Techdirt. Stories filed under "payments"

Unfortunate: Twitter Forces Flattr To Stop Its Twitter Integration

Mike Masnick — Tue, 16 Apr 2013 20:08:55 PDT

Just a few weeks ago, we wrote about how Flattr had integrated with services like Twitter and Instagram to make it incredibly easy to support content creators (including us!) by just favoriting a tweet. Not surprisingly, in the first month after that went into effect, we saw a boost in revenue from Flattr. Unfortunately, Flattr has now announced that Twitter has forced the company to stop this integration.

Flattr had been using the Twitter API to figure out what people had favorited, and had been gathering data about the specific tweets. However, Twitter told the company that it was violating section IV. 2 C from its API terms. That term says that:

Your advertisements cannot resemble or reasonably be confused by users as a Tweet. For example, ads cannot have Tweet actions like follow, retweet, favorite, and reply. And you cannot sell or receive compensation for Tweet actions or the placement of Tweet actions on your Service.

It's that last part where the trouble came in. Of course, it seems clear that that particular line in the terms of service was designed for situations where people are "selling" tweets or something similar. Not for cases where a service like Flattr is helping people make money from supporters. In response, Flattr even said that it would waive its standard 10% fee on any Flattrs that come via tweets. Twitter told them it wasn't good enough. Now, you can argue that "rules are rules," but rules need to make some sense. And it's unclear what kind of sense this makes. There's nothing about the way in which Flattr is using Twttier that is negative for Twitter. It seems like a really nice and useful addition. Obviously, we're somewhat biased, because it also helped us make a few bucks (not much, but some), but I can't see how it makes sense for Twitter to block this functionality.

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Google's Other Bad Idea: Offering 50 Million Euros To French Newspapers [Updated]

Glyn Moody — Fri, 1 Feb 2013 07:37:39 PST

Earlier this week we wrote about a strange move by Google: apparently agreeing to pay the French telecoms company Orange extra to deliver its traffic -- thus abandoning the principle of net neutrality it has championed for so long. And now here's another dubious decision: allegedly offering to pay French publishers 50 million Euros in order to settle the dispute over the display of news snippets in its search results:

According to the report, French publishers turned down the €50 million (USD $66.6 million) offer and demanded a figure of €70 to €100 million instead. They also objected to the way Google proposed to disburse the money. The company reportedly offered to spend a third of the €50 million in the form of direct ad purchases while using the rest for commercial advertising partnerships between Google and the publishers. The publishers reportedly complained that too much of the proposed money was contingent on sales figures.

This suggests that Google is trying to frame these payments as more of a partnership with the newspapers than an acquiescence to their demands. That's no surprise, because if it is seen to be paying a license to display copyright material in this case, the pressure to do the same elsewhere will inevitably increase. In fact, it has already adopted this "partnership" explanation for the deal it cut with Belgian publishers last month: We have reached an agreement that ends all litigation and represents great news for both us and the newspapers. We continue to believe that our services respect newspaper copyrights and it is important to note that we are not paying the Belgian publishers or authors to include their content in our services. From now on, Google and Belgian French-language publishers will partner on a broad range of business initiatives
It remains to be seen whether publishers in France and around the world will be happy to "partner" in this way, or whether some will hold out for a formal recognition by Google that it is paying them for a license to display snippets from their publications. Let's hope not: it would be a truly awful precedent that would undermine not only Google's business model, but much of the Web as we know it.

Update: Right on cue, Eric Schmidt has just unveiled -- you guessed it -- a "partnership" with French publishers:

Today I announced with President Hollande of France two new initiatives to help stimulate innovation and increase revenues for French publishers. First, Google has agreed to create a €60 million Digital Publishing Innovation Fund to help support transformative digital publishing initiatives for French readers. Second, Google will deepen our partnership with French publishers to help increase their online revenues using our advertising technology.

So the price seems to have gone up slightly, from €50 million, to €60 million, plus unspecified amounts to "help increase" publishers' advertising revenue. But no mention of the dreaded "licensing" word in there, so maybe the French publishers blinked, and Google won this time. But expect the issue to come up again in other countries -- Germany, for example -- where Google might not be so lucky.

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Swedish Pirate Party Sues Banks For 'Discriminating' Against Wikileaks

Mike Masnick — Tue, 18 Dec 2012 03:03:05 PST

Earlier this year, we noted that a court in Iceland had ordered Visa to start accepting donations to Wikileaks again. There's been some cat and mouse games as the various payment processors, under pressure from US officials, cut off the site a while back. The latest, however is that the Swedish Pirate Party itself has pressed charges against Swedish banks for discriminating against Wikileaks.

The charges were filed eariler today with the Swedish Finansinspektionen, the authority which oversees bank licenses and abuse of position. This follows an earlier initiative from the Pirate Party to regulate credit card companies on the European level in order to deny them the ability to determine who gets to trade and who doesn’t.

“The blockade is a serious threat against the freedoms of opinion and expression”, says the Pirate Party’s Erik Lönroth, who has been preparing the formal charges. “It must not be up to the individual payment provider to determine which organizations are eligible for donations. At the same time, these charges will bring clarity as to whether the bank regulations of today are sufficient, or if regulations need to be tightened to protect freedom of expression.”

I don't quite understand Swedish law, so it's not entirely clear to me how the Swedish Pirate Party has standing in which to bring these charges. However, it looks like "charges" basically mean asking the relevant regulatory body to investigate whether the actions are legal. Given how much power a very small number of payment companies have over what can and cannot accept money online, it would be nice for there to be some rules against discrimination. Of course, an even better answer would be to create more services that can accept payment...

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Paypal Pressured To Play Morality Cop And Forces Smashwords To Censor Authors

Zachary Knight — Mon, 5 Mar 2012 08:21:18 PST

We have become quite accustomed to Paypal arbitrarily deciding to shut down the payment services for a website with no warning and little recourse. Usually when it does so, it acts through its own volition. However, Paypal also has to deal with the whims of the credit card companies with which it is partnered. With that business arrangement, when a credit card company says to jump, Paypal must comply. When it does so, it effects all its own customers as well. Ebook publisher Smashwords reports that it has become one of the latest recipients of one such action. Under pressure from credit card providers, Paypal has put in place a policy that it would no longer process payments for ebooks that contained themes of rape, incest, beastiality and underage sexual content. It then decided to give Smashwords less than a week to remove all books that fit those criteria.

On Saturday, February 18, PayPal’s enforcement division contacted Smashwords with an ultimatum. As with the other ebook retailers affected by this enforcement, PayPal gave us only a few days to achieve compliance otherwise they threatened to deactivate our PayPal services. I've had multiple conversations with PayPal over the last several days to better understand their requirements. Their team has been helpful, forthcoming and supportive of the Smashwords mission. I appreciate their willingness to engage in dialogue. Although they have tried their best to delineate their policies, gray areas remain.

Their hot buttons are bestiality, rape-for-titillation, incest and underage erotica.

This has put tremendous pressure on Smashwords to comply as it claims that it would be near impossible to change payment processors as Paypal is a major part in not only how it processes transactions but also how it pays its authors. So it has made several changes to its terms of service to account for the types of books that Paypal and its credit card partners are not happy about. Keep in mind, this is hard for Smashwords as it feels that authors of erotica are being unfairly targeted by this move.

We do not want to see PayPal clamp down further against erotica. We think our authors should be allowed to publish erotica. Erotica, despite the attacks it faces from moralists, is a category worthy of protection. Erotica allows readers to safely explore aspects of sexuality that they might never want to explore in the real world.

The moralists forget that we humans are all sexual creatures, and the biggest sex organ is the brain. If it were not the case, none of us would be here. Erotica authors are facing discrimination, plain and simple. Topics that are perfectly acceptable in mainstream fiction are verboten in erotica. That’s not fair.

This is an unfortunate set back for Smashwords as well as for indie authors. While the government in the US is not able to censor speech in this manner, there is little preventing a private company like Paypal or its credit card partners from taking these actions. Yet, Smashwords is not giving up hope. In its latest update, Smashwords notes that it had managed to get the deadline extended as well as the definitions of prohibited content relaxed. It also wants to clarify that neither it nor Paypal are the real villians in this issue.

A lot of people have been attacking Smashwords for my decision to comply with PayPal's requirements. They're pointing their arrows at the wrong target, and they're not helping their cause. We're working to effect positive long term change for the entire Smashwords community, and that includes all our erotica authors and readers.

Over the weekend, many Smashwords authors and publishers demanded we abandon PayPal and find a new payment processor. It's not so simple, and it doesn't solve the greater problem hanging over everyone's head. PayPal is trying to implement the requirements of credit card companies, banks and credit unions. This is where it's all originating. These same requirements will eventually rain down upon every other payment processor. PayPal is trying to maintain their relationships with the credit card companies and banks, just as we want to maintain our relationship with PayPal. People who argue PayPal is the evil villain and we should drop them are missing the bigger picture. Should we give up on accepting credit cards forever? The answer is no. This goes beyond PayPal. Imagine the implications if credit card companies start going after the major ebook retailers who sell erotica?

Smashwords then continues by expressing its goal of pulling the credit card companies out into the open to discuss these issues. The behavior of the credit card companies shown here is exactly the type of behavior we advocated against when fighting SOPA/PIPA. Those bills would have given credit card processors the abiltity to kill payment services to companies alledged to be illegal. We warned that such behavior would result in additional harm as legal speech would be swept up along with the potentially illegal speech. Here we see just that. These credit card companies are using their position to censor speech -- some of which may violate obscenity laws, but much of which is likely perfectly legal, protected speech. This is a no win situation for Smashwords. By complying, it must censor the speech of its authors. By not complying, it would lose the ability to serve all its authors.

Finally, Smashwords suggests a plan of action. It wants everyone to work together to put public pressure on the credit card companies in order to get them to change their stance. We saw how effective such efforts were with SOPA/PIPA. We managed to pressure Godaddy and the ESA to drop their support. We can do the same for these credit card companies and their policies that result in censorship.

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Why We Don't Need To 'Think Of The Artists': They're Doing Fine

Glyn Moody — Fri, 2 Dec 2011 08:54:39 PST

Just as politicians routinely invite us to "think of the children" when they want to push through some new liberty-reducing law, so the copyright industries regularly invoke "the artists" when they want to justify longer copyright terms or harsher enforcement laws.

They claim they are being hit so badly by piracy that artists are suffering as a result. But that's a little hard to square with the fact that media companies still manage to pay their CEOs huge salaries. This suggests (a) the media companies are not doing too badly and (b) that if they really cared about the woes of their artists, they could alleviate it by redirecting some of their fat cats' hefty salary downstairs.

Of course, most people have long ago seen through this rather implausible concern on the part of the copyright industries, but that still leaves open the question of how artists are faring. Here's some interesting evidence that in Australia, musicians, at least, aren't doing too badly:

Even though recorded music sales are down, artists are taking a bigger slice of the overall music industry revenue pie - and more total revenue - than they have in decades. Largely fuelled by copyright-based performance royalties collected on their behalf by APRA and AMCOS, artists' revenues from public performance royalties have doubled in Australia from $110 million in 2000 to $220 million in the past 10 years. Compare that with the recording industry, where wholesale sales have dropped from $594 million to $384 million over the past decade and it seems that it is the record labels that are feeling more pain than the artists they claim are the major victims of online piracy.

As the writer points out, this suggests that artists aren't really suffering from the supposed scourge of piracy. And since everyone – even the record labels, apparently – agrees that what really matters is whether creators are able to make a living from their work, and thus carry on creating, this has to be good news. It also indicates politicians should stop trying to prop up the copyright industries' old business models and just let the artists get on with it.

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PayPal Agrees To Help IFPI Cut Off Funding For Sites IFPI Doesn't Like Without Judicial Oversight

Mike Masnick — Mon, 25 Jul 2011 03:08:39 PDT

Neppe alerts us to the news that PayPal has now followed the same path as MasterCard and Visa, in agreeing to the IFPI's plan to cut off payments to sites it doesn't like, without any judicial review. Basically, the IFPI will send info about sites it doesn't like (i.e., describes as "rogue" sites) to the London Police. It's not clear what sort of qualifications the London Police have on complex copyright issues, but okay. If the London Police agree with the IFPI (and so far, they have in 100% of the cases), the information about the sites will be passed on to the three payment processing companies, and they will no longer allow those sites to accept payments. Watch out, Internet Archive (which has been declared an infringing site by some in the industry), you may soon no longer be able to accept donations, thanks to the IFPI's fear of technology.

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PayPal Sues Google Over Mobile Payment Execs; Where's The Line Between Non-Competes & Trade Secrets

Mike Masnick — Fri, 27 May 2011 16:21:00 PDT

On the day Google announced its big mobile payment system, PayPal announced that it's suing Google and two former PayPal execs who went to Google and were apparently heavily involved in this effort. The focus is apparently on Osama Bedier, who apparently had spent the last couple of years at PayPal trying to do a deal with Google to power Google's offering... before jumping ship to lead Google's own effort (which does not apparently use PayPal). Of course, as we've discussed many times, non-compete agreements are unenforceable in California, because California believes that you can't take away someone's right to work.

What this really does is highlight the fuzzy line between "right to work" concepts and trade secrets. That's because California does have strong trade secret protections. But if an employee has a right to work... how do you remove any "trade secrets" from their previous job from their brain? There are some details -- including accusations of transferring confidential documents to a computer right before making the job switch -- that certainly look bad. But, on the whole, I tend to think these kinds of lawsuits are a waste of time. Focus on actually competing in the market, rather than suing competitors. Frankly, the world needs more payment solutions, and if there's some competition, then it should force all players to improve their game.

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Wikileaks Payment Company Plans To Sue Visa & Mastercard Over Cutoff

Mike Masnick — Thu, 9 Dec 2010 07:06:55 PST

With Visa and Mastercard refusing to take payments for Wikileaks, the company that was providing payment services to Wikileaks, Datacell, has announced plans to sue both credit card companies to try to get them to go back to accepting payments. There's no indication of exactly what law Datacell thinks these firms broke. Unless there are more details, this does sound like a bunch of shouting in the wind. As much as I disagree with Visa and MasterCards' decisions to cut off Wikileaks, they are private companies and can refuse service to anyone, no matter how petty it makes them look.

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ASCAP Tells Artists It's Cutting Their Payments As It Brags To The Press How Much More Money It's Collecting

Mike Masnick — Thu, 7 Oct 2010 12:51:00 PDT

ASCAP feels like the gift that keeps on giving to those of us covering it. If you're an artist... not so much. We've covered many examples of how ASCAP's aggressive efforts to shut down venues from hosting up-and-coming singers is harming local musicians. And, we've also pointed out how they use a system to overpay large acts at the expense of small acts. Now it's getting even worse. Just as ASCAP is attacking groups like Creative Commons, EFF and Public Knowledge -- who help artists find more ways to take control over their own careers, it's also cutting back on payments to many of its artists:

ASCAP cut payments to some members of it's ASCAPlus program by 20-30%. "Unfortunately, because of the fiscal climate, less money was available this year for the award program," ASCAP said in a letter to those receiving checks.

Ah, right. The tough economic climate. We do know about that. But... wait. Here's an ASCAP press release from just five months ago, claiming it was bringing in more money than ever:

"Music is performed more often, in more places, in more ways by more businesses than ever before. That expanded music use, combined with dramatic ASCAP Membership growth, market share increases and effective strategic management have led to stunning revenue and distribution growth for 2009."

Okay, so ASCAP is collecting more money and distributing more money, but it's cutting the amount given to ASCAPlus members by a huge amount. What's ASCAPlus? Ah, right, the smaller artists who can't make a big stink about this:

"writer members of any genre whose performances are primarily in venues not surveyed; and/or writer members whose catalogs have prestige value for which they would not otherwise be compensated."

In other words, ASCAP appears to be taking more money away from small artists, and giving it to their biggest artists. No wonder ASCAP's Paul Williams refuses to debate Larry Lessig, claiming he'd rather focus on "fair compensation to music creators." Unless you're a smaller, less well known artist. Then ASCAP wants your share to be a little less fair. Actually, quite a bit less fair. Like 20 to 30%.

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eBay Dumping All Third Party Checkout Options

Mike Masnick — Wed, 1 Sep 2010 20:30:45 PDT

Reader Mike sent over a story from Investors.com claiming that eBay was now banning Google Checkout from eBay. That struck me as odd, because we had written about eBay banning Google Checkout more than four years ago, and weren't aware that anything had changed. And, in fact, that's the case. Ebay is pointing out that the new announcement has nothing to do with Google, which has always been banned. Instead, what it means is that other third party payment offerings, which had previously been allowed, will no longer be offered. That seems unfortunate, as eBay used to be quite open about letting others play nicely in its sandbox, but recently has become more and more controlling.

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eBay Sued For Patent Infringement... With Added Conspiracy Theory

Mike Masnick — Wed, 14 Jul 2010 07:39:05 PDT

Another day, another patent lawsuit against a big company for doing something obvious, filed by a company that appears to exist solely for the purpose of suing a company that actually does stuff. This time it's a "company" XPRT Ventures who has sued eBay and is demanding a mere $3.8 billion for its troubles. $3.8 billion dollars for doing nothing seems like a pretty good deal. Unfortunately, the news coverage seems lacking. It doesn't say what patents the lawsuit involves or what those patents cover, so we had to do some digging ourselves. The law firm that filed lawsuit issued a rather one-sided press release that also alleges that eBay "unilaterally altered" a confidentiality agreement between XPRT and eBay -- which makes the case a bit more interesting. The press release still doesn't name the patents, but it does link to the ridiculously long (209 pages) complaint (warning: ridiculously large pdf), which you can also read below: From here we find out that the "inventors" (and I use the term loosely) came up with some rather basic enhancements for online payments, and apparently pitched them to eBay way back in 2001. A law firm claiming to represent eBay apparently asked to see the patent applications, and that was about the end of the discussions. XPRT, however, claims that eBay then took those ideas and decided to buy PayPal to implement them. That eBay bought Paypal because most people on eBay were using PayPal to complete transactions and eBay wanted a cut of those transactions isn't mentioned. Instead, the complaint suggests that eBay bought PayPal specifically to try to replicate what was in XPRT's patent applications:

Upon information and belief, eBay's familiarity with the confidential information provided by the Inventors allowed eBay to recognize the advantages it would realize by acquiring, modifying and integrating PayPal's payment platform with eBay's own e-commerce payment platform. eBay also knew or should have known that such modification and combination would violate Inventors' patent applications claims should they issue as patents.

Yeah, ok. This gets even more ridiculous when you realize that XPRT is claiming that it was modifications that PayPal/eBay didn't roll out until 6 or 7 years later that are supposedly infringing.

As for the whole conspiracy stuff about eBay "unilaterally altering" the date on the agreement, it turns out there's not much there there. Basically, eBay and the inventors negotiated over an NDA to share some information, with the initial proposed NDA having a date of March __, 2002. That was, clearly, a placeholder, found in just about every contact negotiation you'll ever see. When eBay actually signed the NDA it replaced the placeholder with the date of the signature, April 30, 2003. That's how contracts work.

XPRT, however, suggests that eBay's own (equally questionable) patents on its own payment system were filed just before eBay signed this document, and that eBay failed to note the XPRT patent applications, despite knowing about them, as prior art. To make it even more fun, the complaint suggests that eBay effectively admitted that XPRT's technologies are patentable, because it tried to cover the same inventions with the claims in its own patent filings. Basically, this is a sneaky way to (try to) cut off a claim that XPRT's patents are invalid.

Anyway, the key patent in the battle is the following, which, while it was filed back in 2001, didn't actually issue until 2009. If you look through the history of this particular patent, you find a trail of rejection. The USPTO did a non-final rejection, then a final rejection of the patent in 2004 and 2005. The inventors appealed (and twice had problems of filing a "defective appeal brief"). The appeal also rejected the patent and sided with the examiner. The inventors then asked to have the patent reconsidered, and that was rejected. Then, they asked for the patent to be examined again, and, yet again, the USPTO rejected the patent -- with both a non-final and final rejection. Finally, after all those rejections, the inventors amended the patent some more and finally got it through in 2009. In other words, whatever they showed eBay way back in 2001 was not actually patentable, and what was patented in 2009 was quite different.

7,483,856: System and method for effecting payment for an electronic auction commerce commerce transaction

If you look at the other patents, they appear to be continuation patents on that patent, the common trick of updating an old patent application to make sure it covers what others are actually doing in the market, even if such things weren't really what the initial patent was intended to cover.

Oh, and finally, why are these guys demanding $3.8 billion for a basic idea that they failed to implement themselves? Well, they appear to be claiming a 6% royalty on all of PayPal's revenues, and then make a bunch of assumptions about how much PayPal is likely to make between now and 2024 when the patents will expire. In other words, it's simply making up how much eBay might make and demanding a rather large cut of that.

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Responding To SoundExchange... By Their Numbers

Fred Wilhelms — Mon, 11 Jan 2010 10:55:00 PST

This is a guest post from Fred Wilhelms, a lawyer whose concerns about SoundExchange we recently wrote about. Due to the length of the post, we've put some of it after the jump, so you'll need to click through to read the whole thing -- but, trust us, it's worth it.

Back before New Years, Techdirt's Mike Masnick picked up on my comment to p2pnet.net regarding the list of artists SoundExchange said it couldn't find. I wrote that the list was not on the website. I was wrong about that, and Mike got suckered into repeating it. I went blissfully without the Internet for a couple weeks (yes, it is possible) and missed the whole thing. I just got it wrong. The list is there. I just couldn't find it.

My apologies, in order, to SoundExchange, Mike, and his readers. The list itself is a very interesting document on several levels, and I will be dealing with that later. This particular note has a specific purpose relating to Mike's piece.

SoundExchange folks like Director Dick Huey and staffer Laura Williams have been gushing all over about SoundExchange's new open communications policy. I have been trying to engage them in actual conversation, rather than simply criticizing their serial press releases. Their campaign seems to be faltering, however, as they've resorted to commenting on my supposed factual errors to third parties like Techdirt rather than deal with me directly. I don't mind. It's the tactic they've used with outside critics like me for years. It's arrogant, but what can we expect from an organization where the Board of Directors is hand-picked by the RIAA?

So, let me take this opportunity to deal with the "Top Ten Reasons Laura Williams Tells Techdirt Why I Am So, So Wrong About SoundExchange (But Won't Tell Me Directly)."

1. About the "missing" list of unpaid artists, I said it wasn't on the website. They said:

"Not sure how FW missed this. It's at http://soundexchange.com/performer-owner/does-sx-have-money-for-you/unpaid-artists/. It's been there all along, old website and new, and this version is easier to use than ever."

As noted before, I missed it.

There used to be a link directly from the homepage to the list, and a rolling counter of artists removed from the list. Those are gone. I used the search function on the site for "unregistered artists" (the term SoundExchange used to use to describe the entries on the list) and came up with nothing. I'm not sure how "easier" the list is to use, given that the alphabetizing scheme used by SoundExchange is even more idiosyncratic than the old one, but I will deal with the contents of the list, and what it means, separately.

All that aside, SoundExchange is right about this. I just missed the list.

2. About what happens to forfeited money, I said SoundExchange gets to keep the money. They said: "This is a common misperception about SX. While our congressional mandate allows us to liquidate funds after 3 years, the board has repeatedly declined to do so, in hopes of locating more artists to pay properly. EVEN IF THEY DID RELEASE FUNDS, those funds go directly to the artists and rights holders who are currently registered, in a windfall royalty - SX is a non-profit and does not keep that money."
There's a whole bunch of misdirection and spin going on in those 70 words.

There's no "congressional mandate." The forfeiture is permitted by Federal regulation adopted by the Copyright Office, specifically, 37 CFR 261.8. A regulation is not a "congressional mandate," although I admit that mandate stuff makes it sound like it is something SoundExchange has to do, rather than something that SoundExchange asked the Copyright Office to do for them, which is what really happened. SoundExchange wants everyone to think they are forced by Congress into taking money from artists they can't find, even if that really isn't so.

Perhaps SoundExchange wants everyone to think it is a matter of Federal law because they don't want anyone looking at the regulation itself. You see, the regulation requires that all money that should be paid to an unidentified or unlocated recipient be placed in a segregated trust account. I've asked SoundExchange repeatedly over the years to advise me where the "segregated trust account" is held, but the inquiries are always met with silence. I've also asked them to tell me how much money is in that segregated trust account. They've ignored that too. I don't think the segregated trust account exists, for the simple reason that SoundExchange doesn't have the slightest idea which artists are entitled to what share of the undistributed money.

About "repeatedly declining" to forfeit more artist money, they say this as if refusing to take money from people who don't know about it is an act of moral courage. They also say this as if they actually never intended to do it again, when history proves otherwise. In January, 2007, immediately after the deadline for the first forfeiture, SoundExchange announced they were going ahead with a second one. Strangely, for an organization that claims to be so vitally concerned with serving artists, they never mentioned the new forfeiture program anywhere but on the website page that linked to the list of unregistered artists. In other words, you had to already know they had your money in order for you to find out they were going to take it. There was not one press release announcing the forfeiture, and not even a notice about it anywhere on the website, or anywhere else for that matter. In blunt point of fact, SoundExchange "declined" to go through with the second forfeiture only because there was public outrage that they would do it again and try to keep it a secret. SoundExchange clearly wants everyone to pretend that they never really meant to try a second forfeiture. The problem is, they did.

I said SoundExchange gets to keep money it forfeits from unfound artists. SoundExchange disputes that and claims that "those funds go directly to the artists and rights holders who are currently registered," which is utter bull. As that regulation so clearly states, SoundExchange doesn't pay the money "directly" to anyone. They get to use the forfeited funds to defray their own expenses, which, when you come down to it, means they get to use it for their own purposes. Technically, SoundExchange doesn't "keep the money," so the "correction" is correct in a very strict literal sense. However, reality shows that they don't keep it because they spend it, which doesn't match up with what they say here.

Now, of course, if they reduce their own expenses, that makes more money available for distribution to registered artists and copyright holders because they have to take less out of the current receipts. That's a good thing, but reality tells me that there are a couple problems. First of all, anyone who has ever worked for a non-profit that must keep a lid on expenses can tell you that "extra" money that can be used to defray expenses tends to get used up pretty fast. In the case of SoundExchange, I can clearly imagine that the forfeited money financed a good part of the musicFIRST campaign for the terrestrial radio performance royalty. Secondly, take a look at what happens to whatever money does get through that "expense" process to be paid to registered recipients. As royalty money is split 50/50 between artists and copyright holders, and, by their own estimates, 70% of the copyright holder royalties goes to the four RIAA members who directly control six of the eighteen seats on the SoundExchange board (and who appointed the other twelve out of the goodness of their hearts), that means that 35 cents out of every forfeited artist royalty dollar goes to the four RIAA members. The one thing SoundExchange got right in its "correction" of my comment is the idea that this is a "windfall." I don't think they meant it the way it actually comes out, because the greatest windfall ends up in the lap of the RIAA labels, but they won't tell you that outright and if you ask them about it, like I have, they ignore you. Because they can.

If SoundExchange actually spent that forfeited money on improving their efforts to find the artists, like the language of the forfeiture regulation actually intends that they do, that would be fine. But they don't, and their "correction" of my comment is nothing but more smoke and mirrors to hide that.

Click the read more or comments link below to see the additional eight points Wilhelms raises in response to SoundExchange.

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If Newspapers Went Offline For A Week... People Might Realize They're Fine Without Them

Mike Masnick — Wed, 11 Feb 2009 08:51:00 PST

Honestly, it's getting difficult to keep up with the massive amount of stories every day from old school journalists -- often with no business or economics background -- either complaining about how things used to be or somehow wishing they could put in place solutions to bring that world back again. It's gone. We'll start with a piece by James Warren in The Atlantic, which you would hope would be a bit more intellectual -- but instead makes the same old errors. Warren seems to imply that investigative journalism can only be done by newspaper reporters -- apparently not realizing that the investigative reporting he's talking about is a very new concept, rather than true "traditional journalism." Also, in trashing online sites, he seems to totally miss why sites like the Huffington Post enjoy such a large community. He blames it on their combination of stiffing writers (including himself) and simply building off the works of those wonderful newspaper reporters.

But that's obviously ridiculous. If online sites were only "winning" the traffic battle because they were ripping off others' content, then that would be easy to fix: those very same newspaper sites should do the same damn thing. Hell, it should work better, since they'd have the original content. The problem is that it's not the reporting that's attracting the community. It's the community. For way too long, the newspapers have ignored or diminished the role of the community. They were forgetting that, in the end, it really is the community that's their "product." They sell the attention of that community. But, for years, they had little to no competition in doing so. That meant they could basically ignore serving the community... and they did. Now that there are sites that actually do serve the community, people prefer going to them than the sites that treated the "community" like lower class riffraff to be kept away. Funny how that works.

Warren also gets quite mixed up in pretending that when newspapers put content for free online, they get nothing back for it. He goes on for a few paragraphs about the disaster of giving away content "for free" (gasp!) even making a stupid joke that maybe the NY Times' columnists should work for free if they want their work distributed for free. Apparently Warren (like so many others) seems to be missing the point again. News organizations sell readers' attention. You don't get that attention if you don't get the readers. And you don't get readers by charging for content. So, when newspapers give away content for "free" -- it's not for "nothing" -- it's because it's supposed to be a part of a larger business model. The problem is that the newspapers have fallen down on that end of the business model. But the answer isn't making it more difficult to get more community attention. That's like purposely burning your most valuable asset.

Along those same lines, Romenesko points us to a painfully bad idea from another journalist: getting all big newspapers, and the Associated Press, to collude with each other to stop publishing any news online for a week. The idea, of course, is that suddenly the rest of the online world will recognize what they're "missing" without these big newspapers. Of course, that (once again, incorrectly) assumes that journalism only comes from newspapers (aren't these big time journalists supposed to research this stuff before publishing such obviously wrong things?). If all the big newspapers don't publish online for a week, what they may actually discover is that people get on just fine without them.

Why? Because the demand for good content is still there, and someone smarter than these journalists will supply it. Imagine if you're a young news organization entrepreneur, and all of the biggest names in the market have just decided to take themselves out of the competition for a week. Talk about a huge market opportunity. So, sure, let the dinosaurs hide for a week (and watch out for antitrust complaints). The journalists who think this is a win-win idea, may quickly discover that all it really shows people is how little the old model is needed. There's plenty of room for good journalism to thrive. It just might not involve newsprint.

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Microsoft Against Free Software... But In Favor Of Paying Nations To Use Its Software?

Mike Masnick — Mon, 3 Nov 2008 16:48:50 PST

With more and more countries aggressively moving to embrace free and open source software, it appears that Microsoft is using its own money to its advantage, such as with this agreement to hand over $60 million to South Korea to get it to use its software, rather than the alternatives. While it may seem silly when you take a step back and look at the situation, it does show some of the mixed up incentives related to software. Individuals and organizations can simply embrace free software, or Microsoft can pay out $60 million towards various projects now, knowing that it will pressure the South Korean gov't and firms into spending a lot more than that on its software. At some point, people will begin to realize this is just a bad deal. The programs Microsoft invests in make out well, as do some government officials, but everyone else ends up worse off.

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Amazon Launches Payment Service... Again

Mike Masnick — Wed, 30 Jul 2008 02:48:50 PDT

As was widely expected, Amazon has now launched a new payment service for online retailers as something of a PayPal competitor. Basically, it will let people use their Amazon account info to buy things at other stores. Of course, as others have discovered, taking on PayPal -- while simple in concept -- has proven a lot more difficult in practice. Companies like Google and Yahoo have tried and haven't made much of a dent. Hell, even Amazon has tried this before, though that was a beta launch that never went very far. Actually getting retailers to implement this and then getting customers to use it is the challenge at this point, and it seems likely to be an uphill battle. There's definitely a sense that many people don't like PayPal, but it's so well established that to provide an alternative, you really need to offer something that provides significant value above and beyond Paypal -- and it's not clear that Amazon really does that.

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Is Amazon Getting Ready To Take On PayPal?

Mike Masnick — Thu, 19 Jun 2008 08:01:00 PDT

Plenty of other companies have tried to take on PayPal and discovered that it was a lot harder than it looked. Even though there are a lot of folks dissatisfied with PayPal, most attempts to compete with it have fallen flat. Even Google's efforts haven't really made a huge dent. However, could Amazon shake things up a bit? Over the years, it's done a few things to put its toes in the water of personal payment systems, and now some are predicting that it's gearing up to launch a full on PayPal competitor in the next few months. The analyst who wrote that report notes that Amazon isn't "just another" PayPal competitor, suggesting that its knowledge and experience with online retailing will allow it to create something better. It would certainly be an interesting fit with other "web services" that Amazon has been offering lately -- and would even tie further into Amazon's existing knowledge and scalability. That said, for whatever reason, this market has been a tough one to crack, so we should probably wait and see what the specifics are (if any) before determining its likelihood of success or failure.

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Payments By Touch Reaching Out For You

Michael Ho — Wed, 3 Oct 2007 01:35:04 PDT

The promises of contactless payments consistently seem to fall a bit short. The hardware costs for merchants sound hard to justify, and the benefits to the consumer are usually minimal -- since credit cards aren't exactly a painful process to begin with. However, wireless technologies are cool, so NTT DoCoMo has demonstrated a prototype phone that uses human conductivity to transmit data for services such as payment-by-touch -- so that you can keep the phone in your pocket and simply touch other devices to transmit your personal information. But if the irrational fears of cell phone radiation weren't enough for you, then imagine the possibilities of using skin conductivity. How will users fill up at the gas station? And consider how many more stories about high-tech pickpockets there will be... when thieves just have to touch you briefly in order to get your payment information. NTT DoCoMo admits that it'll be several years before this payment-by-touch system will be "ready, reliable and safe" for Japan -- but phone makers may also want to anticipate the FUD and weigh it against the existing payment methods before releasing a new plot device for Michael Crichton.

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High Interchange Fees Help Keep Cash Alive

Joseph Weisenthal — Mon, 23 Jul 2007 04:37:00 PDT

In addition to the added convenience, electronic payment methods promise to reduce costs by saving merchants money spent on handling cash. Well, that's how it's supposed to work in theory. In practice, many merchants don't see much benefit from electronic payments due to onerous interchange fees. While the major payment processors take a cut of every transaction, merchants typically pay a flat fee for all of their cash management needs, which makes cash sales appealing. The current system works well for companies like Visa, Mastercard and American Express, which enjoy a lucrative oligopoly. But for smaller startups developing payment solutions, the economics aren't favorable. Already the EU is looking to crack down on high interchange fees, and although EU regulators are typically much more proactive about such issues than their counterparts in the US, Congress is starting to explore the issue. Either way, if fees remain high in the US, innovation in this area is likely to remain slow.

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