Hollywood's New Talking Point: Gatekeepers Are Awesome

from the you-have-to-be-kidding-me dept

We’ve argued for years, that there are different kinds of middlemen involved in making markets. Some are efficient, leading to better reach, easier access, and more convenient transactions, while some are inefficient, blocking access, keeping prices inflated, and generally limiting a market. We tend to separate these into two camps: gatekeepers, who limit efficiency, and enablers, who increase efficiency. In truth, there’s a pretty big spectrum between those two endpoints, and a single company can shift back and forth along the spectrum between being a gatekeeper some of the time and an enabler at other times. Historically, it’s generally (though not always) been true that disruptive innovators are enablers, breaking down the walls set up by the gatekeepers, making markets more efficient, and generally distributing power away from a central gatekeeper out to the end points (the actual participants in the market, rather than the middleman). However, I had thought that it was at least generally recognized and accepted that gatekeepers tend to be bad for markets, and enablers tend to be good.

Obviously, you’d expect some who work for gatekeepers to disagree, though they tend to disagree by arguing that they’re not really gatekeepers. However, perhaps I overestimated some of those who support gatekeepers. I was somewhat shocked to hear, recently, that when Public Knowledge’s Gigi Sohn spoke at the World Creator’s Summit, she was hissed at and booed for suggesting that gatekeepers are a problem. Apparently, the attendees of the World Creators Summit like gatekeepers who hold back actual creators, set up barriers to reaching a market, and only provide a winning lottery ticket to a very small number of creators. Weird.

I’d thought that perhaps that was a one-off situation. However, the “director of legal policy” for the Copyright Alliance — a front group for the music labels and movie studios — Terry Hart, has now written a blog post that could be entitled a defense of gatekeepers controlling artists’ works. The article is really a summary of a new paper by a law professor, Guy Pessach, who argues that disintermediation is bad in the copyright realm. I will note that this is not a research paper or a study. It’s an “essay.” And the central theme is to take the rather contrarian position that “disintermdiation” (i.e., doing away with gatekeepers) in the copyright market will “undermine cultural diversity, decentralization and authors’ welfare.” This, despite all evidence to the contrary — so it’s worth a read.

Frankly, the paper is a mess. It more or less misinterprets the whole “disintermediation” argument, saying it’s about getting rid of middlemen entirely, rather than moving from gatekeepers to enablers. The paper instead turns into an ill-informed and confused attack on internet companies as the problem. It actually seeks to argue that artists have less power and control when using internet services than they do in signing deals with major labels/studios. Bizarrely, and incorrectly, it tries to argue that internet intermediaries are locked in and static, while suggesting that traditional intermediaries (record labels, publishers, movie studios, etc.) are not.

Additionally, it is both anticipated and apparent that markets for Internet intermediaries are highly concentrated, with very few entities dominating. Since much of the cost of producing an Internet intermediary (design, technological innovation) is unrelated to the number of users of the service, the average cost of providing service to each additional user may fall as the number of users increases. Economies of scale reduce the level of competition. Cost of entry is rapidly rising while strong network effects give advantages to large-scale intermediaries

But, of course, that’s false. Anyone who’s paid even the slightest attention to the dynamic in both markets knows that’s false. The major labels have dominated the recorded music business for many decades. Ditto the major studios. In the internet world, it’s constantly changing. A decade ago, Yahoo was on top. Apple was just starting to return to being interesting. Facebook didn’t exist. YouTube didn’t exist. Even MySpace didn’t exist a decade ago. Kickstarter didn’t exist. Twitter, Tumblr, Hulu, IndieGogo, SoundCloud, SongKick, Bandcamp, TopSpin, TuneCore, Pandora, Spotify — none of them existed. And that list could be much, much bigger. To argue that the internet world is stagnant and unchanging as compared to the recorded music or movie worlds is dumbfounding.

Then there’s this bit of insanity:

I begin by referring to authors and creators while presuming that it is authors and creators, rather than traditional corporate media, who are in control of their copyrights. Even so, the bargaining position of originating authors and creators, versus a handful of Internet intermediaries, may be weaker than it was for traditional distributors and corporate media.

Really, now? With traditional intermediaries — i.e., gatekeepers — if you weren’t able to sign a deal, you basically didn’t have a career as in music or movies. And so those traditional intermediaries signed ridiculous contracts, in which you gave up your copyrights and nearly all of the royalties. The new enabling companies don’t act as a gate. They let anyone make use of them, and they tend to give you full control and ownership of the effort — you retain your copyright, and you tend to get a much larger percentage of the money earned.

Amusingly, the paper also seems to argue that the wide open internet is somehow less egalitarian than when you had an A&R guy at a major label deciding who the next big music act would be. Really?

It is now apparent and documented that due to network effects and power law distribution, 40 the typology of the Internet is such that there is a “a complete absence of democracy, fairness, and egalitarian values on the web . . . . [T]he topology of the web prevents us from seeing anything but a mere handful of the billion documents out there.”

Whereas, the old record label system basically cut that off much earlier. It wasn’t egalitarian at all. It would sign a very small number of artists, and tell the rest to go do something else with their lives, and then it would select a very few acts each year, put all of its marketing muscle behind a payola scheme to convince the public “this is what you like this year.”

Pessach also doesn’t seem to understand the nature of promotion, and the concept of multiple revenue streams. Take, for example, his “case study” around YouTube, which he trots out to “prove” that artists suffer under the success of YouTube:

YouTube operates a content partnership program that enables creators who upload content to YouTube to earn revenues from advertisements that appear along with their video clips. This is YouTube’s main and only option that enables creators to get remuneration for making their content available to the public.

Actually, no, that’s not the only option for monetization. First, YouTube allows links directly to buy the songs in question, on at least iTunes, Amazon and Google Play. YouTube also pays ASCAP/BMI and others a license for streaming, and so artists make money that way, contrary to Pessach’s later claims that YouTube never pays for direct usage. To leave all that out suggests Pessach simply is unfamiliar with the site he’s critiquing and basically removes all credibility from the argument. Second, it leaves out entirely the nature of indirect benefits to widespread attention on YouTube, which leads to sales, concert tickets, opportunities for licensing and much, much more. And, even if we assume that Pessach is accurate in claiming that the only option is to monetize through ads, the deal still tends to be better than most record label deals, where they take 85 to 90% of any royalties. He suggests it’s unfair that artists get a “take it or leave it” deal from YouTube on the revenue sharing, but apparently he’s never spoken to an artist who gets a record label contract. It tends to be the same thing, unless they’re already a huge star.

If we recognize that YouTube is really the equivalent to radio, rather than a label, as Pessach seems to be trying to analogize, then the deal is so much better with YouTube. On radio, first of all, most artists never get any airtime. The few that do often have to have massive payola behind them, and then there are no performance rights royalties (in the US) for the musicians, though there are songwriting/publishing fees to ASCAP and such (but, again, that’s true on YouTube as well). On radio there’s no choice. On radio there are no direct links to buy as there are on YouTube (which Pessach apparently never noticed). On radio there’s no ease of sharing with friends, no embedding to promote the artists you like to your friends. Oh, and there’s no revenue share at all, a la YouTube’s partner program. Pessach’s argument, in short, is to compare apples and oranges, and then misrepresent the apples. Yikes.

He later gets to the crux of his argument, which is basically that the “new intermediaries” “don’t finance or invest in the production of content.” But, again, he’s making a false comparison, pointing to YouTube or Facebook or whatnot, as if they’re supposed to do advances. But that’s silly, because we’re talking about totally different types of intermediaries, ones that are more like radio, than a label. And, it’s not like radio ever financed or invested in the production of content either. But if we want to talk about financing the creation of new production of content, let’s talk about crowdfunding platforms like Kickstarter, IndieGoGo, PledgeMusic and more. Kickstarter is never mentioned in the paper. Not once. Or how about direct to fan models? TopSpin? Not mentioned. Bandcamp? Not in there at all. And yet, all of those services are used by thousands of artists to finance and “invest” in the production of new content by allowing artists to go directly to their fans and get support.

Instead, the paper keeps going back to YouTube as the problem. But, again, if you compare YouTube to terrestrial radio, using the same “metrics” that Pessach keeps going back to, it seems like YouTube wins every single time. Take, for example, the following:

Finally, in addition to authors’ and creators’ economic welfare, YouTube’s model may also give rise to long-term alienation that creators and authors may feel against their almost only effective channels to exposure and audience attention. Ironically, or not, it is the psychological and sociological motives of creativity (the same ones that underlie the disintermediation movement) which make creators and authors disadvantaged. Creators’ desire to be exposed and gain as much audience attention (and love) as possible to their creative works is a parameter, which further undermines their bargaining position against a handful of dominant networked intermediaries who control the bottlenecks to audience attention.

Beyond the fact that this paragraph is entirely speculative, rather than based on even the slightest bit of evidence, radio is a much much much bigger bottleneck for artists reaching their audience, in that most artists can never, ever get on the radio at all. Yet, somehow Pessach wants to believe that YouTube is worse for artists? Tell that to the growing number of artists like Alex Day, Jack Conte, Dan Bull, Macklemore and others who have built success stories around their YouTube videos.

Pessach’s other “examples” of bad internet intermediaries are just as laughable. He points to the widely debunked story about Huffington Post being able to sell for $300 million and not giving any of that money to the bloggers who “made the site popular.” Except, most of that story is a myth. HuffPo pays for a large editorial and reporting staff, and many of its most popular stories come from paid staff. For unpaid contributors, it’s a tradeoff between whether they want the promotion of the platform. If not, they have a myriad of other options, including setting up their own damn blog. Unlike with the record labels where it used to be either “get signed to a label or go home,” those who wish to blog could go in all different directions to make money.

His next example is what he says was “Instagram’s failed attempt to commercially utilize, for advertisement purposes, photos that were uploaded by its users.” That, again, is a total bastardization of reality. There was a lot of hype about this, but Pessach’s interpretation of what happened is wrong. The reality was that a bunch of people didn’t understand some boilerplate language used on tons of sites, and assumed, incorrectly, that Instagram was going to put your photos in ads. As the company explained, that had never been its intention at all — but it was some boilerplate language in the terms, which it quickly changed to clarify for users. Again, when Pessach seems to continually misrepresent things, it really detracts from the argument. No wonder the Copyright Alliance is such a huge fan of the paper.

In the end, the paper is basically just an attempt to tar and feather new enablers that have given many new artists new ways to create, to promote, to connect and to monetize their art — while bizarrely suggesting, absent of any proof — that the old gatekeepers were somehow better for artists. About the only explanation it presents is “advances.” Yes, the labels gave out advances to a very small number of artists… and then basically holds them as indentured servants as they seek to recoup that money, piling on more and more “expenses,” and only counting the tiny fraction that is their royalties towards recouping. Or they could make use of the new platforms, retain control over their work, and only have to pay small fees (between 5 and 30% at the top) for the services provided. Furthermore, the suggestion that these new enablers have meant less diversity in content creation is simply laughable on its face, and deserves no further comment.

If the various RIAA and MPAA front groups are going to try to push support for gatekeepers, one would hope that they’d come up with slightly more competent arguments that can at least pass the laugh test.

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Comments on “Hollywood's New Talking Point: Gatekeepers Are Awesome”

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Nigel (profile) says:

Re: So what's your precious Pandora EXCEPT gatekeeper?

A deliverer of music that I like to listen to. I couldn’t care less if I get an ad every once in a while.

Pandora is a very sound alternative and artists would be getting paid a lot more if they were not GETTING RAPED BY THE GATEKEEPERS.

Nice try though, your wheel of an argument is missing the spokes.

Offering up content via completely untenable modalities is just another way the rubes in suits get to keep all the cash.


Anonymous Coward says:

Re: So what's your precious Pandora EXCEPT gatekeeper?

“It’s worse than radio!”

Yes, I love how radio lets me skip even one song and lets me switch to a different artist’s music if I want. I also love how instead of one 30 second ad every once in a while, when listening to radio I have to sit through 5 minute segments of multiple annoying ads even more often.

Anonymous Coward says:

Re: So what's your precious Pandora EXCEPT gatekeeper?

The article starts as: “We’ve argued for years, that there are different kinds of middlemen involved in making markets. Some are efficient, leading to better reach, easier access, and more convenient transactions”

A perfect description of what Pandora does and why it is an enabler rather than a gatekeeper.

Internet Zen Master (profile) says:

Macklemore says hi

Just think. If Macklemore had been forced to sign with a label, do you think we’d ever hear songs like “Same Love” coming from him? I mean, this is the rap genre we’re talking about here. Hating on homosexuals is part of “rap culture” (at least that’s how the labels are pushing it). Thanks in part to YouTube, Macklemore & Ryan Lewis never had to sign with a record label, and we got all those awesome songs on The Heist album.

Side note: Seattle’s hip-hop radio station has started playing other tracks from the Heist that aren’t considered part of its officially listed singles (They’ve started playing “White Walls” after playing “Same Love” for awhile).

That One Guy (profile) says:

Re: Re:

Because before they internet and all the opportunities it presented came about, it was.

Weren’t signed with a label? No radio time, no presence in stores, nothing more than maybe playing local gigs, and since people had to know about you to be interested in listening to you, without a label that was pretty much as ‘famous’ as a musician could get, and the labels knew, and took shameless advantage of, this.

With the internet though, suddenly there are all sorts of new ways for artists to make a living, and best of all without having to sign over the rights to all to their stuff to the parasites in return for maybe getting rich and famous.

Anonymous Coward says:

Re: Re: Re:

He said major labels, leaving the smaller labels as his “Africa’s diamond”. He is not wrong, even though you can easily argue that all labels was part of the problem in the past. The guy is clearly not knowledgeable about how to do business in the new market and that is the only reason why he is complaining!

out_of_the_blue says:

No, Mike, it's YOU who are "one-off".

“I’d thought that perhaps that was a one-off situation.” — WELL, college boy, yet again you find a HUGE gap between your notions and reality! Yet you continue to blunder along the same provedly wrong path. Quite the idealist.

In fact, copyright works FINE every day for, oh, millions just in the US. And you never mention that, only focus on bad aspects. You need to go in with a lot of knowledge of how to not get ripped off, and a realistic assessment of your prospects, but that’s true of ANY field. — IF you were any kind of expert in the field, you could advise and be worth fees, but you’re only a kibitzer who has to rely on T-shirt sales.

The system DOES work, though I dislike MANY aspects of it, such as the star system that ridiculously rewards a few pretty faces while denying continuing income to the laborers who do the heavy lifting. — Besides the fat cat gatekeepers. Income limits are the obvious way, but that proven system doesn’t fit into Mike’s “libertarian” notions.

tl;dr. Blah, blah, right out of boilerplate, pejoratives, assertions, and complaint, NO concrete advice.

This is basically just an attempt to tar and feather the OLD enablers so that NEW grifters can take their place.

Take a loopy tour of Techdirt.com! You always end up same place!
Disintermediate Mike! He just gets between you and facts!
Inspired by ACs at:

Anonymous Coward says:

Re: No, Mike, it's YOU who are "one-off".

“The system DOES work, though I dislike MANY aspects of it, such as the star system that ridiculously rewards a few pretty faces while denying continuing income to the laborers who do the heavy lifting. — Besides the fat cat gatekeepers.”

So…it doesn’t work then. It isn’t a fair system, therefore, it doesn’t work in a context of Democracy, one of the pillars of which is equality.

“Income limits are the obvious way, but that proven system doesn’t fit into Mike’s “libertarian” notions.”

I don’t agree on income limits. I agree on spreading the wealth and rewarding people for their contribution. For example, in a corporation, the salary of the highest paid contributor should never be higher than X times the salary of the lowest paid contributor (X is to be defined). Want to get paid more, just start paying your workers more. Everyone wins in the end, I think.

Anonymous Coward says:

Re: Re: No, Mike, it's YOU who are "one-off".

That is stupidly easy to game. Set up “pyramids” of corporations. Have the janitors in one, upper management in the top, and all others in between. Even if they didn’t engage in that trickery they could just outsource all of the cheap-labor stuff. Sign up for a cleaning service instead of hiring your own janitors.

out_of_the_blue says:

Here's a Pirate Bay "enabler" who's been disintermediated from society!


“Following a hacking-related trial in Sweden last month, Pirate Bay co-founder Gottfrid Svartholm is now expected to go through the same process in Denmark.”

I’ll just jam it in as otherwise won’t be brought up.

Anyhoo, what occurred to me while reading that is that you KNOW intellectual property is a valid concept because those who own it take ACTION TO PROTECT IT. You may not like the action, but it’s there. — And you’ve certainly no obvious claim on someone else’s intellectual property, so we establish that a) it’s not yours, and b) the owners WILL protect it.

Pirates just can’t seem to grasp that they’re not regarded as heroes by the larger society, just as little thieves. This guy wouldn’t keep his paws off someone else’s property, so now he’s paying a price. Even I may not agree with the price, the ethics, and/or whether it’s criminal, but at least I recognize that leaving it alone almost certainly won’t land me in jail.

Anonymous Coward says:

Re: Here's a Pirate Bay "enabler" who's been disintermediated from society!

“Anyhoo, what occurred to me while reading that is that you KNOW intellectual property is a valid concept because those who own it take ACTION TO PROTECT IT.”

Careful with that argument. Dictators also take action to protect their position, by oppressing the population, genociding ethnical groups, etc…

One could argue that concept of Dictatorship is valid because people take action to defend it. This is dangerous.

“Pirates just can’t seem to grasp that they’re not regarded as heroes by the larger society, just as little thieves. “

This is my personal view, but from what I’ve seen, most people are somewhat ambiguous towards piracy, neither cheering for it nor vehemently opposing it.

They’ll also go as far as commit one act of piracy now and then – as in, make a copy of a music cd or a film dvd from a friend or relative – but won’t so far as to just download everything and anything from the pirate bay.

And of course, those people will still pay for those things if they see an economical advantage in doing so. After all, despite all the decades of crying, the music and film industry is still going strong.

Of course, your mileage may vary. This is what I’ve observed.

That One Guy (profile) says:

Re: Re: Re: Here's a Pirate Bay "enabler" who's been disintermediated from society!

Same, but most people also don’t realize how insane Imaginary Property laws have become, which is a big part of why they don’t care.

Tell someone for example that businesses don’t play the radio in public anymore due to fear of being sued/shaken, that copying a song for a friend to listen to is considered a crime worthy of thousands of dollars in fines, and various other similar things, and suddenly that ‘don’t care’ attitude tends to turn to disgust/opposition pretty quick.

RD says:

Re: Here's a Pirate Bay "enabler" who's been disintermediated from society!

“I’ll just jam it in as otherwise won’t be brought up.”

It’s not your blog to bring anything up in. You dont get to just unilaterally change the topic or derail conversations because you have some weird huge hard-on for Mike and all things copyright. Start your own fucking blog if you don’t like it here.

PaulT (profile) says:

Re: A decade ago, Yahoo was on top?

According to this 2003 article, investors were considering Google overvalued compared to Yahoo:


They were certainly on the rise and I dare say that most users of Google considered it to be more valuable, and I certainly recognised that the be-all portal approach was going to fail compared to Google’s cleaner and more targeted approach.

But they were still primarily a search company without most of the services people associate with them today – GMail didn’t even launch as a beta program until 2004, for example.

Anonymous Coward says:

Can’t say I’m surprised. Traditional book publishing has been trumpeting the “Gatekeepers are awesome and essential and you are stupid for thinking otherwise” line more and more frantically in the past few years. They just add in the “without us culture would crash and burn” and a lot of people (including the authors getting exploited) rally behind them.

Anonymous Coward says:

Re: Re:

The hidden agenda is we have to stop this self publishing movement before it takes away most of out market.
I will post again the link Hugh Howey on self publishing, which is the result of an informal survey of book authors that have gone the self publishing route.
The main point that comes out is that many more authors can earn some money, about the same as most published authors, on a smaller fan base, and therefore sales.
Obviously the respondents self selected, but the point is a large number were making money from ebooks without being well known.
The definite conclusion from the article is that for ebooks, an author is best going the self published route, at least at first.

Pragmatic says:

Apparently, the attendees of the World Creators Summit like gatekeepers who hold back actual creators, set up barriers to reaching a market, and only provide a winning lottery ticket to a very small number of creators. Weird.

Perhaps not, Mike. Remember how that guy from HBO said he saw value in exclusivity? Perhaps these fish believe they will appear bigger if the pond they’re swimming in is smaller.

Never underestimate the power of arrogant douchebaggery.

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