How Monopolies Strangle Innovation: Record Label Demands Making Investors Nervous About Spotify

from the copyright-cartels dept

According to rumors reported by Business Insider, music streaming service Spotify is currently working on raising another round of funding at a valuation of about $3.5 billion—a figure that is making some major investment firms skeptical, despite the service’s considerable success at growing its customer base. Over at TechCrunch, Josh Constine points out the most likely reason investors are reluctant: they know that the recording industry uses its copyright monopoly to exact a “tax on success” from innovative music startups.

Unfortunately, this is why investing in Spotify may not be wise and why firms like Andreessen-Horowitz may have passed. It’s a great service with a big lead on other music streamers. But as it scales and gains traction, the record labels will increase their tax. There’s no way Spotify will pay the same fees if it hits 15 million subscribers as it does now. That will make it harder for Spotify to return the multiple most investors want any time soon.

In most industries, if a partner charges you too high a licensing fee you can go to one of their competitors. That’s not how it works in music. You can’t get a cheaper equivalent to Michael Jackson or Lady Gaga like you could for enterprise software. If you want “Thriller” you have to pay whatever the labels ask. And even if it does, Spotify isn’t getting exclusive access to that content.

Though the specifics of the deals between record labels and music streaming services are secret, many details have been leaked over time, and it’s long been known that they are onerous and one-sided. Last year, Michael Robertson of MP3tunes explained how the general structure of the deals make growth and innovation extremely difficult, while collusion among the labels eliminates any last shred of competition and ensures that a service like Spotify can never negotiate better terms. Investors know that music startups essentially live or die at the behest of the legacy industry, and investors are smart—they aren’t about to bet millions on record labels making good decisions.

Economically speaking, none of this is surprising, because copyright is a monopoly and this is what monopolies do. They distort the free market and allow the monopolists to control the competition. Adding insult to injury, recording industry defenders like to tout streaming services as examples of how the industry embraces innovation, and RIAA CEO Cary Sherman recently said he was surprised that Spotify wasn’t generating more revenue for the labels. To anyone who understands how difficult the labels have made life for these startups, claims like these don’t pass the laugh test—and Spotify’s difficulty securing funding is just more evidence of this fact. Its numbers would make it a hot investment property if it operated in any space other than music, but because it is shackled to a dying industry with a long history of technophobia, investors take their money elsewhere. Who can blame them?

Filed Under: , , , , ,
Companies: spotify

Rate this comment as insightful
Rate this comment as funny
You have rated this comment as insightful
You have rated this comment as funny
Flag this comment as abusive/trolling/spam
You have flagged this comment
The first word has already been claimed
The last word has already been claimed
Insightful Lightbulb icon Funny Laughing icon Abusive/trolling/spam Flag icon Insightful badge Lightbulb icon Funny badge Laughing icon Comments icon

Comments on “How Monopolies Strangle Innovation: Record Label Demands Making Investors Nervous About Spotify”

Subscribe: RSS Leave a comment
125 Comments
:Lobo Santo (profile) says:

Crafty Devious Plan

I have the solution:

Money. Tons and tons of money.

Wrap it in heat-dispersant material and then we’ll drop it from orbit onto the RIAA headquarters. The kinetic energy alone should be enough to leave nothing but a smoking crater–and we can innocently claim we were just trying to pay them off.

If some other RIAA building continues their stupid escapades, well, rinse & repeat.

Anonymous Coward says:

It's simple

They just want 120% of the revenue that Spotify makes from streaming their music. Now, that may sound like a lot, but anything under 100% would mean that Spotify is making money on content they don’t own, and that’s not fair to the artists. So a mere 20% on top of the money they already deserve isn’t too much to ask, is it?

That Anonymous Coward (profile) says:

Cary Sherman explained the shock of not seeing more revenue from Spotify thusly – Our agreements with them leave them .05% gross profits, apparently we need to adjust our models so they only get .02%, this should make them a more dynamic company.

And a good line needs repeating….
Hey, this golden egg is awesome. But I bet if we cut the goose open, we could get a second golden egg, and we wouldn’t have to wait for tomorrow. Frankly, I can’t see any downsides to this plan, and I suggest we implement it immediately. Gentlemen, sharpen your axes.

Ninja (profile) says:

Re: Re: Re:

Actually (and surprisingly) it came to Brazil. But it suffers with the same problem Spotify is facing. They simply can’t license more recent stuff making it virtually useless for me. Another good idea killed in their early days because of the MAFIAA endless greed. It won’t grow up if it doesn’t offer a good selection of content. Oh well.

JEDIDIAH says:

Re: Re: Re:3 Ancient Treasures

If you are really interested in ancient treasures then the disk-by-mail service is where it’s really at. That has always had the best selection around. Many people (myself including) dumped B&M rental stores because of it. If you want something besides a recent release blockbuster, chances are that Netflix has it.

Anonymous Coward says:

Re: Re: Re:

It’s a video streaming service that much like Spotify is being hurt by it’s own success. Ala the studios deeming it doomed from the start now see it as a success and are demanding more payments/license fees from it for content. Unfortunately, these higher license fees are passed on to the consumer. Many of whom find them to be ridiculous and thus drop the service entirely. Which leads to there being less revenue overall for Netflix, who then has less to negotiate with the studios who then take content away. Which leads to less content overall on Netflix, which drives customers away due to the lack of material they want.

That’s completely ignoring the regional licensing restrictions that prevent customers from seeing material in whatever country they may be. Which only adds to customers being dissatisfied with what should by all means be a great service. But which is only being hurt by the greed of the studios.

[shrugs] SSDD.

bob (profile) says:

Monopoly? Nah

The artists and the recording companies only have a monopoly on their own work. If Spotify thinks it’s being overcharged, they can easily round up their own artists and publish them. If the artists are really overcharging, it should be simple for Spotify to dislodge them.

We hear again and again that the “gatekeepers” are lazy, “rent-seekers”. So now’s your chance, Spotify. Show the unhip, uncool oldschool record producers how it’s done. Create some great music and send that out to your users. There’s no patent on putting notes together into song.

As Tom Petty says, just pick up that guitar and learn how to play. Oh wait, he’s suggesting it’s not so easy. If you want to be a rock and roll star, you’ve got to pay your dues. If that’s the case, maybe Spotify should just share their revenues with the hard working artists who’ve actually put in the time it takes to be a rock and roll star.

bob (profile) says:

Re: Re: Monopoly? Nah

Of course they want to share. That’s not the debate. We’re debating just how much is fair and that’s how negotiations work. The artists want more and Spotify doesn’t want to pay it. What is fair?

I think creating art is much harder than Spotify believes. They think they should get the lion’s share and the artists should be happy with pennies. I think they’re wrong.

But Spotify shouldn’t take my word. They should prove to the artists how easy it is to make acceptable music. Replace the good music with the low rent newbies and see how long you stay in business.

This is pretty much the game that Netflix is playing. They don’t want to pay more for the newest content and so they’re keeping prices low while stocking their streaming service with crusty old movies and almost forgotten tv shows. Already I hear people complaining that they can’t get anything good on Netflix.

That’s negotiation. If Spotify doesn’t want to pay the price, they should get their own artists and see whether they’re right. That’s how the system works.

Anonymous Coward says:

Re: Re: Re:2 Monopoly? Nah

No I really don’t think he’s trying to fool anyone. I think he just doesn’t get it. He buys their ridiculous claims that they represent the artists best interests. Ask yourself this, when was the last time you saw him make an argument (ANY ARGUMENT) that had an ounce of intellectual thought behind it? I contend that deception is not in his bag of tricks as it requires cleverness that he simply lacks.

bob (profile) says:

Re: Re: Re:3 Monopoly? Nah

So sorry, but I’m not a fool. I don’t think the labels are nice people or out for anyone but themselves. That being said, the labels are very good to the artists, at least compared to the other alternatives. This is why most artists will rush to sign if the labels dangle one of their typical contracts in front of them. The contract may not be fair in the grand scheme of things, but it’s much better than anything else that’s being offered.

But go ahead. Prove me wrong. Start up your own record company and offer people contracts that are in what you think are their “best interests.” The artists will flock to you because they know that the normal companies aren’t that nice. You’ll have the best artists and you’ll change the world.

Ah, but if it were that easy, someone would have done it already. The markets have been negotiating these rates for a long time. They’ve settled on something that may not seem fair to you, but may just be an accurate reflection of reality.

But again, prove me wrong. Start your own record company that’s fair. I would like to see it done.

Casey says:

Re: Re: Re:2 Monopoly? Nah

Maybe. But just because they created a music doesn’t entitle them to licenses at a price they want to set. I would love to create an innovative restaurant that offers all the food you want for $3. Just because I have a good idea in my opinion doesn’t make me entitled to cheap food for my restaurant.

You have to work with the options you are given. Spotify doesn’t want to do that. That’s their problem. This isn’t dreamland it is reality and Spotify needs to wake up. The labels do too, don’t get me wrong. But this is between Spotify and the labels.

bob (profile) says:

Re: Re: Re:4 Monopoly? Nah

In this case, the fishmonger has a monopoly on the particular fish he caught with his own net. If someone else comes along, they may be able to provide it at a cheaper rate. But maybe they can’t.

That’s what so bogus about this monopoly idea. If you hate the monopoly that the major labels have, start your own label. Get your own artists. No one is stopping you. Let me repeat that. No one is stopping you from making music. THey’re just stopping you from making money off of someone else’s hard work.

The fishermen don’t have a monopoly on all fish and the labels do NOT have a monopoly on making music.

Anonymous Coward says:

Re: Re: Re:5 Monopoly? Nah

Again you are missing the entire point, and don’t understand what a monopoly entails. The fishmonger has a monopoly on all tuna. You want tuna, you have to go to him. Just like a label having a monopoly on all U2, or Spin Doctors, or whatever. You have to go to them for that specific music.

Stop being willfully obtuse. None of us are fooled by your obfuscation.

Cowardly Anonymous says:

Re: Re: Re: Monopoly? Nah

Netflix is prevented from using newest content, are they? Then explain to me why I can find sequels to dozens of movies, but if a movie had a sequel, the original isn’t there. That has nothing to do with new (or even cost to produce) and everything to do with abusing Netflix by adjusting license fees to try and subtly kill off the service.

Note that anything achieving a five star rating on Netflix disappears unless it was independently produced. These are movies initially offered at reasonable prices that then have the fee bumped up when they actually do well. That is an incredibly crippling arrangement, do well and they shoot you in the back into you can’t do anything at all.

Ninja (profile) says:

Re: Monopoly? Nah

If the artists are really overcharging, it should be simple for Spotify to dislodge them.

Hello Troll. You make it seem simple but it isn’t. Lady Gaga isn’t [insert other artist here] so even if I have a similar I don’t have Lady Gaga. And ppl won’t be paying for multiple streaming services from each label just because one has Lady Gaga and the other doesn’t. They’ll file share.

Create some great music and send that out to your users.

Spotify is a medium so ppl can listen to music. And they probably have indie labels and artists content too. A SERVICE. Just like The Pirate Bay. Except that Spotify generates revenue to the industry directly while TPB couldn’t care less with the MAFIAA but does generate revenue to smart artists, indirectly.

As Tom Petty says, just pick up that guitar and learn how to play.

That’s what indie artists are doing and what will be the demise of the legacy players if they don’t adapt.

If that’s the case, maybe Spotify should just share their revenues with the hard working artists who’ve actually put in the time it takes to be a rock and roll star.

Spotify is paying the labels. The issue is that the labels want more and more in a never ending greed, which is putting the future of Spotify at stake. And you seem to forget to mention the MAFIAA often fails to give the money to their artists using quite shady schemes.

bob (profile) says:

Re: Re: Monopoly? Nah

. The issue is that the labels want more and more in a never ending greed, which is putting the future of Spotify at stake.

There’s only so much revenue. If the artists want it, you say it’s “greed.” But why isn’t it “greed” when Spotify doesn’t want to share more?

This is a battle between two partners over splitting the pie. Both are driven by greed. Don’t be a fool. Don’t be an astroturfer for Silicon Valley billionaires.

Modplan (profile) says:

Re: Re: Re: Monopoly? Nah

Says the guy consistently substituting the labels for “artists”. Nobody said anything about artists themselves, only the labels who are the ones making the demands. Artists it appears have nothing to do with this fight other than getting the change from the labels pockets after they’ve had their hefty cut.

From the linked article on the labels demands:

General deal structure: Pay the largest of A) Pro-rata share of minimum of $X per subscriber, B) Per-play costs at $Y per play, C) Z percent of total company revenue, regardless of other business areas. As stated previously, this means labels de facto set retail price (they also regularly negotiate floors on price, giving even less wiggle room), which limits the ability of the music service to develop ancillary revenue streams that aren?t siphoned off by the labels.

Labels receive equity stake. Not only do labels get to set the price on the service, they also get partial ownership of the company.

[…]

Non-disclosure. Every contract has strict language prohibiting the digital music company from revealing what they pay to the labels. If they speak publicly about any of the licensing terms, they jeopardize invalidating their license which would torpedo their business. Since labels license on behalf of the artists any payment to the artist comes from the labels not the digital music company. This is the main reason music services, not the labels, have been getting heat from the artist community. Music services can?t defend against accusations about low artist payments because they pay the labels who don?t disclose what they?re paying to the artists.

http://gigaom.com/2011/12/11/why-spotify-can-never-be-profitable-the-secret-demands-of-record-labels/

Anonymous Coward says:

Re: Re: Re: Monopoly? Nah

“There’s only so much revenue. If the artists want it, you say it’s “greed.” But why isn’t it “greed” when Spotify doesn’t want to share more?”

bob, no one is saying there isn’t so much revenue. And nowhere did I mention “artists”. I said the LABELS. The people who don’t pay the artists, who creatively avoid doing so, etc. THEY ARE THE ONES WHO WANT MORE MONEY. Yet they take none of the risk. If Spotify fails, that is one less venue/source for them to make money off of. The artists gets a pittance no matter what.

Nor did I say anything about Spotify. Beyond Spotify is going to end up like Netflix. A victim of it’s own success. As a nobody, they can negotiate on better terms and lower price. Because they have nothing to negotiate with. The minute they become successful they have more money which means the LABELS want a bigger cut of the pie for doing none of the work.

bob, you’re the last person who should be telling anyone “Don’t be a fool”. By no leaps of the imagination (minus in your head) is anything I said even remotely considered astroturfing for Silicon Valley billionaires. Or should I say “big piracy”? Will that make you feel better? I bet you’re just sitting there twitching trying to keep from saying that.

JEDIDIAH says:

Re: Monopoly? Nah

> As Tom Petty says, just pick up that guitar and learn how to play.

Which is fine so long as the industry doesn’t think you aren’t stealing from them. With effectively perpetual copyright, that’s a real problem.

That’s the nasty part about “intellectual property”. It doesn’t just “protect” Tom Petty. It also allows them to steal my work as well.

Anonymous Coward says:

Re: Monopoly? Nah

“If Spotify thinks it’s being overcharged, they can easily round up their own artists and publish them.”

Because that’s not the concept of the company. They are a RETAILER not a PRODUCER. The concept of their service is to provide access to as many different producers as possible. Creating their own publishing branch no doubt would create a conflict of interest with hindering the ability to negotiate deals with other producers. It’s a completely different part of the chain.

Anonymous Coward says:

Re: Re: Re:2 Monopoly? Nah

I think that syntax is a little over his head. He’s far from having the intellectual capacity to understand any type of programming concept so let me try it this way…

la?bel ley-buhl] noun, verb, -beled, -bel?ing or ( especially British ) -belled, -bel?ling.
noun

5. a brand or trademark, especially of a manufacturer of phonograph records, tape cassettes, etc.: She records under a new label.

Now bob, compare that to this…

art?ist [ahr-tist] noun

1. a person who produces works in any of the arts that are primarily subject to aesthetic criteria.

See, Not the same are they? Also notice how I included links to the source of my information when I make a claim? It kind of helps support the fact that I know what I’m talking about now doesn’t it?

Here endeth the lesson.

Anonymous Coward says:

Re: Re: Re:2 Monopoly? Nah

Actually CA, I think you may be on to something there. That may be the actual flaw in MPAA/RIAA mathematics. There is no concept of NOT EQUAL. By their logic…

1 download = 1 lost $.99 sale = $150,000
< 400,000 officially employed = 2,200,000 actually employed
label = artist

See the pattern?

Jay (profile) says:

Re: Monopoly? Nah

The artists and the recording companies only have a monopoly on their own work.

And yet, that doesn’t vibe with the utilitarian concept of copyright.

Create some great music and send that out to your users.

Don’t have to. The artists do it without the labels, hence why the labels are going after Spotify.

If you want to be a rock and roll star, you’ve got to pay your dues.

This is not the 1960s, there are no more hair bands, and the artists pay their dues by building an audience.

If that’s the case, maybe Spotify should just share their revenues with the hard working artists who’ve actually put in the time it takes to be a rock and roll star.

Which they’ve been doing if you paid attention.

Honestly bob, what are we going to do with you? You seem intent on being ignorant and we’re trying our damndest to educate you on matters of course.

Just read the article before everyone just calls you Wrongway Bob from now on.

Josef Anvil (profile) says:

Re: Monopoly? Nah

“If that’s the case, maybe Spotify should just share their revenues with the hard working artists who’ve actually put in the time it takes to be a rock and roll star.”

Why should Spotify share their revenues with the artists? The RIAA and the Major Labels don’t.

Reference: Kenny Rogers, Eminem, Chuck D., and the thousands of other artists that have be ruthlessly stripped of their copyrights and earnings.

bob (profile) says:

Re: Re: Monopoly? Nah

The RIAA and the Major Labels don’t.

Horse manure. The labels give plenty of money to the artists. That’s how Elvis ended up with Graceland and Michael Jackson ended up with his ranch. Artists up and down the food chain have made money on their deals.

Should they have made more? Perhaps. I know the industry is full of sharks who aren’t interested in being fair. But I also know that the artists have no clue how hard it is to market music. It’s quite expensive and this is why so many perfectly good indie bands don’t get very far. They don’t have the financial backing.

So take a second look at those artists. Kenny Rogers wasn’t “stripped of his earnings”, he was– perhaps– the victim of a bunch of biased accountants. He’s still made millions, he just hasn’t made as many millions as he thinks he deserves. That’s a business dispute and it has nothing to do with copyright. He’s still got em and he’s just arguing with the publishers over how to split the pie. It goes on in every business.

JEDIDIAH says:

Re: Re: Re: Monopoly? Nah

Horse manure is your argument fixating on the most extreme examples possible while ignoring the vast majority of the talent. You make it look like everyone would have been better off just playing the Lotto instead of trying to be musicians.

Besides, the chances are that Elvis and Michael made most of their touring and were able to get decent deals once they had an advantage over the labels.

Jackson pretty much performed his whole life and has an album that still may hold the all-time sales record.

Anonymous Coward says:

Re: Monopoly? Yup.

The artists and the recording companies only have a monopoly on their own work […] it should be simple for Spotify to dislodge them.

Sure, if not for that pesky “monopoly” thing you mentioned.

You’re speaking as if any single piece of culture can be easily replaced by any other piece of culture, and it’s simply not true.

It’s disingenuous to talk about free markets while you’re talking about a monopoly.

khory (profile) says:

Re: Monopoly? Nah

Are you kidding? You act like Spotify is trying to get licensing for free. I’m sure Spotify would love to share revenues directly with artists. If they could send Tom Petty a check so they could play his music they’d be all over it. We all know it doesn’t work that way. The recording companies own the rights to a LOT of music. That’s okay because they license with those companies. Where the money goes from there is anyone’s guess….

Spotify and Netflix and the like don’t have a problem paying a fair price for the rights to stream content. Fair is the key here. The problems is that the content producers want to squeeze the life out of these services by making unreasonable/unsustainable licensing demands once the service gets going. That is a very short sighted move for the content industry.

Content producers provide the content
Netflix/Spotify handle billing, distribution, and provide a built in customer base
Consumers get their needs met thus reducing piracy
All parties involved get paid

How is that not a win for everybody? Pricing can be adjusted but I think it is pretty close to right for maximizing income. Forcing streaming companies to raise prices or crippling their catalogs will only force people into finding other, cheaper alternatives. They sure as hell aren’t going to rush out and buy more CDs and DVDs…

Anonymous Coward says:

It all goes back to the gatekeeper thing. The big labels are trying to do whatever will keep the airwaves saturated with the handful of releases they’re trying to promote, and exposure to everything else limited. They’re not interested in helping the public with music discovery, not if it means more sales from the long tail – niche genres, obscure artists, and backlist titles. If it doesn’t help shore up their claim to young artists that you need to sign here to succeed, they’re not interested.

Anonymous Coward says:

Re: Re:

That is payola working. The labels pay the radio stations to play certain artists. Spotify should be doing the same thing. Do not pay the labels, charge them instead. Of course, Spotify has to have the guts to drop uncooperative labels altogether. That is where their real problem is, they do not have the guts.

They will either develop the guts or they will be replaced by a competitor who does have the guts.

Michael says:

Speaking as an independent musician, I believe that we as a community of artists and internet users should be trying to do everything within our power to eliminate the major labels from every facet of internet distribution as possible. That means zero artists from major labels, eliminating the restrictive licensing terms, DRM and other such things they seek to impose. Let ’em park their butts on the radio which nobody listens to anymore and put their lousy videos elsewhere and then see how much support they get. Make them go away!

Anonymous Coward says:

They just don’t want to accept that fact that moving in to the new age, will mean lower prices for content. This like like newspapers wanting to charge the same price for the online version as they do for print, or publishers wanting the same price for e-books as for the printed books.

They also fail to take into consideration that even if they have to charge a lower amount of money for these new digital alternatives, they could still make it up in volume if they made it available EVERYWHERE. This is what the advantages of the digital media are and of the Internet. You could make a lot more money by making it more easily available in more places. But instead they are still treating them like DVD’s.

khory (profile) says:

Re: Re:

Not to mention the reduced costs involved with online distribution. They can charge less, keep a similar margin and make more overall due to increased volume that results from the cheaper price. The physical market may shrink but who cares if you are making up the difference and then some on digital.

The problem is that the legacy folks want to break into one market without accepting that the old one will shrink.

John Doe says:

On a sorta related note

My wife and I are reading The Hunting Games trilogy. I read the first 2 books and then loaned them to her (through Kindle sharing). Now the 3rd book she wanted to read at the same time as me so we could talk about it. So I broke the DRM, copied it to her Kindle and I continue to read online or on my laptop. Does that make me a dirty, filthy pirate? I mean, with a physical book, you loan it when you are done. With ebooks, you can both read at the same time. In either case, I would never have bought 2 copies of the same book. Am I a bad boy for doing what technology allows?

John Doe says:

Re: On a sorta related note

On a related note to my previous unrelated note:

Because of the books, we went to see the movie this weekend, which grossed $155,000,000. We will be watching the other 2 movies as well. Most likely we will rent the first movie(s) just before going to see the next movie as a refresher. Am I still a dirty, filthy pirate?

That One Guy (profile) says:

Re: Re: On a sorta related note

Well of course you’re a dirty, filthy pirate, obviously you would have gone to the movie anyway, the books in no way shape or form influenced you to do so!

As far as the ebooks, a simple bit of hollywood accounting would tell you that that one DRM-broken book was the equivalent of at least five books that would have been bought(somehow… in some fashion…don’t question me!), and going by those numbers, that means you caused at least $750,000 worth of damage to the economy! Not to mention the countless jobs you caused to be lost with your horrific action!

I’m not even going to go into the damage you caused by loaning the first two books, instead of buying them again, both in digital and physical format, but rest assured due to your actions you alone have cost the economy millions, and who knows how many jobs!

TtfnJohn (profile) says:

Re: Re: Re:2 On a sorta related note

Exactly. You’re a pirate and you have now caused ripple effects that will span this and all parallel universes that will rebound on the publishers at 140 million times light speed in economic damage.

You, sir, are not Hitler as you’ve been compared to above, you’re far, far, far worse. You’re BLACKBEARD!!!! ๐Ÿ˜‰

Not an Electronic Rodent says:

Re: Re: On a sorta related note

Yep fraid so. The concept of “more money than we would have had”, “maximum profits” or “fair user” don’t even occur in their empty little heads. “Piracy” is a binary state to them. The options are:

1/ “You will pay exactly what we demand when we demand it, get (if you are lucky) exactly what we decide we want to give you for your (OUR!) money and then use whatever it is we have generously condecended to let you pay a premium for exactly how we say when we say and using only the equipment we say”

2/ “You are a dirty pirate and very likely a kiddie fiddler and baby seal clubber and definitely worse than any murderer or raporist and should be sandpapered, salted, flayed, flensed, hung, drawn and quartered for even thinking there might be an alternative to option 1. Oh and you now need to give us all your money including all the money you might earn in your life and any subsequent lives you may have also that of your parents, grandparents, children, pets, other relatives and anyone you’ve ever met that you might be able to tap up for cash.”

Anonymous Coward says:

Re: On a sorta related note

Well, yes you are.
Just because a gun allows you to shoot people doesn’t mean you should.
If you both wanted to read the same thing at the same time then you are morally obliged to purchase two copies, the fact that doing so would be nonsensical is hardly the issue.
Because once it is a moral issue, sense does not enter into the picture, morals is morals.

PS. You meant the Hunger Games right?

John Doe says:

Re: Re: On a sorta related note

Yes, I meant Hunger Games. My fingers and brain don’t always communicate properly.

But is it really a moral issue? As a Christian, I certainly don’t want to steal. But is this stealing? If I was forced to buy 2 copies to read them at the same time, it wouldn’t happen, we would read one after the other. Since I would not spend the money on 2 copies for any reason, the publisher/author/etc are not out any money. The physical world was by nature, limited to 1 copy unless you bought 2. But the digital world now allows simultaneous sharing, it is an artificial limitation placed on the technology that prevents this. So who is being immoral, the publisher placing the artificial limitation or me circumventing it?

Not an Electronic Rodent says:

Re: Re: Re: On a sorta related note

But is it really a moral issue?

Depends who’s set of moral standards you are using. By the **AA standards yes it’s a moral issue. By government standards it’s only a moral issue if they’ve been paid enough for it to be so. By the standards of most interested people no it’s not a moral issue just a strange legal one. By the standards of most of the rest of the planet they don’t care enough to decide one way or another.

TtfnJohn (profile) says:

Re: Re: Re: On a sorta related note

A moral issue or stealing as it would be defined by Christianity?

I don’t think it’s either. Otherwise we’d be accusing the writers of the synoptic Gospels of the same thing!

The limitation is what’s immoral as it prevents you using technology to do what it does best which is copy and share. Particularly as you have no intention of ever purchasing a second copy, physical or otherwise. Nor do you ever say that you’re going to put the copy on the Internet anywhere for sharing so the “piracy” angle won’t work because you’re not causing the author or publisher to lose a real or imagined penny.

For the life of me I can’t imagine a moral issue in what you’ve done. All you’ve done is to make a copy so that you and your wife and read the book together and talk about it as you do increasing your enjoyment and insight into the book. To me this increases the chances of your hanging in for the full trilogy of films as well as purchasing further works by the same author.

Anonymous Coward says:

so, the way things have to work is to start a business with no help from a particular industry, make loads of money for that industry that didn’t help you, then, as you become more successful, pay even more money to that same industry. end up with no money yourself so the business collapses, thereby giving no money to that same particular industry either.

why does the story of the fox and the scorpion come to mind?

John Doe says:

Re: Re:

Unfortunately, the scenario you paint is exactly what is going on. As the RIAA drains the money from one startup, another pops up and they drain it. Rinse and repeat.

As long as the startups keep starting up, there is no reason for the RIAA to change their strategy.

It also doesn’t say much for the startups. I once watched 4 pizza places go into the same location, one after the other. When the 4th failed I had to wonder why after the first 1 or 2 failures, the 3rd and 4th pizza place even bothered???

Anonymous Coward says:

Re: Re: Re:

Makes me feel better about the place by me…

At least we have a cycle. Pizza, then chinese, back to pizza, now it’s chinese again. Should be about 2 more months before I get pizza again.

Since it’s nearly impossible to get to from the busy street out front, I’m just assuming it’s a money laundering front for the mob…

Josef Anvil (profile) says:

ok maybe this is just too stupid and simplistic

Why doesn’t the RIAA just buy Spotify while it’s young and control the platform?

The only reason that comes to mind is that they know that if they have control then they will jack up the prices so high that it will fold in a matter of days. Which should work for them since they can then say that pirating music killed their effort to embrace technology.

alex (profile) says:

surely....

….as Spotify continues to grow they will find themselves in a stronger and stronger position to re-negotiate the terms.

I don’t think you can blame Spotify for getting into bed with the majors and I don’t think you can blame the majors for negotiating the best terms they could get. It is what it is.

Also, unrelated, I think it’s misleading to say that because copyright is an exclusive right, that it creates a monopoly. The majors don’t have a monopoly on releasing music. They have the exclusive right to license their music but that’s a completely different thing to an economic monopoly.

Chris Rhodes (profile) says:

Re: surely....

You’re assuming that the recording companies are rational actors who would take some non-zero sum over getting nothing at all.

This is an unwarranted assumption. If they can, they’ll strangle Spotify for every cent until it goes under. Then they’ll post here as anonymous shills, decrying the death of the record companies at the hands of “piracy”.

alex (profile) says:

Re: Re: surely....

I’m just assuming that the bigger the quarterly payments from Spotify to the majors get, the better position they’ll be in to negotiate. We’re talking about businesses here.

It’s easy to give the majors some kind of crazed persona based on their past actions but really they’re in the business of making money.

Anonymous Coward says:

Re: Re: Re: surely....

Yes but history is the indicator here. They have ALWAYS resisted technological change even when it was to their benefit. (see. Television/VCR/DVD etc.) Digital Distribution reduces production costs as well as risks which in turn would increase their profits if they would only embrace it, however they not only refuse to embrace new paradigms but instead try to futilely kill them. It is only when they are left with no choice will they adopt it kicking and screaming the entire way. It is their legacy. It is their way.

alex (profile) says:

Re: Re: Re:4 surely....

The digital market doing well is not the same as people buying music. The *overwhelming* majority of people I know have never bought an MP3, but they have bought CDs. However, almost everyone I know is now using Spotify.

It’s a mistake in my opinion to think that big companies “hate” with “passion” – there’s only one driving force – $$$$$$.

nasch (profile) says:

Re: Re: Re:5 surely....

It’s a mistake in my opinion to think that big companies “hate” with “passion” – there’s only one driving force – $$$$$$.

That is possible, but if so the record labels are run by pretty stupid people, because they could make more money by pursuing different strategies. What they’ve been doing for the past 15 years is either designed to maximize control rather than money, or it’s just been really dumb. It’s actually hard to know for sure which it is.

alex (profile) says:

Re: Re: Re:8 surely....

heh =] No, I’ve been reading this blog for a while.

I agree that all the things you mention are good and decent ways to do business for a record label. I don’t know if there’s any evidence to suggest that the majors would generate more revenue by going those routes though.

Charging millions to license their catalogs, filling mass lawsuits against downloaders, negotiating shares in companies like spotify (now being valued in the billions), huge efforts in exploiting their catalogs, creative accounting and 360 deals with artists, skewed deals with collection agencies – etc etc

These guys are in the business of making money and they aren’t stupid. If they thought that being nicer to pirates and lowering their prices to what people are willing to pay was a viable alternative, they would be all over it.

PaulT (profile) says:

Re: Re: Re:9 surely....

“Charging millions to license their catalogs, filling mass lawsuits against downloaders, negotiating shares in companies like spotify (now being valued in the billions), huge efforts in exploiting their catalogs, creative accounting and 360 deals with artists, skewed deals with collection agencies – etc etc”

Personally, I’d argue that many of these things are the cause of the problems they complain about right now. The lawsuits are causing a significant backlash against them, while they offer little to discourage downloading (e.g. they still insist on windowing, regional restrictions, etc.) and often leave people with no legal choices. Creative accounting is damaging their reputations with artists and consumers alike, while high licencing fees are strangling many new services and retailers at birth and making life difficult for existing ones (Pandora have recently highlighted how the industry is making it impossible for them to offer their service in the UK again). Hell, the most notable thing about Spotify is that it actually managed to service other markets before it focussed on the US, while most such services are US-only, and it’s still not allowed to service the entire market as it truly exists.

“These guys are in the business of making money and they aren’t stupid. If they thought that being nicer to pirates and lowering their prices to what people are willing to pay was a viable alternative, they would be all over it.”

I disagree. They’re not “stupid” per se, but these are definitely short-term tactics. In 5 or 10 years, the problems facing them will still be the same, and they will be in an even worse position to handle them than they are already (itself caused by their refusal to deal with market realities for the last decade). The guys currently in charge will definitely not lose any of their bounty, but the major label structure is doomed in the long term if they don’t start competing. No number of lawsuits, restrictive laws or buying out distributors will change that.

Not an Electronic Rodent says:

Re: Re: Re: surely....

I’m just assuming that the bigger the quarterly payments from Spotify to the majors get, the better position they’ll be in to negotiate.

You know what they say about assumptions…..

From similar past situations it seems more likely that as the payments get bigger (i.e. as the service succeeds) the “majors” will demand a yet bigger slice of the pie or start withholding content or changing the deal to the detriment of the service until it is no longer viable.

Cowardly Anonymous says:

Re: surely....

As the monoply that they used to have on widely distributed music is challenged by new advertising/distribution methods, they have taken to predatory tactics and enacting laws that allow them to crush independent artists and the services they use. From collection agencies redistributing royalties of indepent artists so that labels get them to DMCA abuse against content they don’t own, they’ve established a psuedo-monopoly via protection racket.

Casey says:

This may come as a surprise, but the major labels don’t want Spotify to die. In fact they are very happy with Spotify. They are no doubt going to push Spotify a bit more, but what industry doesn’t raise prices for a product?

The main reason Spotify is losing so much money is because of their free service. Rhapsody does not have a free service and as a result is much closer to being and may even be profitable. They even pay more per song than Spotify. If you offer a free service, the expense is a risk you have to take. That is part of their business strategy and isn’t the labels problem.

PaulT (profile) says:

Re: Re:

“The main reason Spotify is losing so much money is because of their free service.”

Yep, I’ll have to ask for a citation there…

“Rhapsody does not have a free service and as a result is much closer to being and may even be profitable.”

Rhapsody has been around for 5 years longer and only services one country. Yeah, longer established companies with no international expansion do tend to be more profitable in the short term, what of it?

“They even pay more per song than Spotify.”

Citation?

“If you offer a free service, the expense is a risk you have to take.”

OK then, and a non-US resident I would like to pay Rhapsody the subscription fee I currently pay to Spotify.

Oh…

“That is part of their business strategy and isn’t the labels problem.”

So, the labels’ constant reluctance to offer international licencing and traditionally high licencing pricing demands aren’t their problem? Hmmm…

Not an Electronic Rodent says:

Re: Re:

No, the failure is to assume that the content is the most valuable part and that the service is an add-on. The one can’t succeed without the other, wheareas to all observation the labels act like it’s a huge magnanimous gesture to let a service like Spotify have access to their precious content at all and should be satisfied with whatever crumbs the labels deign to allow.

This while they sit there repreatedly refusing to provide any such service themselves then whining that everyone’s “stealing” their content instead of buying it.

TtfnJohn (profile) says:

Re: Re:

As we’re talking about the *AA’s here just what service, exactly, are they providing? The make product, which is how they view it in stark contrast to how they viewed it when they were getting started and established.

All Mike’s pointing out is that if you have a monopoly there’s no incentive to bargain sale prices. In fact, there may frequently be the opposite.

The *AA’s don’t care if Spotify continues to exist. They assume that if it dies something and someone they can deal with will come along to replace it.

And they don’t have to deal with Steve Jobs anymore so they don’t have to deal with someone out of their league.

Cowardly Anonymous says:

Re: Re:

Your explanation is no simpler than the one given in the article, so Occam’s Razor doesn’t apply. Further, Occam’s Razor is meant to provide a means of throwing out overly-complex theories until the simple theories have been eliminated. It doesn’t present the final answer.

Now, to address your point:

Given the large number of investors that spoke out against SOPA/PIPA, I doubt they see piracy as a great evil threat, the way the labels do. Rather, they are likely to see those people as simply outside the target market. At most, piracy is competition, which, given the success of spotify in a world saturated with piracy, is already well accounted for.

Anonymous Coward says:

Re: Re: Re:

Although one thing is sure. If the RIAA can claim that piracy was the cause of problems for Spotify, they will do it. To them piracy is the cause of ALL things bad.

Hell, did you know that earthquakes in California are caused by piracy? Yup. Mudslides too. It’s all because of piracy. Just ask them. They will tell you.

Add Your Comment

Your email address will not be published.

Have a Techdirt Account? Sign in now. Want one? Register here

Comment Options:

Make this the or (get credits or sign in to see balance) what's this?

What's this?

Techdirt community members with Techdirt Credits can spotlight a comment as either the "First Word" or "Last Word" on a particular comment thread. Credits can be purchased at the Techdirt Insider Shop ยป

Follow Techdirt

Techdirt Daily Newsletter

Techdirt Deals
Techdirt Insider Discord
The latest chatter on the Techdirt Insider Discord channel...
Loading...