Tweet This Way: Do Commissioner Wright’s Tweets Show the Extent of Google’s Agency Capture at FTC?

William Alden writing in Buzzfeed reports yet more evidence of agency capture by Google of the Federal Trade Commission–it’s indirect, but it’s not fooling anyone:

Google’s allies in Washington have used plenty of subtle techniques to help the search giant advance its agenda.

Now, one high-ranking official has employed the art of the subtweet.

Joshua Wright, a commissioner of the Federal Trade Commission, posted three tweets on Tuesday night that appear to refer to Google — the subject of a recent antitrust inquiry by the FTC that did not result in any charges — without mentioning the company by name.

Commissioner Wright’s tweets indirectly defended Google against the results of a damning study by Professor Tim Wu and others that demonstrate consumer harm by Google favoring its own products over those of competitors in search results.  (“Is Google Degrading Search? Consumer Harm from Universal Search.”) See Andrew Orlowski’s reporting on the study.

Wu’s study is a huge threat to Google as it supports the European Commission’s long running prosecution of Google for massive antitrust violations.  The EC has stopped playing footsie with Google over these serious charges and is aggressively pursuing their case.  So what could be more helpful than a little moral support from an FTC commissioner?  If it weren’t for the obvious agency capture of the FTC by Google, that is.

The concept of “agency capture” or “the capture theory of regulation” defines a government regulatory agency tasked with monitoring compliance by a sector of the economy with laws and regulations promulgated by the agency that has come under the effective control of the sector it is intended to regulate.  Agency capture is a form of political corruption.  It is usually implied and limited to one or a few dominant firms in the regulated space that are able to buy political influence.

It sometimes is a direct outcome of revolving door jobs where a government official recently left a job at one of the dominant firms in the regulated space, a think tank or academic setting that is also dominated or funded by the firm.  And you guessed it–the one contemporary firm that is most successful at capturing multiple agencies is Google.

This is, of course, why we were happy to hear that Senator Mike Lee was investigating Google’s ties to the Federal Trade Commission–an investigation that seems to have trailed off.  As this things often do, don’t you know.

The most recent example of Google’s success at agency capture is a series of tweets by one Joshua Wright, former Google-funded academic and current Commissioner of the Federal Trade Commission.  In fact, the potential for agency capture of the Federal Trade Commission by Google is so present that Commissioner Wright promised the American people as part of his confirmation hearings that if confirmed he would recuse himself from participating in any matters relating to Google for two years.

I’m not making this up–Commissioner Wright’s moral hazard problem is so bad that he had to make this promise in return for being confirmed as an FTC commissioner.  Why Google?  Mr. Wright was paid by Google as noted by Consumer Watchdog in a press release:

In a letter to Sen. Rockefeller, John M. Simpson, [Consumer Watchdog’s] Privacy Project Director wrote:

“Simply put, Wright has repeatedly advocated against laws and regulations that protect consumers and has argued against strong antitrust enforcement.  Worse, he has a record of support for, and financial ties to, Google, whose activities are one of the major ongoing issues confronting the Commission.”

“The next Commissioner should be a truly disinterested party who would consider only facts gathered by the FTC staff when making a decision,” the letter continued. “Wright is not such an individual; he is widely on record as opposing antitrust action against Google and has been funded by organizations that receive money from the company”….

Wright is the research director and a board member of the International Center for Law and Economics (ICLE), which receives funds from Google, Consumer Watchdog noted. He has authored or co-authored several white papers supporting Google that were funded by ICLE. Wright is a Senior Adjunct Fellow at TechFreedom.org, a self-described “technology policy think tank,” which also receives Google money.

And by the way–Google’s astroturfing doesn’t end there–read “Mission Creepy” by the venerable good government group Public Citizen on a dark and stormy night if you want a thorough road map to Google’s influence-buying largesse.

Commissioner Wright’s tweets tell the story:

Now why would an FTC commissioner be tweeting this way?

Of course, the real question is whether Google has achieved agency capture of the whole U.S. government.  Commissioner Wright joins a long list of fellow travelers:

President’s Council of Advisors on Science and Technology and Obama Campaign Volunteer: Eric Schmidt (call sign “Uncle Sugar”)

Google Lobbyist: Katherine Oyama (former Associate Counsel to Vice President Joseph Biden)

Counselor to the Chairman, Federal Communications Commission: Gigi Sohn, formerly CEO of Google Shill Lister Public Knowledge.

Special Assistant to Chairman, Federal Communications Commission: Sagar Doshi (Google Product Specialist)

Chief Digital Officer, Office of Management and Budget and Featured Revolver at OpenSecrets.org‘s Revolving Door Site: Jason Goldman, formerly Product Manager at Google.

Director of Google Ideas (and co-author with Uncle Sugar of The New Digital Age): Jared Cohen (formerly a member of the Secretary of State’s Policy Planning Staff and as an advisor to Condoleezza Rice and later Hillary Clinton).

Director of United States Patent and Trademark Office: Michelle Lee (formerly Google’s Head of Patents and Patent Strategy)

U.S. Chief Technology Officer: Megan Smith (formerly at Google[x])

Deputy U.S. Chief Technology Officer: Alexander Macgillivray (formerly Google’s point man on orphan works)

Director of Google Advanced Technology and Projects Group: Regina Dugan (former director of DARPA)

Director of U.S. Digital Service aka savior of Healthcare.gov (in case you couldn’t tell): Mikey Dickerson (former Site Reliability Manager at Google)

YouTube Global Communications and Public Affairs Manager:  Chelsea Maugham (former U.S. State Dept. Chief of Staff)

Google Head of Global Development Initiatives: Sonal Shah (Advisory Board Member, Obama-Biden Transition Project)

Deputy U.S. Chief Technology Officer (White House): Nicole Wong (former Google Vice President & Deputy General Counsel)

And then there are dozens if not hundreds of former Hill staffers now working for Google’s DC shillery.

Artists Alert: From Our Friends at the Illustrators Partnership The Return of Orphan Works End Run

For more than a year Congress has been holding hearings for the drafting of a brand new US Copyright Act. At its heart is the return of Orphan Works.
Twice, Orphan Works Acts have failed to pass Congress because of strong opposition from visual artists, spearheaded by the Illustrators Partnership.
Because of this, the Copyright Office has now issued a special call for letters regarding the role of visual art in the coming legislation.
Therefore we’re asking all artists concerned with retaining the rights to their work to join us in writing.
When and Where
Deadline: July 23, 2015
You can submit letters online to the Copyright Office here.
Read the Copyright Office Notice of Inquiry.
Here are the Basic Facts

“The Next Great Copyright Act” would replace all existing copyright law.

It would void our Constitutional right to the exclusive control of our work.
It would “privilege” the public’s right to use our work.
It would “pressure” you to register your work with commercial registries.
It would “orphan” unregistered work. 
It would make orphaned work available for commercial infringement by “good faith” infringers.
It would allow others to alter your work and copyright these “derivative works” in their own names. 
It would affect all visual art: drawings, paintings, sketches, photos, etc.; past, present and future; published and unpublished; domestic and foreign. 
Background
The demand for copyright “reform” has come from large Internet firms and the legal scholars allied with them. Their business models involve supplying the public with access to other people’s copyrighted work. Their problem has been how to do this legally and without paying artists.The “reforms” they’ve proposed would allow them to stock their databases with our pictures. This would happen either by forcing us to hand over our images to them as registered works, or by harvesting unregistered works as orphans and copyrighting them in their own names as “derivative works.”The Copyright Office acknowledges that this will cause special problems for visual artists but concludes that we should still be subject to orphan works law.
The “Next Great Copyright Act” would go further than previous Orphan Works Acts. The proposals under consideration include:
1.) The Mass Digitization of our intellectual property by corporate interests.
2.) Extended Collective Licensing, a form of socialized licensing that would replace voluntary business agreements between artists and their clients.
3.) A Copyright Small Claims Court to handle the flood of lawsuits expected to result from orphan works infringements.
In your letter to the Copyright Office:It’s important that lawmakers be told that our copyrights are our source of income because lobbyists and corporation lawyers have “testified” that once our work has been published it has virtually no further commercial value and should therefore be available for use by the public.

So when writing, please remember:
* It’s important that you make your letter personal and truthful.
* Keep it professional and respectful.
* Explain that you’re an artist and have been one for x number of years.
* Briefly list your educational background, publications, awards, etc.
* Indicate the field(s) you work in.
* Explain clearly and forcefully that for you, copyright law is not an
abstract 
legal issue, but the basis on which your business rests.
* Our copyrights are the products we license.
* This means that infringing our work is like stealing our money.
* It’s important to our businesses that we remain able to determine
voluntarily how and by whom our work is used.
* Stress that your work does NOT lose its value upon publication.
* Instead everything you create becomes part of your business inventory.
* In the digital era, inventory is more valuable to artists than ever before.
If you are NOT a professional artist:* Define your specific interest in copyright, and give a few relevant
details.

* You might want to stress that it’s important to you that you determine
how and by whom your work is used.
* You might wish to state that even if you’re a hobbyist, you would not
welcome someone else monetizing your work for their own profit
without your knowledge or consent.


Because this is a complicated issue, we’ll follow up next week with some expanded thoughts of our own.
 
– Brad Holland and Cynthia Turner
for the Board of the Illustrators Partnership
The Illustrators Partnership has filed multiple papers with the
Copyright Office regarding this issue.

You can download them from the Copyright Office website:

Remedies for Small Copyright Claims

January 17, 2012

Orphan Works and Mass Digitization

Initial Comments, February 3, 2013

Orphan Works and Mass Digitization

Reply Comments, March 6, 2013

Orphan Works and Mass Digitization

Additional Comments, May 21, 2014

Forty State Attorneys General File Amicus In Support of Mississippi Attorney General Jim Hood’s Fight Against Google

MTP readers will recall that Google sued Mississippi’s populist Attorney General Jim Hood to stop Hood’s investigation into Google’s drug habits.

More on this to come, but the short history of the case is that Hood served a request for documents on Google consisting of a series of questions about Google’s business practices in furtherance of Hood’s investigation into a number of issues, mostly whether Google had violated the nonprosecution agreement Google entered into with the Criminal Division of the U.S. Department of Justice that allowed Google to pay $500,000,000 to avoid being prosecuted–and having its senior executives including Larry Page prosecuted–for violating the Controlled Substances Act.

Hood’s concern was that Google not only violated the terms of the nonprosecution agreement but also may have violated a variety of Mississippi consumer protection laws for advertising illegal drugs in Mississippi.

Let’s be clear–people die from buying illegal drugs online. That’s why we have the Ryan Haight Act carried by Senator Diane Feinstein–a senator from California.

The overwhelming majority of the questions in Hood’s request concerned Google’s compliance.  Google promptly sued Hood to stop the investigation.  As luck would have it, the case was heard in federal court before a judge who is apparently Hood’s long time political opponent.  Google was able to delay Hood’s investigation while Hood appealed to the Fifth Circuit, where the case is now.

The AGs summarize the fundamental flaw with Google’s case:

This is a case about the authority of state Attorneys General to exercise one of their fundamental powers: the ability to investigate potential violations of state law. What should be a routine discovery dispute in Mississippi state courts, resolved under established state procedures, has instead evolved into a contrivance for a company doing business in the state of Mississippi to invoke federal jurisdiction by asserting potential affirmative defenses to claims that have never been filed.

Imagine if the tobacco companies had done the same to Hood’s predecessor and mentor former Mississippi Attorney General Mike Moore to avoid what became a multibillion dollar multistate settlement against Big Tobacco?  Remember that one?

So it should be no surprise that forty–count ’em, forty–state Attorneys General filed an amicus brief supporting Hood’s ability to conduct his investigation while affording Google full due process rights to object or otherwise defend itself.  As the forty AGs noted, doing otherwise “would provide a roadmap for any potential wrongdoer subject to a legitimate state law enforcement investigation to attempt to thwart such an inquiry.”  I wonder what the other 10 are thinking?

I know what these guys are thinking?

And remember–smoking doesn’t cause cancer.

Read the brief here.

New Study Explains Why YouTube is Always at the Top of Google Search Results

For years now–since Imeem days at least–I’ve been wondering why it is that the top videos in Google search results were always from YouTube (or from Vevo through YouTube).  Like many others, including…let’s see…Senator Mike Lee and the European Commission for starters…I just assumed that Google was stacking the deck to favor YouTube, its wholly owned subsidiary.

According to Brad Stone writing in Bloomberg, a newly released study by Tim Wu (“Is Google Degrading Search?  Consumer Harm from Universal Search”) explains the phenomenon and further backs Google into an antitrust corner.  The study’s thesis is that “Google is able to leverage its dominance in search to gain customers for [Google’s competing] content.  This yield’s serious concerns if the internal content is inferior to organic search results.”  Brad Stone reported:

Google is facing a new high-profile adversary in the roiling fight over whether its monolithic search engine violates antitrust law: Columbia Law School professor and noted Internet theorist Tim Wu. The author of the influential book The Master Switch: The Rise and Fall of Information Empires co-wrote a paper asserting that Google is engaging in anticompetitive behavior by prominently serving up its own content, like restaurant reviews and doctors office phone numbers, in search results….The new study, which was presented at the Antitrust Enforcement Symposium in Oxford, U.K., over the weekend, says the content Google displays at the top of many search results pages is inferior to material on competing websites. For this reason, the paper asserts, the practice has the effect of harming consumers. Wu co-authored the study with Michael Luca, an assistant professor at Harvard Business School, and data scientists at the local reviews site Yelp, which has been one of Google’s primary opponents in the global antitrust fight.

The Wall Street Journal’s Tom Fairless reported on the Tim Wu study saying:

[The study is a] potentially significant twist in Europe’s long-running antitrust investigation of the U.S. search giant….One official at a European antitrust authority, who declined to be named, said any study that showed Google caused ‘quantifiable harm’ to consumers would ‘certainly bring things forward’ for EU regulators.

I’ve been saying for quite some time that YouTube ought to be a prime target for the European Commission’s antitrust enforcers.  The Wu study provides further support for investigating YouTube’s business practices and the harm to consumers of providing inferior video search results.

The research seeks to undermine Google’s primary defense against the charges filed in Europe, where competition regulators have formally established a case that Google violates antitrust law.

What if Google Buys Spotify? The Case For and Against Stock-for-Royalties

While everyone else is focused on a potential initial public offering by Spotify–which is the only exit strategy that anyone seems to think Spotify has in mind–Re/Code reports that Google’s YouTube subsidiary is very interested in buying Spotify.  (That would be the same YouTube that doesn’t seem to be able to turn a profit after nearly 10 years but can come up with the money to buy Spotify.)

Omid Kordestani, who has just temporarily replaced Nikesh Arora as chief business officer of Google, is joining the board of Spotify, according to people with knowledge of the situation.

In addition, sources said, one of the search giant’s former execs, Shishir Mehrotra, will become a special adviser to CEO Daniel Ek and the company’s management.

The move is a fascinating one, especially since sources inside Google said that new YouTube head Susan Wojcicki has expressed interest in acquiring the popular online music service if it were for sale. It is not currently and there are no such discussions going on between the pair about such a transaction.

Which depends on what the definition of “is” is…that story was posted on July 21, 2014 at 10:18 am Pacific Time–what happened after that day and hour is anyone’s guess.  So you have to ask yourself how would the major labels feel if they were suddenly dealing with Google instead of Spotify?

While one could see that the time may not yet be ripe for litigating over the value of the Spotify stock grants widely reported to have been made to the major labels and Merlin, the idea of dealing with Spotify on the issue has more appeal than dealing with the highly, highly litigious Google who will sue over whether the sun rises in the East faster than you can say “Jamie Gorelick”.  If anyone thought that doing business with YouTube was like being sewn in a bag with wild dogs, just wait until Google uses its monopoly rents to gets its hands on Spotify.

The 19 Recordings Litigation

If you’ve ever been cheesed about Pandora executives lining their pockets with millions from IPOs, then you’ll understand why labels demand shares of stock when they license their sound recordings to tech companies.  And if you’ve ever been cheesed about low royalties for artists and songwriters from tech companies with or without stock, then you’ll also understand why 19 Recordings (an affiliate of the company that developed American Idol) wants to sue Sony Music for granting Spotify what 19 alleges are below market royalty rates in return for stock.

Some of this is still confidential (which is what passes for “unleaked” these days) but was reported by the Hollywood Reporter last week:

Richard Busch (perhaps best known for representing Marvin Gaye’s family in the “Blurred Lines” lawsuit) is representing 19 have been fighting in recent weeks to get Sony to come forward with the streaming agreements because they wanted to see whether streams were being discussed “transmissions.” According to the lawsuit, they were. Sony allegedly tried to “mislead 19’s auditors with highly redacted portions of the [streaming] agreements to allegedly support their mischaracterization of the services’ exploitations.”

But the lawsuit now means even more because it’s the first case to test whether the record industry establishment and tech industry vanguard are in cahoots at the expense of the creatives.

There will be a lot of ink spilled on this story, but it’s that “in cahoots” part that I want to focus on in this post.  Mr. Busch will be in an excellent position to “look under the hood” in that dialog and see what Spotify’s role was in the deal.

Because it does take two to tango.

What’s In It For Labels

The most common refrain you hear from labels when trying to license recordings for online services is “we’re not going to create another MTV.”  So let’s set aside the 10 examples of creating another MTV (including Pandora and YouTube) and just focus on Spotify.

It is pretty widely reported that major labels and Merlin got stock in Spotify.  I would argue that it is entirely fair that they got the stock because there is an intrinsic value for a company like Spotify in having large catalogs available to users, particularly if the company is going to feature the ad supported business model with its shite royalty.

And let’s stop kidding ourselves–Spotify is only about the ad supported model.  The subscription part of its business was merely a sop to the labels to close their deals.  As Daniel Ek and Google have both made clear, they will never give up advertising driven services.  Why?  Maybe it might have something to do with admitting Web 2.0 is a disaster for “content” creators?  So Mr. Ek and his board member Google are of the same mind on this issue.

So I think a compelling argument can be made for licensors getting shares of stock in Spotify.  My problem with the way this has worked out is that the compelling argument wasn’t made strongly enough. Not only should the major labels and Merlin have gotten stock, all the artists involved should have gotten equity or an equity-like kicker or cash bonus in return for granting the license at competitive royalty rate much less taking a below market rate in order for Spotify to get off the ground.  (Given securities laws, its a bit simplistic to ask for all artists to get stock–ever try to get a broker to take unregistered private company stock?  But cash works just fine, thanks.)

Mr. Busch is now in an interesting position as he may be able to discover exactly what “in cahoots” really means.

There’s some other aspects to this that may start to come out in the 19 litigation given Mr. Ek’s recent protestations of love for the ad supported side of his business.  If the reality–perhaps discovered in emails–turns out to be that Spotify never intended to boost the subscription side of their business, told the labels that they did intend to do so knowing that the labels would rely on this material promise, and negotiated a contract that addressed this issue from many different angles and issued stock to those who were induced to license on this basis–well, that’s kind of an interesting possibility.

“The better to stream you with, my dear!”

What’s In It For Spotify?

Streaming services like Spotify and YouTube all pay horrendously low royalties and apparently trade stock-for-royalties in their major label and Merlin licenses.  But here’s the trick–once Spotify establishes the subsidized royalty rate, that rate then becomes the top rate they will pay to any other sound recording owner licensing to Spotify.  In fact, they have crammed down even worse royalty rates on independent artists (and presumably independent labels that are not Merlin members) who don’t get the stock.

So if Spotify can trade some of its private shares for an across the board crappy royalty rate, what’s stopping them from doing it?  Particularly if they never intended to transition to a subscription service?  Aside from ethics and stuff like that.

Staying a predominantly ad supported service would be very Googlely after all–and if Google is planning on buying Spotify with all the goodies that would entail for Mr. Ek….Seems like we’ve seen this movie before, I think it was called Rightsflow (the licensing company that couldn’t seem to find the copyright owner for Gangnam Stylevery Googlely).

Would Spotify’s board member encourage more conversion to subscription?  Here’s what YouTube told Music Ally on the subject:

“It’s in Google’s DNA to be in the ad-supported business. Subscription is an add-on. It’s an adjacent business that we’re building.”

Subscription is an add-on?  Is that the approach we would want from an acquirer of Spotify?

What’s In It for Artists?

Record deals typically have language that prevents artists from participating in catalog-wide advances or fees except in extremely rare cases.  Given the recent uproar about “breakage”, the 19 litigation seems to come at an opportune time for artists–if the proceeds from the sale of the Spotify stock is treated as unallocated payments or breakage, then it seems like some of those monies will be passed through to artists based on extremely carefully worded breakage policies.  (Mr. Busch will also be in a position to encourage a court to make sure that policy is enforced.)

Remember, the value of private stock is essentially set by the issuer’s board of directors (with reference to valuations set by the lead investor in private equity rounds).  That’s why Spotify’s valuation is jacked up so high beyond any possible reality.  The investors want it that way to hype their exit. We’ve seen that before–it is called the Dot Bomb Explosion.  (Or more accurately, Implosion.)

In order to sell the shares either privately or in an IPO there’s usually some restrictions from the issuer as well as statutory holding periods.  For example, if the label shares (probably preferred stock) are able to be sold in an IPO, that usually means that (after converting preferred to common stock) the stock held by a label can be registered along with the IPO common stock shares.  After the company’s registered stock is available on a public stock exchange, the holder of the label stock can sell the shares to the public after “lock ups” come off.   Lock ups are a period of time that is usually set by the company in which holders are prohibited from selling their stock (to prevent a rush of selling).  There may be other restrictions.

So valuing those shares and also getting the cash from that valuation to distribute as breakage is not quite so easy.  Then there’s the question of how to distribute the cash value among artists and one thing we know for sure is that no record deal addresses this issue head on (although presumably superstar lawyers have got this figured out by now).  I’m looking forward to seeing how Mr. Busch solves these problems–although I fully expect the resolution will be a confidential settlement.

Tango for Two

Don’t let your eye get taken off of the ball here.  You can say that Sony (and probably all the others) negotiated a lower minimum guarantee and royalty in return for stock.  Or you can say that the stock was a way to capture an intangible value that would have been distributed to artists under Sony’s breakage policy.  That may or may not have been fair to the artists depending on what the breakage policy was.  If you’re like me, you’d want the stock and the market-price royalty, too.

But what we do know is that Spotify profited from the stock-for-royalties subsidized rate to jam it down everyone else’s throat without giving them equity or the cash equivalent.  That benefit flows strictly to Spotify and likely had nothing to do with the labels that got equity.

And that sounds like a Spotify class action to me.

What’s Next for Daniel Ek? Wherever he is, he’s not in Kansas anymore.

After pulling out all the stops in the smear campaign against Apple, the Spotify/Google juggernaut got a pause this week courtesy of @taylorswift13.  Mr. Ek–and potentially the entire ad-supported business model touted by The Man 2.0–may need some help.  You know, buy a vowel, phone a friend–just not one named Sean or Larry. Courtesy of Complete Music Update, a summary of indie label reaction:

Helen Smith of pan-European labels group IMPALA: “This is a great precedent in any sector on the benefits of working together and taking a stance to achieve a fair result. With 80% of all new releases produced by independent labels, this is also a great result for Apple. Their launch will now incorporate the very music that makes an online service attractive to music fans. The involvement of Merlin is vital considering its fundamental role in strengthening the independent sector. IMPALA has repeatedly called on online platforms to ‘play fair’ and this is an impressive outcome for independent labels and artists”.

Darius Van Arman, Secretly Group: “Apple listened to our community and then revised its music service agreement, demonstrating that it is committed to treating fairly all creators – labels, artists and songwriters. Secretly Group is proud to continue its partnership with Apple towards making music truly indispensable”.

Tom Silverman, Tommy Boy: “Today’s agreement shows Apple’s concern for the issues of the artist and independent label creative community. We look forward to Apple achieving huge and rapid success with its subscription service”.

Oke Gottlich, Finetunes: “The German indie sector is very happy and grateful that Apple has returned to the table, starting a dialogue again and involved our members – the small and middle-sized labels – for making the new Apple Music experience a real game changer for the whole music sector, finally”.

And from MTP’s favorite, Martin Mills, Chairman of Beggars Group and records man extraordinaire:

“Over the last few days we have had increasingly fruitful discussions with Apple. We are now delighted to say that we are happy to endorse the deal with Apple Music as it now stands, and look forward to being a big part of a very exciting future”.

Here’s a quick trip down a Spotify short-term memory lane for some long-term problems.

1.  Contract Leaks:  Nobody believes that Spotify had nothing to do with leaking Sony’s contract.  At least they didn’t try to blame it on the North Koreans!  Why would you ever trust Spotify to hold on to a piece of paper?

2.  Blaming the Labels for Low Artist Royalties Hasn’t Worked:  There are way too many indie artists who collect the label and the artist share to buy into this crap.  In case you haven’t noticed, it’s the indie artists who do get the total label, publisher, artist and songwriter pie who are complaining about how their royalties are shite while Spotify gets multibillion dollar valuations.  And who could forget Sean Parker’s line about what’s really cool, like dude.  Once they’ve insulted you and tried to interfere with your relationship with your label and vice versa to masque their own shite deals and cronyism, who would trust their spin?

3.  Complaining to Antitrust Authorities Hasn’t Worked (Yet):  And probably won’t.  It’s pretty clear now that Apple’s supposedly “take it or leave it” terms weren’t getting taken and so were left.  With 50% control over the global subscription market according to Spotify analyst Will Page, I would not be too quick to cast stones.  Particularly not with Google as a member of the Spotify board of directors.  Stones have a tendency to boomerang.  So unlike Mr. Ek’s refusal to cooperate with @taylorswift13 and YouTube’s threats to indie labels and independent artists, Apple came back to the table.

4.  Daniel Ek is in the Advertising Business:  Mr. Ek has been very clear just how wedded he is to the advertising model–you know, the one where his board member Google sells advertising on Spotify (and YouTube and everywhere else).  In fact, he supposedly said he’d rather shut down the company than give up “free” music, i.e., ad supported.

Which is fine, but he should stop fooling himself that he’s in the music business.  He’s not.  He’s in the advertising business. That’s what he is committed to, not the subscription business.  And certainly not the music business.

If artists want to be in the advertising business, too, then fine.  Make your deal with Spotify.  But don’t do it thinking you’re “helping” Spotify get into the subscription business.  Not at a multibillion valuation.  They don’t need your help.

5.  If Apple Can Pay for Free Trials, So Can Spotify:  Of the many things we can thank Taylor Swift for point out is that it’s just as unfair to give any digital service a break on “try before you buy” as it was to give away dozens of CDs in a record club.  No more free trials–services should either pay the artists–all the artists and songwriters, that is–or find some other way to market their service.  Maybe marketing the music might be a place to start.  Just sayin’.

6.  There’s A Heart in that Machine, Not a Ghost:  Remember the Tin Man in the Wizard of Oz?  Did he want an algorithm or a heart?  One thing we’ll find out with Apple Music is whether fans really do want real people suggesting music to them on Beats 1 and whether artists can develop a sustained relationship with fans through Connect.  I’m very optimistic about these things.

Why?  Because I think what drives fans to music is heart.  And that’s what’s always made Apple different–to coin a phrase.  Because it takes courage to use your brain and listen to your heart.  And check it out Toto–you’re not in Kansas anymore.

Attention Mr. Ek: Here’s how you get it done, son.

June 22, 2015 1 comment

MTP readers will recall that I said of Spotify’s Taylor Swift debacle that it was unfathomable how Spotify CEO Daniel Ek could allow there to be a Taylor Swift reality that did not involve Spotify.  The fact that he did it while renegotiating Spotify’s license with Universal, nominally Taylor’s label, was grounds for termination for cause.

Then came Apple Music, emphasizing an artist-oriented music ecosystem that omits the free tier that has failed so miserably with Spotify.  Is it business genius not to copy a failed model?  Not really.  But there are some really genius aspects to Apple Music that have a lot of promise (such as Connect and the Beats 1 station with Zane, Ebro and Julie).  Music genome fans will probably not dig it, but then the Tin Man wanted a heart.

My sense is that the Apple Music service launched without all the deal points fully baked, and God knows that wouldn’t have been the first time that happened.  Apple wanted that 90 day royalty free period–meaning Apple wanted artists to take the ride with them on the 90 day trial period.

That was a cringeworthy idea when first proposed and it didn’t go down well.  Lots of handwringing, and then Taylor Swift wrote one of her incredible letters–kind of like she did with Spotify.

Here’s the difference:  Rather than publicly taunting her, Apple did the right thing.  Eddie Cue said, you know, you have a point there.  Let’s not do that, thank you for pointing it out to us.

Or more precisely, he said this:

And Taylor said:

“They listened to us.”  How gracious.

And that was that.  No fuss, no muss.  Why?

According to Billboard:

Once the decision was made by Cue and Apple CEO Tim Cook, Cue called Swift on the phone from her tour in Amsterdam. “I let her know that we heard her concerns and are making the changes. We have a long relationship with Taylor so I wanted her to hear directly from us.”

Ahem…”a long relationship with Taylor.”  My point exactly.

Because even Apple knows that there cannot be a Taylor Swift reality that does not include Apple Music.   They know that Taylor is a thought leader for thousands of artists, if not tens of thousands.  And because Apple is by and large an artist friendly environment.  They’re smart enough to know when to listen to a good idea from a smart artist.  No threats, no lawsuits.  Just a polite ask and an equally polite yes.

And that’s why they win.

Oh, and Mr. Ek.  Sorry, I forgot you were there.   That’s how you get it done, son.

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