Record Labels! Beware of Fake Independence!

Giant corporate groups are a fairly recent development in the music industry. The most extraordinary and wonderful music has always been produced outside the city walls by innovative and committed independent record labels.

Around 40% of recorded music industry value is created by independent record labels, but 65% of that independent music is captured by major label owned distributors. Only 14% is truly independent all the way through the supply chain.

This is not really so surprising. Scale is very important, and bigger platforms can provide global coordination between digital and physical products that is not available to the flock of indie distributors. That is an active choice and is fair enough. Much music migrates into major label systems by default though, and much is there despite the preferences of the indie labels.

How does it get there? Some labels see themselves as incubators of talent, intending to pass successful artists up to the layers above for a price, and for them the relationship with a major label is valuable. Many labels get bought, or do a deal for financial support which locks them in.

Probably the biggest factor is that many distributors start independent, but either run out of cash or have investors who want to get a return on their money. The Orchard, for example, started out as a beacon for independence, took investors’ money, and sold out to Sony Music. On its way it took other potential icons with it into the corporate belly, a migration taken by IODA, IRIS, DRA, Essential, and others. Feeding the beast seems to be a Sisyphean task. It’s not just Sony; the other global music behemoths are just as hungry.

Here’s what this looks like from a drone:

If music distribution was as simple and transparent as it should be these major label owned, pretend independent distributors would be a great adornment to the commonwealth. For many reasons they are a blight. Here’s why

One: Stealing by stealth from the famous black box

Fake indie distributors provide a very easy way to funnel unattributable revenue – the famous ‘black box’ – into central corporate bank accounts. Other benefits too, such as delivery fees, deal fees, marketing and promotion opportunities – all these are essentially stolen and allocated to global priorities and corporate profits.

Two: Gatekeeping the label’s own metadata and music

Labels and artists have many reasons for wanting access to their metadata and files, from public performance to promotion and synch opportunities. Understandably the effort of preparing digital releases and data is not something they want to go through twice. Instead of sticking to their service ethos, some distributors (and not just the fake indies) forget where the value comes from and end up acting as a gatekeeper to a label’s own catalogue and assets, or worse, trying to herd them into rights admin deals instead of letting them collect directly where they can.

Three: Sitting on sales and analytics data

All distributors act as a conduit for sales and other analytical data. But beyond feeding some selected parts into a pretty dashboard, many don’t pass it through to the label, and so end up with more insight into the music and artists than the label is able to get for themselves.

A fair tradeoff?

These might by themselves be a fair tradeoff for the services and scale that bigger companies can offer in the marketplace, and the advantages of access to some major label deals might well balance out some leakage. But more recent developments are highlighting just how pernicious fake indy distribution can be for genuine indie labels.

So What’s New?

A major label buy out was always a reasonable exit for an indie label owner wanting a quieter life. That is how the majors ended up so big in the first place. But digital distribution has almost certainly accelerated this as new dependencies make that sell out happen sooner. And given the data asymmetry, the buyer now has much more information than the seller about what a catalogue is worth. So from being that indie beacon, The Orchard is now one of the biggest acquirers of catalogues and labels in the market, on behalf of its corporate master, Sony.

What this means is that with each acquisition there is more internal competition between owned catalogue and distributed catalogue, and you don’t need to be a genius to guess which will win.

And back to that data asymmetry, which sets up a very bad incentive for the distributor and its owner by giving insights into artist development way ahead of when a label might be thinking it’s time for an artist to move up to a bigger home. Anecdotally some distributed labels have already seen artists getting targeted by the corporate owner of their fake indie distributor. The fact that major labels are buying sales report processing companies, such as RoyaltyShare and Korrect, shows you how strategically valuable this data is.

Again this might be a fair and reasonable tradeoff for the scale, service, and access provided. But it might also be a toxic mixture of foreclosure and unfair competition. And if the latter what can be done about it?

Prevention is better than cure…

Starting with the basics, it helps to know who owns a distributor, and what their long term intentions might be. As a rule of thumb, the major labels are gatekeeping the more profitable revenue lines and trying to commoditise the rest, as well as ensuring as far as they can that there is less competition to sign the most promising new artists. Any distributor with venture capital or private equity funding – no matter how much they protest their indie credentials – will be looking to sell itself at some point, and will have given up to the financiers the right to decide who the buyer is.

Next, read the contract! Carefully!! It’s normal in many contracts where there are potential future conflicts of interest to include ‘change of control’ clauses in case you don’t like the new owners after a sale. But at the very least it helps to know what rights and privileges are changing hands before it becomes an issue, and what you can expect not to be provided as well as what is being offered. And any gotchas, like the right to use your sales data without your knowledge or permission.

And the practical steps. Keep your metadata and assets where you can use them without interference from your distributor. Those web based product uploaders might be convenient, but you can end up with no organised metadata at all about your releases and recordings. Store your sales and trends data too where you can use them yourself if you need to.

Of course the best defence against being packaged and sold is to remain independent, and only work with partners who value independence as much as you do.

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A Fair Way to Bridge the Value Gap

The music industry says that artists, labels, and songwriters are getting a raw deal from services that allow users to upload content. The beef is that user-uploaded songs, which may generate advertising revenue for the service and the uploader, compete directly with those same songs uploaded by the copyright owner. The difference in revenue between a user upload and a professionally supplied version is what the music industry means by the ‘value gap’.

And they don’t like it. As explained by record company trade body IFPI’s Frances Moore:

The value gap is about the gross mismatch between music being enjoyed by consumers and the revenues being returned to the music community.

Copyright terms and conditions always make the uploader responsible for any copyright permission or licences, but sometimes uploaders don’t have all the rights they need. If services remove the content promptly when asked they benefit from what is known as a ‘safe harbour’, and the copyright holder has no claim against them for infringement or loss of revenue.

So what does the music industry want? Frances Moore again:

The “safe harbour” regime designed for the early days of the internet should no longer be used to exempt user upload services that distribute music online from the normal conditions of music licensing. Labels should be able to operate in a fair functioning market place, not with one hand tied behind their back when they are negotiating licences for music.

Unusually for the music industry the IFPI position has managed to generate broad support among artists and indie labels, as well as songwriters and publishers. Over 1300 artists have now signed a letter to the EC President Juncker, which you can read online here:

The music industry is not calling for safe harbour to be abolished, rather that the qualification to benefit from it is drawn far more narrowly now that many platforms are less file hosting services and more media and advertising businesses. And the European campaign is mirrored by similar efforts in the US asking for changes to the DMCA safe harbour provisions.

The pushback has been quick and predictable, and based on the same set of positions that have been rehearsed over the last 20 years of internet history. Some feel that copyright should be abolished, and artists who can play live should make money only from from ticket and tee shirt sales. Some suspect the campaign is just the biggest artists and labels wanting to add even more millions to their already vast riches. Many think that the music industry should share out more equally what it already has first before seeking to get stronger rights. Some think that over-zealous labels and artists are harming other creators by issuing unfair take-down notices.

Legal sophisticates will recognise some important principles wrapped up in this debate. Citizens and consumers are clearly right to demand that an industry with unfair practices is not rewarded. And in a commercial environment in which only a tiny proportion of new work achieves a return on investment there is a balance to be found between the value of distribution and promotion to the creator, and the value of the content to the service. There are too a whole class of either inadvertent, incidental, and innocent infringements where the uploader has no intent to profit to the detriment of the musicians. The can be no possible justification for chilling such activities as saving something to read later, or sharing an extract or a link with a friend.

But does the music industry have a point at all? The disparity in the money the music industry gets for the same consumer experience is real enough. IFPI calculated wholesale subscription revenue per user at just under $30 per year for 2015, while advertising brought in about $0.72 per user per year, albeit from a much larger user base. The advertising rates on UGC are generally much lower than on professionally supplied content, so where YouTube and other services are being used as a music jukebox the hit to music industry revenue from this competition is very significant.

Internet advertising has its own set of issues quite apart from any music industry griping. We are learning that the cost of relying on advertising to support media generally is paid partly in greater intrusion into our private lives as trackers try to squeeze more value out of our daily traces mostly with nothing like informed consent. High quality journalism is expensive. It might be weakened even as more people have greater access to publishing platforms, with subsequent harm to political process and public life.

Chauncey Gardiner -

Chauncey Gardiner in ‘Being There’ -” I like to watch…”

But of course there is no way to know whether all that intrusion is really necessary, or whether there’s more money to be found. The services currently benefiting from safe harbour have every incentive to increase their own revenue. Other old copyright businesses that are moving to internet economics seem to be suffering similarly, so it might just be inherent in the way internet media economics works. For an entertaining rant about this here’s Professor Scott Galloway:

For me one of the ironies of the long standing conflict between copyright and internet businesses is that if copyright was a tech startup innovation it would be lauded as a thing of progressive genius. It would not be organised in national silos, nor looked after by people who refuse to cooperate with each other of course, but there’s no more natural way, in a world of infinite replication and trackability, to incentivise and reward creators. And that is what ad-supported UGC services do, through unique digital object ids, channels, and the massively complex world of consumer tracking and advertising markets.

There is a great deal both sides can do to show they are fit for purpose. The music industry should finally deliver on the promise of digital technology and make it easy for everyone to identify and pay the creators and owners of the music, just like YouTube does with its own creators. Services need to show they deserve a safe harbour by demonstrating respect for the rights and privileges of everyone, from fair dealing student to striving artist to privacy deserving citizen. I would like to see the value gap closed by giving songwriters and musicians more say in the deals that affect their livelihoods, and by demanding more transparency from services on what they do with all of our data.

(A version of this appeared on the ORG blog)

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Pricing Music Fans in the New Data Economy

In 2003 digital artist Angie Waller released a wonderful project she called ‘Data Mining the Amazon’. Asked about it by art community Rhizome Waller offered the following:

I was surprised that books about military battles and corporate takeovers pointed to the soothing CDs of Enya and Sarah Brightman.

Battle of Punta San Salvatore by Spinello
The Battle of Punta San Salvatore by Spinello

No record shop until Amazon had been able to capitalise on Enya fans’ interest in military history, and Amazon had the choice to do so explicitly – ‘people who bought this also bought’ -, or in subtler ways. Today Amazon is advertising Vanish Stain Remover to me alongside Enya’s latest album – you can draw your own conclusions about that.

Traditionally, alongside selling records and supplying streaming services, the music industry sells music licences to restaurants and radio stations, where a band or jukebox plays to the diners, and a DJ spins the discs. The music station’s licence doesn’t apply to the talk station on the adjacent preset – despite being the same radio in the same car, this is metaphorically a different place. Perhaps luxury music attracts wealthy patrons, but it would be hard for the restaurateur to argue that the benefit spills down the street into the book shop next door. We’re often accused of being old fashioned. These models might as well be based on the classical unities described in Aristotle’s Poetics!

Angie Waller’s art is amusing in its own right, but points also to a fundamental disconnect in the way we understand media, our experience of it, and the commerce that sustains it. Amazon could extend its advantage even further, by making the data it holds about the preferences and behaviour of all its customers available anywhere on the internet, and to anyone who was willing to buy it. We have moved from a model of attention which is constrained by time and space, to one which is fluid and portable.

To understand this better, think about a normal journey to work. The music you listen to fits into a data-centric view of you as a person, and as a consumer. Your device knows where you live, and where you spent the night! It knows which apps you use, how you travel, where you work. All this data can be correlated with other data to build up a compelling picture of your daily needs and desires, the groups you belong to, and how you like to live.

To the apps you use and the websites you visit on that journey you are now an identity and a cluster of data points, all derived from your stored preferences and histories, your digital fact pack, and your recent behaviour. Like a magnet being dragged through iron filings, these tiny packages of data stick to your profile, and are used to select new content to show you, to build your ideal music playlist, and to add value to your attention as your presence is sold to advertisers. The terms and conditions and privacy policies of music apps make this very clear. Here’s Pandora’s privacy policy, which sets this out in detail.

Those apps and websites extend what Amazon was doing over a decade ago, and offer the new data they generate from your activity to other apps and websites in complex and dynamic marketplaces, where content and profiles are mixed and matched with marketing messages. It is in those marketplaces – some familiar names, such as Google and Facebook, many essentially invisible to the people they are tracking and selling – that music fans are priced and sold.

Codes of conduct and some regulation has grown up around this tracking activity, including the Network Advertising Initiative, who offer a quick view on who knows who you are, which may be seen here. 67 NAI member companies are currently tracking my web browser, and ironically, by using the NAI tool, I expect I am informing them that I am interested in my privacy. Pandora refers people to TRUSTe’s preferences manager, with a tracker code which tells TRUSTe where you have come from. The EDAA monitors the activity of 111 companies, and helpfully shows a nice green tick against that ones who are successfully tracking you.

What they all have in common is that none of them are really asking music fans for an informed permission to spy on them, and none are paying musicians for the data that music generates. Perhaps they shouldn’t. After all musicians made no extra investment or effort to create the technology and services that turn our traces into a marketable commodity, and music consumers get a convenient service at a lower price. This is a debate however we should have.

So what is the price of a music fan to a seller of military books, or indeed stain remover, holidays, or health insurance, or any of the things the digital marketing industry is paid to offer us? Right now, we in the music industry simply don’t know, but it’s not hard to see that some of the bigger music platforms value their advertising supported tiers very highly. And what if the music industry had a stake in that game? If we had the tools to participate in the revenue it might turn out that ‘free’ is much more valuable than being locked up in a $9.99 subscription service. The implications of this discontinuity in time and space could be truly revolutionary.

In the new music industry we need to understand the value that music creates in the data economy. But more importantly we need to have a conversation with the music fans themselves, because it’s their data, not the platforms’ and not the musicians’. We have a unique opportunity to stand alongside the people we reach with music, and make their privacy a condition of doing business with us. If we get this right, music can once again represent a free mind in a world of exploitation.

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The Simple Maths of the New Music Industry

The pre-modern music industry could be navigated with some very simple maths. Bands made records, record labels sold them to shops. Wholesale revenue wasn’t that much more complicated than units x price. And what mattered to most bands was the size of the advance, even if recording contracts were adept at slicing percentages here and there.

The modern music industry seems much more complicated. Alongside unit sales we now have subscription and advertising supported streaming in the mix. In 2015 the world’s largest market, the US, passed through a point where it was roughly divided into thirds between streaming, download sales, and physical sales. As streaming grows in importance it becomes more urgent to understand its hidden complexities. There are however some simple ways to understand the new model, and to build strategies to make the most of the modern music industry. Here are a few.

Zero slumming it, or, permanent total war…

In subscription services there is at any point in time a fixed number of subscribers, and therefor a fixed pool of money. This means it is impossible to win without some other artist losing. It’s known as a zero sum game – each unit of gain is balanced by a unit of loss elsewhere in the system.

The math involved here can be seen in windowing strategies, which are basically a gamble on whether over the short term fans will pay more than the streaming services would. Arguably this is good for the industry as a whole as it helps consumers understand that buying a music service does not guarantee access to everything in the world.

The caveat is that deploying windowing indicates to the music fan that you consider them a cheapskate who is there to be fleeced. For sure some will consider this part of the deal with fandom – if it doesn’t hurt the wallet it’s not nearly so much fun. So to decide whether or not to window you need to know the degree of pain an artist’s core fans want to suffer. If they are a hardy bunch you can take £8.99 off them in the first week or two; if they are lily livered then ubiquity on day one is called for.

Pricing in and out of bundles

Pricing is a dark art, and commonly misunderstood. The possibility of windowing tells us something important about price, and that is that the right price is different for each and every potential buyer and each product has its very own profile. Let’s take a hypothetical product and see how it works.

An artist might have 1000 fans, each of which is willing to pay £8 for the next album. It’s not a given by a long way that a lower price would magically increase the sales. If it did, a £1 reduction would need to deliver 1143 sales and we’d need 889 sales at £9 to be evens on total revenue.

Bundling makes sense in music just as it does in other businesses – would you buy lace up shoes without laces? And in music there are bundles all over the place, from albums, to subscription services, to playlists. Done right the practice delivers higher value to both producer and consumer, and doing it right means that each buyer gets the items they value within the bundle, rather than all buyers simply getting a lower cost for their goods. An example might be selling that £8 album in a £25 bundle with the back catalogue for newly converted fans.

Arbitrage – arbitrary + outrage?

This exotic word covers a very easy idea, which is that given two sources of the same thing, you have the privilege of choosing and selling the cheaper. It’s important however to have a sophisticated idea of what the thing is that is being bought and sold for profit.

In music, for a very clear example of arbitrage in action it is only necessary to look at the way Amazon builds a range of offers around a single product in its music store. Sadly, The Very Best of Prince is currently number 1 on the Amazon music chart and may be obtained for £4.50, plus postage and packing. But it’s never that simple with Amazon:

20 new from £4.50 2 used from £10.00 1 collectible from £29.99
Buy the MP3 album for £8.99 at the Amazon Digital Music Store.

Some of these offers come with free p&p as part of a larger order, some are sold by third parties, and Amazon’s includes a set of MP3 files delivered to your cloud account, which is itself a separate source of value. It’s a fun game to try to trace all the different ways Amazon can make money from just one album, right from the use of its cloud storage product before the music has been delivered from the studio. Algorithms can manipulate the relative price and visibility of each of these, ensuring that Amazon gets the ideal outcome. No other party to the transactions has the same command over the data and the environment to do that.

A more disturbing arbitrage in music is the way that licensed and unlicensed music sit alongside each other in UGC and search engines, with the advertising driven platform owner able to influence the consumer’s choice, and therefore the content cost of any click-through. In public performance, soundalikes are close to arbitrage, as are catalogues licensed privately in competition with collecting societies.

The new programmatic content marketing industry is built around a frenetic matching between personal profiles, content, and marketing messages; platforms attempt to maximise the value differences between essentially equivalent content and marketing impressions. Music has yet to play in this game at any scale, but the possibilities are exciting. Perhaps a track or a video could be more valuable for 24 hours outside any sales or subscription service, in the wild west of the new algorithmic web!

If you’re not doing maths, it’s being done to you…

These three examples show how different the new music industry is from the old, but also how an awareness of the way that digital platforms make decisions arms the music industry to fight back and win in the battle for value.

It’s easy to feel helpless in an unequal fight driven by forces way beyond the comprehension of most of us. After all, hardly anyone can play Go, let alone develop software which can beat the world champion, as a Google owned company has recently achieved. But all three techniques described above can be managed with some simple strategic thinking, and some readily available tools. And where it’s tougher, we can, as an industry, come together to explain our fears and ask for help, such as with the flaws in ‘notice and takedown’ for dealing with UGC copyright arbitrage.

And we do have a great strength, which can make much of the new maths irrelevant. People develop personal relationships with music, and with creators and performers, and even sometimes have a romantic attachment to record labels. It’s a privilege which the owners and operators of all the maths in the world don’t have, to be able to speak directly to people who love what you do, and ask them to support your work.

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The Sadness of Crowds

Marillion’s 2001 release, Anoraknophobia, was a pun for a different age. Singer Steve Hogarth told the BBC in May of that year, “In those days everyone was pointing and laughing and calling us nerds. Now it’s the trendy thing to do.”

They were getting laughed at because in the mid 1990s they had staked their future on the Internet, and ‘anorak’ was shorthand used by ordinary people to describe those showing a weird obsession with computers and websites. And the reason the album was noteworthy for the BBC pop-tech journalists was that the band had emailed its fans asking them to buy it before it was even made, and had financed recording and production with the proceeds. In other words, they had introduced ‘crowdfunding’ to the recorded music industry.

The band and their manager explain the deal on their website in an archived news item. Two things stand out from the perspective of 15 years of technical and market development. The first is that the deal was extraordinarily simple. The band set a price, the fans paid, the band made the CD and sent it to them. As a thank you, all the supporters names were printed in the booklet. The second thing is that this was a small part of the release plan, with the fans only expected to account for 5% of total sales. Marillion was just as innovative with their deal with EMI, which seemed happy to pick up the other 95%. Access to finance meant that Marillion could keep ownership of the copyright.

From Marillion’s news archive:

EMI Liberty’s co-director Peter Duckworth added: “We were very impressed with this venture which we believe breaks new ground in the industry. We are all in a win, win situation, EMI are happy, retail is happy, the band are happy and the fans are extremely happy.”

For all the excitement Marillion were far from being the inventors of crowdfunding. The London Gazette of 24th May 1683 caries an advertisement from Henry Purcell to his crowdfunders letting them know that the Sonatas of three Parts were ready and that the price would go up for people who wanted to wait and buy them from the booksellers.

Serialisation, which really hit the big time with Charles Dickens’s Pickwick Papers, was another form of crowdfunding, with episodes being sold monthly for a shilling and sandwiched between pages of advertising. A popular story added readers month by month, with the advantage that a writer could extend the plot until the public tired of it. Buyers of the first instalment of Pickwick in March 1836 had to wait until October 1837 to read the last chapter. The deadlines could be gruelling even for a writer of Dickens’ facility, but the rewards could be great.

The demographics of the literate public changed dramatically between the 1830s and the 1930s, but the subscription business model proved resilient. Reader’s Digest started in 1920 as a monthly collection of condensed articles from other publications, one for each day of the month. It succeeded without advertising until rising production costs forced a change in 1954, and its readers choose ads rather than a higher price. Charging its readers in advance for writing yet to be created had gained the brand independence, credibility, and authority. In 1954 the Reader’s Digest was first to publish on the connection between smoking and lung cancer, something tobacco companies had much success in suppressing elsewhere.

Fast forward to 2016 and both the subscription and advertising models for funding new writing seem to be under stress, while in music, where advertising was only ever an adjunct, the risk capital provided by record labels has mostly retreated to the top of the charts. And Marillion is once again going to their fans to get the money to make a new album, but this time on a commercial crowdfunding platform. And what a difference that makes to the scope and nature of the project!

Far from being a single exclusive product, at a high price, with a sponsors list as the only way to say thank you for pre-ordering, Marillion now feel they have to deliver 17 different product bundles, many thousands of them signed, all exclusive. Even while they are making the album they are delivering even more exclusive content to the platform in the form of updates, photos and video clips. Sample tracks are there for free streaming. It looks like a lot of extra work. And who knows, with so much effort and exclusivity gone into this campaign, whether a record label would feel the residual sales are worth picking up, the way EMI did back in 2000?

But are the fans happier? A glance through the comments reveals some very telling whinges. The album is taking a long time. People bought one package and now they want to change their order. Limited editions have been made slightly less limited, so the value feels less. One set of signatures is not enough! Someone even wants the buyers to come up with the album title.

Customers are right to be demanding of course, but it is hard to ignore the impact of the platform in setting the rules, controlling the environment, and creating an entirely artificial competition between the projects on offer. Artists are understandably driven to create super-premium products and bundles, and work harder to attract attention as each week another tempting new project appears on the platform.

There is no harm in hard work, but what are they working on? Signing, for a start. Writing booklets, having more photographs taken, commissioning more artwork, even driving around the country to perform private gigs, and cooking dinners for buyers. It might seem like fun at the planning meeting, but probably palls after a while, as you become a combination of cottage industry and minimum wage domestic servant, chasing the crowdfunding dollar. And none of this makes a jot of difference to the record, even if some of it improves the product. Perhaps the budgets will stretch to strings and horns, and an extra few days in the studio to capture the elusive perfect performance, but perhaps they will be spent on thicker card for the record sleeves instead.

In what became both poster child and the first big scandal for music crowdfunding, some of the musicians were given a different kind of deal when Amanda Palmer raised over $1.2m dollars for her 2012 album, and offered love instead of money. An informed view of the costs of fulfilling all the various offers Palmer made suggests that actually $1.2m was not a huge lot, and she has since confirmed that she just broke even on it. But that did not wash with the public who just saw the money and thought it hypocritical. Crowdfunders are not buying art, it seems. They are patrons of their own particular definition of virtue. Palmer is crowdfunding again, this time on a platform called Patreon, and has again found herself criticised not for her art but for having a baby. Some patrons don’t want to be short changed, and don’t want such direct funding to be spent on childcare.

So what appears as freedom can turn out to be a behaviourist straightjacket. Platforms manage extreme competition between supplicants in such a way as to push artists to offer super-premium products and personal services. They choke off opportunities for other forms of finance. They divert time and money from the core – surely a great recording in music’s case – to the periphery of packaging and merchandise. And even many of the fans don’t even seem very happy. Music industry funding platforms should acknowledge and seek to address these pressures, otherwise artists risk becoming the Uber drivers of the crowdfunding economy. Perhaps the risk capital business model of the record labels, along with the ‘take it or leave it’ nature of markets was not so bad after all.

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One Music Copyright Can Be Better Than Two

Music copyright was developed in nineteenth century France as a response to an obvious unfairness. Bars and restaurants could hire musicians to entertain their customers, raising sales and profits. The restaurant owner benefited, the musicians got paid, but the composers got nothing. No credible argument was offered that the sheet music sales or future commissions were enough to justify free use of music. Civilisation (represented by the French law courts) demanded that composers should share the economic value their music created.

This was of course long before the advent of sound recording technology, and the emergence of the music recording industry. The principle of tradable rights in the activities that generate revenue, either directly or indirectly, was later carried across to this new class of recording producers and performers. The assumptions on which these rights rested were clear and simple. A composer created a work, some musicians performed it, and it was enjoyed by the public either live or recorded. The recordings could be replicated and the copies sold, and the interests of the parties survived throughout the web of economic activity.

It turned out that some composers were also excellent performers, and some made recordings of their own and others’ music. The separation of interests nevertheless gave composers, whose interest is mostly in having more performances and recordings of a work rather than fewer, an important protection. Coercion to leave the market free of competition for a new waltz, or a new song, is always a danger; attempts would amount to restraint of trade so the system protected against such conflicts of interest quite well.

Students of 20th century music will know however that the recording process developed in ways that were far more creative than anticipated. Magnetic tape proved to be a flexible and compliant medium, allowing for delay, loops, multi-tracking, and cut and splice. Electronics made it possible to alter sound, extending what could be achieved through mechanics and acoustics. And then the digital revolution exploded the world of possible sound, handing musicians a superabundance of tools, tricks, and techniques.

And so it is that in the 21st century the recording and the composition are often one and the same; a single creative work, by a single person or creative team, frequently involving nothing that could be recognised as a traditional musical performance. No musical notation or instruction set pre-exists the creation, and any notion of a tune and harmonic structure is left to be extracted after the fact. Consequently the likelihood of other performances and other recordings is greatly lessened. But the world of copyright really struggles to provide an efficient way to manage these creations.

Copyright insists on the separation of composition and recording even when none is asked for or indicated, and this creates massive inefficiency and absurdity in licensing and payment. For musicians who don’t know their way around the industry it’s easy to miss out on a percentage of each and every sale or stream as the compositions side is licensed through a complex international network of societies and agencies representing music publishers. Even with good administration each unique sale or stream creates a secondary flow of money which moves mysteriously (and slowly!) around the world, in contrast to the normal monthly accounting and payment cycle for the recordings.

The suggestion therefor is that, at the creator’s option, a new unitary copyright in the combination of composition and audio object could replace the dual system that causes so many inefficiencies. Until and unless a composition is extracted and performed separately no other rights would be needed to ensure that the creators have the control and compensation that is now so imperfectly effected. These new rights could swerve the traditional music publishing world entirely, saving huge amounts of unnecessary data and processing. Using someone else’s composition and claiming a unitary right would of course be fraud, and a much more serious and risky offence than infringement. New technology is anyway in the pipeline to identify music similarly to how audio fingerprinting identifies recordings. A fingerprint of the original master file could provide the basis for highly reliable proof of title, and form the basis of a combined supply chain and royalty payment framework.

Such a new right could happily live alongside today’s dual system, using just enough of the existing infrastructure as necessary, and no more. In a world of fragmentation and disputes, where even the biggest music users claim not to be able to identify many of the creators who deserve and need payment for their work, a simple and commercial solution is overdue.

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Streaming versus Downloads? The Fight is Far From Won

The recent decline in the music download market, coupled with an acceleration in the streaming revenue numbers, has led many to predict the kind of transition that saw the end of the cassette tape, or indeed the cart and horse. There are a few reasons, some a bit less obvious, why this might not be such a certainty.

For a start, building the higher bandwidth mobile networks required for pervasive access is expensive and difficult. Ofcom, the UK telecoms regulator, says most of the country has 50% or less 3G coverage. There are plenty of ‘not spots’ due to topography and building materials, so there are likely to be connectivity constraints and disappointments for the foreseeable future. On one of Britain’s main train lines there’s only a 10% chance of maintaining a 15 minute mobile phone conversation. Even if we wanted mobile music on demand we’re not likely to get it cheaply and reliably for years.

The second aspect to look at is the nature of demand for music. Studies show that most people are happy with a library of 1000 tracks or fewer, a minute fraction of the 50 million tracks now available on demand. And by far the majority of music buyers, even in music mad countries such as the UK, traditionally listened to the radio and bought one or two albums per year.

In a recent study consumers cited the ability to play music offline as the biggest benefit of a paid for music subscription. They get that with downloads, and with CDs, which perhaps explains the resilience of compact discs, along with the resale opportunity of course. What’s more, mobile data storage is going to get bigger and cheaper much faster than any improvements in mobile broadband. A small personal library, with a radio, and the occasionally impulse track download, is perhaps the ideal package for the casual music buyer.

It’s likely that streaming’s rapid growth represents the migration of heavy download buyers to a more attractive value proposition, rather than the rest of the market trading up. There might be other reasons for the casual buyers to be enticed into streaming services, for instance their value as profiled targets of advertising. But as things stand downloads serve all but the top few music buyers with a much better mix of price and functionality, so they are likely to be around for a long time yet.

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Change How We Think First, Technology Second

Many years ago I was asked to discuss with the board of a trade association how the music industry was changing. One prominent executive summed up by saying “complexity has served us well”.

A few days ago Spotify’s James Duffett-Smith was moved to exclaim “music industry licensing and copyright structures are legendary in their complexity” in a blog post on how the company is responding to a mini-crisis in royalty payments. What bit Spotify was no conspiracy to defraud on a grand scale, just a simple expression of the inherent laziness of the music industry, and its abiding ability to move problems to where they are hardest to solve.

Let’s clear up some fundamentals before trying to understand how we might help ourselves towards a better and cleaner approach to bad data. Duffett-Smith oversells complexity. The basics of copyright and licensing are simple enough. Somebody writes a piece of music, somebody performs it, someone records it, and someone plays the record. A play of the recording usually involves permission and payment to the people who contributed. There are only a few permutations of this basic requirement, and in fact the music industry and governments have over time found ways to simply even further through block licensing and some limited, mostly benign monopolies.

Some complexity in how rights and contracts are managed however enables musicians to offer the right kind of permission at the best price, rather than having to accept a single flat rate for an impoverished range of uses. This finds its best expression in the use of music in films and advertising, where a great song can transform a movie or sell millions of pairs of jeans. Neither Spotify nor other music services, nor public radio and most TV producers, nor indeed bars, hairdressers, garages etc., have to worry about such matters. They get simple commercial or collective licences.

But even after 15 years of the data driven 21st century the music industry has not yet managed to create a coherent supply chain. So music services get their information about the music they play from two sources, which do not cooperate to ensure either accuracy or completeness. And it’s not because they can’t, it is because they won’t.

Those two sources of data are the owners of the recordings on one side, and the owners of the compositions on the other. For very good reasons the rights and royalties for these two groups have taken different paths; songs and records have a Venn diagram of interests, and they need some protection from each other, even though in many cases the individuals concerned are the same.

But when it comes to supply chain and data management, the industry has built silos. There is no matching of data between the two sides before the tracks are sent into the market, and no collaboration before the official release date to make sure the songs and songwriters for each recording are properly identified. And the law excuses this, fully transferring the risk to the point where the music is played.

Observers will note an irony here, as the music industry is notorious for its high profile plagiarism court cases. And added to this there is a fundamental right to attribution in most copyright codes (reinforced by an item in the UDHR) which is ignored on an industrial scale by the industry that most stands to benefit should it be universally respected.

I have argued elsewhere for a simple tweak to either law or industry practice that would see us indemnifying parties which rely on the data we provide about our music and our rights. This seems to me to be simple good sense. But there is an ethical dimension to the question too, for it is surely everyone’s right whether they are a musician, or any other kind of creator, to be identified with their work wherever it is performed or exhibited. And that is the change in thinking we need in the music industry, to a cultural norm where to hide or omit the creators’ due credit is seen as the shameful and lazy act that it truly is.

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The World Is Singing A New Song

We live in an age of everyday activism, with every purchase an expression of values as well as needs. Ideas about fairness go far beyond the impact of certified fair trading schemes; they permeate consumer marketing. Social media drives a radical transparency in supply chains, with no exploitation tacitly excused.

Alongside fairness we have discovered a new appreciation of the craft skills and tradition wrapped up in the idea of an artisan. We know that we can be fed and clothed, and that our homes can be furnished and decorated by machines. At some point however we lost the sense that mechanisation is progress, and what came to the surface is the powerful idea that all economic transactions are a medium for human communication. A loaf of bread is now, somehow, a laying on of hands as well as nutrition.

A musician playing an instrument or singing with real skill and feeling is the very definition of an artisan. The century we’re in could have been made for musicians, whose work delivers all the meaning of a transaction with none of the burden of common wants and needs. If this seems too much of a stretch, consider a cup of fair trade coffee. How much does the ethical content really improve the world? Or how much is it just an excuse for a caffeine dose in a disposable cardboard beaker?

We in the music industry should not get carried away with enthusiasm for ideas that are easy to express but much harder to live up to. Some voices are now mooting a ‘fair trade’ approach to music. It is very hard indeed to see the parallels between the life of a musician in a G7 economy, and the fate of a worker on a coffee plantation. Nor would the Walk Free Foundation find many major label recording artists among the 35.8 million slaves it works so hard to free.

Fair trade and authenticity in the music industry have to start from a very different place, and it will need the kind of grinding attention to detail that we have in abundance, but have not so far deigned to put on display. Today it is hard to find out who created a song, and who played the instruments. Such credits as there are don’t really tell the whole story. Was the performance recorded simply and directly, or did a studio wizard remanufacture it into something entirely wonderful but different? If we answer these simple questions we create trust, and trust is the foundation of both fairness and authenticity.

But this comes with a warning. We won’t be correcting a great social injustice by going down this road, and we should be very careful not to wear the clothes of the genuinely oppressed and suffering. Fairness in music comes when everybody’s contribution is acknowledged and everybody’s rights respected; it’s not an argument over percentages of a payout.

We have to admit in music that we are years away from the time when we can stand behind a full set of credits for a recording and swear that they are complete and truthful. Our audience, and consumers, have in many ways gone ahead of us, and it’s they who are singing a new song. We need to sing in harmony with them. It’s simple commercial good sense, as well as the right thing to do.


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Dear Music Industry, There is No Saviour Machine!

My beloved music industry is winding itself up again in one of its periodic pursuits of a saviour, and this time the lucky victim is the blockchain. It will go through much the same process as any of the other manic episodes in our recent history, and end up in the same kind of bewildered slump.

To be clear, it seems obvious that blockchain based technologies can make a big difference to some industries. They reduce the cost and risk involved when many parties, who might not know each other, have to trust each other to honour the terms of transactions. Traditionally this function has been done via trusted exchanges, intermediaries, and insurance, all of which help manage risk to some degree. Blockchain substitutes for some of this a shared and mutually verified ledger. The transactions on that ledger can be governed by similarly verified contracts, so that if conditions are not fulfilled payments won’t be made.

Like many innovations, blockchain is emerging in a ferment of enthusiasm and speculation. It might indeed transform many industries, but its impact on music will be more modest. Here’s why.

  1. Very few transactions in the music industry carry significant financial risk, and the ones that do are generally between two parties who know each other. The risk around the amount of uncertain future income is of a different nature. Blockchain won’t be able to guarantee that your next album will be a hit, just that you will get paid for the licence you sold to exploit it.
  2. Music has billions of events with financial implications (each click on a play button) but relatively few of them are actually transactions. It makes no sense to increase massively the number of transactions that need to be recorded and reconciled, and would be absurdly expensive to do so.
  3. Music benefits from a kind of semi-formality, where we can freely move audio files around between devices and platforms, some of which are part of the tracked and royalty bearing infrastructure and some not. Ensuring that the many stakeholders in a single audio file had given permission and were compensated at the point of each transfer would add massive cost and inefficiency.

So once you take out the dafter ideas about what blockchain might enable – or given that this is the music industry, what it might be coerced into preventing – what is left is a more modest but nevertheless important set of back office functions. I hope we can all agree these are worthwhile even though they are not so sexy as the complete and waterproof total music rights permissions and royalties machine that some visionaries seem to be offering us.

But this is the music industry. We’re not traditionally a recruiter of qualified and experienced scientists or technologists, but a community driven by hope and emotion. So, in the hope that a great artist’s emotion will make more of an impact than a bit of rational analysis, here’s David Bowie explaining far better than I can, to a video that blockchain would make utterly impossible:

Update: June 2016

The video originally embedded had so much third party copyright material in it as well as a presumably unlicensed copy of Bowie’s track that it was only matter of time before it got a take down.

Update: August 2016

The video seems to be back online.

Here’s another:

Update: October 2018

More bitrot and link attrition, so here’s another:

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