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Crowdsourced Cover Collections: A Copyright Conundrum November 17, 2015

Posted by Bill Rosenblatt in Law, Music, Services.

A friend recently introduced me to a website called Cover Me, in which contributors write about cover versions of songs.  There are artist-cover anthologies, lists of “Five Good Covers” of oft-covered songs, and entire albums’ worth of cover versions.  Accompanying text describes the songs, the original artists, and the various cover versions.  Sometimes the “art” is in finding cover versions of obscure songs; other times it’s in selecting among many cover versions of better-known songs and putting together an interesting collection.

Entire albums featured on this site include Led Zeppelin III, XTC’s Skylarking, and several Ramones albums.  The site is run by Ray Padgett, a Brooklynite whose day job is at a small PR/social media firm.

Now here’s the conundrum.  All of the song titles link to audio of the cover versions. Some are simply links to files on SoundCloud, YouTube, or other hosting sites, while others are links to iTunes or Amazon purchase pages.  But many others are downloadable MP3s hosted on the site, with embedded MP3 players for streaming the music.  Most of these tracks are available on YouTube; some are available on Spotify.

My friend told me that the site will take the MP3 files down when requested, although it does not have a written copyright policy.  The site does not carry ads and has no apparent source of revenue; the contributors are volunteers.

What do you think?  Fair use or not?



The Mysterious Case of the Fake Beatles Cover October 29, 2015

Posted by Bill Rosenblatt in Music, Rights Licensing.
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Several big-name recording artists have been “digital holdouts” who have refused to license their material for distribution through interactive streaming music services like Spotify, Apple Music, Google Play Music, Rhapsody, and so on.  One by one, most of them eventually gave in and joined the crowd: Led Zeppelin, Pink Floyd, Metallica, Kid Rock, Def Leppard, Black Sabbath, AC/DC, Frank Zappa.  Only a tiny number of artists remain digital holdouts by choice, including the biggest one of all: the Beatles.  Or are they?

A curious phenomenon occurs around digital holdouts: other artists distribute cover versions of the digital holdouts’ tunes and create appropriate metadata, so that users searching for the big-name artists find the cover versions and play them.  This results in royalties for the cover artists even if the music wasn’t what the users expected. Cover versions with the right metadata are also picked up by Internet radio services.  So, if you searched for “Led Zeppelin” or started a “Led Zeppelin Radio” channel before Led Zep licensed its music to the interactive services, you might have heard Zep covers from a band called Led Zepagain.  When Interscope held Carly Rae Jepsen’s monster hit “Call Me Maybe” back from interactive services a couple of years ago, users heard a cover version by an unknown singer.

If you listen to “Beatles Radio” on a pure Internet radio service like Pandora, you will hear Beatles tunes every once in a while.  That’s because Internet radio services have statutory licenses that allow them to play any song at all, as long as they pay appropriate royalties to record labels and songwriters.  (Similarly, anyone can record a cover version of any song.) But an interactive service can’t offer any song for on-demand listening unless the rights holders have licensed it to do so.

Yet something curious happened while I was listening to “Beatles Radio” on Google Play Music the other day. I heard a version of the Beatles song “In My Life” (a lesser-known track from the Rubber Soul album*) that sounded suspiciously like the real thing — even though the artist was listed as “Liverpool Beat,” not the Beatles. The radio feature on Google Play Music lets you go back and repeat songs you heard previously if Google Play has interactive streaming rights to them.  Sure enough, I was able to play “In My Life” as many times as I wanted.  Then I compared it with a download of the actual Beatles song.  Allowing for differences in codec quality, they were absolutely identical.  That’s right: this was a fake Beatles cover.

Apparently, Liverpool Beat is one of a couple of Beatles cover bands that are designed to sub in for the Beatles in circumstances similar to Led Zepagain for the real Zeppelin.  (There are also a couple of Beatles tribute bands called Liverpool Beat that play bars, weddings, etc., but this is different.)  Liverpool Beat has dozens of Beatles songs available on the major interactive streaming services — including Spotify, Google Play, and Apple Music — from all phases of the Beatles’ career.  I listened to all of them.  They range in quality from mediocre to pretty decent imitations, but they are clearly not the Beatles… except for “In My Life.”  That’s definitely John Lennon singing and George Martin’s double-speed piano solo.

Evidently someone uploaded the real Beatles track to a distributor that feeds to the interactive streaming services.  It was included with other Beatles covers by Liverpool Beat on a four-part “album” called… wait for it… Sergeant Pepper’s Lonely Hearts Club Band.

Given that the Beatles’ online distribution is tightly controlled and exclusive to iTunes downloads, and that the terms of their 2011 deal with Apple are unique in the industry, this is just a little bit remarkable.  The question is, whodunnit?  Here’s a poll:

Update: through further research, I found the likely source(s) of Beatles covers by “Liverpool Beat.”  I’ve written an article on Forbes about it.  Props to Nate Hoffelder of The Digital Reader and David Leibowitz of CH Potomac for help.

*There is no point in calling it a “classic.” All Beatles songs and albums are classics.

Ninth Circuit Calls for Takedown Notices to Address Fair Use September 15, 2015

Posted by Bill Rosenblatt in Fingerprinting, Law, Music.
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This past Monday’s ruling from the Ninth Circuit Appeals Court in Lenz v. Universal Music Group, a/k/a the Dancing Baby Video case, is being hailed as an important one in establishing the role of fair use in the online world.  The case involved a common enough occurrence: a homemade video clip of someone’s child, with music (Prince’s “Let’s Go Crazy”) in the background, posted to YouTube.*  UMG sent a takedown notice, Stephanie Lenz sent a counter-notice, and an eight-year legal battle ensued.  Monday’s ruling was not a decision on the defendant’s liability but merely a denial of summary judgment, meaning that case will now go to trial.

The three-judge panel produced two important holdings: first, that fair use is really a user’s right, and not just an affirmative defense to a charge of infringement.  The second is that copyright holders have to take fair use into account in issuing DMCA takedown notices.  As we’ll discuss here, this will have some effect on copyright holders’ ability to use automated means to enforce copyright online.

Under the DMCA (Section 512 of U.S. copyright law), online service providers can avoid copyright liability if they respond to notices requesting that allegedly infringing material be taken down.  Notices have to comply with legal requirements, one of which is a good faith belief that the user who put the work up online was not authorized to do so.  This court now says that fair use is not merely a defense to a charge of infringement — to be asserted after the copyright holder files a lawsuit — but is actually a form of authorization.

It follows that the copyright holder must profess a good faith belief that the user wasn’t making a fair use of the work in order for a takedown notice to be valid. The court also held that this good faith belief can be “subjective” rather than based on objective facts; but it’s ultimately up to a jury to decide whether it buys the complainant’s basis for its good faith belief is valid.

The question for us here is how this ruling will affect the technologies and automated processes that many copyright owners use to police their works online, often through copyright monitoring services like MarkMonitor, Muso, Friend MTS, Entura, and various others.  These services use fingerprinting and other techniques to identify content online, create takedown notices from templates, and send them — many thousands per day — to online services.  Page 19 of the Lenz decision contains a hint:

“We note, without passing judgment, that the implementation of computer algorithms appears to be a valid and good faith middle ground for processing a plethora of content while still meeting the DMCA’s requirements to somehow consider fair use. . . . For example, consideration of fair use may be sufficient if copyright holders utilize computer programs that automatically identify for takedown notifications content where: (1) the video track matches the video track of a copyrighted work submitted by a content owner; (2) the audio track matches the audio track of that same copyrighted work; and (3) nearly the entirety . . . is comprised of a single copyrighted work. . . . Copyright holders could then employ [humans] to review the minimal remaining content a computer program does not cull.” (Internal citations and quotation marks omitted.)

At the same time, another clue lies in pp. 31-32, in a footnote to Judge Milan Smith’s partial dissent:

“The majority opinion implies that a copyright holder could form a good faith belief that a work was not a fair use by utilizing computer programs that automatically identify possible infringing content. I agree that such programs may be useful in identifying infringing content. However, the record does not disclose whether these programs are currently capable of analyzing fair use. Section 107 specifically enumerates the factors to be considered in analyzing fair use. These include: ‘the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes’; ‘the nature of the copyrighted work; ‘the amount and substantiality of the portion used in relation to the copyrighted work as a whole’; and ‘the effect of the use upon the potential market for or value of the copyrighted work.’ 17 U.S.C. § 107. For a copyright holder to rely solely on a computer algorithm to form a good faith belief that a work is infringing, that algorithm must be capable of applying the factors enumerated in § 107.”

To follow this ruling, takedown notices will now presumably have to contain language that describes the copyright holder’s good faith belief that the user who posted the file did not have a fair use right.  This can be a “subjective” basis, and the source of that information cannot “solely” be a “computer algorithm.”

It is, of course, impossible for any computer algorithm to determine whether a copy of a file was made by fair use; there is no such thing as a “fair use deciding machine.”  But that’s not what’s required here — only evidence that some (unspecified portion) of the four fair use factors were not met, other than “because I said so.”  Two of the four factors are easy: “the nature of the copyrighted work” ought to be self-evident to the owner of the copyright, and today’s widely-used content recognition tools can determine whether “the amount and substantiality of the portion used” was the entire work.  The majority in Lenz suggested that this latter factor “may be sufficient . . . for consideration of fair use.”  Apart from that, for example, the fact that a file appears on a website touting “Free MP3 downloads!” and featuring banner ads could be cited as evidence of an “effect of the use upon the potential market for or value of the copyrighted work” or “the purpose and character of the use.”

In other words, some of the characterizations of a work as “not fair use” that are often written into lawsuit complaints (written by lawyers) may have to find their way into takedown notices (generated automatically by technology).  As a practical matter, copyright monitoring services may want to produce takedown notices with more situation-specific information in order to pass the non-fair use test — such as characterizations of the online service or other circumstances in which works are found.  This could require a greater number of different takedown notice templates and more effort required to populate them with specifics before sending them to online services — yet the processes still ought to be automatable.

The upshot of the Lenz decision, then, is that copyright holders may have to go to somewhat more effort to generated automated takedown notices under the DMCA that will survive a court challenge.  Just how much more effort and how much more verbiage in notices is necessary will be a subject for the Lenz trial and future litigations.  But today’s basic paradigm of copyright monitoring services using content recognition algorithms and other technological tools to automate enforcement processes is likely to continue, largely unchanged.

*I had a very similar experience two years ago.  I took a video of my daughter’s dance recital on my smartphone from the audience, and I posted it on YouTube under a private URL known only to her uncles and grandparents. UMG issued a takedown notice — on one of the three one-minute-long song samples used in that dance routine.  I tried filing a counter-notice, which UMG denied; so I gave up and emailed the clip to the relatives.  I suspect that no human ever analyzed this clip: the Jennifer Lopez track that UMG complained of was one of two tracks owned by UMG, while the other, a techno track by Basement Jaxx, is one that services like Shazam have a hard time recognizing.

The Myth of DRM-Free Music May 31, 2015

Posted by Bill Rosenblatt in DRM, Music, United States.

The annual IDPF Digital Book conference took place this week in New York, as part of the BookExpo America trade show for the publishing industry.  You can count on two topics being discussed at any book publishing conference: Amazon and DRM.  IDPF Digital Book 2015 was no exception.  One particular panel featured writers from leading book industry trade magazines, and the moderator was Joe Wikert, a well-respected digital publishing executive who is an outspoken opponent of DRM.  The discussion turned to the pros and cons of “walled gardens” such as Amazon’s Kindle ecosystem.  Wikert remarked on how quickly the music industry got rid of DRM and suggested (as he often does) that book publishers should follow.

The usual story is that the music industry went DRM-free in 2009 when Apple completed its removal of DRM from its vast iTunes music catalog.  But how true is that?  Not very, as it turns out.  I’d argue not only that DRM never really went away but that it’s making a comeback.

The first thing to recognize is that downloaded files are the only mode of digital music delivery in which the music isn’t encrypted.  All on-demand music services (Spotify, Rhapsody, Google Play Music, Beats Music, etc.) encrypt streams as well as music tracks that users download for “offline listening.”  And all forms of digital radio — Internet (Pandora), Satellite (SiriusXM), and digital TV (Music Choice) — are encrypted.

These modes of delivery are now more popular than download purchases.  Music download sales peaked in 2012 and have moved into sharp decline.  Based on publicly available subscribership figures and studies such as Edison Research and Triton Digital’s The Infinite Dial, I estimate the total U.S. active monthly listenership to on-demand music services in the 60-70 million range.  That’s counting the use of YouTube as a de facto on-demand music service, which The Infinite Dial estimates as more than four times that of Spotify.  (The study says that 73% of YouTube music users don’t even watch the videos but just listen.)  Internet radio, led by Pandora and iHeartRadio, has well north of 100 million active listeners, while over 27 million people subscribe to SiriusXM.  All of these numbers are growing steadily.

How many people purchased digital downloads?  About 40 million in a year (based on 2013 research from NPD), and declining.  Of course, once someone has downloaded a file, she can play it any number of times, but the number of download buyers is a reasonable measure of active users of the purchased-download model.  So it’s safe to say that the number of people who obtain music using a DRM-free model (legally) is much lower than the number of people who get it through a model in which music is encrypted.  To be more precise, the percentage of people who purchase music downloads is only about 18% of the total digital music market.  (That’s a lower bound, assuming no overlap, but it doesn’t include satellite or digital TV radio.)

More recent research by GlobalWebIndex reinforces the trend.  The firm’s Q1 2015 survey of teenagers around the world shows that while 60% used a streaming service during the last month, only 21% purchased a music download.

Compare this to the numbers in 2008, the end of the supposed “DRM era.”  At that time, iTunes represented about three-quarters of the music download market.  At least 10 million people in the U.S. purchased music on iTunes on a monthly basis, meaning that over 13 million purchased music downloads from anywhere.  Internet radio had perhaps 7 million active users, and on-demand services had less than 2 million subscribers.  In other words, download purchasers accounted for a lower bound of 60% of all Internet music users in 2008 — more than triple the percentage today. (These are all rough estimates; email me to find out how I calculated them.)

An even better way of measuring the percentage of digital music delivered with and without encryption is the revenue that record labels get from music through these various modalities.  For this, we turn to numbers compiled by the RIAA.  Here’s what they tell us:

DRM-free percent

Percentage of recorded music industry digital revenue from DRM-free vs. encrypted delivery modalities. Source: RIAA.

This chart shows the percentages of total digital recorded music revenues that come from DRM-free vs. encrypted modalities.  DRM-Free includes downloaded singles, downloaded albums, kiosk sales, and ringtones (even though some of the latter may be DRM-protected).  Encrypted categories include SoundExchange distributions (all forms of digital radio), Paid Subscriptions (paid on-demand services and premium Internet radio such as Pandora One and Rhapsody unRadio), and Ad-Supported On-Demand Streaming (YouTube, Vevo, Spotify Free).

The chart starts in 2009, when iTunes went fully DRM-free.  2008 was a transitional year as two of the major labels (first EMI, then UMG) began to go DRM-free on iTunes, and Amazon launched its completely DRM-free MP3 store.  Before then, perhaps 5% of digital music revenue was from DRM-free sources.

The trend began to reverse in 2011, when Spotify launched and the major labels completed deals with YouTube in which they allow most of their material to be shown in exchange for a share of ad revenue, resulting in “hockey stick” growth in listenership to on-demand services that continues to this day.

From this data it’s fair to predict that the lines will cross, that encrypted modalities will represent the majority of recorded digital music revenue by 2016.

As a footnote, the fastest-growing category of recorded music revenue is neither on-demand nor Internet radio; it’s vinyl.  Vinyl has come back from near death in 2010; its revenue growth is at 50% per year and accelerating; it now contributes more revenue to record labels than YouTube.  Now here’s a rather metaphysical question: should we count vinyl records as DRM-free or not?  You decide, but look here first.

Forbes – High-Res Audio for the Masses: Innovations in Sound Encoding Technology December 24, 2014

Posted by Bill Rosenblatt in Music, Technologies, Uncategorized.
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I’ve just published another piece in Forbes in my series on the emerging market for “high-res” audio, reflecting the recent surge in activity in this space as both the major record labels and consumer electronics companies see opportunity in expanding the market for high-quality digital audio beyond the audiophile niche.  This piece is about new codec technologies — an area that hasn’t seen much innovation since a decade ago.  As always, your feedback is most welcome.

As a postscript to that piece, it continues to amaze me — in a positive way — that vinyl is making such a comeback.  Our favorite indie music store in Western Massachusetts recently got rid of all of its CDs and is now selling vinyl exclusively.  Even Barnes & Noble is now selling a small, mostly highbrow selection of vinyl LPs.  Most amazing of all?  They’re flying off the shelves at an eye-opening $22 apiece.  And everyone used to complain about the $16 CD — which didn’t scratch, took up less space, was easier to play, etc., etc.

Forbes – Going Hi-Fi To Compete With Spotify (And Google And Apple) December 1, 2014

Posted by Bill Rosenblatt in Music, Services.
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My latest piece in Forbes is about the new breed of subscription music services that offer lossless compression, in order to appeal to the audiophile crowd.  Two of them recently launched in the U.S. market: Tidal and Deezer Elite.  I speculate about whether this development will finally lead to an era where top audio quality has finally caught up to low cost and convenience.  As always, I welcome your feedback.

Why Does Apple Want to Halve the Price of On-Demand Music? October 26, 2014

Posted by Bill Rosenblatt in Business models, Music, Services, United States.
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Apple is asking record labels to agree to a $5/month subscription price for its Beats Music on-demand service, instead of the going rate of $10/month that it and others (Spotify, Rhapsody, etc.) charge in the US market.  This development started as rumor a few weeks ago, then rose to specific evidence of record label conversations confirmed by musician and artists’ rights champion David Lowery at the recent Common Ground intellectual property conference at George Mason University near Washington DC.  As of this past Friday, the evidence became strong enough for the Wall Street Journal to treat it as fact.

Re/code also reports that despite the major labels’ apparently cool reception to the new pricing, Spotify is already responding by offering a family plan in which additional family members can add their own subscriptions to a $10/month plan for $5/month.  (Beats Music has been offering discounted family plans through AT&T wireless accounts for a while.)  As Re/code reports, one reason that Apple has given for the change to $5/month is that it has found that its best iTunes customers spend about $60/year on the service.  Given that music download revenue has begun to drop rapidly, Apple apparently believes that it can entice iTunes users to an all-you-can-eat subscription service at the same spending level, instead of losing those users to free music services (or illegal downloads).  In other words, $5/month subscriptions are being offered to labels as a way to shore up revenues at $60 ARPU (annual revenue per user) from people who actually still pay for music .

This reasoning is clearly designed to appeal to record labels, which are known to be unhappy about the accelerating decline in purchases.  But is it Apple’s real motivation for halving the price of on-demand subscriptions?  I don’t think so.

The first thing to understand about on-demand music services is that despite all the talk about monthly subscription fees, the vast majority of users do not pay for them.  Research from Edison Research and Triton Digital has determined that the use of YouTube as a de facto on-demand music streaming service draws a US audience of four times all other on-demand services combined — including Spotify (paid and free).  Put another way, only about 8% of US users of on-demand music services actually pay for them.  Spotify’s percentage of paying US users has stabilized at 25% — which I am proud to say that readers of this blog predicted three years ago — while Google Play, Rhapsody, Rdio, and Beats Music do not offer free tiers for on-demand music.

On-demand music use is growing rapidly, but Apple only has a tiny piece of the market.  Beats Music has merely a few hundred thousand users, compared to the estimated 60 million who use YouTube as an on-demand music service and Spotify’s 12 million total US users.  Even when one counts only paying users, Beats Music still accounts for well below 10% of the market.

Apple clearly must do something dramatic to become a serious contender.  Integrating Beats Music into iTunes (and thereby marketing it heavily to the enormous iTunes audience) by itself isn’t going to expand the market enough to be meaningful to Apple.  And even if Apple thinks it can increase the paying user base disproportionately by halving the price, that’s not much of an increase in audience size — especially since the vast majority of the on-demand audience already gets it for free.

No, my view is that Apple’s primary purpose in halving the price is to throw the on-demand market into disarray.  Services like Spotify and Rhapsody have been operating their businesses based on the expectation of $10/month revenue for years.  Obviously, if Apple comes out with a rebranded Beats Music (iTunes On Demand, iTunes Beats, iTunes Unlimited, iTunes Jukebox, or whatever they end up calling it) at $5/month, all of the other on-demand services will have to offer the same price.  Spotify, Rhapsody, and Rdio would find themselves with unsustainable financial structures and/or the necessity of renegotiating their record label deals.  The best that any of these “pure play” services could hope for is to become acquisition bait for companies that are big and diverse enough to be able to cross-subsidize them (Yahoo and AOL come to mind).  A move to $5/month could even cause Google to rethink its plan to launch a paid subscription music service associated with YouTube.

In short, I predict that if Apple gets record companies to agree to $5/month for on-demand music, we will see a repeat of the shakeout that occurred around 2007-2008, which left only a handful of on-demand services in the market.  When the smoke clears, Apple could well find itself with a much larger chunk of the on-demand music market than if it were to try to grow its share organically.

The remaining mystery is whether Apple intends to add a free tier to Beats Music, such as a limited on-demand capability under the iTunes Radio banner.  The advent of free, legal on-demand music from Spotify and (effectively) YouTube in 2011 did cause the on-demand model to grow from a niche product for music geeks to a mainstream offering.  On-demand is still not quite as popular as Internet radio — I estimate the on-demand audience to be about 60% of the size of the audience for Pandora, iHeartRadio, etc. — but it has surpassed the user base for paid digital downloads.

On-demand is clearly a big part of the music industry’s digital future.  Apple is behind in the transition from downloads to access-based models and needs to catch up.  Only dramatic, disruptive gestures can make this happen, and halving the price is certainly one of them.

Now, since you were so good at predicting Spotify’s percentage of paying US users, let’s see how you do with this one.  Here’s a poll: 

UPDATE 29 March, 2015: It looks like we were wrong.  Although the majority of respondents to the poll predicted that Apple would succeed in lowering the price of subscription music to $5/month, the major labels are holding the line at $10/month.  That’s the pricing that Apple expects to maintain when it launches its rebranded on-demand streaming service later this year.

That Old Question Again September 28, 2014

Posted by Bill Rosenblatt in DRM, Economics, Music, Services, United States.
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I’m looking at the U.S. music revenue numbers that the RIAA just released for the first half of 2014; at the same time, I’m reading Download: How Digital Destroyed the Record Business, a 2013 book by the noted UK music journalist Phil Hardy, who tragically passed away in April of this year.  For “numbers guys” like me, the book is a bonanza of information about the major labels’ travails during the transition from CDs to purely digital music. It’s a compendium of zillions of hard facts and opinions delivered with Hardy’s typical dry British wit  — though (like his other books) it would have benefited from a copy editor and, occasionally, fact checker.

One of the statements in Hardy’s book that sits somewhere between fact and opinion is his assertion — as recently as last year! — that the elimination of DRM from music downloads boosted sales.  Sigh… that old question again.

The question of whether DRM-free music download sales helped or hindered the music industry (no doubt it was good for consumers) served as a sort of Rorschach test back in the late 2000s after Apple and Amazon started selling DRM-free downloads — rather like the Rorschach test of Radiohead’s “pay what you wish” experiment in 2011.  If you hated DRM, DRM-free was going to usher in a bright new era of opportunity for everyone; if you liked it, removing DRM was going to spell the end of the music business.

So I thought that with the RIAA revenue statistics database in hand, I could put the old question to rest.  Here is what I found:

U.S. Digital Music Revenue, millions of 2013 dollars.  Source: RIAA.

U.S. Digital Music Revenue, millions of 2013 dollars. Source: RIAA.

In this chart, “Downloads” includes singles plus albums; “Streaming” includes both paid and ad-supported on-demand services (Spotify, Rhapsody, YouTube, Vevo)* as well as Internet radio (Pandora, iHeartRadio, Slacker, TuneIn Radio), plus satellite radio and a few other odds and ends.  I estimated totals for 2014 by taking the RIAA’s newly released numbers for the first half of this year and applying growth rates from the second half of 2013 to the first half of this year.

The relevant dates are:

  • April 2003: Apple opens the iTunes Music Store.
  • May 2007: Apple launches iTunes Plus, selling tracks from EMI without DRM for $1.29.
  • January 2008: Amazon launches AmazonMP3 with DRM-free MP3s from all labels.
  • May 2009: iTunes goes completely DRM-free in the US.
  • 2011: Spotify launches its “freemium” model in the US; major labels complete ad revenue share deals with YouTube, so that virtually all major-label music is available on YouTube legally.

Before we get into the analysis, let’s get one thing out of the way: the biggest change in music industry revenues from 2003 onwards was, of course, the dramatic drop in revenues from CDs.  Those numbers aren’t shown here; for one thing, they would dwarf the other numbers.  This is all part of the move from physical products to digital products and services, which has affected both downloads and streaming.

Now let’s look at what happened after 2007.  Growth in download sales began to slow down a bit, while streaming remained fairly flat.  Starting in 2008, growth in paid downloads remained virtually unchanged until the ad-supported on-demand year of 2011.  2008 was a transitional year for DRM, as Apple only offered a small amount of music DRM-free (and at higher prices), while Amazon offered all DRM-free music but had only a single-digit share of the market.  The real post-DRM era for paid downloads started in May 2009.

So, to see what happened after the major labels agreed to sell digital files without DRM, we need to look at the period from May 2009 to the start of 2011, which is highlighted in the chart.  What happened then?  Not much of anything.  Growth in download sales was essentially unchanged from the preceding two years.

One could argue that if streaming hadn’t ever existed, download revenues might have grown after January 2009, given that streaming revenues from 2009-2011 started to grow faster.  But given that streaming growth didn’t accelerate immediately after January 2009, I wouldn’t make that causality.

So there you have the answer to the old question: removing DRM from music files had little or no effect on download sales.

As a postscript, my 2014 projections included an interesting factoid: vinyl album sales, if current growth rates continue, should reach about $340 million this year.  That takes the resurgence of vinyl from a mildly curious hipster phenomenon to almost 5% of total music revenue.  For comparison purposes, it makes vinyl almost as valuable as ad-supported on-demand streaming (YouTube, Spotify Free, Vevo) and puts it on track to exceed that segment in 2015.  Vinyl could even end up equaling CD revenue sometime around 2016-2017 — for the first time since the late 1980s!

*Paid subscription on-demand services include download features, which use DRM to tie files to users’ devices and make them playable as long as the user pays the subscription fees. But the RIAA reports these as part of “subscription services,” lumping them in with streaming on-demand music.

Ghosts in the UltraViolet Machine September 24, 2014

Posted by Bill Rosenblatt in Business models, Music, Publishing, Services, Video.
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A few brief items of interest this week.  First is a reminder about Copyright and Technology London 2014 next Wednesday – there’s still time to register!  We have a great lineup of keynote speakers, including Shira Perlmutter, Maria Martin-Prat, and Dominic Young of the Copyright Hub, as well as panels on hot issues such as ISP responsibility for policing infringement and content protection for “4K” video content.  I look forward to seeing some of you in London next week.


Apple and Amazon Add UltraViolet-Style Family Accounts

Amazon and Apple recently announced the addition of “family accounts” for sharing content.  These enable up to six users who share a billing address to link accounts and get access to each other’s content, including e-books, apps, music, and video.  Apple’s Family Share is a feature of the new version of its mobile operating system, iOS 8, while Amazon’s Family Library feature is expected to launch later this Fall.

The primary difference between the two is that Apple Family Share enables the sharing of all videos downloaded from iTunes while Amazon only allows sharing of video streamed via Amazon Prime Instant Video, as opposed to videos purchased by non-members of Amazon Prime.  (In other words, this is yet another gambit to entice more users into Amazon’s US $99/year Prime service.)  Some websites have commented that Amazon’s service does not allow sharing of purchased music, while Apple’s does; but this is a bit silly given that music downloaded from both services is DRM-free.

It’s not particularly surprising that Hollywood studios have given both Amazon and Apple the rights to extend purchases to family accounts.  That’s because the rights are similar to those that the studios already extend for the same types of content under UltraViolet usage rules.  In fact, the availability of family access to video content from two of the biggest digital movie retailers eats into the advantages that UltraViolet offers.  (UltraViolet’s principal retail partners are Nook (Barnes & Noble), Target, and Best Buy).

More surprising is that one of these retailers decided it was worth the development effort to add this feature (causing the other to add it as well); perhaps this is a sign that UltraViolet is catching on?  Either way, this is yet another example of how the mainstreaming of digital content products and services has exposed deficiencies in the rights that users get to digital content compared to physical products such as DVDs (not to mention print books) and has led to innovation.  I would expect a similar announcement from Google Play in time for the holiday shopping season.

Garth Brooks Launches GhostTunes

Finally, a minor hypestorm erupted in the music industry recently over the beta launch of GhostTunes, a new digital music retail site spearheaded by country music superstar — and longtime digital holdout — Garth Brooks.  Contrary to initial reports, GhostTunes does not only sell albums; it also sells single tracks — though only at artists’ or labels’ discretion. Purchased music is available in an online locker and can be streamed or downloaded as DRM-free MP3s.  Some items are multi-album packages that contain multimedia items, in the vein of Apple’s iTunes LP.

Many musical artists will surely like GhostTunes’ willingness to sell single tracks only if the artist permits it.  The recorded music industry has been looking for ways to prop up the sales of albums in the digital age — just as UltraViolet was originally intended to help Hollywood studios prop up sales of movies while all of the growth is in streaming.  According to RIAA statistics, single track sales accounted for about 1% of unit volume when the iTunes Music Store opened in 2003 and have grown to over 80% today.

Yet GhostTunes looks like it is shaping up to be the music industry’s Pluto Nash moment: an expensive undertaking whose primary function is to cater to the whims of a big influential star rather than to be successful as a business.  Although GhostTunes is billed as an “artist-friendly” retail site, there’s little reason for anyone to go there other than the exclusive availability of Garth Brooks’s music in digital form… legally. The music selection comes from all three major labels but is limited: the press release touts “a million tracks” (compared to more than 20 million on iTunes or Spotify), while the site itself appears even more limited to a few dozen releases in each of several genres.  The highlight of the current catalog is a bundle of a dozen albums plus a concert video from Brooks himself for $30.

GhostTunes received a moderate amount of attention two weeks ago, ranging from neutral and factual to critical and skeptical. The press release contains a combination of vague hype (“music fans and artists deserve more”) and either falsehoods or anachronisms (“Just as it seemed fans would be left buying music in an increasingly more restrictive configuration without the ability to take the music they purchase anywhere they please, GhostTunes.com offers a new way.”)

It’s hard to see what GhostTunes can possibly offer that isn’t available on iTunes or Amazon — other than low prices for album bundles — but we’ll see what it does offer when (or if) it goes from beta to full launch.

MP3Tunes and the New DMCA Boundaries March 30, 2014

Posted by Bill Rosenblatt in Law, Music, Services, United States.

With last week’s jury verdict of copyright liability against Michael Robertson of MP3Tunes, copyright owners are finally starting to get some clarity around the limits of DMCA 512.  The law gives online service operators a “safe harbor” — a way to insulate themselves from copyright liability related to files that users post on their services by responding to takedown notices.

To qualify for the safe harbor, service providers have to have a policy for terminating the accounts of repeat infringers, and — more relevantly — cannot show “willful blindness” to users’ infringing actions.  At the same time, the law does not obligate service providers to proactively police their networks for copyright infringement.  The problem is that even when online services respond to takedown notices, the copyrighted works tend to be re-uploaded immediately.

The law was enacted in 1998, and copyright owners have brought a series of lawsuits against online services over the years to try to establish liability beyond the need to respond to one takedown notice at a time.  Some of these lawsuits tried to revisit the intent of Congress in passing this law, to convince courts that Congress did not intend to require them to spend millions of dollars a year playing Whac-a-Mole games to get their content removed.

In cases such as Viacom v. YouTube and Universal Music Group v. Veoh that date back to 2007, the media industry failed to get courts to revisit the idea that service providers should act as their own copyright police.  But over the past year, the industry has made progress along the “willful blindness” (a/k/a “looking the other way”) front.

These cases featured lots of arguments over what constitutes evidence of willful blindness or its close cousin, “red flag knowledge” of users’ infringements.  Courts had a hard time navigating the blurry lines between the “willlful blindness” and “no need to self-police” principles in the law, especially when the lines must be redrawn for each online service’s feature set, marketing pitch, and so on.

But within the past couple of years, two appeals courts established some of the contours of willful blindness and related principles to give copyright owners some comfort.  The New York-based (and typically media-industry-friendly) Second Circuit, in the YouTube case, found that certain types of evidence, such as company internal communications, could be evidence of willful blindness.  And even the California-based (and typically tech-friendly) Ninth Circuit found similar evidence last year in a case against the BitTorrent site IsoHunt.

The Second Circuit’s opinion in YouTube served as the guiding precedent in the EMI v. MP3Tunes case — and in a rather curious way.  Back in 2011, the district court judge in MP3Tunes handed down a summary judgment ruling that was favorable to Robertson in some but not all respects.  But after the Second Circuit’s YouTube opinion, EMI asked the lower court judge to revisit the case, suggesting that the new YouTube precedent created issues of fact regarding willful blindness that a jury should decide.  The judge was persuaded, the trial took place, and the jury decided for EMI.  Robertson could now be on the hook for tens of millions of dollars in damages.

(Eleanor Lackman and Simon Pulman of the media-focused law firm Cowan DeBaets have an excellent summary of the legal backdrop of the MP3Tunes trial; they say that it is “very unusual” for a judge to go back on a summary judgment ruling like that.)

The MP3Tunes verdict gives media companies some long-sought leverage against online service operators, which keep claiming that their only responsibility is to respond to each takedown notice, one at a time.  This is one — but only one — step of the many needed to clarify the rights of copyright owners and responsibilities of service providers to protect copyrights.  And as far as we can tell now, it does not obligate service providers to implement any technologies or take any more proactive steps to reduce infringement.  Yet it does now seem clear that if service providers want to look the other way, they at least have to keep quiet about it.

As for Robertson, he continues to think of new startup ideas that seem particularly calculated to goad copyright owners.  The latest one, radiosearchengine.com, is an attempt to turn streaming radio into an interactive, on-demand music service a la Spotify.  It lets users find and listen to Internet streams of radio stations that are currently playing specific songs (as well as artists, genres of music, etc.).

Radiosearchengine.com starts with a database of thousands of Internet radio stations, similar to TuneIn, iHeartRadio, Reciva, and various others.  These streaming radio services (many of which are simulcasts of AM or FM signals) carry program content data, such as the title and artist of the song currently playing.  Radiosearchengine.com retrieves this data from all of the stations in its database every few seconds, adds that information to the database, and makes it searchable by users.  Robertston has even created an API so that other developers can access his database.

Of course, radiosearchengine.com can’t predict that a station will play a certain song in the future (stations aren’t allowed to report it in advance), so users are likely to click on station links and hear their chosen songs starting in the middle.  But with the most popular songs — which are helpfully listed on the site’s left navbar — you can find many stations that are playing them, so you can presumably keep clicking until you find the song near its beginning.

This is something that TuneIn and others could have offered years ago if it didn’t seem so much like lawsuit bait.  On the other hand, Robertson isn’t the first one to think of this: there’s been an app for that for at least three years.


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