#howgooglegateworks: Will @senmikelee Investigate Washington Insider Beth Wilkinson for Her Role in the FTC’s Noninvestigation of Google?

thetrichordist:

The FTC can regulate songwriters but not Google?

Originally posted on MUSIC • TECHNOLOGY • POLICY:

The Googlegate Mascot

One of the historical facts that may (or ought to) come up in Senator Mike Lee’s corruption investigation of Google and the Federal Trade Commission is the FTC’s hiring of Washington insider Beth Wilkinson.  Ms. Wilkinson was hired to oversee the FTC’s Google investigation on April 26, 2012, four months before the internal FTC report recommending prosecution as reported by Brody Mullins at the Wall Street Journal.  Beth Wilkinson has several dots that connect her to various players in the Googlegate corruption probe.

Why Was Ms. Wilkinson Hired?  The threshold question is why did the FTC need to bring in an outside lawyer to manage the Google investigation?  Has the FTC done this before?  (Not that I can find.)  Why did they do it this time?  Why did they hire Ms. Wilkinson and who else did they consider for the post (if anyone)?  How…

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@senmikelee Investigating White House Influence in FTC Decision Not to Prosecute Google

thetrichordist:

Maybe Senator Lee could look at Google’s scorched earth attack on Zoë Keating?

Originally posted on MUSIC • TECHNOLOGY • POLICY:

According to the National Journal (“Senate to Investigate White House Role in Google’s Antitrust Victory“):

A Senate panel plans to investigate whether the White House inappropriately derailed a federal investigation into accusations that Google was stifling online competition.

Sen. Mike Lee, the chairman of the Senate Judiciary’s Antitrust Subcommittee, plans to contact the Federal Trade Commission, Google, and other online companies to discuss the issue, Emily Long, a spokeswoman for the Utah Republican, said Monday. The subcommittee has no plans yet to hold a hearing on the issue, she said….

“In short, we are interested in how the FTC allowed a confidential report to be disclosed, and second, what conversations, if any, the FTC or Google had with the White House about the pending investigation,” Long said in an emailed statement. “We are not likely at this time to re-examine the underlying merits of the investigation, which was…

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The Queen of Denial: Be Careful or Rachel Whetstone Will Clap You in Irons

Originally posted on MUSIC • TECHNOLOGY • POLICY:

The demagogue is one who preaches doctrines he knows to be untrue to men he knows to be idiots.

H.L. Mencken

You may have read one of many, many recent news articles about an internal Federal Trade Commission report about the Google antitrust investigation released by the FTC under a Freedom of Information Act request by the Wall Street Journal.   That report conclusively demonstrates that at least some of the lawyers at the Federal Trade Commission wanted to bring an action against Google for a variety of violations of the U.S. antitrust laws.

That report was overruled by the political appointees who run the FTC.

The Journal followed up their reporting with an analysis of how many times Google met with Obama Administration officials at the White House both before and after the FTC voted not to pursue an action against Google.  When coupled with the number of Google executives…

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Spotify is the Problem, Not Labels. (Well, Mostly…)

There is a narrative that keeps getting repeated by Spotify apologists and propagandists. It goes something like this, “The problem is not that Spotify pays too little to artists it’s that record labels are not paying the artists their fair share of royalties from Spotify.” Ha! When the gross payable is half a cent or less we think this has a lot more to do with Spotify than labels.

But this idea that labels are the problem pretty much means that Spotify ignores or otherwise feels that any artist not signed to a major label is unimportant in this conversation and that’s too bad.

We don’t know how many artists and small DIY indie labels aggregate to Spotify via Tunecore and CDBaby for example but we suspect it’s literally THOUSANDS of artists that are not signed to major labels (or ANY label). These are artists who are collecting either 100% of their Spotify royalties directly (Tunecore) or collecting those royalties after a 9% dist fee (CDBaby).

When Spotify shifts the blame for low royalties they are ignoring and invalidating all of the artists not signed to major labels, or any label. There are no industry middlemen taking Zoe Keating’s royalties from Spotify. The per stream rate is just incredibly, horribly bad. 

There are high profile artists such as Zoe Keating and others who echo the sentiments of artists across all strata’s of the business. The economics of Spotify are just unsustainable from the top down at present rates.

Everyone knows that record labels advance massive amounts of money to develop the careers of those artists signed. These advances are recouped from monies earned in royalties. One can argue about the recoupment mechanics but it doesn’t change the fact that with so little money being generated by Spotify the problem is much greater then the labels.

It’s also interesting that in all the talk of democratization and empowering musicians how little of it appears to be actually happening.

99.9% of Tunecore Artists Make Less Than Minimum Wage…

If the Internet is working for Musicians, Why aren’t more Musicians Working Professionally?

We’ve detailed numerous times how at the top end of the food chain, the Spotify math just doesn’t work and would require more subscribers paying $9.99 a month then any other mature premium subscriber business has achieved to date.

Here’s some context for the chart above. Netflix only has 36m subscribers in the US, no free tier, and massive limitations on available titles of both catalog and new releases. Sirius XM, 26.3m in the US as a non-interactive curated service installed in homes, cars and accessible online. Premium Cable has 56m subscribers in the US paying much more than $10 a month and also with many limitations. Spotify… 3m paid subscribers in the US after four years. Tell us again about this strategy of “waiting for scale.” Three Million Paid… Three…

* 3m Spotify Subs Screen Shot
* 26.3m Sirius XM Subs Screen Shot
* 36m Netflix Subs Screen Shot
* 56m Premium Cable Subs Screen Shot
* $7b Music Business Screen Shot

And, just so everyone is clear, we’re not giving the labels a free pass either. But Spotify’s divisive punt to blame the labels for their own bad business model isn’t fair. We’ve reported on the 18% equity stake the labels took as part of their licensing agreements. That’s an 18% equity stake that we’re pretty sure the artists won’t participate in at the time of an IPO or sale (should there be one).

The larger issue in this conversation however is that if Spotify and on demand streaming services can not generate the same or more revenue then transactional sales, then the model is a net negative for artists.  This has nothing to do with labels and everything to do with a flawed business model. Removing the free Ad-Supported tier after a limited time is probably the first, best and most obvious immediate solution but not the only one that should be addressed.

Spotify can not hide behind their bad math by shifting blame to labels when so many artists are getting their royalties from Spotify directly without labels.

 


 

Spotify Must “Adapt Or Die” : Pricing For Sustainability

 

Five Important Questions For Spotify from Artists and Managers

 

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

 

Another Indie Label Sells Out Artists: This Time It’s My Own Euro Label Cooking Vinyl

It is with great sadness that I see Martin Goldschmidt of Cooking Vinyl resort to demagoguery in the debate about Spotify. Defending Spotify n the Wall Street Journal he says

““A lot of artists think the world owes them a living,” says Mr. Goldschmidt. “And it doesn’t.”

Sometimes all caps is necessary.

NO ARTIST IS DEMANDING A LIVING. THEY JUST WANT A FAIR DEAL FROM SPOTIFY AND STREAMING SERVICES. OR THE RIGHT TO OPT OUT. UNLIKE THE MEMBERS OF THE MERLIN INDIE LABEL ALLIANCE WE DIDN”T GET EQUITY IN SPOTIFY.

FURTHER SPOTIFY ISN”T ENTITLED TO A PROFIT. ESPECIALLY WHEN IT REQUIRES THE INVOLUNTARY EXPLOITATION OF ARTISTS SONGS.

http://www.wsj.com/articles/selling-songs-for-a-song-scrutinizing-the-streaming-model-1427468267?mod=WSJ_hp_RightTopStories

Must Read Op-Ed by AFM President Ray Hair Lays it Down on the Shadowy Naxos Deal with Pandora

As we posted, there are very few details about the recent direct deal between Naxos Records and Pandora.  The two big points that aren’t getting discussed is the Pandora special “steering payola” that Naxos and Pandora refused to discuss with the RAIN Newsletter.

The big issue that Naxos and Pandora also refused to discuss is direct payment to artists, musicians and vocalists through SoundExchange which was a big part of the Merlin direct deal with Pandora.

The musicians union president Ray Hair (American Federation of Musicians) stepped up and called out Naxos and Pandora on this issue in Billboard in a must-read op-ed:

We are alarmed by the agreement recently reached between Pandora and Naxos, the world’s leading classical music label, on a multi-year US license for the entire Naxos catalog. We were concerned when their joint announcement was notably silent on any mention of fair and direct payment of royalties to artists. As AFM members who record classical music are keenly aware, professional musicians receive royalties directly and immediately when Pandora uses the statutory license. Pandora has repeatedly and publicly boasted about the supposed benefit it provides to artists, including in their sworn testimony to the House Judiciary Subcommittee, just a few months ago. They praised the statutory licensing process as an efficient, transparent solution that “must be preserved,” and specifically applauded the fact that the statutory license ensures that artists and musicians “actually receive their fair share of the hundreds of millions of dollars in royalties that services like Pandora pay each year.”

Indeed, direct pay to artists and musicians was supposedly a significant part of Pandora’s agreement with Merlin, an independent consortium of record labels — there was an entire paragraph in the Billboard article on the agreement about the fact that artists would still be paid directly, even if they were on a label subject to that agreement. But nothing in the Naxos announcement mentions anything about SoundExchange administering payment to the artists.

Read the whole thing here in Billboard.

We are 100% in Ray’s corner on this and commend him for taking a leadership role in calling out both Naxos and Pandora to disclose the terms of the deal and pay creators fairly.

We also are 100% in sync with the AFM members calling for the AFL-CIO union pension funds to divest of any shares of Pandora or Google stock they hold, and of course any shares of the members of the “Free Radio Alliance” who oppose artist pay for radio play.  It’s time to get serious.

Big thanks to Ray for all he does for musicians.

This Chart Explains What Is Wrong With Current Streaming Model (Sorry Generation tl;dr)

IMG_0361

(Sharky Laguna’s recent post on the problem with streaming got me thinking about the issue again. I decided to probe a little deeper into the matter at UGA this week.   This is still a work in progress but I think this goes a long way to explaining the internal conflict within the music business over streaming.)

Apologies in advance to “generation tl;dr”  there is not a simple explanation here.   This is the best I can do: In a free market specialty or niche products generally cost more than mass market products.  So for instance a semi-ironic american flag tank top from walmart can be sold for $9 and the manufacturer still makes money.  This is in part because the fixed costs can be spread over a large number of buyers.  Compare that to a  Rockmount Ranch Wear hand stitched western shirt.   It’s impossible for this maker to sell this shirt at $9 and stay in business.  Now if through a combination of government mandates and cartel price fixing all shirt makers were required to sell each of their shirts for $9 the Walmart american flag tank top would stay in business.  Rockmount Ranch Wear would go out of business.

I’m simplifying here but, on-demand streaming pays a more or less fixed rate to rightsholders per spin. For Spotify it’s around  $0.0049.  For YouTube (Content ID)  it’s on average less than $0.001 ( YouTube is a much bigger problem for artists than Spotify!!).   This fixed price per spin was the result of a combination of government mandates and cartel price fixing.

So what has happened?  I’m generalizing here, but niche market artists (and their labels), even middle class artists  have a difficult time recouping fixed costs of recording and are generally unhappy with this sort of deal (not all).    Meanwhile pop stars, their labels and managers are generally happy with this deal because it’s easier for them to recoup their fixed costs (but again not all).   Both groups of artists/labels and managers are acting rationally from their own perspectives.

But if you really look at my chart you see that something much more troubling is going on. Niche products should be more expensive, while mass produced products should be less expensive.   But here the reverse is true.  Because of the fixed price per spin, the most popular artists look like they are being overpaid.  While the the niche and middle class artists look like they are being underpaid.    So in effect this is a transfer of wealth from the niche and middle class artists/labels  to the biggest pop stars and their labels.

++++++ tl;dr stop reading here+++++++++++++++

Assumptions:

My curve is   Y= Average Fixed Cost Per Song ÷X

Y = fixed cost per spin.

How do I know what the average fixed cost per song is?   I don’t.  I was trained in abstract mathematics -and I realize this is gonna drive the applied math and engineers folks crazy- but you don’t really need to know that.

It doesn’t matter whether the average fixed cost per song is $500 or $50,000 dollars you are still gonna get the same shape in the curve.   You will still have the biggest artists being overpaid and the niche artists being underpaid.

Further because spins of songs appear to exhibit  non-guassian variation the “break even” point is still gonna be up towards the top tier of artists whether fixed costs are $500 or $50,000.   My “break even” point for this version of the chart was just subjectively chosen. Its where I thought the “pain” seemed to be kicking in.  Artists in the below 10 million spins seem to be complaining.  Artists above 100 million spins, not so much.

 

UPDATE 1

One side of the scale (X axis) is log scale compressed, because spins/sales exhibit wild variation and I couldn’t properly  draw the curve on the chalkboard.  Unless the chalk board was several miles (?) long.   This misrepresents the size of “overpayment” region.    But the “underpayment” region isn’t really represented properly either.   My intent is not to have you compare the “area” of these regions. Just that there is an aggregate underpayment to smaller artists and an aggregate overpayment to very popular artists.  If you look very very closely it says “log?” on the Y axis.  The Y axis is not supposed to be Log compressed, though i did make that note.  I’m not really sure it would make much difference either way since I’m asking the reader to NOT compare size of regions.  Not compressing the Y axis helps make the curve more “readable” but distorts the size of regions.   But I am open to suggestion on this.

 

UPDATE 2

Finally remember I am talking about the hypothetical average song and the average artist.  There clearly will be individual exceptions. Of particular importance is that many small artists some new, some  semi-professional, others hobbyists (no negative connotation implied) will happily offer their music for free, and the low per spin rate is not a problem.   New artists especially, have always given away their music for free. It’s a competitive advantage and a key part of any new artist marketing strategy.  I’m sure you can find any number of small artists that don’t feel underpaid and instead feel that streaming services offer them an opportunity to reach a mass market.  The odds are long for these artists as the consumer is faced with a tyranny of choice, but it is still a rational choice for many artists.  And I am all for artists choice.   What concerns me the most is that this streaming model seems to underpay the vast middle class of working artists that are really the backbone of the music industry.

Is the video below a glimpse of what the future looks like without this middle class of artists :) ?

I welcome sensible and polite comments. I hope this provokes a conversation that leads to a better and more accurate model of this phenomenon  and eventually that leads to sensible solutions.

Who benefits from ad supported streaming? Three guesses.

Trichordist Editor:

FOLLOW THE MONEY.

Originally posted on MUSIC • TECHNOLOGY • POLICY:

What do you pay for when you pay for a subscription to an ad supported service like Spotify or Pandora?  It stops being ad supported.  So who benefits from that?  Fans and artists who hate advertising.  Artists who get a higher royalty rate.

Who doesn’t benefit?

Well, who do ya think?  Here’s a risk factor from Pandora’s SEC filing that gives you a hint:

We rely upon an agreement with DoubleClick, which is owned by Google, for delivering and monitoring our ads. Failure to renew the agreement on favorable terms, or termination of the agreement, could adversely affect our business.

We use DoubleClick’s ad-serving platform to deliver and monitor ads for our service. There can be no assurance that our agreement with DoubleClick, which is owned by Google, will be extended or renewed upon expiration, that we will be able to extend or renew our agreement with DoubleClick on terms…

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Spotify Desperately Doubles Down on Dumb Bad Math… Free Doesn’t Pay, It’s Just Math.

Bring out your shills… It’s no surprise that Spotify has once again enlisted it’s shills and PR machinery to defend it’s exploitation of artists, bad business model, and horrible royalties. The latest offensive comes as the major labels have announced that the unlimited free tier is not working for them (go figure, free doesn’t pay?).

Last year we wondered out loud, Who will be the First Fired Label Execs over Spotify Fiasco & Cannibalization? In February of this year we found out when Rob Wells exited his post at UMG. Around the same time public comments were made by Lucian Grainge for the need to get more paid subscription revenue. He also noted that the free tiers are not creating the type of performance required for a sustainable ecosystem of recorded music sales. Sony music chief Doug Morris has also come to the party stating, “In general, free is death.

Generally speaking we’re not often fans of major labels (remember they have 18% equity in Spotify) but we’re glad they’ve gotten out the calculators. Right now, the three major labels are currently reviewing their licenses with Spotify which are up for renewal this year. This is the time for the major labels to renegotiate those licenses to be more fair for artists.

We’ve detailed the math here, Music Streaming Math Can It All Add Up? In that post we look at the numbers based only upon paying subscribers. The bottom line is that even at the current rate of $9.99 (per month, per subscriber) it’s going to take a lot more paying subscribers to even get close to the type of revenue earned from transactional sales. Free, ad supported revenue, not even close.

Here’s a couple more things to keep in mind that we’ve detailed:

* Spotify Per Stream Rates Drop as Service Adds More Users…

– and –

* USA Spotify Streaming Rates Reveal 58% of Streams Are Free, Pays Only 16% Of Revenue

But perhaps the worst part of Spotify was outlined by Sharky Laguna’s editorial, “The Real Reason Why The Spotify Model Is Broken.” The well written piece details how the artist you play, may not be the artist who get’s paid due to the fixed revenue pool and market share distribution of revenues.

Now keep in mind we’re not anti-streaming. We completely believe that streaming is the future of music distribution and delivery. None of our arguments here are anti-streaming or anti-technology.

Our arguments are anti-exploitation and anti-bad business models. Technology and economics are different issues. We detailed our thoughts for moving forward with potential solutions in our post Streaming Is The Future, Spotify Is Not, Let’s Talk Solutions. We look at five practices that can make streaming music economics viable for all stakeholders and generate the revenue required for a sustainable ecosystem.

When a Spotify rep says, “We think the model works” keep this in mind as we review the Spotify Time Machine…

* 2010 A Brief History Of Spotify, “How Much Do Artists Make?” @SXSW #SXSW

Back in 2010 during Daniel Ek’s Keynote Speech an audience member who identified themselves as an independent musician asked how much activity it would take on Spotify to earn just one US Dollar. The 27 year old wunderkind and CEO of the company was stumped for an answer… Five years later we have a pretty good idea why.

– and –

* 2012 A Brief History Of Spotify, “It Increases Itunes Sales”… @SXSW #SXSW

Ek strenuously denied that his streaming service cannibalises sales of music through services such as Apple’s iTunes.

“There’s not a shred of data to suggest that. In fact, all the information available points to streaming services helping to drive sales,” he said.

Of course, that was until this past year when Itunes sales are reported to have declined by 13-14% and that is pretty much directly attributed to the cannibalization done by Spotify. Hello…

It is said that one of the definitions of insanity is to keep doing the same thing while expecting different results. Our suggestion to the those in positions of power is simply this, if  you want something different, you have to be willing to do something different.

Sure, Spotify was a grand experiment but after half a decade we now have the data to know if that experiment is working out (or not). In the end, it’s just math and free doesn’t pay…

 


 

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

 

Spotify Per Stream Rates Drop as Service Adds More Users…

 

USA Spotify Streaming Rates Reveal 58% of Streams Are Free, Pays Only 16% Of Revenue