Techdirt. Stories filed under "disputes"

TuneCore Fires Last Remaining Founder, Gets Into Ridiculously Petty Fight With Jeff Price

Mike Masnick — Wed, 30 Jan 2013 15:52:50 PST

Last summer, we wrote about some of the bizarre happenings at TuneCore, a very cool and useful service that has helped more musicians actually make money than probably any other service out there, ever. It basically became the de facto standard for musicians who wanted to get their music into the various top digital music stores. TuneCore was founded by Jeff Price -- who is known for being opinionated and not afraid to share his opinion. This rubs some people the wrong way, but even when I've disagreed with Jeff, I've always found him to be completely genuine in his singular belief that the most important thing to him was to help artists as much as possible. Many people who have dealt with TuneCore over the years quickly realized that Jeff was the driving vision and heart behind the company. However, last summer, he was pushed out under questionable circumstances with no explanation from the company or its board (who has maintained a pretty uniform wall of silence).

Over the last few days, it seems that more has developed, which raises some serious questions about the priorities of TuneCore management and its board. What has become clear (and confirmed from multiple sources) is that TuneCore's lawyer from the law firm of O'Melveny & Myers, contacted Price to say that it was "investigating" whether or not he had "faked" a $500 invoice from a trip. Apparently, the invoice came from a bed and breakfast that Price stayed at because it was cheaper than a hotel, and where he paid cash, because the operator of the BnB offered a discount that way. TuneCore's lawyer is arguing that no legitimate lodging would send a Microsoft Word document as an invoice -- and thus, he must be faking it. One wonders just how much TuneCore is spending on its lawyers to "investigate" a single invoice for a $500 reimbursement.

The situation led TuneCore co-founder Peter Wells to send every shareholder at the company an email arguing that this was a ridiculous move, a waste of time and money and clearly just an attempt to embarrass or intimidate Jeff. It also raises serious questions about TuneCore's priorities at the moment. Is it about serving artists, or about attacking their founder and fired CEO Jeff Price? The full letter Peter sent is included at the bottom of this post, but this key line is the important one: "We at TuneCore ask artists to trust us with their music, their money and their relationships with iTunes and Amazon and more. How can we ask them to trust us if we act like this towards our own?"

As I was trying to learn more about the details behind all of this, the other shoe dropped. The third co-founder of the company, and the only remaining co-founder still employed by TuneCore was fired earlier today, with some believing it was some sort of retaliation for Peter's email to the shareholders, and as the company continues to try to maintain a wall of silence.

Jeff Price, too, is upset about this whole situation. He told me that his main concern is that this whole thing is a distraction for the company, and that he feels he has "an obligation to the artists to have TuneCore reach its potential." He also noted that the fact that the company is focusing on this is "heartbreaking" before going on to note:

The idiocy here is beyond me. It just makes me so sad. I get called out for being on a company business trip where I saved the company money. It's just so strange. I don't get it. Why is the company spending its money this way? What's the end game? How does this benefit the company? If they're capable of doing this to me, what are they doing for artists?

As for the supposed "faked" invoice, I've got an email from the woman who runs the bed and breakfast, explaining that she rents out her place via AirBnB, and that for "return guests" that they liked, they would often just deal in cash with invoices (which they report as income) and charge a slightly lower rate (I assume to save on the AirBnB fees). She confirms Jeff stayed and that while a Word doc is not very "formal" -- it is legitimate. Thus, it appears that this was, indeed, a case of Jeff saving TuneCore money.

Others -- including shareholders and customers of TuneCore -- are speaking out, and many are quite concerned about the direction of the company. Gian Caterine, who for years was TuneCore's CFO was incredulous about the accusations against Jeff and quite worried about the future of the company itself. Regarding the idea that Jeff might fudge a $500 bed and breakfast invoice, Gian found that to be "ridiculous."

Jeff is the "king of coach." He's such a frugal guy. Of all the criticisms you could have about Jeff, stealing $500 is not on that list. It's ridiculous.

But his much larger concern was what all of this meant for the company.

It looks like the company has lost its path. There's no one left at TuneCore that has any meaningful background in music. Jeff was always the spokesperson for musicians' values. There's no evidence that the company has any vision, and I can only see this leading to a loss of credibility among artists.... There's a big, big issue with vision and leadership now. They have not articulated a vision and there's no one with the necessary experience left to help.... I don't know if it's ignorance or arrogance, but the damage is pretty severe.

Rather than pointing fingers at Jeff, they need to get on with it. The whole situation leads me to believe that there's something really wrong that has nothing to do with Jeff.

Another shareholder, Joel Morowitz, who helped co-found Jeff's previous company, the indie label SpinArt, was similarly angry about the attack on Jeff and what it meant for TuneCore.

Personally, and as a shareholder, I am absolutely disgusted by these allegations against Jeff. It reeks of desperation and diversion. I have known Jeff for over 30 years, and while no person is perfect, I can personally attest to his high ethical standards, especially with regard to his tenure at Tunecore. More than anyone, you know how much time and effort he put into it. And now, after building Tunecore into the undisputed leader in the field, and quite literally, changing the model of the music industry, they now shout "lack of confidence" and "mismanagement"!? It just doesn't wash...and they know it. They have never been forthcoming about Jeff's termination.

He further pointed out that having a law firm investigate a $500 reimbursement is nothing more than "wasting valuable time and resources," questioning just how much the law firm was charging for such an investigation: "the sum of the bill is most likely far greater than the amount being disputed." Again, he is at a loss as to why there's this focus on attacking Jeff:

I am so saddened that this situation has devolved into a stalemate. Instead of focusing on the continued growth and diversification of Tunecore, they have chosen to turn this into a battle against Jeff. It is abundantly clear that whatever the real reasons are for Jeff's termination, Tunecore has been on the decline since his departure. Jeff was certainly not without controversy in the public eye, but no visionary CEO ever is. He was the clearly best person for the job. What do we have now?....a company with no vision, no direction, low morale, and most importantly, no effective leadership.

I've also been speaking to a few TuneCore's customers, who have expressed similar concerns. Andy Richards, who notes that he was TuneCore's 23rd customer way back in the beginning after randomly finding them online, notes that Jeff always struck him as "an extremely driven and passionate entrepreneur, but above all, a music fan who truly respected the artists with whom he worked." Furthermore, he notes that he's still on TuneCore, and hasn't seen any direct changes yet, but he's "definitely keeping an eye on things and will jump ship if I don't like what I see."

Disputes between startup management and investors is nothing new. We see it in the startup world all the time. Sometimes it does just make sense to bring in new management, but for companies built around driven and visionary CEOs, such changes can be quite problematic, especially when they leave a complete void where the vision used to be. The fact that TuneCore now seems focused on simplistic and petty disputes about a $500 reimbursement -- even to the point of accusing Jeff of having faked the invoice seems to raise serious questions about just what the company is focused on these days.

Over the past few days, I've reached out to every single board member at TuneCore, along with key remaining members of the management team. I've heard nothing from the board. However, just as I was about to go to press with this story, I heard from a PR person (he apparently leads the "crisis communications" team at his PR firm) who told me that he didn't think this was a matter that the press should be concerned with as it's a "private" issue. He then issued a further statement:

Tunecore focuses on its core business of helping artists reach their fans and consumers. It is expanding into Japan, Canada and on campuses, and has several exciting initiatives on the horizon which will increase its value to its artists/customers. The matter of the dispute is one more appropriately handled behind closed doors with the parties’ attorneys, and if necessary, in a courtroom. It is not for public consumption, nor does it have any bearing on its work toward its core mission.

The company offered no comment at all on Gary Burke being fired, saying there was nothing to say on the matter.

Again, disputes between management and investors are a common plotline in the startup world. But this one seems particularly messy, and unfortunate, given the large role that Price and his cofounders played in turning TuneCore into such a large player in the space.

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YouTube Stars Fighting YouTube Networks Over Their Contracts

Timothy Geigner — Tue, 29 Jan 2013 00:01:00 PST

As YouTube becomes more and more popular as a primary entertainment resource, it is going to have many of the same growing pains as traditional entertainment venues. If it can ever get past its "internet problems", it can move on to having actual entertainment issues. This means far more fun problems, like agents screwing young stars out of money, networks building contract language to screw young stars out of their artistic freedom, and lawyers threatening to enforce exclusive contracts to screw young stars out of their lives. Are you noticing a theme here? It's going to become increasingly important that formerly amateur YouTube stars read the contracts they sign with a growing number of upstart "YouTube Networks" very carefully, or else they are going to face situations such as we're seeing with Machinima stars, who are shutting down production because they're locked into lifetime and beyond contracts with the multi-channel network.

Vacas, known online as Braindeadly, has big brown eyes, a fauxhawk, a stubbly goatee and a British accent, discernible as he tells his 40,000 YouTube subscribers goodbye.

"I woke up today hoping to make a video, but I went into a call with Machinima this evening and they said that my contract is completely enforceable. I can't get out of it," Vacas tells the camera. "They said I am with them for the rest of my life — that I am with them forever. If I'm locked down to Machinima for the rest of my life and I've got no freedom, then I don't want to make videos anymore," he says quietly.

The screen fades to black.

Ominous, but not entirely unexpected. Those who make their bones on YouTube and any other new platform that might arise aren't going to have traditional avenues for making sure they know what they're signing. In the case of Vacas, he admits to this explicitly, later stating that he signed his Machinima contract quickly, not realizing they would own the rights to anything he produced on YouTube "in perpetuity, throughout the universe, in all forms of media now known or hereafter devised." Even death would not release Vacas of his contractual obligations. It sucks, but he signed it.

The point is that in these early days of YouTube channel capitalization, artists need to be very wary of sharks swimming in those waters. As the article points out, this isn't really new, it's just a different venue.

A recent string of high-profile disputes is prompting comparisons between YouTube networks and the exploitative Hollywood studios of the 1930s and '40s: Both convinced young and naive talent with little leverage to sign contracts that leave them at a disadvantage. For networks, that means contracts that bind creators to them indefinitely, demand rights to their content in perpetuity and take large ownership stakes in any resulting businesses.

As ugly as some of these contracts are, as are the intentions of those that wrote them, this should end up working itself out as YouTube matures as a primary entertainment platform. After all, Machinima can have all the dastardly contractual language it likes, but if the artists like Vacas refuse to produce in protest, what good does that do them? Eventually, a middle ground should and will be found. In the past, if you didn't like the contract offered to you by a major gatekeeper, you were pretty much out of luck. Today, however, not only are there more providers, but it's not difficult to "go it alone" if you choose such a path.

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France Telecom Accused Of Holding YouTube Videos Hostage Unless It Gets More Money

Mike Masnick — Fri, 4 Jan 2013 09:36:08 PST

An interesting post from broadband news reporter Dave Burstein argues that anti-trust regulators in France may have basically enabled France Telecom to hold YouTube videos hostage unless Google backbone partner, Cogent, pays more money:

Millions of French netizens discover their YouTube streams sputter and die or never begin in the first place. Other video services, including TF1, are also struggling. The effect varies, sometimes randomly and sometimes by time of day. Respected consumer organization UFC-Que Choisir found between 20% and 50% of users surveyed online had problems.

Again, the existing connection remains and much of the traffic gets through. But Net traffic always grows and without regularly adding additional capacity many - not all - streams are blocked. French networks, with France Telecom in the lead, are refusing to accept growing traffic from Cogent, a major backbone carrier that services Google. They demand payment to accept all the streams their customers request. The independent French competition authority (Autorite de la concurrence) on September 20 approved the charging plan, leaving no doubt this is neutrality dispute.

The details suggest that this isn't so much a "neutrality" issue as a peering dispute. In fact, it actually sounds somewhat similar to the Level 3 / Comcast dispute from a few years back. In that case, Level 3 was providing service to Netflix, and Comcast worried about the big influx of traffic. Comcast (like France Telecom) demanded that Level 3 pay up for delivering it extra traffic. The bit that's interesting here is that French regulators got involved and said that this was legal in this case, though they're worried about the lack of transparency.

Of course all this does is show, yet again, how the internet's interconnectivity through peering arrangements is increasingly under pressure as certain broadband players become more powerful. And, unfortunately, the public (and their YouTube videos) may be at risk.

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Success! Sita Sings the Blues Once Again Viewable on German Youtube

Nina Paley — Mon, 18 Jul 2011 16:33:00 PDT

After one or two (or more?) years of being blocked on German Youtube, the full-length noncommercial Sita Sings the Blues movie is once again viewable in Deutschland:

I assume this is because last week I posted this video, complaining about why my 100% legal and painstakingly and expensively licensed movie was blocked in Germany:

Apparently many Germans are none too pleased with GEMA themselves, as indicated by interesting comments here. Some industry shills weighed in as well, but it looks like popular sentiment is against them. The story was shared widely, including in Der Spiegel and the New York Times online editions.

It's not clear how an American YouTube user is supposed to contest takedowns in Germany. When I was in Berlin recently, it was suggested I find a German lawyer to take some sort of action. At the very least, I would need someone in Germany to contest the takedown on my behalf. I imagine that would have been a slow and possibly expensive process. Then I thought of making this video. Although it took some work (writing a statement -- yes I know it's an imperfect statement, I did the best I could with the knowledge I had -- shooting the video, recording the audio via a separate mic, transferring files, editing, compressing, etc.), it was less work than managing an international legal process. And it got results fast! Better still, it contributed to ongoing debates about GEMA and Intellectual Pooperty in general.

My thanks to everyone who helped spread the word about this, and especially people in Germany who checked the Sita Sings the Blues URL and confirmed when the movie was blocked, and when it was unblocked.

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Why Sita Sings The Blues Is Perfectly Legal In Germany, But You Still Can't Watch It On YouTube

Mike Masnick — Thu, 14 Jul 2011 11:21:12 PDT

Nina Paley, who regularly writes for Techdirt (as well as plenty of other publications) passed along this video she put up about how her movie, Sita Sings the Blues is blocked by YouTube in Germany, thanks to GEMA, the music collection society in Germany. Since I know a little bit about the ongoing fight between GEMA and YouTube in Germany, I asked Nina if it was okay to do a post, discussing some of the details. We've written about GEMA a few times before, and last year, I went to Berlin and interviewed YouTube's Patrick Walker on stage at PopKomm/All2gethernow, specifically discussing YouTube's ongoing fight with GEMA. The details are a little different than what Nina suggests in the video, though she's absolutely correct that this is very much GEMA's fault. Even though Nina has a paid-in-full license with the various music companies that say displaying/performing her movie for free in Germany is entirely legal, GEMA has taken a ridiculous hardline stance with regards to YouTube. It believes that YouTube needs to pay it ridiculous sums of money for every video on the site that includes any GEMA-licensed music.

Other collection societies around the world have made agreements with YouTube, and worked out reasonable royalty rates for performances. Except GEMA. If I remember correctly, GEMA may be the only major remaining collection society which has not worked out a royalty rate with YouTube, and instead has been fighting a battle in German courts against YouTube. Because of that, and because of some clearly ridiculous court rulings, which suggest that YouTube (rather than its users) are liable for any infringement on the site, YouTube is blocking all videos that it comes across that include GEMA music.

Thus, I believe that the reason Sita Sings the Blues has been taken down is not, as Nina suggests, because of a direct takedown notice by GEMA (though, that's possible), but more likely because of YouTube needing to avoid liability from crazy German court rulings and GEMA's overinflated belief in what a "reasonable" royalty rate would be. Now, notice the key part here: the artist in this case wants the video to be online. Nina is pissed off that it's offline. She's paid quite a bit of money to the various music publishing entities to have the rights to show the movie worldwide, and the one blocking that is GEMA.

This is not an uncommon occurrence in Germany, unfortunately. Because of the way the laws work in Germany, those who have deals with GEMA effectively give up all of their own rights on such things. When I was in Germany, I spoke with multiple artists who were freaking out because they couldn't give away their own music, because GEMA didn't allow it. Aritst would show me their official webpage, without free music, and then their "secret, unofficial" web page with the music they wanted people to download. GEMA, which seems to be run by people entirely out of touch with how music works today, simply insists that no one can give away music for free... because then GEMA doesn't get to collect money. Furthermore, for those who try to get around GEMA and used alternative licenses, GEMA has been known to ignore such licenses, and insist that people still need to abide by GEMA's rules.

This is not a healthy situation. You basically have an out of touch bureaucracy that thinks it gets to set all the rules, even if they don't match the reality in the marketplace. Because of that, artists are suffering. And the fact that YouTube is blocking Sita..., despite it being fully licensed and perfectly legal in Germany, should really wake some people up to the fact that GEMA is not helping artists at all. It's stifling them massively.

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