Tuesday, June 9, 2020

Debating Cory Doctorow’s internet blanket music licensing plan | Music Ally

This story begins with an article by author and activist Cory Doctorow on the website of the Electronic Frontier Foundation: ‘A Plan to Pay Artists, Encourage Competition, and Promote Free Speech‘.

It proposed extending the kind of blanket licensing that allow clubs, restaurants and radio stations to play music to the internet as a whole, including any digital service that wants to use recorded music.

“Let companies pay a per-user license fee that gives them access to the same catalog that Amazon, Apple, and Google claim, without having to cut deals with every label and musician,” wrote Doctorow.

Music Ally wanted to explore this idea more, for our weekly Music Ally TV Show. So, host Joe Sparrow interviewed Doctorow for a pre-recorded segment in the show – you can watch the full interview here or via the embed below.

Then, we invited two UK-based experts on music licensing, Cliff Fluet and Becky Brook – who’ve both worked with a number of startups seeking music licensing deals over their careers – to tell us what they thought about Doctorow’s plan, and the wider topic of licensing.

You can watch the show, which included a shorter cut of the pre-recorded interview, via this link or the embed further down this article. This piece summarises some of the main talking points, first from the Doctorow interview, and then from the discussion of it by Fluet and Brook.

Doctorow and the EFF have their critics within the music industry, as this response to his plan from Music Technology Policy blog shows. In the interview, he suggested that there is common ground between the EFF and artist rights groups.

“If there’s one thing that EFF and artist groups completely agree on is that artists incomes have not been improved” by many of the developments in online music distribution.

“But there are some things that have really increased artists’ incomes, and we see that wherever we see empirical research, which is that if you give people who want to listen to music a chance to buy it at a fair price, on fair terms, they do so.”

He cited iTunes and Spotify as examples, but then suggested that “although the music industry generated more income as a consequence of this, it didn’t necessarily reach artists”. Meanwhile, both the tech and music industries have consolidated down to a small number of tech giants and major labels.

“It doesn’t take an economics genius to understand that when sellers are selling into a market with just a few buyers, when there are just a few intermediaries that control it, what those intermediaries do is they increase the share of the income that they retain, in the industry,” he said.

“We’ve spent two decades with internet advocates and artist advocates choosing a champion between big tech and big content, and hoping that when they finish wrestling, one of them would toss us some crumbs.”

As Doctorow’s plan makes clear, we do already have blanket licences – where companies pay set amounts for access to the entire catalogue of music – for public performances (the clubs / restaurants / radio examples). In the US, the Music Modernization Act created such a licensing system for mechanical publishing rights too.

Doctorow talked us through the plan that he thinks could work for recorded music.

“If you want to start an online service that does what the services that currently license music do, whether that’s Spotify, YouTube, TikTok or what have you. You go to a collecting society and you pay them a licence fee based on the number of users you have, and that goes up and down as your users come and go,” he said.

“The collecting society uses statistical sampling to figure out how music is being used on your platform, and they take the money that you have paid on behalf of your users, and they give it to the artists. And half of the money goes directly to the artists, irrespective of their contractual arrangements with their labels.”

“Even if the label says ‘100% of this collecting society money goes to Universal’, Universal can’t touch half of the money. Half of the money goes straight into the artists’ pockets… They get paid even if they’ve been corralled into a terrible contract that says they have to recoup, or some other thing has to happen before they start seeing a dime.”

One obvious question is why labels would agree to do this, and Doctorow was clear in his response: “I don’t think they would. Or at least, I don’t think they will willingly. I think that they’re probably going to have to be dragged kicking and screaming to it.”

Doctorow was a prominent critic of the recent European Copyright Directive, and in the interview he cited it as one example of recent copyright modernisation that was “transferring a few points from the balance sheet of a concentrated big tech industry to the balance sheet of a concentrated entertainment industry, but very few crumbs have landed on the tables of artists, or of audiences”.

He sees his plan as a rebuttal of that dynamic. “I think that if you offer artists a more direct way to get paid, if you jump clear of this ridiculous notion that the only way we can hope to help artists is to help the firms that have historically exploited artists, and hope they have a ‘Christmas morning miracle’ where they change their minds and decide that rather than putting those extra monies into executive compensation, and shareholder dividends, that they’ll just up their royalty rates,” he said.

Doctorow also suggested that even the biggest music companies may experience life at the sharp end of a buyer’s market.

“As the tech industry itself becomes concentrated, you have another version of this relationship, where you have companies like YouTube or Spotify or Amazon who, if they say to an entertainment company ‘Either you take our terms or we don’t carry your work’ that’s a crippling blow to the company,” he said.

“If we are going to create diversity in the relationship between music companies and tech distributors, then we need more tech distributors, then we need more tech distributors, and the way to get them is to lower the cost of being a tech distributor.”

He cited Napster in evidence of this: a service created by “a couple of college kids” that attracted hundreds of millions of people.

“The only thing they didn’t have was an army of glad-handing suits to ink contracts, and if they’d had that, then they would have had a sustainable business,” he suggested. “You have so many potential firms, and not just firms but artist cooperatives, micro-labels, fan coops that serve specific niches.”

However, Doctorow made it clear that there are a “lot of big empty spaces” in his plan that need to be filled: it was a conversation starter rather than a neatly-baked solution.

Those empty spaces range from what the collecting society that would oversee such a licensing scheme would look like; what a fair division of royalties would be between performers and songwriters; and what system of statistical sampling and analysis would be fit for purpose.

The conversation started by Doctorow continued in our Music Ally TV show on Friday, where Fluet and Brook were joined by our regular guest Henriette Heimdal of CD Baby. All three had read his original article, and watched his interview, as preparation for the discussion.

“I see both sides to the argument. I spend my life licensing companies, and let’s not pretend it’s not an absolute nightmare!” said Brook.

“It might be better than it was, there might be more innovation supported than there was five or ten years ago, but even with my experience or Cliff’s experience, music licensing is really very tough, even if you’re following an exact precedent.”

“Once you factor in innovating – doing things that are truly different – then you have to have very deep pockets, and endless dynamism and persistence. I really see why anyone would fairly say that the current situation is stifling innovation massively.”

Fluet opened by pointing out that ‘blanket’ licensing is far from simple in itself: even for businesses like nightclubs or hairdressers, there is no one global rate that they pay: in different parts of the world the licensing works differently.

“It’s a great rhetorical device that gets conversations like this going… In every single territory in the world they’re different, so the idea of saying ‘let’s go back to the internet era, and then just apply it to the current one, I just can’t get there,” he said.

Brook agreed. “Undoubtedly we need change: it is currently not working. I have startups come to me day-in, day-our wanting music licences, and I have to explain to them they just don’t have enough money or enough time or enough expertise to get there – and even those who have a decent amount really very much struggle,” she said.

Brook thinks that changing this may require changes to copyright law, but she warned against the idea that blanket licensing can be a panacea. “It’s really not. I could spend a day telling you the problems of existing blanket licences!”

Fluet did agree with Doctorow that artists must be at the centre of any changes, especially at a time when they have seen their income from touring disappear at a stroke during the Covid-19 pandemic.

“We’re not going to see touring at the same scale for at least 12 months. There will be live music, but are we going to have the big festivals, the big tours? Not for the foreseeable [future], which means for most artists there’s going to be a big crunch point in terms of their revenues. That’s one of the agents of change,” he said.

“Also the music industry is starting to realise, while streaming is fantastic, there has to be yet more change. They can’t just have one major royaltor, they can’t have two or three, you need to have a more diverse ecosystem. The diversification of revenue stream is absolutely key… and all of those roads lead back to licensing.”

Brook chipped in. “Let’s be very clear, music licensing is even painful for the biggest tech companies… Even they struggle to innovate in music,” she said.

“Very large tech companies have had these very good ideas and have been unable to launch them because of music licensing. It is death for a startup, it is slower innovation for a big tech company. I don’t think that people are actively trying to stop innovation generally, as a rule, but the system is such that it’s not allowing it.”

So, both were in agreement with Doctorow about the need for diversification. Fluet made the point that it’s not just about having more services, but having “more types of services” – startups using music in many different ways, rather than just lots more streaming services.

cory doctorow tv show panel

The TV Show trio also pushed back at the characterisation of the music industry as dominated by the major labels (Heimdal: “The independent and DIY sectors are growing at much faster rates than the rest of the industry”) and also at suggestions that label deals are intrinsically artist-unfriendly.

“Even the major labels are innovating in this space. The narrative that major labels are all evil and out to screw artists? It’s long gone. When you look at the labels investing, they’re investing at making themselves more scalable and offering more services [to artists] rather than old-school contracts,” said Brook.

“The real question is what is equitable,” added Fluet. “I’ve seen 50/50 deals in contracts which are highly un-equitable, because everything is recoupable…”

Doctorow’s proposition of statistical sampling as the method by which royalties for blanket-licensed services would be calculated came in for some criticism during the show, too.

“Statistical sampling would be how you would be paid? Why? We measure all consumption in the digital world anyway. All of these new consumptions are going be measurable. Why on earth would you not just pay based on the actual usage?” said Brook.

“There’s no really good enough technical excuse. The biggest problem right now is that every single CMO [collecting society], every single label needs to have the infrastructure to process these large datasets, and so it’s inefficient, and it’s expensive. So they don’t invest sufficiently to be able to process it…”

“But if we process it in a more efficient manner, the technology is readily available to do this. Every creator, performer, should be paid based on actual usage from digital consumption, where the consumption is measured.”

As the show drew to a close, Fluet voiced an idea that might be closer in spirit to what Doctorow is proposing.

“There could be a world where there is a ‘startup licence’. And actually, BPI and various of the majors have talked about this, and you’ve got the LOML [Limited Online Music Licence] on the PRS side, and there’s some great new fast licensing by the likes of ICE,” he said.

“So things are changing, things aren’t absolutely terrible… but if you do want real innovation, we do need a bit of bravery.”

Brook agreed. “The industry could bring about, could effect a global innovation licence. It doesn’t have to cover every single use, but it would have to cover innovation,” she said.

“We need to make it easier for true innovation to flourish, and that will only happen if we get some collaboration. And not in an anti-competitive manner! Just in a way that enables, frankly, a startup to take out a licence like they buy Amazon services… and on a multi-territory, hopefully global basis, but also covering both recorded and publishing rights.”

“I would like to see it happen willingly, rather than have to be a statutory change, but maybe what we need is the threat of statutory change to encourage the industry to collaborate.”

Stuart Dredge

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