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.

Purcell Gazette Advertisement

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. Arguably charging its readers in advance for writing yet to be created 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 today, and in 2016 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.

Of course 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 the cut and splice. Electronics made it possible to alter sound, extending what could be achieved through mechanics and acoustics. And then of course 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.

Charlie Chaplin in Modern Times

Charlie Chaplin in Modern Times

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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Two Ideas for a Bigger, Better Music Industry

We have come a long way in the music industry since the first faltering attempts to sell music online in the mid 1990s. A couple of personal anecdotes (names withheld to protect the guilty) from those years illustrate just how much music industry attitudes have changed. A top UK band manager raged in one meeting, ‘get [my band] off the internet’. A top record label CEO told a company conference, ‘we think the internet will prove to be like CB radio’. 10 4 good buddy!

Behaving badly and getting away with it

Public perceptions of the music industry have changed too, and continue to evolve. What made it attractive as a career to a certain kind of person before the millennium, is perhaps best summed up by this misappropriation and misquotation of Hunter S Thompson:

The music business is a cruel and shallow money trench, a long plastic hallway where thieves and pimps run free, and good men die like dogs. There’s also a negative side.

That the original was about TV, not music, and that the twist was added, just serves to demonstrate the sense that success in music was about behaving badly and getting away with it. The potency and validity of that idea seems to have been draining away fast in the 21st century. One of the most enlightening studies of the music industry’s war on internet piracy came not from an economist, but a professor of marketing, Markus Giesler, who looked at how attitudes changed over a period, casting the undoubted disruption almost as an argument between lovers. The title, ‘Conflict and Compromise’, tells us a lot about modern commerce, and music is no exception.

There is too much in Giesler’s paper that is too good, but I shall pull out a quote from his conclusion:

consumer heroism also plays a formative role in directing the historical process of market evolution

Yes, consumers are heroes, and are neither passively compliant, nor victims of whatever tricks the music industry might want to play on them. Consumers do not exist merely to solve our cashflow problems.

So here are two big ideas, that between them will do much to improve music for all of us who value it beyond its ability to convert clicks into cash.

1 we must be guided by a model of the kind of consumer we hope to engage.

In music I would say that our ideal consumer is knowledgeable, about music and artists, and about culture with all its facets, and able to connect between music and other forms of art and craft. Our music consumer is interested in the world too, and what music can do to bring comfort, joy, freedom, ideas, into the many dark places as well as our comfortable developed societies. They are not the super rich. It would be absurd to ask that 99% of the world should be paying for music; but what about pricing within reach of 66%, as a start? And finally, the ideal music consumer is ethical in approach and habit, always choosing the fair and sustainable over a short term buzz with dubious provenance.

2 we must remove the risk for our partners who innovate and invest to carry our music into the world.

We should license our partners long term, so they can plan to improve the consumer experience through many iterations. We should be willing to trade some short term benefit for long term stability, so that music licensing risk is never again mentioned in statutory stock market filings. Within the music industry we should collaborate to present our partners with a complete set of copyrights, and a complete set of information about the music. We should take perhaps a seven year, rather than a one or two year view. Our ideal partner is one who will over many years invest to support music with their networks and their infrastructure, and return revenue so that we can reward the creators and investors and regenerate our industry.

Growing up in public

We are having a debate now in the music industry about transparency, about data, about interdependence and its risks for us, and for how we can continue to work together. That some of this debate is leaking into our collective conversation with consumers seems to me to carry its own risks. Do artists want to be more transparent about their own business? Or do they only want the rest of the industry to be more transparent to them? Should we be lifting the kimono fully on the small group of writers and producers that dominate chart pop? Does the music consumer have a right to know whether the string section got paid?

If we continue to go into this debate as though we are unaware we are being observed and judged by our ideal consumers, we will be in danger of perpetuating the perception that we are an underserving industry, that each of us is simply out to get what we can no matter whom we swindle in the process. But if we can get over ourselves and concentrate on being fit to serve our ideal consumers and our ideal partners, a bigger and better music industry awaits us.

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It’s a Playlist World. Time to Break the Lock-in!

Playlists are moving to the front and centre of music discovery and consumption. They alter the balance of power in the industry in some obvious, and some less obvious ways. So who is winning in a playlist world, and how can we make sure the power of the playlist is used for the benefit of music fans and artists?

It helps to know which playlists are important, and for what reasons. For artists and record labels playlists can now make the difference between success and obscurity. Lorde was famously a beneficiary of Sean Parker’s Hipster International playlist, back in 2013. Since then the music services themselves have made sure they own the lists that matter. As though it needed underlining, here’s Will Page explaining how Spotify used its playlists to make Meghan Trainor’s “All About That Bass” a hit:

Spotify can proudly claim over 90 percent of the credit for this historical achievement, and our curated Browse playlists were the biggest factor.

What artists are looking for is the chain reaction, where exposure on one playlist leads to additions to other playlists and so to positions in interactive charts. There’s some data showing that this now happens ahead of mass media coverage, for instance through broadcast radio.

Even if charts and pop success are not the main aim playlists can deliver a solid number of plays (and therefore revenue), or bring high engagement from a community. Spotify’s Paul Lamere generously gave us a lot of detail here, including a helpful breakdown of different categories of playlist – genre, context, mood… So for the platforms, playlists are a critical user experience feature, as well as a tool to manage their relationship with the music providers.

For users, playlists solve some of the paradox of choice problem, while ceding less personalisation than radio or non-interactive streaming. They are also, of course, a digital era reinvention of the mixtape, with all the personal and public status and communication amplified by global reach. For cheapskate families (sorry, hardpressed and hardworking families) playlists solve the dilemma of sharing an account between many people without getting too much in each others’ way. They are a scratchpad for research, and an amazing way to express one’s inner librarian.

All of the above is an investment in a service; you would expect much lower churn from users who had made more playlists. As such this is a form of lock-in. The cost of switching to a different supplier now includes reconstructing important playlists, or abandoning many hours of work, even where there might not be a significant repertoire risk. And as social and communication tools infiltrate ever more deeply it’s just going to get harder to leave an interwoven graph of music and connected people.

I suggested elsewhere that the music industry should be considering how we can achieve playlist portability between services, much as mobile network switching was really stalled before you could keep your number. There is a wholly understandable conservatism when users, and artists and labels, have invested heavily in an aspect of a service which is technically tied to that service. We end up working to preserve a service not because it innovates and offers great value, but because we don’t want to lose the work we put in.

So this is the playlist panorama. A small revolution in discovery and listening, but not a democratic one as the platform owned playlists have almost all the power. A new layer of sharing and self-expression for users. A new dynamic in value which pushes users and music providers to work unpaid to increase the value and stickiness of the platform. Oh, and new opportunities for payola, which frankly are just as bad value as they ever were, and just as uninteresting.

As so often, the music fan’s interests are wholly aligned with the artists’ and labels’ for a fair, open, and portable playlist format. So take this as a very gentle warning that the benefits of a playlisted world need to be a little more evenly distributed. We should not tempt the platforms to prefer rent seeking to innovation and competition, even if it’s working for us right now. Portability would make playlists perfect.

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Equal Pay for Equal Play is Only Fair for Streaming

Popular music is popular because it is listened to by more people, and that includes more people who are not such great music fans. The music industry needs to take this kind of information on board as we plan for the future. We have enough perverse incentives already embedded in the way we do business without wilfully amplifying or adding new ways to make fools of ourselves.

It took a bit of research to clarify how and why music becomes popular. We like to know what other people are listening to, so popularity is in itself a driver of additional listening by more listeners. It turns out we think we like music better if we think it is more popular too. The hyper curious can chase down work done by Salganik, Dodd, and Watts, who studied this phenomenon, even to the extent of faking popularity, with depressing results for those who think that cream rises despite our biases.

Some of us like a wider range of music than others. But it turns out that the model of an eclectic listener who dives deep and never surfaces is mostly a myth. Pop seems to be pop with eclecticists, as well as the casual listener; Anita Elberse has studied this in detail with Felix Oberholzer-Gee, in response to the influential Long Tail ideas expounded by Chris Anderson.

As her online bio says, “Professor Elberse is one of the youngest female professors to have been promoted to full professor with tenure in Harvard Business School’s history”. Looking at some large data sets Elberse found that nearly all of us start at the top of the pop pyramid; most of us stay there; a some explore a bit deeper and further. Elberse put this much more succinctly than I can:

consumers of the most obscure content are also buying the hits

The people who only like popular music turn out not really to like much music in their lives. They are the classic light listeners. Again, that should be no surprise as they don’t demonstrate much deep interest with their music choices. And conversely, the eclectics are the heaviest users of content services. Of course they are. They are passionate, and adventurous.

Many people wish all these awkward findings were not so evident, and despite what the world is showing them are campaigning for a change in the way that subscription fees are divided up and paid to copyright owners and musicians. Their big idea is that the money from each subscriber should be paid out only for those tracks that particular subscriber listened to. It seems to be fair, as it treats the monthly sub as a kind of pre-payment for actual consumption.

This was proposed by Pedersen in a study of a small data set from a Danish streaming service. His conclusion was that the popular artists did better with per user distribution (although some Danish artists also benefit), but that it was an open question how consumers would respond if they knew about the method. I shall quote his own conclusions:

Switching from the current pro rata distribution model to a per user distribution model would primarily benefit the most popular artists.


There are two primary benefits of shifting to a per user distribution model. First, it re-establishes the economic connection between the consumer and the artist, where the fees paid by the subscriber is distributed among the artists she actually listens to. Secondly, it benefits local artists, which could be interesting from a cultural policy perspective.

I would argue that we should be cautious about relying on any conscious and deliberate economic purpose from music listeners when we are thinking about how to develop our industry. It seems too much to ask that consumers should choose between royalty structures when they are wondering how to get their music, even where we might expect some to prefer suppliers that try to be fairer.

But a small group of commentators have jumped on the per user distribution idea and turned it into a campaign. Some clearly don’t understand the data, and claim that it benefits indie and niche artists. Others simply consider it fairer. It is an odd kind of fairness however, that decides in retrospect that one listen is worth more than another listen, and that listens by light listeners are worth more than listens by committed and engaged music fans. And it would have the very obviously unfair result of rewarding artists more to the extent that their listeners could be persuaded to spend less time with music as a whole, and with other artists.

We have to decide what kind of music fans we want. I have argued elsewhere for diversity and discovery as the signs of a healthy market. It seems to me that we get there by making sure that all the incentives are lined up so that we in the industry want our audiences to love more music from more artists, rather than less from fewer.

In subscription that means each listen should be paid out at the same rate, or at a rate that the copyright owners and musicians have negotiated. We have a huge range of choices for people who want music, and for the lighter listeners perhaps a few good compilation albums bought as CDs or downloads are better value. But there is no justification at all on the grounds of either fairness or outcomes to hypothecate subscription fees.

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Fairness and Advantage in Future Music Markets

A debate is being conducted by the stakeholders in the future of the music industry, about who should get paid, how much, and by whom. So much devilish detail is being left out that an intelligent observer would get a very distorted view of the present, and that is no basis on which to build a future.

So what is missing, and why does it matter?

First, the spotlight on streaming shades all the other ways that musicians can make money, as recording artists, composers, and performers. It might indeed be that apart from public performance and synchronisation, streaming becomes the overwhelmingly dominant way that recorded music gets paid for. But there is a long way to go yet, and short term advantage over the transition (if there is indeed a clean and substitutional transition) could translate into long term advantage for the winners. ‘Winner takes all’ is not great for music, which benefits from innovation and diversity as much as the rest of civilised life.

Second, it’s easy to miss the fact that there are many parties between the artist and the streaming royalty, all negotiating their share as best they can. An appearance of transparency can hide as much as it reveals. An artist might agree a 10% royalty from a record company in return for a recoupable investment in their career, in cash and effort. That same record company might agree a 20% royalty with another artist, because there is more competition for their recording rights. Another artist might use a DIY platform that pays out 100%, but have to borrow the money to record the music and hire their own team (or really do everything themselves in their spare time). In a debate about fairness the percentages are meaningless, unless there is coercion or bad legal advice when these agreements were made.

Third, the famous ‘black box’ exists because some income from selling the right to use a catalogue of music is inevitably unattributable to the subsequent actual use of a piece of music. This is evident at every layer between performer and audience, and it can be dealt with contractually, using proxy values if necessary. If particular companies get a reputation for growing the black box at the expense of attributable revenue in order to retain a larger share of the profits, they will have to compensate by growing the attributable revenue even faster or they will find musicians migrating to where they get a better deal. There’s enough ‘unfair contract’ case law in music to serve as a warning to record labels and music publishers which set out to rip off musicians.

Fourth, and a more subtle point, is a concern that the mechanisms for calculating how the music owners, and ultimately the musicians, are going to get paid is inherently unfair. This appears in two forms; one in which stakeholders in a single payment (for instance composers) argue that they should get more of that payment, and the other over whether large pools of money from subscriptions should be considered aggregates of individual subscriber payments, or a single collective payment for the totality of the music offered and used. Neither yields easily to an argument based on fairness, and both are re-distributative. In particular the latter overlooks some very critical points. The service has to provide the music in advance, with the payout being partly for the opportunity to listen, whether it’s taken up by a particular individual or not. Services also have to consider consumer satisfaction, which might just as easily be driven by lots of listening to a wide range of music as by the ability to increase royalty payments for any particular recipient. Artists with very broad appeal will do very well in all cases, but other artists whose audience is more open-eared and experimental might well turn out to be critical for the long term health of the music industry.

It could easily be that the music industry as a whole is at a great disadvantage to its technology driven partners, whose users naturally enough want to upload and download without a debate about fairness and legality. Certainly in recorded music a very heavy price is being paid for the transition from physical to digital, and consumers and the new music services and device makers are capturing a lot of the new value created. Within the music industry however, there are warning signs that those who arguably already benefit most will try as hard as they can to embed their advantage. It should be a warning to us when ageing and wealthy musicians are presented as the future of the music industry, or asked to argue for fairness in the way all musicians get paid.

Here’s just one example:

“Why is someone who pays 9.99 Euros a month just to listen to ABBA in the same basket as my daughter, who streams thousands of songs?”

The answer to me is obvious. As an industry we need to help new artists get discovered and supported, and we need to develop young and paying customers for music. Helping more money go to the creators of 40 year old sound recordings will achieve neither of those aims; instead let’s choose discovery of new music, and more music, as the way we judge whether the market is working, and fair.

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