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Power Transition, Lawfare and the Spotify/Google Interlocking Directorate

Though this be madness, yet there is method in it.

Hamlet, by William Shakespeare

Power Transition in Business

When a relatively unequal competitor is about to overtake a dominant competitor, lawfare is most likely to break out when the less dominant competitor perceives their opportunity to replace that hegemon.  At this point in the power relationship, the less dominant competitor may seek interlocking relationships with other less dominant competitors in the relevant market in order to attack the hegemon by reducing competition with each other and coordinating lawfare operations against the hegemon.

These interlocking boards or corporate relationships may work well when there is something in it for the allied less dominant competitors that helps each of them in ways that do not harm each of them.  For example, in an alliance of two less dominant competitors G and S against hegemon A, this will be particularly true if company G has discrete  goals with hegemon A that only tangentially affect company S.  If lawfare against hegemon A would greatly benefit company G and would not harm company S, S may find an alliance with G for lawfare against A to be beneficial.

This may be particularly true if A is competing directly with S in a related market and (with apologies to Professor Kugler) at a moment when A is temporarily weaker than S, but S perceives A as about to overtake S.  In other words, lawfare is not most likely to break out when A in fact overtakes S, but rather at the moment when S perceives A as about to overtake S.  It is at that moment that an interlocking alliance with G may be most desirable to S so that the two companies can bring their collective power to bear on A by making lawfare on A.  (This is a version of the “power transition” theory of international relations.)

In the world of corporate realpolitik, such alliances may form well in advance of an anticipated move by A that threatens both S and G.

Spotify’s Dominant Market Position

On May 12, 2014, Spotify’s director of economics Will Page gave a presentation at the Music Biz Conference in Nashville (hosted by the Google-dominated Music Business Association, formerly known as NARM in a soon to be forgotten day).  As reported by Billboard, Will Page gave the audience a good deal of evidence of Spotify’s domination of the online music market:

Spotify claims to have represented one out of every ten dollars record labels earned in the first quarter….Page’s claim shows the speed at which subscription services are gaining share of the U.S. market. According to IFPI data, all subscription services accounted for 10.2 percent of U.S. recorded music revenue in 2014. If Spotify had a 10-percent share in the first quarter, it’s safe to say the overall subscription share is well above the 10.2 percent registered last year.

These numbers suggest that while Spotify may have a significant share of overall U.S. recorded music revenue, Spotify is clearly dominant in the global subscription market with its now 20 million subscribers and probably is dominant in the U.S. music subscription market.

Yet it is Spotify’s failure to convert users of the Spotify ad supported service (with ads served by Google) to the Spotify subscription service that is at the heart of objections to continuing to license the ad supported service.  Not to mention the bait and switch aspect.

The Return of the Interlocking Board

While Spotify may have enjoyed global domination in music subscriptions, it did so with an eye over the shoulder at the much anticipated and inevitable launch of the a subscription service by Apple, which also happens to be Google’s main competition in the smartphone market.  Not surprisingly, we saw this July 21, 2014 story in Re/Code by the highly credible tech journalist Kara Swisher a few weeks after Page’s presentation:

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.

Thus, the new appointments appear unrelated. And, to be clear, Google’s top execs often join boards of companies, both with corporate ties to them and not.

In any case, Google is still planning on launching a long-delayed YouTube subscription music service this year that would compete with Spotify. If it actually does get going, it will be the second such offering from the company.

That YouTube subscription service is now even longer delayed.  In fact, I’m beginning to wonder if it will launch at all.

Ms. Swisher revisited that July 21 story on July 22 to clarify the reference to Google’s potential purchase of Spotify–only.   She wrote:

…Spotify co-founder and CEO Daniel Ek has indeed met with Google execs about various and substantive commercial deals at YouTube, Google Play and Android.

“There has not been a single conversation about Google’s interest between the two,” said one source, reflecting many others. “There was never a price, never a negotiation, never anything.”

Ms. Swisher followed up that July 21 story with a post on September 11, 2014:

As Re/code previously reported it would do, Spotify has officially added Google’s business head, Omid Kordenstani, to its board.

And thus the interlocking alliance was formed.

Google’s Shady History With Apple

Recall for a moment that the Federal Trade Commission pressured Google Executive Chairman (and then-CEO) Eric Schmidt to resign from the Apple board of directors.  This after Google launched a series of products that directly compete with Apple and is so coincidental as to call into question whether Schmidt violated his fiduciary duty as an Apple director (Droid, Google Tablet, AdMob, Google TV, and what was then called Google Music).

So what about that resignation?  According to Engadget, Steve Jobs said:

“Unfortunately, as Google enters more of Apple’s core businesses, with Android and now Chrome OS, Eric’s effectiveness as an Apple board member will be significantly diminished, since he will have to recuse himself from even larger portions of our meetings due to potential conflicts of interest.”

According to Reuters, on July 9, 2009 the Federal Trade Commission announced that it would continue investigating Schmidt:

The U.S. Federal Trade Commission said it will continue to investigate the relationship between the boards of Apple Inc and Google Inc, after Google’s chief quit Apple’s board on Monday.

Richard Feinstein, director of the FTC’s bureau of competition, commended both companies for recognizing that sharing directors raises competitive issues, in light of the resignation of Google Chief Executive Eric Schmidt from Apple’s board.

Feinstein said regulators have been investigating the Google-Apple tie for “some time,” even as the two companies increasingly compete with each other in markets such as smartphones and operating systems.

“We will continue to investigate remaining interlocking directorates between the companies [for violations of the Clayton Act],” Feinstein said.

Well, that 2009 investigation seems to have trailed off and gone nowhere.  2009, 2009, what else happened in 2009?

It can safely be said that Google’s war on Apple is long standing and there is no love lost there.  It should not come as a surprise that Spotify would view Google as a valuable ally in its own competition with Apple.  Not only was Spotify’s dominant position in the music subscription market directly threatened by the launch of Apple Music, but Apple’s gifted executive Eddie Cue delivered further humiliation to Daniel Ek involving Ek’s bête noire, Taylor Swift.

Artist relations problems need to be solved quickly and generously (and frankly if an issue get to become an artist relations problem, it’s your own damn fault).  Mr. Cue quickly solved an artist relations problem around Apple’s proposed 90 day royalty free launch by his deft handling of criticism from Taylor. Mr. Cue’s successful handling of Taylor’s criticism solved his company’s artist relations problem.  Whether Mr. Ek knows it or not, this was a further humiliation to him after Spotify’s brand damage from his widely-reported collision with the Taylor juggernaut.

The Washington Hackathon Continues Apace

In September 2014, Spotify announced a hire that was largely overlooked at the time.  Taking “hackathon” to a whole new level, Spotify announced that it had hired Washington lobbyist and Clintonista Jonathan M. Prince as its corporate communications revolving doorman.

Jonathan M. Prince Revolving Door Profile from OpenSecrets.org

Now why do you suppose this person was brought on?

Compounding the urge to merge was the announced policy change at Sony and Universal demonstrating an increasingly skeptical view of the ad supported services like Spotify and YouTube, also broken by Re/Code in a March 8, 2015 interview by the outstanding journalist Dawn Chmielewski (who has written extensively on the music business for many years) with Universal’s Lucian Grainge.  This was followed shortly by a statement from Sony’s Doug Morris indicating dissatisfaction with the free content model that is at the heart of Spotify and Google’s business (“In general, free is death.”)

I seriously doubt that these relatively simultaneous statements by Lucian and Doug came as a total surprise to either Spotify or Google, but the public nature of the statements combined with personnel changes probably put a fine edge on reality for Spotify and Google.  Lawfare was now in order.

Not only did Spotify and Google have interlocking interests in preserving the ad supported model, but each brought complimentary skill sets to the lawfare ready room.  Spotify is able to play the role of plucky startup victimized by the big bad Apple and the smaller but badder major labels that are conspiring to take free music away from consumers.  Google is able to hang out in the shadows and bring its investment in Washington, DC agency capture and vast experience being on the wrong end of antitrust investigations around the world.  And in particular, Google’s stunning influence over the U.S. government through the Obama Administration including the Federal Trade Commission.

Just a quick reminder of Google’s dominance of the U.S. government:

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.

Not to mention FTC Commissioners Joshua Wright and Edith Ramirez, Julie Brill and Maureen K. Ohlhausen.

Timing is Everything

In yet another case of curious timing involving a Google relationship, the day that Apple Music launched the New York Attorney General announced an investigation into whether Universal–remember, the same Universal that had announced it was going to take a relook at its ad supported deals of the kind it had with Spotify and YouTube–and Apple Music had somehow colluded to undermine Spotify and YouTube.  As NPR’s Laura Sydell reported:

The investigation centers on whether Apple may have urged [Sony and Universal] to drop support for free, ad-supported streaming services such as Spotify and Google’s YouTube. Such a move could be seen as anti-competitive.

That investigation was later dropped by the New York AG (who also signed the amicus brief supporting Mississippi Attorney General Jim Hood against Google).  Why was it dropped?  Well, possibly because there are solid commercial reasons for deciding that the experiment with ad supported music was a disaster?  Possibly because it became apparent that Spotify’s story about converting free users to subscribers was not borne out by the…you know…results?

How do you suppose that this investigation got started?  Just a coincidence?

I think not.

Guess what also happened right around the same time?

Spotify Lobbying According to OpenSecrets.org

Spotify Lobbying According to OpenSecrets.org

Yes, those Washington lobbyists don’t have to use a scientific calculator to add up what Spotify pays them!

The NY complaint was a skirmish before the main attack.  And here’s where the real lawfare gets interesting.  Remember, Google has been fighting Apple for years and Eric Schmidt left the Apple board under a cloud (no pun intended).  Independently of Spotify, I think it’s pretty safe to say that if Google could find a way to jack with Apple they would jump on it.

Also remember that Google has been bashing apps for quite a while and it takes no great genius to suspect that the reason is because they can’t stalk you inside of apps very easily.  So if Google could find a way to attack Apple’s apps, don’t you think they’d jump on it?

And what better way for Google to attack Apple than to go after Apple’s pricing model in the App Store?  (Apple takes 30% of “digital consumables” sold by developers through the App Store, including most subscriptions.)

Of course if Google itself went after Apple’s App Store pricing that might be a little transparent, so that won’t do.  What to do, oh what to do?

Things That Go Bump in the Night

According to the Radio and Internet Newsletter’s July 9, 2015 reporting:

Spotify has sent an email to Apple iOS subscribers, suggesting they cancel their Spotify Premium accounts, if those subscriptions were purchased through the Spotify app, and re-subscribe on Spotify’s website.

The reason for this surprisingly suggested workaround is to save money. A Spotify Premium plan costs $13 when purchased through iTunes, and $10 when bought directly from Spotify. “The normal Premium price is only $9.99, but Apple charges 30 percent on all payments made through iTunes,” Spotify said in the subscriber email acquired by Engadget.

Here’s part of the email:

Spotify Attachment-1.0

As RAIN confirmed, Apple has nothing to do with setting the price for in-app purchases.  That decision lies with the developer exclusively.  The developer–Spotify in this case–knows going in what the cost will be.  Spotify knew that when it first put the Spotify app in the App Store years ago.

But RAIN notes the curious timing of Spotify’s misleading advertising campaign:

The timing of Spotify’s communication, soon after Apple’s launch of a competing on-demand music service, cannot be ignored. It must be particularly galling to Spotify that Apple is potentially luring users to its own service, and taking a portion of Spotify subscription payments. The risk of Spotify’s communication strategy is that subscribers will cancel their Spotify/iTunes subscriptions, as Spotify recommends, and sign up for Apple Music’s three-month trial. The advice here, for what it’s worth, is for Spotify to drop the in-app subscription price to $10, eat the loss, hand the saving to subscribers, and retain its users. Complaining isn’t aggressive business. Pricing is.

There is, of course, a long way from “galling” to “illegal.”  And that’s what lawfare is all about.  So it should come as no surprise that the Federal Trade Commission is now investigating Apple for deceptive trade practices.

The Washington Post reporting on the investigation contains a helpful quote from an employee of Google shill-lister Public Knowledge (so you know it must be important to Google):

What is so tough for regulators here — other than that they are using relatively arcane laws that probably never anticipated the innovation now going on in the tech sector — is that the streaming companies really do have a lot of ways to reach consumers. They can sell it over the Internet. And they all offer apps on Google’s store, which actually serves more customers around the world than Apple does.

So is Apple’s behavior truly anti-competitive?

“The fundamental question is if it is big enough to wield enough market power that can harm the competitive process,” said Gene Kimmelman, president of media public interest group Public Knowledge. “Music distributors would need to show that they truly need to be in the iTunes ecosystem to demonstrate a legitimate competitive concern.”

Actually–the fundamental question is whether Google is manipulating the Federal Trade Commission to conduct lawfare against Apple to preserve the shite artist royalties from ad supported services like YouTube and its interlocking relationship partner Spotify.  This is not just a Nixonian fantasy.

You Won’t Have Johanna Shelton to Kick Around Anymore

After the Wall Street Journal’s release of internal FTC staff memoranda recommending that Google be prosecuted for antitrust violations (a prosecution that was squashed by political appointee FTC commissioners) Google lobbyists were caught instructing FTC commissioners to be be publicly supportive of Google according to Buzzfeed:

Johanna Shelton, a senior lobbyist at Google, emailed an official at the Federal Trade Commission with a pointed request: release a public statement that would help the search giant deal with a negative story. Two days later, the agency did just that….Google was “deeply troubled” and “puzzled” by the agency’s silence on the matter, Shelton said in the email, which emerged in response to a public records request and was obtained by BuzzFeed News. She said the inadvertently released document was being used by Google’s rivals to “sow confusion and undermine the FTC’s conclusions, especially in Europe.”

“We believe it is critical for the FTC to defend its reputation, showing that it followed a thorough process and fully took into account the Bureau of Competition staff memo, among other internal agency opinions including the Bureau of Economics,” Shelton said in the email. “A public statement standing by the FTC’s ability to make a final decision after assessing differing internal views would go far in the international space to restore the reputation of the FTC, especially on due process.”

Two days after the email was sent, and after the Wall Street Journal published another article about Google’s relationship with Washington, the FTC released a statement that provided the context Shelton had sought.

In other words, Google lobbyists said jump and the FTC’s political appointees merely asked how high.

Is Google pulling rank to get the FTC to investigate Apple on a pricing policy that has been in place for years?  Is Google using its interlocking board seat with Spotify to use Spotify’s competition with Apple in the music subscription market to get the FTC to attack Apple in a way that also benefits Google in the smartphone market?

Of course now that Spotify has Jonathan Prince on board, the company may be able to use Prince’s easy access to senior White House staff to sick the FTC on Apple all by themselves.  But either way, the motives are oddly aligned.

However–Digital Music News tells us that Apple Music to date has had no effect on Apple App Store downloads of the Spotify, Pandora or YouTube iOS apps.  I wonder what the FTC thinks of that stat?

Let’s remember that Spotify is a music service.  It’s not in as many business lines as Google.  The only reason why Spotify is able to spend hundreds of thousands on lobbying (probably soon to be millions at this run rate) is because they get cheap deals on music.  Those deals have an end point.

The most meaningful statistic of all, though, is the number of subscribers to Apple Music.  Apple reached 10 million subscribers in about 45 days.  Spotify reached 20 million subscribers in seven years.  If Apple Music continues on anything like this run rate, it is going to be very difficult for company S to overtake hegemon A.  Apple Music provides market confirmation that free music is not necessary to get users to subscribe to a music service.

And that is not good for company G or company S.  Not to mention that lawfare can backfire.  What they have to worry about is that in their effort to stop Apple by manipulating the FTC, Google and Spotify will have demonstrated that something is really rotten in Washington, DC.  And Mountain View.  Not to mention Sweden.

Berklee’s Misplaced Reliance on Sony Pictures Hack

Originally posted on The Trichordist:

The Berklee College of Music’s bizarre “transparency report” is a gift that keeps on giving.  One of the odder parts of the report is a quotation from one of the confidential emails stolen from Sony Pictures–allegedly by “North Korea”–and published on Wikileaks.  Let’s put aside for a moment the antitrust implications of the coordinated goals of Google and Spotify’s interlocking management teams and take a closer look at the section of the Berklee report that uses one of these stolen emails to justify the ad supported business models of Spotify and YouTube.

This quotation is in a confidential “music strategy” email from the late David Goldberg to Sony Entertainment and Sony Pictures CEO Michael Lynton.  We have to assume the Berklee authors (whoever they are as none were given a “written by” credit that we could find) actually read the confidential email if they didn’t study it in detail.  Goldberg’s…

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Antitrust Lawfare Breaking Out by Google and Spotify Against Apple–Using Your Music

As reported in The Verge, that ever-reliable source for Spotify press releases, the Federal Trade Commission is apparently continuing its investigation of Google….no wait…Apple.  Sorry, that’s the European Commission that’s investigating Google.  We’ll come back to that.

And what is the FTC investigating this time and at whose request? Spotify’s misleading and muddled advertising campaign trying to get Spotify users on iOS devices to drop their subscriptions through the Apple App Store and resubscribe directly through Spotify?  So Spotify could use its dominant position in the global music subscription market to avoid paying App Store commission?

No, not that.

Maybe this, as reported by the highly credible tech journalist Kara Swisher in the widely-read Re/Code:

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.

Two dominant players in the relevant market share a board member?

No, not that.  Something else.

No, the FTC is apparently continuing to look into Apple’s long-standing 30% commission for “digital consumables” sold through the App Store.  And The Verge confirms what I suspected at the outset–they are doing it at the behest of Spotify.  I would suggest that when the FOIAs begin, it will become apparent that the FTC is also investigating at the behest of Google.

The Verge tells us:

Sources with direct knowledge of the matter tell The Verge that the FTC has already issued subpoenas to music streaming services as it gathers more information to determine whether Apple’s App Store rules are anticompetitive.

You know–if the FTC is asking for documents from other streaming services–another explanation is that the FTC is looking into anticompetitive activities by the streaming services.  But let’s leave that for another post.  Just remember that anything you write to these litigious dweebs may show up in a government file someday.

The timing is curious–it’s not like Apple just started charging 30% commission for maintaining the App Store, the network that supports it, credit card fulfillment, antifraud, etc.  Apple’s been charging that fee from the inception of the App Store.  Because Apple’s charges are sales based (often charged on Apps that are free to the public), Apple only makes money when the developer makes money.  Apple could have chosen to follow a Tunecore-type model where all the distribution risk is pushed onto artists (or developers in Apple’s case) in the form of a flat fee, but Apple didn’t do that.  Like a music publisher or record company, they only make money if there are sales and they eat their other costs if there are none (called “distribution risk”).

If Apple had started charging a commission–or what the Spotify press release…sorry, Verge’s reporting…calls a “tax”–when it launched the Apple Music product in competition with Spotify, that would be one thing.  Or if Apple had started charging commission to just Spotify users, that would have been yet another thing.  But Apple didn’t do any of that.  The Spotifys of this world come and go (see Myspace) but Apple marches on.

But the Google angle here cannot be overlooked.  As The Verge’s repost of the Spotify press release tells us…sorry, the Verge’s reporting tells us about the Apple “tax” as profit-haters at The Verge call it:

Apple’s App Store rules force companies that sell digital goods to use its in-app purchase API, commonly referred to as iAP, for any and all purchases in iOS apps. This stipulation has become a key point of interest in the FTC’s investigation, according to sources. Google, for instance, requires that apps selling digital goods use its in-app purchase system, but does offer exceptions in certain situations — like for digital content that can be used outside of the app — while Apple offers no such leniency.

Ah yes, those good guys at Google.  You don’t suppose that Google might want to highlight this competitive advantage against Apple in fora like the FTC and the European Commission do you?  And let’s not forget the influence that Google has over the FTC–that declined to investigate Google for the same kind of antitrust violations that the European Commission is vigorously pursuing.

Recall the breathless CYA that ensued when the Wall Street Journal reported on Google’s political influence at the FTC that resulted in a decision not to prosecute Google.  Faster than you can say “Jamie Gorelick”, Google’s lobbyists swung into action.  If you were a sleaze bag bunch of crony capitalists that had captured every agency in Washington, what you’d need right about then was to push a button at the FTC and have them issue a useful public statement.  And that’s exactly what Google did according to Buzzfeed’s reporting:

On the evening of March 23, Johanna Shelton, a senior lobbyist at Google, emailed an official at the Federal Trade Commission with a pointed request: release a public statement that would help the search giant deal with a negative story. Two days later, the agency did just that.

Shelton’s email was sent in the wake of [Brody Mullins’ reporting].  In response to the revelation, the FTC issued only terse statements calling the release of the document unfortunate.

But Shelton, in an email to Heather Hippsley, the FTC’s chief of staff, urged the FTC to say more, arguing that the agency’s own reputation was at stake.

Yeah, right.  That’s a typically Googley move–it’s not that we care, oh, no.  It’s for your own good. And what exactly is for your own good?  Releasing the statement they want released or complying before Google calls the White House and ends your career at the FTC?

Google was “deeply troubled” and “puzzled” by the agency’s silence on the matter, Shelton said in the email, which emerged in response to a public records request and was obtained by BuzzFeed News. She said the inadvertently released document was being used by Google’s rivals to “sow confusion and undermine the FTC’s conclusions, especially in Europe.”

That would be the European Commission antitrust investigation which Google had been slow walking for four years and that had just blown up in their faces.  (And is now going full bore against them.)  This is important because the Wall Street Journal revealed that the professional staff at the FTC had been sharing information with their counterparts in Europe–you know, the ones that are now prosecuting Google.  Get out your hazmat suit, because here comes the lawfare courtesy of Google PR team:

“We [i.e., Google] believe it is critical for the FTC to defend its reputation, showing that it followed a thorough process and fully took into account the Bureau of Competition staff memo, among other internal agency opinions including the Bureau of Economics,” Shelton said in the email. “A public statement standing by the FTC’s ability to make a final decision after assessing differing internal views would go far in the international space to restore the reputation of the FTC, especially on due process.”

Two days after the email was sent, and after the Wall Street Journal published another article about Google’s relationship with Washington, the FTC released a statement that provided the context Shelton had sought.

The email also included this paragraph:

We recall that in February 2013, when the process and result [of the FTC’s investigation into Google] were similarly called into question by our competitors [and anyone else capable of sequential thought] every Commissioner, including then-Commissioner Ramirez, wrote a clarifying letter to the editor of Politico standing by the staff and their work in this matter.  We believe this unfortunate FOIA incident is similarly worthy of a public statement of the FTC standing by its decision.

Do you really think that Google (a Spotify board member according to Kara Swisher) couldn’t send a little email to the FTC telling them they needed to investigate Apple?  Do you think that Apple doesn’t know this already?

Here’s another possible explanation–as David Lowery reported in The Trichordist, Spotify recently hired Jonathan Prince, a Washington lobbyist and revolving doorman with deep ties to the Obama and Clinton Administrations.  Before the revolving door hit him, Prince was an advisor to Hillary Clinton at the State Department.

Jonathan Prince Employment Timeline–Open Secrets

Prince’s long-time lobbying firm lists a number of clients such as the old familiar and ubiquitous Computer and Communications Industry Association, the governments of Mexico, the Congo, Nicaragua, Ecuador, Columbia and Nigeria, and not to forget the Rockefeller Foundation.

So whether Google or Prince got the FTC investigation started, they are both perfectly capable of turning Spotify into the crony capitalist it evidently yearns to be.  Yes, little Daniel Ek wants to hang out in the tall weeds with the big dogs.

But here’s the difference–what gives Spotify (and YouTube for that matter) their market clout is your musicYour music is now being leveraged in a scorched earth corporate lawfare campaign against your interests. And as Taylor Swift has shown, Spotify needs hits and hits don’t need Spotify.  So why let them leverage your music for a corporate lawfare campaign?

Not only is it a trumped up accusation against a long-standing Apple business practice that only became a problem when Apple started competing head to head with Spotify, I would argue that it’s a campaign that is at least in part manipulated by Google to make itself look good to regulatory authorities so that it can continue to steal our music and line its pockets.

350 million takedown notices can’t be wrong.

Goog Transparency

Even More Transparent: 5 Omissions From Berklee College/Rethink Music’s Report

Originally posted on The Trichordist:

I love transparency.

Last week Berklee College of Music/Rethink-Music/Kobalt Music released this report on transparency and fair pay in the music business.  The report eviscerates the record labels, publishers and performing rights organizations for failing to provide the proper level of  transparency and fair pay to artists.

While we can agree with some aspects of Berklee’s Kobalt Music-funded report, Berklee’s report doesn’t even mention the opaque deals and revenue calculations used by many of the ad supported music services.  Berklee’s report only looks at downstream royalties–what the services pay to rights owners–not upstream royalties, the revenues earned by services that those downstream royalties are based on.

For example, Google will not disclose the revenue that its YouTube subsidiary generated last year but Morgan Stanley estimates that YouTube generated nearly $6 billion. Almost as much as the entire US recorded music business. How much was paid back to YouTube’s…

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Speaking Truth to Power and Speaking Truth to Friends

VERMILLION
Hell, I got lots of friends.

DOC
I don’t.

Tombstone, written by Kevin Jarre

A friend is someone whom you trust to do the right thing.  Sometimes you’ll hear people say that a friend did something uncharacteristic.  If they are really your friend, you will be the one to stand with them in those moments and say that just can’t be right.  Give them another chance to prove themselves.

So it is with National Public Radio’s short-lived membership in the MIC Coalition, the massive lobbying group organized by…someone…to oppose the Fair Play Fair Pay Act guaranteeing artist pay for radio play.  By the looks of it, those organizers were the usual suspects at the National Association of Broadcasters and Google.

As I mentioned in my presentation last week at the Copyright Society of the USA in Austin, the MIC Coalition members are companies and trade associations with a combined market capitalization over $2 trillion dedicated to two things:  “transparency” (for thee but not for me) and keeping royalties down.  That is, continuing the grotesquely unfair practice of denying artists (featured and non featured) compensation for terrestrial radio airplay–a practice that has been out of step with the rest of the world for decades.  As we know, the U.S. is the only democratic country that does not recognize the right.

When your friend makes a mistake like that what should a friend do?  An intervention of some kind is necessary.  Sometimes that intervention is rough.  But you don’t do interventions to shame or humiliate your friend, you do them because you believe in your friend’s essential goodness and you want to help them find that goodness in themselves again.  You do interventions to help your friend recover from a wrong turn.  In the end though, your friend must find their own path and there’s only so much you can do.  You can’t have been in the music business for very long without experiencing this.

So it was with NPR’s involvement in the MIC Coalition.  A really bad wrong turn.  However the organization ended up in that position, it became very apparent very quickly that it was not a decision that was vetted with the NPR News or Music employees.  One reason we know this is that David Lowery was contacted by a whistleblower inside of NPR who wanted the world to know that this was not the decision of the music or news divisions.

I would imagine that the reason that David was contacted is because the whistleblower trusted him.  I know this one.  It’s one of the most gratifying things you can imagine when someone turns to you and puts their career in your hands because they have no where else to turn, no one else who they can trust.  That’s a big deal.  Particularly in David’s case on this particular whistleblower–there are some pretty big guns that were none too happy.

David did one of the most remarkable interviews with Adam Ragusea of The Current that is a wide ranging discussion of the role of public media, social justice and NPR’s involvement in the MIC Coalition.  My bet–and I ask no questions–is that Adam’s interview had a lot of influence in the broader NPR news room.  And eventually may have had some influence in NPR’s decision to leave the MIC Coalition.  That influence is just as much about Adam as it is about David.

This is not about a victory lap.  I think this is actually a solemn moment when we reaffirm our commitments to our friends in public media and especially NPR.  We put this episode behind us, join arms and walk down the path together.  But let it be said that it was a remarkable example of speaking truth to power by David, Adam and probably dozens of people inside NPR whose names we will never know but to whom we owe a big debt of gratitude.

And now–back to work.  We need to get Fair Play Fair Pay passed into law.  You can start doing that by signing the #irespectmusic petition here. 

Then make sure you’re registered to vote.  More on that later.

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Here They Go Again: Did You Take the Spotify UnRoyalty So Spotify Could Spend Money on Lobbyists to Attack Apple?

July 14, 2015 1 comment

According to Politico, the Washington insider pub:

Spotify’s lobbyists have quietly made the rounds in D.C., whispering to lawmakers for months that Apple’s new music offering threatens to stifle its competitors, according to sources familiar with the discussions. The apparent goal has been to raise antitrust suspicions about the iPhone giant, which faced a previous government lawsuit over its pricing of e-books.

The secretive congressional meetings come amid reports that the Federal Trade Commission is looking into Apple’s streaming service, though the agency has declined to say if it’s opened a probe. Still, Spotify’s effort to fan the flames highlights the intensity of the clash between the two companies – and the potential for scrutiny as Apple enters a new, fast-evolving market.

What Politico fails to mention is that Spotify is itself a dominant player in the global music subscription market (50% according to Spotify’s Will Page).

What the Politico tech reporter also failed to mention is that Spotify is conducting a misleading advertising campaign directed at consumers.  The only mention is this equally misleading reference:

In another sign of tensions between the two companies, Spotify recently emailed its subscribers to encourage them to cancel Spotify subscriptions they made through the Apple App Store and re-enroll using Spotify’s own website.

As the Radio and Internet News Daily (home of streaming boosterism) observed Spotify’s smear campaign is misleading and misguided–and coming from RAIN, that’s like man bites dog as RAIN never saw a stream it didn’t want to take to lunch:
It might be good business to inform users of the cheapest subscription plan, though creating discontent in customers is a questionable tactic….The timing of Spotify’s communication, soon after Apple’s launch of a competing on-demand music service, cannot be ignored. It must be particularly galling to Spotify that Apple is potentially luring users to its own service, and taking a portion of Spotify subscription payments. The risk of Spotify’s communication strategy is that subscribers will cancel their Spotify/iTunes subscriptions, as Spotify recommends, and sign up for Apple Music’s three-month trial. The advice here, for what it’s worth, is for Spotify to drop the in-app subscription price to $10, eat the loss, hand the saving to subscribers, and retain its users. Complaining isn’t aggressive business. Pricing is.

Back in Washington, it’s not surprising that Spotify lacks the balls to come right out and say what they’ve been up to now that they’ve been caught:

Jonathan Prince, Spotify’s global head of communications and public policy, declined to detail his company’s contacts with officials in Washington, but characterized them as part of a general effort to keep D.C. informed.  [Recent Spotify hire Jonathan Prince is a long-time DC operative dating back to the Clinton administration.]

Mr. Prince also offers free political advice on his Twitter account:

As David Holmes reports in Pando Daily,

If Spotify convinces Washington to act against “unfair” Apple Music, guess who suffers most: Artists….Daniel Ek’s unprofitable, multi-billion dollar music startup, hopes to arouse suspicions that Apple is guilty of anticompetitive behavior designed to squeeze out rival streaming services.

MTP readers will not be surprised to learn that for months Spotify lobbyists have been “quietly” taking meetings on Capitol Hill to sow the seeds of doubt with key legislators like Senator Mike Lee–who seems to have dropped his investigation into Google’s influence peddling at the Federal Trade Commission.

Spotify hired big gun lobbyists who represent everyone from a host of big drug companies, insurance companies, iHeartMedia (Clear Channel) and….Pandora.

And here’s the point–the only reason that Spotify is in a position to jack with Apple–a company that by in large has been a good friend to artists–is because of the licenses they enjoy from artists and record companies, songwriters and music publishers.  Spotify are using their now-dominant position in global music subscription services–that they gained because artists gave them a chance to build a business–to attack competitors not in the market place but in Congress like the crony capitalist they have revealed themselves to be.

Artists should understand this–you’re next.  The subtext of Spotify’s recent attack on Universal Music Group alleging collusion with Apple suggests what they really want–government mandated licensing under consent decrees like PROs.  Remember–you heard it here first.

Spotify Windows App Store Subscriptions, Now with Added Misleading Advertising

July 9, 2015 4 comments

You’ll remember that The Verge ran the leak of Spotify’s agreement with Sony Music.  Now The Verge is running a story about subscriptions to the Spotify app from Apple’s App Store:

Spotify is trying to raise awareness around the fact that it’s cheaper to subscribe on the web instead of through Apple’s App Store. The leading subscription music service plans to email iPhone customers the below note encouraging them, if they haven’t already, to start paying at Spotify.com and save a few dollars. “In case you didn’t know, the normal Premium price is only $9.99, but Apple charges 30 percent on all payments made through iTunes,” the email blast reads. “You can get the exact same Spotify for only $9.99/month, and it’s super simple.”

Here’s the actual emails:

Spotify Attachment-1.0

Quick–based on what you just read, who sets the price for the Spotify subscription through the App Store?  Apple or Spotify?

I bet you thought that Apple forced an upcharge onto you because you bought the subscription through Apple and not from Spotify directly.  It is true that Apple takes a 30% commission from all app developers for “digital consumables” bought through the app like subscriptions.  (Apple also operates the App Store, actually created the entire market for apps in the first place, collects the money and pays it through–known as “transaction costs” in the trade.  But let’s leave that to one side and pretend that Apple doesn’t deserve the 30% commission which clearly what Spotify wants you to believe.)

Apple doesn’t force an upcharge on anyone.  Apple doesn’t set the price for the app or any digital consumable sold from within the app.  The app developer sets that price–that’s right, Spotify sets the price.

So if the Spotify premium subscription costs $12.99 when purchased inside the Spotify IOS App and $9.99 direct from Spotify, that’s because Spotify is marking up the $9.99 price to take into account Apple’s 30% commission so that they end up netting $9.09–or since we’re talking about Spotify, $9.093.  That price is set by Spotify, just like every other developer.  It is not set by Apple.

And it also means that because Spotify charges more when the subscription is purchased through the App Store, Spotify decided to pass on the lions share of the cost of Apple’s commissions to their users.  And if Spotify is telling you that you’ll be better off to subscribe directly from Spotify, you will be getting it cheaper, but it appears that Spotify will net about $0.90 more per subscription converted from an in-app purchase than they currently do.

Does Apple care?  Just to put this in perspective, Apple made about $4 billion from the App Store last year and developers made about $14 billion.  Given Spotify’s horrendously low conversion rate of “free” music users to subscribers, something tells me that Apple won’t be missing Spotify–but wait.  Isn’t that called windowing?  So Spotify is now windowing their syndication?

Something also tells me that this is more about Spotify’s smear campaign against their competitor Apple Music than it is about anything else.  And here’s a hot tip.

You know the Federal Trade Commission and state Attorneys General that Spotify complained to about Apple Music?  (A complaint that has gone nowhere.)  There’s another division there besides the antitrust division.

The consumer protection division.  You know–the one that handles false and misleading advertising claims.

One more thing–Spotify has been in this commercial deal with Apple as long as the Spotify app has been in the App Store.  Now that Apple is competing with Spotify, suddenly we see Spotify turning on Apple.  What makes you think that they won’t do the same to us?  Like the way Daniel Ek handled Taylor Swift.

Yet another unnecessary misstep from Spotify’s PR team.  Next they’ll be blaming Apple’s commission rate on Taylor Swift.

Where do they find these people?

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