Staff picks this week:
1. Phantogram (Saratoga Springs) “Running from the Cops” @phantogram
2. Off! (Los Angeles) “Upside Down” @offofficial
3. Jonquil (Oxford) “Get Up” @jonquilband
4. Hollie Cook (London) “Body Beat” @holliecookie
5. Tom Staar (London) “Two Tone Simms” @tomstaar
Great panel at the California Copyright Conference tonight with Curt Marvis of Lionsgate, Keith Bernstein of Royalty Review Council/Crunch Digital, Robert Allen of Universal Music Publishing and Dean Kay, ASCAP Board Member and publisher extraordinaire. My opening remarks below. For those who were there, the two startups I mentioned were Patronism and Stageit.
I’d like to thank the CCC for hosting this panel, especially the planning committee. I’d also like to thank the panel for taking the time out of their days to come and talk about some positive developments in our business. I’m going to make a few remarks and then the panel will introduce themselves.
The first time I spoke at CCC was 1994 and I remember a panelist saying that night that the reason there were not more deals with companies like AOL, Compuserve and what then passed for ISPs was simple—those companies were an immature industry and it was impossible to negotiate with them.
I suggested at the time that maybe it wasn’t that they were immature and did not know what they were doing, but rather that they were immature and knew exactly what they were doing. And what they were doing was trying to roll over us.
It wasn’t that these companies didn’t respect property rights at all. All of them respected their own rights to sell shares of their stock to the public and they welcomed government regulation that gave them access to the public financial markets. They just didn’t respect property rights or government regulation that kept them from “getting big fast” and increasing their market valuations. Things like copyright.
Fast forward to 2011, and we see the triumph of this thinking in the recent Google drugs debacle. Google recently signed a nonprosecution agreement with the US government requiring it to pay $500 million of the stockholders money to keep their executive suite from being indicted for facilitating the importation of controlled substances into the United States.
Why? Because it suited Google over an 8 year period and 7 different sting operations to profit itself not only from those selling counterfeit drugs, but also FDA approved drugs purchased without proper prescriptions. Former Health and Human Services Secretary Joseph Califano believes these drugs were sold to children.
Now compare this to Apple. Depending on the week, Apple is now the second largest American corporation. How did Apple approach selling devices that allowed consumers to listen to music and watch movies? Apple did not pretend they only knew about piracy when copyright owners notified them of it. Apple did not wrap themselves in the flag of “innovation” to engage in “parasitic innovation.” Instead Apple built the greatest filtering software known to mankind. They got licenses. They did the work. They respected the property rights of others because stealing music is bad karma.
Apple got licenses because it was the right thing to do. And the right thing to do paid off.
This is the paradox of our business. I think everyone in this room is committed to a belief in property rights, yet we struggle to understand people who actually do not share that belief. We honor respect for the rule of law and our place in the market economy, and we assume that the ability to do business in peace is a universal value. We also assume that because we are willing to compromise and negotiate, others will, too.
One of my favorite political writers said “Lack of imagination leads to the conclusion that all conflicts can be resolved — if only we’d explain ourselves better, show others respect, address grievances, and offer more generous concessions. But this conclusion is erroneous.”
So what is to be done? Where do we find more companies like Apple?
I think we must balance our attention between fighting to achieve the legal environment for survival with supporting the people who are doing legitimate business or who aspire to do legitmate business. And we likewise have to do what we can to nurture a business environment where people with good karma can thrive.
I think this panel will explore the business choices we need to make in determining whether to do business with the kinds of people who sell advertising for counterfeit drugs and those for whom it is bad karma to steal.
There are many good ideas in our business and our embrace of technology to help our artists prosper is a story that often does not get past the typical narrative. Maybe it was because Steve Jobs was a Buddhist that he chose to do the right thing—if that’s what it was, I will take the Buddhist every time. And so will Apple stockholders.
So tonight we will look at some examples of legitimate alternatives in the entertainment business, and how to be sure creators are collecting from them. And there are a lot of examples of our business embracing technology and innovation.
Because the good news is that the bad news is not the whole story.
For those of us who follow Google closely and understand how their business harms competition and consumers, it was hard not to notice three glaring trip-ups by Eric Schmidt at last week’s Senate antitrust subcommittee hearing on Google’s business practices.
Advertising Illegal Drugs — Google’s Eric Schmidt stumbled badly on basic factual questions from Senator John Cornyn regarding Google’s recent nonprosecution agreement with the U.S. Department of Justice and payment of a historic $500 million forfeiture to avoid indictment. Schmidt tried to cut off Senator Cornyn’s line of questioning about the illegal drug deal, saying—under oath—“Unfortunately, as part of that agreement, and I have been advised very clearly by our lawyers, that we have an agreement with the Department of Justice that we are not to speak about any of the details of it, so I would have to ask you to speak to the Department of Justice for more of that.”
That agreement says nothing of the kind, as rampant audience whispering noted. Senator Cornyn did his homework and knew Schmidt’s statement to be false. He courteously handed Schmidt a shovel to dig his way out of the hole, but instead Schmidt dug himself deeper by acknowledging that the illegal behavior covered by the nonprosecution agreement happened with his knowledge. Senator Cornyn asked, “Was it the result of oversight or inadvertence or were there some employees in the company that were doing this without your knowledge or —“ and was cut off by Eric Schmidt, who replied, “Certainly not without my knowledge.”
As Senator Lee noted in his follow-up, “the primary focus of our antitrust analysis should be consumer welfare.” Violating the Controlled Substances Act for the importation—essentially smuggling—of controlled substances into the United States is illegal and detrimental to consumer welfare. And now we know it was done with Schmidt’s knowledge.
Facilitating and profiting from piracy — Google search also routinely points millions of consumers to counterfeit and infringing non-pharmaceutical goods, another act that hardly maximizes consumer welfare. Senators Klobuchar and Franken questioned Schmidt about how little Google does to prevent linking to known infringers. Schmidt opined that it’s easy for someone like Senator Klobuchar to recognize an infringing site, but very difficult to train a computer to recognize one, saying it is a “very hard computer science problem”.
Google could either use a human to “know it when they see it” or block infringers such as the Pirate Bay (criminal conviction confirmed months ago). They don’t do this probably because Google knows that people want “free” content and Google intends to sell advertising to them where they get it. This also begs the question of how Google maximizes the consumer welfare of advertisers who don’t want their brands associated with illegal goods—Google fails that test miserably.
No content license, No problem! – As we heard from witnesses Nextag and Yelp!, Google’s modus operandi with content owners is consistent. Google indexed web content without consent—copying web content without a license for use in its monopoly search. Google then decided to compete with content owners and tries to license for a competing Google product the same content they just copied for search. If Google can’t make a license deal it likes, Google takes the content anyway—until the government steps in. Google used this approach with Nextag and Yelp! as well as YouTube, Google Books, Adsense,
Blogger—the alternative being that you can opt out of search altogether or don’t advertise with Google online. Or as we in the music business refer to Google’s DMCA notice and takedown practices, ‘that’s notice and shakedown.’
Senator Al Franken drew the most incriminating answer in the hearing from Schmidt regarding Google’s biased treatment of its own products in search results: “[Senator Lee] asked you…do all your rankings reflect an unbiased algorithm, and you said after a little hesitation, ‘I believe so.’ That seemed like a pretty fuzzy answer to me coming from [Google’s] Chairman. If you don’t know, who does?”
Remember when Google’s general counsel told the House IP subcommittee that Google had voluntarily agreed to remove piracy search terms from “Autocomplete” and that all Autocomplete does is provide answers that a lot of users are looking for in some kind of ranking?
You don’t suppose that a lot of Google users are looking for illegal stuff, do you? So searches for illegal stuff would show up in Autocomplete very often? Very, very, very often? In fact, so often that you could probably depend on the first few Autocomplete suggestions for IP related searches being for illegal stuff? Wow, now I bet you had to go to the Harvard Law School to figure that out. Here’s the Google pledge:
“We will prevent terms that are closely associated with piracy from appearing in Autocomplete. While it’s hard to know for sure when search terms are being used to find infringing content, we’ll do our best to prevent Autocomplete from displaying the terms most frequently used for that purpose. (‘Google’s autocomplete algorithm offers searches that might be similar to the one you’re typing.’)”
Now also consider that Google recently had to pay a $500 million forfeiture–that’s half a billion dollars of the shareholders money–because the U.S. Department of Justice ran seven separate sting operations on Google over a seven year period that caught them conspiring with bad guys to sell counterfeit drugs to Americans through Canada. One of the largest forfeitures in U.S. history.
So you would think that if Google was going to actually implement this Autocomplete commitment to copyright owners–voluntarily made by Google–they might start with the thing that just cost them $500 million, particularly when it involved the public health of the United States.
But as you will see from the screen capture above, the search “buy oxycontin online no prescription” still brings back many handy Autocomplete terms, including “buy oxycontin online no prescription cheap”.
When I first arrived in New York as a 19 year old musician, I discovered the sax player in my band overdosing on heroin in the bathroom of our rehearsal hall. We saved him that time, but within a year he had gotten busted for burglary and hung himself in the Tombs. There isn’t a month that goes by that I don’t think of him.
We take this stuff seriously in our business. It’s not funny.
Who are these people and how do they look at themselves in the mirror?
Staff picks for Monday
1. Advent Horizon (Salt Lake City) “Justified” @adventhorizon1
2. Joshua Burnside (Belfast) “Attic Things”
3. The Sword (Austin) “The Warp Riders” @thesword
4. Frank Turner (London) “Peggy Sang the Blues” @fthc
5. Kyuss (Palm Desert) “Green Machine” @kyusslives