It’s not every day that we can get two “Big Lies” out of one Daniel Ek interview, but the Claire Atkinson reporting in the New York Post shows a distinct lack of fact checking that let him get away with another whopper.  (“Spotify CEO says middlemen gobble cash“)

Ek suggests there are perhaps too many middlemen, coupled with the problem of antiquated collection systems. “Some systems and processes use physical pieces of paper. How do you do that when every unit would be in the billions? That’s a lot of paper,” says the tech-focused Swede.

Antiquated?  You know who uses “physical pieces of paper”?  Google.  Anyone knows this who gets a Google royalty statement which is pretty much everyone.  You can elect to get accounted to electronically (which usually signs you up for a bunch of other sneaky stuff), but the default is a paper statement.

But–but–if you read the Spotify agreement with Sony that was posted on The Verge (and has now been taken down), specifically Paragraph 2 “Reporting and Payment,” you would know that all of the statements from Spotify to Sony are required to be in “machine readable” form.  You can safely assume that all the major labels are accounted to the same way–in fact, everyone we know who gets a statement from Spotify gets a digital statement  We can also tell you that we have never heard of anyone who got a paper Spotify artist statement.  (Which, by the way, doesn’t mean that the statement is correct, paper or digital.)

They may send paper statements to publishers, but as far as we know, all of the major publishers and administrators require digital statements, particularly for streaming services.  This would include companies like Kobalt, Ole, Songs, Peer and many others, including ASCAP, BMI and SESAC.  There’s really no believable way that anyone with a catalog of any size could get a paper statement from Spotify because there would be hundreds if not thousands of pages even for a relatively small catalog.  And a check for $9.  The paper for the statements would cost more than the earned royalties.

We are just mystified as to why an outstanding reporter like Claire Atkinson would allow Ek to get away with what is clearly a questionable statement.  Unless Ek never read his contracts and never talked to his royalty department, he knew the statement was false when he made it.  Claire Atkinson should have asked him for names or picked up the phone and asked any CFO or accounting manager in any of the labels or digital aggregators that do business with Spotify and they could have told her off the top of the head that Ek was making a false statement.

We don’t see how it could have been anything other than a knowingly false statement, also called a lie.

Why didn’t anyone fact check it?  Because just like the “greedy middlemen” headline, it fits the 1999 narrative that Ek and the McCoalition are still trying to peddle.  The music business is so antiquated that they’ll never been as hip as “the tech-focused Swede” with his monopoly music service.  Just like nobody questions how Spotify gets a valuation that’s higher than any record company.  Ek is sooo 1999 from biting the hand that feeds to the Dot Bomb valuations.

Hey, Mr. Bit Torrent–1999 called and wants its bullshit back.  And shame on the New York Post for publishing these rants without checking the facts.

Billboard reports that the International Music Managers Forum has more than the usual helping of sanctimony about the terms of Spotify’s deal with Sony (and by inference all other major labels).  Curiously, Billboard doesn’t seem to question the credentials of managers to speak on behalf of all artists.  We do.

Ask yourself this–how many managers have screwed artists to the wall?  Want to talk about sunset clauses?  Commissioning income the manager had nothing to do with producing?  Expense charges for first class tickets to MIDEM and $1000 dinners that suddenly appear when the artist wants to leave the manager?  Charging cars for the manager’s mistress to the artist’s credit card so the wife doesn’t catch him?  Sure, there are plenty of great managers who would take a bullet for their artists or dangle an offending promoter out of a window, but let’s not pretend that managers as a class are without sin.

Let’s also not pretend that artists feel like they can question their manager’s transparency or conflicts of interest.

Speaking of sin and the sanctimony of transparency–here’s a few questions for those in the glass house of the IMMF.

1.  How much money do you get from Google, directly or indirectly?  There have been rumors for years that IMMF is in Google’s pocket, so how about publishing your books online?  Anything to hide?

2.  Did any of your members get stock from Spotify, Bit Torrent or any tech company your organization promotes?  Were you given the opportunity to invest or did you get the stock for service rendered?

3.  Any IMMF members been hired as consultants by Google?  Spotify? Bit Torrent?

4.  Do your members have an obligation in their management contracts to disclose all sources of their income to their artists (like Spotify stock)?

5.  Who gets to decide whether the manager has a conflict of interest?  The manager?  Or the artist?

6.  How many of your members knew about the Spotify major label terms before the Verge leak?

7.  If your member got stock from a tech company what was it for?  Their wisdom or their access?

We’re reminded of a story about a manager who made a fortune managing a particular superstar and then wanted to sell his management company (and the superstar’s contract) for a bundle.  The artist wished him well and had just one question:

Where’s my 80%?

More on this later, but The Verge leaked the 2011 license between Spotify and Sony Music.  Considering the source, we have to assume that the Verge intended to make Sony look bad, but here’s the reality:  The total advances for 3 years that Spotify committed to pay to Sony was $42.5 million.  Given Sony’s huge market share and strong artist roster, this isn’t exactly chump change, but it’s pretty low.  Reasonable, in fact.

Given all the braying that’s come from Spotify about how many millions they have paid to the “music industry”, we have to imagine that these advances actually recouped.  Here’s a hot tip for the Verge–an “advance” is a prepayment of royalties.  The fact that you got an advance on your catalog doesn’t excuse the label getting the advance from paying royalties on streams or sales.

The label may “keep” the advance, but they turn around and pay it out as they get royalty statements from Spotify.  An advance only becomes “breakage” (i.e., an overpayment) if the advance is greater than the sales at the end of the contract, not at the beginning.  Given the relatively low advances in the Sony deal, it doesn’t reek of the contrived breakage where the label gets an advance that is clearly going to result in a grotesque overpayment.  (We think all the goodies should be shared, but what you would want shared in this case is the overpayment at the end of the contract term, not the total advance paid at the beginning of the term before it’s reduced by royalty payments.)

Granted there were some other goodies thrown in like discounted advertising inventory available to Sony, but in a sourceless article (very Googlely) the Verge has no evidence that Sony ever used any of that inventory.  Or if they did, whether they “sold” it to a third party rather than advertising their own records.  Since Sony’s not in the advertising business–unlike Spotify–it seems unlikely that Sony would be selling that inventory to a third party.  The Verge really needs to come up with some better facts–probably from the same person who was in a position to leak the Sony contract.

We would imagine that thanks to the Verge, Sony artists are hoping that their label isn’t quite so generous to Spotify in their renegotiation.

But here’s the other thing.  Now that we know that Spotify was making deals with major labels with significant advances and all kinds of goodies thrown in presumably to justify a lower royalty rate, how did Spotify stand there with a straight face and ask independent artists to take an even lower royalty with no goodies?  Why should we get the hillbilly deal?

Who are these people?

Spotify’s A Dominant Player in the Relevant Market

There’s all kinds of rumors going around about the European Commission investigating whether major labels have somehow conspired with Apple to hurt Spotify and YouTube (owned by Spotify board member Google).  How?  By offering a music service without a free service based on the crack model.  This theory has to do with Apple and the major labels having dominant market positions, and the EC’s alleged desire to protect Sweden-based Spotify.

Or so the narrative goes.  There’s scant documentation of any such “probe” aside from a couple unattributed news reports based on “people familiar with the case“.

But if the European Commission is looking into Apple to protect Spotify, maybe they should be looking at Spotify itself.  According to a Billboard report, a Spotify executive told the Google-dominated Music Biz Association (formerly NARM) that Spotify has 50% of the global music subscription market:

[Spotify executive Will] Page also pointed out that Spotify is half of the $1.5 billion global subscription streaming market. In the U.S. market, Spotify made up approximately 90 percent of last year’s growth in subscription revenue, according to Page.

Isn’t that special?  So Spotify is at least a dominant company if not a monopolist in a very relevant market to the EC’s rumored investigations.  Maybe while the EC is looking into the major label deals with Apple they could also look at Spotify’s behavior toward independent artists and control over the trickle of royalties from subscription?

And before Spotify tries to change the subject–we’re not talking about royalties paid by labels, we’re talking about royalties paid by Spotify to independent artists with no label.  And if the royalties suck for independent artists, they must really bite for signed artists who have to share the revenue with their labels.

Why Do We Want Out of the Ad Supported Tier?

Here’s an alternative and non-conspiratorial explanation of why people want out of the free streaming tier–maybe it just sucks.  How about that?  And who is hurt by cutting out an ad supported tier?  Advertising networks serving ads to Spotify, like, oh say Google Adsense.  You know–Google, the Spotify board member.

The Google connection is actually very interesting.  For all the bitching and moaning that Spotify does about YouTube, why would they put Google on their board of directors?  A “freemium frenemy” perhaps?  Maybe because Google has a strong interest in seeing that Spotify stays an ad supported business for a long time?

The reaction against the free tier is not just a reaction to Spotify, it’s also a reaction to YouTube and it’s mainly a reaction against ad supported streaming, a business model that is supposed to be a defense to ad supported piracy.  You know, the ad supported sites that Google drives traffic to.  Remember 350 million take down notices to Google search last year?

Frenemies Creating Another Compulsory “License”

Maybe the Spotify narrative is wrong.  Maybe the real story is that the fight is between those who profit from the advertising model through a bunch of crappy deals with Spotify and YouTube that should never have gotten done in the first place.  Maybe everyone is realizing that now and want out.  Maybe Apple is taking advantage of that realization and is innovating and competing.  Maybe Spotify is trying to use its dominant position in music subscription to throw its weight around in its “freemium” business and its “frenemy” and board member Google is in the background doing what Google does best:  jacking artists around.

What is troubling about Spotify’s antics is that they don’t get a compulsory license for recordings, so they can’t quite screw us as hard as Pandora or SiriusXM do with the power of the federal government behind them.

But if Spotify can force the major labels to license to them for the free tier by manipulating the antitrust law, that means that Taylor Swift will not be able to withdraw from either Spotify or YouTube.  And we suspect that’s the object of the exercise.

Don’t regulate the Internet except for the artists and the songwriters.

As we were told last week by a whistleblower, National Public Radio’s in-house lobby shop decided that it was in NPRs best interests to align themselves with the so-called “Mic Coalition” (or as some call it, the “McCoalition”).

The McCoalition is not only National Public Radio, but also includes the National Association of Broadcasters–an extraordinarily powerful special interest group long devoted to protecting crony capitalism and the Clear Channel no-royalty loophole.  Yes, in a move worthy of Pandora’s Chris Harrison (aka “Mr. $50 Handshake”), the McCoalition also includes a couple other trillion-dollar babies: Google, Amazon, Pandora, the Digital Media Association (of which Google/YouTube, Amazon and Pandora are members), the Computer & Communications Industry Association (of which Google, Amazon, Pandora are members) Cox Media Group, iHeartMedia (formerly Clear Channel), Salem Media Group, the National Association of Broadcasters (of which Cox, iHeart, Salem and Pandora are members), the Music Licensing Committee (of which Cox and Clear Channel are members), the Consumer Electronics Association (of which Amazon, Google and Pandora are members), the National Restaurant Association (which fought the performance royalty for songwriters whose music is performed in restaurants), the American Hotel and Lodging Association (which also fought the performance royalty for songwriters).

As the leaked email told NPR stations:

NPR is participating in the Music, Innovation & Consumers (MIC) Coalition to ensure that public radio’s voice is heard in future policy decisions involving copyright law. Changes to copyright law may have a direct impact on public radio stations’ abilities to bring music to listeners nationwide.

Our participation in this coalition is not an endorsement of the business plans or activities of other members.

Really?  What is it then?  Pandora has spent millions trying to screw legacy artists who recorded prior to 1972.  The NAB has spent millions lobbying against artists to continue getting a free ride on the music they broadcast, something they’ve fought for decades.  The rest of the world accepts artist pay for radio play–just not the National Association of Broadcasters, North Korea and Iran.

And NPR.

Google, the CCIA and the CEA routinely try to screw artists for a host of reasons and are some of the principal sources of propaganda and lobbying hustle to hurt all of us.  If you include songwriters–all of the above, plus the National Restaurant Association.  The National Restaurant Association is so greedy they managed to get the U.S. taxpayer to subsidize their last play at crony capitalism called the Fairness in Music Licensing Act.   That special interest legislation violated international law and wound up in an international trade arbitration that cost the U.S. taxpayer $3.8 million in fines and potentially more to come.  Maybe the restaurateurs would like to cut the taxpayer a check?

Yes, that’s right.  The U.S. taxpayer is subsidizing music in U.S. restaurants–not for American songwriters, because we don’t have a right to that money.  The restaurants outsourced their royalty payments to the World Trade Organization.

And there is NPR.  And the suits in the NPR lobby shop think this is all OK because NPR doesn’t “endorse the business plans or activities of other members.”

This is pretty pricey company for NPR–poor old public radio that always seems to be strapped for cash.  These “coalitions” usually charge membership fees–big ones.  Here’s the problem:  Is the McCoalition being sponsored by “listeners like you”?  Or by “taxpayers like you”?  Or is it just plain old corporate sponsorship?  Or is it a “free membership”?  Because to paraphrase John Perry Barlow, just like information, loyalty wants to be free, too.

The problem is that when NPR lies down with these dogs, those fleas don’t come off.

If you call in for WNYC’s current pledge drive, you might ask them how that mange treatment is coming along.