Category: Art

Pandora wins on appeal. But stay tuned.

This week, the 2nd Circuit Court of Appeals ruled in favor of Pandora, upholding a ruling by Judge Denise Cote in affirming the 1.85 percent of revenue cost set by the rate court as “reasonable.” Maybe, but any way you slice it, songwriters and composers are still getting hosed by streaming services  You’ve probably seen some of the headlines or statements made by songwriters you know saying things like, “20 million plays earned me about two dollars.”  Maybe you didn’t care because you figured the famous person who made that statement was already rich; but setting that logic aside, it ought to be clear that today’s generation of new songwriters and composers will not be building professional careers based on revenue streams that turn millions of plays into pennies.

Music streaming is cool and convenient, but even as the dominant players in the space congratulate themselves for being “innovators,” the reality is that a tiny handful of guys are making millions of contemporary dollars while enjoying the benefit of paying antiquated rates to publishers, who in turn pay songwriters and composers.  This is because ASCAP and BMI (generically called PROs for Performance Rights Organizations), who traditionally negotiate and collect fees on behalf of publishers for public performance licenses are locked into consent decrees whereby a court has set the rate at 1.85 percent of revenue for radio broadcasting.  Spokespeople for ASCAP have consistently pointed out the absurdity that this particular class of artists is more regulated than the corporations that profit by using their work. As such, the PROs back the proposal of the Songwriters Equity Act in an effort to change rate setting to better conform to the new market.

It should be obvious to anyone that a Pandora-like service isn’t exactly radio. The collective earnings of thousands of terrestrial radio stations add up to considerably more than the revenues of a single Pandora.  At the same time, a single Pandora reaches a global audience, even obviating the need for listeners to use terrestrial radio at all.  That’s just technological progress, and nobody hopes or expects to put that genie back in the bottle.  But because the one Pandora is allowed to pay the same percentage of earnings as the collective of all terrestrial stations, that’s the reason millions of plays worldwide translates into pocket change for songwriters and composers.

So, in a nutshell, the appellate court ruled that ASCAP may not raise its rates to new benchmarks that would be aligned with this dramatic shift in the market, and it also ruled that the individual publishers Sony/ATV and UMG may not withdraw only their digital rights from ASCAP  in order to negotiate those specific licenses separately with Pandora.  But consumers should not assume this is a “win” for streaming that will perpetuate their desire to have all the music they want for free for the rest of time.  Because now the major publishers are faced with an all-or-nothing option.  They either leave all their rights with ASCAP and BMI or pull out entirely, which Sony/ATV’s CEO has already indicated may be the response to the courts not allowing them to extricate themselves from the outdated consent decrees. Meanwhile, the Department of Justice is reviewing the consent decrees and may yet recommend that the courts are wrong in their determination that a rights holder may not partially withdraw one of its bundle of rights without withdrawing entirely from the PRO.  Either way, that ruling will likely be the end of that particular debate.

If the larger publishers withdraw from the PROs, they’ll demand higher rates from Pandora no matter what; but attorney and blogger Chris Castle in this post suggests Pandora doesn’t care about that if they can effectively bust the PROs by forcing the big publishers to jump ship and leave the organizations populated with smaller publishers, who have limited bargaining power.  Thus, instead of a system of collective bargaining that represents both large and small publishers, we may see a bifurcated market in which the large players negotiate against one another while the smaller players continue to choke on the crumbs.

There’s no reason to assume this will mean longterm benefits for consumers, either with regard to affordable access or especially with regard to fostering and sustaining the greatest diversity of works.  At the same time, what may happen to public performance licenses other than streaming is unclear.  Presently, your local bar pays an affordable fee to be able to play damn near every song ever recorded, and it pays that fee to no more than three PROs — ASCAP, BMI, & SESAC.  If the major publishers are no longer part of those catalogs, your local bar owner, depending on what music he wants to play as well as other factors like size of the business, may have to pay for all three PRO licenses and also deal with the major publishers, who will be free to charge whatever they want based on any criteria they decide because they are no longer subject to the ASCAP consent decrees.  If nothing else, it sounds like a pain in butt for a small business owner compared to the old system, but it could get rather complicated when you consider the number and types of venues, even websites, around the world that traditionally cover their music needs with one to three blanket license fees.

Whatever is to come, people should be clear that Pandora’s strategy isn’t about consumers, it isn’t about innovation, and it sure as hell isn’t about competition.  Nobody I know dislikes  streaming in principle. What’s not to like?  But it’s not THAT innovative. If you didn’t see it coming at least by the time Napster became a thing, you weren’t paying attention. The companies that have emerged as dominant players in this space aren’t particularly great visionaries; they’re just the guys who were in the right place at the right time to capitalize on a relatively obvious means of distributing music akin to what we historically called “radio.”  So, let’s not beat the word innovation to death when talking about companies like Pandora; and let’s especially not get suckered into thinking this is about competition.

It is the nature of business leaders to want to dominate, which is healthy in a market that doesn’t foster natural monopolies.  Unfortunately, the Internet does foster natural monopolies. Why do you think Google+ couldn’t take, or even share, the market with Facebook?  Because most of us don’t really need two of the same kind of social media environments  in our lives.  Hell, many of us, have to force ourselves to limit the use of just one.  It doesn’t matter how dominant Google is in other areas or how good their programmers are; the Internet generally favors one winner at a time in certain lines of business. And so it may be with music streaming.

On that note, it will be interesting to watch the relaunch of Apple’s entry into the streaming market. Reported to be a subscription-only service, Apple may be in a position to offer the best available terms to all publishers and re-assert itself as the only game in town much as it did with digital downloads in the wake of Napster. Of course that move was directly tied to sales of a little device called the iPod, produced by the company that rules in the arena of attracting customers to new gadgets.  Streaming, of course, isn’t about gadgets, at least it’s not about any one particular gadget.  At the same time, both European and US trade officials are already investigating whether or not Apple is using its still-dominant position in digital downloads as leverage against rivals like Spotify and Pandora.  Sure, but again, I think there are natural reasons why one player at a time will be dominant, regardless of trade regulations.

Whether it’s Pandora, Spotify, YouTube, Apple, or some other company, one downside of digital, worldwide distribution is that consumers may not need more than one service provider when all is said and done. And, if all this is heading toward consolidation of delivery models and consolidation of production models, while limiting the variety of career paths for the next generation of writers and composers, there is no guarantee that either consumers or makers of music are going to win in the long run.  As with other copyrights, the so-called reformers seeking “balance” in the new market are only too happy to leave intact any outdated provisions that favor their own earnings to the detriment of those whose works are essential for their business models to work at all.

Why I Don’t Really Hate Hollywood

P1180231Once again, I maintained my tradition of not making it through the Oscars.  I haven’t cared much about the show itself in years, and I have even less patience for the pre and post-game buzz about everything that’s right or wrong with Hollywood, with the nominees themselves, with the Academy, and most especially with what anyone is wearing. Okay, I’m  a curmudgeon.  But not really.  Because the truth is a love/hate relationship with Hollywood has been part of the American story since before the L-A-N-D came off the famous sign that gives the town its name. Even the word movies was originally a pejorative adopted by the farming community of Southern California to describe those decadent idolaters who made those damn “flickers.”  I really don’t think it’s possible to have an industry built on so much passion, ego, fear, sex, and money without people finding it alternately alluring and repulsive. I also believe it is never quite possible to love cinema without liking Hollywood at least a little.

For one thing, what many people think of as independent cinema isn’t necessarily independent from Hollywood so much as it is codependent on Hollywood.  Big film and little film are more  symbiotic than they are competitive.  For example, the indie producer who needs to pay lower day rates to actors or skilled technicians is able to hire those folks because big movies pay well enough that they can afford to take on low-budget projects between the larger ones.  But the symbiosis is even more intrinsic than that.  For instance, if the production designer of a low-budget, indie feature has also done massively complex, studio projects, he is going to be a huge asset to that smaller film, as will any other experienced member working in another department.  A novice director can live or die by the experience of the people willing to work for him or her.  Additionally, little film benefits from the technological advancements driven by big film. And then, of course, big film looks to little film for new talent and fresh ideas. So, the line between Hollywood and independent cinema isn’t so much bright red as a kind of fuzzy pink.

How “independent” a film is really depends on how much creative control is maintained by the visionary (or visionaries) who want to make the work in the first place.  Naturally, if a filmmaker needs five-hundred thousand dollars from a small group of private investors, she has a better shot of keeping creative control than if she needs a hundred million dollars from a couple of large, corporate financing companies.  On the other hand, an example I often cite is Steven Spielberg, whom few people would describe as “independent” even though he is certainly a director who has full creative control over his films.  So, independent isn’t necessarily about scale or budget; and it certainly isn’t about the style or content of a film.  Plenty of absolute garbage has been produced independently, and plenty of great movies were produced by the old studio system.  But I suspect that because the golden age of indie (from the late 1980s to the early aughts) lost much of its gleam about the same time the Internet began to blossom, and big studios generally transitioned into franchise fare, this helped calcify the “us” and “them” sensibility that assumes a separation between “the creators” and “the industry.”

Make no mistake — Hollywood studios certainly have executives with MBAs who wouldn’t know which end of a camera to blow into.  Such is the nature of large corporations.  Still, the symbiosis between big film and little film exists, and this remains relevant because there is a persistently naive sentiment floating around in cyberspace that digital technology somehow enables truly visionary creators to “bypass the gatekeepers.”  This sounds idyllic, but as you run beyond the cliff edge and hang there Wile-E-Coyote-like, feet treading air a thousand feet above the desert, you have to ask yourself, “Bypass to go where exactly?”

Simply put, digital technology has only lowered the barriers to entry by putting certain tools of production and distribution into everyone’s hands. And this is unquestionably cool.  But entry implies a portal of some kind — we might even call it, well, a gate.  Maybe it’s the literal, iconic gate of Paramount Pictures, or maybe it’s the metaphorical gate of investors willing to back a second film based on the relative success of a first. By the way, finding a distributor for that first film requires passage through another kind of gate, if you will. But it’s really that next project that is the key.  Technology indisputably helps get a first film done, but any experienced filmmaker will tell you that you can only make a movie on favors and Fluffer-Nutters once.  As a general rule, you have to pay people to work on the second film, which means at least some gatekeepers (i.e. investors) are going to get involved, and they’re going to want a distribution plan that involves at least some return on that investment. And there is nothing about digital technology that overturns this basic business model.

With the approach of the Oscars, piracy of the nominated films spiked, and concurrent with reports of this increase came predictable comments that “the industry” must respond by making films available across all platforms simultaneously. This is supposedly the only answer to piracy because “producers need to understand the way consumers want to watch films.”  Perhaps.  But it is interesting that the prevailing faith in the Internet as an expansive, inclusive, incubator of diversity also ignores just how homogenous this demand for universal distribution actually is.  For one thing, there is no “the industry” in this context because there is no one way to market and distribute the broad range of films. Both films and audience trends will continue to shape one another, and we should not assume there is a single strategy that suits all projects.

No matter what, piracy is universally harmful, especially to the small filmmaker most eager to experiment with new platforms. I just met a writer/director who self-financed a small movie and made it modestly profitable by splitting up the rights and negotiating a fairly complex schedule of distribution windows, licensed to various channels from DVD to VOD to streaming. That’s not a new approach to licensing, but what serves both the filmmaker and the audience is the expansion of legal platforms, giving both producer and consumer more than one way to engage in a viable market.  Meanwhile, that same film was also heavily pirated upon its release, and the plus-or-minus x% on a modest film expecting modest returns will surely be the difference between attracting investors to the next project or not.  Meanwhile, how did this filmmaker self-finance his film?  With money he made working on big, Hollywood movies.  See what I mean?

Thinking About Zoë Keating Today

I am very sad to learn today that Zoë Keating’s husband, Jeff, lost his fight with cancer three days ago.  My thoughts are with Zoë and her son.

I have never met Zoë Keating, though in my work advocating for the rights of artists, I have met several people who do know her, and of course, I have become familiar with her words and with her incredible music.   More than once, she has humbly tried to remind people that musicians like her are just regular working folks, dealing with the same assortment of life’s ordinary, and sometimes extraordinary, challenges.  Though I do feel compelled to say that one difference is that the way so many of us are able to endure, overcome, and understand life’s challenges is thanks to musicians like Zoë.

Please visit www.zoekeating.com.