Creative Commons for Music: What’s the Point? January 22, 2012
Posted by Bill Rosenblatt in Law, Music, Rights Licensing, Services, Standards.20 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.16 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.
European High Court Says No to ISP-Level Copyright Filtering November 28, 2011
Posted by Bill Rosenblatt in Europe, Fingerprinting, Law, Music, Services.add a comment
Last Thursday the European Court of Justice (ECJ) ruled that ISPs cannot be held responsible for filtering traffic on their networks in order to catch copyright infringements. This ruling was the final step in the journey of the litigation between the Belgian music rights collecting society SABAM and the ISP Scarlet, but it is a landmark decision for all of Europe.
This ruling overturned the Belgian Court of First Instance, which four years ago required Scarlet to install filtering technology such as acoustic fingerprinting to monitor Internet traffic and block uploads of copyrighted material to the network. Scarlet appealed this decision to the Brussels Court of Appeals, which sought guidance from the ECJ.
The ECJ’s statement affirmed copyright holders’ rights to seek injunctions from ISPs like Scarlet to prevent copyright infringement, but it said that the Belgian court’s injunction requiring ISP-level copyright filtering went too far. It cited Article 3 of European Union Directive 2004/48, which states that “measures, procedures and remedies [for enforcing intellectual property rights] shall be fair and equitable, shall not be unnecessarily complicated or costly and not impose unreasonable time-limits or unwarranted delays.” The ECJ decided that the mechanism defined in the appeals court’s ruling did not meet these criteria.
The real issues here are the requirement that the ISP bear the cost and complexity of running the filtering technology, and the fact that running it would slow down the network for all ISP users. It’s easy to see how this would not meet the requirements in the above EU Directive.
This decision has direct applicability in the European Union, but its implications could reach further afield. For example, the issue currently being argued between Viacom and Google at the appeals court level in the United States boils down to the same thing: whose bears the cost and responsibilty to police copyrights on the Internet?
Of course, EU law doesn’t apply in the United States. In the Viacom/Google litigation, Google is relying on the “notice and takedown” portion of the Digital Millennium Copyright Act (DMCA), a/k/a section 512 of the US copyright law. This says that if a copyright holder (e.g., Viacom) sees one of its works online without its authorization, it can issue a notice to the network service provider to take the work down, and if it does so, it won’t be liable for infringement. Google’s argument is that it follows section 512 assiduously and therefore should not be liable.
Viacom’s task in this litigation is to convince the court that the DMCA doesn’t go far enough. More specifically, its argument is that the legislative intent behind the DMCA is not served well enough by the notice-and-takedown provisions, that network service providers should be required to take more proactive responsibility for policing copyrights on their services instead of requiring copyright owners to play the Whack-a-Mole game of notice and takedown.
The ECJ’s decsion in SABAM v. Scarlet has no precedential weight in Viacom v. Google. But it may help get the Third Circuit Appeals Court to focus on what Jonathan Zittrain of Harvard Law School has called the “gravamen” (which is legalese for “MacGuffin“) in this case: who should be paying for protecting copyrights.
ReDigi Gets RIAA Nastygram November 15, 2011
Posted by Bill Rosenblatt in Economics, Law, Music, Services, United States.8 comments
Last week the RIAA issued a cease-and-desist letter to a music startup called ReDigi, which has been attempting to create a market for “used” digital music files. It allows users to sell their music files for prices below those of “new” files on iTunes or Amazon, and gives a portion of the proceeds to record labels. (It does not have licenses from the labels to do this.)
I had been paying attention to ReDigi since it had gotten some attention on the tech blogs when it issued a beta release a month ago, and I consulted a couple of copyright law experts about the legality of what they are doing. Based on the results of my research, the RIAA’s actions towards ReDigi were about as surprising to me as an announcement that the sun will rise tomorrow morning.
Who were the “legal experts” that ReDigi claims told it that what it does is within the law? What investors were credulous or rash enough to finance this venture? Or did everyone involved do this just to try to make a point? Regardless of the motivation, ReDigi’s legally embattled state has been a foregone conclusion.
ReDigi purports to implement something called Digital First Sale. The First Sale Doctrine (a/k/a Section 109 of the U.S. copyright law, and known as Exhaustion in most other countries) says that if you obtain a copy of a copyrighted work legally, you can do as you wish with it – keep it, lend it, sell it, give it away, use it to line a birdcage – as long as you obtained it legally and you don’t do anything with it that infringes copyright law, such as make unauthorized copies.
The issue is that this law was designed to apply to physical goods; no one is quite sure about its applicability to piles of bits. The U.S. Copyright Office was asked for an opinion on Digital First Sale a decade ago. The Office stated that Digital First Sale would require a complex technical mechanism that ensured that once you gave your copy of a file to someone else (whether for money or not; whether permanently or not), you had no further access to the file. The technical shorthand for such a mechanism is “forward and delete.” The Office opined that such a mechanism might be feasible at some point in the future but wasn’t then, so it declined to endorse the concept of Digital First Sale.
ReDigi claims to have implemented a robust forward-and-delete mechanism. It uses acoustic fingerprinting from Gracenote to ensure that once a user has sold a file, the same song no longer exists on the user’s PC or iPod. There are ways to hack the system, but that’s somewhat beside the point.
Digital First Sale remains very much unsettled law, even according to copyleft legal scholars, such as Jason Schultz of Berkeley (formerly of the Electronic Frontier Foundation), who would generally like to see Digital First Sale become reality.
Even putting First Sale aside, there’s another legal issue with ReDigi’s model. ReDigi only lets users sell files that they bought on sites such as iTunes and Amazon, in order to ensure that users are only reselling legally-obtained files. (The source of a file can be determined by examining metadata or watermarks.) There’s just one little problem with that: these sites have Terms of Use that expressly forbid resale of purchased digital files. (Here are Amazon’s and iTunes’s.) In other words, users who sell files on ReDigi may or may not be infringing copyrights, but they are certainly running afoul of iTunes or Amazon’s Terms of Use, which are contracts between the retailer and the user.
But wait a minute: if the Terms of Service forbid users from doing something that copyright law allows, which one prevails? Apparently that’s an unsettled question as well, according to both a senior legal authority at the Copyright Office and one of America’s leading copyright litigators. The latter told me “the ink is not dry” on this area of copyright law.
Yet one thing is very clear: Digital First Sale scares the media industry to death. Think about it: if anyone could resell their digital content at any price, then ReDigi would only be the beginning. There would be many competing content-resale marketplaces. People could auction their “used” files on eBay. People could “donate” them to public libraries with virtually no cost or effort – and get a tax deduction for a charitable donation. All perfectly legal. The result of this would be a rapid acceleration of what I have called the race to the bottom: the price of legal content would drop to near its cost of coping and distribution, i.e., virtually nothing. Furthermore, the major copyright owners would lose a lot of control over distribution; for example, Hollywood studios’ release windows would become virtually meaningless.
It’s also evident that the media industry would much rather nip this trend in the bud than endure years of litigation with uncertain outcomes. Even attempting to negotiate a license with a service like ReDigi would imply some comfort with Digital First Sale at a conceptual level, which is something that the media industry would surely want to avoid. Thus the RIAA’s actions against ReDigi come as no surprise.
The RIAA’s “nastygram” points to file copying that must take place in order for ReDigi’s system to work as evidence of copyright infringement, even though, of course, that’s not the real issue here. Other litigation concerning Digital First Sale, such as Vernor v. Autodesk (commercial software), is working its way through the courts. Whatever happens with Digital First Sale, the law will take years to reach clarity — and until then, services like ReDigi will continue to be in limbo.
Incidentally, Digital First Sale is going to be a topic at our Copyright and Technology conference week after next (Wednesday November 30). We will have legal experts on this topic as well as Paul Sweazey of the IEEE 1817 standards initiative, which is another attempt to implement something approximating Digital First Sale. The discounted registration offer I made last week still stands.
The Future of Music: From Blanket Licensing to Registries October 10, 2011
Posted by Bill Rosenblatt in Law, Music, Rights Licensing, Standards.4 comments
The Future of Music Coalition Policy Summit, which took place last week, has been a fixture in Washington, DC for a decade now. For those interested in how copyright has to find its way in the ever-changing world of digital music, this is a wonderful place to spend a couple of days. The FMC Policy Summit is a great event — and an inspiration for our own Copyright and Technology Conference — because it gathers many different types of people and forces them into a single room to get to know one another. As an organization, FMC represents the interests of independent musicians and songwriters, but the subject matter discussed at its Policy Summit should be of interest to anyone contemplating the future of music.
The panels at the FMC Policy Summit cover a range of topics beyond copyright. But last week’s conference had two panels on copyright arcana that were linked implicitly if not explicitly: on the first day, a panel on blanket licensing; on the second, a panel on music copyright registries. Perhaps the most remarkable aspect of these two panels was that digital music expert/ideologue Jim Griffin was on the latter panel, not the former.
Let me take a couple of steps back to explain why this is remarkable.
The treatment of music copyrights most countries is a horrible mess. It is so complex as to be virtually incomprehensible to content creators — the people who need to understand them the most.
If you make a music recording, you have two sets of copyrights: one for the underlying composition (which could be someone else’s if you didn’t write the music), and another for the recorded performance of it. Each of those rights needs to be owned by, granted by law to, or licensed by entities such as record labels, distributors, service providers, and end-users. These rights are handled in various different ways in the United States. Some are implicit copyright rights; some come from so-called statutory licenses that have been added to the copyright law; some result from ad-hoc license agreements; and some come through collecting societies (a/k/a PROs or Performing Rights Organizations) like ASCAP and BMI, which represent only those rights holders who sign up with them.
If you’re already confused, welcome to a very large club.
A few panelists at the FMC Summit — mainly law-professor types who habitually think in terms of concepts and idealism instead of practicalities and the real world — contemplated blowing up the entire system and starting from scratch. Others, such as the new Register of Copyrights, Maria Pallante, settled for “Sure it’s bad here in the US, but it’s worse elsewhere” arguments. Her predecessor, Marybeth Peters, was an advocate of streamlining the entire music licensing process so that content creators can come closer to “one-stop shopping,” as countries such as the UK have attempted.
There are two schools of thought on how to improve a system that, in the words of Gary Greenstein of the law firm Wilson Sonsini (who will also speak at Copyright and Technology 2011), exists primarily to preserve the many jobs that would be eliminated under a more streamlined system. One is to move to a comprehensive system of blanket licensing, i.e. forming entities that represent all music rights holders and license their works under fixed terms. Another is to use technology to measure all usages of copyrighted works and compensate rights holders accordingly.
These two schools of thought are not mutually exclusive. Automated measurement and compensation can work in a blanket or statutory licensing regime if the technology is pervasive and accurate enough. Yet blanket licensing usually works with compensation schemes derived from sampling (e.g., BMI requires radio stations to log the music they play for a couple of weeks each year) or levies (“copyright taxes” collected from makers of consumer electronics or blank recording media). These are blunt-instrument approaches which all but guarantee that “long tail” content creators will not be compensated fairly and that abuses will creep in.
The blunt-instrument school of thought has persisted for quite a while as a lowest common denominator that is at least practicable, even if it has outlived its usefulness. Yet recent developments have proved two important things: first, the blunt-instrument approach has serious limitations in the digital world, given the Byzantine nature of the underlying system; second, better alternatives not only exist but are exposing the inherent inadequacies of the blunt-instrument approach.
The better alternative that has emerged here in the States, according to the views of most FMC Policy Summit attendees, is SoundExchange. SoundExchange came in to being in the early 2000s as the result of laws enacted in the late 90s that established “performance rights in sound recordings”; this meant that online music services had to pay royalties for playing recordings, not just for the underlying compositions. The latter royalties are administered by composers’ collecting societies like ASCAP and BMI. As the result of the new laws, online music services would have to pay performance royalties, though terrestrial broadcast radio would not. (See, I told you this was a confusing mess.)
SoundExchange requires online music services to collect data on the music they play, report the data, and pay royalties accordingly. (Small noncommercial webcasters are exempt from this process and only pay a small flat annual fee.) SoundExchange negotiates royalty rates for various types of digital music services (webcasters, on-demand streaming services, satellite radio, etc.) through periodic rate-setting proceedings before panels of judges in Washington.
FMC Policy Summit attendees — who tend to be musicians, songwriters, or indie label people — see SoundExchange as a beacon of light in the darkness, an organization that gets musicians paid and does it with relative transparency and low overhead, at least compared to older organizations like ASCAP and BMI.
While SoundExchange has shown that automated, data-driven royalty compensation can be done, advocates of blanket licensing have run into a major snag: if you’re going to offer an online music service a blanket license to music, you have to offer it for “all music,” not just some of it, otherwise what you’re offering is not going to be very helpful to the online music service. The problem is that offering a license to “all music” is just plain impossible, at least without an act of Congress like that which produced SoundExchange.
With this insight, naive and idealistic notions such as charging all ISP subscribers a monthly “music tax” that gets (somehow) distributed to rights holders go straight out the window. This is where we finally get back to Jim Griffin: blanket-licensing schemes such as Choruss, the business that Jim Griffin ran for Warner Music Group, are revealed to be the impossibilities they are.
Griffin, a battle-scarred veteran of the early days of digital music, had been an articulate blanket-licensing ideologue for years when WMG CEO Edgar Bronfman asked him to set up a blanket licensing business, which they called Choruss. Choruss failed about a year ago; as I explained at that time, the primary reason for its failure was that it couldn’t get licenses to anywhere near “all music.”
So Griffin has acknowledged the impossibility and moved on. He has turned his attention to an underlying problem that is even more complex and fundamental: the lack of a global registry of all music rights information that would be required to support any kind of comprehensive and fair licensing scheme. At the FMC Policy Summit, Griffin was on a panel on music rights data; he was talking about the International Music Registry (IMR), a project led by the World Intellectual Property Organization (WIPO). Griffin is one of over two dozen people from around the world working on the IMR.
IMR is adopting a federated approach to rights registries that acknowledges and leverages the existences of various “island” registries throughout the world and attempts to build a unifying layer on top of them. (One of these “islands” is the so-called Global Repertoire Database, which is initially focused on Europe.) This approach is analogous to the Digital Object Identifier (DOI) standard that I helped define in the publishing industry in the late 1990s: we wanted a copyright work identifier and registry that could coexist peacefully with various existing standards and registries such as ISBN for books, ISSN for journals, PII for other journals, URL for online resources, and so on. On the other hand, it differs from the Book Rights Registry contemplated in Google’s settlement with book publishers and authors, which would have been a single über-registry for all book content, at least in the United States.
So that’s a long way of explaining what Jim Griffin was doing on the music registry panel instead of the blanket licensing panel at the FMC Policy Summit, and why that’s important. The rights registry problem is the right (no pun intended) one to be working on. If it can be solved, it would get us away from blunt-instrument schemes that encourage systemic abuses and favor big-name artists over the long tail, and it would facilitate content creators actually getting paid according to how much their music is played. It’s a problem that’s worth the monumental effort it will take to solve… if it’s even solvable at all. It will take years to find out one way or another, but it’s worth the journey.
C&T 2011 Conference: Registration Now Open October 4, 2011
Posted by Bill Rosenblatt in Events, Music, Services.add a comment
(Re-running this for those who may have missed it over the Jewish New Year last week.)
Online registration for the Copyright and Technology 2011 conference, November 30 in New York, is now open!
Take a look at the program and you’ll see that we have most of the panels filled out – though a few opportunities remain, particularly for moderators. Please contact me if you are interested.
I am also pleased to announced that the law firm of Frankfurt Kurnit Klein & Selz has become our latest sponsor.
We invite law firms with practices in the digital copyright area — like Frankfurt Kurnit — to sponsor the conference as well. We have an exciting lineup of panels in our legal track. We will attract a high-caliber audience of professionals from media and technology industries who are coming to grips with issues of intellectual property in the digital age. If you are interested in sponsorship materials, please contact me as well.
In other news, the long-expected consolidation of music subscription services has begun with Monday’s announcement that Rhapsody will acquire the assets — mainly the subscriber base — of Napster.
Rhapsody is the first of the on-demand streaming subscription services to have gotten licenses from all of the major labels. They did this back in 2002, when there were five majors and Napster was still trying to recover from being shut down by a federal judge. Napster re-launched the following year… that is to say, the Napster brand was used to re-badge a service originally called Duet, then pressplay, which was a joint venture of two of the majors.
A first wave of subscription services appeared in the mid-2000s. Rhapsody and Napster were survivors of consolidation that took place around 2007, with other players like Virgin Digital disappearing. Now, with the launch of a second wave of subscription services, another cycle of consolidation has been inevitable.
Rhapsody only operates in the US, whereas Napster runs in a few other countries. Rhapsody will retain the Napster brand name outside of the US. Once the deal closes, Rhapsody will have 1.2 million paying subscribers, compared to 2 million for Spotify.
It’s a two-horse race now: Spotify vs. Rhapsody. The value of press hype and the long buildup to its US launch have done wonders for Spotify, which — as many would argue, and notwithstanding its superior mobile client — has considerably less functionality than Rhapsody. As I’ve said before, the consolidation will continue over the coming months.
Facebook: Making the World Safe for Music Subscription Services September 25, 2011
Posted by Bill Rosenblatt in Business models, Music, Services.2 comments
Facebook’s announcement of the integration of several music services at its f8 conference last week attracted a lot of hype and even more breathless press coverage. But what exactly will it do for these services?
A lot. A huge amount. In fact, this could be a tipping point in favor of subscription services against the iTunes paid-download model.
First I must get some personal bias out of the way: I have always been a fan of subscription services, and I’ve never had much use for iTunes. I’ve tried them all. I feel that subscription services have suffered from a lack of marketing resources and from negative treatment in the press, which — at least until the hype started to build around Spotify’s US launch — dismissed them as “rental” and thus inferior to the iTunes ownership model.
I always felt that this was a naive and unfair characterization of subscription services, which offer a value proposition that happens to be unfamiliar to people who are used to radio and record stores. iTunes is a digital version of a record store; Pandora is digital radio, taken to the limits that the law (specifically Section 114 of the Copyright Act) will allow. That familiarity is why each of them have more than 100 million users today.
But subscription services have languished at a lower order of magnitude. Even Spotify, with its free, ad-based offering, claims total membership somewhere between 10 and 15 million. Paid subscription service membership is said to total around 5-6 million worldwide, with the top two (Spotify and Rhapsody) making up at least half of that total.
And it’s true that even if people understand the value of subscription services — the celestial jukebox, with libraries of over 10 million tracks available on demand at any time, for the price of about one downloaded album per month — they are not for everybody. They aren’t good deals if you have a few favorite songs that you want to listen to over and over again. They are much better for “grazers” like myself, who like to try all sorts of music before (in most cases) losing interest and moving on to something else.
But I wonder about cause and effect here. Do people listen to the same few songs over and over again because they have been conditioned to the record-store model — where every song represents a financial investment — or would they still do so even if the model changed? (Did I become a grazer while being a radio DJ for 12 years and enjoying access to large music libraries at three radio stations?) It’s hard to say in general, but I bet that at least some people will change their habits once they see the advantages of the alternatives.
That’s where Facebook comes in. Subscription services have competed with each other by offering more and more features that are likely to appeal to the same core audience, attempts to be all things to all people, or pure bloatware. Rhapsody, MOG, and Napster in particular have become many-headed beasts that try to appeal to all types of listeners while not succeeding in attracting many beyond the cadre of grazers.
Facebook integration should change all that. The basic idea of Facebook integration is that whenever you play a song on one of the integrated services, it shows up on your Facebook page for all your friends to see. They can click on a link and play the same song on the service on which you are playing it. The participating services have set up various flavors of free trials and restricted free tiers of service a la Spotify. This will introduce subscription services to a vast new audience of people, many of whom would otherwise not have considered subscription services at all.
Subscription services have “share” features, through which users can post their songs playing or playlists to Facebook, Twitter, blog posts, email, etc. But how many people actually do this, and how many people actually respond? Not very many. It’s not consistent, it doesn’t scale well, and most users probably treat this kind of thing as an annoyance, a form of spam. The new Facebook integration amounts to an opt-out version of this: if you connect with Facebook, all of your plays get posted there. Given Facebook’s enormous reach, that’s one hell of a lot of “I’m listening to this song” posts; they will become a fact of life on Facebook and virtually impossible to ignore.
I don’t know of any financial terms between the participating services and Facebook (e.g. commissions on paid subscriptions), but as they say, you can’t buy this kind of publicity.
Yet I am a little concerned about how all of the subscription services are falling over each other to offer freemium deals to take advantage of all that publicity. There are just too many subscription services now. Spotify and Rhapsody are the top two, and there are enough differences between their feature sets to keep them both viable for a while. I worry that second-tier services like MOG, Rdio, and Slacker will try to compete on price or by extending their free offerings to the point that the public will come to expect more and more for nothing.
I have little doubt that the market can’t support more than two or three of these services and that the others will wither and die. (Rdio, which depends too heavily on features that Facebook integration now renders redundant and has a lackluster mobile client, ought to be the first to go.) Let’s just hope they don’t take the entire industry down with them by setting public expectation that they should be free while hemorrhaging money all the while.
Facebook integration is the marketing tidal wave that subscription services have needed ever since Rhapsody became the first to launch with major label licensing back in 2002. 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. iTunes and Pandora certainly aren’t going away, but subscription services will finally join them as the viable music business model that they deserve to be.
iTunes Match Goes Beta, and It Downloads September 2, 2011
Posted by Bill Rosenblatt in Fingerprinting, Music, Services.2 comments
When Apple announced iCloud back in June, it announced an intriguing feature called iTunes Match. iTunes Match will scan users’ hard drives for music files and identify them using techniques such as acoustic fingerprinting and scanning ID3 metadata in MP3 files. If it identifies a track that’s in the massive iTunes library, it will download that track to the user’s Apple devices or PCs/Macs running iTunes software. Apple will charge US $24.95/year for iTunes Match. Earlier this week, Apple took it into beta and released it to developers.
Astute readers may have caught a very interesting word in the previous paragraph: download.
We had been speculating whether Apple would supply tracks to users’ devices by download or streaming; Apple itself had been ambiguous — I would say intentionally — on this point. A poll of Copyright and Technology readers suggested that streaming was the likely method, by more than a two-to-one margin. No: in the latest version of the beta, as of August 31, it’s downloading. (To be more precise: progressive downloading, meaning that the track starts playing shortly after the download starts.)
I imagine that stream vs. download was an issue in Apple’s licensing negotiations with the music industry leading up to the iTunes Match launch; and it’s possible that Apple may move to streaming at some point in the future. Royalty structures for downloads and streams differ. Streaming is cheaper yet requires much more technical infrastructure — although Apple supposedly owns such infrastructure as the result of its purchase of the streaming service la la in late 2009.
The implications of iTunes Match as a downloading “cloud sync” service are worth considering, and they don’t look very favorable to the record companies. ITunes Match helps Apple lock users into the iTunes/iPod technology stack now that it no longer uses DRM — although all of the files involved are unencrypted and therefore easy to use in non-Apple music players.
At the same time, iTunes Match is essentially an amnesty service for people who have unauthorized music files. For $25 per year, you can get pristine, legal AAC-encoded copies of up to 2500 of your music files on all of your devices. That’s a penny a track to go legal and get the added convenience of music synced to all your Apple devices.
On the one hand, this service probably won’t appeal to hoarders — those people who have accumulated multi-terabyte hard drives full of dubiously legal content. 2500 tracks, roughly 250 albums’ worth, is not much for hoarders. It’s unlikely that many of them will be interested in paying $25 to ease worries about infringement for a small fraction of their holdings.
The use case that Apple (and record companies) most likely had in mind is, in fact, very much like the DRM use case: to apply to so-called casual copiers, who may have ripped a few of their friends’ CDs or downloaded the occasional track from a file-sharing network but would pay a modest amount for legal music plus the convenience of keeping it on multiple devices.
On the other hand, the opportunities for abuse — the analogs to DRM hacks — are interesting to contemplate.
Here’s one example. I presume that iTunes Match uses Gracenote’s music identification technology, because iTunes already uses Gracenote. Yet this is different from the usual content identification use case, in which it’s safe to assume that ID3 tags actually signify the music in the file. In other words, music ID technology typically looks for ID3 tags (or equivalent metadata in other file formats) first and stops if it finds them, otherwise it goes on to analyze the actual content in the file using acoustic fingerprinting.
If iTunes Match comes across a music file, does it check to make sure that the music in the file is actually the music that the metadata describes? One would think not, because this would be inefficient. But in that case, it would be possible to create libraries of MP3 files that contain dummy MP3 data along with ID3 tags signifying actual music. Do you want a nice collection of a couple thousand tunes in your favorite genre? Just download this ZIP file of fake MP3s and run iTunes Match on them; you’ll get legal files of all those tracks on all of your Apple devices.
Although such dummy files would take some effort to create, they would be easy enough for non-techies to use with iTunes Match. To me this sounds just like a hack to a weak DRM, with one big difference: whereas it’s a crime to hack DRMs, this hack is perfectly legal. Furthermore, I would argue that because the files are unprotected, this type of hack is more of a problem for record companies than for Apple compared to DRM.
iTunes Match is still in beta, with launch expected in the coming weeks. We’ll see whether this feature leads to more abuse than DRM hacks relative to the money that it puts in record companies’ pockets.
Mixed Verdict for EMI against MP3tunes.com August 23, 2011
Posted by Bill Rosenblatt in Law, Music, Services, United States.4 comments
A federal district court judge in New York this Monday delivered a mixed-bag opinion in long-running copyright litigation between a number of record companies led by EMI and MP3tunes.com, led by that veteran of music industry litigation, Michael Robertson.
The summary judgment decision affirmed yet again the principle that online content providers have no obligation to proactively “police” their sites or services for their users’ copyright infringements — which has been established in such recent cases as Viacom v. Google (YouTube) and Universal Music Group v. Veoh, at least at the district court level. As long as service providers respond “expeditiously” to takedown notices under the Digital Millennium Copyright Act (17 U.S.C. § 512) and terminate the accounts of egregious repeat offenders, they aren’t liable for their users’ infringements.
MP3tunes provides what has come to be known as a locker service: users can upload their music to the service and access it from any Internet-connected device. That aspect of MP3tunes.com got a clean bill of legal health from Judge William Pauley.
Another feature didn’t, though: the “sideload” feature. MP3tunes operates a separate website called sideload.com, which lets users search third-party sites that contain free music files (whether legal or not). Users can search all of those sites with a single search command, select files from them, and copy the files into their MP3tunes lockers. Sideload.com currently claims access to over 160,000 tracks. MP3tunes responds to takedown notices on such files by removing its links to them from sideload.com search results, but not removing copies of the actual files from users’ lockers. Judge Pauley didn’t buy MP3tunes’ argument that doing the latter would violate its users’ privacy and personal property; instead he found MP3tunes liable.
Michael Robertson is a wealthy man, having sold his previous music venture, MP3.com, to Universal Music Group for over US $370 Million back in 2001. Now it seems that he spends his time and effort designing technology products and services that provocatively test the boundaries of both copyright law and copyright owners’ patience. Robertson started MP3tunes.com in 2005, and in doing so, he invented the idea of “cloud sync” locker services, which are now virtually mandatory checklist items for online music services. Other vehicles for Robertson’s copyright nose-thumbing include AnywhereCD (buy a CD, get the MP3 for free) and Linspire (Linux-based operating system that runs Windows programs), both now defunct.
As Judge Pauley’s order reveals, MP3tunes.com looks like a site that was designed by Robertson in consultation with copyright law experts with the objective of figuring out just how much they can get away with without record company licenses. As an example of this, consider a feature in some locker services known as scan and match. With scan and match, a locker service need not upload a user’s actual files. Instead, the service scans each file and identifies the music through various means such as examining ID3 tags (metadata in MP3 file headers) and acoustic fingerprinting. If it has that music in its online catalog already, it skips the upload step and gives the user access to the copy of the file that the service already has.
Scan and match has two big advantages over uploading. First, uploading could take hours, days, or even weeks depending on the size of the user’s collection. Second, scan and match eliminates the need for the service to store many files of the same music; it only needs to store a single copy.
Scan and match is a controversial feature; record companies claim that it requires a license from them to cover the “master” files that the service provider hosts. Apple has a license to implement scan and match for its forthcoming iTunes Match service. Catch Media has a license for this as well. Google and Amazon do not.
MP3tunes finesses this issue by actually uploading users’ files but only storing a single copy. It claims to be able to restore the copy that a user actually uploaded when she wants it — possibly by storing some information about how the uploaded file differs from the file that MP3tunes stores and then using that information to reconstruct the user’s original file on demand. In other words, MP3tunes has it both ways: it presumably avoids the need for record company licenses (by doing actual uploads instead of scanning and matching) while also avoiding both the storage overhead and the copyright liability of storing multiple copies of the same music on its servers (because each copy is a separate possible infringement, and each infringement carries high financial penalties). MP3 tunes thus does not actually source its music from record companies; it sources the files from its users. Another service that operates this way is Grooveshark, which has also found itself in legal hot water.
The point is that MP3tunes’ implementation has nothing to do with the user experience and everything to do with treading on the knife-edge of the law.
Similarly, sideload.com is based on the legal principle that because users don’t know whether the music on the third-party sites to which it links is unauthorized or not, the company should not be liable for contributory infringement for those files. The judge concurred with this.
Robertson’s comments (e.g. on CNet) on the heels of Judge Pauley’s decision reinforce the impression that he is doing this as a professional goad to the music industry: he seems to be much more interested in the decision’s impact on Google and Amazon than on his own site and its 300,000 users. This decision doesn’t seem to help Google and Amazon much, though: at bottom, it merely reiterates findings from the Veoh and YouTube cases at the district court level. We won’t know much more about the legal boundaries of online storage services at least until an appeals court renders a decision in one of these cases.
How High Will Spotify’s Paid Subscribership Go? August 10, 2011
Posted by Bill Rosenblatt in Business models, Europe, Music, Services, United States.1 comment so far
More on the direct consumer revenue trend: the first set of results of Spotify’s US launch are in, courtesy of the Wall Street Journal’s All Things D. As of earlier this week, only a month into the service’s US presence, Spotify has signed up 1.4 million subscribers, of which 175,000 are paying. At 12.5%, that’s a bit lower than the 15-16% paid subscribership Spotify is enjoying in Europe, but it doesn’t change Spotify’s overall paid-subscriber rate very much.
All Things D’s Peter Kafka points out that the US conversion rate from free to paid is likely to be lower because US subscribers get more free music during the first six months of the US launch than European free subscribers do. But I would also argue that the conversion rate is lower because Spotify is new in the US, and people are just trying it out — many of whom may already subscribe to a competing service such as Rhapsody.
Given that the addressable market for Spotify increased by 150% when it launched in the US (about 150 million Internet users in the seven European countries in which Spotify operates vs. about 220 million in the US), Spotify’s total subscribership could end up in the multiple tens of millions fairly quickly. But to me, the more important question is: given the steep growth in its percentage of paid subscribers, where does that growth stop?
Here’s a poll:
Bill Rosenblatt
Azita Arvani
Bill Jones
Niels Thorwirth
