Killing The Golden Goose: Copyright Holders Demand More Cash Even As Streaming Music Services Struggle To Be Profitable

from the because-that's-how-it-always-works dept

For years, we've pointed to the legacy entertainment industry's history of trying to kill the golden goose any time a new and successful service has come along that actually helped drive them into the modern era. These services never actually come out of the industry itself, and thus are almost always hated (often with a passion) by the legacy players who failed to innovate, and now fear the potential alternative power in their industry. It's no secret that the legacy record labels and studios maintain their position by trying to control every aspect of their market, rather than by innovating to what the public wants.

In the music space, there have been a growing number of complaints from industry insiders about just how unfair it is that companies like Pandora and Spotify are successful. You see complaints that these services don't pay enough and a search for regulatory changes to demand more cash from these companies. And yet, Pandora and Spotify are both having tremendous difficulty reaching anything approximating profitability -- in large part because the existing costs of the music they stream is so ridiculously high.

John McDuling at Quartz has a good overview of the state of the streaming music space, which (among many other points) highlights this problem:
Spotify, by contrast, needs to negotiate directly with content owners (record labels and publishers) and maintain a huge library to satisfy all of its users’ different tastes, even though a large proportion of those songs are apparently never played. So its royalty costs are fixed at a high proportion of its revenues.

Ultimately, this means Pandora has a much leaner cost base than other services do. It paid out around 50% of its revenue in royalties last year. For Spotify, that figure is closer to 70%.

And yet, Pandora is still not really making money. Since its IPO in mid-2011, the company has eked out a quarterly profit just twice (Wall Street is expecting another small profit when it reports earnings on Thursday, July 24). Over the last two financial years it has racked up more than $75 million in losses. And despite these losses, content owners (record labels and publishing companies), perhaps envious of its growing user base and elevated share price, have been aggressively trying to squeeze more out of it in royalties. For some, this offers evidence of structural flaws in the Pandora business model.
It doesn't seem like a structural flaw in the business model, so much as the legal regime that assumes that it's the content alone that is the value, and that the service has no value at all. The legacy content guys see any profits at all as a sign that they're somehow being screwed over and underpaid, and thus they have to angrily demand more and more. It's happened over and over again. Remember how popular ringtones were? Part of the reason they went out of style was that the industry desperately saw it as a place to get ever more money from. Ditto for music video games.

The industry systematically overvalues the content and undervalues the service. That's not to say that the content shouldn't be paid for. But it's incredible how long a history we have of the legacy recording industry consistently smothering innovative new services with oppressive costs, frequently driving them out of business. They consistently kill the golden goose because they hate the idea of any outsider having success, even as they fail to innovate.

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    That Anonymous Coward (profile), Jul 28th, 2014 @ 10:21am

    Well without their music libraries there would be nothing for them to stream, so of course they are owed 99.9% of the profits.

    Of course without the streaming, a shit ton of their music would never be heard because there would be no one talking about that great track they just heard on social media.

     

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    jupiterkansas (profile), Jul 28th, 2014 @ 10:31am

    Run them into bankruptcy and then buy them up when they're finished. Sounds like a business plan.

     

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    Anonymous Coward, Jul 28th, 2014 @ 10:35am

    What is "Pandora"? What is "Spotify"?

    Are they what people who don't use torrents use?

    Less snarky version: I'm not about to give a dime to the legacy recording industry, either directly or indirectly through these. I'll support musicians all day long, and I do: I buy their recordings (directly) and their merchandise (directly) and sometimes I even write them checks just because. But there is NO WAY I'm going to hand a dime to either of these services when I know full well that a nickel (or more) of it will go to some of the most evil and greedy assholes on the planet.

     

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      Jim, Jul 28th, 2014 @ 10:49am

      Re: What is "Pandora"? What is "Spotify"?

      This definitely sounds like a good way to have any hope of changing the status quo. Ignore/boycott actually good services just to try to screw over the labels.

      Spotify has completely ceased my torrenting of music just like Steam did for video games and Netflix streaming + redbox did for movies.

      If I'm clamoring for better services and reasonable prices and then I ignore the better services & reasonable prices and continue to pirate, I am a hypocrite at best.

       

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        Anonymous Coward, Jul 28th, 2014 @ 12:24pm

        Re: Re: What is "Pandora"? What is "Spotify"?

        You're very naive. If you think that supporting Pandora and Spotify will do ANYTHING to change the status quo, you're delusional.

        The only thing that will change the status quo is bankrupting the industry. Nothing else will have much of an effect, nor will it have it for long. The only way out of the current mess is starve the beast to death by any means necessary.

        And that is why what I'm doing is not only un-hypocritical, it's vastly more effective than what you're doing. (Consider: if we ALL did what you're doing, then the industry would continue to profit. But if we ALL did what I'm doing, it would be bankrupt in a year or two.)

        Supporting Pandora or Spotify == supporting the RIAA.

         

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          Anonymous Coward, Jul 28th, 2014 @ 1:11pm

          Re: Re: Re: What is "Pandora"? What is "Spotify"?

          You'll never bankrupt the industry. Entertainment is too much of an everyday necessity for most, so there will always be a profit seeking corporate presence.

           

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          RadialSkid (profile), Jul 28th, 2014 @ 1:36pm

          Re: Re: Re: What is "Pandora"? What is "Spotify"?

          The only thing that will change the status quo is bankrupting the industry.

          Agreed. But as long as you're pirating their material, you're giving them a scapegoat. Their mentality is, "Well, if we can just crack down more on internet freedom and shut down more services, people will start paying us again."

          The recording industry is a monster, and one that is beyond redemption. They can never turn anything around in a way that will make me forgive them for the last 15 years. The only logical thing to do is to shut them out completely. Listen to independent (true independent, that is, not Matador Records) music and just pretend the majors don't exist at all.

           

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            jupiterkansas (profile), Jul 28th, 2014 @ 2:11pm

            Re: Re: Re: Re: What is "Pandora"? What is "Spotify"?

            What's wrong with Matador Records? They're not a member of the RIAA.

             

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            Anonymous Coward, Jul 28th, 2014 @ 2:25pm

            Re: Re: Re: Re: What is "Pandora"? What is "Spotify"?

            Agreed. But as long as you're pirating their material, you're giving them a scapegoat. Their mentality is, "Well, if we can just crack down more on internet freedom and shut down more services, people will start paying us again."

            More like if we work on it we can get the right to shut down any site on our say-so, and eliminate the self publishing menace that is the real threat to out business.

             

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            Anonymous Coward, Jul 28th, 2014 @ 2:54pm

            Re: Re: Re: Re: What is "Pandora"? What is "Spotify"?

            Actually, I'm not pirating much of their material, because most of it is crap. And most of what I do pirate, I already bought and paid for years ago on vinyl anyway, so I could (and will) use the recording industry's own argument that I already purchased a license for the content, thus the medium (vinyl, CD, mp3, etc.) doesn't matter.

            But I do use torrents to explore new artists that I might find interesting (e.g. Amanda Fucking Palmer, thank you TD for bringing her to my attention) and I listen to their work. Some I like. Some I don't. Those I like? I seek out their shows, I buy their recordings directly from them, and sometimes, like I said, I just write them checks because I feel it. Those I don't like? Their music sits on my disks but probably doesn't get listened to much.

            But in any case, I do what I can to ensure that none of my money ever gets anywhere near the recording industry, per se. Yes, we can starve it if only people have the willpower and self-control required. (Of course I've said the same thing about the movie industry, but that probably won't work because there are plenty of idiots willing to actually pay money to see totally worthless shit like Hercules or Lucy or Transformers 23.)

            As to giving the recording industry a scapegoat, it doesn't matter: we all know they make it up. They lie, lie, lie constantly about how much and how many and what it costs. All torrenting could stop tomorrow and they would continue to lie about it, escalating the numbers next year -- and why not? Most "journalists" are mere stenographers and will repeat the lies as truth.

            So, the bottom line is that I'm making an effort to put money into the pockets of working musicians and avoid putting money into the pockets of the MAFIAA. Now if only 50 million other people would do the same, we could do some good things for musicians and inflict some damage on the recording industry.

             

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          Anonymous Coward, Jul 28th, 2014 @ 9:00pm

          Re: Re: Re: What is "Pandora"? What is "Spotify"?

          I think the biggest problem is that the industry has corrupted our government into passing insane IP laws.

          I don't think the 'solution' is to boycott the industry in favor of independent artists. It's not to boycott one offering over another.

          I think the best solution is to either demand (and pay for) permissibly licensed content or to demand that content be released under a license that releases it under a permissible license after some predetermined reasonable set of time and that no copy protection transfers can reverse the release date.

          For example a book or song can be released under a license that releases it under a CC license after ten or so years from the publication or release date. Such a license is not revokable and the license states that no transfer of the IP from one party to another can reverse the CC license release date (ie: selling the 'rights' to a publisher after it's been released under this license still means that the book gets released under a CC license ten years from its original release date). For the first ten years the content is all rights reserved and the author or publisher can do whatever they want to make a profit. After that it gets released under a CC license.

          If everyone demanded content be released under such a license and was willing to pay for it and refused to buy content under other terms I can guarantee you it will mostly fix the copy protection problem term limits.

          You may argue that copy protection laws have other problems. Infringement penalties are too high and licensing is too expensive. Perhaps consumers should start demanding that the license the content is released under sets a lower maximum infringement limit (for example no one will be fined for more than $100 per infringement). The license could also include a maximum licensing fee that compels the copy protection holder to grant a use license and the license could include contact information or a way to send the money that must be in tact and it must provide a way to deliver the money and receive a use license. Or, for that, we can create an entity that can handle these collections and transfers and the license could include a clause that states that you can purchase a use license from this entity for a predefined amount of money (stated in the license). This entity can handle collections for many books from many authors. The license can also optionally provide alternative methods of buying a use license in case the collection agency goes out of business and state that if the agency goes out of business and the alternative use license purchasing systems are no longer effective then a use license becomes free.

          The point is that all of the problems we complain about copy protection laws can easily be fixed if consumers demand that content be released under an appropriate license. Copy protection lasts too long but you believe in some copy protection? Someone can simply create a license to accommodate both of these concerns and strike a balance and consumers can demand that the content they buy be released under such a license. The penalty structure is too one sided? Maximum possible penalties can be included in the license above. Use licensing is too expensive? That can also be fixed by a license and the right consumer demand.

          If everyone worked together to demand what we want and to demand fair and balanced licenses (in opposed to having to follow bought and paid for laws) we can circumvent the problems with copy protection laws.

          To that I say I don't care if the content is released by the industry (the RIAA/MPAA, Disney, etc...) or by an independent artist. If you are buying 'all rights reserved' content, regardless of its source, you are supporting a broken IP system. Instead demand content and software that's released under a more fair and balanced license no matter the source and then you would be supporting more fair and balanced licenses (in effect a more fair and balanced system for all).

           

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            That One Guy (profile), Jul 28th, 2014 @ 9:41pm

            Re: Re: Re: Re: What is "Pandora"? What is "Spotify"?

            I'm seeing two different messages here.

            On one hand, you seem to be saying that a boycott is not the way to go.

            I don't think the 'solution' is to boycott the industry in favor of independent artists. It's not to boycott one offering over another.

            While later on you say that a boycott is the proper response.

            If everyone demanded content be released under such a license and was willing to pay for it and refused to buy content under other terms I can guarantee you it will mostly fix the copy protection problem term limits.

            Now, using custom licensing terms to address some of the worst aspects of current copyright law is an interesting idea, though having it be both legally binding, and, should it come up(and it would), supersede current copyright law could be a tricky proposition.

            As far as I know licensing terms cannot override the law, and if the two conflict, the law on the books takes precedence, so custom terms likely wouldn't hold up in court if it came down to a fight with a company determined enough to push back, say after buying a copyright and wanting to enforce specific rights that the liscense disallows them from having.

             

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              Anonymous Coward, Jul 28th, 2014 @ 11:12pm

              Re: Re: Re: Re: Re: What is "Pandora"? What is "Spotify"?

              "On one hand, you seem to be saying that a boycott is not the way to go."

              I said a boycott against a particular party is not the way to go. A boycott against content not released under certain licensing conditions is the way to go.

              "As far as I know licensing terms cannot override the law, and if the two conflict, the law on the books takes precedence, so custom terms likely wouldn't hold up in court if it came down to a fight with a company determined enough to push back, say after buying a copyright and wanting to enforce specific rights that the liscense disallows them from having."

              This would violate basic principles of contract law. When I buy a book under a specific license there is an agreement between me, the buyer, and the IP holder that I get these terms. The license should specify that these terms are absolutely not subject to change. So if the original IP holder decides to sell their copy protection privileges then the new buyer should reasonably be assumed to know about this prearranged agreement. So if I, the buyer of a license to read your book, do not get what you agreed to deliver then I demand my money back because I have not been given what I was sold. That's false advertising. All buyers should likewise do the same.

              Contracts do not override law in the sense that if the law says that you must murder someone and you change your mind and don't or you missed that little clause in there somewhere you will not be legally held to do so and so there will be no legal punishments. Or if there is a non-compete clause in a contract but such clauses are illegal in your state then it will not be binding. But copy protection gives IP holders the right to release their content under a license and so why not give them the right to release it under an irrevocable CC license as well. The IP holder agreed to this voluntarily out of their own free will. For the law to deny an artist the right to voluntarily release content under an irrevocable CC license would negate the purpose of having CC licenses creating all sorts of uncertainty around them and it would also reveal the true anti-competitive intent of the law, to prevent the promotion of progress and to hinder the public domain and to harm the public interest in order to help the middlemen.

               

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                Anonymous Coward, Jul 28th, 2014 @ 11:42pm

                Re: Re: Re: Re: Re: Re: What is "Pandora"? What is "Spotify"?

                The true purpose of IP law is not to liberate more content by expanding the public domain and it is not to give artists more options. It is to restrict content and to give intermediaries control of the content of artists and to restrict artists. For the court to deny an artist the ability to release content under an irrevocable CC license would further restrict them and it would restrict content further revealing the true nefarious nature of IP law.

                 

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      Josh in CharlotteNC (profile), Jul 28th, 2014 @ 11:59am

      Re: What is "Pandora"? What is "Spotify"?

      Spotify is what got me off downloading all my music via torrents.

      If it goes under, I'll have no problem switching back.

       

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      PaulT (profile), Jul 29th, 2014 @ 12:10am

      Re: What is "Pandora"? What is "Spotify"?

      "Are they what people who don't use torrents use?"

      Yes, they're what people who pay for content use to ensure that labels and artists get paid when they can't buy (or already own) the albums in question, or they wish to legally preview the content before purchase. If labels continue like this, they're free to collect the $0 of direct revenue they enjoy from every torrent instead.

       

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    Casey, Jul 28th, 2014 @ 10:42am

    Streaming

    Spotify pays substantially more per-play than Pandora. Because of that, many in the industry seem to think Pandora should pay more like Spotify does, or simply die and let Spotify pick up their users.

    This fight is going to get uglier, especially if songwriters/publishers start pulling from ASCAP/BMI entirely like they are threatening to do.

     

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      PRMan, Jul 28th, 2014 @ 12:06pm

      Re: Streaming

      But Spotify lets me pick the song and Pandora is more like a radio station. If Pandora pays more, then will I get to pick songs on there too?

       

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        Casey, Jul 28th, 2014 @ 3:12pm

        Re: Re: Streaming

        You would think so but that is not how the licenses work.

        The pureplay rates run out in next 1-2 years. What happens after that could be a complete disaster if the labels/artists get their way. That's not even factoring in the separate rates from publishers and songwriters, which they want to increase exponentially.

         

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      PRMan, Jul 28th, 2014 @ 12:09pm

      Re: Streaming

      Pandora and Spotify need to come up with their own joint label that signs artists with music not available to everyone else. And then go after the new albums of some of the largest names in the industry. And also viral stuff like Friday and Gangham Style.

      That should shake things up a bit. And it wouldn't be hard to offer better terms than the record industry. Let the industry chase them for a while.

       

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        jupiterkansas (profile), Jul 28th, 2014 @ 12:25pm

        Re: Re: Streaming

        Unfortunately a service that doesn't offer everything anyone might want to listen to is never going to do all that well. A ridiculous amount of music is owned by the major labels and most listeners don't care about how much anyone is paying in royalties or who's music is licensed with which service - they just want their favorite artists available.

         

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    Tom Stone, Jul 28th, 2014 @ 10:43am

    78 RPM was good enough for my daddy and It's good enough for you!

     

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    Anonymous Coward, Jul 28th, 2014 @ 10:44am

    'Copyright Holders Demand More Cash Even As Streaming Music Services Struggle To Be Profitable'

    this is the whole point! they want these alternative services to fail so as to be able to take back 110% control of everything, just as they had it before the internet! these industries not only refuse to change their habits, their business models, they dont want to change because in doing so, others have more control and that is something the industries cannot abide!

     

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    Mason Wheeler (profile), Jul 28th, 2014 @ 10:46am

    The industry's idea is "content is king." They've thought that forever, and they've been wrong about it forever. Content is fungible to the point of irrelevancy; get rid of one piece of content and another will show up to take its place. The true king is connectivity.

    Create a platform that allows people to interact with each other, and content will arrive to fill it. This has been true since the days of the Pony Express. Create content, and nothing interesting to do with it, and nobody will care.

    Connectivity is king. Content is just riding its coattails. Always has been, always will be.

     

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      DannyB (profile), Jul 28th, 2014 @ 11:48am

      But Content is King

      It sounds like you are suggesting that motion picture cameras and projectors were not invented for the purpose of making and distributing all of the movie content that was then available prior to the inventions?

      But Content Is King. The motion picture cameras and projectors were invented for the very purpose of the existing content. If it weren't for the existing motion picture studios, would the cameras / projectors have even been invented?

      It sounds like you're trying to put the horse before the cart.

       

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        Mason Wheeler (profile), Jul 28th, 2014 @ 11:57am

        Re: But Content is King

        What in the world do cameras and projectors have to do with anything? And furthermore, how could the video camera have been invented "for the very purpose of" movies that already existed before its invention?

        I get the feeling that there's a coherent argument in here somewhere, but it needs a bit of proofreading because at the moment, I have no idea what you're trying to say or how it has any relevance to the point I made. :(

         

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          DannyB (profile), Jul 28th, 2014 @ 2:40pm

          Re: Re: But Content is King

          Before motion picture cameras and projectors were invented, there was no movie content.

          I am suggesting the ridiculous argument that since content is king, the purpose of inventing the hardware to make movies was because of the all of the movie content that existed prior to the invention of the hardware which makes movies possible.

          See the problem with this?

          As the post that I reply to suggests, content will arrive for any new platform that enables creating or distributing content. Movies arrived once the hardware to make them came to be. Radio content. TV content.

          It is true that the internet is nothing more than a new delivery mechanism. But it may also enable entirely new forms of content. Possibly 3D (not necessarily holograms -- there are other ways to capture and view 3D).

           

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            Mason Wheeler (profile), Jul 28th, 2014 @ 3:11pm

            Re: Re: Re: But Content is King

            You seem to have missed the point, which is that we're talking about communications networks, which don't inherently have anything to do with the creation (cameras) or consumption (projectors) of content.

            The idea of "content is king" is that this commercial content is the most important thing on the network, and therefore it should be treated with preference. But it's not. Magically remove all music and movies from the Internet, and the Internet would survive and continue to prosper. But if you were to magically remove the Internet... the music and movie businesses that derive significant percentages of their revenue from online business would be severely impacted.

            The network itself is what matters. Connectivity is king; content is just along for the ride.

             

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        PRMan, Jul 28th, 2014 @ 12:11pm

        Re: But Content is King

        Nope, he's right. If all the movies from the 20s and 30s were gone (and most of them are) people would just watch newer movies. And if all the big media companies pulled all their movies, we'd all watch indie movies on Netflix (I often do anyway). The network is more important than the content.

         

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        John Fenderson (profile), Jul 28th, 2014 @ 12:16pm

        Re: But Content is King

        It depends on what you mean by "content". If you mean movies and music, then on the internet content is most definitely not king. The internet flourished before movies and music were readily available, and would continue to flourish if they were not.

        The value of the internet is in connecting people together, not in "consuming content". That's the point.

         

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        jupiterkansas (profile), Jul 28th, 2014 @ 12:29pm

        Re: But Content is King

        I'm confused. Cameras and projectors existed long before any movie studio, esp. the MPAA studios that still exist today. They didn't show up until 25 years after the movie camera was invented.

         

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          DannyB (profile), Jul 28th, 2014 @ 2:42pm

          Re: Re: But Content is King

          That's kind of my point. Content follows mechanisms to create it and distribute it.

          Even without any RIAA / MPAA content, mp3 devices would eventually catch on simply because of their utility. Similarly digital streaming of audio or video.

           

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            rapnel, Jul 28th, 2014 @ 5:31pm

            Re: Re: Re: But Content is King

            I think you failed to see the horse for the cart. You're missing the art. There were plays and paint and ink and voices long before a motion picture camera was invented. Naturally, people will choose to communicate to the very limits of anything that exists and enables them to do so.

            The content that these mafioso fucks think they own is, truly, just along for the ride, still.

             

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              PaulT (profile), Jul 29th, 2014 @ 12:21am

              Re: Re: Re: Re: But Content is King

              "There were plays and paint and ink and voices long before a motion picture camera was invented."

              But, for example, someone had to invent paint and find ways to extract ink before artists could create with them. While pen and ink were great, the creation of art was greatly spurred on by the invention of the printing press and typewriter to complement them. And so on...

              Essentially, they go hand in hand. Technology is used to create and distribute art, but the art itself can be instrumental in making the technology successful.

              The real problem here is the way that technology democratises art. Those who depend on their existence as gatekeepers and middlemen aren't taking kindly to being eliminated. Rather than adapt, they want the world to change back to how it was when they were most profitable.

               

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        DC, Jul 28th, 2014 @ 7:07pm

        Re: But Content is King

        You needed a sarc tag.

         

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    Anonymous Coward, Jul 28th, 2014 @ 10:56am

    I think we're all focusing on the wrong war. Instead of educating people on not pirating, we should be educating artists and creators on self-publishing.
    If all of the new artists begin to self-publish, the leeching pool for the gatekeepers will dry up.

     

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    william (profile), Jul 28th, 2014 @ 11:07am

    This is not killing the golden goose. It's more like milking the cow for all it's worth. If industry has its way, they want 99% profit of all the internet services' profit and leave the streaming company in a half-dead status, just enough profit to not make them give up on this streaming business.

    After all, all those service did was "put our stuff online", so the industry deserve all the profit.

     

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      John85851 (profile), Jul 28th, 2014 @ 7:37pm

      Re:

      That's an excellent point.

      To take it one step further, I'm sure the labels would love to make their own service, similar to Pandora. Oh, wait, didn't they try that already and it was so full of DRM and restrictions that no one used it?
      And there we go again- we're back to issue of labels wanting to control everything, even how users experience the music.

       

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    Andyroo, Jul 28th, 2014 @ 11:19am

    easy solution.

    Nobody is allowed any payments until the company has covered costs, then 25% of profits paid to the copyright maffia.
    That is all they deserve until they prove beyond any doubt they are not skimming 80% off the top of any profits due to the creators.

     

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    DannyB (profile), Jul 28th, 2014 @ 11:43am

    Streaming services should be treated equally

    If movies (MPAA) and signed recording artists (RIAA) are not allowed to be profitable, then why should streaming services be treated differently?

     

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      Anonymous Coward, Jul 28th, 2014 @ 5:52pm

      Re: Streaming services should be treated equally

      Can the streaming services use the same accountant as the MPAA and RIAA?

      Pandora should create a shell company that they pay for advertising. Another company that they have to pay to maintain and service their equipment. Another company that they pay to lobby politicians.

      then they too can never show a profit.

      let's see. 70% of nothing is what?

       

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    Anonymous Coward, Jul 28th, 2014 @ 11:50am

    Re: Streaming services should be treated equally

    They should be treated equal with radio which are covered by blanket licensing.

    It's simply absurd that streaming is not analogous with radio.

     

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      Anonymous Coward, Jul 28th, 2014 @ 1:36pm

      Re: Re: Streaming services should be treated equally

      Pandora is treated much like radio, because it pays a statutory license, which is similar to blanket licensing.

      Where they separate is that radio does not have to pay royalties for sound recordings, just for the composition (every piece of music is two different copyrights).

      The irony is that radio pays have the price, and plays fifty times the commercials. Want to see why one is profitable and the other is not? Count the commercials. I'm about as much of a copyleftist as they come, but I know 'pleading poverty' when I see it. They would be just as profitable as radio if they were playing more commercials. None of us want that, obviously, but I think that truthfully none of us want to pay for music with money or eyeball time.

       

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        John Fenderson (profile), Jul 28th, 2014 @ 2:32pm

        Re: Re: Re: Streaming services should be treated equally

        "I think that truthfully none of us want to pay for music with money or eyeball time."

        Well, I want to (and do) pay for music with money, so consider your hypothesis disproven.

         

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        Karl (profile), Jul 28th, 2014 @ 3:25pm

        Re: Re: Re: Streaming services should be treated equally

        Pandora is treated much like radio, because it pays a statutory license, which is similar to blanket licensing.

        Yes, but terrestrial radio stations pay less than Pandora in composition royalties - including royalties from Internet streaming services (e.g. IHeartRadio).

        That is the reason that Pandora bought a radio station: so that they could be "similarly situated" to Clear Channel and IHeartRadio, and pay the same royalties for composition.

         

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        Casey, Jul 28th, 2014 @ 3:32pm

        Re: Re: Re: Streaming services should be treated equally

        Pandora runs the risk of devaluing their ads if they run too many. Broadcast radio has been on a race to the bottom for some time, resulting in many stations being barely profitable and cutting everything they can to stay afloat.

        Currently Pandora is trying to establish internet radio as a higher quality advertising source for advertisers because they run less (ads don't get lost in the flood), can be targeted to different audiences, and can include pictures/videos. Running more ads could undermine everything they have been working toward. They also would probably run into ad inventory problems, which they have already done several times in the past.

        One thing they could certainly do is try to sell more Pandora One subscriptions. But their recent decision to raise the price significantly and preventing people from renewing annually leads many to believe Pandora doesn't really want to be in the subscription business. Especially when iTunes Radio costs $25 per year, less than half the price of a new Pandora One subscription.

         

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        PaulT (profile), Jul 29th, 2014 @ 12:34am

        Re: Re: Re: Streaming services should be treated equally

        "None of us want that, obviously, but I think that truthfully none of us want to pay for music with money or eyeball time."

        Speak for yourself. Plenty of people happily pay for an ad-free service. I pay Spotify 10 euros per month for their streaming service, and I still but the occasional album, on top of going to live gigs, etc.

        The assumption that the people who pirated did so only because it was free was made by fools who ignored most of what was being said to them by their own customers.

         

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      DannyB (profile), Jul 28th, 2014 @ 2:43pm

      Re: Re: Streaming services should be treated equally

      > It's simply absurd that streaming is not analogous with radio.

      Ding! Ding! Ding! We have a winner!

       

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        Anonymous Coward, Jul 28th, 2014 @ 3:08pm

        Re: Re: Re: Streaming services should be treated equally

        Well, there are different types of streaming. Pandora is similar to radio and should be treated like radio. Spotify is not and without a doubt cannibalizes download sales. So Spotify needs different licensing. But Spotify is not in as bad of shape as people seem to think. They could probably cut their financial losses simply by cutting their free service. They are willingly losing money on their free service to upsell subscriptions. That is a pretty valid strategy but it will cost them money for the time being.

         

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          PaulT (profile), Jul 29th, 2014 @ 12:39am

          Re: Re: Re: Re: Streaming services should be treated equally

          "Spotify is not and without a doubt cannibalizes download sales."

          Citation needed. Especially since one common use for Spotify is to listen to albums people already own. Plenty of artists have made money, however small an amount, from me listening to albums I already own. I'm not going to suddenly buy a copy of a song because I want to listen to it and I hadn't synced it before leaving the house, but I will stream it. Plus there's the advertising aspect of it - Spotify has specific features to expose people to new music, and yes some people do indeed buy after hearing it there.

          "They are willingly losing money on their free service to upsell subscriptions."

          Citation needed.

          "They could probably cut their financial losses simply by cutting their free service."

          But, if they're running the free service purely to upsell to paid subscriptions as you claimed, how many paid accounts will they lose? How do the figures stack up - do you have them?

           

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            Anonymous Coward, Jul 29th, 2014 @ 1:50pm

            Re: Re: Re: Re: Re: Streaming services should be treated equally

            Common sense needed.

            Download sales are on a downward trend for the first time in history. Apple is investing in streaming. Spotify no longer claims their service doesn't cannibalize. Every label that doesn't live under a rock knows making their music available on streaming services will begin to erode their download sales. There is a reason so many labels are looking to see how well windowing works and whether or not streaming will ever make sense financially. If you can't see that streaming is cannibalizing download sales then you live even further behind the times than the labels you criticize.

             

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              PaulT (profile), Jul 30th, 2014 @ 12:28am

              Re: Re: Re: Re: Re: Re: Streaming services should be treated equally

              So, no citation, I just have to believe what you assume as if it's the truth? How typical.

              I didn't say that sales were never cannibalised, however the picture is far more complicated than anonymous simpletons here try to pretend. Some of those streams actually generate sales, both downloads and elsewhere, while others replace pirated downloads.

              But, feel free to provide evidence as to why I might be wrong rather than expecting me to believe whatever you say, because that will never work.

               

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          Karl (profile), Jul 29th, 2014 @ 1:33am

          Re: Re: Re: Re: Streaming services should be treated equally

          In addition to the things PaulT said:

          They could probably cut their financial losses simply by cutting their free service.

          No, they couldn't, because their losses are due to the excruciatingly high royalty rates that they pay copyright holders.

          And those royalty rates are a percentage of their profits, not a fixed rate per song.

          So, if Spotify made more money, they would simply be giving more money to the copyright holders. They still would not make much money themselves.

           

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            Anonymous Coward, Jul 29th, 2014 @ 1:39pm

            Re: Re: Re: Re: Re: Streaming services should be treated equally

            Spotify's royalties are much more complicated than simply being %70 of their revenues.

             

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    LAB (profile), Jul 28th, 2014 @ 12:30pm

    If terrestrial radio found a way to be profitable I am sure internet music services will figure out how to do the same. The licensing amounts paid per play by pandora and spotify are fractions of a cent and to suggest the "industry" is trying to destroy internet radio and the like is confusing. What happens when it is not the "Legacy" holders but the independent artist that is paid this extremely low rate? Is the argument the independent artist is trying to destroy internet radio by negotiating royalty rates? Lastly, what is a speaker without anything coming out of it? Silent. The argument content is not important to a internet music provider is strange at best. If any internet music provider thinks they are paying to much for content they don't have to carry it. They can use content that is less expensive.

     

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      That One Guy (profile), Jul 28th, 2014 @ 5:48pm

      Re:

      A few articles you might want to check out, in particular the first one.

      Myth Dispensing: The Whole 'Spotify Barely Pays Artists' Story Is Bunk
      https://www.techdirt.com/articles/20120622/16193319442/myth-dispensing-whole-spotify-barely-pays -artists-story-is-bunk.shtml

      Billy Bragg Says Don't Blame Spotify; Blame The Record Labels
      https://www.techdirt.com/articles/20131107/16343725173/billy-bragg-says-dont-blame-spotify-bla me-record-labels.shtml

      Musicians Increasingly Realizing That Streaming Services Are Actually A Really Good Thing
      https://www.techdirt.com/articles/20140223/22200926326/musicians-increasingly-realizing-that-st reaming-services-are-actually-really-good-thing.shtml

       

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        LAB (profile), Jul 29th, 2014 @ 3:25pm

        Re: Re:

        Thanks I was familiar with the the majority of the articles you sited. My point was, it is not an industry is trying to destroy another. These are negotiated licensing rates and they are trying to make the most money. If Pandora and Spotify are at the mercy of simple supply and demand economics. To be more profitable they will have to generate more money ( I think it rather obviously, charge more for subscriptions or create more ad revenue).

         

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          That One Guy (profile), Jul 29th, 2014 @ 5:55pm

          Re: Re: Re:

          If the labels are demanding crippling cuts from the streaming services, such that they struggle to actually stay profitable, and thus stay in business, then to me at least that sounds like their greed getting away with them, and causing them to drain the streaming companies dry. Even if they are 'only' stopping the services from growing, because they don't have the spare profits to risk expanding, that's still a pretty hefty price the labels' greed is costing the streaming service.

          To be more profitable they will have to generate more money ( I think it rather obviously, charge more for subscriptions or create more ad revenue).

          It's not nearly that simple to boost profits.

          On the subscription price, I believe the rate is something like $10 a month, but whatever the rate is let's use that as a hypothetical.

          Say they boost the price to $15 a month. Awesome you might say, just like that they increased profits by a hefty 50%. However, say they loose a third of their customers by doing so. 30% of their current customer, who were fine with paying $10 a month, feel that $15 is just too much, and drop their subscriptions because of it.

          Suddenly that 50% boost in profits isn't looking so good compared to the losses, as they've both lost a good chunk of current customers, and the profits they would have made off of them, but they have to consider how many potential future customer they've eliminated as well, people who would have been willing to shell out $10 to give the service a try, but aren't willing to risk $15.

          It's similar with the ad revenue. Sure it may sound simple, increase ad revenue by increasing the number of ads, but at what point do they become too much, and start driving people off? How much ad time in an hour can they get away with, and still have at least a similar number of listeners? Much like the subscription price boost, doesn't do much good to double ad time, if you drive off half your listeners because of it.

          Also, because your comment reminded me of it, have some Dilbert:

          http://dilbert.com/strips/comic/1993-01-28/

           

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          John Fenderson (profile), Jul 30th, 2014 @ 8:32am

          Re: Re: Re:

          "I think it rather obviously, charge more for subscriptions or create more ad revenue"

          This isn't obvious at all. Doing either of those things will reduce demand for the service, and could reduce revenue rather than increase it. You & I have no idea which way this would cut.

           

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      JMT (profile), Jul 28th, 2014 @ 6:08pm

      Re:

      "The argument content is not important to a internet music provider is strange at best."

      That would be strange, that's why absolutely nobody is making it. It's what's called a strawman argument, and it's the hallmark of people who are struggling to honestly support their own position.

       

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      DC, Jul 28th, 2014 @ 7:21pm

      Re:

      Pandora pays more than terrestrial, as has been stated endlessly.

       

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    Anonymous Coward, Jul 28th, 2014 @ 12:38pm

    When industries get old and clunky, they tend to over value their product. Here we see that any profit at all is thought that it should go back to the old libraries.

    Pandora has already caught Sony and ASCAP in the act of trying to blackmail them into high royalty fees.

    These majors have forgotten something. If Pandora and Spotify fail to survive, the increase in piracy will come right back to their doorstep. They're getting paid something now, with 100% piracy they won't be getting paid anything. Both of these services were designed from the ground up to slow piracy, make easy access to the legal goods, and to pay something to the major labels.

    I suggest that these majors go back to collecting money off their cds and dvds, both of which the markets are cratering on.

    Personally this idea that the majors have to be a vampire to any that deal with them has been so off putting to me that I don't want a dime of my money going to them. I refuse to buy their product, it's not even worth the bandwidth to download them as a pirate. But guess what? Since I hear no new music, I'm not exposed to the new latest greatest. I have no connection to new artists. That means the future market of what could have been is gone. They have no market whatever with me. I've totally disconnected from the majors.

    The young folk have no real interest in cds and dvds. They don't want a library. They want to hear it now without toting all that extra baggage around to hear something later. These services go under, good luck on making a profit for the majors. Without the want for a library, good by repeat sales.

     

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      That One Guy (profile), Jul 28th, 2014 @ 3:07pm

      They don't care

      These majors have forgotten something. If Pandora and Spotify fail to survive, the increase in piracy will come right back to their doorstep. They're getting paid something now, with 100% piracy they won't be getting paid anything. Both of these services were designed from the ground up to slow piracy, make easy access to the legal goods, and to pay something to the major labels.

      Despite claims to the contrary, they absolutely love piracy, as it gives them an excuse, a talking point they can hand to their bought out politicians, as to why they need even more laws and regulations passed in their favor, and why the government needs to crack down on any company/service that might otherwise compete with them.

      The 'piracy boogieman' is far too valuable to them to ever give it up, as it allows them to do, and demand, things that would otherwise never pass scrutiny.

       

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        Anonymous Coward, Jul 29th, 2014 @ 4:22pm

        Re: They don't care

        Citation needed. I see no evidence that the record industry is about something other than money.

         

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          That One Guy (profile), Jul 29th, 2014 @ 5:39pm

          Re: Re: They don't care

          Easy enough, they could decimate piracy, and see a massive boost in profits almost overnight, if they were willing to offer their products at reasonable prices, in reasonable ways.

          They do not do this.

          The reason is that for such a thing to really work, it would require them to give up large chunks of control they currently have. DRM, timed releases, region locks, that sort of stuff would all have to go.

          Whether they value control for it's own sake, or assume that the more control they can exert the more profits they will get, the end result is pretty clear: they care more about power and control than they do profits.

           

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      Anonymous Coward, Jul 28th, 2014 @ 9:19pm

      Re:

      I hear a ~lot~ of people talk about piracy as their solution to labels, and y'know what, I swap stuff with my friends who download known artists sure.. but the stuff I download and listen to? Independant music, fan creations, youtube stuff people upload for their hobby trying to get their start, folks self publishing their own tunes. Short is I don't pirate cause I don't have to. The musics out there, y'just have to look.

      My message to people? Look. Look for the people selling their own stuff out of sound cloud. Have old music you want to update? Well you already supported the origional work, so look up remixes and derivitive work. Truely support the creation and distribution of ~new~, not just legacy content.

      You may find your options are broader than you think.

       

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    Anonymous Coward, Jul 28th, 2014 @ 1:00pm

    Parasites?

    You know what they call an organism that latches onto a host and sucks it dry? A parasite. Sounds like the labels are parasites, sucking the artists, the customers and the innovators dry.

     

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    Anonymous Coward, Jul 28th, 2014 @ 2:38pm

    C'mon, Pandora, innovate or die. Maybe sell some t-shirts? Hang outs with Tim Westergren? Surely they can come up with a better way to make money than "we're not going to try to make any money."

    Or you know, they could actually put enough advertising on the service to make it profitable, like most other successful "free to consumer" business models. *At some point* someone has to be charged money in order for an enterprise to be called a "business."

    Unless your whole "business model" is to be bought out, I suppose.

     

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    LAB (profile), Jul 28th, 2014 @ 3:08pm

    My comment was to be posted after being viewed by a moderator. That was hours ago and it never was posted. I didn't think this site did that. Has that ever happened to anyone else? Is this new? I don't even say that stupid "Mike just hate's it when blah, blah, blah, nonsense"

     

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      That One Guy (profile), Jul 28th, 2014 @ 5:38pm

      Re:

      It happens every so often, when the spam-filters they've got(and I believe they have several layers of them) for whatever reason thinks your post/posting pattern seems a little dodgy.

      As far as I know, and I believe Mike and co. have confirmed this in the past, as long as something isn't clearly spam, it will be let through once they get to it in the 'held for moderation' list, it's just that can take a little bit at times.

       

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      Anonymous Coward, Jul 29th, 2014 @ 4:24pm

      Re:

      Yes. Happens to me a lot. Probably because I use TOR. I have had comments in moderation hell for days, and I mostly agree with this site. It has nothing to do with the content of your comment.

       

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    Anonymous Coward, Jul 28th, 2014 @ 3:11pm

    Please tell me what "your comment is being held for moderation' mean? and then it's never posted. Where all those cries of censorship true?

     

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    Whatever (profile), Jul 28th, 2014 @ 8:36pm

    Goose Eggs

    Calling these services the "golden goose" is pretty misleading. They really are a product of piracy more than anything, created as a way to make pennies because the public has been trained by piracy not to pay dollars for content anymore.

    So they are perhaps not so much a golden goose as much as a polish turd, the consolation prize given to the loser of the great web content battles.

    For what it's worth, there are plenty of radio stations out there who are losing money, and yes, they pay for their content use as well. Even with relatively successful business models, not all businesses will succeed.

    Pandora and Spotify (and others) have the issue that they are attempting to ask people to pay for what they believe should be free. As such, they may have a basically flawed business model that will not work given the current market conditions and the current legal tolerance of widespread piracy. They actually find themselves in competition of sorts with radio, Sat radio, and other media source options, and not all of those options will be profitable and successful.

    Online streaming music services have it worse, as people have all the tools and the ability to rapidly download and control their own (illegally obtained) copy of the music, which they can listen to over and over again without cost and without bandwidth charges or connection fees. You can download once a song you like much faster than listening to it on these services, and you can listen to it again and again.

    Essentially, everything you say about recorded music sales applies to streaming in an even bigger way. These services are trying to sell convenience, but perhaps that marketing angle isn't strong enough to overcome the piracy headwinds.

     

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      Anonymous Coward, Jul 28th, 2014 @ 11:25pm

      Re: Goose Eggs

      And piracy is a product of the labels.

      If the labels had not shown how immoral they are throughout their history, if they if they had not spouted so many lies and used corruption to advance their backwards thinking, there would be no piracy.

      If the labels had done their job and kept up with technology rather than spend all of their effort in holding the world hostage and tied to the 1980's then there would be no piracy.


      Therefore these services are a product of the labels and they deserve to go out of business.

      Let these services pay the same rates as radio and we will see who is profitable. It will not be the labels.

       

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      PaulT (profile), Jul 29th, 2014 @ 12:51am

      Re: Goose Eggs

      "They really are a product of piracy more than anything, created as a way to make pennies because the public has been trained by piracy not to pay dollars for content anymore."

      Can you really not just stop lying your ass off for one thread?

      Streaming is an extension of radio. Are you saying that radio was due to piracy? Funny, they were all about paying people to play their music on radio for them before they lost control of the outlets...

      Stop making up your own arguments in your head, address reality. Stop repeating talking points that were roundly debunked in the days of dial-up, come up with original thoughts. But, above all, stop lying.

      "as people have all the tools and the ability to rapidly download and control their own (illegally obtained) copy of the music"

      ..and legally obtained copies, you disingenuous twat. I'm not going to pay for a full album again just so I can listen to it because I didn't sync the trip of my CD before leaving the house. I paid for that legally, and if I listen to it through Spotify the artist gets paid MORE than if I left it till I could sync it again.

      Reality is more complicated than the strawmen you try to attack. Stop lying.

       

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    techflaws (profile), Jul 28th, 2014 @ 10:17pm

    They really are a product of piracy more than anything, created as a way to make pennies because the public has been trained by piracy not to pay dollars for content anymore.

    And yet they make more pennies for content owners than traditionl radio. How come?

     

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    Anonymous Coward, Jul 28th, 2014 @ 11:23pm

    Re:


    The 'piracy boogieman' is far too valuable to them to ever give it up, as it allows them to do, and demand, things that would otherwise never pass scrutiny. 


    Yes, and remember that paying for entertainment the legal way does not preclude the industry from demanding more draconian laws.

    Copyright is a oneway street, and even if the industry got payment for 99 percent of all entertainment, we would never get rid of the anticircumvention of the DMCA, copyright extension or other international agreements already in place.

     

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    Anonymous Coward, Jul 28th, 2014 @ 11:46pm

    Re:

    And any money going to the organizations with a vested interest in the status quo is money funding more lobbying in favor of the next entrenchment of even harsher IP enforcement.

    It's like materially supporting a terrorist organization's humanitarian work.

    Every dollar going to the RIAA or the MPAA ends up freeing more resources for lobbying with all the well known consequences for civil liberties.

    Would you really foregive any organization or corporation having supported SOPA?

    Effective enforcement of copyright is fundamentally inconsistent with privacy, due process and freedom of expression.

    This is the point often stated by Rick Falkvinge, and even though some claim it's an overstatement, it's a fact that the copyright lobby is also responsible for supporting other policies detrimental to civil liberties such as mandatory data retention, internet filtering, statutory damages for noncommercial copyright infringement and sweeping third party liability downstream to owners of wireless networks.

    To summarize my own view, even if the mafiaa promises free entertainment, I still want it to fail.

     

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    Anonymous Coward, Jul 28th, 2014 @ 11:56pm

    Abolish copyright


    I think the best solution is to either demand (and pay for) permissibly licensed content or to demand that content be released under a license that releases
    it under a permissible license after some predetermined reasonable set of time and that no copy protection transfers can reverse the release date.

    For example a book or song can be released under a license that releases it under a CC license after ten or so years from the publication or release date.
    Such a license is not revokable and the license states that no transfer of the IP from one party to another can reverse the CC license release date (ie:
    selling the 'rights' to a publisher after it's been released under this license still means that the book gets released under a CC license ten years from
    its original release date). For the first ten years the content is all rights reserved and the author or publisher can do whatever they want to make a
    profit. After that it gets released under a CC license.



    No, the better solution is abolishing copyright or scaling
    it back to commercial infringement.

    Copyright can't be enforced as long as privacy of communication and the internet are allowed to exist.

    The worst damage done by copyright to civil liberties is contributory infringement.

    Abolish any contributory infringement liability and we can talk about a sane copyright law.

    But as long as the industry argues that that any third party ought to be responsible for the infringement by others, copyright law is insane.
    If copyright is a package and can't exist without third party liability, it should be ahbolished.

     

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    me, Jul 29th, 2014 @ 4:25am

    What would be interesting

    Is to see the indie artists out there thumb their nose and shun the record labels and only go through the streaming services, and reduce the copyright bullshit to the importance of elevator music.

     

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    identicon
    Ryann Rasmussen, Jul 29th, 2014 @ 3:41pm

    How do musicians feel about streaming services? It's complicated...

    Hey guys, great discussion here. Just wanted to offer some cool context...

    Our resident musician from Highspeedinternet.com, John Dilley, recently wrote a first-hand account of the reality behind online streaming for independent artists. In short, it's complicated. Check out his article to see how the numbers add up - or don't - for bands trying to make it big.

    http://highspeedinternet.com/blog/the-web/gutting-the-music-industry-one-stream-at-a-time

    Thoughts? Comments? Discuss...

     

    reply to this | link to this | view in chronology ]

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      PaulT (profile), Jul 30th, 2014 @ 12:46am

      Re: How do musicians feel about streaming services? It's complicated...

      Not a bad article, though many of the things he's complaining about (creative bankruptcy from majors, independents having less of a voice overall) have noting to do with streaming.

      "You will also notice, while Spotify is a great deal for consumers, it is not good for artists. In order for a signed artist to make as much money on Spotify as they would by selling a platinum album, they would need about two billion streams."

      I always take exception to this kind of comparison, because it's apples to oranges. While some people are choosing to stream rather than buy, the actual business model for Spotify is comparable to radio, NOT sales. The comparison is how much they get from these services compared to airplay on a terrestrial station, and on this metric Pandora (at least, not seen a direct comparison for Spotify AFAIK) is apparently paying *more* per listener. I understand the concerns, but this is like complaining that Netflix's DVD rental business wasn't giving your movie as much revenue as DVD sales were. Well, of course, they're not, they're separate markets and nobody's going to pay full sell through costs to rent the movie...

      "The new distribution model has fractioned everything into niche markets—very few of which are large enough to push independent artists over the tipping point into the mainstream."

      I'd also argue the internet has done this overall, not just streaming. Plus, in the past wasn't it the case that most independent artists didn't tip over into the mainstream unless they signed with a major label? Especially in the US, where radio airplay was a metric measured for chart position so you couldn't chart highly unless you got onto a ClearChannel (i.e. major label) radio station?

      "Today you can find music just as good as at any time in history, but you’ll have to put forth the time and effort to find it."

      Here, I agree, although I disagree that it's necessarily more work than it used to be. IMHO, if you don't have a mainstream top 40 sensibility, it's as easy/difficult to find great music as it ever was. It's just that your local independent record store with a knowledgeable, possibly like-minded clerk has been replaced with a repository of the world's music and various guides through it. This might be Pandora or Spotify's attempts to match similar listeners or a website/app such as Pitchfork, a blog, or even a web radio station. You have guides through all of this, you just have to find which one suits your tastes.

      I personally don't see the problem from the listener's point of view, unless you are the kind of person who always depended on a major label executive or TV station to tell you what to listen to. In which case, you do still have that choice, it's just that if you're not a 14 year old girl you might not be in their current target market... But, it's always been a problem that the mainstream addresses certain narrow demographics, most of us just didn't realise it at the point where we belonged to one of them.

       

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