Must Read Op-Ed by AFM President Ray Hair Lays it Down on the Shadowy Naxos Deal with Pandora

March 28, 2015 Leave a comment

Originally posted on The Trichordist:

As we posted, there are very few details about the recent direct deal between Naxos Records and Pandora.  The two big points that aren’t getting discussed is the Pandora special “steering payola” that Naxos and Pandora refused to discuss with the RAIN Newsletter.

The big issue that Naxos and Pandora also refused to discuss is direct payment to artists, musicians and vocalists through SoundExchange which was a big part of the Merlin direct deal with Pandora.

The musicians union president Ray Hair (American Federation of Musicians) stepped up and called out Naxos and Pandora on this issue in Billboard in a must-read op-ed:

We are alarmed by the agreement recently reached between Pandora and Naxos, the world’s leading classical music label, on a multi-year US license for the entire Naxos catalog. We were concerned when their joint announcement was notably silent on any mention of fair and direct payment…

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Google Distributing Another Terrorist Propaganda Video

March 26, 2015 Leave a comment

Right on cue, Google’s YouTube video monopoly platform is distributing yet another terrorist propaganda video:

According to The Long War Journal:

The Al Nusrah Front, al Qaeda’s official branch in Syria, has released another video showing its fighters using American-made TOW missiles. As The Long War Journal reported earlier this week, Al Nusrah released a video featuring a TOW missile attack in the early hours of the jihadists’ newly-launched offensive against Syrian regime forces in the city of Idlib.

Al Nusrah continues to use the weapons against Bashar al Assad’s forces. Earlier today, Al Nusrah released the video shown above on one of its official Twitter feeds.

These guys know who they can count on to distribute their aspirational jihad videos, the “catch me if you can” video network being pumped right into your house right now.

The Free Speech Rights of Advertisers (h/t to @LaurieSegallCNN)

March 26, 2015 Leave a comment

As we have seen in Google’s attempt to stop being investigated by Mississippi Attorney General Jim Hood and other members of law enforcement, Google are quick to cast themselves as the defenders of free speech under attack from law enforcement–as they serve ads on YouTube against ISIS recruitment videos as reported by CNN, NBC an a host of others.

The latest example is the aspirational video posted by Jund al-Aqsa promoting the group’s most recent suicide bombing attack (YouTube Distributes Jund al-Aqsa Video Glorifying Jihadi Suicide Bombers).

One group whose free speech rights were not discussed: Advertisers.  But thanks to courageous reporting by CNN’s Laurie Segall, the truth is starting to emerge on just how bad Google’s adserving platforms really are.  (See These Ads Ran Before ISIS Videos).

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NBC covered the story, but this time the reporters unfortunately succumbed to the Google Spin (Ads Shown Before YouTube ISIS Videos Catch Companies Off-Guard):

With more than 300 hours of footage uploaded every minute, and with ISIS-related videos cropping up from a variety of accounts, YouTube relies heavily on its users to flag content that violates its community guidelines. YouTube also has a “promotes terrorism” flag as an option underneath every video, and it reviews content that anyone flags.

In other words, Google’s defense is that in an environment that is 100% within Google’s control, Google is unwilling to spend the money to properly filter videos that violate laws against giving material assistance to terrorists before YouTube distributes them widely around the world through ISIS’s much vaunted social media campaigns.

And serve advertising against them, thus forcing their advertisers to subsidize terror.

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There are several steps the Congress could take that would  go a long way toward fixing Google’s unwillingness to treat advertisers fairly and honestly.  These are best summarized by Professor Ben Edelman of the Harvard Business School in his “bill of rights for advertisers” which offers a robust multi-tiered approach easily adopted in regulation and against which one can imagine little principled objection.  Consider right #1:  The advertiser’s right to say no.

Ask Advertisers Where They Want Their Ads to be Placed

It usually comes as a surprise to the casual observer of YouTube’s distribution and monetization of terror that advertisers—the true source of the revenue for Google—are kept in the dark about the ultimate destination of their ads.  As Professor Edelman says,

“It is nonsense to pay for ad space without knowing where an ad will appear; sites vary too much in user quality and context.”

Refusing to tell advertisers where their ads appear is a common practice, in fact is the industry standard.

Why might that be the case?  Is it that the adserving company doesn’t want to bear the cost of producing the information for its clients, or is it that the adserving company doesn’t want to get the advertisers’ approval.  Or take a chance that the advertiser might leave the service or worse yet—refuse to pay for advertising against YouTube videos that it had instructed Google were not to have the advertising.

Yet by producing this piece of information—no law enforcement costs to the government involved—advertisers speech rights are protected and Congress helps the market to correct for many of these anomalies.

Clearly, providing decent accounting information and true choice to advertisers is not a panacea.  But it is certainly something that Google could do tomorrow as an undeniable benefit for truth in advertising.

It is the FTC’s long held view that

“cyberspace is not without boundaries, and fraud and deception are unlawful no matter what the medium. The FTC has enforced and will continue enforcing its consumer protection laws online to ensure that products and services are described truthfully in online ads….These activities benefit consumers as well as sellers, who expect and deserve a fair marketplace.” (emphasis mine)

Requiring the FTC or other government agency to enforce such a law as part of the FTC’s “truth in advertising” regulations is a vital part of aiding law enforcement —particularly if the Congress retained oversight over the law to make sure that powerful commercial interests were not able to take advantage of special treatment by industry insiders who come through the revolving door into the agency.

It would also go a long way toward stopping adserving companies from free-riding on the brands of unsuspecting advertisers as well as the life’s work of artists.

As a never ending flood of stories are released almost daily about Google’s influence over the US. government in general and the Federal Trade Commission in particular, it may just be that the U.S. government is so far in the tank with Google that we can not expect the federal government to do its job.

That’s why it is important for Mississippi Attorney General Jim Hood to succeed in at least being able to investigate Google’s seedy business practices.  While the big advertisers have enough of a relationship with Google to get the attention of the Leviathan of Mountain View, the little advertisers in Mississippi represented by the populist Hood will never get a human on the phone at Google to discuss the problem, much less the time of day.

The “little guy” can only turn to their State Attorney General when confronted with Google, a company that averages one meeting a week with the White House.  Crony capitalism and the special interests can only be defeated by sunlight brought by crusaders like Attorney General Hood.

Only Jim Hood and AGs like him can force Google to stop defrauding advertisers and to stop YouTube from pumping jihad into our homes–jihad that Google monetizes.

YouTube Distributes Jund al-Aqsa Video Glorifying Jihadi Suicide Bombers

March 25, 2015 Leave a comment

Remember when a UK Member of Parliament called out Google for providing material support for the terrorist group Jund al-Aqsa by distributing recruiting and aspirational videos for the group?  That’s right, in the UK House of Commons, Diana Johnson, a leading Labour MP, had quite a lot to say about Google’s involvement with jihadi recruiting:

We recognise, of course, that events in Syria, Iraq and northern Africa are fuelling a rapidly evolving network of inter-related terror groups who pose a real threat to the UK and our allies. It is absolutely right to use all legal measures to try to counter the spread of these groups and to ensure that they cannot establish themselves in the United Kingdom.

In this case, we have two groups with close links to other proscribed groups. Jund al Khalifa-Algeria is an Algerian-based Islamic militant group, linked to al-Qaeda and hoping to establish a caliphate in northern Africa. The group is affiliated to the Islamic State of Iraq and the Levant. Secondly, Jund al-Aqsa or Soldiers of al-Aqsa is a splinter group of the al-Nusra front, and it is just three months since we proscribed JKI—Army of the Islamic Caliphate, another splinter group of the al-Nusra front. In common with the al-Nusra front, the JAA is largely based in Syria, and as a group has attracted many jihadists from outside Syria. JAA started out as a campaign against the Syrian Government, but in recent attacks the group has seemed happy to target innocent civilians….

In this case…there is no need to see sensitive information to conclude that these are terrorist groups. Far from hiding their activities, they are actively boasting about them on social media, using YouTube, Facebook and Twitter to spread images of the most horrendous violence, alongside messages justifying it. These are not groups that want to hide; these are groups that are actively recruiting.

Jund al Aqsa, or Soliders of Al Aqsa, is an al Qaeda ally that frequently operates alongside the Al Nusrah Front, al Qaeda’s official branch in Syria.  And sure enough, here’s the latest and greatest from Jund al-Aqsa distributed by YouTube, a video of of Jund al Aqsa fighter Abu Omar al Kuwaiti detonating at the Al Qal’ah checkpoint in Idlib city:

Who benefits from ad supported streaming? Three guesses.

March 25, 2015 Leave a comment

What do you pay for when you pay for a subscription to an ad supported service like Spotify or Pandora?  It stops being ad supported.  So who benefits from that?  Fans and artists who hate advertising.  Artists who get a higher royalty rate.

Who doesn’t benefit?

Well, who do ya think?  Here’s a risk factor from Pandora’s SEC filing that gives you a hint:

We rely upon an agreement with DoubleClick, which is owned by Google, for delivering and monitoring our ads. Failure to renew the agreement on favorable terms, or termination of the agreement, could adversely affect our business.

We use DoubleClick’s ad-serving platform to deliver and monitor ads for our service. There can be no assurance that our agreement with DoubleClick, which is owned by Google, will be extended or renewed upon expiration, that we will be able to extend or renew our agreement with DoubleClick on terms and conditions favorable to us or that we could identify another alternative vendor to take its place. Our agreement with DoubleClick also allows DoubleClick to terminate our relationship before the expiration of the agreement on the occurrence of certain events, including material breach of the agreement by us, and to suspend provision of the services if DoubleClick determines that our use of its service violates certain security, technology or content standards.

Here’s an excerpt from Spotify’s website:

Some of our advertising partners may use cookies and web beacons on our site. Our advertising partners are listed below:
– Google AdSense – Commission Junction – Adbrite – Widget Bucks – Kontera – Clickbank – Azoogle – Chitika – Linkshare – Amazon

Of course YouTube has ads exclusively by Google.

And what do these three companies have in common?

Spotify board member Google serving advertising.  Who gets cut off if the ad supported platform goes away?

Gee, who could it be.

And by the way, it’s not just the money which has to be a drop in the bucket compared to Google’s overall revenues.  It’s a loss of control, it’s the loss of Google’s ability to exert its monopoly power over the music industry.

The leading groups representing the crony capitalists and the special interests opposing artists and songwriters are all controlled to one degree or another by Google and Amazon, all of whom are making common cause with the National Association of Broadcasters. Here’s an example of the kind of inside the beltway event these people stage to influence lawmakers in Washington.  (They do it at the state level, too–Google is currently suing Mississippi Attorney General Jim Hood to stop his investigation into Googles shady business practices on drugs and monopolist behavior.)

Inflaming artist, songwriter and major label opposition to ad supported music services plays right into the hands of the National Association of Broadcasters, too.  The rumor is that there will be a performance rights bill introduced imminently in the U.S. Congress that would require broadcasters to pay artists for radio play for the first time in history.

Not surprisingly, the NAB is trying to conflate “free music” on Spotify, Pandora and YouTube with “free music” on radio.  An inapt analogy to be sure, because at least Pandora, Spotify and YouTube pay artists something.  But the NAB senses blood in the water, and so is trying to exploit that message through it’s “Free Radio Alliance.”

The NAB then lists all of its “Alliance Members” by state–but they just list the call letters.  They don’t list the station owners.

It’s the usual suspects–mostly the same people who are simultaneously petitioning the FCC for a waiver on the payola rules.

So let’s not miss the point–piling on the artists and labels wanting to revisit the rates for ad supported music services just helps the crony capitalists and the special interests with over $2 trillion in market cap that are using their political clout to crush creators.  It was revealed this week by the Wall Street Journal that Google averages one meeting per week at the White House.

Have you been to the White House lately?

Artists, labels and songwriters are exercising their property rights to negotiate the terms on which they license their works even though the government forces either artists or songwriters to license to all of these services.  Let’s not lose sight of that.

The people who lose the most from cutting back ad supported music are the people who are supporting the ads.

Three of the Hottest Reasons Not to Invite a VC to a Music Conference

March 23, 2015 1 comment

Sorry, couldn’t resist.  They tell you that if you want to have a clickable post make it about lists of things, so after reading “SXSW: The 7 Hottest Topics in Music Tech“, I thought I’d give it a try.

The thing to remember about the conference part of SXSW is that there’s two conferences.  One is at the panels where panelists are pitching, the other is everywhere but the panels where things are getting done.  Frankly–I went to two panels this year and had a reason to go to each.  So here’s a good example of why I don’t spend a lot of time at the panels.  Not saying they’re not worthwhile or anything negative, just that this is  a good example of why I don’t tend to show up there as much as I do at the Four Seasons (where they have valet parking).

The DMN story is about a panel with Director of Product Management at Facebook, Michael Cerda, VP of Business Development at BandPage, Chris Wiltsee, Managing Director of Walden Venture Capital, Larry Marcus and the moderator was SF MusicTech veteran, Todd Tate.

In other words–no musicians.  No songwriters.  So unless you really like being spoonfed what the VC class and their followers want you to believe, no reason to go to yet another “top down” panel.

Proof?  You ask for proof?

Here’s three of the 7 that I think prove the point.

1.  “Business Models For MusicTech Companies With Copyright Reforms”:  This was a biggie for Pandora investor Larry Marcus.  (Who is a well-meaning guy, so don’t flame him.)  When a VC starts talking about “copyright reform” what they really mean is “using my crony capitalist connections in Washington so I can make more money and musicians make as little as possible”.  He’s a Pandora investor, right?  If you want to see how much Walden VC made off of Pandora, click here.

Don’t get me wrong–I want venture investors to make piles of money off of music tech companies.  It’s just that I’d like artists, songwriters and musicians to make piles of money, too.  Risk-adjusted, to be sure, but when we are asked to take a cut in royalties and subsidize Pandora’s business, we are investing, too.

And when we do it because the government orders us to do it as in the case of the statutory license and the ASCAP/BMI rate courts, the rate we should do it at should reflect the value of Pandora’s one product–music.

So here’s the money quote–so to speak–that DMN attributes to Mr. Marcus:

“I hope there is a shifted mindset for people who own the copyrights, the labels, to construct win-win deals.  And that’s NOT about upfront cash payments.  It’s where if the company succeeds then everyone succeeds.”  -Larry Marcus, Walden VC

Right–first of all, “people who own the copyrights” are not just “the labels.”  So either Larry needs to back to music business school to understand how insulting it is for him to completely gloss over songwriters and independent artists, or Pandora needs to finally come clean and stop this charade that they give a rats ass about artists and songwriters.

But the choice part is “that’s NOT about upfront cash payments.  It’w where if the company succeeds then everyone succeeds.”

No, see that’s what happens when you are a stock holder.  So unless a VC is planning on treating those scruffy artists and songwriters the same as his well-scrubbed little cheeks, that statement is complete bunk.  Or something.

2.  Replace House Sound Mixers with a Machine:  Another quote from DMN:

“Algorithms can do a better job at live mixing than most people” – Larry Marcus.

He thinks the “Virtual Sound Guy” app is just around the corner. And with the notoriously shitty house sound guys, I’m interested to see what an algorithm can do.

You must be playing somewhere other than Austin and Nashville.

Next they’ll be telling us that you can download Abbey Road in a Box for free off the Internet and make a better record than The Beatles.

3.  The Real News:  Why do the tech giants stop you from connecting with the fans you drive to their platforms?

In fairness, Mr. Marcus is quoted by DMN as saying something important:

“[Y]ou may have 2 million followers on YouTube, but you can’t actually reach those followers. It’s really important to own your fans.”

There’s a very simple fix for this that I have discussed with Beats and Spotify but no takers:  Allow artists to have a email signup button that would take the fan out of the service to the band’s own email sign up page so that the fan could sign up directly with the band.

So I’ll be looking forward to Pandora adding this feature soon.

Something else for Tim Westergren to think about in his 13 bathroom house after he has a think about copyright reform.

#howgoogleworks: Why did the Federal Trade Commission ignore staff recommendations to prosecute Google for antitrust violations?

March 21, 2015 Leave a comment

OK, now that you’ve stopped laughing, that’s not a trick question.  We all know why Google has never been prosecuted by the U.S. government.  One way or another, they buy their way out of it through Google’s unprecedented network of lobbyists, fake academics and shadowy nonprofits like the Electronic Frontier Foundation and Public Knowledge.  (For the detail, see Public Citizen’s extensive report on Google’s three-dimensional influence network “Mission Creep-y–Google Is Quietly Becoming One of the Nation’s Most Powerful Political Forces While Expanding Its Information-Collection Empire“.)

The Wall Street Journal and a tidal wave of other publications are reporting on a previously secret internal FTC memo demonstrating conclusively that the FTC’s professional investigating staff recommended prosecuting Google.  The secret memo was produced by the FTC under a Freedom of Information Act request as disclosed in the Wall Street Journal.  If that wasn’t enough news, the copy of the secret report that the FTC provided was not redacted.  That means that there was nothing blacked out so the public could actually read the report with all the information that was available to the FTC commissioners–the political appointees for whom the professional staff authored the report.  And also read by outside attorney Beth Wilkinson who was hired by FTC Commissioner and Latham & Watkins partner J. Thomas Rosch shortly before the report was concluded to oversee the FTC’s investigation into Google.

That would be the same Beth Wilkinson who was herself a former Latham & Watkins partner, and a protege of Jamie Gorelick, who represented Google in the negotiation with the Eric Holder Department of Justice and who currently represents Google against Mississippi Attorney General Jim Hood.  The same Eric Holder who replaced Gorelick as Deputy Attorney General.  The same Jamie Gorelick and Beth Wilkinson who both worked for Fannie Mae where Wilkinson was paid over $5 million in compensation in 2006 plus an $800,000 “sign on bonus” even though “she knew little about mortgage-backed securities.”  Well, who among us can say they did, really?

Interestingly, Beth Wilkinson also represented Big Tobacco in 2006…you know, the same Big Tobacco that lost a multibillion dollar class action case to the then-attorney general of Mississippi Mike Moore currently advising Mississippi Attorney General Jim Hood in prosecuting Google.

We’ll get to just how important that is–and why without the benefit of the unredacted report, the public would never have known just how absurd it is that the FTC’s political appointees voted not to prosecute Google.  But realize just how unusual it is for anything even sightly negative about Google to reach the public and the press.  Protective orders, nondisclosure agreements, misleading statements to Congress requiring subsequent correction after the reporters have stopped looking, heavy political pressure, a PR department that demands journalists change unflattering but truthful reporting, inside deals to suppress evidence, all standard operating procedure.

But the delicious irony is that the last remaining state prosecution is being brought against Google by Mississippi Attorney General Jim Hood who Google is currently trying to muzzle based on stolen documents that surfaced after the United States suffered one of the first known cyber attacks by a state actor on a private company.  That state actor was North Korea.

Eric Schmidt, Kun Tony Namkung

After heaping loads of sanctimony from Google and its shills against the scrappy populist Hood, all based on stolen documents presented to a federal judge, Google has pretty successfully deflected attention away from Hood’s antitrust case against the company.  But the disclosure of the previously secret report highlights that the U.S. had a strong case against Google that mysteriously was ignored by the commissioners who voted 5-0 against prosecuting Google.

Since the facts at issue in the Mississippi antitrust case (and other state cases) would have substantially overlapped with factual basis for the U.S. antitrust case, we can easily understand why Google would want to suppress the FTC report and worked hard to stop other state antitrust investigations (including hiring now Senator Ted Cruz when he was in private practice).  It was undoubtedly easier to get state attorneys general comfortable with the idea of dismissing their cases if the U.S. dismissed its own investigation.

But that didn’t work with Mississippi Attorney General Hood. Like his fellow prosecutors at the FTC, he smelled a rat. And now he’s got the FTC’s own report that demonstrates conclusively that the U.S. had a recommendation to prosecute Google from those who have the experience to know better and that these recommendations were ignored by political appointees.  And he didn’t get his evidence from North Korea.

Uncle Sugar’s Field Trip

More importantly, the FTC’s previously secret report shows that companies of the size of Amazon and eBay were so afraid of Google that they decided to file confidential complaints with the FTC, now revealed in the unredacted report.  Mississippi’s case against Google includes investigation into advertiser fraud on behalf of small advertisers who live in the state.

Ask yourself this:  If it weren’t for Hood’s investigation and the FTC staff’s “inadvertent” disclosure of the unredacted secret report, how would we ever know how bad Google’s behavior really is?  And if Amazon and eBay have to go to the FTC for help, who does the average Joe advertiser in Mississippi go to?

Maybe their attorney general?

Remember–Google has been trying to relitigate SOPA as cover for trying to stop Hood’s antitrust investigation.  So far they have been successful using stolen documents and deflection.  Every state attorney general that Google talked out of prosecuting them for antitrust is reading this news coverage, too, and are rethinking what they should do now that it is obvious that they were conned.  Senator Cruz must feel like an idiot now that he knows conclusively just how much he was deceived by his client.  Nothing new, but it sure does sting when you put your own integrity on the line and your client burns you.

No one in the music business who deals with YouTube is going to be surprised by the behavior documented in the FTC’s previously secret report.  We’ve watched how they treat indie labels and independent artists like incomparable Zoë Keating.  There may be some comfort in knowing that Google treats us the same way they treat the big boys, but there’s no question that the Google problem is bigger than even the biggest of us can handle, and apparently bigger than even the U.S. government is prepared to handle.

But not Jim Hood.  As the extraordinarily popular Mississippi AG told MLex:

“If a mother is searching for a pediatrician somewhere in Europe, and she is able to get the correct results for the best pediatrician, as opposed to being led to some pediatricians that actually signed up for Google Plus, a mother in Jackson, Mississippi, ought to be able to get the same search result. The EU is leading the way, and America will follow at some point.”

In the US, he added, “people don’t really get it. The Internet is great, but people don’t really grasp what [Google has] really done” with search results. Google Plus is the company’s online social network. 

A Google spokeswoman declined to comment Thursday on Hood’s comments, citing the ongoing litigation. Google had previously acknowledged antitrust investigations by the attorneys general of Texas, Ohio and Mississippi. While Texas and Ohio spent several years investigating Google for antitrust violations, both states dropped their probes after taking no action in 2014….

Despite the fact that Hood is the only known US regulator investigating Google for antitrust violations, the Mississippi attorney general said he believes that will someday change.

“Google is walking into exactly what [AT&T] did. At some point, they are going to get broken up. If this ruling [on the Wingate injunction] is that an Attorney General can’t even ask a question, even as strong as a lobby as they have in Washington, the Congress is not going to let that stand,” Hood said.

“Basically Google is just walking into an antitrust case where they are broken up,” he added. “Maybe in the next administration, there is some interest in pursuing it, and the Congress gets on it. They are going to get broken up.”

Let’s start with YouTube.

Remember–if you had walked into a room of MBAs in 1985 and told them that in a few years time junk bond king and Master of the Universe Michael Milken would be in prison and his vastly influential Drexel Burnham Lambert would be bankrupt, you would have been laughed out of the room.  And yet it happened.

Why?  Because Goliath never learns.

schmidt senate

Googlers Pablo Chavez, Uncle Sugar and David Drummond Conferring Before Uncle Sugar Took the Fifth Under Oath At U.S. Senate Antitrust Subcommittee Hearing on Google Oversight

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