MegaUpload (MegaVideo) Smoking Gun? Did the site illegally charge for Streaming Movies?

Trichordist Editor:

With Kim Dotcom getting his day in court, this is timely.

Originally posted on The Trichordist:

These screen shots appear to show that Kim Dotcom’s Megaupload was selling streaming movies that it did not have the rights to sell.

Megaupload was allegedly paid uploaders per stream from files they uploaded to Megaupload. That is why there were so many links that Google autopopulated Megavideo after you entered Star Wars in the search field.

Then Google estimated that there were 4.3 million web pages that had the words “star wars megavideo” on them.  Legitimate file locker sites like Dropbox, don’t allow any public links to copyrighted content.  In fact Dropbox just banned Boxopus, a torrent tool from using its API.

Megavideo let you play the first 45 minutes of Star Wars and thousands of other movies for free (after they had served you and profited from dozens ads) . . .

But then, to watch past 45 minutes, you had to enter your credit card and pay…

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Ellie Goulding’s New YouTube Strategy Finally Puts Google in its Place

Trichordist Editor:

Nice to see artists getting smart about YouTube.

Originally posted on MUSIC • TECHNOLOGY • POLICY:

We all know that YouTube pays the lowest royalty rate and has the least transparent royalty statements of any digital service. Due to really bad advice, artists and labels have been driving traffic to YouTube essentially for free and marketers misread the direction of this traffic in forming the belief that hits need YouTube.  Actually, it’s the other way around.  YouTube needs hits.

Taylor Swift’s 1989 release led the way on putting this YouTube situation back on the right track.  Taylor’s videos were pretty much only available on the higher-royalty Vevo, and her label used a variety of tools to take down most of the other Taylor videos on YouTube proper.  (So while it is true that Taylor denied Spotify, to say that somehow the business move was ill-advised because YouTube pays less than Spotify misses the Vevo point.)

Ellie Goulding is now extending the strategy in rather a brilliant…

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Can Blocking Ads Help Artists? Should Artists Encourage Fans to Block Ads?

Screen Shot 2015-09-20 at 8.43.52 PM

Rates are “all in” at source.  Calculations based on royalty statements from a catalogue of 1500 titles 2014.  Exception is Pandora which was calculated from 2nd quarter 2015 statements (higher than 2014).  

In the fight for fair pay artists are not at war with the Internet or really even the streaming services, we are at war with the online advertising industry.   As we have demonstrated time and time again, subscription (paid) music streaming services pay at least 7 times the rate that the free services pay.   When you see artists (like myself) post absurdly low royalty payments it’s usually from one of the services that is predominately ad supported. Above is a chart that illustrates this nicely.

So for artists the solution seems easy:  get rid of ad-supported free tiers.  The problem is that in order to do away with these ad-supported tiers we have to fight not just the music streaming services but we have to fight the real power behind the throne:  the online advertising industry which is dominated by Google. Indeed all three ad supported services above rely on Google to serve their ads. 

So basically we have to fight Google?

Good luck with that, right?   This is a company with so much lobbying power in Washington D.C. they can make an FTC investigation go away and  turn a federal criminal drug charge (aiding “Canadian” pharmacies) into a civil penalty.   Artists don’t have the money to fight Google largely cause Google has decimated our income streams over the years by allowing “users” to give our stuff away for free on YouTube and feeding massively infringing sites with ad dollars.


So what would happen if most consumers decided to block ads?

First of all it’s not a question of if consumers will block ads but when.  Consumers have grown increasingly suspicious of the entire ad tech industry.  It’s not just the annoying banners, pop-ups and pre-rolls that slow down our browsing experience, consumers have finally become aware of the industrial scale data mining and spying operations used by the online advertising industry. These companies are tracking virtually every web page you visit and often know your physical location to within a few meters.  (Don’t believe it? Don’t take it from me, ask your tech savvy friends who use browser plug-ins like Ghostery.)

While it’s relatively easy now to block pop-ups and banner ads it’s more difficult to block ads on Spotify and YouTube.   But it is doable (if a little clunky)  and it is only a matter of time before ad blocking technology catches up with the streaming services. Apple has announced its intention to allow ad blocking in the newest IOS.  It’s unclear if this will eventually block ads in Spotify and YouTube but most users would welcome it.

So what happens to artists if this happens?  If it becomes suddenly possible to block all ads?

In the short term artists would lose revenue.   But it is not as bad as you think.  If ALL the free streams on Spotify went away IMMEDIATELY artists would see their Spotify payments drop only 16%.  See here: USA Spotify Streaming Rates Reveal 58% of Streams Are Free, Pays Only 16% Of Revenue.   But lets not get too distracted by that because the real crime is that YouTube pays so little it’s a joke.

YouTube is the biggest digital platform of all. Yet as a songwriter I received $12.87 from YouTube last quarter.  By my calculations YouTube paid all rights holders (label/publisher/songwriter) less than $340 for access to my catalogue.  YouTube revenue is not gonna save artists and or the industry at large.   I will barely miss it.  And YouTube is clearly inhibiting the growth of subscription services that pay higher revenues.


What happens in the long term?

This is where it gets interesting and also very difficult to forecast. Admittedly I’m not an expert (and my terminology may not be perfect)  but in the long term ad-blocking forces all ad supported services to move towards other sources of revenue or cross subsidies.  Subscription? Bundle with another service or services?  Become a loss leading “add on” to a company selling other goods? Or much more lucrative advertising schemes like embedded ads or sponsorship.

All of these are more likely than not to boost revenue to artists on a per stream basis. We already know subscription boosts revenue per stream; Cable (I know, not a great example) has figured out how to get people who don’t watch sports to pay $6 a month for ESPN; and iTunes was clearly a loss leader built to sell hardware. Regardless the point is there are very common cross subsidy schemes already out there that could increase revenue to artists.

The downside is that there is a very real potential we end up with something like an Apple/Amazon/Altice  (don’t laugh) streaming tri-opoly if streaming services aren’t standalone. (Why no Google? Ad-blocking may put Google into a revenue crisis with unpredictable consequences.) But I would argue that consumers will adopt ad-blocking anyway, with or without artists encouraging it.  IMHO it is better for this to happen sooner than later because the longer these services limp along with no hope of profitability, the greater the damage to perceived value of music.


The Difference Between Free and Ad-supported

I want to make an important distinction here.  Not all free and ad-supported services are the same.  In reality there is a continuum but I’m gonna simplify into three groups from good to bad:

  1. Services that offer free trials which convert to paid subscriptions after 30-90 days.
  2. Services that offer free ad supported tiers but provide effective incentives for users to upgrade to subscription tiers.
  3. Services that offer free tiers with no intention or incentives to upgrade to subscription tiers or lack subscription tiers entirely or fake subscription tiers that never materialize. (like YouTube’s Music Key?)

We can argue all day over which services go into category 2.  Lets skip that for now or reserve it for a future post.  The question is whether ad-blocking eliminates category 2 and whether the users then move into subscription tiers or down into category 3?

Reasonable people can disagree, but I think that a degradation or elimination of ad revenue for category 2 is a net positive for artists as it forces these services to hone their incentives and move users from free tier to subscription tiers faster.  It’s also possible that if this is not managed correctly users will move backwards to category 3.  Admittedly there are risks.


What about YouTube/Google?

If consumers get really serious about blocking ads and refusing to be tracked?  There is no Google/YouTube.  Not in its current incarnation, not at its current size.  Google must invade your privacy for its cash machine to continue working.

Google could work around ad-blocking and anti-tracking software, but my bet (60%/40%) is they are not nimble enough to do so without a serious hit to their revenue.

Despite all the claims to the contrary Google is a one trick pony: advertising. More than 90% of Google’s revenue comes from advertising.  And a lot of that is the nastiest form of advertising, the tracking spying kind.  I believe Google is what Nassim Taleb would term “fragile.” An institution too brittle to adjust to unpredictable external shock.  A shock like the “viral” adoption of technology that allows consumers to NOT be tracked or subjected to their obnoxious advertising. The ad supported web is not and never was a given.  The internet doesn’t care about Google’s stock price,  currently stable business model or how many lobbyists they have in DC.  Just ask the music business.

The wildcard here is that an unintended consequences of net-neutrality.  As written net-neutrality  gives Google – oops, I mean the FCC a backdoor into consumers smartphones, tablets and PCs.  Absurd as it sounds the FCC could declare ad blocking in violation of net-neutrality, because it discriminates against certain packets and sources of traffic. Hopefully I’m wrong on this.


What about piracy?

Ha.  Piracy is completely supported by ad revenue.  Just ask Kim Dotcom. And Google has always been there to lend a hand,  with obfuscating ad exchanges, astroturf organizations, bloggers with financial ties to Google, shared law firms and  amicus briefs. Also does anyone else find it odd that that Dotcom was arrested only  after he proposed a plan to hijack the entire online ad network (link above)?

I think it is fair to say that Google has served as the deep pockets to aid many massively infringing businesses in their legal battles against rights holders.  This has the benefit of prolonging  a market failure that keeps supplier prices low for its “other” business YouTube .


What happens to the Internet?


The internet and the online advertising industry are not the same thing, although there are companies that spend a lot of money trying to make you think they are the same thing. To counter this I ask you to  read this imaginary conversation between The Verge’s Nillay Patel and The Berkman Center’s Doc Searls (author of the conversation), starting with this paragraph:

(NP) Unfortunately, the ads pay for all that content…

(DS) A lot, but not all. There are plenty of publishers and broadcasters that get along fine without advertising. HBO, Netflix, Consumer Reports and this blog, for example.

(NP) …an uneasy compromise between the real cost of media production and the prices consumers are willing to pay…

(DS) Stop. The commercial Internet is just 20 years old (dating from the end of NSFNet, the last holdout against commercial traffic within the Internet). We’ve hardly begun to experiment with all the different ways things can be funded, and ways people can signal their willingness to pay…

Actually read all five of his pieces on the online advertising industry.


To Block or Not to Block?

So should artists encourage their fans to block ads?  It’s not certain that things will get better for artists in the short term or long term.  On the other hand the professional working class musician is about to be snuffed out of existence.  Can it really get that much worse?

An options trader would see this as a great opportunity:  our losses are small and capped but the upside is potentially unlimited.

If you haven’t noticed I’m a bit of a bomb thrower. I enjoy provoking what I see as necessary conversations. I also enjoy figuring out how to break things.   Encouraging fans to ad-block is a bit of both.  It provokes a necessary conversation about the exploitative logic of the ad supported web and breaks stuff at the same time. Naturally I’m drawn to it.

But what is not so easy to see is that there is a careful calculation here.   The idea is to disrupt the disruptors. Musicians, performers, producers and songwriters have this in our DNA.  Each successive musical style or innovation disrupts the last one which was not so long ago the disruptor. Usually after the disruptor has grown soft, complacent or even arrogant.  When the disruptor begins to proclaim they are here to stay or changing the world?  In the music business everyone knows what happens next. Remember just ten short years ago we were proclaiming MySpace the future of the music business.

As a musician I’ve prospered (to varying degrees) through five dominant format shifts: Vinyl, Cassettes, CDs, MP3s and Streaming. The last two were the most challenging.  Still you think musicians will be sweating another transition as we go from ad-supported streaming to a fairer model?  No. By paying so little the ad-supported streaming services have made themselves economically irrelevant to most of us.  The way most musicians look at it: Who cares if they fail?  They need us more than we need them.

You know what to do right?









Bumps Not Dumps: Merlin’s Pandora Catastrophe Continues

Merlin’s DMX-style direct deal with Pandora is the gift that keeps on giving.  As we expected, Pandora introduced their Merlin deal in the ratesetting preceding in Washington that sets all of our sound recording royalty rates for any service that uses the webcasting and simulcasting compulsory license.  This is done at the “Copyright Royalty Board,” which is three rate-court judges who rule on the rates we get paid on services like Pandora and Clear Channel/IHeartMedia.  This is different than the ASCAP and BMI rate courts for songwriters.

The way this works is similar to the “Chris Harrison Special” that DMX pulled with ASCAP and BMI.  The way this stunt works is that Pandora (under Chris Harrison’s guidance) goes out and finds some gullible label to make a direct deal with them at a low royalty rate.  (Harrison was the DMX lawyer who Pandora hired, likely because he did such a good job of screwing songwriters at DMX that Pandora wanted his special skills brought to their own end of the sty.  Harrison, aka Songwriter Enemy #1, has since gone on to greener pastures at SiriusXM where his special skills can be put to use in the Sirius direct licensing program–more on that later.)

They usually accomplish this by paying a big advance or giving the label some other incentive to make that direct deal.  Pandora then tries to use that low royalty deal as a “benchmark” for the Copyright Royalty Board to use as evidence of a market rate deal when setting the “willing buyer/willing seller” royalty rates that apply to everyone BUT the label that got the goodies for making the direct deal.

You can see that Pandora wants to make a direct deal with a royalty rate that is BELOW the current statutory rate that applies to the rest of us.  Why?  Because the assumption is that the current statutory rate will INCREASE in the current rate proceeding.  So if you’re Pandora, you want to try to find as many ways to screw artists and songwriters that you can, so you want to make as many of these “direct deals” as you can so you can put them in front of the Copyright Royalty Board to get the judges to IGNORE the goodies that incentivized the label to make the direct deal in the first place and ONLY look at the penny rate as evidence of an arms length “market rate” for the royalty rate that will apply to the rest of us who don’t get (and may not even want) the goodies.

The Chris Harrison Special

This is exactly the kind of “Chris Harrison special” that Pandora ran against us in the current rate setting (called “Web IV”).  The gullible label in this case is the Merlin label group.  What goodies did Merlin get?

1.   Advance:  Because we haven’t seen a copy of the Merlin deal with Pandora (or any side deals) we don’t really know what Merlin got in the way of an advance for Merlin labels or a flat fee for Merlin itself.  Even though Pandora had to file a copy of its Merlin deal with the Copyright Royalty Board in Web IV, the public version of that deal has the deal points blacked out.  That’s right–the very terms that Pandora and Merlin are using to screw the rest of us are secret.  Funny how The Verge hasn’t gotten a leaked copy of that deal.

2.  Steering Payola:  As David wrote in his comment to the FCC about the broadcasters request for a waiver of the payola rules, Pandora’s contract with Merlin allows Pandora to pay Merlin a lower royalty the more music they play from Merlin labels, called “steering”.  Remember–Pandora is now an FCC licensed broadcaster, so the payola rules apply to Pandora, and steering looks an awful lot like pay to play–a discount on royalties is just another form of payment.  David wrote the FCC to ask them to look into whether the Merlin steering deal with Pandora was even legal. Using forks and knives to eat their bacon!

3.  Direct Payments:  Merlin agreed that all artist royalties under the direct deal with Pandora should be paid through SoundExchange just like the compulsory license.  We really don’t know how this will work from a practical viewpoint.  This is kind of like what happens if a songwriter’s publisher pulls out of ASCAP or BMI because of the bizarre rate court rulings, but the writer wants to keep their writer’s share with their PRO.  It’s every bit as screwy.

We can’t believe that any Merlin label actually asked their artists if they wanted their records to be included in this direct deal rather than just get paid the compulsory rate directly from SoundExchange because the cost of accounting will probably exceed the royalty in many cases (through no fault of SoundExchange, by the way).  It appears that the only logical explanation for why Merlin wanted the artists to get paid directly in this screwed up deal was for the political cover it gave them.

Dumps Not Bumps

How is this fair for Merlin artists?  We’re not trying to speak for them, but by the looks of things, they need to wake up and smell the coffee.  We’ve heard of increases in royalty rate the better you do (“bumps”) but we’ve never heard of decreases in royalty rate the better you do (“dumps”).  Can you imagine the cocktail party conversation?  “Hey, man, I’m so special I get dumps from my label.”

It’s not enough that the royalty should be lower the more times you’re played or that your royalty should be lower the more times someone else is played, a deal that seems tailor made for the CRB to use to screw artists.  Surely that kind of royalty rate is not in anyone’s Merlin label record deal.

It’s also not enough that you don’t get told if there’s a Merlin side deal or what the terms of the Merlin side deal are, it’s not enough that your deal is going to be used by Pandora to screw every other artist–no, on top of it all, the cost of giving your label political cover has to make it so that the reporting administration for that political cover has to cost more than anyone else and may actually cost more than you make.

And who pays for that?  Who pays those additional reporting costs? Pandora?  Unlikely.  Merlin?  Even less likely.  More likely it’s SoundExchange, which may mean those costs (including the cost of fighting about it in the CRB) get “socialized” across all the featured artists, non featured artists and sound recording owners (often the same people at the featured artists).

How Can CRB Give Weight to an Illegal Payola Contract?

It’s pretty clear that the Copyright Royalty Board should give no weight to the Merlin contract in setting rates for the rest of us at least not until the FCC rules on David’s question to them in the Clear Channel payola waiver case.  Even if the FCC yields to Pandora’s lobbying power and upholds the deal, the Merlin deal still has nothing to do with anyone but Merlin, even if the steering contract isn’t illegal under the payola laws.

RAIN reports that Pandora is crowing about a ruling of the Register of Copyright that told the Copyright Royalty Board they were able to consider the direct deal as a “benchmark”:

The CRB judges asked for an opinion on the admissibility of specific direct-license benchmark agreements as evidence in their current proceedings. Today, the Copyright Office deemed that Pandora’s rate deal with indie label collective Merlin Network is admissible as a valid benchmark for the Copyright Royalty Board’s rate-setting proceedings.

Pandora’s antics would make you think they felt like they’ve won something major.  As we read the Register’s ruling, all she really said was that the CRB could consider “potentially probative benchmark agreements.”   We are mystified how a potentially illegal contract can have “potentially probative value” in setting the rates in a market that is itself defined by the compulsory license.

There’s a valid point to be made here that the CRB should not consider the Merlin deal at all when setting the compulsory rate because it really has no relation to everyone else’s deal.

Hopefully the CRB is on to Pandora’s “Chris Harrison Special” and will disregard it altogether.  Of course, if the CRB uses the Merlin rate minus goodies as a “benchmark” for our rates, then Pandora will have succeeded in screwing artists once again, and then we’ll all have to deal with that.


Big Tech Has Become Way Too Powerful: Google Is Playing By the Rules They Make

Originally posted on MUSIC • TECHNOLOGY • POLICY:

Americans are freedom loving people, and nothing says freedom like getting away with it.

From Long, Long Time by Guy Forsyth

If you read nothing else this weekend, read former Secretary of Labor Robert Reich’s New York Times op-ed “Big Tech has Become Way Too Powerful.”  (Which was evidently originally posted under the title “Big Tech has Become Way Too Powerful, Ask Google” judging by the title in the link (–I wonder who made that change.)

Secretary Reich makes the point that Google, in particular, has an unprecedented stranglehold on the U.S. Government:

In 2012, the staff of the Federal Trade Commission’s Bureau of Competition submitted to the commissioners a 160-page analysis of Google’s dominance in the search and related advertising markets, and recommended suing Google for conduct that “has resulted — and will result — in real harm to consumers and to innovation.” But the commissioners chose…

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Americana Music Conference Goes Down the Streaming Rabbit Hole

Originally posted on MUSIC • TECHNOLOGY • POLICY:

Americana Drink Ticket

A conference has to make a buck, you know?  We all understand that, and the Americana Music Conference is no exception.  The conference that is attached to the Americana Music Awards is a stalwart in our business and has managed to maintain its true authenticity for a very long time.  We appreciate the sponsors who line up to support the show and the conference–it’s a great group.  For the most part.

How anyone thought that it was a good idea to include Pandora in the mix of sponsors is a bit beyond me.  Pandora is getting sued in the Turtles class action because they don’t pay to play artists who happened to record before 1972.  That list includes a huge number of Americana, bluegrass, roots and country music artists.  So how the Americana Music Conference could allow these people in the door is beyond me.  Well, if they’re…

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ATX Music Office and TALA Host “Get Your Money!” From SoundExchange and the Union IP Funds


Another great result from the Austin Music Census!

Originally posted on MUSIC • TECHNOLOGY • POLICY:

If you live in Austin, the ATX Music Office and Texas Accountants and Lawyers for the Arts are hosting a workshop to help you “Get Your Money!”  This workshop is focusing on SoundExchange and the union IP funds.  Both SoundExchange and the AFM/SAG-AFTRA IP Rights Distribution Fund make a big effort to encourage artists and musicians to sign up and claim money that each organization may already be holding for creatives.


The workshop is the first of a series co-sponsored by ATX Music, Texas Accountants and Lawyers for the Arts and Capitol View Arts.

This is a “how to” event led by Don Pitts of the ATX Music Office, Sean Glover of SoundExchange and TALA volunteer attorney Chris Castle to help Austin artists sign up for SoundExchange and the union IP funds.  The idea for the workshop grew out of the ATX Music…

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Guest Post: @JanitaArtist’s #IRespectMusic Interview for Forbes That Forbes Refused to Publish

Originally posted on MUSIC • TECHNOLOGY • POLICY:


[Editor Charlie sez: Hot on the heels of the Steven Johnson debacle in the New York Times, we find out that our friend Janita was approached by Forbes to do an interview about the #irespectmusic campaign–an offer that was quickly withdrawn once Forbes found out what she had to say.  So naturally…here it is.]

Guest Post by Janita

I have great respect for journalists, and I respect Forbes magazine. As a newly-minted American citizen myself, I’ve gained a deep love and understanding for the inherent––in fact unique––importance reporters have in U.S. society. So, I was excited and honored when told I’d been “confirmed to be the subject of a major Q&A with,” specifically about my involvement in the #IRespectMusic campaign.

I was sent five thought provoking questions from the writer at Forbes, and I answered them as authentically and truthfully as I could. I sent the completed written interview back.

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Guest Post: A response to Michael Geist’s Defense of Bootleg Beatles Records by Canadian Music Publishers Association’s Executive Director, Robert Hutton

Originally posted on MUSIC • TECHNOLOGY • POLICY:

[This post by Canadian Music Publishers Association Executive Director Robert Hutton is reprinted with permission from the CMPA’s Sept. 3, 2015 newsletter.]

We recently read the article posted by Michael Geist to his website earlier this week on the matter of Stargrove Entertainment’s legal action against parties allegedly impeding their sale of recordings which were, at the time, in the public domain in Canada.

We are frequently asked by our members and international partners to offer some counterbalance to Mr. Geist’s views and have been reluctant to do so until now, feeling that it is best not to feed the flames or enter into something that is not based on facts or fairness.

CMPA has no interest in or ability to comment on a legal action. We have no position in the matter, nor can we. We are not going to comment here about the legal aspects of this case.


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Please Vote for “The New Artist Rights Grassroots Advocacy” Panel at SXSW

Blatant Trichordist self-promotion alert!  Please consider voting for “The New Artist Rights Grassroots Advocacy” panel in the SXSW Panel Picker.

We think this will be a great panel with the triumvirate of David Lowery, Blake Morgan and Chris Castle talking about how you can get involved with true grassroots artist rights advocacy.  As far as we can tell, there’s no other panel like it at SXSW.

The panelists will also discuss their experiences with artist rights advocacy, the #irespectmusic campaign, Pandora, artist pay for radio play, testifying before Congress, comments with the Copyright Office, Department of Justice and the Federal Communications Commission.

You can vote for the panel at this link before the deadline on September 4 (Friday).  We’d really appreciate it. We’ll let you all know how the voting turns out.