Friday, November 12, 2010

What are the dangers and benefits of government intervention in copyright and licensing?

Should we be concerned by the news that BT and Talk Talk have been granted a full judicial review of the Digital Economy Act? This review is almost certainly going to further delay the implementation of an act which already feels slow in completing its move from concept to real world application.

No doubt BT and Talk Talk will interpret this latest development as a coup for two companies who are desperate to champion consumer rights and prevent unjustified invasions of privacy. For those on the rightsholders’ side of the debate however, they might also be described as companies hiding behind supposedly moral arguments as a smokescreen for the real aim of avoiding being held accountable in any way for the massive piracy which takes place across their networks.

Thankfully, the judges will concentrate only on the specific points which it has agreed to review – whether the DEA contravenes European laws on privacy and e-commerce, and whether the Labour government allowed the European Commission enough time to properly study the Bill before it was passed in the UK. We suspect that the European argument is not a strong one. Prior attempts on a European level to outlaw three-strikes legislation have been unsuccessful, whilst the successful passing of similar legislation in France might be interpreted as showing that Europe is keen to let its member countries handle its own business on copyright legislation, provided there are no grave threats to freedom or human rights.

More interesting perhaps – and perhaps of more long-term concern for rightsholders are other recent challenges to the whole copyright framework as we know it. The Department for Business, Innovation and Skills has just announced its own intellectual property review, to be led by academic and journalist Professor Ian Hargreaves. As well as considering the DEA, this sets out to examine ‘barriers to new internet-based business models, including the costs of obtaining permissions from existing rights-holders'.

In additional to Hargreaves’ review, the cross-party Culture, Media and Sport Committee is also investigating the Protection of Intellectual Property Rights Online. It also clearly has the DEA in its sights, and intends to assess whether it has captured the right balance between “supporting creative work online and the rights of subscribers and ISPs”. Some feel that this committee is intent on damaging the credibility of the Act and seeks to derail its implementation.

A third questioning of current copyright regime has now come from Europe, where Commissioner for Digital Agenda Neelie Kroes last week declared her dissatisfaction with the current copyright framework. She said that art was bring compromised by the interest of “intermediaries” and that rights holders avoid debate to “protect their vested interests”, leaving a system which is characterised by “corporatist self-interest”. Kroes has clearly and rightly identified the complex licensing framework – especially online – as a barrier to innovation. But does she also realise that many of those “intermediaries” are also the people who pay artists and make their artistic endeavours possible in the first place? We’re not disputing that the licensing picture is over complex– but do we trust the European Commission to sort it out for us? The last time Europe intervened on international licensing by collection societies, digital businesses were left with a new rights clearance system which was fundamentally more complex and difficult to navigate than the old one they sought to improve.

One thing which we certainly won’t be able to avoid is government interest and intervention in copyright. One the one hand this is something to be welcomed – the industry had failed to control issues of online piracy on its own – government intervention became necessary. And it’s right that government also places demands on the industry to improve its own practices in return. When we hear the kind of language used by Kroes however, it gets us worried. It smacks of over simplification and a lack of understanding that the ‘art’ and “intermediaries” are fundamentally entwined, and not necessarily in an unhealthy “corporatist” fashion.

As our copyright laws undergo such thorough examination, we expect we’re going to be hearing an increasing number of calls for the introduction of compulsory licensing. It’s a term which strikes fear into many in the music industry, despite the fact that we already have compulsory licensing in place with regard to music being played on the radio. Should digital services also get free reign to use music, provided they properly recompense rights holders? We can see the sense, in theory. Compulsory licensing is often favoured by those on the artistic side. However, we can’t help but feel that – contrary to what many believe - artists would actually be more likely to lose out than corporations under such a regime. An examination of the collection and payout of performance royalties exposes a system which is still too inefficient and stacked in favour of major rights holders. We’re not convinced the same wouldn’t be true if this regime was applied to online music use. Would monitoring, collection and distribution of royalties be fair and error-free just because the music use is in the digital domain? We doubt this very much.
We’re fully in favour of improving the fluidity and fairness of music licensing. Perhaps if governments could make one intervention, it should be to step in and arbitrate when major rights holders are accused of unreasonably holding back innovation by refusing to license new services. This would be the kind of practical and useful initiative that might bring real benefits. What we fear however is an attempt to wholly redefine licensing based on either utopian thinking, or a misunderstanding of who the “intermediaries” are and what their relationships are to artists and even the consumer. As always, the more nuanced and less extreme the solutions proposed, the more likely they are to provide some practical benefits.

Friday, September 10, 2010

"The music industry as a standalone industry is a dead duck. It will always be an interesting part of a multimedia future, but that is where it’s going"

As Orchestral Manoeuvres in the Dark break a hiatus of 14 years with the release of their 11th album ‘History Of Modern’, RotD asks frontman Andy McCluskey about his experiences in the music industry, and his hopes and expectations for the new album.

This is your first album since 1996 – what inspired you to release another record now? 

At the end of ’96 when we released Universal it was at the height of Britpop and we were banging our heads against a brick wall. Along came all these bands who were re-creating the 60s and early 70s – that became the future and we as modernists became the past. Move forward 10 years however and people had started asking us about playing live and, as the electro things started to grow, we began to get asked to produce new artists’ records. We went to do a TV show together for a laugh and we had so much fun that we decided to do a few gigs. The gigs went so well that we kept on playing live and now we’ve made the stupid and dangerous decision to make a new record.

RotD remembers working with you in 1996 on the international promotion of Universal. Is it fair to say things didn’t go well? 

It was painful because it was patently obvious that OMD was no longer a priority act for Virgin Records. It’s quite soul-destroying when you know you’re visiting a country for promotion and they’ve thrown together a short campaign to make you feel they’re doing something, but in reality they’d really rather not pay for the airfare and the hotel. Added to that, we were finding it difficult to connect with radio and other media who had decided that we were old and they wanted something else. To be fair, the record companies were just responding to the market forces that were happening at the time.

16 years on there have been seismic changes in the whole record business. Does it feel like a different business to you?

The bottom line is that popular music as an art form is old. It’s done its thing, there is nowhere new to go. The generation of young people for whom music was the instrument by which they defined and created themselves is no longer there. I’ve got kids – they like music but they’re not one trick ponies: they’re much more savvy, they’re much more multimedia. Essentially music is not a product any more to the younger generation – it’s a file, it’s an icon that can be copied, attached or deleted and they don’t treat it as having any great value. My son doesn’t see why he should pay 79p to download something but he’ll quite happily pay £50 for a game for his Xbox. The music industry as a standalone industry is a dead duck. It will always be an interesting part of a multimedia future, but that is where it’s going.

Even despite these changes, we’d argue that the power of a good song hasn’t been diminished. Does that still motivate you?

We did the album because we wanted to have a conversation with ourselves in the voice of Orchestral Manoeuvres in The Dark. We made the record we wanted to make and if other people want to listen to the conversation that’s great. If they don’t, they don’t. We believe that we still have something to say and can produce songs that will be strong and worth listening to. But we also realise that we’re not going to sell what we used to sell. If we’d made this album in 1985 it would have sold millions. We won’t sell millions, but if Coldplay or Lady Gaga released these songs they might still sell millions. We think it’s a fucking great record, but we know it’s not going to sell millions.

You’re releasing the album through the indie 100% Records. How did that relationship come about?

We are very fortunate to be personal friends of Mirelle Davis, who is probably the best international licensing and marketing person in the UK. She had interest from lots of labels for the album. She has a close relationship however with Toby Harris, who had just started a new label called 100%. They had been mostly doing distribution deals but when they heard the album they offered us a JV.

The position we were in is that there are these days essentially three types of records: there’s the big ones on the big labels where, if they sell millions, every one makes money. Then there’s the little ones - and this is where we saw ourselves - which might sell 10-15,000 and if you’re careful with your costs you’ll be all right. The bit in the middle: from 20,000 sales to half a million – everybody’s fucked. You
need a big budget, big PR, big record company and nobody makes any money.

The marketing campaign for the album feels modern and comprehensive. There are five different formats of the record, there’s active online promotion and there’s a direct to fan feeling too. Have you had to adopt a whole new approach? 

When you make a record you ultimately do it for yourself, but if you’re going to release it, you want as many people to hear it as possible, so you look to find people who know how to do this in the current market place. We’re very fortunate in that the people we’re working with know what they’re doing and there’s no doubt that the arketplace needs different techniques from what were used to in the old days. But we are also prepared to go back to basics. The artist has to be prepared to work for every little victory. You can’t just parachute in, expect to get three top TV shows and a couple of major interviews and sell a million records. You’ve got to be prepared to go out there and nickel and dime every radio station, every interview, every internet site and say “if 5,000 people go there, a percentage of them might be interested in buying the record.” You do the work and you hope that word of mouth will spread, that people will read some good reviews, and that maybe they’ll buy the record.

A History of Modern does have the feeling of being a ‘proper’ album. You’ve clearly put your hearts into creating a set of songs that were designed to hit home and last the test of time. What are your hopes for the release?

The reality we face is, why would any one want to buy the 11th OMD album? We’re trying to convince them that we’ve still got something to say and at the age of 50, it’s quite a hard thing to do. I’m sure you must receive records from people and think ‘Why did they even bother? Why have they made this?’ There are a lot of wrong reasons to make a record, especially for acts with some history behind them. But hopefully we’ve managed to confound some expectations with this one. And when we hear people like you say, “you know what, this album is a lot better than I was expecting”, that makes us feel like we’ve got something right. I’m feeling good.

American anti-piracy law is certainly pretty useless. Will the new UK legislation offer a better deal for rights holders?

26 August 2010 - The RIAA has over the last 10-15 years acted in ways which have often left it appearing anti-consumer, stuck in the past and blind to change. It’s fair to say we’re not the RIAA’s biggest fans but this week we find ourselves completely in agreement with statements made by its president Cary Sherman.
He complained that the USA’s current copyright laws are unworkable, placing an unfair emphasis on rights holders to police and respond to infringement, whilst those site hosting the infringements are protected by safe harbour allowances. Specifically, he complained that current US anti-piracy legislation as detailed in 1998’s Digital Millennium Copyright Act needs to be re-assessed.
Any one who has ever tried to send DMCA takedown notices to infringing sites will know that it can be hugely time consuming and often ultimately ineffective. The scale of piracy is so massive that unless those hosting the illegal content are held responsible in some way, there is no realistic chance of copyright owners seeing their ownership of the works respected. The legislation certainly works to the advantage of companies such as Google however, which recently used DMCA safe harbour provisions as the key tool of defence in its court battle with Viacom. The balance is not right.

No doubt the RIAA is quite envious of the UK’s new Digital Economy Act, which places considerably more pressure on ISPs and other intermediaries to actively engage in preventing access to pirated content. The DEA calls on rights holders, ISPs and the media regulator Ofcom to each play an active role in implementing a system which monitors levels of copyright infringement, as well as warning and ultimately taking sanctions against persistent offenders. The legislation also crucially includes powers which could see the blocking of access to websites which systematically engage in copyright infringement. There are heavy burdens of proof to be met before sites can be blocked, but at least the possibility is there. Whilst the measures outlined in the DEA undoubtedly appear to work more in favour of copyright owners than the existing US legislation, those measures are as yet untested and there’s still a considerable way to go before the DEA becomes effective. We are soon however to reach the first important landmark since the passing of the Act, when Ofcom publishes by the end of September its statement on the consultation process about the Initial Obligations code. This will provide the first concrete intelligence on how the DEA could be implemented, what the costs involved are likely to be and whether the legislation is workable in real terms. The DEA has many critics, mostly those who fear the persecution of individual consumers. We prefer to focus on the desperately needed measures contained within that could provide a way to deal with organised piracy or complicity with it. There are undoubtedly businesses which profit from currently weak legislation on online piracy, and it’s about time they lost the ability to do so.

Friday, August 20, 2010

Music licensing is a mess. What are we going to do about it?

Music licensing continues to be a subject creating much heated discussion and debate.We recently complained that some rights holders are clinging to outmoded attitudes about the rights they hold and the way in which the value of those rights should be calculated. Specifically, we complained that some licensors cling so hard to an economic model where there must exist a set minimum value for use of a song that they end up stifling innovation and new services. The negative impacts of such attitudes can currently be viewed clearly in Spotify’s failure to secure a license from Gema to launch in Germany. Closer to home, ambitious UK launches such as Virgin Media have come unstuck when faced with inflated payment demands which cling to old models and fail to grasp possibilities for lower per-use revenues, but with much larger economic scale.

Google recently complained about the huge complexity faced by any one seeking to license music rights. At the time we took its complaints with a pinch of salt, arguing ‘if Apple and all these other digital service providers can do it, so can Google’. But this justifiable viewpoint probably doesn’t do enough to admit the massive challenges which are faced by those who seek to license music. The complexity of the rights model challenges faced by such companies were beautifully illustrated this week in a graphic provided by Pure at the launch of its 7digital and Shazam affiliated FlowSongs service - check it out. Make no mistake, the picture of music rights faced by potential licensees is incredibly complex, fragmented and a huge cause of friction. This graphic doesn’t even tell half the story about the number of clearances which a service mush attain – consider the fact that ‘Record Companies’ are grouped as one single entity here, whilst clearing ‘CELAS and other overseas societies’ similarly involves multiple individual negotiations, not just one as depicted in the diagram.

No one can argue that the music rights picture isn’t overly-complex. But we hear very little in the way of useful suggestions about how it can be simplified. Indeed, recent attempts to improve things actually achieved the opposite – we think specifically of EU demands for pan-European licensing which created a whole new tier of societies such as Celas, which demands an additional layer of clearance on top of the local rights bodies in each territory. Simplification doesn’t come easy. We quite understand why, for example, record companies would not willingly hand over the administration of all digital rights to an organisation such as PPL – it involves a loss of control over the rights which are their most important asset. With this understood, some voices in the industry argue that a compulsory licensing approach is the only one which massively simplifies rights clearances and encourages widespread innovation. Problems with such plans however include that they would also require the establishment of a massive new layer of administration of rights, whilst they could also decimate the existing legal music market and destroy those companies which have successfully managed to navigate the existing rights minefield.

Could there be a third way? We take some interest in the joint initiative of music publishers and digital services to establish a Global Repertoire Database – currently inviting proposals from developers. This initiative seeks not to change the entire licensing model but to greatly simplify the process of identifying who owns which rights. It’s not a new idea – a number of similar proposals have been mooted since the late 90s. Nevertheless the scale, forethought and ambition involved in this new project is indeed serious. The existence of an authoritative global source of music rights info would be hugely welcome. However, several key issues remain unclear. Most importantly – who will own this database and how will it be funded? Can the organisation which builds the database justifiably charge for access to data which they may have compiled by doesn’t ultimately belong to them? Will rights holders view the access to this database as a revenue opportunity rather than an enabler? We’d love to imagine a free to access, global resource for rights information but we suspect this is not what’s going to be delivered. In the meantime, licensing music remains a sticky, complex business requiring massive patience and determination. Anyone got any good ideas?

Friday, August 06, 2010

enough about the cloud - where are the cheap, attractive music services for the mass market?

It’s been a busy week for cloud-based music services, with a number of big brands entering the ring. In the UK, Carphone Warehouse launched its Music Anywhere locker service, which offers users the ability to have music from their existing collections streamed directly to their smartphones. In the US, the Skype founders publicly launched their Rdio streaming service, which allows subscribers ($9.99 per month) to steam unlimited music to mobile and PC, combined with a number of social and recommendation features. Meanwhile, news emerged via MP3tunes founder Michael Robertson that some of Apple’s long-awaited cloud-based services are actually already available to users of its iDisk online storage service, who can now stream their music collections to multiple devices including iPhones and iPads.

‘Cloud’ is very much a buzzword of 2010, but it’s also inherently a little confusing. All that ‘cloud’ really means is ‘internet’ and it therefore encompasses a wide range of music services. One thing that does link them all however is the principal that music is streamed to a customer from the internet when they play it, rather than being accessed from a local hard drive. The move to the internet makes total sense, of course. If music collections are stored centrally, they can be accessed on a wide range of devices and locations, which inherently makes sense for the consumer. There are currently some big legal grey areas around cloud music, especially with locker services. Some labels have sought to shut down any service that stores music on servers without a specific license – mp3tunes being a case in point. The granting of licenses to Music Anywhere suggests however, that labels are now more inclined to look at the potential upside of locker services, rather than trying to shut them down.

There is no doubt that cloud services are the future model for tech-savvy, demanding, forward-looking iPhone/Android owning consumers. The success of Spotify, as one example, shows that this customer group demands flexible, high quality, multi-device use and is more than happy to pay a premium for it. One thing which occurs to us however, is that there are far more people who don’t fall into this customer group than do. What about that massive number of people who probably don’t own a smartphone and even if they do, probably would not want to commit to a new subscription for a music service? We’re concerned that this group is getting sidelined as our obsession with technology grows. This group also includes a huge number of people who don’t currently engage with legal digital music services. Surely this is the group that the music industry should place most emphasis on?

We feel that there is still a real need for new mass-market digital music services. Specifically, we believe that there is a need for new subscription offerings which can attract those who don’t currently spend much on legal music. These offerings need to be simple to use, easy to understand and they need to be good value. If we’re going to attract large amounts of digital music ‘avoiders’, these services probably also need to make use of existing billing relationships. That’s to say, a household is far more likely to spend an extra £5 a month to some one they already have a contract with – BT, Sky or Virgin Media being possible examples – than they are to sign up for any new monthly bill.

We’re not convinced that the raft of new services we see arriving really takes care of these needs and these people. It’s highly regrettable that Virgin Media’s proposed revolutionary unlimited music service has yet to be licensed. We may have Sky Songs, but as far as we can see there is still a large gap in the market here. Why is this? It can only be as a result of licensing.

Licensing is the debating topic that probably prompts more argument in this industry than any other. It tends to highlight rifts between the traditionally conservative major labels and more experimentally-minded independents. It’s still a subject which desperately needs to be discussed and re-examined. The UK may have many licensed digital music services, but it doesn’t have the range of services that this industry needs and attractively-priced, mass market stores are still missing, especially in the subscription space. A lot of it seems to be about price, with an entrenched view holding firm in some sectors that there needs to be a clear minimum price for digital music. We’d argue that if that price is so high that many people won’t pay for it, doesn’t it obviously need to come down? If we’re still failing to convert so many people to legal digital services, price must be a key factor. We’ve both seen and undertaken research that clearly showed that lowering prices for à la carte album downloads attracted so many additional customers that they led to greater overall revenues for labels. We’d also dispute claims that lowering prices for certain kinds of services will kill the high-end market. Isn’t it quite clear that we need a new kind of attractively-priced subscription offering in the market? So what exactly are we, as a wider industry, waiting for?
David Balfour

Friday, July 16, 2010

David Balfour questions PRS for Music's paper suggesting aproaches for tackling piracy

This week PRS for Music’s chief economist Will Page released a co-authored paper suggesting some approaches for tackling online piracy which are radically different from those currently proposed by the Digital Economy Act. The paper is complex but we think it’s fair to summarise its main message is thus: “Rather than targeting individual file-sharers and seeking to punish them, instead let’s look at ways in which we can monetise illegal music use at the ISP level.”

It was little surprise that most media outlets ran with the paper’s most juicy suggestion that a levy could be charged on ISPs for the amount of illegal media use on their networks. This proposal takes its cue from the existing requirement of the new Digital Economy Act that illegal activity will be monitored and measured at the ISP level, then presented to Ofcom and the Secretary of State on a quarterly basis. ISPs, Page and Touve set out, could therefore be charged for that illegal use, with charges dropping if they found ways to tackle and reduce the piracy measured on their networks. Less prominently reported was the paper’s other suggestion that ISPs could be brought into the fold via compulsory licensing, as has been the case in South Korea. All internet users would make payments for their music use to their internet provider, with the accumulated pot of money being distributed to rights holders according to the traffic which is measured.

There are some interesting suggestions in this paper. We’re always in favour of market-based solutions to tackling piracy. But are these genuinely market-based? They rely after all on the legislation of the Digital Economy Act, yet they suggest a totally different use of that legislation than that which has been proposed. If PRS for Music envisaged a radically different solution to piracy than that which was contained within the Digital Economy Bill, why is it proposing it now after the Bill has become legislation? Another problem with these suggestions is that they would seem to require additional legislation in order to be implemented. So are they not therefore being voiced rather too late? Is there a subtext which says that PRS for Music is deeply unhappy with the DEA as it currently stands?

We found the timing of this paper strange. Less than a week after BT and Talk Talk launched a legal bid to challenge the Digital Economy Act, PRS for Music launches a paper which suggests placing an even greater burden on ISPs than the measures they currently object to. We wonder how this could cause anything other than greater friction between ISPs and rights holders? Meanwhile, some tech commentators have reacted quite negatively to this report. One key argument raised against an ISP levy is that it could end up punishing those ISP customers who don’t engage in piracy. Others question whether ISP-based monitoring of internet traffic can ever be accurate enough to form the foundation of a levy-type ‘punishment’ model.

From our perspective, we have to wonder what exactly PRS for Music was trying to achieve with this report. We’re all in favour of discussion and debate but if this was a simple think piece, it seems to have had a much deeper impact than intended. To us it reads rather as a sideways condemnation of the Digital Economy Act. And we wonder, if it is no more than a discussion piece, why was it so prominently-branded by PRS for Music and actively promoted to media? PRS for Music is one of the main funders of lobbying organisation UK Music, but seems to be engaged in separate lobbying which doesn’t necessarily fit neatly alongside it. Regardless of the quality of the research or suggestions in the report, its manner of release was in our view poorly-timed and potentially damaging to the wider industry, a great shame when we’re sure that the intention was to create a positive impression.

Monday, July 12, 2010

Google talk music at BPI AGM

This year’s BPI AGM was remarkable for an enlightening and challenging keynote speech from Google’s president of global sales operations and business development Nikesh Arora. Respect is due to the BPI for securing a keynote speaker who was so eagerly awaited and who produced so many talking points.

Arora cut a considerable swagger at the BPI AGM, presenting via radio mic in typically-informal tech style. He started off in friendly terms, describing some excellent heckling he’d heard whilst sitting at the back of the auditorium. He soon made it pretty clear however that he was appearing to tell the music industry how things are, not the other way around. He’d already made this apparent when a few days before the AGM he tweeted "Going to talk to the British music industry this week. Thoughts from all of you on what to enlighten them about?"

It’s hard not to feel hostile when confronted by such comments from a representative of a company which arguably does no more than the law insists on when it comes to protecting and respecting copyright. Nevertheless, Arora had plenty of interesting things to say. He noted that pretty much the entire population of the developed world is now connected to the internet and that the reshaping of industries by the internet in a revolution which will only increase its effect. Devices are now driving change, he said, not only giving us always-on connection, but also acting as tools of production. Technology is empowering consumers to destroy the bundles traditionally served by media – be that albums, newspapers or TV subscriptions. What entertainment companies should be doing and aren’t so good at, is to respect the consumer’s desire to create their own bundles and service that. “Why can’t I buy my friend’s playlist on iTunes or Amazon in the same way that I could buy an album? We have to get out of that mode of thinking,” he said.

Arora provided some staggering stats. 16 times more data was created in 2009 than in all time up to 2005. “The amount of digital content is phenomenal”. Technology performance is crucial to business success, he argued, noting that when Amazon serer issues cost 100 milliseconds in reduced speed, the company saw a 1% decline in its revenues. People expect instant gratification, he said and we’d better provide it if we want to say in business.

One of Arora’s key points for the music industry was that it needs to reconsider a licensing model which he sees as antiquated. “With technology national borders mean less and less.” When pressed to provide a timeline for the launch of a Google music service he said “designing the service is not the hard part of launching a music service. Navigating the copyrights is extremely complex and getting global rights to a piece of content is a nightmare”. He urged music companies to simplify the model.

It was no surprise that all delegates were keen to hear Arora’s thoughts on piracy. It is beyond doubt that Google’s search engine is a facilitator of piracy. That’s not to say that the company itself can be deemed responsible for that piracy, as the recent Viacom court ruling showed. But equally it can’t (and admittedly doesn’t) claim not to be involved at all. Arora’s responses on the subject were what we’d describe as slippery, both acknowledging and avoiding hard questions. “I understand the passion about blocking piracy”, he said, before underlining that it’s not Google’s responsibility to stop it. “We believe content has value and without it we can’t be in the search business,” he said. What Arora would not give, even when specifically pressed by RotD, was any indication of Google’s moral and political stance on online piracy. Instead he sought to underline that the company was doing everything required by the law to comply with anti-piracy legislation and to act quickly on takedown notices as well as looking to improve how quickly it processes these. He threw the ball back to the industry, calling for “compelling ways” to access content and collaboration with Google to find “new processes and ways to deal with it”. What he did promise – and we believe this is a truly significant and encouraging promise – was that Google would work with the music industry as it has with other sectors to find ways to ensure that legal content gets ranked higher in search results. Considering the fact that currently it’s very often illegal content that ranks highest on Google, such a development could be hugely beneficial for music companies. It might not be a clear ant-piracy policy, but it’s an initiative that is well worth the industry collaborating with Google to achieve.

What were Google’s main messages to the industry? At risk of oversimplifying, we’d say they were: “sort your licensing out”, “improve your legal services”, “empower the customer’s desire to create their own products and don’t dictate products to them”, plus “don’t look to us to provide your silver bullet in the fight against piracy”. Some of this sounds quite reasonable. We do feel however, that if other companies have managed to deal with an admittedly complex licensing framework, why can’t Google? Is it instead evidence of a company that is seeking to backward engineer copyright legislation using the stick of its enormous market influence and the cherry of promising to provide hugely mass market legal music services? Online licensing does undoubtedly need to be simplified however, and the industry would do well to place significant emphasis on working towards this admittedly distant hard-to-achieve goal.

We’re still not convinced by Google’s claims of respect for copyright but what really counts is future progress on this issue. We wouldn’t be at all surprised if there aren’t yet more legal challenges to Google’s position on piracy, perhaps under UK law. Nevertheless, if Google does make good on its promise to promote legal music services over illegal ones, this is to be welcomed as nothing less than a massive step forward. As ever caution is required. The music industry must work with Google and try to understand its position – it is probably now the single most important gatekeeper of our content. On the other hand, we can’t afford to roll over and give up the value of our copyrights when confronted by such an impressively powerful beast. What we do have as our ace is amazing content that real people want. Surely that’s a strong enough basis to form a collaborative future relationship with Google?

Google scores landmark court victory over Viacom

Large corporations can now show blatant disrespect for copyright and get away with it. That seems to be the message coming from the Southern District Court of New York, which this week delivered a defeat to Viacom in its long-running litigation with Google/YouTube. Viacom had alleged that YouTube built the value and user base of its business based on copyrighted works used without permission, and that YouTube consistently and deliberately dragged its heels when it came to removing infringing material. Google claimed that it acted absolutely within the conditions of the US Digital Millennium Copyright Act (DMCA), following all guidelines for dealing with piracy on its service.

Like any court judgement, this one is based on certain specific questions. The court’s key finding was that Google had acted within the rules of the DCMA and as such, could not be found liable for copyright claims on its service. The ruling accepted of Google’s claim that it always complied with specific and correctly-delivered takedown notices but could not be held generally responsible for identifying and removing pirated material from its site. The court also – rather surprisingly to our mind - accepted Google’s claim that it did not receive a financial benefit from the use of pirated material.

This ruling seems to fly in the sense of common sense. Does the court really believe that YouTube gained the $1.65bn value which Google paid for it based solely on user-uploaded videos of dogs chasing their tales? And that the company has never derived financial benefit from illicit clips of music, TV, sport? The main problem here is that the DMCA seems to be open to some interpretation and has provided protection to a business that in our view profited from the misuse of others’ copyrights, whilst providing no protection to the wronged copyright holders.

This week we learnt that the BPI has submitted new copyright infringement claims to Google, where it identified not just specific URLs for infringing material, but also entire website URLs such as and Interestingly this story broke before news of the ruling in the Viacom case. But clearly the BPI had an inkling that the DCMA was going to be found lacking in terms of providing enough protection. These new infringement claims open two new possible avenues: one being that Google might in future be found liable for piracy for linking to entire infringing sites, not just specific links. Indeed the IFPI has now also written to Google with similar claims, asking it to remove links to The Pirate Bay.
What these claims also prepare the way for is a possible action fought not under the US law, but the new, untested UK Digital Economy Act.

We’re nervous of any anti-piracy moves which seek to criminalise or punish individuals whose piracy is insignificant on an economic scale. But we don’t feel the same way about companies which at the very least display a corporate ambivalence to piracy on a massive scale, but might even be accused of being engaged in a strategy to profit from piracy. We absolutely agree that the BPI and IFPI should make unerring and determined efforts to ensure that Google treats copyright with more respect, and that specifically it must stop providing easy linking access to infringing material.

What’s really bizarre about all this is that Google is apparently planning to launch its own legal music services. A company which appears to show blatant disregard for music copyright also wants to become a legitimate player. Isn’t it time that Google decides where it stands on online copyright infringement? The legislation may allow room for manoeuvre, but the general issue is actually quite simple. Either Google is committed to fighting piracy, or it turns a blind eye. So which is it?

Monday, June 14, 2010

10% fewer teenagers in the UK by 2017? What will that mean for A&R decisions?

Should the music industry be worried by 2017 that we’ll have experienced a near 10% drop in the number of British teenagers? It’s long been a key demographic for music companies. We can imagine youth marketers in many businesses having kittens at the idea of such a sudden drop in teen numbers. After all, this group, as one analyst told the FT this week, is likely ‘to be most influenced by fashion trends’. Or to put it a different way, teenagers are perfect sponges for products which are new, on-trend and aggressively marketed. Those who make business plans around demographics are not going to be cheered any more by the fact that the number of young people aged 15-24 is also set to drop by five per cent over the next five years.

The music industry has long been accused of being obsessed with the 15-24
market. As an industry we seem to have an incredible urge to constantly launch new
‘products’ which are young and fresh. As a result we also have a worryingly fast churn of acts and a real problem with building acts which have any degree of longevity. This sickness is not helped much by the fact that media also seems too focused on the same age groups. Radio 1 may have a youth remit, but it also has a budget and dominance which far outweighs its demographic. Similarly, television aggressively markets music and lifestyle to young people with barely a thought for truly mainstream audiences.

Remember the 50 quid man trend which gripped the music industry a few years ago?
This was where we sought to target the people who actually spent most money on
music, a pretty sensible idea. As digital has erupted and physical declined, the importance of the teen demographic must surely be at its lowest for years – as far as recorded music buying is concerned. Teens are still powerfully important for live events, but we’d guess that they probably spend less on recorded music than at any point in recent memory. For some reason however, many record companies still seem obsessed with this demographic, even though it’s skint, fickle and usually not averse to illegal downloading.

We wish A&R decisions were made with much less thought for demographics. And
that the age of signed artists was treated with much less importance. Shouldn’t it be about great music and great songs? That’s why it’s been heartening to see the massive current success of Fyfe Dangerfield/Billy Joel. This classic has appealed across ages and touched a nerve. Similarly, teen audiences are often present in force at gigs by ‘classic’ bands. Even the teen audience is impressed by amazing songs and performance skills.

If an impending drop in the number of young people leads to less focus on youth marketing and a restoration of music-centred A&R, we’d say ours is an industry which
might actually benefit.

Friday, June 11, 2010

live is not the saviour of musicians

Imogen Heap is a rare artist who finds herself almost universally respected within the industry. Now that she’s picked up an Ivor for International Achievement, her credibility has risen even further and when she says something about the state of the industry, people tend to take her seriously. So when Heap tweeted this week that she’s finding it pretty much impossible to break even when touring, it caught a lot of people’s attention. The Guardian’s Charles Arthur picked up on it, and wrote a pretty interesting analysis of what’s Heap’s news means for perceived ‘facts’ about the new music industry model.
We’ve long been frustrated by the oft-repeated line that ‘artists need not worry about falling record sales because they can make up for the lost income from their live earnings’. This concept has always been deeply flawed for the vast majority of artists, yet it gets repeated again and again (most often by those who want to justify illegal file-sharing). The live industry as a whole may have enjoyed significant growth in recent years, but it’s a lazy and inaccurate assumption to presume that this also means that live income has risen by similar margins for artists.
It’s long been the case that artists on the first rungs of their career ladder will probably not make any significant profits from touring. For these acts live work is about building an audience and getting their music known. This has always been such a crucial aspect of developing a music career that labels did not mind stumping up major sums in tour support in order to help get their artists known and loved. As recorded revenues have declined however, some people have looked at the growth in live revenues and made this ridiculous leap of faith which says that live income will balance everything out. It may be so for well-established ‘heritage’ acts, but they’re the only artists making a profit. This concept that live was the new industry saviour was also given wings by some record companies’ insistence on 360˚ deals for new acts. This itself led to an impression that live (and of course merch) were the key new revenue streams.

It’s sobering indeed to learn that even artists like Heap are struggling to make touring pay. She has a large and particularly devoted fanbase. Granted, she might not be frugal when it comes to production costs, but she cares deeply about putting on a great and memorable show. The fact that she cannot make it pay points to several sicknesses within the industry. The most obvious one is that artists playing anything other than small venues face crippling costs from the gatekeepers of live: venues, promoters and ticketing agencies in particular. Interestingly, Heap went on record to say that this issue isn’t unique to the Live Nation-dominated USA, but an international problem. With Live Nation winning regulatory approval for its merger with Ticketmaster, we can’t imagine things are going to get anything other than worse.
What interests us most about Heap’s comments however is her acknowledgement that record sales are still vitally important for her as an artist. She clearly does not fall into the ‘control the internet’ anti file-sharing lobby, but her career still depends on selling recorded music. She may not reject all forms of file-sharing, but that doesn’t mean she wouldn’t like to also sell some records. Hopefully lazy commentators can now accept for once and for all that recorded music is still vitally important, not just for labels, but for artists. And hopefully we can also now put an end to the absurd notion that rampant file sharing doesn’t matter because artists can make money from live.
We find it amusing that within 24 hours of Imogen Heap’s comments, another artist – Sia – commented to the BBC that all file-sharing does is ‘make record labels feel scared’, that it allows her to plan her live work, adding that she has "never made any money out of record sales anyway". None of this actually undermines our points. In Sia’s case she hasn’t actually sold a great many records and her highest-profile album was through a major label. We assume that she was significantly unrecouped so we’re not the least bit surprised that she didn’t make any money from record sales. It doesn’t follow that that it’s impossible to make money from record sales, it’s just that she didn’t. Sadly the BBC made a headline of her ‘I've never made any money out of record sales’ comment. We wonder whether Sia is happy with the subsequent piece which reads like a defence of the file sharing is good, live equals money and record companies are stupid viewpoint. We know better.

Why DO performers get paid so much less than writers? Plain talking at the PPL AGM

PPL chairman and CEO Fran Nevrkla’s is one of very few people who can claim to speak on behalf of the entire UK recorded music industry, since PPL represents the interests of record companies large and small, as well as individual performers. Nevrkla’s AGM speeches therefore act as something of an annual State of the Union address for the British recorded music sector.
So where does the British recorded music sector as a whole – and PPL more specifically- sit in June 2010, according to Nevrkla? It’s performing pretty well in comparison with other territories he notes, but there are still plenty of challenges. There has still been no success in achieving copyright term extension for sound recordings, for one. This subject has been lower on the news agenda in 2009/10, but it’s still a crucial one for PPL and its members, he noted. A European Copyright Directive is required, and whilst the Spanish Presidency only has three weeks left to provide such legislation, PPL will continue the fight as the presidency moves to Belgium. “We never, ever give up,” Nevrkla insisted.
Nevrkla also warmly welcomed the passing of the Digital Economy Act. Whilst acknowledging that the Act has its imperfections, he asked its critics to give the new legislation a chance, saying “have you ever seen or heard of a piece of legislation which is perfect at its point of enactment and introduction?”
PPL itself had a frustrating 2009, he acknowledged. The company was on course to continue its impressive annual growth and pay more money than ever back to its members, when it lost a ruling at the Copyright Tribunal which meant that it is forced to return £18.1m in license fee income. Needless to say that PPL was highly dissatisfied. “My colleagues and I are wholly supportive of the concept of the Copyright Tribunal,” Nevrkla said, before going on to describe its actual ruling against PPL as an “eccentric and bizarre decision”.
Nevrkla also noted that the Copyright Tribunal even described itself as “ill equipped to perform” its regulatory task. What this experience has meant however, is that the vast majority of the pub and retail market enjoys a one-size-fits-all license fee price, regardless of the businesses’ size. Not only is that unfair, it also means that performers and recording rights holders receive much less than composers and publishers for the public performances of their work in the very same premises.
Nevrkla clearly views the imbalance between writers’ and performers’ rights as a deep injustice which permeates UK copyright law and its application, one which needs to be addressed. Not only do performers’ copyrights expire more quickly, they also get paid much less for the same usage than writers do.  A fascinating illustration was later delivered by PPL’s executive director Peter Leathem: A building the size off PPL’s office must pay a PPL license for music performance which costs £337 per annum. The same building must pay PRS for Music £3140. “Why this continued discrimination,” Nevrkla asked. We certainly find it bizarre and unjust that the public performance of one intrinsic copyright in a recording can be valued be worth roughly ten times more valuable than another intrinsic copyright. Can writers and publishers defend or justify this disparity, or do they prefer merely not to draw attention to it? We invite them to send us their responses on this subject.
Nevkla further noted that the industry must do everything it can to promote the value of music and “would be well advised to delete two or three words from our vocabulary entirely and they are ‘promotion’ and ‘promotional value’.  There is no such thing in the 21st Century.  There is usage, there are benefits.” He also hit out at those who belittle the copyright on sound recordings, and rubbish any moves to protect these rights. He accused this “small minority of our academics, various other self-styled ‘thinkers’…the digital freedom fighters” of “gross ignorance and naivety.” He also hit out at the argument that performers should “sell more T-shirts” to make up for the diminishing or disappearing value they receive from sound recordings. “What should that T-shirt say”, he asked “‘I was a fiddle player in the LSO and the RPO years ago, I can’t play anymore, I am old, I am ill, please feed me, cuddle me, look after me, make me warm, give me water’.  If it was not so arrogant and cynical and pathetic it would be laughable.”
Nevrkla paid warm tribute to a great many music industry bodies and figures, all of whom do their bit to protect musicians and their incomes. AIM, BPI, IFPI, MU, Equity, MPG, FAC, UK Music and MMF all got thanks and encouragement. “We are in this fragile glass boat together, all sectors of the music industry.  No-one should ever try to do anything to score brownie points at the expense of another,” he added.  The message to PRS for Music was slightly more challenging, possibly on account of the disparities mentioned earlier. “We are delighted to be collaborating with PRS for Music, please let us do it a bit faster because otherwise it might get a bit frustrating,” he said, adding: You truly are our cousins and we could and should do many good, exciting things together.”
As always Nevrkla left us with plenty of food for thought. We’ve long been aware of the disparity between writers’ and performers’ rights. As the entire recorded music usage model moves increasingly and rapidly from sales to licensing however, levelling this disparity seems an ever more crucial issue fundamental to the health of the music business but also musicians themselves. It would be wrong to focus only on this disparity however, since writers and performers do have so much common ground when it comes to copyright: they all feel the painful pinch of falling music sales. They all stand to suffer when their copyrights are not respected. With organisations as focused and passionate as PPL fighting to protect these rights, musicians are lucky to have some powerful and intelligent allies.