Capitol Records Prevails in ReDigi Case April 1, 2013
Posted by Bill Rosenblatt in Law, Music, United States.16 comments
A federal court in New York City handed down summary judgment against ReDigi over the weekend in its legal fight with Capitol Records. In his ruling , Judge Richard Sullivan found the digital resale service liable for primary and secondary copyright infringement. He rejected ReDigi’s arguments that its service, which enables users to resell music tracks purchased on iTunes, is legal under the doctrines of fair use and first sale.
The decision is a surprising blow to the Boston-based startup, especially given that Judge Sullivan refused Capitol’s request for a preliminary injuction early on in the case.
The central holding in Judge Sullivan’s opinion was that in order to resell a digital file, a user has to make another copy of it — even if the original copy disappears, and even if two copies never coexist simultaneously. He based this holding on a literal interpretation of the phrase “copies are material objects” from Section 101 of the Copyright Act.
Once Judge Sullivan established that the ReDigi system causes another copy to be made as part of the resale process, the rest of his opinion flowed from there:
- The user didn’t have a right to make that new copy, therefore it’s infringement — specifically of Capitol’s reproduction and distribution rights under copyright law.
- ReDigi knowingly aided and abetted, and benefited from, users’ acts of infringement, therefore it’s secondary as well as primary infringement.
- The user resold the new copy, not the original one, therefore it’s not protected under first sale (which says that a consumer can do whatever she wants with a copy of a copyrighted work that she lawfully obtains).
- The “new” copies made in the ReDigi process don’t qualify as fair use: they are identical to the originals and thus aren’t “transformative”; they are made for commercial purposes; they undercut the originals and thus diminish the market for them.
In sum, as Judge Sullivan put it bluntly, “ReDigi, by virtue of its design, is incapable of compliance with the law.” At the same time, he was quick to point out that his was a narrow ruling based on a literal interpretation of the law, saying that “this is a court of law and not a congressional subcommittee or technology blog[.]” He investigated Congress’s intent regarding digital first sale and found that it hadn’t advanced since the U.S. Copyright Office — the copyright advisors to Congress — had counseled against allowing digital resale back in 2001.
I’ve always assumed that any district court decision in this case would be minimally relevant, as it would be appealed. ReDigi has already stated that it will appeal. And the opinion does contain patches of daylight through which an appeal could possibly be launched.
Most important is the opinion’s focus on the making of a “new copy” during the resale process. It’s hard to see how this gibes with the many “new copies” of digital files made during normal content distribution processes, including streaming as well as downloads.
In other words, if ReDigi is making “new copies” without authorization, then so are countless other technologies. Some such copies might be covered under fair use or the DMCA safe harbors. Other “new copies” are considered “incidental” (not requiring permission from the copyright holder); the judge didn’t explain why copies made by the ReDigi system don’t qualify as incidental. ReDigi did make a similar argument; the judge didn’t buy it because it didn’t involve the issues in this case, but a higher court, looking at the broader picture of digital first sale, might see things differently.
Judge Sullivan’s reliance on the Copyright Office’s 2001 report on digital first sale is also somewhat problematic. The Copyright Office believed that a “forward-and-delete” mechanism — not unlike what ReDigi has built — could actually support digital first sale. The Copyright Office simply concluded that such a mechanism would not be practical to implement. This does not comport with Judge Sullivan’s assertion that “forward-and-delete” requires a new copy to be made and thus cannot qualify as first sale in the first place.
Another notable feature of Judge Sullivan’s opinion is his assertion that “a ReDigi user owns the phonorecord that was created when she purchased and downloaded a song from iTunes to her hard disk.” The assertion that a user “owns” a digital download is itself controversial and not based on legal precedent. Judge Sullivan found no legal precedent for digital first sale, but somehow he did find a basis for asserting that digital downloads are “owned.”
Retailers of digital goods believe that they don’t actually sell them in the way that books, CDs, or DVDs are sold; instead they license them to users under terms that may resemble sale. The question of sale vs. licensing of copyrighted digital content is a gray area in the law, and it wasn’t up for examination here: Apple, for example, wasn’t a party to the case and remained silent throughout. But if Apple (or another digital content retailer) ever objects to its content being “resold” through a third-party service, it will have to deal with Judge Sullivan’s language; and once again, it may be harder for a higher court to ignore this aspect of digital resale when determining its legality.
It remains to be seen whether the above issues can be forged into a legal theory that can convince the Second Circuit appeals court to reverse Judge Sullivan’s ruling. Yet even if ReDigi throws in the towel and ceases operations, its very existence has called a lot of attention to the idea of digital resale. The mechanisms are in place today: beyond ReDigi, there’s at least one more startup (the NYC-based ReKiosk); and Amazon was recently granted a patent for resale of digital goods. Indie music labels and a few e-book publishers, at first, will most likely experiment with it.
This court ruling won’t eliminate digital resale; if let stand, it will simply restrict it to content that copyright owners have given permission to resell — permission that will probably include say over pricing, timing, and other factors. This will complicate the lives of resellers, but it will ensure that digital resale doesn’t harm copyright holders. In other words, ReDigi has let the digital resale genie out of the lamp. It’s bound to happen, one way or another.
Copyright Alert System Launches in U.S. February 25, 2013
Posted by Bill Rosenblatt in Fingerprinting, Law, Music, Video.2 comments
With today’s launch of the Copyright Alert System (CAS) by the Center for Copyright Information, the United States joins the list of countries that have adopted a so-called graduated response system for educating Internet users about online copyright infringement and taking steps to punish repeat offenders. The CAS is finally launching after a few months’ delay, part of which was supposedly due to the effects of Sandy, the mega-storm that hit the northeast U.S. late last year. Other graduated response countries include France, New Zealand, and South Korea; the United Kingdom is currently struggling with its own implementation.
The CAS is a partnership between music and video content owners on the one hand and major ISPs on the other. The content owner representatives include not just the majors (RIAA and MPAA) but also the Independent Film and Television Alliance (IFTA) and American Association of Independent Music (A2IM). On the ISP side, membership includes the five largest providers: AT&T, Verizon, Time Warner Cable, Comcast, and Cablevision. Book and game publishers are not involved at this point.
The CAS is run by Jill Lesser, a tech policy veteran with deep experience on both the content and ISP sides. It has an advisory board whose principal function seems to be to curb abuses: it includes advocates for looser copyright laws (Gigi Sohn of Public Knowledge) and user privacy (Jules Polonetsky of the Future of Privacy Forum).
The CAS works similarly to other graduated response regimes: copyright owners employ infringement monitoring services, which can identify copyrighted works as users send them around the Internet using fingerprinting and other content recognition technologies. The monitoring services send notices to ISPs, which issue warning messages to users. The warnings get stronger with repeat infringements.
ISPs can opt to punish repeat alleged offenders by such means as throttling bandwidth and making users watch videos about copyright. (ISPs already have policies for terminating repeat infringers’ accounts, which they must have in order to maintain their eligibility for the DMCA safe harbor.)
Where the CAS differs from other graduated response systems is that it is not tied to law enforcement. The arrangement between content owners and ISPs is voluntary. ISPs will not terminate or suspend users’ Internet accounts, nor will they pass information about infringements on to copyright owners. Another difference is that the CAS is not being funded through taxes or levies on Internet service (although funding sources are confidential).
In other words, the CAS is a more purely educational approach than France’s HADOPI or other systems. Analysis of the CAS’s results will therefore be more useful in determining how successful education by itself can be in getting people to respect copyright. The hope is that education will do more than draconian statutory damages or blunt-instrument legislation.
Given how little effect those approaches have had, it may not be difficult to declare the Copyright Alert System a relative success in the years to come. As it is now, it seems like quite a reasonable system: it raises awareness about the importance of copyright by using advanced Internet technologies instead of relegating enforcement to outmoded nontechnical legal means; it is permeated with references to legal content sources; and it doesn’t cost users a thing.
Music Subscription Services Go Mainstream September 17, 2012
Posted by Bill Rosenblatt in Business models, Music, Services.add a comment
While revisiting some older articles here, I came across a prediction I made almost exactly a year ago, after Facebook’s announcement of integration with several music subscription services at its f8 conference. I claimed that this would have a “tidal wave” effect on such services:
I predict that by this time next year, total paid memberships of subscription music services will reach 10 million and free memberships will cross the 50 million barrier.
So, how did I do? Not bad, as it turns out.
The biggest subscription music services worldwide are Spotify and Deezer. Let’s look at them first.
Spotify hasn’t published subscribership data recently, but music analyst Mark Mulligan measured its monthly membership at 20 million back in May of this year. Judging by the trajectory of Mulligan’s numbers, it ought to be about 24 million now. In fact, Mulligan shows that Spotify’s growth trajectory is about equal to Pandora’s. Furthermore, that’s only for users whose plays are reported to Facebook. A redoubt of users — such as yours truly– refuse to broadcast their plays that way (despite constant pleas from Spotify), so make it at least 25 million.
Deezer, based in France, is Spotify’s number one competitor outside of the US. A month ago, PaidContent.org put Deezer’s numbers at 20 million total but only 1.5 million paid, and added that Spotify’s paid subscribership is at 4 million.
Rhapsody is the number two subscription service in the US market. Unlike Spotify and Deezer, Rhapsody has not embraced the “freemium” trend and has stuck to its paid-only model. Rhapsody passed the 1 million subscriber milestone last December.
The next tier of subscription services includes MOG, Rdio, and MuveMusic (where the monthly fee is bundled in with wireless service) in the US; regional players including WIMP, simfy, and Juke (Europe); Galaxie (Canada); various others in the Asia-Pacific market; and Omnifone’s recently launched multi-geography rara.com. These should all be good for a few hundred thousand subscribers each.
So among all these services, 50 million looks pretty safe for the number of total subscribers.. As for the number of paid subscribers, IFPI put it at 13.4 million for 2011 in its 2012 Digital Music Report, published in January. Given that this represents a 63% increase over 2010, we can be confident in saying that the figure now is more like 17-18 million, but I’d back it off somewhat because IFPI probably counts services that I would not categorize as subscription (such as premium Internet radio). So let’s say 13-15 million paid – way past my prediction of 10 million.
It’s also worth noting that if these figures are correct, the percentage of paid subscribership is in the 26-30% range. That’s in line with the 20-30% that readers predicted here when I ran a poll on this a year ago — the most optimistic of the poll answer choices.
To put this in perspective, 50 million still falls far short of the audiences for paid downloads, Internet radio, and even YouTube, which are all well above 100 million worldwide. But it proves that the public is catching on to the value of subscription services, and they are no longer a niche product for “grazers.”
The Shame Factor August 30, 2012
Posted by Bill Rosenblatt in Economics, Music.3 comments
Larry Lessig’s first book, Code and Other Rules of Cyberspace, is a landmark work in many respects. One of the less-mentioned ones is his description, starting on p. 88, of the four forces that govern cyberspace (or any other environment that humans inhabit or interact with): the market (economics), architecture (technology), people’s behaviors (norms), and laws (self-explanatory). This insight is an infinitely powerful tool for evaluating the digital world and attempts to influence the way it works.
In the world of content, we can view attempts to enforce copyright and uphold the value of creative works through the framework of Lessig’s four forces. At one time or another, pro-copyright interests fight the battle on all four fronts: they support new business models that “compete with free” (the market), they try to implement technologies that limit what users can do with content or monitor cyberspace for copyright abuses (architecture), they try to educate consumers on behavior regarding copyrighted material (norms), and they litigate or lobby for stronger copyright protections (laws).
Most of what we talk about here is some combination of market, architecture, and legal factors. The norms front has been both uninteresting and ineffective: it consists mainly of copyright holders’ desires to “make it easy to do the right thing” (through arms-length licensing deals with third parties that have other agendas, e.g. profit) and preachy educational campaigns (through trade associations that no one trusts).
Now David Lowery, of “Open Letter to Emily White” fame, has come up with what might just be the first interesting twist on norms: shaming big businesses. In his blog The Trichordist, he has written a series of posts that all follow the same template: “[Musician with Artistic Cred] Exploited by [Name-Brand Companies]!!” The musical artists with critical/indie cred have included Peter Gabriel, Neko Case, Aimee Mann, Neil Young, Jared Leto, Talib Kweli, and Tom Waits; the name-brand companies have included Volkswagen, LG, Ford, Target, Macy’s, Levi’s, Wells Fargo, BMW, Toyota, American Express, AT&T, Wendy’s, and many others.
Here’s what Lowery is trying to accomplish. Torrent and file-sharing sites make money by selling ads that they show to people who come to those sites to download infringing music. The artists and songwriters make no money from these ads (unlike, say, on YouTube, which shares ad revenue in many cases). The companies that advertise don’t buy the ads themselves, of course; instead they are placed by online ad networks like ValueClick, Turn Media, 24/7 Real Media, AdBrite, Collective Network, Specific Media, and those run by Google, Yahoo, AOL, and Microsoft. Some ad networks buy ad inventory wholesale from other ad networks. In other words, the name-brand companies may not even know where their ads are being placed.
Many companies have policies with ad networks that their ads should not be placed on certain types of sites, including sites that offer infringing content (as well as porn, political extremism, etc.). This is analogous to traditional advertising, where companies tell media buyers where and where not to place ads in publications, on TV shows, and so on. The problem is that such policies often aren’t enforced — especially when multiple layers of ad networks sit between the advertiser and the site with the inventory.
Lowery’s objective is to generate negative publicity that will shame these companies into actually enforcing these policies, through audits and other measures, thereby starving the infringing sites of ad revenue. He constructs his posts in such a way as to appeal to journalists looking for sensationalist angles like “Hip/Not-Rich Artist Exploited!” (He isn’t complaining about exploitation of Lady Gaga or Jay-Z.)
I admire Lowery and his tactics. He’s trying to do what he can with the tools he has (e.g. no multi-million-dollar budget for lawyers or lobbyists) and to build on the momentum he generated in the firestorm following his Open Letter to Emily. Yet I had not been impressed with his emphasis on norms, or as his blog slogan has it, Artists for an Ethical Internet.
In general, people behave economically rationally. If there’s a way to get something for free instead of paying for it, and the likelihood of getting caught is virtually zero, people will choose free. If your boyfriend offers to fill your iPod with several gigabytes of his favorite music, you’ll take it and dive right in. Trying to change this behavior through appeals to “ethics” is tantamount to fund drives on public broadcasting: it might work for a small, affluent minority but is hardly enough to sustain creativity in general.
Yet ethics do have economic value to corporations with consumer brands. Bad PR can cost real money. No company brand manager wants another Apple/Foxconn type situation on his or her hands. Lowery has written to advertising departments of consumer product companies and gotten a couple of positive responses: thanks for bringing this to our attention, we will certainly clamp down on this in the future. To add oomph to his message, Lowery often points out that the sites that feature infringing material usually also have ads from companies that offer Ukrainian mail-order brides, porn, and other things with which mainstream consumer product companies probably don’t want to be associated.
It’s an interesting and innovative gambit. However, I have to wonder how effective it will be. So far, no journalists appear to have picked up on any of Lowery’s posts, even though he has been at this for a few weeks. Maybe he’ll have better luck after everyone returns from summer vacations, but he could use some help in getting the message out. (Hello, Future of Music Coalition??)
The economics behind Lowery’s approach are in line with those of the failed SOPA and PIPA legislation: focus on squelching the supply of infringing content by cutting off economic benefits to the suppliers. This is considered to be “low hanging fruit” because it does not directly affect consumer behavior. But it has a major limitation: squelching supply of infringing content is highly unlikely to affect demand for it. If people can’t get their free content from KickassTorrents or FilesTube, they’ll get it from places that don’t make ad revenue, of which there are plenty. The most serious long-term issue is the dwindling perceived value of content. Getting AT&T and Ford to pull their ads from TorrentReactor and IsoHunt won’t help solve this problem.
ADDENDUM: One of Lowery’s posts did get noticed on adland.tv, a site featuring insider-y discussion of advertising industry topics that appears to be frequented primarily by art directors, i.e. the creative types who make the ads, not the media buyers. The upshot of the discussion there is “how difficult it is to find a network[] where the buyer has control” over where ads are placed.
The DMCA and Presidential Politics July 29, 2012
Posted by Bill Rosenblatt in Fingerprinting, Law, Music, United States.3 comments
A minor firestorm has hit the techblogosphere over the past several days regarding the removal of a Mitt Romney campaign ad on YouTube that contained a short clip of President Obama singing Al Green’s “Let’s Stay Together” (while at a campaign stop at the Apollo Theater in Harlem). Commentators used this as an occasion to blast an aspect of DMCA 512, the U.S. law that provides for “notice and takedown.” The knee-jerk reactions to this incident have been wrong-headed and a little bit depressing.
The law says that if a copyright owner sends a proper notice to a site operator (in this case Google for YouTube) about an unauthorized content item, then the operator may take the item down to avoid liability. The law enables the operator to provide counternotice but stipulates that the operator must wait 10 days after issuing the counternotice for a reply period before it can repost the item without risk of liability.
Sites like Public Knowledge and Ars Technica have focused on the fact that the five-second clip in the Romney ad is highly likely to be fair use, how dare BMG Music Publishing do this, etc., etc. Public Knowledge also complained that the counternotice period forced the political ad off the air for too long a time and thus constituted abuse of copyright.
There’s no question that the clip makes a fair use of the song snippet; the “fair use analyses” done by people like Public Knowledge’s Sherwin Siy are beside the point. More importantly, it’s wrong to blame the “evil music company” for instigating the takedown.
Here’s a much more likely explanation of what happened: The Obama campaign contacted the copyright owner and asked them to issue the takedown notice, as a tactical response to Romney’s attack ad. BMGMP issued the notice as a routine clerical matter, as it does all the time at the request of songwriters or their management. The notice triggered YouTube’s automated system, which took the clip down.
Mike Masnick at TechDirt — the only one here who appears to have done some actual investigation instead of mere grandstanding — noticed that other YouTube clips of Obama singing the song remained up for a while until they were taken down as well. He also found that other singers’ versions of the 1972 classic hit remained up. Masnick attributed this to overzealous lawyers at BMGMP ”doubl[ing] down” on takedowns for the sake of consistency.
Uh,no. The truth, once again, most likely lies in campaign tactics. The Romney campaign (or allied interests) probably tried to re-post the ad several times with different titles or metadata. The Obama camp then responded by asking BMGMP to use YouTube’s automated Content ID scheme (based on fingerprinting), which would find all instances of the singing president and get them taken down as well. And once again, BMGMP would have handled this as a routine request. This was the only way that the Obamians could have ensured that the attack ad would not reappear.
It’s also worth pointing out here that the DMCA 512 does not obligate anyone to take content down; it only enables someone to avoid liability by doing so. YouTube automates 512 takedowns to minimize risk of liability and do so as efficiently as possible.
In other words, YouTube also responded to this situation in a routine fashion. I would venture to guess that if a lawyer at YouTube actually looked at BMGMP’s takedown notice, he or she would have left the clip up, secure in the knowledge that no one would bother to file an actual copyright lawsuit against it. (Similarly, I’m convinced that no one with a legal brain at BMGMP looked at this initially either.)
In other words, if anyone is liable for abuse of copyright — which is itself actionable — it’s the Obama campaign, which simply used routine mechanisms at both BMGMP and YouTube to accomplish its aims. (Disclosure: I plan to vote for Obama in November.) Otherwise, the errors were of omission, not commission; no actual human beings at BMGMP or YouTube appear to have thought or cared about, let alone considered the fair use implications of, this incident.
Meanwhile, clips of Obama’s Apollo Theater performance have been restored to YouTube. Yes, it took time, but that’s what you get when humans have to decide questions of Fair Use.
P.S. Romney’s ad has always been available elsewhere, just not on YouTube.
The Artists’ Rights Movement July 10, 2012
Posted by Bill Rosenblatt in Music, Uncategorized.1 comment so far
The phenomenon that I called the Loweryquake has survived the press’s news-cycle rhythm and the proverbial 15-minute time limit. It continues to reverberate throughout the mainstream press and techblogosphere. It has led to a lot of what New York magazine last week called “actually pretty thoughtful online discussion.” And it has engendered what can only be called a movement in favor of artists’ rights.
This has nothing to do with the RIAA, MPAA, or any other representative of Big Media. The Artists’ Rights Movement is the product of actual content creators, real people who make the copyrighted works and receive the royalty checks… or not, as the case may be. They are in favor of stronger copyright enforcement, eager to expose technology industry profitability on the backs of recorded content, and deeply skeptical of many of the schemes that have been suggested to make up for lack of compensation from content in the digital age, from T-Shirts to “True Fans.” (They also sometimes espouse extreme positions such as curtailing First Sale.)
David Lowrey’s blog The Trichordist is fast becoming the unofficial house organ of the Artists’ Rights Movement. The Trichordist Random Weekly Reader, a weekly post of links to relevant articles around the web, is becoming as useful in its way as the lamented Rightscom Daily Briefing was before it was discontinued a few years ago. The Trichordist also aggregates other sympathetic blogs such as Copyhype and Fareplay, and more mainstream columnists such as Andrew Orlowski of The Register and Helienne Lindval at The Guardian.
Through The Thrichordist Random Weekly Reader I learned, for example, that the Center for Copyright Information (CCI) — the United States’ private-sector analog to graduated response regimes in countries like France — has appointed an Executive Director and is gearing up to launch later this summer. The surprising tidbit about this news is that they have appointed an advisory board that includes people representing consumers, privacy issues, and so forth — including Public Knowledge CEO Gigi Sohn.
It’s good to see Gigi Sohn doing something constructive like this. My opinion of Public Knowledge had been declining since its excellent white paper on 3D printing over a year ago. Its output has shifted towards shrill fire-up-the-base scare tactics. Its attempt to tie its Internet Blueprint to SOPA and PIPA was a particularly disingenuous piece of opportunism. Sohn has said that she will try to influence the CCI to stay away from copyright enforcement through suspensions of users’ ISP accounts. But more generally, the CCI advisory board will benefit from her point of view and, frankly, her presence will serve to blunt accusations that it’s a cabal between Big Media and ISPs and that consumers’ concerns aren’t being heard.
An article in today’s New York Times suggests that a main theme of this week’s annual exclusive Sun Valley media/tech summit will be constructive engagement on copyright infringement. On the one hand, RIAA CEO Carey Sherman has stated that he’s giving up on legislation as a remedy, now that SOPA and PIPA have failed (ACTA, which was soundly voted down in European Parliament last week, had long ago lost its teeth on copyright enforcement). He is more optimistic about “best practice” solutions arising from the private sector.
On the other hand, a top Google executive said, “we do not want to be building a business based on piracy.” Google also cosponsored an interesting new study of online copyright infringement carried out by BAE Systems Detica in the UK, and while — like all such studies — the methodologies can be questioned, this is another pleasantly surprising development.
These are all hopeful signs that, in the wake of the SOPA/PIPA defeat, the media and tech industries may be ending their hyper-partisanism, and in particular that the tech community may soften its “Party of No” stance regarding using technology to solve problems that were born of technology in the first place. Meanwhile, The Trichordist is clearly growing in influence; it may (to extend an analogy) even become an MSNBC to the likes of TechDirt’s Rush Limbaugh.
P.S. one organization that really needs to get the memo on the Artists’ Rights Movement is the Future of Music Coalition, which purports to represent independent musicians and songwriters. They could start by taking a hard look at their own advisory board.
The Loweryquake June 27, 2012
Posted by Bill Rosenblatt in Economics, Law, Music, Uncategorized.5 comments
David Lowrey is a semi-legendary musician in one of techdom’s most beloved genres, indie rock. He sits on Groupon’s advisory board. He’s neither a rich rock star nor a spokesman for the RIAA. As a university professor, he is more a beneficiary of what Larry Lessig calls “the academic patronage system” than of copyright. In other words, you’d expect David Lowrey to be one for “sticking it to the man.” Yet last week, he wrote a 3800-word masterpiece about the dire state of musical artists in the digital age and the moral compromises that got us there.
As everyone involved with music knows by now, Lowery’s “Letter to Emily White” was originally occasioned by a blog post by an intern of that name at National Public Radio, who admitted to being a big music fan and possessing 11,000 tracks of digital music but only having paid for less than 2% of them (which puts her well below the generally-accepted figure of 5%). It went viral online and got mentions in the New York Times as well as other major media and blogosphere outlets.
Paul Resnikoff in Digital Music News said it best, in perhaps the most cogent piece of analysis I’ve ever read from him:
Our digital innocence just died … after a decade of drunken digitalia, this is the hangover that finally throbs, is finally faced with Monday morning, finally stares in the mirror and admits there’s a problem. And condenses everything into a detailed ‘moment of clarity’.
Over the years, I have written occasionally about the “race to the bottom,” in which the price of content is tending inexorably towards zero. The massive amount of free and illegal content available now, coupled with legal content services’ needs to “compete with free,” has led to more and more legal content offers for less and less money. Emily White’s frank admission shows that, for a growing number of young people, the race to the bottom in music is over, and musicians and songwriters have lost.
I won’t comment on Lowrey’s piece per se, except to recommend strongly that you read it. And I will say that as I read more of the posts on his blog, The Trichordist (by other authors as well as Lowrey himself), I found some attitudes about intellectual property that I felt were a little extreme and/or ignorant in their own ways.
Instead, I want to focus on the range of comments people have posted about Lowrey’s Letter to Emily, particularly the negative ones. The Trichordist curates comments by hand (and has been “accused” of favoring positive comments heavily as they cope with comment volumes that are orders of magnitude higher than usual), but they have appeared unfiltered on other sites — thousands of them.
Some of the negative comments are sober economic arguments that conclude with “This is just the way it is, and we can’t change it, so we all just have to adapt,” citing principles such as supply and demand, value migration, or cost of goods sold. While I disagree with the “we can’t change it” part, the economics are hard to argue with.
Yet the bulk of the negative comments are remarkable for their defensive attitudes, as expressed through smugness, arrogance, misinformation, rationalizations, and most telling of all, outright hostility towards Lowery. Many of them remind me of the rhetoric of right-wing political extremists when backed into a corner. Apart from the ad hominem attacks against Lowrey, the negative comments fall roughly into the following buckets:
- Economic rationalization (record companies): The record companies rip artists off anyway. Lowrey rips this one apart in his piece.
- Economic rationalizations (artists): Musicians can make money touring instead. Ditto. (Did the people who wrote these comments actually read Lowrey’s piece?)
- Economic rationalization (users): Emily is just a poor young intern and isn’t able to pay for that music anyway. See below on the perceived value of music.
- Legal rationalization: What Emily did was “fair use.” When your prom date gives you a “present” of 15GB worth of digital music, it’s probably not fair use. (Of course, that this is even a question is a problem with fair use itself, but that’s another subject.)
- Terminological distractions: So-called piracy is not “stealing” because the original remains once you have copied it. As even TechDirt’s Mike Masnick points out, what you call it doesn’t matter; it’s copyright infringement, which is against the law.
- Exceptions that prove the rule: So-and-so has figured out how to thrive under the new system, so there must be ways to do it. This one is Masnick’s specialité de la Maison. He seeks out these examples in order to encourage others to follow them. That’s fine, but they continue to be few and far between.
- Market research cherry-picking: I saw a study that says that piracy actually benefits music sales and/or the RIAA/MPAA’s piracy studies are biased. Let’s agree that no study of the economic effects of copyright infringement is both methodologically unassailable and unbiased, and perhaps that the “real” effect may be unmeasurable. But if we’re going to cite studies, we should at least look at all of them instead of putting up strawmen for the purpose of knocking them down. I have looked at all of the studies (and not just those about music) and found that those that claim economic damage from infringement outweigh those that claim economic benefit by a wide margin, even when studies commissioned by the RIAA or MPAA are ignored.
I am also reminded of a conversation that took place at the Copyright and Technology conference last week in London. The eminent copyright litigator Andrew Bridges echoed the common copyleft refrain that “copyright infringement is not a problem” except perhaps that “some companies are losing money.” He also asserted that the sky-high statutory damages under United States law act as an effective deterrent to copyright infringement because they scare people.
I disagreed with both statements. The case of Emily White is the best counter-argument I could have made to both points if I had known about it at the time. For every Joel Tenenbaum or Jammie Thomas-Rasset who makes headlines getting nailed for copyright infringement (and getting Harvard Law professors to defend them), there are millions of Emily Whites who don’t, and millions more who have no idea about copyright infringement, let alone statutory damages.
However, none of these arguments addresses the real problem. The real problem is that the value that people perceive in music has virtually disappeared. As Jaron Lanier pointed out in his book You Are Not a Gadget and subsequent writings, there is a profound cost to society as the perceived value of original content goes to zero. And the cost goes well beyond questions of whether there is “enough creative content” if artists can’t make livings.
Lowrey’s Letter to Emily is more about morals and ethics than about the inherent value of content. The problem is that simply preaching ethics to people in order to get them to change their behavior doesn’t work. At best, as Ben Sisario points out in the New York Times, this gets musicians to the status of charity recipients.
A more recent post on The Trichordist, by Lowrey’s Camper Van Beethoven bandmate Jonathan Segel, focuses exclusively on perceived value — after providing an illuminating history of musicians’ compensation since Beethoven. Killer quote:
What is happening here seems to be a willful ignorance that the inherent value is still there, not being paid for in the distribution of additional copies. These same individuals would certainly make the claim that they are copying the music in order to listen to it … but are refusing to admit the relevance of the social contract that says that that inherent value is what is used in the exchange rate with monetary currency. I see this as a hypocrisy: either music has no value at all, (in which case why copy it to begin with?), or it has value and the copiers are refusing to admit that it does, simply because it is a copy.
Once this behavior becomes normal — i.e. becomes standard practice for the Emily Whites of the world — then the taint of hypocrisy disappears. Once that happens, concern over the value of content evaporates, as then does the value itself.
The time for questioning whether or not this is a problem is over. The proper question is how to solve it.
Who’s Subsidizin’ Who? February 9, 2012
Posted by Bill Rosenblatt in Business models, Music, Publishing, Services, Uncategorized, United States.add a comment
Barnes & Noble has just announced a deal offering a US $100 Nook e-reader for free with a $240/year subscription to the New York Times on Nook. Meanwhile, MuveMusic, the bundled-music service of the small US wireless carrier Cricket Wireless, passed the 500,000 subscriber mark last month. MuveMusic has vaulted past Rdio and MOG to be probably the third largest paid subscription music service in the United States, behind Rhapsody and (probably) Spotify at over a million each.
MuveMusic isn’t quite a subsidized-music deal a la Nokia Ovi Music Unlimited, but it does offer unlimited music downloads bundled with wireless service at a price point that’s lower than the major carriers. (The roaming charges you’d incur if you leave Cricket’s rather spotty coverage area could add to the cost.) Cricket is apparently spending a fortune to market MuveMusic, and it’s paying off.
It looks like the business of bundling content with devices is not dead; on the contrary, it’s just beginning. The fact that both types of bundling models exist — pay for the device, get the content free; pay for the content, get the device free — means that we can expect much experimentation in the months and years ahead. Although it’s hard to imagine a record label offering a free device with its music, we could follow a model like Airborne Music and think of things like, say, a deal between HTC and UMG offering everything Lady Gaga puts out for $20/year with a free HTC Android phone and/or (HTC-owned) Beats earbuds. Or how about free Disney content with a purchase of an Apple TV?
As long as someone is paying for the content, any of these models are good for content creators. device makers, ane consumers alike. Bring them on!
Creative Commons for Music: What’s the Point? January 22, 2012
Posted by Bill Rosenblatt in Law, Music, Rights Licensing, Services, Standards.22 comments
I recently came across a music startup called Airborne Music, which touts two features: a business model based on “subscribing to an artist” for US $1/month, and music distributed under Creative Commons licenses. Like other music services that use Creative Commons, Airborne Music appeals primarily to indie artists who are looking to get exposure for their work. This got me thinking about how — or whether — Creative Commons has any real economic value for creative artists.
I have been fascinated by a dichotomy of indie vs. major-label music: indie musicians value promotion over immediate revenue, while for major-label artists it’s the other way around. (Same for book authors with respect to the Big 6 trade publishers, photographers with respect to Getty and Corbis, etc.) Back when the major labels were only allowing digital downloads with DRM — a technology intended to preserve revenue at the expense of promotion — I wondered if those few indie artists who landed major-label deals were getting the optimal promotion-versus-revenue tradeoffs, or if this issue even figured into major-label thinking about licensing terms and rights technologies.
When I looked at Airborne Music, it dawned on me that Creative Commons is interesting for indie artists who want to promote their works while preserving the right (if not the ability) to make money from them later. The Creative Commons website lists ten existing sites that enable musicians to distribute their music under CC, including big ones like the bulge-bracket-funded startup SoundCloud and the commercially-oriented BandCamp.
This is an eminently practical application of Creative Commons’s motto: “Some rights reserved.” Many CC-licensing services use the BY-SA (Attribution-Share-Alike) Creative Commons license, which gives you the right to copy and distribute the artist’s music as long as you attribute it to the artist and redistribute (i.e. share) it under the same terms. That’s exactly what indie artists want: to get their content distributed as widely as possible but to make sure that everyone knows it’s their work. Some use BY-SA-NC (Attribution-Share-Alike-Noncommercial), which adds the condition that you can’t sell the content, meaning that the artist is preserving her ability to make money from it.
It sounds great in theory. It’s just too bad that there isn’t a way to make sure that those rights are actually respected. There is a rights expression language for Creative Commons (CC REL), which makes it possible for content rendering or editing software to read the license (in XML RDFa) and act accordingly. As a technology, the REL concept originated with Mark Stefik at Xerox PARC in the mid-1990s; the eminent MIT computer scientist Hal Abelson created CC REL in 2008. Since then, the Creative Commons organization has maintained something of an arms-length relationship with CC REL: it describes the language and offers links to information about it, but it doesn’t (for example) include CC REL code in the actual licenses it offers.
More to the point, while there are code libraries for generating CC REL code, I have yet to hear of a working system that actually reads CC REL license terms and acts on them. (Yes, this would be extraordinarily difficult to achieve with any completeness, e.g., taking Fair Use into account.)
Without a real enforcement mechanism, CC licenses are all little more than labels, like the garment care hieroglyphics mandated by the Federal Trade Commission in the United States. For example, some BY-SA-licensed music tracks may end up in mashups. How many of those mashups will attribute the sources’ artists properly? Not many, I would guess. Conversely, what really prevents someone who gets music licensed under ND (No Derivative Works) terms from remixing or excerpting in ways that aren’t considered Fair Use? Are these people really afraid of being sued? I hardly think so.
This trap door into the legal system, as I have called it, makes Creative Commons licensing of more theoretical than practical interest. The practical value of CC seems to be concentrated in business-to-business content licensing agreements, where corporations need to take more responsibility for observing licensing terms and CC’s ready-made licenses make it easy for them to do so. The music site Jamendo is a good example of this: it licenses its members’ music content for commercial sync rights to movie and TV producers while making it free to the public.
Free culture advocates like to tell content creators that they should give up control over their content in the digital age. As far as I’m concerned, anyone who claims to welcome the end of control and also supports Creative Commons is talking through both sides of his mouth. If you use a Creative Commons license, you express a desire for control, even if you don’t actually get very much of it. What you really get is a badge that describes your intentions — a badge that a large and increasing number of web-savvy people recognize. Yet as a practical matter, a Creative Commons logo on your site is tantamount to a statement to the average user that the content is free for the taking.
The truth is that sometimes artists benefit most from lack of control over their content, while other times they benefit from more control. The copyright system is supposed to make sure that the public’s and creators’ benefits from creative works are balanced in order to optimize creative output. Creative Commons purports to provide simple means of redressing what its designers believe is a lack of balance in the current copyright law. But to be attractive to artists, CC needs to offer them ways to determine their levels of control in ways that the copyright system does not support.
In the end, Creative Commons is a burglar alarm sign on your lawn without the actual alarm system. You can easily buy fake alarm signs for a few dollars, whereas real alarm systems cost thousands. It’s the same with digital content. At least Creative Commons, like almost all of the content licensed with it, is free.
(I should add that I wear the badge myself. My whitepapers and this blog are licensed under Creative Commons BY-NC-ND (Attribution-Noncommercial-No Derivative Works) terms. I would at least rather have the copyright-savvy people who read this know my intentions.)
Oblivion, But Not Beyond January 2, 2012
Posted by Bill Rosenblatt in Music, Services.19 comments
Last week, the music startup Beyond Oblivion ceased operations. The shutdown happened after three years of development and shortly before the company’s service was to go into public beta. The news was leaked to Engadget last Thursday and became “official” when it was reported in the Financial Times on Saturday.
First, the disclosure: I consulted to Beyond Oblivion throughout much of the company’s existence. I’m proud of what we did, privileged to have worked with its top-notch management team, and sad about what happened last week.
I’ll leave it to others to chew over the amount of cash that the company burned through or why the company shut down at this particular time. Instead I want to talk about the company’s vision and business model, which — if it had seen the commercial light of day — did in fact have the potential to change the online music industry for the better. Although Beyond Oblivion did get some press coverage, its unique model was never fully explained.
At a basic level, Beyond’s model was a hybrid between download services like iTunes and streaming services like Spotify. It was based on the concepts of licensed devices and play count reporting. Users could buy new Beyond-licensed devices or purchase licenses for their existing PCs or other devices. They could download tracks from the Beyond catalog to their licensed devices (a la iTunes) and listen to them as often as they wanted. The Beyond client software would securely count plays and report them for royalty purposes (a la Spotify).
Users could also add their own music files to their Beyond libraries using a process that is now called “scan and match”; Beyond would report plays of those files too, even if the original files were obtained illegally. We had also designed a way for users to add music to Beyond’s music catalog (we called it “catalog crowdsourcing”), with permission of rights holders, which could have resulted in the world’s largest legal online music catalog.
There would be no limit to the number of tracks a user could download to a licensed device. Furthermore, Beyond users could freely share their files with other Beyond users; a Beyond file could play on any Beyond-licensed device (within a given country).
Beyond Oblivion had two signed major-label deals with others in the works, and over seven million tracks in its catalog at last count.
Now here’s the real differentiator: users would pay neither monthly subscription fees nor per-download charges for the service. Beyond’s business model was to charge device makers or network operators the license fees, with the expectation that they would subsidize these fees or perhaps bundle part of them into users’ monthly network charges. If users wanted to add Beyond to their own devices, they would pay a one-time charge, expected to be well under US $100, for unlimited downloads for as long as they owned the device.
Whenever anyone knowledgeable about digital music asked for a quick explanation of Beyond’s model, I would answer, “It’s like Comes With Music on steroids.” (Comes With Music was Nokia’s attempt to create a subsidized music model for a few of its own devices.)
The problem with device maker subsidized models is that they are limited to new devices from that maker. Instead, Beyond’s intent was to build a large, global ecosystem of subsidized music that would work on a wide range of devices and networks. It would be an intermediary between device makers and network operators (license fee payers) on the one hand and music copyright owners (royalty recipients) on the other. Beyond’s pitch to the former was simple: here is a chance to eat into Apple’s market share for digital music by offering a service to users that “feels like free” but is completely legal.
The Beyond concept was based on a fundamental insight by founder Adam Kidron, a serial entrepreneur, former pop record producer, inveterate frequent flier, and spreadsheet Jedi Master. In fact, his business model began on a spreadsheet. He figured out that if he could count every play of a digital music file and pay a small royalty to the copyright owners for each one, he could make a profitable business by charging device licensing fees — essentially trading off device license fees against those “micro-royalties” — and still offer legal music for much less money than anyone else. His model took into account factors such as the expected ownership lifespans of certain device types such as PCs and mobile handsets.
Kidron determined that technology companies were the only remaining entities in the digital music value chain where revenue could come from: users are being led toward expecting to get music for free, and ad revenue has been disappointing. Thus, we tried to define a model and features with enough appeal to tech companies to get them to pay the licensing fees.
But Beyond would only have had industry-wide impact if it could sign up a critical mass of network operators and device makers at launch — a process that would require a lot of salesmanship, faith-building, and delicate discussions about exclusivity versus the power of the ecosystem. When Kidron first approached me three years ago about helping the company and explained the model, my initial thought was, “This might actually work if someone threw enough money at it.” Then he proceeded to explain the funding plan. I was impressed; he had thought it through. He didn’t just want to launch yet another music service, he wanted to move the music industry “beyond oblivion.”
The company did raise large sums of money in order to seed the entire ecosystem. It was in advanced talks with companies worldwide. A few name-brand device makers were considering putting out new Beyond-enabled models of handsets, tablets, and other devices. Wireless carriers in several geographies were considering launching services for Beyond-enabled devices. Major record labels signed licensing deals. But even with cash in hand, the negotiations among the various constituencies proved to be a long, hard slog.
Yet Beyond’s impact on the music industry was potentially much wider than mere profitability for one business. To understand this, it’s useful to look at its economic model in light of various recent governmental attempts to get network service providers to assume more responsibility for curbing copyright infringement. These have boiled down to operators paying for three different things: technology to monitor activity for possible infringement; per-user levies for use of content, and ”piracy fees” to cover copyright enforcement costs.
All of these models have serious drawbacks. Levies are inaccurate in paying copyright owners according to actual use of their content and unfair in that they charge all users the same amount regardless of their use. If network operators paid for their own piracy monitoring, they would do it in the same way that device makers have implemented DRM: at the lowest possible cost, with little regard for efficacy, and in ways that benefit them instead of copyright owners, such as customer lock-in. And “piracy fees” are the most inequitable idea of all.
A market-based solution that enables network operators to offer functionally rich access to legal content in a way that feels like free seems like a much better approach — a carrot rather than a stick. It can entice people away from copyright infringement while compensating rights holders fairly and accurately. Given the choice, a network operator ought to want to compete on offering the most attractive music service rather than be forced to pay a “copyright tax” as a cost of doing business. (By the way, this is not my retrospective view; it was all part of the original thinking.)
When Beyond was starting development, users had strong preferences for file ownership over streaming. We started with a download model and figured out a way to reconcile file ownership with usage reporting. We also designed a mechanism for determining (with reasonable accuracy) when a device changed owners, so that it would not be possible to sell a Beyond-licensed device on eBay (for example) and have the second owner inherit the music rights along with the device; “lifetime of device ownership” was key to making the numbers work.
Since then, streaming has become more popular. Yet on-demand streaming services like Spotify and Rhapsody have business models that were originally based on monthly subscription fees; they face the choice of living with a “freemium” model in which only a fraction of users pay subscription fees (Spotify, Rdio, MOG, Deezer) or persisting with an all-pay model against the rising tide of freemium (Rhapsody, Slacker Premium, Sony Music Unlimited). Either choice may be hard for those services to sustain financially over time.
In contrast, Beyond was designed to be a scalably profitable subsidized pay-per-use model from the beginning. As such, it could have had better long-term prospects than those other services.
However, three years is a very long time to be developing any kind of online business in today’s world of iterative development-and-release a la Google. Many of Beyond’s innovative features started making their way into the market through other services during the past three years. For example:
- Catch Media launched a service in the UK in 2010 that counts and monetizes users’ plays of MP3 files regardless of their origins, although the service costs users £30 per year.
- Spotify, Deezer, and Rhapsody have gotten a few bundling deals with wireless carriers, though none of these are full subsidies.
- Spotify also recently introduced an API for app developers, another feature that Beyond included from the beginning.
- The small US mobile carrier Cricket Wireless launched MuveMusic a year ago; it is an unlimited-download package bundled with Cricket’s wireless service. It has attracted over a quarter million users, although the service is limited to five handset models (mostly Android-based).
- Several services have introduced scan and match features that download files from servers to users’ devices. Apple and Catch Media offer this, while others offer it through streaming instead of downloading.
Yet only Beyond put all these features — and more — into a single offering. Apart from the business model and concepts, I can attest that its user experience was terrific. Its interface, responsiveness and sound quality on mobile devices all beat Spotify. It’s a real shame that this highly promising service did not get a chance to make the impact on the music industry that it could have.
Azita Arvani
Niels Thorwirth
Bill Rosenblatt
Bill Jones
