Are Moves By FCC Chief Ajit Pai on Net Neutrality Good for Copyright Holders?

FCC Chairman Ajit Pai proposes rick rolling back FCC regulation, and this may be good for copyright holders.

A few years ago I was one of a number of artists that signed onto a petition to strengthen net neutrality. You have to understand why an independent musician, songwriter and label owner like myself might see this as important. There is a long history of “paid prioritization” in the music business. Radio payola being the most obvious. But back in the 80’s and 90’s there were all sorts of payola type fees. Even independent record stores (think High Fidelity) demanded fees and free goods for in store play and end racking. It was all a shakedown that favored the incumbent players and discriminated against startup labels.

So to my indie musician brain, net neutrality seemed akin to earlier anti-payola and anti-bribery prohibitions. Sure, in the end it was probably unenforceable but at least it was a gesture towards fairness. And looked at in another way, how was this any different then the public exchanges for equities? Aren’t public exchanges designed to treat each trade the same? Not prioritize some over others? Didn’t this guarantee a flat and fair “market” for each packet of music?

At the time a couple of friends warned me that I would come to regret this. That somehow net neutrality was simply a trojan horse for the FCC to not just regulate the ISPs but also the content creators and copyright holders. As it turned out I should have listened to my friends.

Ironically the true dimensions and implications of the net neutrality debate have been manifested in the hypocritical protestations of the defenders of Title ll in response to FCC Chairman Pai’s proposal to reverse Title ll’s application to net neutrality. First you have to understand that despite all the hyperventilating (and RickRolling) by groups like freepress.net, the FCC is not rolling back net neutrality. Instead it is handing back authority to the FTC. We DID have net neutrality before it was regulated by the FCC. Going back to the FTC does not mean it’s going away. It’s just the FCCs rather extraordinary power will not be hanging like Damocles sword over copyright holders as they negotiate with companies like Google and Amazon.  As songwriters will tell you repeated intervention in music licensing by the DOJ (through the outdated 70 year old consent decrees) has radically depressed songwriter public performance royalties.  Do we really want the FCC intervening in film, tv and cable in the same way?  Songwriters are the last in line to get paid, and we always seem to suffer the most when there is agency capture.

Moreover, it has become increasingly clear that Title ll net neutrality is primarily a fight between corporate giants trying to secure negotiating leverage about who has to pay for what, with over the top providers (Google/Amazon) trying to decrease the costs for reaching their users.

More fundamentally, Title ll net neutrality is a form of internet exceptionalism under which the internet would operate under non-market rules. But why does this make sense? The internet may have started as a vehicle for the sharing of ideas, but today it is also the backbone of the global economy. Property rights encourage investment. We risk undermining the vitality of the global economy if we introduce (or in some cases, maintain) significant encroachments into the operation of market economies. The FTC can, and should, guard against anti-competitive practices by internet giants, whether they are ISP’s, or edge providers (Google, Facebook, Amazon etc). But we should not take actions based on some perception that the internet has upended the reason for encouraging market, rules-based, commerce.

We have already been down this path with the FCC with respect to set-top boxes. In 2016 the FCC under the guise of “opening up” set top box competition came up with its AllVid proposal for cable TV. The problem was that it wasn’t really about “unlocking the set top box” it was really about unlocking copyright holders content and giving Google, Amazon and other technology companies access to the content without having to go through the hassle of getting licenses. Maria Pallante then the US Register of Copyrights warned the new rules “could interfere with copyright owners’ right to license their works … and restrict their ability to impose reasonable conditions on the use of those works.”

Luckily, FCC Chairman Pai has scuttled this proposal, but given the near miss that copyright holders had with the FCC on the AllVid proposal, it probably a good thing for all copyright holders that he has proposed to eliminate Title ll net neutrality in favor of restoring authority to the FTC to address anti-competitive practices. To my fellow musicians and songwriters, I know some of you feel differently, and are drawn to the idea of limiting the capacity of perceived gatekeepers to skew fair and open access. I share that concern. But Title ll is the wrong remedy. There are a broad range of potential gatekeepers, but there is one company that undoubtedly has the greatest influence on what is relevant and irrelevant on the internet, and they support Title ll.  That would be Google.  Doesn’t this tell you something? At a minimum, it is not the David v. Goliath battle that Title ll defenders would have you believe.

I’m sure that some of you will disagree.  Flame and troll away.  I am on tour in Spain and will be off the grid for a while, don’t get your feelings hurt if I don’t respond.

 

The Politics of Librarians

Castle makes an excellent point here. The entire Google/Soros funded anti-copyright astroturf industrial complex is dead. Did they overplay their hand? Sure, the orchestrated attacks on the Register of Copyrights by groups like Public Knowledge and FreePress.net followed by her apparent unlawful constructive termination by the newly appointed Librarian of Congress (herself a former Open Society Foundation board member) would suggest they did overplay a bit. But ultimately I think Castle is right. The main reason that they lost is that there is a sea change on Capitol Hill: No one is afraid of Google and their pathetic astroturf groups anymore.

MUSIC • TECHNOLOGY • POLICY

The lopsided vote this week on HR 1695 (the Register of Copyrights Selection and Accountability Act) this week invites an explanation (378-48).  Some people were surprised by just how few votes the opposition got but the spread in our office pool was at least 300 voting “yes”.  Why?

You hear different explanations for this such as Republicans like property rights so they want strong copyright laws and the Democrats like Hollywood, so naturally they’d all support an independent Register of Copyrights.  Neither stereotype is universally true, obviously–House Minority Leader Pelosi voted against the bill.  The more interesting stereotype is the one about Republicans.

While it may be a transitive aspiration (“Republicans like strong property rights so they ought to like copyright”), it is simply not true that all Republicans like strong copyrights no matter how they feel about property rights in general, particularly the Republicans who work at think tanks…

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Content Creators Coalition Responds To Rep. Zoe Lofgren’s Attack on Goodlatte and Conyers

This may seem down in the weeds, but it’s worth the read. Basically Rep Zoe Lofgren the congresswoman from Silicon Valley, tried to suggest that race/gender is playing a role in efforts to split the Copyright Office from the Library of Congress. Dr Carla Hayden the Librarian is black.

However this has prompted a sharp response from the Content Creators Coalition to the Congressional Black Caucus:

“As artists of color, we find it deeply offensive that opponents of this bill have attempted to recast their anti-creators’ rights goals into a smear campaign against its sponsors and supporters, insinuating that the legislation is about the race and gender of the current Librarian of Congress. ”

Read more below.

MUSIC • TECHNOLOGY • POLICY

[Cross posted from Artist Rights Watch]

I want to call your attention to a letter by members of the Content Creators Coalition regarding the Copyright Office.  First, a little context.

In case you missed it, Rep. Zoe Lofgren (D-Google) has been on a tear to oppose a bill in the House of Representatives (HR 1695) to both widen the pool of potential candidates to head the Copyright Office (called the “Register of Copyrights” for historical reasons) and elevate the office to a presidential appointment like the head of the Patent & Trademark Office.  (By the way, support HR 1695 by signing the CreativeFuture petition if you haven’t already.)

The bipartisan bill, authored by Chairman Bob Goodlatte and Ranking Member John Conyers and passed by the House Judiciary Committee 27-1 by its very nature increases the level of transparency in the appointment of the Register of Copyrights and maintains…

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#irespectmusic and #savesoho Join Forces in London, Tuesday, April 18!

This is fantastic. Blake Morgan #IRespectMusic and Tim Arnold Founder of #SaveSoho join forces in Soho (London) for panel hosted by BBC 6’s Matt Everitt.

MUSIC • TECHNOLOGY • POLICY

IRM London

BBC 6 Music’s Matt Everitt hosts this very special event.

The Save Soho pop-up venue returns to The Union Club for a special meeting bewteen two artists, both well known for their activism in the music sector. Blake Morgan, from New York – founder of #IRespectMusic and Tim Arnold from London – founder of Save Soho.

This will be a chance to hear both artists perform as well as hear each of them discuss their passion for protecting the rights and freedoms of the creative communities in the UK and the U.S with their campaigns.

The Reservation continues the Soho tradition to support emerging artists.. For this event we are delighted to welcome singer Sara Strudwick in her debut London show.

Make your reservation now….

http://www.seetickets.com/event/save-soho-the-reservation/the-union-club/1064413

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What Would Asset Bubble Theorist Hyman Minsky Say About Spotify’s Unique IPO Plans?

 

The Wall Street Journal is reporting that Spotify is taking a unique approach towards a potential IPO:

“Spotify is seriously considering a direct listing, in which the company would simply register its shares on a public exchange and let them trade freely, according to people familiar with the matter. The company wouldn’t raise any new money or use underwriters to place new blocks of stock.

That would mark a departure from the typical IPO, in which new investors buy shares from the company or its early investors, or both, the night before they start trading. The initial price is set by underwriters following extensive meetings with potential new investors.”

While this will save the company underwriting fees and on the surface it appears “cooler” and more innovative matching the young company’s style,  it also raises some serious questions.

First and foremost the article states clearly “In direct listings, early investors would be subject to less stringent lockups governing the sale of insiders’ shares.”  In typical IPOs most insiders can’t sell their shares for 90 days or more.   This prevents unscrupulous companies from dumping their shares to unsophisticated investors before problems with the company become apparent to outsiders.

Second, while the underwriting system may often give an unfair advantage to institutional investors,  it also helps everyday investors by vetting the company (at least in theory).   Banks and other financial experts examine the financials of the company before they agree to buy large blocks of shares.  This is something retail investors can’t do.  For instance, analysts working for institutional investors might evaluate: the effect that the convertible debt (a fairly nasty way of borrowing money) has on the long term price of the shares; risks associated with contingent liabilities (lawsuits, patent infringement claims or tax penalties);  content licensing agreements with the large multinational labels; tax penalties; and the EXACT number of paid subscribers and how those subscribers are counted.

What happens with these rare direct listings is that the financials of  a company and associated risk are not likely to be evaluated by third parties, or if they are, not with the same level of scrutiny.  Sure Spotify will have to disclose all financials as well as financial risks, but it’s unlikely that ordinary retail investor will read these disclosures.  So it seems fair to say that some significant portion of the public buying the stock will be unsophisticated investors.  This is likely to exacerbate  “information asymmetry” between retail investors and insiders.   It’s a recipe for trouble.

So what does this have to do with the late Washington University economist Hyman Minsky? Minsky is known for his theories about the unavoidable tendency for markets to develop bubbles (specifically debt bubbles) and become unstable.   Indeed the collapse of debt markets and subsequent collapse of asset bubbles is sometimes referred to as a “Minsky Moment.”  The question as to whether financial bubbles can be predicted has long vexed economists and been a serious topic of debate for decades.  Minksy made a stab at identifying irrationally priced debt supporting asset bubbles before they collapsed.  His theories are unique in that instead of looking at the underlying assets themselves he looked at the participants in the market and the market structure.  For instance in the case of debt he identified three kinds of borrowers. When those three kinds of borrows are present and active in the market you may have a bubble.  From wikipedia:

Minsky argued that a key mechanism that pushes an economy towards a crisis is the accumulation of debt by the non-government sector. He identified three types of borrowers that contribute to the accumulation of insolvent debt: hedge borrowers, speculative borrowers, and Ponzi borrowers.

This is all very technical and it requires complex explanation to directly apply this theory to the Spotify non-IPO situation, and ponder the true value of Spotify stock.   Fortunately professional traders have provided us with a much simpler (and vulgar) heuristic, informally known as “The 3 I s”  Innovators, Imitators and Idiots.    The idea is that a stock is first favored by the innovators;  then sophisticated imitators follow them into the trade, and then finally unsophisticated investors who have no business investing in risky stocks pile into the trade.   Proponents of this heuristic argue that as soon as the third set of investors (idiots) start buying you should start selling, because the stock is overpriced.  It’s really the same idea that Minsky put forward. It’s just applied directly to the stock rather than the underlying debt. 

Honestly, I bet a lot of people don’t buy the explanation for the “non-IPO” that has been put forward by the unidentified sources in the WSJ.   I certainly don’t think it makes sense.  Something else is going on here.
Regardless, insiders and current shareholders (including major labels) should be asking themselves “is this really just a not-so-clever way to sell shares to the idiots?”  Dark thoughts yes, but you can never be too careful.   I mean what happens if this whole thing blows up?  Is someone with a badge gonna come around asking “what did you know and when?”

 

 

 

 

Is Google Violating US Treasury Department Terror Fundraising Sanctions?

Google and the slippery slope of advertising on rogue sites:  It may have started with “a little” funding of organized copyright infringement but it’s gonna end with investigations into violations of terror funding laws.  There is no other way around it.  This time governments can not turn a blind eye to Google misdeeds.  

As many of the readers of the Trichordist are aware, we have spent the last 5 years chronicling how the Google advertising ecosystem funds the for profit music and film piracy business.  Along the way we discovered that Google advertising appeared to be supporting all kinds of other illegal activities.  The biggest problem for Google so far was the “Canadian Pharmacy”criminal drug investigation. These so-called “Canadian Pharmacies” are not necessarily in Canada nor are they legitimate pharmacies.  They are sophisticated professional drug trafficking operations.  That’s why it was a criminal not civil investigation conducted by a US attorney.   Google was caught red handed advertising these “Canadian Pharmacies” and paid a $500,000,000 fine to settle the matter.   That’s right 1/2 a billion dollars.  But IMHO someone should have gone to jail. . Prosecutors routinely prosecute the drug dealer’s accountants and bankers, why should advertising company executives be treated any differently?

Last week the Times of London reported that Google was slinging advertising onto terror affiliated YouTube channels.  We noted last night that Google was advertising its own products on a YouTube video channel that seemed to be operated by Hezbollah or a group that supports Hezbollah. The Register in the UK verified our story and asked Google if funds were going to the operators of this channel.  Google did not reply but the YouTube channel disappeared within the hour.

  The important thing to understand is that with pre-roll video advertising there is often some kind of revenue share agreement between the operators of the video channel and Google.  The Times of London  reports “The practice is likely to generate tens of thousands of pounds a month for extremists.”

So did Google pay money to the operators of these YouTube channels?  Yes or No?  The anti-terror treasury sanctions are complex.  But this seems to be exactly the sort of case for which they were designed. Certainly the UK’s Solicitor General warned that Google could face criminal probe:

‘There is an offence of recklessly disseminating this material, and the criminal law is there is a clear boundary beyond which they should not stray.

‘I think the legislation is clear. It is my hope and expectation that these organisations will indeed come to heel and obey the law but the law is there if necessary.’

Even without the money, isn’t hosting a channel that distributes propaganda for ISIS, Hezbollah or other terrorist groups  material support for those groups?  Google should be investigated.

Timely Reprint: Do You Want Your Music Alongside Hate Rock Songs? Artist Face YouTube Music Dilemma

I light of the Google/YouTube boycott by brands whose ads have appeared next to hate speech.  We thought we’d reprint this piece from November 2014!!

Forget exploitative pay from Spotify! Do you want your music on YouTube Music? Will you be alongside Hate rock songs? Jihadi Recruitment Music Videos? Probably.  YouTube is full of this vile stuff.  And we let our kids watch YouTube?  Why do artist work such an amoral company?  Should artists ask their labels to pull videos from YouTube.  Or will we be complicit?

Walmart, Pepsi, Coca Cola, Procter and Gamble and GM Are All Now Boycotting Google Over Extremist Videos

The Wall Street Journal is now reporting that Walmart, Pepsi and GM have joined the Google advertising boycott over extremist videos and hate speech.

See story:

https://www.wsj.com/articles/googles-youtube-has-continued-showing-brands-ads-with-racist-and-other-objectionable-videos-1490380551

 

Following the Money: Solutions for Google’s Problems with Defrauded Advertisers

Music Tech Solutions makes a good point. Where does the money go? And shouldn’t the advertisers be entitled to a full refund? And what about the shadowy groups that distribute this content? What sort of laws are violated going into business with these groups?

Music Tech Solutions

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

From Long, Long Time written by Guy Forsyth

Google’s UK Policy Manager Theo Bertram advised in 2012–“Follow the Money to Fight Online Piracy“.  Google’s copyright lawyer Katherine Oyama endorsed this approach on behalf of Google before the U.S. Congress in 2011 (“We would publicly support legislation like what I described, the follow the money approach…”).

Several UK banks and other advertisers are now doing just that according to the London Times (“Banks pull Google ads in row over hate videos“):

Three of Britain’s biggest banks have pulled advertising from Google after their marketing appeared alongside extremist YouTube videos.

HSBC, Lloyds and Royal Bank of Scotland acted over fears that chunks of their advertising budgets have in­advertently ended up in the pockets of banned hate preachers and anti-semites. The lenders join a growing…

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