Category: Guest Post

Guest Post: Pandemic: @Music_Canada COVID Study Sets the Gold Standard for Reopening Data-Driven Policy

By Chris Castle

[This post originally appeared on MusicTechPolicy.]

MusicCanada commissioned an outstanding survey by Abacus Data using serious data-driven methodology to credibly measure the Canadian public’s experience with the COVID shut down of live music and expectation for reopening.  Instead of glorified “Who’s Hot”-level casual polls you see cropping up here and there, The Locked-Down Blues: Canadians, Live Music and the Pandemic sets the gold standard for the kind of data-driven serious national opinion study that policy makers can actually use to plan how to get out of this corner.

The study measures many different factors, including the more intangible questions of what trust level fans will require before they come back to live music.  Regardless of what distancing or contamination standards are imposed, none of that matters much if the fans don’t trust it enough to come out to hear live music in cities like Toronto and Austin.

For example, the study found this reaction:

DESPITE WANTING TO GO, CANADIANS, EVEN THOSE WHO LOVE LIVE MUSIC, SAY THEY WILL BE RELUCTANT TO GO BACK TO LIVE MUSIC EVENTS BEFORE A VACCINE FOR COVID IS FOUND.

Even if they are permitted to go to live music events, many Canadians, including those who love live music the most, will be reluctant to return for some time.

We asked respondents how soon they will feel comfortable enough doing several activities, once physical distancing restrictions are lifted. In almost all cases, fewer than 40% said they would feel comfortable in a few months or less. For most, the time horizon was much longer with many saying they may never feel comfortable again.

For example, 43% said it would take six months or more before they would feel comfortable going to a music festival or a concert in a large venue. Another quarter said they may never feel comfortable going to those types of events again.

I find it hard to believe that there’s going to be an appreciable geographical distinction between Canada and any other country on these issues.  But this study provides a gold standard for other studies in other countries, all of which should be done and done using a robust and defendable methodology.

So let’s be clear–this study is giving you the hard truth.  It is not some Chamber of Commerce hoorah or conclusion-driven clap trap.  It also tells us that the idea that you can just turn the lights back on and people will flock to the clubs may be looking at the wrong ball.  It has serious implications for the entire music industry across all genres.

But–it especially has serious implications for cities like Austin that get significant economic benefit from music tourism.  Given that the City of Austin commissioned the Austin Music Census in 2015, another robust data-driven study that produced  unwelcome dire conclusions,  it is astonishing that the blinking red light in the Census was completely ignored.  Not only were Austin musicians poorer than the City seemed to think they were, the entire local ecosystem was essentially dependent on live music.  For example, streaming was a negligible source of revenue for Austin musicians–think maybe someone would have wanted to look into that issue as a matter of industrial strategy?  And is there anything about the “Live Music Capitol of the World” that gives you a clue that maybe you might want to start thinking about why all the eggs were in that basket?  As Mark Twain said, if you’re going put all your eggs in one basket, watch that basket.  Or at least don’t ignore it.

Since the City did such a thorough job of ignoring the Census for so long, I wonder if they’re going to be able to figure out how to solve the current crisis.  Or if maybe somebody actually would like Austin to turn into just another college town with a Google campus, self-driving cars busily scraping rider data while stacked up on I-35 and Uber Eats Your Soul.

We can be grateful to Music Canada for commissioning this study and getting it out at the perfect time for policy makers to have some meaningful data driven reality conducted in a manner that could stand up to peer review like the Austin Music Census.  And show the world the gold standard for how to develop policies that actually solve a problem because you better know what the problem is you want to solve.

Here’s the survey:

 

 

Click to access Music-Canada-National-Survey-Interview-Schedule_Release.pdf

by thetrichordist

@musictechsolve: Defiance or Collaboration? The Role of the Presidential Signing Statement in MLC Board Appointments

[Jem Aswad reports in Variety that Concord Music Publishing and Pulse Music Group have announced a joint venture with Concord acquiring a majority stake in Pulse.  Both Concord and Pulse have board seats on the Mechanical Licensing Collective.  This presumably means there will be an opening on the MLC board that will have to be filled.  There is a question as to whether the Librarian of Congress has to approve a new board member.  Chris Castle discusses this issue in this post from last year on MusicTech.Solutions.]

Even though they have a long history, Presidential Signing Statements are not exactly front and center in every civics class or constitutional public law class in America.  You may be hearing about them for the first time now.  But that doesn’t mean they have not been an important part of Constitutional law-making and jurisprudence.

Presidential Signing Statements were first used by President James Monroe in 1822 in the form of a “special message” to the Senate. Presidents Andrew Jackson, John Tyler and Ulysses Grant also issued signing statements, but they were used infrequently until the 20th Century.  Then their use picked up quite a bit starting with President Theodore Roosevelt and continuing to the present day.  So the use of Signing Statements is quite bipartisan.  While Signing Statements may not themselves have any actionable legal effect, they should not be ignored, either.

The MMA Presidential Signing Statement

Not surprisingly, there is a Presidential Signing Statement accompanying the Music Modernization Act (“MMA”) specifically relating to Title I and at that specifically relating to the MLC board appointments.  The relevant language is:

One provision, section 102, authorizes the board of directors of the designated mechanical licensing collective to adopt bylaws for the selection of new directors subsequent to the initial designation of the collective and its directors by the Register of Copyrights and with the approval of the Librarian of Congress (Librarian). Because the directors are inferior officers under the Appointments Clause of the Constitution, the Librarian must approve each subsequent selection of a new director. I expect that the Register of Copyrights will work with the collective, once it has been designated, to ensure that the Librarian retains the ultimate authority, as required by the Constitution, to appoint and remove all directors.

Let’s explore why we should care about this guidance.

According to Digital Music News, there have been changes at the Mechanical Licensing Collective, Inc. (“MLCI”) the private non-profit permitted under Title I of the MMA [in addition to the potential opening due to the Concord/Pulse consolidation]:

[I]t appears that two separate MLC board members are jumping ship.  The details are just emerging and remain unconfirmed, though it appears that two members — one representing indie songwriters and the other on the publishing side — are out of the organization.

Because the board composition of MLCI is preemptively set by the U.S. Copyright Act along with many other aspects of MLCI’s operating mandate, the question of replacing board members may be arising sooner than anyone expected.  As MLCI is a creature of statute, it should not be controversial that law-makers play an ongoing role in its governance.

The Copyright Office Weighs In

The Copyright Office addressed board appointments for MLCI in its first request for information for the designation of the Mechanical Licensing Collective (83 CFR 65747, 65750 (December 21, 2018) available at https://www.govinfo.gov/content/pkg/FR-2018-12-21/pdf/2018-27743.pdf):

The MLC board is authorized to adopt bylaws for the selection of new directors subsequent to the initial designation of the MLC. [If these bylaws have been adopted, we haven’t seen any announcements and as far as we know, they have not been posted.  If you know otherwise, please let us know.  The MLC website appears to be down.  UPDATE:  as of 1/13/20 the mechanicallicensingcollective.org now resolves to songconnect.org]

MCLI Down

The Presidential Signing Statement accompanying enactment of the MMA states that directors of the MLC are inferior officers under the Appointments Clause of the Constitution, and that the Librarian of Congress must approve each subsequent selection of a new director. It also suggests that the Register work with the MLC, once designated, to address issues related to board succession.

When you consider that MLCI is, for all practical purposes, a kind of hybrid quasi-governmental organization (or what the Brits might call a “quango”), the stated position of the President, the Librarian of Congress and the Copyright Office should not be surprising.

Why the Controversy?

As the Songwriters Guild of America notes in comments to the Copyright Office in part relating to the Presidential Signing Statement (my emphasis):

Further, it seems of particular importance that the Executive Branch also regards the careful, post-designation oversight of the Mechanical Collective board and committee members by the Librarian of Congress and the Register as a crucial prerequisite to ensuring that conflicts of interest and bias among such members not poison the ability of the Collective to fulfill its statutory obligations for fairness, transparency and accountability.

The Presidential Signing Statement, in fact, asserts unequivocally that “I expect that the Register of Copyrights will work with the collective, once it has been designated, to ensure that the Librarian retains the ultimate authority, as required by the Constitution, to appoint and remove all directors.”

SGA regards it as a significant red flag that the NMPA-MLC submission to the Copyright Office devotes the equivalent of ten full pages of text principally in attempting to refute this governmental oversight authority, and regards the expression of such a position by NMPA/MLC as arguably indicative of an organization more inclined towards opaque, insider management control than one devoted to fairness, transparency and accountability.

So the Presidential Signing Statement to the MMA is obviously of great import given the amount of ink that has been spilled on the subject.  Let’s spill some more.

How might this oversight be given effect and will it be in the public record or an informal process behind closed doors?  Presumably it should be done in the normal course by a cooperative and voluntary collaboration between the MLC and ultimately the Librarian.  Minutes of such collaboration could easily be placed in the Federal Register or some other public record on the Copyright Office website.  Failing that collaboration, it could be done by either the Department of Justice (unlikely) or by individuals (more likely) asking an Article III court to rule on the issue.

Of course, the issue should not delay the Copyright Royalty Judges from proceeding with their assessment determination to fund the MLC pursuant to the controversial voluntary settlement or otherwise [which was released after this original post].  One could imagine an oversight role for the CRJs given that Congress charged them with watching the purse strings and the quantitative implies the qualitative.  The CRJs have until until July 2020 to rule on the initial administrative assessment and appeal seems less likely today given the voluntary settlement and the elimination of any potential objectors.

Since the Title I proponents drafted the bill to require a certain number of board seats to be filled by certain categories of persons approved by Congress in a Madisonian balance of power, the Presidential Signing Statement seems well grounded and furthers the Congressional mandate.

Yet there is this conflict over the Presidential Signing Statement.  What are the implications?

A Page of History is Worth A Volume of Logic

The President’s relationship to legislation is binary—sign it or veto it.  Presidential Signing Statements are historically used as an alternative to the exercise of the President’s veto power and there’s the rub.

Signing Statements effectively give the President the last word on legislation as the President signs a bill into law.   Two competing policies are at work in Presidential Signing Statements—the veto power (set forth in the presentment clause, Article I, Sec. 7, clause 2), and the separation of powers. 

Unlike some governors, the President does not enjoy the “line item veto” which permits an executive to blue pencil the bits she doesn’t like in legislation presented for signature.  (But they tried–Line Item Veto Act ruled unconstitutional violation of presentment clause in Clinton v. City of New York, 524 U.S. 417 (1998).) The President can’t rewrite the laws passed by Congress, but must veto the bill altogether.  Attempting to both reject a provision of a new law as unconstitutional, announce the President’s intention not to enforce that provision AND sign the bill without vetoing it is where presidents typically run into trouble.

Broadly speaking, Presidential Signing Statements can either be a President’s controversial objection to a bill or prospective interpretive guidance.  Signing Statements that create controversy are usually a refusal by the President to enforce the law the President just signed because the President doesn’t like it but doesn’t want to veto it.  Or to declare that the President thinks the law is unconstitutional and will not enforce it for that reason—but signed it anyway.

The President can also use the Signing Statement to define or interpret a key term in legislation in a particular way that benefits the President’s policy goals or political allies.  President Truman, for example, interpreted a statutory definition in a way that benefited organized labor which was later enforced by courts in line with the Signing Statement.  President Carter used funds for the benefit of Vietnam resisters in defiance of Congress, but courts later upheld the practice—in cases defended by the Carter Justice Department.  The practice of using Presidential Signing Statements is now routine and has been criticized to no avail for every administration in the 21st Century including Bush II, Obama and now Trump.

Since the 1980s, it has become common for Presidents to issue dozens if not hundreds of Presidential Signing Statements during their Administration.  So it should come as no surprise if the Department of Justice drafted up the statement for the MMA prior to it being presented to the President to be signed into law.  (See the American Presidency Project archives https://www.presidency.ucsb.edu/documents/presidential-documents-archive-guidebook/presidential-signing-statements-hoover-1929-obama)

Defiance or Collaboration?

What does this mean for the MMA?  The President certainly did not call out the statutorily required board membership of the MLC as an unconstitutional overreach that he would not enforce.  To the contrary, the MMA Signing Statement expresses the President’s desire that the legislation comply with the requirements of the Constitution.

Moreover,  the MMA Presidential Signing Statement is not a declaration about what the President will or won’t enforce but rather interprets a particular section of a long and winding piece of legislation.  (Title I principally amended Section 115 of the Copyright Act—now longer than the entire 1909 Copyright Act.)  This kind of interpretation seems to be consistent with the practices of prior Presidents of both parties, not an end-run around either the veto power or separation of powers.

Failing to acknowledge the admonition of the signing statement would seem an unnecessary collision both with long-standing jurisprudence and with a sensible recommendation from the President of how the Librarian, the Copyright Office and the Justice Department expect to approach the issue in collaboration with the MLCI.  That’s possibly why the Copyright Office restated the Signing Statement in the RFP.

Title I of the MMA is a highly technical amendment to a highly technical statute.  A little interpretive guidance is probably a good thing.  Collaboration certainly makes more sense than defiance.

by thetrichordist

Guest Post @musictechpolicy: Another Bad Artist Relations Week for Spotify

By Chris Castle

Spotify released one of their groovy ad campaigns last week.  This time celebrating their freebie subscription campaign.

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You really do have to wonder where they find the people who come up with these things.

Blake Morgan, David Lowery and David Poe all laid into Spotify with their own tweets.  Just like Lowery’s seminal “Letter to Emily” post, but much faster, social media began driving traditional media with the story.

Billboard, Newsweek, Variety and New Music Express all picked up the story in 24 hours, and many others are also picking up the story.  I did a short post that Hypebot connecting the dots from the giveaway campaigns to user-centric royalties.

But the capper was the Godwin’s Law moment when Spotify’s lawyer and NYU professor Christopher Sprigman went after both Blake and David Lowery on Twitter for reasons that are frankly lost on me.  Professor Sprigman had something of a bizarre moment when he compared Lowery to Alex Jones which culminated in this exchange (recall that Alex Jones was deplatformed):

Sprigman 1

It should not be lost on anyone that Professor Sprigman supported Professor Lessig’s losing argument in the Eldred v. Ashcroftcase and apparently was co-counsel with Lessig in another losing argument in the Kahle v. Gonzalescase.  It also must be said that David Lowery and Melissa Ferrick’s class action against Sprigman client Spotify and Lowery’s case against Rhapsody were probably among the most consequential copyright cases (along with BMG v. Cox)  in the last five years.  Some would say that the Lowery cases set the table for the Music Modernization Act (and it should come as no surprise that David was asked to serve on one of the committees).

So while Professor Sprigman may find that Lowery “isn’t important”, there is a crucial difference between Professor Sprigman’s big copyright cases and David’s.  Want to guess what it is?

Some are speculating that Sprigman is retaliating on Blake and David Lowery for their successful commentary on his client Spotify–but I’d want to see a lot more proof.  Until then, you’d have to say Charlie has a point when he says that Sprigman is kind of an academic Bob Lefsetz.

Sprigman 2

And Spotify stumbles across the finish line of another bad media week of dissing artists.  Whew. Thank God it’s Monday, right?

by thetrichordist

Arithmetic on the Internet: The Ethical Pool Solution to Streaming Royalty Allocation

Guest post By Chris Castle

“Sick of my money funding crap.”
A Fan’s Tweet

Subscription services are one of the few secular trends in the current economy that is not yet reactive to trade wars or interest rates.  Subscription services are found in many areas of the economy, but music drives some of the big ones like Spotify, Amazon and especially the razor-and-razorblades plays like Apple.  But per-stream royalties do not come close to making up for the CD and download royalties they cannibalize.   Not only do subscription retail rates need to increase, but it’s also time for a major change in the way artist’s streaming royalties are calculated from what is essentially a market share approach to one that is more fair. 

Artists’ dismal streaming royalties on music subscription services are largely based on a simple calculation:  A per-stream payment derived from a share of the service’s revenue prorated by number of streams.  Artists get a portion of a service’s monthly revenue (at least the revenue the service discloses) based on a ratio of your plays to all the plays.  Your plays will always be a lot smaller than the total plays.  (This is essentially what Sharky Laguana referred to as the “Big Pool.”)

Sounds simple, but mixed with the near-payola of Spotify’s playlist culture and Pandora’s “steering” deals, it’s really not.  Negotiating leverage allows big stakeholders to tweak the basic calculation with floors, advances (aka breakage), nonrecoupable payments that help cover accounting costs, and other twists and turns to avoid a pure revenue share.

It also must be said that stock analysts and venture investors always—always—blame “high” royalties for loss-making in music services.  This misapprehension ignores high overhead such as Spotify’s 10 floors of 4 World Trade Center or high bonus payments such as Daniel Ek’s $1,000,000 bonus paid for failing to accomplish half of his incentive goals stated in the Spotify SEC documents (p. 133 “Executive Compensation Program Requirements”).

Of course all these machinations happen behind the scenes.  Fans are not aware that their subscription pays for music they don’t listen to and artists they never heard of or don’t care for.   Plus, it’s virtually impossible for any label or publisher to tell an artist or songwriter what their per-stream rate is or is going to be.

Fans Don’t Like It:  A New Wave of Cord Cutters?

So neither fans nor artists are happy with the current revenue share model. Given that the success of the subscription business model is keeping subscribers subscribing, the last thing the fledgling services need are cord cutters.

Many artists will tell you that the playlist culture and revenue share model are destructive.  Dedicated fans often don’t like it  either (after they understand it) because it gives the lie to supporting your favorite artist by streaming their music.  Artists don’t like it because unless you have a massive pop or hip hop hit, all you can aspire to is a royalty rate that starts in the third decimal place from the right if not the fourth.  This is compounded for songwriters.   (See Universal Music Publishing’s Jody Gerson on streaming royalties for songwriters.)

Simply put, if a fan pays their subscription and listens to 20 artists in a month, that fan likely believes that their subscription is shared by those 20 artists and not by 200,000 artists, 99.99% of whom that fan never listened to and probably never will, similar to Sharky’s “Subscriber Pool.”

This is why some artists like Sharky Laguana (and their managers) have begun arguing for replacing the status quo with “user-centric” royalties that more directly correlate fan listening to artist payments. I have a version of this idea I call the “Ethical Pool.”  

How Did We Get Here?

How in the world did we get to the status quo?  The revenue share concept started in the earliest days of commercial music platforms.  These services didn’t want to pay the customary “penny rate” (as is typical for compilation records, for example), because a fixed penny rate might result in the service owing more than they made–particularly if they wanted to give the music away for free to compete with massive advertising supported pirate sites.

Paying more than you make doesn’t fit very well with a pitch for a Web 2.0, advertising driven model:  All you can eat of all the world’s music for free or very little, or “Own Nothing, Have Everything,” for example.  It also works poorly if you think that artists should be grateful to make any money at all rather than be pirated.

Revenue share deals for big stakeholders have some bells and whistles that leverage can get you, like per-subscriber minimums, conversion goals, top up fees, limits on free trials, cutbacks on “off the top” revenue reductions, and the percentage of revenue in the pool (50%—60%-ish).  Even so,  the basic royalty calculation in a revenue share model is essentially this equation calculated on a monthly basis:

(Net Revenue * [Your Streams/All Streams])

Or ([Net Revenue/All Streams] * Your Streams)

In other words all the money is shared by all the artists.

Sounds fair, right?

Wrong.  First, all artists may be equal, but on streaming services, some are more equal than others.  Regardless of the downside protection like per-subscriber or per-stream minima, the revenue share model has an inherent bias for the most popular getting the most money out of the “Big Pool.”  (This is true without taking into account the unmatched.)

And of course it must be said that the more of those artists are signed to any one label, the bigger that label’s take is of the Big Pool.  So the bigger the label, the more they like streaming.

Conversely, the smaller the label the lower the take.  This is destructive for small labels or independent artists.  That’s why you see some artists complaining bitterly about a royalty rate that doesn’t have a positive integer until you get three or four decimal places to the right.  Why drive fans away from higher margin CDs, vinyl or permanent downloads to a revenue share disaster on streaming?

Yet it increasingly seems that we are all stuck with the nonsensical streaming revenue share model.

Do Fans Think It’s Wrong?

There’s nothing particularly nefarious about this—them’s the rules and rev share deals have been in place for many years, mostly because the idea got started when the main business of the recorded music business was selling high margin goods like CDs or even downloads.  Low margin streaming didn’t matter much until the last couple years.

It was only a question of time until that high margin business died due to the industry’s willingness to accept fluctuating micropennies as compensation for the low-to-no margin streaming business.  (I say “no margin business” because the costs of accounting for streaming royalties may well exceed the margin—or even the payable royalty—on a per-stream basis when all transaction costs are considered as Professor Coase might observe.)

So understand—the revenue share model is essentially a market share distribution.  Which is fine, except that in many cases, and I would argue a growing number of cases, when the fans find about about it, the fans don’t like it.  They pay their monthly subscription fee and they think their money goes to the artists they actually listen to during the month.  Which is not untrue, but it is not paid in the ratio that the fan might believe.  Fans could easily get confused about this and the Spotifys of this world are not rushing to correct that confusion.

Here’s the other fact about that rev share equation: over time, the quotient is almost certain to produce an ever-declining per-stream royalty.  Why? 

Simple.

If the month-over-month rate of change in revenue (the numerator) is less than the month-over-month rate of change in the total number of streams or sound recordings streamed on the service (the denominator), the per-stream rate will decline over those months.  This is because there will be more recordings in later months sharing a pot of money that hasn’t increased as rapidly as the number of streams.

As the number of recordings released will always increase over time for a service that licenses the total output of all major and indie labels (and independent artists), it is likely that the total number of recordings streamed will increase at a rate that exceeds the rate of change of the net revenue to be allocated.  If there are more recordings, it is also likely that there will be more streams.  (For example, see “Despite Record Revenues, Spotify’s Payouts to Artists and Labels Continue to Decline” in Digital Music News.)

So streaming royalties in the Big Pool model will likely (and some might say necessarily will) decline over time.  That’s demonstrated by declining royalties documented in The Trichordist’s “Streaming Price Bible” among other evidence.

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Thus the fan’s dissatisfaction with the use of their money is already rising and is likely to continue to rise further over time.

User-Centric Royalties and the Ethical Pool

How to fix this?  One idea would be to give fans what they want.  A first step would be to let fans tell the platform that they want their subscription fee to go to the artists that the fan listens to and no one else.  This is sometimes called “user-centric” royalties, but I call this the “Ethical Pool”.

When the fan signs up for a service, let the fan check a box that says “Ethical Pool.”  That would inform the service that the fan wants their subscription fee to go solely to the artists they listen to.  This is a key point—allowing the fan to make the choice addresses how to comply with contracts that require “Big Pool” accountings or count Ethical Pool plays for allocation of the Big Pool. 

Artists also would be able to opt into this method by checking a corresponding box indicating that they only want their recordings made available to fans electing the Ethical Pool.  The artist gets to make that decision.   Of course, the artist would then have to give up any claim to a share of the “Big Pool.”

Existing subscribers could be informed in track metadata that an artist they wanted to listen to had elected the Ethical Pool.  A fan who is already a subscriber could have to switch to the Ethical Pool method in order to listen to the track.  That election could be postponed for a few free listens which is much less of an issue for artists who are making less than a half cent per stream.

The basic revenue share calculation still gets made in the background, but the only streams that are included in the calculation are those that the fan actually listened to.  If the fan doesn’t check the box, then their subscription payment goes into the market share distribution as is the current practice, but their musical selection is limited to “Other than Ethical Pool” artists.

That’s really all there is to it.  The Ethical Pool lives side by side with the current Big Pool market share model.  If an Ethical Pool artist is signed, the label’s royalty payments would be made in the normal course.  The main difference is that when a subscriber checks the box for the Ethical Pool, that subscriber’s monthly fee would not go into the market share calculation and would only be paid to the artists who had also checked the box on their end.

One other thing—the subscription service could also offer a “pay what you feel” element that would allow a fan to pay more than the service subscription price as, for example, an in-app purchase, or—clasping pearls—allow artists to put a Patreon-type link to their tracks that would allow fans to communicate directly with the artist since the artist drove the fan to the service in the first place.  I’ve suggested this idea to senior executives at Apple and Spotify but got no interest in trying.

The Ethical Pool is real truth in advertising to fans and at least a hope of artists reaping the benefit of the fans they drive to a service.  There are potentially some significant legal hurdles in separating the royalty payouts, but there are ways around them.

I think the Ethical Pool is an idea worth trying.

 

by Trichordist Editor

Understanding Music And Blockchain Without The Hype

Well the bitcoin fervor seems to have already peaked and we’ve moved on to the blockchain (the underpinning tech that makes bitcoin work) as the new investor de rigueur. It’s like that moment when your favorite unknown band goes from obscurity to superstardom and suddenly everyone is telling you how much they’ve always loved them. Everyone loves the blockchain. In fact when it comes to solving the many issues facing the music industry, there is a massive rush of interest in using blockchain technology to solve them all, citing the ridiculously bandied about word of the moment, “transparency”.

What currently concerns me with the goldrush to fund or participate in blockchain projects is of course the fact that when investors jump into nascent tech, it often gets convoluted from its original intent to something often unrecognizable. What made bitcoin and blockchain so attractive to many developers and users was that it wasn’t part of “the system”, nor built around the idea of being part of the establishment. And yet, that is exactly what is happening.

As someone who actually has a technology platform that works with blockchain, let’s look at it with some critical objectivity.

What is the blockchain?
Without providing a deep and detailed explanation of how “ blocks” become the “blockchain,” or talking about miners mining bitcoin, and other concepts that will cause your eyes to roll into the back of your head, just think of the blockchain as an immutable decentralized (no one owns it) public ledger or record of transactional data. That data is distributed around the world to multiple servers that allow this transactional data to be written into a permanent record. Each copy of this data is designed to contain the same data as the others. Essentially, you can trust that if you write a transaction into the blockchain, they all have the exact same transactional information. To boil it down to a very basic level, if you put something in it, it is there permanently, impossible to tamper or change.

Right now there are newly funded companies trying to use the blockchain to validate/record stock trades, artwork, music, copyright, diamonds, and other tangible/intangible assets. Even banks and governments are looking into how they might utilize the blockchain for documentation of important information. Many within the music industry feel that by writing practically everything into a blockchain they will solve all the issues and we’ll suddenly be returned to a time of unicorns and rainbows, with more money than ever before falling from the sky. And maybe it can.

It is in fact quite a brilliant bit of kit and as of late, other people have started to see that having such a mechanism could be very valuable for other types of transactions. And so we’ve got other companies and organizations creating not only their own cryptocurrencies, but their own versions of blockchain technology. In fact, what could be the version of the blockchain that is recognized as “official,” is currently in the process of experiencing a fork in the road. Sparing you the politics behind what’s going on, there are certain limitations inherent on the blockchain that a group of developers want to re-engineer to solve, and so they are in the process of what is called “forking” or splitting off the blockchain to run a new version of it.

Confused yet? Welcome to my world, and I’m using it every day.

The blockchain, in theory, shows some promise as an immutable public ledger that provides some needed transparency when it comes to important transactions, whether they be purely financial or a public statement of fact. However, if it is going to get past the point where it is being funded for the sake of finding the next big thing (beyond bitcoin), to actually being the next big thing, it has to solve five main issues, Authority, Immutability, Scalability, Legacy, and Privacy.

Authority

“Def: the confidence resulting from personal expertise: he hit the ball with authority.• a person with extensive or specialized knowledge about a subject; an expert: she was an authority on the stock market.• a book or other source able to supply reliable information or evidence, typically to settle a dispute: the court cited a series of authorities supporting their decision.”

Humans tend to trust people and institutions because they place within them authority. If one institution fails us, we often have recourse to go to another to find satisfaction. We hire experts in certain fields or use certain organizations to perform certain tasks, because of the authority invested in them. Authority doesn’t inherently exist, but is something that has to be recognized and accepted by humans, because data (good or bad) is just data. Regardless of how many times technologists want to convince us that AI and technology can do certain things better than humans, almost every person prefers to have a direct connection to another person when resolving issues.

The blockchain does not possess cognitive empathy and does not understand nuance, therefore sometimes the only way to solve a problem is with a person to person dialogue. Blockchain is not an authority unless given that state by humans. It has to be recognized as such. However, blockchain also belongs to no one, and it in fact is simply a public ledger or record of information pertaining to a transaction or asset, and it can in fact be polluted by humans (garbage in/garbage out). It cannot be accountable because it has no one to be accountable to, and no one is truly responsible for it. Since it is designed to exist in a decentralized format, (meaning it lives out in the ether of the Internet and has no owner), the perceived value is that anyone can write to a blockchain and by making it public, almost anyone can use it to validate a transaction.

However…

It hasn’t been tested in a court of law. While I like the idea behind decentralized transaction ledgers, I see some serious issues specifically surrounding authority. There is no centralized authority responsible for blockchain, and therefore you can’t really hold anyone accountable for the data. Certainly for many, this means there are pluses and minuses, yet while a record may be a record, generally in court you have an authority which can validate the authenticity of that record going in and coming out.
If you have a land dispute, for example, you may have to call in not just surveyors, but also government officials who have the original land deeds or registered documents on file to testify to the validity of said data. They always possessed the data and it was recorded at that location, so they can testify to its validity. When it comes to copyright, in order to sue for a valid copyright infringement case, you have to have (in the US) registered your work with the Library of Congress, not simply throw something into the blockchain. There has to be someone accountable.

You also have to in fact be able to 100% trust who is entering that transactional data, and they have to be accountable. If that trust is being put into the hands of a private technology company, and you are relying on that data and that company, you have to understand there are risks. That company could in fact be acquired or go out of business. While some of your data might safely tucked into the blockchain, that doesn’t mean you are 100% protected and free of risk.

While we may or may not like it, having authorities (institutions/people of repute) that we generally trust, has always been critical to society, and it is not just information that backs that up, but people. I know some will say that blockchain is impossible to “hack” or game, but I’ve yet to see any technology that hasn’t been exploitable on some level, so who will people turn to when they have disagreements or feel they have been taken advantage of? Sometimes data also doesn’t tell the whole story, which is why we don’t call computers to testify, we call humans.

Since anyone can essentially write anything into the blockchain, this is why having trusted institutions involved is so important, but to date, all the language I hear from blockchain disruptors is that they want to burn down the old legacies, yet they don’t yet have a trusted replacement for them yet.

Immutability
I think my biggest issue to date with those rushing to work with blockchain is the idea that you can and therefore should write any and all data into the blockchain. For example, several companies I’ve talked to (and some I’ve met) have thoughts of writing business logic into the blockchain, which could include metadata, ownership information, spits, rates, terms, and so on. The thought being that if everything is out there, it is easy to parse out, interpret (via people or machines), and deliver that always elusive “transparency.”

Besides the technical limitations on this, even if possible, it is a remarkably stupid idea.

Business logic is not always immutable. In fact, it isn’t even always that logical. All creative industries are in a constant state of flux. Rates, terms, use, and even ownership can change at any given moment. There are not simply market forces at play, but there are emotional forces at play. It is one of those ideas that on the surface sounds brilliant, but without any real thought as to what comes afterwards as far as resolution conflict and other complications that are products of people. The music industry is replete with battles and disagreements and misunderstandings. It also doesn’t take into consideration  the power of “oops.” Mistakes will inevitably be made.

Certainly, some data can and should be written into the blockchain, but the idea that there will be a magical wonderland of machine logic that will always know how to handle every given situation is laughable. Machines do not understand intent, and they do not understand abstractions like fair use, parody, or pastiche. Humans barely understand these ideas. On the scale that things like user-generated content are created, the idea that this can all be handled in this manner is illogical.

There is a better way to handle business logic, and that is using a method I call “immutable fluidity.” It is in creating a hybridization of static and motion. That’s another article.

Scalability – Size
Here’s some of the reason we’re seeing a fork of the current blockchain. When it comes to scalability of size (and speed), there are two camps on this. One is saying blockchain scalability is not an issue, and the other says that it is a major issue. Which is it? I think I can make an argument for why it may not be scalable. With the rush to build/fork blockchain into the “blockchain for x” and the “blockchain for y” are we not exacerbating the issues of scalability? We certainly are making it very difficult to pick a platform to back.

Let’s look out a bit into the near future and take into consideration all the possible uses for blockchain. We’re talking trillions of transactions/records every day. Massive amounts of data that, while not blob data (large files like video/music), is still data.

If we take the bitcoin wiki scalability targets they use by comparing bitcoin/blockchain to the Visa platform, then according to the wiki, Visa has a peak capacity of around 50k transactions per second. I know that’s “peak” (not average) but if we are looking at displacing other payment systems as well as other data recorded in blockchain, you have to build for the world you may have, which can include a future of trillions of micro transactions as well. From just a financial transactional aspect, you are talking roughly 4.5B transactions per day or 1.6T transactions a year. Now add to that the traffic and data requirements for blockchains that cover all sorts of transactions that may not have any financial aspect or may in fact have both financial and other data requirements that need to be recorded. Judging by some rough numbers, we could be looking at many terabytes a day and a few petabytes a year in data, likely more. All of this data has to move and be stored somewhere, and there is cost to that in financial and time factors as well.

Now I understand that not all nodes need to store the entire blockchain, but for many of the transactions people are talking about, they have to exist forever and there must always be a record of it somewhere. We know that systemically it is possible for things to fail and decentralizing data can help prevent from some critical aspects of this from occurring, but it is possible that at some point this data becomes untenable. Yes, I know that storage and bandwidth become cheaper all the time, but we’re talking about still needing to handle the traffic/storage of photos and video and music and whatnot (that we already do online), on top of blockchain data.

Scalability – Time
Over the past 2 years, the average round trip time for confirmation on a blockchain transaction has hovered in the 6-10 minute range, typically around 8 minutes. Two years, and transaction times have not decreased, but also not increased with the popularity of bitcoin. This isn’t necessarily a good or bad thing. However, many mission critical uses of blockchain will in fact require transaction times measured and confirmed in milliseconds.

Recently there’s been a lot of press written up around an announcement about how a music intelligence company is partnering up with blockchain/cryptocurrency company. From what I gather, they are taking a stab at creating yet another rights database, on top of the dozens of other attempts to do this around the world at the moment. In fact, another blockchain rights database project is also being developed on the competing blockchain platform. How many projects like this can we really have? At some point some serious decisions are going to have to be made.

Legacy
Many of the people I’ve met who are working to introduce blockchain solutions operate with the general idea that the old systems are broken and we need to simply burn it all down and start over. Hard to argue with that, considering it isn’t as if things are running like clockwork and there is a tremendous amount of wasted revenue that is eaten up by overhead and broken methodology. But whenever I hear anyone use the word “music industry” as a way to demonize a system that clearly has both positives and negatives, it harkens back to another time I heard those same words…

Sure, I’m a technologist, but I’m also a writer. I was told 15 years ago by the tech industry that this was our coming golden age. The walls are coming down and you’ll be able to self publish your work and make more money than ever before. In those intervening years I’ve seen peers go from making $1 a word to around $.01 a word, and as far as all the of walls coming down…the last time I checked with this great disruption and golden age, Amazon was on top controlling the methods of sales, distribution, and with devices…consumption. Not content with that, Amazon now is funding books, movies, tv shows, etc…not far from being the only game in town.

Great job technocrats!

Here’s my fear. First of all, with all of the differing approaches and variations of blockchain technology, combined with the undermining attitude of burn it all down, what that in fact might do is create the worst of all partnerships…big media and big tech united against a common enemy.
You see a lot of investors and money are in Spotify, Apple Music, Deezer, Rhapsody, Google Music, YouTube, Amazon, etc. A lot of rights owners of all kinds (majors and indies) have committed to moving past music sales and on to supporting streaming. And while they both desperately need each other to make this work, they are also not friends. There is an inherent distrust of tech from creative industries and vice versa. Right now this is actually a good thing as it keeps everyone on their toes and it is these issues that drives the discussions of making better solutions. But if you “disrupt” or threaten to “disrupt” these “legacy” platforms, you may just unite them against a common cause, positive progress. That battle will put big media and big tech together with big government and we’re talking about trillions of dollars and the ability to legislate you into oblivion. That means once again failed attempts of planning and strategy will have the opposite effect of your desired revolution.

I think it is critically important to instead work to build a bridge between legacy and the future if we want to see a future. I’d hate to get to the end of this and all we’ve done is further consolidated power in the hands of the old or the new, and failed to actually build a fair and equitable system. Again, these promises have been made before and the outcome not so good.

Privacy
One of the key and primary features inherent in blockchain is the ability to put data into a public ledger that has a level of privacy. However, there are many things that people do not want to ever enter into any blockchain. Some things should always remain private and some transactions should never be made public. In some cases, there are private sales of valuable assets whereby certain parties do not want entered into any public ledger, including things that are political or involve safety. Not only that, but there are issues surrounding just how private any transaction can be:

“Elliptic’s ability to track various participants in the bitcoin network should be an eye-opener for anyone who still thinks the digital money can be easily transferred in an anonymous manner. When asked about his thoughts on future privacy enhancements for bitcoin, Dr. Smith explained:

‘We welcome increased privacy features, and such new technology will inevitably change the way we have to detect crime, but increased privacy does not necessarily have to equate to more freedom for criminals.’”

A nice sentiment, protecting us all from criminals, but criminality is often an issue around territories and privacy isn’t always about criminal behavior. While you cannot defend any centralized technology company or online retailer as a bastion of security <cough>ashleymadison</cough>, at least some of those exposed transactional events are mitigated by being limited to specific platforms. But what about splaying everything out in the open? Also, privacy can not only be a positive aspect, it can also be a negative one. For example, there is the possibility that blockchain could be used for nefarious purposes such as distributing malware or child pornography:

“A loophole in the code that powers Bitcoin, which heretofore has mostly been used to post jokes, was discovered this week to contain repellent links to sex sites, including child porn, according to CNN Money.
The code was uncovered in Bitcoin’s blockchain, the distributed digital ledger that keeps track of all Bitcoin transactions.”

and

“Although the code modifications are not dangerous in terms of malware, they do pose a potential danger to anyone who owns Bitcoin. The problem with this rubbish—well, one of the many problems—is that these messages become part of the blockchain for the life of the ledger.
According to a statement from INTERPOL and researchers from cyber security research firm Kaspersky Labs, uploading malware to the blockchain would make it extremely hard to get rid of. Indeed, there are “no methods currently available to wipe this data,” according to the statement. Once a file is in the blockchain, and hence on every computer in the Bitcoin network, it’s there forever. For now, at least.”

In fairness, pretty much anything on the Internet is capable of being used for good or bad behavior, but this does go to my point of how important authority and trust will be with using blockchain.

In Closing
While there are certain benefits from the ideas behind blockchain and distributed databases, which citizens and entities can use as a way to validate that something happened, we already have database technologies and platforms that perform these exact tasks, and in many cases, the companies that back them up are not only already considered authorities, but have the financial and insurance backing to give them an added element of trust.

If there’s a violation of trust somewhere down the road occurring with a decentralized database that belongs to no one, who will we go to to get our recompense? In fact one could even argue that corporations could adopt decentralized blockchain transaction ledgers to indemnify themselves from risk, and when citizens want accountability, they just pull a “safe harbor” type of shrug and tell you you are out of luck. Sorry your money is gone but the blockchain doesn’t lie. So while there is great promise in the ideas of “why” blockchain, it may be time to evaluate the best ways to execute these ideas before we find ourselves too far down a road without truly thinking what the outcome will ultimately be. We certainly have seen enough negative disruption that has hurt many a career, and can creative industries really afford to take another hit? Maybe the rush to jump to funding or back every blockchain technology should be met with some added scrutiny, and I include myself in that.

———

P.S. My Personal View
I feel I’ve been critical enough with the above observations that I can now honestly tell you that regardless of the issues I’ve mentioned above, I actually do support blockchain technology and some of the ideas behind it. That didn’t happen overnight. For our own project, OCL, I simply looked at those issues and asked myself, how do we solve them?

My favorite quote is from Dieter Rams who said:

“Question everything generally thought to be obvious.”

We all sat down, did just that, and worked out solutions around those concerns. Once we got past that, I realized that yes, there is remarkable value and power in the ideas behind blockchain, but it will require more than just a bunch of clever ideas, it also will require a great deal of cooperation and a bit of hand holding, and some patience. But if we can get beyond all the media hype and hyperbole, there is something amazing here. The question to ask though, is whether it will truly benefit artists and the creative class or will we simply give birth to yet another techno-oligarchy.

Alan Graham is the co-founder of OCL http://n2one.us

by agraham999

Disruption And The Death Of The Creative Class : Part 1 of 2

Guest post by Alan Graham

This is a long piece. I’m warning you in advance, because these days our short attention spans generally peter out after…well about now. But if you are a professional creator, emerging artist, or rights owner on this planet, you should read this, and the piece that will follow it. It is not simply a call to action, but hopefully an opportunity to open minds to what the creative class is truly facing. 

 

Disrupt: throw into confusion, throw intodisorder, throw into disarray, 
cause confusion/turmoil in, play havoc with; disturb, interfere with, 

upset, unsettle; obstruct, impede, hold up, delay, interrupt, suspend; 
informal throw a (monkey) wrench into the works of.

 

The word disruption is often worn as a merit badge amongst tech circles. The negative connotations have been twisted into a positive. This arose from the obstruction of progress that tech often faced from legacy businesses, who generally held all the keys to all the doors and often refused to share. I have personally experienced this myself, and still see it happening to this day. In the past I use to use “disruptive” quite often in a positive context, up until I began a project in the music industry. Beginning from the ground up, you see the industry for what it actually is, passionate creative people, not just some amorphous entity encapsulated by the words “music industry”.

I realized that any more technological “disruption” will equal death. And not just the death of old inefficient systems, but the actual freedom that this age of technology had promised to deliver the creative class if you just came along for the ride. You believe you have freedom of choice, but as I’ll point out a bit later, it is an illusion. What good are a thousand different choices that are owned by the same handful of people? 

We need something better than disruption. We need something that belongs to you. 

I don’t need to tell you your very livelihood is at stake, but based on those I meet in the music industry, you are ill equipped and not ready for what is coming. I know you think you know what is happening, but you don’t. These days there is a lot of talk about things like “transparency” which are general abstractions that point towards a lack of clarity and openness between record labels, the deals they make, and royalties. It has become the subject du jour. I cannot speak to those issues. However, what I want to call attention to is that while you and the media are all focusing on those issues, which are of course important, it also serves as a bit of misdirection for issues on the horizon which are much larger problems.

Technology is about to take away your power to enforce your rights. While it joins your chorus and lauds the need for more transparency, it will simultaneously make things more opaque, obfuscating how your creations are used, where they are used, etc. Infringement and piracy is about to get worse than ever before, moral rights will soon disappear, and the DMCA provisions that gave you some semblance of control, will lose all their teeth. While your tech friends get you to focus on the lack of openness from within your own industry and work towards making it more accountable, they are already making that issue moot. You just don’t see it yet. This is exactly what they want. And if you think copyright is going to save you, it already may be too late for that, unless we solve these issues rapidly. The new flag flying in tech is “privacy,” and while it is easy to get everyone on board with that idea, it will render copyright unenforceable.

Privacy always trumps copyright. 

I’m going to look into this in detail in the second part of this piece (although I’ll hint at it here), but in order to get there, we need to start by understanding how we got where we are right now.   

 

You May Ask Yourself – Well How Did I Get Here?
 
“Media companies are running scared these days. Their failure to embrace technology has put them in a delicate position. For the first time in history, the bread and butter of the media enterprises like music, film, and television are faced with the fact that they may no longer be in control of their business.”
Hard to believe I wrote those words 12 years ago, since it feels like I could have written those same words today. 
 
Back then, I was furious at the heavy handed tactics of the RIAA and the political clout they seemed to wield on Capital Hill. It was clear that their all out onslaught against file sharing was taking a scorched earth approach towards everything that only made the music industry look petty, while clearly trying to deny that the pace of technology would eclipse them in a very short time. Turned out to be very short indeed. Last time I checked, torrents, downloads, and streaming are thriving as the preferred methods of media delivery these days. And yet here we are, trying the same old strategies. 
 
For many years I was fully on the side of tech, whose intentions back then seemed pure in its desire to truly improve the lives of people through the democratization of information. Who couldn’t get behind the idea of “don’t be evil?” The entire technology sector is marketed to us every day with positive affirmations of change and hope. Who wouldn’t love a company that names its OS releases after candy? 
 
In that piece I was essentially writing a call to action of sorts as well, that if technology didn’t want to find itself at the mercy of big media, it needed to start getting savvy when it came to political influence. We needed to even the playing field.
Letting The Days Go By
Wow, that was fast. We see today’s youth idolizing tech giants more than rock stars, with teens even building startups from their bedrooms. There are major motion pictures with both protagonists and antagonists from tech. “Silicon Valley”, a show that is a remarkably accurate parody of the delusional echo chamber that is Silicon Valley, is somehow adored by those in Silicon Valley who obviously don’t seem to see the absurdity.
Since I wrote my original technology call to action, Google’s lobbying fees have gone from $80k a year to a yearly peak of $18M in 2012, with cumulative lobbying expenditures projected out just five years from now looking to top well over $100M. From just one company! In political influence, the tech industry has eclipsed media and is on track to surpass Oil and Gas.
This doesn’t even begin to count all the astroturfing that goes on in the guise of “grassroots” campaigns. That’s not to say that big media doesn’t employ the same tactics, but as you can see, the tech sector is a quick study, and in fact, they build all the grassroots tools. Deploying a hundred “cause sites” (as I call them) that garner 100k signatures over a weekend is trivial.
 
“Legalize sharing,” urge press releases issued by Peers, another tech astroturfing outfit launched in 2013. Peers is the “grassroots” organization launched by “sharing economy” companies like the transportation app Lyft and the home subletting site Airbnb, the latter of which paid a PR group to create Peers.

All of these organizations have one common link: venture capitalist Ron Conway. Conway’s invested in Peers member companies like Airbnb and the online course web site Skillshare, and he’s a founding member of FWD.us and sf.citi, whose Affordable Housing Committee is headed up by none other than SPUR’s Gabriel Metcalf.

FWD.us as you might recall is led by Mark Zuckerberg, and in case you are curious of the type of power you are up against and all of the connections and ties to tools and services you use every day, look no further. Even the creative industries much lauded Patreon has ties to Facebook, not to mention it also has investment from the above mentioned Ron Conway, AKA The Godfather, who has made over 650 investments over the years. These include BuzzFeed, Digg, Facebook, Google, Napster, PayPal, Pinterest, Reddit, Square, and Twitter. There isn’t likely a single creative industry tool or service that you use that doesn’t likely have some direct investment connection to Silicon Valley. Somehow, whether you like it or not, you are always going to be paying part of your earnings to someone in northern California. Meet the new boss…
We always think of monopolies as corporate entities, but what about investors? This isn’t a many headed hydra, this is an all encompassing blob. As I mentioned at the beginning of this piece, with a little misdirection, we are focusing our discussions on only one area where transparency is desired, yet where we need it most is unlocking and questioning all these connections within investment circles and their impact on your lives.
While I support the general idea of investment, this isn’t the Internet I signed up for, where power is consolidated into a small group of people residing in a 25 square mile area in California. Not to mention there are many like me who never believed that the mantra adopted (and misunderstood by many) that information should be free meant that it had no cost. For many of us, the intent was that information should be able to move freely, with little friction, but somewhere along the line, wires got crossed and the message was corrupted.
While there are many people, like Robert Levine, who have done much more research on how we got here, I have plenty of anecdotal evidence having lived through the deluge of “free” as a writer, and it is clear that the monetization of free media through advertising, venture capital, and acquisitions has left professional creators in a precarious state, reducing the value of creative content to what you can get it for with an upfront advance or the lowest bid for it on a Cost Per Click (CPC) basis. Considering how much of tech is funded and subsidized by the previous, we are simply one economic hiccup away from a serious problem. So if you put a lot of eggs in those baskets…you are one mixed metaphor from a house of cards. CPC’s have been dropping year after year, while volume continues to increase. Essentially, we just keep moving the same money around from platform to platform. Moving music or videos to Facebook doesn’t magically create new money, it just takes it from someone else.
Into The Blue Again, After The Money’s Gone 
Tech has done a remarkable job of rebranding itself into the victim, but the victim of what exactly? Success? Practically everything driving the internet economy falls under copyright, all of it provided and fed into their platforms by creators of all kinds (professionals and regular citizens). All of it serves the purpose of providing immense value to tech platforms by which many established companies are generating massive revenue. Take two of the top platforms out there and you’ll find revenues that far surpass those of the entire global music business. Even market valuations of newly minted startups are almost impossible to fathom. Snapchat’s current valuation is higher than the entire music industries revenue. Now compare that with an indie record label with a 20+ year catalogue of respected works that can no longer sell them, because you can get them for free on some web platform that’s literally minutes old. A life’s work disrupted by companies whose existence in months can be counted on fingers and toes.
WTF is going on? Have we collectively lost our goddamn minds?
Same As It Ever Was…Same As It Ever Was
 
PastedGraphic 1
If we look back at the turbulent start of YouTube, it was clear that the modus operandi was Superius Augmentum Omnia or “growth above everything”, something for startups that is still true to this day (maybe more so), generally driven by hopes of acquisition or IPO. Due to the Viacom lawsuit, we got some insight into just how serious they took copyright infringement with internal missives from YouTube employees like:
“technically we shouldn’t allow it . . . but we’re not going to take it off until the person that holds the copyright. . . is lìke . . . you shouldnt have that. . . then we’ll take it off .” 
and
 
“…but we can leave this up until someone bitches.”    
The latter of which has actually become Silicon Valley’s legal position and business model, one backed up by Safe Harbor provisions. This is a model that is supported voraciously by organizations like the once laudable EFF, whose constant push to erode copyright laws ultimately benefits those who they get most of their funding from, at the expense of the citizens they strive to protect. Their boards are tech and law heavy, creator light. In fact, between boards and staff, I count over 30 lawyers.
Forget commercial media copyright issues for a second. In an age where information is more valuable than gold or oil, can you think of a civil right more important to citizens than their own copyright? Yet these groups want you to voluntarily work on their behalf, while donating money, to take those rights away while they fight on to protect your “privacy”. The same organization that has tutorial after tutorial on opting-out of things, by default signs you up to their mailings when you sign a petition.

Voila Capture2015 08 04 10 19 02 AM

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Say what you will about the complexities or unfair exploitation of copyright by media corporations, the moment you actually kill copyright, is the moment that technology companies will take the exploitation of your ideas, thoughts, feelings, and creative works to entirely new heights. These plans are already being devised in the seedy dungeons where EULAs are crafted by legal minds trained in the darkest of arts. Don’t believe me? It has already begun. And what’s the EFF doing about it? 
 
…while the Electronic Frontier Foundation’s intellectual property director Corynne McSherry confirmed that “it doesn’t appear that Flickr is doing anything wrong”.
 
So in the end, just how useful is that Creative Commons license?

Flickr’s latest business model – selling wall-art prints of more than 50m imagesshot by its community of photographers – has sparked a debate around Creative Commons licensing.

The Yahoo-owned site will keep all the revenues from sales of prints based on photos shared to Flickr using a Creative Commons “commercial attribution” licence, which allows commercial use.

But I digress.
YouTube’s post acquisition solution to the problem of infringement was to create ContentID, an anomalous band-aid built to appease rights owners. It was a Faustian deal created out of the need to bring some sense of control (even if it were the illusion of control) to the Wild West of infringement. I don’t blame the music industry for making this deal, because they had very few options at the time. But due to a lack of technical solutions, instead of building direct relationships with citizens, the music industry was forced to choose platforms over people, thus putting a middle man in-between them. Guess who actually has the meaningful relationship with the customer? The result being that ContentID and ad sharing revenue essentially created a system by which people are rewarded for bad behavior, and there are really no repercussions. I doubt even YouTube knows the full scale of rights violations on their platform, and possibly why after all these years, they still refuse to disclose how much money in revenue they generate. 
 
Because if artists only knew just how much money is made and yet missing…
However, the promise of YouTube being a phenomenal tool of promotion for selling music, has in fact had the opposite effect in that it actually created the most popular “free” music platform on earth. While I was busy buying music like a dumbass (plus a paid Rhapsody user since 2006), I failed to see that coming. But it turns out I may be stupidly paying Netflix as well, as YouTube is a great unmonetized free tv and movie platform as well. If the MPAA and others think they’ve got this under control… 
Many videos on YouTube today are simply the title of a popular piece of media, but to avoid a piracy takedown or to sidestep ContentID, are in fact several minutes of silence plus a link to an outside site where the pirated media sits, making it nearly impossible to find or remove. Due to the scale of postings to YouTube, managing this and other copyright issues is a near impossibility. Here’s an example of this on YouTube right now. Just search for a popular TV show.
Voila Capture2015 08 03 01 33 30 PM
If you follow the link in the description you can get to the external site and even read their laughable DMCA notice which is as follows:
“It should be noted that is a simple search engine of videos available at a wide variety of third party websites.
Any videos shown on third party websites are the responsibility of those sites and not . We have no knowledge of whether content shown on third party websites is or is not authorized by the content owner as that is a matter between the host site and the content owner. does not host any content on its servers or network.”
Ah, Safe Harbor in action. Hey startups, here’s how to maximize its use:
1. We’re just simply a search engine/web platform. Check
2. We have no responsibility for infringing material of others. Check
3. Hosted in a foreign country. Bonus Check
 
Good luck suing us!
Half-assed English legalese, with most of its traffic coming from the US, no information on the domain registrant. Seems legit.
Am I Right? Am I Wrong?
Irony of ironies, now YouTube stars, who often found themselves at the other end of a music takedown (for improperly using music) and decried the heavy handed tactics used against them (we’re giving you free promotion!), have now found themselves in their own piracy hell. Via a practice known as “freebooting,” they are now finding their works essentially stolen and reposted on other platforms that either make the infringer money or simply are diluting the value of the views these stars need to keep their fledgling stars shining. One “victim” of this is Grant Thompson, of the YouTube channel, The King of Random. Grant sometimes repurposes ideas he finds around the web into videos which may include Creative Commons music, that he then monetizes. He’s understandably frustrated (careful not to drink any beverages while reading this):
“The worst thing is just the shock of how viral they go on Facebook compared to the ones I post on YouTube,” Thompson said of his videos. “Some of these videos I’ve been working on for years. It makes me wonder why I want to keep doing this.”
Guys…can you imagine? What must that be like, I wonder, slaving on something for years, only to have it stolen and enjoyed for free again and again? Somebody should do something. Anyone?
Hank Green, a self-described Internetainerpreneur (seriously?), recently wrote a piece on the seriousness of freebooting and how Facebook is essentially a liar. Again, you might want to take precautions to avoid a spit take.
“I’m a professional YouTube creator. Some people think that this is some kind of joke but I have 30 employees. All of them work in the online video industry, about half of them work directly on producing videos for our educational YouTube channels. We’re a small, profitable business.”
 
Re: Facebook “But there are a few things that make me wary, not of their ability to grow my business, but of whether they give a shit about creators, which is actually pretty important to me.“
and my favorite:
“What to do? Well, the lack of searchability on Facebook makes it impossible for creators to discover when their content is being freebooted, so if you see suspect content, please reach out to the creator so they can take action. If you have any legal or technical solutions you think might work, please post those as responses to this. And above all, just know that this is an issue and share what you can with who you can. Facebook won’t hold itself accountable, but maybe they will if we make them.“
Citizens, can you please help them? We need to make Facebook accountable for the seriousness that is freebooting. Theft of intellectual property is a big deal and….god I just can’t believe the fucking balls of these guys! Is this really happening, YouTubers complaining their content is being stolen after all the shit they gave music rights owners for trying to enforce the exact same rules? Don’t worry about these guys though, they’ve got over 6,000 patrons on Patreon paying a total of $31k a month. They’ll manage.
And yeah…it’s the same guy who said about using a Calvin Harris song illegally in his video:
“this was a blatant violation of copyright, I just stole it, but somehow, that’s okay”
Do you find this delivery charming or smug?
His explanation in August 2014 is essentially that it is okay to take something…wait, let me just use his word…it is okay to steal something, as long as there is some monetization engine in place in which the rights owner can get paid. Now things like asking permission or paying for an actual sync license or just using music that is in the Creative Commons, is for idiots, because stealing is okay when it is your stuff (music artists), but when it is my stuff (YouTube star):

But most creators have responded, thus far, the same way as me. By shrugging our shoulders and saying “What am I gonna do about it…it’s Facebook, they’re massive.”

But that’s exactly what makes it so awful.

This all sounds so very familiar. Where have I heard this argument before?
Regarding their freebooting issue…aren’t freebooters in fact just giving them free promotion?
 
¯\_(ツ)_/¯
This Is Not My Beautiful House
Paraphrasing the late great Bill Hicks who once said if you advertised a product you are off the artistic roll call forever, these days you don’t have the luxury anymore of not being a shill for a product. For example, if your music illegally appears on a Hank Green Internetainerpreneur Educational video about how artists can go fuck themselves, perhaps you have to accept that Nespresso will Awaken Your Senses. Yes, artists have simply become products, exploited to sell other products. I’m pretty sure when Bob Dylan was singing “If your time to you, is worth savin’” he clearly was speaking about the importance of keeping my Mac clean with CleanMyMac 3 (the current ad I see on YouTube). The times really are a changin. You know what’s blowin in the wind?  These nifty 3D T-Shirts by Clothing Monster. George Harrison’s Guitar may be gently weeping, but you don’t have to cry if you switch over to Gmail.
Sadly, YouTube has turned even Bill Hicks into a pitch man for a sugary food marketed towards children. If you know his work, this is the irony of ironies.
Voila Capture2015 08 04 07 30 44 AM
I remember an age where we actually lost respect for any artist who was associated with a brand. Now I’m happy to see them able to make any money at all, even if it requires ads loading around their art or them pitching some product. However, I recently began employing ad blocking because my computer is often choking on the resources required to load even a single web page. Seriously, should it require 30+ calls to third party ad trackers and 3GB of RAM to read an article? And the tech industries answer to the upcoming ad blocking explosion of doom (you remember ads, the things musicians now make money from) is that they believe the problem is that they just aren’t creating enough ads people want to see.
Um…yeah…right, that’s the reason.
Should you worry about this?

PageFair, a company that works with publishers to measure the cost of ad blocking and to help them display less intrusive advertising that can be whitelisted by the ad blockers, estimates that Google lost out on $6.6 billion in global revenue to ad blockers last year.

To put that into context, that’s 10% of the total revenue Google reported in 2014.

and

Spending on digital video advertising increased almost 60 percent in 2014 from the previous year. During the same period, the number of Internet users using ad blockers rose from 54 million to 121 million. Today, almost 150 million people have downloaded ad-blocking software

I mean why should you worry, it is only $6B of what might also be your money that was “lost”. 
BTW, while listening to the entire Imogen Heap album, “Sparks,” on YouTube, how about cooking up a batch of Uncle Ben’s rice for dinner? Or how about buying a new Chromecast device from Google, for just £30? Courtesy of an unauthorized upload of Zoe Keating’s song Frozen Angels. Yes, Google is happy to promote its own products on infringing content, from a woman they tried to bully into accepting their “take it or leave it” terms. That’s some fucking hubris right there.
It is likely (judging by YouTube’s own released statistics) that the majority of infringing use on YouTube goes completely unmonetized (between low volume video views and ad blocking). And while music has found a way to carve out some form of payment through ad sharing, other rights owners have been caught with no options for monetization at all. If you are a professional photographer, illustrator, or digital artist, and any of your work is somewhere online, it could be found on some video on YouTube, yet how would you in fact know? Sorry, there’s no ContentID for you. I have easily found videos with upwards of a hundred copyright violations (in just 4 minutes of video), with no remuneration for visual artists. So while the music industry might have found a way to monetize improper use of music online (through audio fingerprinting), many other digital artist whose work appears in those videos, get nothing. Is this not a class action lawsuit waiting to happen? Hello, photographers? Deep pockets over there.
And while everyone knows what I’ve outlined above, all of that pales in comparison to what’s coming very soon, which we’ll explore in more detail in part two of this piece.
Where Does That Highway Go To? 
In a 2013 Billboard interview with Universal Music head Lucian Grainge, he was asked about power, and part of his response was:
“Power is the ability to stop new services. Power is the ability to create new services. That’s power.”
While I get the larger point put forward by Mr. Grainge (and we certainly need a tough stance), the problem when it comes to the music industry is the belief that what you have is more valuable than what the other side has. While that might have seemed the case many years ago, if you were to ask people today if they had a choice to give up social media or music, would you really want to know their answer?
Snapchat alone has taught the coming generation that the ephemeral is more important than the past. So what’s the value of deep catalogue? What is more important than the “now”? Snapchat was even able to bypass negotiating with the music industry for music use by simply enabling music recording in snaps via using the speaker and microphone of a smartphone. I mean it is only 10 seconds of your song, so that has like…no value, right? No records, no auditing, no rights, no royalties, no evidence. Hey…it’s Safe Harbor…what are you gonna do about it? Plus, everything on their platform is deleted after 24 hours. How could Snapchat possibly know what people are doing on their platform, because um, privacy!
This idea of “power” is fleeting, because we have entered into a waiting game. Tech has the capital and resources to wait out creative industries, while they build alternate ways to create and deliver media. Tech is beginning to get heavily invested in not simply delivering media, but generating it, monetizing it, and even collecting royalties on it. So ask yourselves…in 5-10 years, what do they need any of you for?
They’ll build their own catalogues.
They will acquire new talent, and when you sign, you will fund your projects via their platforms, create media with their tools and in their studios, then release it with their tools. You will promote it with their tools, “sell/distribute” it with their tools, you’ll even tour using their tools – via their self driving cars, staying in their Air BnB’s. You’ll pay them at every turn for this process and then start all over again. Is this the vibrant creative class we really want to see? Is this freedom? Well look around you, it is happening….right now.
Once In A Lifetime
Are you angry yet? Frustrated? Motivated? You should be.
I wrote the above as a precursor to a second piece. This serves as a framework whereby I want to illustrate what has been happening so I could talk about what is about to happen. I want to delve deeper into actual technologies that will have a profound effect on the livelihood of creators. For the past two years I’ve been warning people in the creative industries of upcoming developments that make these issues of the past look like tinker toys. With all of the efforts put into strengthening copyright laws or protections for rights owners, none of what is currently proposed will do any good whatsoever, unless we find a way to strike a balance between creative and tech, and that means creative needs to start pulling together.
What is needed is a new approach that does not solely rely on solutions provided through legal means. No, what has to happen is that the creative industries need to start building their own technology that belongs to them and serves their greater good and that the tech industry has to use. The politics have got to stop. Majors vs indies, it’s a battle they want you to be fighting, because out of left field will come disruption. Yet working together to solve many of the issues and problems facing creators is no longer something we can just pay lip service to, it is a moral imperative.
Technology doesn’t care about borders, regions, laws, rules, or fairness. It cares about results…and it is time the creative industries started delivering some.
David Byrne once said about the song Once In A Lifetime:
“We’re largely unconscious,” Byrne says. “You know, we operate half awake or on autopilot and end up, whatever, with a house and family and job and everything else, and we haven’t really stopped to ask ourselves, ‘How did I get here?‘ “
More importantly, the question to answer now is, where are we going?
 
 
Alan Graham is the co-founder of OCL
by agraham999

Internet Exploitation, Not Just a Problem For Artists | Nick Lewis

Guest Post by Nick Lewis (Copyright in the Author)

Nick Lewis is a mastering engineer from Brighton, UK. Visit his website at www.brightonmastering.co.uk

Most talk about the exploitative internet is focused on artists. But they’re just the headline. Artists may be the front-line, the visible face, but the effects go much deeper.

Artists being paid less due to piracy, pay-what-you-like and advertising funded models has a direct effect on entire subsections of the economy. And these sectors serve as omens for the future of increasingly information-based economies like the UK.

The trickle-down effect

Think about everything that goes into making and releasing a record. Recording engineers, mixing engineers, mastering engineers, mixing desks, outboard, microphones, speakers, software, computers, pressing plants, their staff and equipment, blank stock manufacturers, distributors, warehouses, vans, drivers, PR agencies – the list goes on.

No one gets paid if no one buys the record.

I can’t count the number of times artists have promised to send a single/EP/album to me for mastering by a certain date only for that date to slip because they can’t get the money together. Very often it never materialises: they’ve given up and either forgone mastering, tried to do it themselves or got their hobbyist mate to do it. This isn’t good for me or the band.

The same goes for mixing. Probably 90% of everything I work on has been mixed by the artist themselves. And I’ll tell you something – you can immediately tell when something has come from a proper studio mixed by a proper mixing engineer. It’s night and day. Sure, sometimes it’s a conscious choice on the part of the band, but most of the time they just can’t afford to mix in a proper studio.

The fewer working studios there are, the less money spent on high-end equipment and the fewer techs can afford to keep working. You see where this is going.

Loss of expertise

 This isn’t just bad for people losing money. Less money means less investment which means lower quality. Fewer people can afford to make a living doing the things that make a difference to how a record sounds (for example).

Yes you can make a record on a laptop. But it won’t come close to Abbey Road. This is about time with experts where artists can concentrate on their art and not worry about anything else. This is about a level of technical knowledge, let alone appropriate acoustic spaces.

People can’t afford to take on apprentices like they used to. A lot of the top mixing and mastering engineers now work from private facilities at home. Eventually all these people will retire and their skills will go with them. The people that replace them will never have learnt from them, and very likely never had the money to invest in the same quality of equipment.

Soft skills are already suffering because there’s not enough money in it. People have to get day jobs and pursue them as a hobby or not at all. That means a lower quality end product.

Beyond music

 This isn’t just about music. It’s not even just about creative enterprises. The downward trajectory of price to zero will eventually affect anything transmittable in binary. Data, software: anything that can be distributed with a computer.

For countries like mine, the UK, which is increasingly moving towards an information based economy, where manufacturing is taking a backseat and media and services dominate – this can only spell disaster. When competition from open source projects, piracy and vastly under-priced international alternatives hits everything from financial services to software development we will have nothing left to sell.

Free market fallacy

The internet has provided the mechanism for the biggest, fastest, unregulated free market the world has ever seen. And its sheer size is exposing the flaws in the system.

The free market theory is that competition will drive price down, which is good for the consumer. Adam Smith couldn’t possibly have predicted what would happen in the face of intangible, easily copyable assets and hyper-globalisation. The trend towards zero is not good for the consumer in the long-term as the quality of product degrades or disappears altogether along with the skills and supportive infrastructure that go into it.

A sustainable internet isn’t just about ensuring musicians and artists get paid fairly for their work, it’s about protecting our economies. Further, it’s about choosing what kind of a world we want to live in.

The French (among others) have a fixed book price agreement, recently extended to include e-books, to protect their publishing industry. The net effect is 2,500+ book shops in France, while the UK sector, left to laissez faire, dwindles. This is a direct expression of the value placed on literature in France – both in itself and as an economic sector. It’s also an example of the kind of measure we need to fight for online. As musicians queue up to descry the new business models of the digital economy, it’s clear the ‘invisible hand’ isn’t working for artists, listeners or the jobs and skills that depend on both.

This isn’t just about art. Art is just the beginning. This is about restoring the link between price and value in an information economy.

by trichordist

Mullets, Platform Shoes, Mack Daddies and Public Knowledge

Written by Chris Castle

“[W]hen it comes to the internet, there’s always someone in the middle, especially when it comes to handling the money.” Wired Magazine

Call me cynical, but I always keep an eye on Friday afternoon press releases–Friday afternoons are the great graveyard of bad news.

Google announced on August 10 (Friday) that they are doing something I understand they have been doing increasingly over the last few months: Pushing sites down in search results if Google gets a lot of takedown notices for those sites.  (This is a version of what Google promised to content licensors for Google Video–and of course no one believed them like you don’t believe a street drunk that they’re really going to buy food with your $5.)

Remember–Google has announced in its rather untransparent Transparency Report that it gets millions–millions–of takedown notices annually.  A Google lobbyist told the House Judiciary Committee that Google had “processed” five million DMCA notices as of November 2011 and had “processed” over three million in 2010.  (As usual, Google doesn’t use a good verb like “received” instead of the ambiguous “processed”.)

That five million number seems to have taken a big jump, and I doubt it suddenly happened in the last 10 months.  According to the Wall Street Journal, “The company on Friday said it is now receiving more than a million copyright notices related to its search engine per week.”  (When exactly is “now”? Before or after Google’s testimony to the Congress?)

That is on track for over 50 million notices a year for search alone.

Understand this–it is highly likely that every notice Google received was for a link on a page for which Google served–or profited from–at least one ad.  It’s also likely that those ads were from brands to which Google had promised that it would not serve ads on sites with infringing content.  And guess what happens when Google charges an advertiser for serving an ad in violation of its contract with an advertiser.

It’s called a rebate.

If even half of the notices for which Google has received a DMCA notice–bearing in mind that is a US-based remedy–also have advertising served by Google, then Google may well be on the hook for rebates for millions upon millions of ads for years and years and years.  You would never have thought about this rebate exposure if you relied on Google’s investor disclosures.  If Google stockholders want to blame anyone, they should take a close look at whoever did the legal analysis on setting up the Google advertising platform in the first place.  (Hint: He now works at Spotify.)

I would suggest that what is happening is the beginning of something along the lines of the market solution I have advocated  for a long time–a site-based rating system based on the raw number of DMCA notices received.  This would be along the lines of the restaurant rating system that LA County has in place and would provide a useful feedback to the Congress as well as consumers.  Disclose the information to the market and see what happens.  (Of course, Google doesn’t count DMCA notices sent to YouTube or the Blogger cesspools–but that’s another story addressed by Searchengineland.)

Actually giving effect to such a system would be a step toward ending the advertising supported organized crime that is a large part of the “hybrid economy” on the Internet.  Assuming Google really does what they say they will, this announcement may signal the beginning of the end of this dark fashion.

Not surprisingly, we see this press release from Public Knowledge:

For Immediate Release August 10, 2012

Public Knoweldge [sic] Raises Concerns About Changes to Google Search Algorithm

The following statement may be attributed to John Bergmayer, Senior Staff Attorney:

“It may make good business sense for Google to take extraordinary steps, far beyond what the law requires, to help the media companies it partners with.  That said, its plan to penalize sites that receive DMCA notices raises many questions.

“Sites may not know about, or have the ability to easily challenge, notices sent to Google.  And Google has set up a system that may be abused by bad faith actors who want to suppress their rivals and competitors.  Sites that host a lot of content, or are very popular, may receive a disproportionate number of notices (which are mere accusations of infringement) without being disproportionately infringing.  And user-generated content sites could be harmed by this change, even though the DMCA was structured to protect them.

“Google needs to make sure this change does not harm Internet users or the Internet ecosystem.”

This might be a faintly interesting comment except for one thing: it’s not.  According to Politico’s reporting:

Google said Friday it has received more than 4.3 million copyright removal requests in the past month — about 97 percent of which are valid. Many of the domains that are targets of the most requests are file-sharing and torrent sites. (emphasis mine)

It’s not surprising that Public Knowledge doesn’t get it.  Companies are increasingly aware that their valuable brands are being trashed by association with all manner of sketchy or outright illegal sites with advertising for illegal drugs, human trafficking, financial products and–yes, copyright infringement, but not just copyright infringement.  This at the same time as Google is trying to get into the mainstream entertainment business with Google Fiber and its various other products.

When fashion turns, it leaves all those people with mullets, platform shoes and superwide ties in the lurch.  A closet full of crap and a brain full of mush, weird hair and no dates.

It’s the economics, stupid.  Who in their right mind could imagine that the world could continue to look this way?  Who would really think that many, many artists and media companies have anything but public and private contempt of the first order for Google?  An ontological level of distrust?

And who would really think that the brands that also court relationships with top athletes, musicians, artists and actors would continue to get ripped off by having their advertising served on millions of unsavory sites.  And guess what–when a big brand picks up the phone, they don’t want to hear about how Google is trying to bust another union or wants every link on every page to be adjudicated an infringer before they take action while reposting disabled links in near real time in the cesspool regions of Blogger.  Google’s excuses have nothing to do with the brands.  If brands don’t want their ads on site X, then the ads won’t go on site X.  End of discussion.  And Internet users will be the better for it.  Unless they’re trying to buy a bride or score some oxy.

And I have to believe that Attorney Bergmayer knows this.  He surely can’t be that sheltered.

Time for a haircut and spring cleaning.

Google offers the Mack Daddy special.
(A version of this post previously appeared on the Music Tech Policy blog)
by Chris Castle