Update On Choruss: Universities Not Talking, Mysterious 10,000 Students Still Nowhere To Be Found

from the still-waiting... dept

We've been pretty big critics of the music tax concept, that was being pushed by Jim Griffin's Choruss along with Warner Music (who had hired Griffin to create this program). Of course, we've only been able to criticize what bits and pieces have leaked out from those who have seen Griffin's presentations. That's because, despite a busy conference schedule, Griffin never seems to publicly describe what Choruss really is. So, every time we hear some new info about Choruss, and explain why it's bad, we get angry emails from Griffin calling me all sorts of insulting names, and insisting that I've mischaracterized Choruss. So, we ask for more details, and we don't get them. Instead, we're given amorphous descriptions about how it's "an experiment." But what is the experiment? Well, it will be lots of things. As soon as we narrow in on an example, however, and explain why it's bad, we're attacked because the plan might not include that particular example. But we haven't yet heard an example that makes sense.

Griffin had agreed (as part of an angry email) to answer questions from the Techdirt community, and we obliged by sending him a long list of questions. Griffin had some personal issues to deal with over the summer, which was totally understandable, but we still haven't heard any answers. I'm beginning to wonder if we ever will.

But the biggest question I had was if he could explain who the "tens of thousands" of students were who Griffin told a conference in June would be using Choruss this fall semester. It seemed odd to find out that so many students had signed up for something when we still weren't being told what it was. As the fall semester started, we asked to hear from students who were using Choruss, and got silence -- which seemed odd. Apparently, it's because those tens of thousands of students hadn't signed up for the fall.

However, as a bunch of you have sent in, now the claim is that six college campuses will be testing Choruss this spring semester, but Griffin won't say who they are and the campuses won't admit to participating. They claim that they're afraid of backlash from folks like us -- but that makes me wonder. If the concept is so good, why not stand up and defend yourself for being a part of the program? If you can't defend the reasons for testing the program, it makes me wonder why you're doing it in the first place.

The article at the Chronicle of Higher Education provides a few new details that don't sound particularly appealing. Rather than (as some had suggested earlier, but since Griffin never made it clear, we just don't know if this was ever true) a system that would let students share files freely under some sort of blanket license, it sounds like "yet another limited music service." It will allow unlimited downloads, but you have to use the Choruss service (again, perhaps the article is wrong, but that's what it says). Similar services have been tried on various campuses and failed, so we're curious to hear what's so special about Choruss that will be different.

It still seems like Choruss is trying to solve a problem that doesn't exist. We're seeing more and more smart musicians put in place business models that work. They work in a way that lets fans choose to send money to the artists they want to support directly, without a big middleman. Choruss appears (from all we've heard) to be an attempt to set up a big middleman that will take big chunks of money and then use some magical process to figure out how to dole it out. But why do we need that overhead? The market is figuring stuff out. It doesn't need another middleman.

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Tens Of Thousands Of Students Have Signed Up For Choruss... Even Though No One Knows What It Is?

from the am-I-missing-something? dept

A bunch of folks have sent in the story in The Register about Jim Griffin's appearance at the World Copyright Summit, where he apparently told the crowd that "tens of thousands" of students at universities have agreed to voluntarily pay for Choruss. But, unfortunately, nobody seems to know what it is. Plenty of folks have been asking for an actual description of what it is -- and every time we're not told anything other than that it's "an experiment" that we're not to criticize. So, I'm curious who these tens of thousands of students are, and exactly what they've signed up for. If any of them is willing to share with us the details of what they signed, that would be great.

At one time, we were told that Choruss would be mandatory, but lately, Griffin has suggested that it will be voluntary. A voluntary system is much better, so that's definitely a step in the right direction, if that's true. But there are still plenty of other problems with such a system, many of which I've outlined elsewhere. It still seems like the entire program is based on a negative benefit ("you won't get sued") rather than a positive incentive ("here's a reason to give money in exchange for something you want") and a distortionary effect on the market (i.e., inserting unnecessary bureaucracy into a market, such that artists will actually make less). But, the fact that supposedly tens of thousands of students have agreed to pay for this when no details of what "this" is have been offered seems quite odd.

Separately, I should note that in our last post about Choruss, we solicited questions to be sent to Griffin which he has promised to answer. Due to my own hectic travel schedule, I haven't had time to go through the responses yet and whittle the list down to a more reasonable level, but I'm hoping to do that shortly. Alternatively, Griffin is free to answer questions and discuss these issues in the comments, but to date he has preferred not to do so, which is his right, of course. Still, if you have any additional questions for Griffin, feel free to add them in the comments, and I'll include them in the potential list (which will be narrowed down, so as not to overwhelm Griffin).

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Ask Jim Griffin Questions About Choruss... Along With My Concerns About It

from the ask-away dept

It's no secret that I think Jim Griffin's plan for Choruss -- to set up a licensing system for P2P -- isn't just grossly flawed, but dangerous in many ways. We discussed at length why the very idea of any sort of licensing (i.e., a "tax") on online music is a bad idea. We've also worried about the apparent bait-and-switch nature of the plan -- in that, while it would grant either "covenants not to sue" or (potentially) "licenses" for any file sharing you do, it wouldn't stop the recording industry from still trying to shut down file sharing apps as illegal.

A few months back, I finally met Jim and was still left with many, many questions about the program -- especially because I felt that when anyone tried to pin him down on any particular bad idea that's been associated with the project, he would cut off the discussion by saying, "we're just experimenting -- so just let us get data before you criticize." And this, in fact, is a part of the problem. Rather than discussing the merits of any particular idea, Griffin keeps suggesting that -- despite evidence, history or theories about how various license programs work -- none of that is relevant to discuss until he's got data on his particular experiment. The way the plan is structured is that different (as yet unnamed) universities and colleges will begin testing Choruss this fall -- and each university will set it up how they see fit, in order to get comparative data. Thus, some could make it compulsory. Some could make it voluntary. Some could charge a lot. Some could bundle it with something else. Some could charge a flat fee. Some could charge a per download fee. Some could charge a per listen fee. But, if you try to dig down into the problems with any of these, Griffin has just said, "well, we're just experimenting, and we don't know if it's a good idea or not." Unfortunately, this avoids allowing us to discuss the details of why the concept is troubling, because we're told repeatedly it's just an experiment.

Jim Griffin to answer questions

That said, in an email exchange, Griffin agreed that if we asked folks at Techdirt what questions they had about the program, he would answer them -- and I hope that we can get more detailed answers. Now, to say our email conversation has been without conflict would be incorrect, and there was a bit of a misunderstanding about the timing of us soliciting questions (I had hoped to do it as a part of The Free Summit, which he was scheduled to attend, but for perfectly legitimate reasons, he was unable to attend at the last minute). But Griffin says he wants to answer whatever questions we have, and I'd like to send him some good ones.

My own concerns

To kick it off though, I'm going to share an edited/updated version of the last email I sent Griffin, after he asked again why I was so against Choruss. In pitching Choruss, Griffin likes to tell the story of the founding of SACEM, the very first collective licensing society. He talks about how since restaurants benefited from the music, they should pay for that benefit -- and how that's the basis of every collection society since: any place/service that benefits from music should pay for that benefit. I have serious qualms about that thinking, and here's why:

My worries about Choruss come from a few different angles. I think any sort of collective/group licensing scheme involving such a third party is an economically inefficient, and unnecessary solution, that ends up doing more harm than good. I know you like to tell the story of SACEM. To me, that's a horror story. It's a story of how to create a system that leads to massive wasted resources, inefficiency, a reliance on a bad (but easy) business model, followed quite quickly by regulatory capture that leads to an ever increasing inefficiency. Look at what SACEM has resulted in, and all I see are massive inefficiencies. The idea of adding to that legacy concerns me. If you look at collections societies, over time they just keep trying to increase how much they collect, and will often lean on the government for help in doing so. The story of PRS in the UK is instructive here.

My concern is specifically that we're seeing other business models that are working tremendously well. I know you were unable to stay for my keynote in Nashville, but I went through examples of many different artists (small, medium and big) who were embracing new business models to tremendous success -- none of which relied on any sort of licensing proposal.

So, then, along comes a licensing plan where I need to pay (and, yes, I know this isn't determined yet and experiments will occur) say... $5/month for Choruss. Now suddenly that's $60/year that I'm paying for music (some of which gets siphoned off by the bureaucracy in the middle, even if it's a non-profit, just for administration) that relies on some magic formula to figure out who it goes to. I'm now less inclined to spend additional money directly with my favorite artists, because I've already spent the money via Choruss. My favorite artists get less money (and I'm reliant on your system to make sure that my favorite artists are actually rewarded). My money is spent less efficiently, and now there's a group in the middle who has every incentive in the world (even as a non-profit) to try to get an ever increasing part of the pie.

That just doesn't make sense to me.

You talk about the two issues: collecting a pool of money and distributing it efficiently. What's wrong with letting the market do that? People are giving money, gladly, to the artists who give them a reason to buy. That's your efficient collection and distribution system all in one. Except it doesn't need a middleman like Choruss.

The problem the recording industry faces isn't that there hasn't been an effective licensing system in the middle. It's that they weren't giving people a reason to buy. A licensing scheme isn't a reason to buy. It's a removal of a threat. That's negative value (we won't sue!), not positive value (here's additional scarce value you want to pay for). The artists I highlighted in my presentation were all giving positive reasons to buy. I'm afraid that focusing on a system like yours focuses on that negative reason to buy (you won't get sued!) rather than the positive reason (check out all the benefits I get).

That's my big concern.

That concern is exacerbated by the fact that every time a direct question is asked about how Choruss will work, your response is "it's just an experiment, so we don't know." I recognize that it is an experiment and you don't know all of the answers, but it feels very much like a dodge. I'm sure it's a fine line, because there are many details you don't know about, but you've been so vague about everything that it's hard to know what to think. A bunch of universities have agreed to it, but who are they? Why would they agree to test something without the details being clear? Who's setting up what those details are? In Nashville, you said some would involve all students, but at the SanFran Music Tech event you were saying they'd all be voluntary for the users. It just has this quantum feel to it. Any time anyone tries to get specific and warn about a certain aspect, you can just claim "well, we might not do that."

My biggest concern, frankly, is that putting in this inefficient, unnecessary bureaucracy in the middle, we take away resources from the new, more efficient, business models that are working. Both times I've seen you speak about Choruss, you've claimed that those business models won't necessarily be harmed, because they can still be built on top of Choruss -- but that goes against fundamental economics. If people have less money due to Choruss, they're a lot less likely to buy into these other business models.

Now, I'll be the first to admit that competing between business models is a good thing, but the very foundation upon which any sort of collective licensing system is built is to basically get everyone to opt-in, somehow or another -- and thus is set up to crowd out more efficient business models. Otherwise it just doesn't work. So you have every incentive to get third parties (universities, ISPs) to put in place policies that either force, or heavily incentivize, their students/subscribers to adopt a much more inefficient plan. The incentives are skewed. You and the universities/ISPs benefit -- but users (and musicians) do not.

So, with that, let's kick off some questions that I have as "starter" questions, and let's see what else you guys can come up with in the comments. Also, feel free to let me know which of the starter questions/user submitted questions you like best. Once we have a good bunch, I'll send them to Griffin and when we get his answers, I'll post them here. Some of these starter questions are the same ones I asked earlier this year, but I've added a few as well:

• Why do we even need such a plan when plenty of musicians are showing that they can craft business models on the open market that work?
• How does adding yet another middleman make the music market any more efficient?
• What's wrong with letting the market mechanism handle the collection and distribution of the funds directly between musicians and fans?
• Will the recording industry promise to stop trying to shut down file sharing systems if this program gets adopted?
• Will the recording industry promise to stop pushing for 3 strikes if this program gets adopted?
• How will the program prevent the gaming opportunities, where artists set up scripts to constantly reload/download their songs?
• Why should music be separated out and subsidized while other industries have to come up with their own business models?
• Why should those who don't listen to much music and aren't interested in giving their money to the recording industry be required to participate if their university or ISP decides to make them?
• Why should we have a business model focused on negative value (you don't get sued), rather than positive value (here's something scarce that's worth buying)?
• The history of collections societies shows that they only tend to expand, and try to capture more rents. Why would Choruss be different?
• If Choruss becomes big, won't lots of other industries want in? Movies will want their own version. Then newspapers. And if newspapers are getting their cut, then why not bloggers too? Or blog commenters? Or just any website? The road this leads down is a bad one, where we end up creating massive bureaucracies to subsidize every form of content, rather than focus on business models where those content providers have to provide a reason to buy their particular product. How do you prevent that?

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Update On The Free Summit: Speakers Announced

from the update dept

Wanted to give everyone an update on The Free Summit that I'll be emceeing next month. We've lined up most of the speakers, so check out the agenda. As already mentioned, Chris Anderson will be doing the keynote, talking about some of the concepts from his new book on "Free" (I'm reading it now -- and it's great). There will also be two panels that should be quite interesting. One of the things that we wanted to ensure was that the panels we put together didn't just involve people who all agreed with each other (or with me, certainly), so that the discussion would remain quite interesting. So, on the panel about music, we're having Jim Griffin (who I've certainly clashed with in the past) from Choruss, the major record label-backed attempt to come up with a new business model for licensing music, Gigi Sohn from Public Knowledge, the public advocacy group that has taken a strong pro-consumer position on copyright issues, and Dave Allen from the seminal band Gang of Four, a big advocate of "free," and who now helps plenty of other bands learn how to embrace and profit from "free." It should be an exciting discussion.

We've also got a panel on the news business, involving Kara Swisher from AllthingsD/Dow Jones, Dan Gillmor, the director of the Knight Center for Digital Media Entrepreneurship as well as one of the first "old school" reporters to jump on the participatory media bandwagon, Alan Mutter, a journalism professor/investor/entrepreneur/former reporter who's been a vocal critic of newspapers' decision to go free online (calling it "the original sin") and Marshall Van Alstyne, an economics professor from Boston University and MIT who has studied information economics and who recently debated with Mutter and others on the Freakonomics blog about news organization business models. There will also be a session from Alex Iskold (another person I've disagreed with in the past) who will be presenting on "the dangers of free."

What's great about this is that it really is a mix of folks with (sometimes starkly) different opinions -- but who all believe quite strongly in their positions and are willing to discuss and defend them. I'm hopeful that what comes out of all of this will be some great new insights from all sides about what "free" means in terms of business models and economics today.

Finally, we're excited to announce that, as a part of this, we'll be including a mini-Techdirt Greenhouse at the beginning of the event. For those who have followed Techdirt for a while, you may recall we ran a series of "idea workshops" called the Techdirt Greenhouse, where individuals would do short, 5-minute presentations not as a "demo," but to discuss a challenge they were facing -- and then we broke up the audience into workgroups to take on those challenges and come up with ideas/plans/suggestions. Those events were a lot of fun, and we received a ton of great feedback. We've been meaning to start them up again (and we still get emails from attendees demanding we do so), but have been too busy to focus on them -- so this is a good way to sneak in a mini-Greenhouse, and also get us geared up to do a full Greenhouse again in the near future. In this mini-Greenhouse, we'll be focusing on the challenges associated with using "free" in a business model. It should be a lot of fun...

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Jim Griffin Explains Choruss; We're Still Left Wondering Why It's Needed

from the still-don't-see-it dept

Last week, we had a bit of a back and forth with Jim Griffin, who's trying to build Choruss, a recording industry-backed service to have certain gatekeepers (universities initially, then ISPs, then...?) act as gatekeepers, who would effectively pay a per user fee, which they'd likely pass on to users, to allow those users to file share (sorta -- as the record labels would still likely try to shut down file sharing networks and still push for "three strikes" laws). I got to see Griffin present his "vision" for Choruss at the Leadership Music Digital Summit and spent some time chatting with him after (no punches were thrown -- it was quite friendly). That said, having heard from him directly, I'll say I'm still quite skeptical and somewhat worried about where Choruss is heading, and many others I spoke to in attendance felt the same way.

First, Griffin's point is basically this: for the past 150 years or so, any place that "used music to draw a crowd" eventually ended up paying some kind of license for it. It started with restaurants and then moved on to concert halls and radio and movies and television. So, to Griffin, setting up a similar licensing scheme (which he continues to say is voluntary, not compulsory) is simply the next obvious step. He paints himself as a technology supporter -- and I have no doubt that's true. He also points out that "piracy" isn't necessarily the biggest "problem," out there, though he still says it is a problem. He notes that there's a lot more competition for everyone's time and entertainment dollar spend. From his vantage point, the real problem is that all of the different rights holders are sitting around yelling at each other (it's true, it happened on an earlier panel) rather than agreeing to take a dollar and split that dollar. So, while they all fight, that dollar goes somewhere else. So, based on that, the solution is simple: set up a process to get the dollar, and then let everyone fight over that dollar behind the curtain, rather than out front in dealing with consumers directly. I've heard a very similar vision from folks like Fred von Lohmann over at EFF.

While I've been tough on Griffin, I will say that I believe quite strongly that he earnestly believes this is the best solution to the "problems" facing the recording industry. I don't think he's trying to create a pure money grab for the record labels or create what becomes a "music tax." The problem is that that's exactly what such a program is likely to become.

To defend against those claims, Griffin repeatedly says what he said earlier: this is just an experiment! He says that later this year a bunch of universities will launch with Choruss (in fact, he claims that more universities wanted to sign up than they could handle) -- but each may be using a different model. So, one university may require every student to participate. One may be opt-in. One may be opt-out. One may set up their own centralized file sharing server. Even how they measure what files are shared will be a variety of experiments: one may use technology tools. One may simply use self-generated "diaries" (like the old Nielsen/Arbitron systems). Payments may be based on downloads on one system and "plays" on another. The pricing may be different at different universities. Basically, it's just a series of tests, and supposedly we'll all "learn" from it and move on from there. In fact, he's hoping that since these tests will be done at research universities, that professors there will help study the results. So that's why Griffin has been upset about some of the coverage (including ours) that didn't highlight the fact that these are tests that could go in a variety of different directions.

He didn't address any of the questions we raised in that last post, in part because he doesn't have the answers to many of them yet (it's part of what he hopes shakes out from the experiments). However, there are still plenty of reasons to be quite wary of this plan. For all of Griffin's belief that this is the an experiment worth trying, I think it's built on faulty premises and will quickly go down a dangerous road. It's just too tempting to take this concept in exactly the wrong direction.

The faulty premise: that licensing is a way to "handle" the issue (even if he still doesn't want to call this a license). Licenses have always been a way to duct-tape on a temporary solution to a new technology. Adding yet another such license is simply layering on yet another layer when it's simply not needed. Griffin complains that "we cannot tolerate a society where paying for art, culture and knowledge is voluntary," but that's missing the point. It assumes, incorrectly, that paying for the content directly is the only way to make money off of that content. As we've been showing over and over again (and many others at this very event are demonstrating) that's simply not true. There are lots of ways to make money, and many of those are enhanced by having the music be available for free.

Griffin addressed that briefly, suggesting that those other models still work on top of Choruss, whereby Choruss acts as sort of a "basement floor" on top of which those other models can be built. That sounds great, but it sounds to me like a social welfare program, separate from what the market would allow. And once you build such a system, as we've seen over and over again, the folks who control it keep asking for more and more. So even if these are experiments and who knows where the final model will go, given who's backing it, it's not hard to guess: they're going to demand to make it about as close to compulsory as possible. ISPs are going to offer it and will simply add to everyone's bill. The program doesn't work at all if they don't do that -- and that's simply going to piss off a lot of people, just at a time when musicians actually have been showing they can win the trust (and money) from true fans.

Griffin suggests that ISPs won't have to make it mandatory, but will be able to "upsell" people to tiers that include the Choruss tax covenant not to sue license whatever it's called. He uses, as an example, just how difficult AT&T (he didn't name them, but it's clear who he meant) has made it to sign up for naked DSL. He interprets this to mean that the ISPs are good at upselling users. He ignores the fact that AT&T worked hard to hide the option and when that was revealed a rather angry outcry went up among AT&T customers who felt cheated.

When challenged on all this by an audience member -- Dave Allen, member of the UK band Gang of Four, who has now gone on to a second career helping musicians build real business models around their brands -- Griffin used "the cable model" as a way that this all makes sense: i.e., even if you don't like sports, you get ESPN in your basic cable package. Allen smartly shot back the fact that customers hate that and are increasingly looking at alternatives like Hulu and Boxee, that let them get away from such deals. All Griffin could do was insist that such bundling would "come back."

But Allen really got to exactly the heart of the problem with Choruss: it's a plan based on what's best for the existing stakeholders, not the customers. There are plenty of business models out there (and I've been hearing about a bunch more from musicians as I chat to them at this event) that work by creating a true win-win relationship between the musicians and the fans. They're models under which everyone benefits. Choruss doesn't work that way. It seeks to perpetuate the old model, where you have to "get" money out of others in order to "allow" them to do something. It's not about creating win-win models where everyone's happy to take part, making a willing transaction where they feel better off. The examples Griffin gives -- of older licensing models, ISP upsells and cable TV bundling -- are exactly the sorts of things that have always pissed off fans, and it seems likely that Choruss will do the same, no matter how much Griffin hopes to have it avoid that fate.

Instead, there are tons of models that don't involve anyone feeling angry or ripped off -- and those embracing them are finding them to be quite lucrative (in many cases more lucrative than older offerings). Griffin says that Choruss won't interfere with those other models, but that's unlikely (at best). If people feel they're getting ripped off by having to pay a university fee or ISP-fee (tax) for music, they're going to be less willing to participate in these sorts of new business models, already feeling pissed off and that they've "given" already... often under duress. That's not the model on which to build a successful industry.

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Dear Jim Griffin: Let's Have An Open Discussion About Choruss

from the we're-waiting... dept

Yesterday, we wrote a highly critical post concerning the details around Choruss, the recording industry's latest plan to get universities or ISPs to hand over a chunk of money in exchange for "covenants not to sue." On a private email list (which has been forwarded to me by a few members of that list), Mr. Griffin responded by claiming that my "report is factually incorrect in every respect."

I certainly hope that's true!

The points I've raised are that the industry will continue suing file sharing networks, that they'll still pursue three-strikes policies, and that Choruss will be expensive, diverting a chunk of money away from other legitimate business models, which many musicians have been establishing successfully, by adding yet another middleman. Is he saying all of these assertions are false?

Actually, Griffin doesn't address or refute any of these points at all. With respect to the last one, he actually confirms it, by claiming that Choruss will be costly to run.

The only "factual" point he disputes is a rather minor one: concerning whether the program would also cover publishers and songwriters rather than just the labels. He insists that it will, noting that Warner Music owns one of the largest publishers. That's true, but hardly eases the worries. It just suggests, again, that this is a plan for Warner and its subsidiaries, rather than for building a better system for all stakeholders. And he doesn't explain how the system can cover the necessary rights at the price points being discussed. In fact, by noting how costly the program is to run, and how it will lose money at first, it certainly sounds like he's saying "this program will start out cheap, but then we'll jack up the fees."

He claims that Choruss "cannot credibly be claimed to be a money grab -- the costs will exceed the fees," but that's highly misleading on several accounts. First, as noted, it confirms just how expensive the program will be. Second, if it's a pure money loser, than why would anyone be involved with it at all? Obviously the idea, and the whole reason why Warner Music is backing it, is that it expects this to be a money maker, eventually. Claiming that it's costly simply confirms my original point, that inserting yet another costly middleman is the last thing that we need in the process. And this just suggests that any early pricing is, once again... bait and switch. The eventual prices will have to be increased once people are locked in.

That seems to confirm my initial complaints, rather than show how they're "factually incorrect."

Mr. Griffin, (on a private email list), again tries to refute the claim that they haven't included the stakeholders in the process, by noting:

"the calendar is a clear refutation: The coming week has Choruss at SXSW, a music conference in Nashville and the music educator's conference in Boston. We've done appearances and podcasts with Educause, dozens of public meetings at colleges and a keynote at Digital Music Forum."

Yes, after coming up with the plan in back rooms, without input from the actual stakeholders, Griffin has started going out and presenting the plan to others. But there's been no open discussion with those of us worried about the inevitable consequences of his plan. There's been no explanation of why this is actually needed. There's been no attempt to actually respond to the numerous questions that we've raised about the plan and no attempt to bring the actual users into the discussion:

• Why do we even need such a plan when plenty of musicians are showing that they can craft business models on the open market that work?
• How does adding yet another middleman make the music market any more efficient?
• Will the recording industry promise to stop trying to shut down file sharing systems if this program gets adopted?
• Will the recording industry promise to stop pushing for 3 strikes if this program gets adopted?
• How will the program prevent the gaming opportunities, where artists set up scripts to constantly reload/download their songs?
• Why should music be separated out and subsidized while other industries have to come up with their own business models?
• Why should those who don't listen to much music and aren't interested in giving their money to the recording industry be required to participate if their university or ISP decides to make them?

Finally, Mr. Griffin takes a personal swipe at me, saying that no "responsible professional" would write what I've been writing. I've the highest respect for Mr. Griffin, who I do believe is very capable and very smart -- and most certainly has the best of intentions with Choruss. But it's a bad plan and he seems unwilling to address the many, many questions raised about it, other than to brush anyone who disagrees with him aside, and focus on talking to friendlier audiences. If he wants to brush me off as not a "responsible professional," that's fine. I'm willing to let anyone judge me on my work, not on what Griffin says about me. But the very least he could do is actually address the points that I've raised.

To date, his form of "discussion" has been to have Warner Music PR send me a statement saying that it's "premature" to issue any criticism of his plan. That's not discussion and that's not addressing the many, many questions raised by his plan.

But, there's some good news. That "music conference in Nashville" where he'll be presenting about Choruss next week is the Leadership Music Digital Summit... which I happen to be keynoting. So, I'd love to sit down with Griffin and see if he'll actually answer some of these questions, rather than continue brushing us off as being "factually incorrect in every respect," without actually addressing the fundamental questions raised.

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Choruss' Music Tax Plan: Bait-And-Switch

from the ah-the-fine-print dept

Back in December, when we revealed how Warner Music, through consultant Jim Griffin and his new organization "Choruss," were quietly pushing a music tax on universities, Warner and Griffin snapped back angrily, telling us it wasn't fair to criticize the plan, because it was still being "discussed." Yet, as we then asked: where is that discussion and why isn't it taking place with the actual stakeholders? To date, the answer has been a near deafening silence. Despite having reached out to both Griffin and Warner Music directly, neither has shown any interest to actually engage in any form of conversation.

Now we're beginning to learn why.

While we discussed, in detail, why any such music tax is problematic, the details coming out make it clear that this is much worse than originally imagined. In fact, it's so bad that it can be described accurately as a bait-and-switch program designed to make people (1) pay lots of money (2) believing they're now free to file share and then find out that (3) file sharing systems will still be sued out of existence and (4) the users themselves, despite paying, will still be liable for massive lawsuits. It's basically a plan to give the record labels tons of money, handed over by universities (so users have no chance to opt-out) without actually changing anything.

After months of silence on what he was working on behind closed doors and in backrooms, Griffin recently gave a prepared speech supposedly revealing some "details" on the plan -- but as IP attorney Bennett Lincoff points out, what Griffin and Choruss are proposing is to pull the wool over universities and the public's eyes. The plan, as we originally pointed out, isn't a license: it's merely a covenant not to sue -- and that leads to all sorts of problems.

First, considering that the RIAA has been cutting back on lawsuits, that's not particularly meaningful. It'll still pushing for 3 strikes policies that will cut users off from the internet, even if they've paid up through Choruss. Furthermore, as was made clear in the speech, the RIAA won't stop trying to shut down file sharing systems. So, people who think this is a good idea because it will let them use The Pirate Bay or Limewire may discover after getting locked into this program that the lawsuits continue and those services keep getting shut down. Next, since it's just a covenant for the labels not to sue, rather than a license, it doesn't cover all of the other rightsholders, such as songwriters and the music publishers -- meaning that those who file share will still be wide open to lawsuits from those parties.

This is quite a scheme that the record labels and Griffin may pull off:

• Convince universities to buy into the program with no input from students. Universities will buy into it because they think they're "helping" deal with the "problem" of file sharing... and to avoid Congress forcing them into such agreements
• Universities pass the cost on to students (of course), so students are forced to pay for this
• Record labels get a big chunk of money for no good reason
• New expensive bureaucracy (Choruss) gets set up to siphon more middleman cash away from musicians
• Record labels don't do anything different, since they already have started moving away from suing individuals (sorta)
• The public thinks that file sharing is now legal
• Record labels continue to sue and shut down favorite file sharing networks, leaving only crappy, limited and expensive "approved" systems
• Individuals who paid up start getting sued by other rightsholders not covered by this agreement and not getting any money from it

And most of the press will eat it up as a revolutionary agreement whereby the record labels "legalize" file sharing.

Now can you understand why Griffin and Warner Music aren't open to any real conversation and will slam anyone who actually offers to take part in a conversation? A real conversation might bring out these issues, and that's the last thing the record labels want. They want everyone to believe they're working to make file sharing legal, when all they're doing is constructing a massive wealth transfer from people to the labels providing almost no benefit to consumers at all.

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Why A Music Tax Is A Bad Idea

from the let's-go-through-the-details dept

We already had a post discussing how we find it troubling that Warner Music has not been more open in discussing its proposed "voluntary license" plan. It was a neat little rhetorical trick by Warner to claim that we weren't being fair in slamming the proposal so early, when the company itself had kept the plans secret all along. Would they have preferred until they rolled out the "completed" plan for us to point out its problems?

Either way, while we discussed why it was a bad plan in our original post, some are not convinced it's a bad plan. Matt Asay, over at News.com gives his qualified support for the plan, while Nate Anderson at Ars Technica pretty much takes Warner's party line that we're being unfair in criticizing this idea before it's had a chance to air out. Of course, Anderson conveniently skips the fact that Warner wasn't letting the plan air out. These discussions were being held without important stakeholders, where key problems with the plan would not get discussed. Besides, given how many times the major record labels have come up with new great plans that actually made life worse for consumers, I would think the industry has to earn the right to be given the benefit of the doubt. We've been fooled too many times.

Anderson also mischaracterizes our position greatly -- first claiming that we're only kicking the plan because of our "knee-jerk churlishness" and need "to jackboot the music industry in the proverbial groin every time it comes up with a new idea." That makes for nice prose, but pretty much ignores any substance behind our position. In fact, Anderson seems to claim the only reason we dislike the plan is because we called it a "tax" insisting that was the "sum total" of our analysis. This, of course, is untrue -- and Anderson and his co-authors at Ars Technica are well aware of the more than a decade we've put into analyzing music industry business models, including cheering on good models (and even cheering on the big record labels when they do something right). Why Anderson and Ars Technica chose to misrepresent all of that (while throwing in some unwarranted insults), I do not know, but I'll take the blame, and suggest that perhaps we did not explain our position clearly.

So, I'll try again.

Why A "Voluntary License" Is A Bad Idea

Yes, the industry gets upset when anyone calls this a "tax" so I'll use the "voluntary license" term, even though tax is much more accurate. A true voluntary license wouldn't require everyone having a certain provider to opt-in, but that's exactly what this plan would require. In fact, as the slides indicate, eventually it would basically require all ISPs to "opt-in" forcing all of their members to "opt-in." Suddenly, everyone has to pay. That's not a voluntary license. It's a tax.

However, even if we step back and pretend it's really a voluntary license, and even if we grant the premise that all record labels sign up for this plan, you've still created a mess that doesn't help anyone. First, you have to set up a huge bureaucracy to manage this process -- and it is quite a process. You need someone to monitor everything that's happening online to determine whose music is actually being shared and played. You have to somehow create methods to accurately determine -- from the biggest to the smallest -- who actually deserves payment. And, if you don't think that process won't be gamed, you apparently just got on the internet in the last year. As soon as there's the ability to get paid out just because more people are sharing your music, just watch the games that folks take to make sure they get a larger cut. The system will punish honest artists, and reward the scammers.

Next, you have to set up another bureaucracy in charge of managing all of this money, and figuring out how to dole it out (while keeping a cut for itself). Even if this operation is, as planned, a "non-profit" -- don't think it will be cheap. You're talking about a huge operation that is tasked with determining how much money every musician in the world is owed, and then trying to get that money to them. Given the recording industry's history with not being able to "find" some big name musicians, just take a guess how well this will work here? Instead, there's a better than even chance that eventually, the big record labels will note that it's "easier" and "more efficient" for this "third party" bureaucracy to just send a big check to the labels each month, and let them dole out the money to their artists (after taking a cut, of course).

And, of course, there's the whole question of what the rules will be for determining how much each artist will make. Over the summer, we had a look at the sausage making process for compulsory licensing, and it's not pretty. Basically, you get backroom deals combined with senile "copyright board" judges who don't understand the marketplace or technology making final determinations on exactly how much every action is worth. We've already got too many different compulsory licenses to count. All this will really be doing is adding yet another one to the list. It doesn't simplify things -- it complicates them even more. The recording industry, of course, loves that complication. It lets them come in and "handle" things, which most of the time means twisting the rules to its advantage.

Yes, the EFF and Public Knowledge favors some form of "voluntary license," and Warner Music and Griffin are quick to play that up, as if their plan has won some kind of public approval. But the reality is quite different. Someone from Public Knowledge was quick to show up in our comments (where Warner Music still fears to tread, for some reason) to point out that they have not endorsed this plan, but are open to discussions on it. The EFF has also been cautious, noting in the past that it does not support a license that is called voluntary, but is really compulsory. In the end, though, I simply disagree with the EFF on the benefits of any sort of licensing plan. Fred von Lohmann once explained his support to me as such: "A voluntary licensing plan basically gets the issue off of consumers, and lets everyone else fight it out in court."

That sounds nice, but ignores the unintended consequences. The big record labels have shown over and over again that they can twist the process to their advantage. So while it may be true that consumers won't be getting sued any more, it doesn't mean they won't get screwed. The plans will weigh heavily to the advantage of the established recording industry with its leverage in the space. It's a really, really sad situation that we should feel like rewarding the industry for its decade of actively fighting against progress by saying "well, phew, as long as you agree to stop suing, here's as huge chunk of money."

Have you noticed a pattern here? What you're doing is setting up a big, centrally planned and operated bureau of music, that officially determines the business model of the recording industry, figures out who gets paid, collects the money and pays some money out. The same record industry that has fought so hard against any innovation remains in charge and will have tremendous sway in setting the "rules." The plan leaves no room for creativity. It leaves no room for innovation. It's basically picking the only business model and encoding it in stone.

Oh, and did we mention it's only for music? Next we'll have to create another huge bureaucracy and "license" for movies. And for television. And, what about non-television, non-movie video content? Surely the Star Wars kid deserves his cut? And, newspapers? Can't forget the newspapers. After all, they need the money, so we might as well add a license for news. And, if that's going to happen, then certainly us bloggers should get our cut as well. Everyone, line right up!

This is a bad plan that will create a nightmare bureaucracy while making people pay a lot more, without doing much to actually reward musicians.

And, worst of all, it's totally unnecessary.

So What's The Alternative?

But then, as people will be quick to note: what's the alternative? If we don't do this, then how will musicians get paid? This, of course, is a logic fallacy that assumes incorrectly that musicians only make money from the direct sale of music. Musicians that are already embracing business models based on a solid understanding of information economics are discovering they can do quite well (almost always better than under the old model). And, yes, this applies to both big and small musicians.

The basics are pretty straightforward, and if you're new here, you should follow the links to understand them more thoroughly. But musicians get to use their already-created content, which are effectively infinite due to its digital nature, to grow the market for all of the scarcities that surround them. This can include physical goods, but the bigger money is in non-tangible scarce goods that simply can't be copied: access to the musicians, seats at a concert, the ability to create new music and many other opportunities that have the side benefit of more closely tying fans to the musician. And this doesn't need to be complicated. You could set the whole thing up as a subscription fan club with different levels providing different scarce benefits -- and everyone wins.

The simple fact is that these business models are already working for many, many musicians. Hardly a day goes by where someone doesn't show us yet another example of musicians creatively coming up with new and unique business models that embrace these economic principles, and which allow them to make even more money than they did in the past. And, yes, there's still room for the record labels if they want to act as true partners, helping musicians implement these business models and enabling musicians to better connect with their true fans.

Of course, that involves some work. It involves a real change in how business is done. It may not be as easy as a plan that lets the record labels sit back and collect large sums of money with promises to distribute it, but it can be a lot more profitable for everyone in the long run. It's more efficient. It allows true competition to take place in the marketplace, rather than letting the market set the winning model. It lets people share music without worry of a lawsuit (in fact, if the business model is implemented correctly, it gets musicians to encourage more file sharing as it helps build up a larger audience for those scarce goods). Without having to fund those huge bureaucracies, there's also much more money that can go to the actual artists as well. Plus, fans feel better knowing that their money actually is supporting the artists, rather than a central bureaucracy.

But the important point is that this plan is working today for many different players in the music world, including some smarter labels and (most importantly) the fans. The only ones it's not working for are the big record labels who have refused to recognize the opportunities -- and the bands that rely on those labels for guidance. We shouldn't be setting up a system to reward those folks, just as everyone else is figuring out how to succeed.

Let The Market Work

Jim Griffin and Warner Music have been working behind closed doors, trying to craft the perfect business model that preserves their business. During that same period, a large number of folks have been out here, actually involved in an open conversation about business models that are working today. We've seen artist after artist learn (on purpose or accidentally) how to embrace these concepts and how to succeed beyond anything they ever saw in the past.

Let's not kill that off with a plan worked out in the backrooms that will almost definitely have significant unintended consequences. Let's let the market work its magic transparently.

Griffin's complaint about our post (delivered via Warner Music) was that it was unfair of us to criticize a plan so early in the planning stages. We made no such complaint here when we first laid out these discussions so many years ago. We encouraged people to criticize and discuss the plans -- and for people to test them out. That resulted in more discussions and more experiments and adjustments and we're seeing the end result of that now -- with many, many success stories. Griffin's plan allows for no such experimentation. It's an all or nothing plan, and if you accept it as currently laid out, you're going all in when half the rules of the game are being established without the players' knowledge.

That's a bad, bad bet.

If Jim Griffin wants us to hold back on criticizing his plan, why can't he and Warner hold back on implementing their plan that effectively blocks out the market forces that are already succeeding?

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Warner Music: Where's The Conversation?

from the let's-talk dept

Last week, we broke the story about a presentation being given to various universities about a music "tax" plan. The plan presented wasn't any different from what Jim Griffin (who was hired by Warner to pitch exactly this plan earlier this year) has talked about in the past -- but Warner Music Group was quick to contact us and distance itself from the presentation -- despite the title of the presentation announcing that this was Warner Music Group's plan, and two full slides of "comments from WMG," with one of those slides suggesting people contact Griffin at WMG for more info.

This week, a bunch of news organizations reported on the story -- with some, such as the the Chronicle of Higher Education, just repeating what was already known, while a few added to the story. Wired discovered that the planned name of the organization that would handle the "distribution" of funds would be Choruss. It also found out that EMI and Sony BMG have already signed onto the plan, along with Warner, which initiated it. Universal Music is the major label that's still holding out. Apparently independent labels are able to join up, as well, but the terms aren't at all clear yet.

Portfolio stepped up with its own discussion of the topic, highlighting a key point that I made to the Warner Music rep who called me: this conversation should be public. My conversation with Warner Music was off-the-record at their request, but I tried to defend posting the presentation by noting that this information should be discussed among all the stakeholders, rather than settled in a backroom deal like so many efforts by the recording industry. Otherwise, the parties that are left out of the discussion (generally, consumers) are going to get screwed.

In Jim Griffin's response to my post, he complained that: "At this early stage, many ideas may be discussed and discarded, but efforts to prematurely label or criticize the process only hinder achievement of constructive solutions." I would say back, that, at this early stage, if ideas are being discussed and discarded, why not bring everyone here into the conversation, so that we don't feel like the fix has been put on us after the "finished product" is finally announced from high atop RIAA-mountain? We're more than willing to help, right here on Techdirt.

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Warner Music Pitches Music Tax To Universities: You Pay, We Stop Suing

from the pay-us-not-to-sue dept

Back in March, we noted that Warner Music Group had hired Jim Griffin, a music industry guy who has been pushing the concept of a "blanket license" for file sharing. The idea would be to get various ISPs to simply add an additional fee to everyone's internet access, have that money go into a pool that the recording industry would be responsible for paying out -- and then let people have free reign for file sharing. This is a bad idea for a variety of reasons. It's basically a music tax -- allowing the record industry to be lazy. Someone else gets to go out and collect all this money and hand it over to the industry to distribute (or, actually, not distribute). It effectively sets the business model of the recording industry in stone, and harms better, more innovative business models by inserting the recording industry (and not the musicians) into a role where they don't belong.

We hadn't heard much about this music tax lately, but apparently Griffin has been focused on getting universities to buy into the plan first. An anonymous reader passed on some details, saying that Columbia, Stanford, University of Chicago, University of Washington, MIT, University of Colorado, University of Michigan, Cornell, Penn State, University of California at Berkeley and University of Virginia have expressed interest and talks are under way. A basic presentation that's being given to these universities is below (if you're reading via another site, click through to see it):

There's obviously something appealing about ending the lawsuits and letting people file share freely. But, it's quite problematic to add an effective "tax" when none is necessary. Plenty of other business models, such as those we've outlined here and elsewhere can suffice to fund the creation of music. On top of that, giving the proceeds of this tax to the very industry that has so badly mismanaged musicians for so many years is a travesty -- sort of like bailing out the failed auto industry or banking industry. The presentation says that a nonprofit has been set up to handle the money, claiming that it's "to be clear we intend to operate with good intentions and not profit as a motive," but given the way the industry has acted in the past, that's difficult to take at face value. Also, this isn't really a license. It's a "covenant not to sue" -- meaning that lawsuits could still result.

Of course, while the introduction frames this as a "voluntary" blanket licensing program, the presentation also mentions that they'll need some way to get all ISPs and universities to buy into the plan, or they'll have to work out a way to "avoid massive leakage." So, basically, it's not voluntary at all. It's either join, or get saddled with significant limitations. In other words: all ISPs and universities need to agree to pay a huge tax to the very industry that hasn't been able to adapt, and then trust them to distribute the funds fairly.

Update: Warner Music got in touch and sent us a statement concerning this presentation from Jim Griffin:

"This presentation belongs to someone outside our company and represents that individual's interpretation of issues discussed at meetings held several months ago. It was not made by me or anyone at Warner Music Group. Of course, we are actively engaged with universities and other parties to seek a constructive resolution to a complex issue - how to assure artists appropriate compensation while enabling the widespread dissemination of their work among fans. Therefore, we are undertaking an effort to develop new voluntary business models that seek something other than - and we believe, better than - a litigation-based approach. This is exactly the type of solution that several universities and their associations have been asking for. We recognize that there are many different potential solutions to this issue, and we are determined to continue to think creatively and cooperatively with other parties in order to find the best ones. At this early stage, many ideas may be discussed and discarded, but efforts to prematurely label or criticize the process only hinder achievement of constructive solutions."

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Warner Music Latest To Jump On The Music Tax Bandwagon

from the please,-gov't,-save-our-business-model! dept

Remember earlier this month how there was a story about a guy going around pitching a required tax on ISPs for music sharing as a good idea? Well the main guy who was pushing that proposal has now been hired by Warner Brothers to make it a reality. While the idea is gaining some momentum, it doesn't change the extremely questionable nature of this proposal. It's a proposal based on the laziness of industry execs, who want others to go out and collect money for them, which they'll then get to "distribute" (by which we mean not actually distribute) to musicians.

The fact is that there is simply no reason for this proposal to go ahead. It treats everyone as a criminal first. In the article, one supporter of the plan even admits this:

"At this point, 96 percent of the population is guilty of some sort of infringement, whether they're streaming or downloading or sharing. What we have here is the widespread use of technology that declares all of the population to be illegal."

While that 96% number is made up and pure bunk, it's a bizarre world in which someone claims that nearly everyone is breaking the law and therefore we should punish everyone, rather than get rid of the law. Considering that more and more musicians are showing that there are perfectly good business models that don't require treating everyone as a criminal, can someone explain why this "music tax" should be put in place? And can they then explain what will happen when every other industry wants its own "you're a criminal" tax included on internet connectivity?

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