit radio.  This is, of course, the main distinction between NPR and every other corporate member of the McCoalition (and really every member unless you want to say that somehow trade associations comprised of for-profit corporations are like NPR–we’ll leave that argument to someone like Michael Petricone).

Adam says that a non-profit ought to have a different organizational duty of loyalty–instead of the for-profit’s duty to shareholders:

At least the way I figure it, [a non-profit’s] loyalty should be to your institution’s mission, not to the institution itself….And yet I often see public media institutions, mostly in little ways, doing things that serve the institution over its mission.

And that right there is an eloquent statement of what sticks in the craw about NPR’s membership in the McCoalition.  We’ve always believed–and are more convinced than ever–that NPR’s membership in the McCoalition was more the product of the suits in the lobbying department and not the journalists working in the news and music areas.

Have a listen to the show–Adam’s lead in to David’s interview starts around 20:20, but listen to the rest of it, too.  We really appreciate Adam giving David a platform to have a dialog about the issues.

What’s Next for Daniel Ek? Wherever he is, he’s not in Kansas anymore.

Trichordist Editor:

Spotify is in the Advertising Business First… and the Music Business Maybe…

Originally posted on MUSIC • TECHNOLOGY • POLICY:

After pulling out all the stops in the smear campaign against Apple, the Spotify/Google juggernaut got a pause this week courtesy of @taylorswift13.  Mr. Ek–and potentially the entire ad-supported business model touted by The Man 2.0–may need some help.  You know, buy a vowel, phone a friend–just not one named Sean or Larry. Courtesy of Complete Music Update, a summary of indie label reaction:

Helen Smith of pan-European labels group IMPALA: “This is a great precedent in any sector on the benefits of working together and taking a stance to achieve a fair result. With 80% of all new releases produced by independent labels, this is also a great result for Apple. Their launch will now incorporate the very music that makes an online service attractive to music fans. The involvement of Merlin is vital considering its fundamental role in strengthening the independent sector. IMPALA has repeatedly called on…

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Why Apple Music and Tidal are the right business models with the wrong optics.

Since Spotify launched in 2010 the music business has been in an existential crisis. Convinced that ad-supported unlimited free access to on-demand music would ultimately grow recorded music revenues the major labels opted into what may be their worst decision ever. This decision aided by an estimated 18% (or more) equity position in Spotify has not grown overall music revenues over the past five years. In fact, for the year ending 2014 global revenues reported by the IFPI stated that revenues were at the lowest point in decades. So what to do?

For starters the first and most obvious solution would be to eliminate the unlimited ad-supported free access to on-demand music. This is the model that made ad funded, for profit piracy so popular on over half a million infringing links from unlicensed businesses served by Google search and delivered to your inbox by Google Alerts complete with social media sharing buttons. These unlicensed businesses are receiving hundreds of millions of DMCA notices annually from artists and rights holders. Let us not forget that this is also the same model that Daniel Ek helped to perfect as the CEO of u-torrent the worlds most installed bit-torrent client. Ek has said he’d rather shut down Spotify than give up his failed ad supported business model.  We thought Spotify was built on converting ad supported (where Spotify board member Google makes money serving ads) to subscription (where artists make money).  So much for that.

And this is who the record business is taking notes from? Perhaps that’s why Universal is restructuring.  This may have seemed like a good idea to some senior executives but it turned out to be a complete disaster.  Time to change.

Despite moves in the right direction by Tidal and Apple Music the optics for both of these companies at launch of their respective streaming models have been somewhere between missteps and an absolute disaster. Dismissing for a second that both Apple and Tidal could be the targets of public relations campaigns by competing corporations such as Spotify, Pandora and Google (YouTube) let’s look at what each is offering. Tidal and Apple Music offer no unlimited ad-supported free access to on-demand music. That means no business to those selling advertising… like, Google.

There is nothing more important to the future of the recorded music ecosystem than removing the unlimited ad-supported free access to on-demand music.

For all intents and purposes even free streaming is ownership and here’s how you can tell. If you can chose it, and access it, you essentially own it whether you pay for it or not. Streaming replaces ownership at the consumer level but does not compare to ownership on price. At some point there needs to be a market correction to properly value music consumption.

The launch of Tidal should have been a rallying cry for all artists to support a business model that limited free streaming, incentivized paid subscriptions through exclusive offerings and diversified consumer experiences with higher quality streaming formats. This is the model we should be focused on. As the Buddhist saying goes, “trust the teaching, if not the teacher.” In other words it doesn’t matter if you don’t like Jay-Z and Madonna.  And securities laws makes the whole stock issue so difficult that Tidal would have been far better off saying they’d pay all participating artists a bonus in the cash from the company’s own stock sales rather than get down the rabbit hole of who gets stock and who doesn’t.

Unfortunately the celebrity that could have united a community, instead divided it through messaging that most would acknowledge appeared to be less than inclusive. Worse, the optics appeared to be elitist whereby those already rich and famous seemed to be more focused on their own fortunes as opposed to a sustainable ecosystem for the next generation of musicians.

Perhaps if each of the artists at the Tidal launch would have appeared with a developing artist they were supporting the messaging and optics would have been more inclusive and more about community than celebrity.

We have to acknowledge what kind of business we want going forward. Clearly, unlimited ad-supported free access to on-demand music is not working. Both Tidal and Apple Music do NOT have unlimited ad-supported free access to on-demand music. So what’s the problem?

Following the Apple Music launch Spotify announced it had achieved 75m global users (we love that, “users” no kidding) and 20m paid subscribers. So let’s look at the numbers in relationship to what Apple Music could bring to the market place. Keep in mind that 55m of Spotify’s user base are NOT paying for the service. Based on reporting we’ve been provided the free tier accounts for 58% of plays which is only 16% of the total revenue.

With all the back and forth between Apple and labels and the announcement last week by NMPA of the publisher’s deal—freely negotiated without government “help” by the way–it’s pretty clear that Apple announced Apple Music without all their ducks in a row contractually.  This opened up an opportunity for haters who are just gonna hate.  Now that the picture is becoming a bit clearer, we feel more confident than ever that most of the noise is coming from competitors who would like to create yet another consent decree situation but this time for artists and record companies.

So there are a few questions we need to ask about the launch of Apple Music to evaluate the trade-off for eliminating the unlimited ad-supported free access to on-demand music. But before we ask those questions, we need to understand the mechanics of the Apple Music ecosystem.

First, the 90 days free without payment at launch requires the understanding that all consumers will get 90 days free at Apple Music whether they sign up at launch or at any other point later. This means that some people will opt in at launch, some will opt in at some later time. Based on what we have seen of how these streaming subscription services scale we have to ask a few questions.

How many people will have access to opt into Apple Music Streaming on launch? We’ll assume it’s the entire installed user base who upgrade into iOS 8.4. Here’s some back of the napkin math from the iPhone 6 launch when Apple dropped that U2 album into everyone’s Itunes.

According to CBS News 33 Million people of the 500 Million Global Itunes users “experienced” the U2 album. That’s just 6.7 percent of Apple’s reported consumer base.

So what kind of adoption and conversion rate could one expect from the launch of Apple Music? 10 million paid subscribers? 20 million paid subscribers? 50 million paid subscribers? It’s hard to know, but anything north of 20 million pretty much beats Spotify on paid subscribers.  And if you are looking for the company that has defined a paid music service, who you gonna call?  Apple or Spotify?  Who do you trust going forward?

What if Apple is able to convert 30 million or more consumers to paid streaming in only four months when it has taken Spotify five years to acquire 20 million paid?


BREAKING NEWS AT PRESS TIME. APPLE WILL PAY ARTISTS DURING THE FREE TRIAL PERIOD!
Apple Reverses Course, Will Pay Artists During Apple Music Free Trial | Mac Rumors


Of course, Apple should use a couple of bucks from it’s 178 billion dollars in cash reserves to compensate musicians for the consumption of their music during the initial 90 day launch of Apple Music. This would  incentivized artists to promote the service as being both fair and artist friendly and give Apple the thumbs up from the people that matter the most, the artists themselves. Apple’s purchase of Beats was a three billion dollar acquisition, so surely there’s enough money in those coffers to pay artists something.

To put these numbers into perspective Spotify claimed to have paid artists and rights holders two billion dollars globally from it’s initial launch in 2008 through October of 2014.

Here’s some more perspective from asymco.com: In 2012, global music revenues were reported at $16.5 billion, with $5.6 billion coming from digital music. Of that $5.6 billion in music downloads, Apple paid labels $3.4 billion for iTunes sales, which is about 60% of the total digital revenues industry wide—IN LESS THAN ONE YEAR.

In 2012, Apple’s transactional digital model created more revenue for artists and rights holders in less than a year in then it took for Spotify to earn almost 6 years.

If we want to break the death spiral of unlimited ad-supported free access to on-demand music we have to embrace the trade-off of offering limited free trial periods as an incentive for consumers to make the switch.

And by the way—compare the classy way that Eddie Cue of Apple handled Taylor Swift compared to Daniel Ek who comes off like a semi-stalker.  Who understands artist relations the best?

The problem with ad-supported unlimited free access to on-demand music is illustrated below showing Spotify domestic streams and revenues. It’s just math and it’s time to move on. Apple Music and Tidal are showing us the way.

 

Briefing Op Ed: Should the Feds Shoulder Some of the Blame for Low Digital Music Royalties?

Lowery briefing screen capture

I have an exclusive op ed at Briefing this morning.  It’s making waves.

“If you step back from the debate about whether Spotify or Pandora pay fairly and look at the big picture, something very ugly becomes apparent: The playing field is not even at all. The federal government protects the corporate broadcasters, technology firms and digital services from market forces when it comes to paying artists. But when it comes to ad supported piracy and “user generated content” the federal government sits on its hands, refuses to enforce performers’ legitimate property rights, and in effect provides another subsidy to many of these same companies. Constitutional scholars might term this a “taking.” For this reason I say much of the blame for low pay to artists in the digital realm stems from gross mismanagement by the federal government.

Full piece here: http://briefi.ng/perspectives/david-lowery

AIM Stands Up For Indies Against Apple, So Where Were They On Spotify?

Alison Wenham of the UK Association of Independent Music helpfully pointed out the problems with the 3-month free trial for apple music.

“The main sticking point is Apple’s decision to allow a royalty free, 3-month trial period to all new subscribers. This means that no royalties will be paid through to rights holders during that 3-month period.

This is a major problem for any label that relies on new releases rather than deep catalogue as the potential for this free trial to cannabalize not only download sales, which remain a very important revenue stream, but also streaming income from other services, is enormous.”

She makes an excellent point.   The free period would pay no royalties and has the potential (like all free streaming services) to cannibalize sales and subscription streaming revenue.  So this brings up an excellent point.  Where has AIM been when it comes to Spotify? Cause it does exactly the same thing?

StreamingRatesandPercentagesUSA

Real Spotify revenue data from a moderately sized independent label 2014. Broken down by free, premium and trial tiers.

 

As we have demonstrated over and over again here on this blog Spotify free tier in the US pays about 1/7th per spin compared to the premium tier.   AND since Spotify requires that your entire catalogue be available on both the free and premium tier, this simply allows the free tier to cannibalize not just sales but also spins on the higher paying premium tier.   That is, Spotify does exactly what Wenham accuses Apple of doing.

While we certainly appreciate AIM and Wenham rallying and defending the indie community against Apples predatory pricing,  it also illustrates the hypocrisy of  advocates for indie music industry when it comes to Spotify.   AIM’s licensing partner MERLIN has been a strident defender of all things Spotify.  This blog was singled out early on by MERLIN for mildly criticizing Spotify.  We suspect this is because Indie labels got stock in Spotify and they are willing to look the other way.  Either that or MERLIN is corrupt.  And I do mean corrupt in a legal way. Like there exists some sort of quid pro quo to defend and favor Spotify in the digital streaming space.  Let us not forget that MERLIN  cooked up a likely illegal and anti-competitive deal with Pandora in which indie labels trade lower rates for more spins.  This certainly meets the letter of the law for Payola in the US.

We’d like to see AIM apply the same logic to Spotify free tier, because it’s increasing looking like they are giving Spotify a pass.   Given that we now have multiple anti-competitive investigations into Apple  in the EU, DOJ and New York and Connecticut AG offices, this is starting to  look like “lawfare” between Spotify and Apple with the indie community as partisans.  Apple partisans are already whispering that the EU action is “backdoor protectionism.”  This is a terrible mistake for indies and artists.  We might never get a fair shake from these institutions again.  And there is gonna come a time when we need these government institutions to defend our economic interests.