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Spotify Is Growing, but So Are Its Losses

June 17, 2017

By BEN SISARIO 6/16/17 NYTimes.com

Is streaming music a good business?

Streaming has taken over as the dominant music format and is attributed with revitalizing the moribund business of record labels big and small. But for streaming companies, the answer is not as clear-cut.

Last week, Pandora, which has been bleeding money as it tries to adapt its business model to compete with Spotify and Apple Music, accepted a $480 million investment from SiriusXM, giving up 19 percent of its ownership and three board seats.

And on Thursday, Spotify released its annual report, which may be the last piece of financial data available to investors before the company formally moves to go public, expected this year or next.

On the surface, its results are impressive. Spotify, which is based in Sweden, had 2.9 billion euros (about $3.3 billion) in revenue in 2016, up 52 percent from the year before. On Thursday, Spotify also announced that it has 140 million regular users around the world, 50 million of whom pay for monthly subscription plans.

But its revenue growth has slowed — last year, revenue increased 78 percent from the year before — and its losses are mounting. In 2016, Spotify’s net loss totaled about $600 million, up from about $257 million the year before. The company attributed this increase to the costs of servicing its debt — it raised $1 billion last year in convertible debt — and to the effects of foreign exchange rates.

Since the company began, the costs of paying record labels and others for licensing rights has been by far its biggest expense, and the more its users click, the more Spotify must pay. According to a company statement, royalty and distribution costs equaled nearly 85 percent of its revenue. Add in nearly $900 million in salaries, marketing, product development and other costs, and, once again, expenses far exceeded revenues.

When will it be profitable? In its report, filed with European regulators, Spotify repeated a statement it has made numerous times over the years: “We believe our model supports profitability at scale.”

But it has never been clear what scale means. Since it began its service in 2008, and arrived in the United States in 2011, Spotify has grown extremely fast, becoming a household name among young people. It has even brought a once-reluctant Apple into the business of selling music subscriptions — Apple Music, introduced just two years ago, has become Spotify’s biggest competitor, with 27 million subscribers.

As recently as four years ago, Spotify was using 40 million paying users as a threshold number to demonstrate how much money it could contribute to the music economy once its business reached a certain size.

Now, with the company looking to go public, investors will be considering how that expanding girth can benefit Spotify itself.

As Spotify grows, economies of scale will help in areas like product development, said Mark Mulligan, a digital media analyst with Midia Research, and with more financial clout, particularly after going public, it could pursue more disruptive goals like signing artists directly. It is also pushing to improve margins, by renegotiating licensing deals with record labels.

Still, he added, streaming itself has not proved profitable for Spotify or any other service like it.

“Streaming is the content industry’s response to Napster,” Mr. Mulligan said. “We have not got highly viable user propositions, but have yet to develop commercial models.”

Spotify declined to comment on what “scale” means — the number of users, subscribers or revenues at which its losses will tip to profits. In its report, the company indicated that the most important kind of scale it is currently pursuing is signing up more users. It is now available in 60 territories around the world, including Japan, the world’s second-largest music market, which for years had remained stubbornly resistant to streaming.

“We believe we will generate substantial revenues as our reach expands and that, at scale, our margins will improve,” the company said. “We will therefore continue to invest relentlessly in our product and marketing initiatives to accelerate reach.”

U2 Producer’s Other Job: Selling CDs in Indonesia’s KFCs

April 4, 2017

By JON REGEN NYTimes.com 4/03/17

Steve Lillywhite knows a thing or two about making music that sells. That six-time Grammy winning producer has worked on multiplatinum recordings with artists including U2, the Killers and the Rolling Stones.

Now Mr. Lillywhite is proving he knows how to sell music, too, although in a very unexpected way. He is the chief executive of Jagonya Music & Sport Indonesia, a company in Jakarta, Indonesia, that bundles recorded CDs with fast food at Kentucky Fried Chicken restaurants throughout that country.

At a time when the United States music industry has seen physical CD sales in free-fall — according to the latest report from the Recording Industry Association of America, 99.4 million full-length discs were sold in the United States in 2016, the fewest since 1986 — Mr. Lillywhite’s company, a subsidiary of KFC in Indonesia, sells 500,000 CDs a month alongside menu items like the Chick ’N Fillet sandwich and the Colonel Yakiniku Rice box.

“My job is basically like running a record label, except this record label also happens to sell chicken,” said Mr. Lillywhite, 62, who acts as a curator, choosing the music that goes into the Indonesian KFCs. (At the moment, the songs come exclusively from Indonesian artists, though he hopes to expand.) “Record companies pitch artists to me and I’ll say either ‘yes’ or ‘no.’ Or I’ll approach an unsigned artist and say, ‘I will guarantee you a slot in KFC if you sign directly with us,’” he said in an interview at Electric Lady Studios in Manhattan, while listening to a new U2 song he’s producing. The company orders CDs from a distributor and pays a percentage of the sales to KFC, as well as royalties to the artists.

Mr. Lillywhite’s journey from Englishman known for championing soaring choruses to creative guru of the Indonesian fried-chicken music market began six years ago, when he was asked to give a speech at a 2011 music festival in Singapore. He met some people who later invited him to produce music for the Indonesian band Noah. When he traveled to the band’s home to work on songs with them, “I immediately fell in love with the country,” he said.

“I loved the food, the people and the way they saw music as an experience. My synapses were overloading,” he added. “I imagined I would stay a year. I had nothing planned — I just thought I’d investigate the music.”

Mr. Lillywhite moved from Hollywood to Jakarta in 2014, and produced albums for artists like Iwan Fals, whose music he describes as “a mix of Springsteen and Dylan.” In March 2016, a mutual friend introduced him to Ricardo Gelael, director of PT Fast Food Indonesia, which owns 570 KFC outlets throughout Indonesia, as well as Jagonya Music & Sport, the company that places music in those restaurants. “He was looking to solidify and expand his company’s connection between CDs and chicken, as he realized he had become the new king of music distribution,” Mr. Lillywhite explained. When Mr. Gelael offered him a job to run and expand the company, Mr. Lillywhite immediately accepted.

“Steve has a proven track record in music as well as a love of Indonesia,” Mr. Gelael said in a text message. “So I thought he’d be the perfect person for the job.”

“CDs are still the No. 1 way to get music in Indonesia,” Mr. Lillywhite said, noting that a small percentage of the population has credit cards and internet connections are slow, hindering streaming. “In Indonesia, CDs are $4,” he continued. “And since nearly all of the record stores have closed down due to the cheap influx of pirated CDs, KFC is really the only place to buy them these days. People no longer go out to buy CDs on their own, but they do go out to buy chicken. And now buying a CD has become part of that experience. We even do concerts at KFC with some of our artists. So music and chicken have become intertwined.”

KFC has a more upscale reputation in Indonesia, where the flagship restaurants “are more like Hard Rock Cafes than fast food outlets,” Mr. Lillywhite said. Stores keep a display featuring 10 to 15 CDs on hand for browsing, and the cashier asks customers if they want a CD bundled with their meal. Mr. Lillywhite estimates that 98 percent of their music sales “are to people who go in to buy chicken but see the CDs and say, ‘Ooh, I’ll have a CD too!’”

When selecting music for KFC, Mr. Lillywhite draws on what he has learned “makes people’s emotions go wild.” He explained: “They love ballads, they love smooth jazz and they love to cry. I also always offer a kids’ album, as well as releases by big Indonesian artists like 19-year-old pop singer Rizky Fabian, the legendary rock band Slank and compilation albums too.”

He is considering a “duets” album pairing Indonesian and Western artists and a venture into streaming is also in the works. A smartphone app is starting this year.

Kasey Mathes of KFC public relations in Louisville, Ky., said that the company “doesn’t have any plans to bring this to the U.S. at this time.”

Whether or not this business model would work stateside is up for debate. “This is reminiscent of when quick service restaurants in the U.S. sold CDs of popular artists and compilations at a value price,” said Larry Katz, a music industry lawyer and the former senior vice president for business affairs at EMI Records, who once brokered a deal between EMI and McDonald’s that sold millions of CDs over a 30-day period in the mid-1990s. Considering the dominance of streaming in the United States, “Selling CDs at fast food restaurants here is likely a thing of the past,” he said, “but it’s not surprising that it still works in other areas of the world.”

John Burk, president of Concord Records — a company that experimented with placing CDs in Starbucks — said the concept “certainly has worked,” but also cited the rise of digital music as a deterrent now. “If you want to buy an album and put it on your phone, which is what most people want to do, it’s easier just to download it,” he said.

These days, while Mr. Lillywhite still takes the occasional trip to produce bands like U2, he is content in his new surroundings. “When I go into something, I go in feet first, with all my enthusiasm,” he said.

And what do the members of U2 think of his new venture?

“They think I’m barking mad,” he said. “Bono is obsessed with it. He’s always telling people: ‘Do you know what Lillywhite’s doing? He’s working for KFC!’”

Bruce Springsteen, Beyoncé post top-grossing tours of 2016

January 2, 2017

Randy Lewis, LATimes.com 12/29/16

Bruce Springsteen & the E Street Band navigated “The River” 35th anniversary tour all the way to the bank in 2016, pulling in $268.3 million globally to score the top-grossing concert trek of the year worldwide, according to Pollstar, the concert industry-tracking publication.

Beyoncé nipped close at the E Streeters’ heels, grossing $256.4 million from her Formation world tour, followed by Coldplay ($241 million), Guns N’ Roses ($188.4 million) and Adele ($167.7 million) to round out Pollstar’s top five.

“In what has been a banner year for the concert business, the Top 10 Tours alone grossed a combined $1.67 billion,” Pollstar editor Gary Bongiovanni noted in a statement. “That is significantly better than the $1.5 billion in 2015.”

It is, in fact, an 11.3% increase.

Adele is one of just two performers to have emerged in the new millennium to make the Top 10, the other being Justin Bieber, whose tour grossed $163.3 million, placing him at No. 6 on the list.

That’s a bit of a come down from last year, when Taylor Swift had the top-grossing tour of 2015 worldwide and the Top 10 also include such relative newcomers as One Direction  and Ed Sheeran.

Following Bieber on the 2016 roster, Paul McCartney posted a worldwide gross of $110.6 million; Garth Brooks, $97 million; the Rolling Stones, $90.9 million; and Céline Dion, $85.5 million.

Coldplay, however, sold the most tickets, moving almost 2.7 million during the year, followed by Springsteen at 2.4 million and Beyoncé at 2.2 million.

Dion easily had the top average ticket price of $146.26, followed by McCartney at $127.43, the Stones at $122.33, Beyoncé at $114.59 and Springsteen at $111.48.

In terms of average gross per show, however, the Stones dwarfed the competition, taking in an staggering $9.1 million from just 14 performances in 10 cities. Beyoncé finished second with an average of nearly $5.6 million at 49 shows in 46 cities, then Coldplay at just under $5.5 million from 60 shows in 44 cities and Guns N’ Roses at almost $5.4 million from 44 shows in 35 cities.

Brooks can claim the most affordable tour among the Top 10 finishers, tickets averaging just $69.29 for the 102 performances he gave in 25 cities.

Pollstar is still finalizing figures for its annual ranking of the Top 200 tours globally and in North America; results will be posted in its Jan. 6 edition.

Bongiovanni noted that Beyoncé took top honors for the highest-grossing North American tour of 2016, but the figure for that portion of her world tour was not released.

Both Springsteen and Beyonce surpassed Swift’s field-leading gross of $250.1 million in 2015.

People May Be More Cooperative after Listening to Upbeat Music

September 7, 2016

Study subjects hearing songs like “Yellow Submarine” shared more than others hearing hard metalcore

 

By Kathryn Doyle scientificamerican.com

(Reuters Health) – The right mood music can influence how well people work together, a new management-oriented study suggests.

Many retail establishments carefully select the music they play in order to influence consumer behavior, such as encouraging shoppers to buy more, the authors write. But employees hear the same music and its effect on them hasn’t been studied.

“In our case, the new article focuses attention on the role of music in relation to management questions,” said lead author Kevin M. Kniffin of Cornell University in New York.

In the first of two studies, 78 participants were randomly divided into two groups: a “happy music” group that heard songs like “Yellow Submarine” by The Beatles and the theme from the television show “Happy Days,” and an “unhappy music” group that heard less familiar heavy metal songs like “Smokahontas” by Attack Attack!

The participants in each group used a computer application in which they played a sort of economics game with other unidentified participants in the same room, but players didn’t speak to one another.

In the application, each person was given 10 tokens corresponding to monetary value and was paired with two other people. Over 20 rounds of decision-making, each person was prompted to either keep their tokens or allocate them to a group pool which would be split among the participants at the end. Tokens in the group pool were valued 1.5 times as much as those held individually.

Consistently, people listening to happy music contributed more to the group pool.

In a second study, the researchers repeated the design with an added no-music group, and also measured participants’ moods.

Again, those hearing happy music contributed more to the group pool than those hearing unhappy music or no music at all. Unhappy music elicited a worse mood than both other conditions, and a happier mood was tied to more token contributions to the group, according to the results in the Journal of Organizational Behavior.

“The bottom line is that emotions count,” said Neal M. Ashkanasy, professor of management at The University of Queensland in Brisbane, Australia, who was not part of the new research.

People in a positive mood are more cooperative and more creative, while those in a negative mood tend to narrow in on solving individual problems rather than group problems, Ashkanasy told Reuters Health.

“Interestingly, we find that mood helps to explain some of the relationship – such that people’s moods get lifted by happy music – but we also find a statistically independent effect for happy music in relation to cooperation,” Kniffin told Reuters Health by email.

“Given that having a good rhythm is a definitional feature of happy music, our article suggests that people are partly motivated to cooperate when happy music is being played because of the rhythm’s tendency to get people into sync with each other,” he said.

Retail outlets already use things like music, lighting, paint color and even smell to influence customer behavior, in some cases encouraging lingering in the store and in other cases encouraging “churn” through the doors, Kniffin said.

“Our article calls on people to recognize that the atmospherics — including but not limited to music — that are designed to influence consumer behavior should be recognized for their potential importance in relation to — and potential conflict with — employee behavior,” he said.

“In terms of the potential for ‘bad music’ to adversely affect employees in the workplace, it is interesting that in the context of our lab experiments, at least, there was no harm done in relation to cooperative decision making when Screamo music was played when compared with no music,” Kniffin said.

Which Rock Star Will Historians of the Future Remember?

May 24, 2016

Chuck Klosterman NYTimes.com 5/23/16

The most important musical form of the 20th century will
be nearly forgotten one day. People will probably learn
about the genre through one figure — so who might that be?
Classifying anyone as the “most successful” at anything tends to reflect more on the source than the subject. So keep that in mind when I make the following statement: John Philip Sousa is the most successful American musician of all time.

Marching music is a maddeningly durable genre, recognizable to pretty much everyone who has lived in the United States for any period. It works as a sonic shorthand for any filmmaker hoping to evoke the late 19th century and serves as the auditory backdrop for national holidays, the circus and college football. It’s not “popular” music, but it’s entrenched within the popular experience. It will be no less fashionable tomorrow than it is today.

And this entire musical idiom is now encapsulated in one person: John Philip Sousa. Even the most cursory two-sentence description of marching music inevitably cites him by name. I have no data on this, but I would assert that if we were to ask the entire population of the United States to name every composer of marching music they could think of, 98 percent of the populace would name either one person (Sousa) or no one at all. There’s just no separation between the awareness of this person and the awareness of this music, and it’s hard to believe that will ever change.

Now, the reason this happened — or at least the explanation we’ve decided to accept — is that Sousa was simply the best at this art. He composed 136 marches over a span of six decades and is regularly described as the most famous musician of his era. The story of his life and career has been shoehorned into the U.S. education curriculum at a fundamental level. (I first learned of Sousa in fourth grade, a year before we memorized the state capitals.) And this, it seems, is how mainstream musical memory works. As the timeline moves forward, tangential artists in any field fade from the collective radar, until only one person remains; the significance of that individual is then exaggerated, until the genre and the person become interchangeable. Sometimes this is easy to predict: I have zero doubt that the worldwide memory of Bob Marley will eventually have the same tenacity and familiarity as the worldwide memory of reggae itself.

But envisioning this process with rock music is harder. Almost anything can be labeled “rock”: Metallica, ABBA, Mannheim Steamroller, a haircut, a muffler. If you’re a successful tax lawyer who owns a hot tub, clients will refer to you as a “rock-star C.P.A.” when describing your business to less-hip neighbors. The defining music of the first half of the 20th century was jazz; the defining music of the second half of the 20th century was rock, but with an ideology and saturation far more pervasive. Only television surpasses its influence.

And pretty much from the moment it came into being, people who liked rock insisted it was dying. The critic Richard Meltzer supposedly claimed that rock was already dead in 1968. And he was wrong to the same degree that he was right. Meltzer’s wrongness is obvious and does not require explanation, unless you honestly think “Purple Rain” is awful. But his rightness is more complicated: Rock is dead, in the sense that its “aliveness” is a subjective assertion based on whatever criteria the listener happens to care about.

This is why the essential significance of rock remains a plausible thing to debate, as does the relative value of major figures within that system (the Doors, R.E.M., Radiohead). It still projects the illusion of a universe containing multitudes. But it won’t seem that way in 300 years.

The symbolic value of rock is conflict-based: It emerged as a byproduct of the post-World War II invention of the teenager, soundtracking a 25-year period when the gap between generations was utterly real and uncommonly vast. That dissonance gave rock music a distinctive, nonmusical importance for a long time. But that period is over. Rock — or at least the anthemic, metaphoric, Hard Rock Cafe version of big rock — has become more socially accessible but less socially essential, synchronously shackled by its own formal limitations. Its cultural recession is intertwined with its cultural absorption. As a result, what we’re left with is a youth-oriented music genre that a) isn’t symbolically important; b) lacks creative potential; and c) has no specific tie to young people. It has completed its historical trajectory. Which means, eventually, it will exist primarily as an academic pursuit. It will exist as something people have to be taught to feel and understand.

I imagine a college classroom in 300 years, in which a hip instructor is leading a tutorial filled with students. These students relate to rock music with no more fluency than they do the music of Mesopotamia: It’s a style they’ve learned to recognize, but just barely (and only because they’ve taken this specific class). Nobody in the room can name more than two rock songs, except the professor. He explains the sonic structure of rock, its origins, the way it served as cultural currency and how it shaped and defined three generations of a global superpower. He shows the class a photo, or perhaps a hologram, of an artist who has been intentionally selected to epitomize the entire concept. For these future students, that singular image defines what rock was.

So what’s the image?

Certainly, there’s one response to this hypothetical that feels immediate and sensible: the Beatles. All logic points to their dominance. They were the most popular band in the world during the period they were active and are only slightly less popular now, five decades later. The Beatles defined the concept of what a “rock group” was supposed to be, and all subsequent rock groups are (consciously or unconsciously) modeled upon the template they naturally embodied. Their 1964 appearance on “The Ed Sullivan Show” is so regularly cited as the genesis for other bands that they arguably invented the culture of the 1970s, a decade when they were no longer together. The Beatles arguably invented everything, including the very notion of a band’s breaking up. There are still things about the Beatles that can’t be explained, almost to the point of the supernatural: the way their music resonates with toddlers, for example, or the way it resonated with Charles Manson. It’s impossible to imagine another rock group where half its members faced unrelated assassination attempts. In any reasonable world, the Beatles are the answer to the question “Who will be the Sousa of rock?”

But our world is not reasonable. And the way this question will be asked tomorrow is (probably) not the same way we would ask it today.

In Western culture, virtually everything is understood through the process of storytelling, often to the detriment of reality. When we recount history, we tend to use the life experience of one person — the “journey” of a particular “hero,” in the lingo of the mythologist Joseph Campbell — as a prism for understanding everything else. That inclination works to the Beatles’ communal detriment. But it buoys two other figures: Elvis Presley and Bob Dylan. The Beatles are the most meaningful group, but Elvis and Dylan are the towering individuals, so eminent that I wouldn’t necessarily need to use Elvis’s last name or Dylan’s first.

Still, neither is an ideal manifestation of rock as a concept.

It has been said that Presley invented rock and roll, but he actually staged a form of primordial “prerock” that barely resembles the post-“Rubber Soul” aesthetics that came to define what this music is. He also exited rock culture relatively early; he was pretty much out of the game by 1973. Conversely, Dylan’s career spans the entirety of rock. Yet he never made an album that “rocked” in any conventional way (the live album “Hard Rain” probably comes closest). Still, these people are rock people. Both are integral to the core of the enterprise and influenced everything we have come to understand about the form (including the Beatles themselves, a group that would not have existed without Elvis and would not have pursued introspection without Dylan)

Pretty much from the moment it came into being, people who liked rock insisted it was dying.
In 300 years, the idea of “rock music” being represented by a two‑pronged combination of Elvis and Dylan would be equitable and oddly accurate. But the passage of time makes this progressively more difficult. It’s always easier for a culture to retain one story instead of two, and the stories of Presley and Dylan barely intersect (they supposedly met only once, in a Las Vegas hotel room). As I write this sentence, the social stature of Elvis and Dylan feels similar, perhaps even identical. But it’s entirely possible one of them will be dropped as time plods forward. And if that happens, the consequence will be huge. If we concede that the “hero’s journey” is the de facto story through which we understand history, the differences between these two heroes would profoundly alter the description of what rock music supposedly was.

If Elvis (minus Dylan) is the definition of rock, then rock is remembered as showbiz. Like Frank Sinatra, Elvis did not write songs; he interpreted songs that were written by other people (and like Sinatra, he did this brilliantly). But removing the centrality of songwriting from the rock equation radically alters it. Rock becomes a performative art form, where the meaning of a song matters less than the person singing it. It becomes personality music, and the dominant qualities of Presley’s persona — his sexuality, his masculinity, his larger‑than‑life charisma — become the dominant signifiers of what rock was. His physical decline and reclusive death become an allegory for the entire culture. The reminiscence of the rock genre adopts a tragic hue, punctuated by gluttony, drugs and the conscious theft of black culture by white opportunists.

But if Dylan (minus Elvis) becomes the definition of rock, everything reverses. In this contingency, lyrical authenticity becomes everything; rock is somehow calcified as an intellectual craft, interlocked with the folk tradition. It would be remembered as far more political than it actually was, and significantly more political than Dylan himself. The fact that Dylan does not have a conventionally “good” singing voice becomes retrospective proof that rock audiences prioritized substance over style, and the portrait of his seven‑decade voyage would align with the most romantic version of how an eclectic collection of autonomous states eventually became a place called “America.”

These are the two best versions of this potential process. And both are flawed.

There is, of course, another way to consider how these things might unspool, and it might be closer to the way histories are actually built. I’m creating a binary reality where Elvis and Dylan start the race to posterity as equals, only to have one runner fall and disappear. The one who remains “wins” by default (and maybe that happens). But it might work in reverse. A more plausible situation is that future people will haphazardly decide how they want to remember rock, and whatever they decide will dictate who is declared its architect. If the constructed memory is a caricature of big‑hair arena rock, the answer is probably Elvis; if it’s a buoyant, unrealistic apparition of punk hagiography, the answer is probably Dylan. But both conclusions direct us back to the same recalcitrant question: What makes us remember the things we remember?

In 2014, the jazz historian Ted Gioia published a short essay about music criticism that outraged a class of perpetually outraged music critics. Gioia’s assertion was that 21st‑century music writing has devolved into a form of lifestyle journalism that willfully ignores the technical details of the music itself. Many critics took this attack personally and accused Gioia of devaluing their vocation. Which is odd, considering the colossal degree of power Gioia ascribes to record reviewers: He believes specialists are the people who galvanize history. Critics have almost no impact on what music is popular at any given time, but they’re extraordinarily well positioned to dictate what music is reintroduced after its popularity has
The greatest sacrilege was when the Beach Boys used the melody of “Sweet Little Sixteen” for “Surfin’ USA” and had a No 1 hit with it. …

“Over time, critics and historians will play a larger role in deciding whose fame endures,” Gioia wrote me in an email. “Commercial factors will have less impact. I don’t see why rock and pop will follow any different trajectory from jazz and blues.” He rattled off several illustrative examples: Ben Selvin outsold Louis Armstrong in the 1920s. In 1956, Nelson Riddle and Les Baxter outsold “almost every rock ’n’ roll star not named Elvis,” but they’ve been virtually erased from the public record. A year after that, the closeted gay crooner Tab Hunter was bigger than Jerry Lee Lewis and Fats Domino, “but critics and music historians hate sentimental love songs. They’ve constructed a perspective that emphasizes the rise of rock and pushes everything else into the background. Transgressive rockers, in contrast, enjoy lasting fame.” He points to a contemporary version of that phenomenon: “Right now, electronic dance music probably outsells hip‑hop. This is identical to the punk‑versus‑disco trade‑off of the 1970s. My prediction: edgy hip‑hop music will win the fame game in the long run, while E.D.M. will be seen as another mindless dance craze.”

Gioia is touching on a variety of volatile ideas here, particularly the outsize memory of transgressive art. His example is the adversarial divide between punk and disco: In 1977, the disco soundtrack to “Saturday Night Fever” and the Sex Pistols’ “Never Mind the Bollocks, Here’s the Sex Pistols” were both released. The soundtrack to “Saturday Night Fever” has sold more than 15 million copies; it took “Never Mind the Bollocks” 15 years to go platinum. Yet virtually all pop historiographers elevate the importance of the Pistols above that of the Bee Gees. The same year the Sex Pistols finally sold the millionth copy of their debut, SPIN magazine placed them on a list of the seven greatest bands of all time. “Never Mind the Bollocks” is part of the White House record library, supposedly inserted by Amy Carter just before her dad lost to Ronald Reagan. The album’s reputation improves by simply existing: In 1985, the British publication NME classified it as the 13th‑greatest album of all time; in 1993, NME made a new list and decided it now deserved to be ranked third. This has as much to do with its transgressive identity as its musical integrity. The album is overtly transgressive (and therefore memorable), while “Saturday Night Fever” has been framed as a prefab totem of a facile culture (and thus forgettable). For more than three decades, that has been the overwhelming consensus.

But I’ve noticed — just in the last four or five years — that this consensus is shifting. Why? Because the definition of “transgressive” is shifting. It’s no longer appropriate to dismiss disco as superficial. More and more, we recognize how disco latently pushed gay, urban culture into white suburbia, which is a more meaningful transgression than going on a British TV talk show and swearing at the host. So is it possible that the punk‑disco polarity will eventually flip? Yes. It’s possible everyone could decide to reverse how we remember 1977. But there’s still another stage here, beyond that hypothetical inversion: the stage in which everybody who was around for punk and disco is dead and buried, and no one is left to contradict how that moment felt. When that happens, the debate over transgressions freezes and all that is left is the music. Which means the Sex Pistols could win again or maybe they lose bigger, depending on the judge.

“There is a justice-driven part of my brain that believes — or needs to believe — that the cream rises to the top, and the best work endures by virtue of its goodness,” argues the music writer Amanda Petrusich, author of “Do Not Sell at Any Price,” a dive into the obsessive world of 78 r.p.m. record collectors. “That music becomes emblematic because it’s the most effective. When I think of rock and who might survive, I immediately think of the Rolling Stones. They’re a band that sounds like what we’ve all decided rock ’n’ roll should sound like: loose and wild. Their story reflects that ethos and sound: loose and wild. And also, they’re good.”

This is true. The Rolling Stones are good, even when they release records like “Bridges to Babylon.” They’ve outlived every band that ever competed against them, with career album sales exceeding the present population of Brazil. From a credibility standpoint, the Rolling Stones are beyond reproach, regardless of how they choose to promote themselves: They’ve performed at the Super Bowl, in a Kellogg’s commercial and on an episode of “Beverly Hills, 90210.” The name of the biggest magazine covering rock music was partly inspired by their sheer existence. The group members have faced arrest on multiple continents, headlined the most disastrous concert in California history and classified themselves (with surprisingly little argument) as “the greatest rock and roll band in the world” since 1969. Working from the premise that the collective memory of rock should dovetail with the artist who most accurately represents what rock music actually was, the Rolling Stones are a strong answer.

But not the final answer.

NASA sent the unmanned craft Voyager I into deep space in 1977. It’s still out there, forever fleeing Earth’s pull. No man‑made object has ever traveled farther; it crossed the orbit of Pluto in 1989 and currently tumbles through the interstellar wasteland. The hope was that this vessel would eventually be discovered by intelligent extraterrestrials, so NASA included a compilation album made of gold, along with a rudimentary sketch of how to play it with a stylus. A team led by Carl Sagan curated the album’s contents. The record, if played by the aliens, is supposed to reflect the diversity and brilliance of earthling life. This, obviously, presupposes a lot of insane hopes: that the craft will somehow be found, that the craft will somehow be intact, that the aliens who find it will be vaguely human, that these vaguely human aliens will absorb stimuli both visually and sonically and that these aliens will not still be listening to eight‑tracks.

But it did guarantee that one rock song will exist even if the earth is spontaneously swallowed by the sun: “Johnny B. Goode,” by Chuck Berry. The song was championed by Ann Druyan (who later become Sagan’s wife) and Timothy Ferris, a science writer and friend of Sagan’s who contributed to Rolling Stone magazine. According to Ferris, who was the album’s de facto producer, the folklorist Alan Lomax was against the selection of Berry, based on the argument that rock music was too childish to represent the highest achievements of the planet. (I’m assuming Lomax wasn’t too heavily engaged with the debate over the Sex Pistols and “Saturday Night Fever” either.) “Johnny B. Goode” is the only rock song on the Voyager disc, although a few other tunes were considered. “Here Comes the Sun” was a candidate, and all four Beatles wanted it to be included, but none of them owned the song’s copyright, so it was killed for legal reasons.

The fact that this happened in 1977 was also relevant to the song’s selection. “Johnny B. Goode” was 19 years old that year, which made it seem distinguished, almost prehistoric, at the time. I suspect the main reason “Johnny B. Goode” was chosen is that it just seemed like a reasonable track to select. But it was more than reasonable. It was, either deliberately or accidentally, the best possible artist for NASA to select. Chuck Berry may very well become the artist society selects when rock music is retroactively reconsidered by the grandchildren of your grandchildren.

Let’s assume all the individual components of rock shatter and dissolve, leaving behind a hazy residue that categorizes rock ’n’ roll as a collection of memorable tropes. If this transpires, historians will reconstitute the genre like a puzzle. They will look at those tropes as a suit and try to decide who fits that suit best. And that theoretical suit was tailored for Chuck Berry’s body.

Rock music is simple, direct, rhythm‑based music. Berry made simple, direct, rhythm‑based music.
Rock music is black music mainstreamed by white musicians, particularly white musicians from England. Berry is a black man who directly influenced Keith Richards and Jimmy Page.
Rock music is preoccupied with sex. Berry was a sex addict whose only American No. 1 single was about playing with his penis.
Rock music is lawless. Berry went to prison twice before he turned 40.

Rock music is tied to myth and legend (so much so that the decline of rock’s prominence coincides with the rise of the Internet and the destruction of anecdotal storytelling). Berry is the subject of multiple urban legends, several of which might actually be true and which often seem to involve cheapness, violence and sexual defecation.

“If you tried to give rock and roll another name,” John Lennon famously said, “you might call it Chuck Berry.” That quote is as close as we come to a full‑on Sousa scenario, where the person and the thing are ideologically interchangeable. Chuck Berry’s persona is the purest distillation of what we understand rock music to be. The songs he made are essential, but secondary to who he was and why he made them. He is the idea itself.

Chuck Klosterman is a writer and journalist.

Recovering music biz still can’t cash in on YouTube

April 12, 2016

By Claire Atkinson NYpost.com 4/11/16

The music business has finally hit bottom and is beginning to bounce back.

After years of falling album sales and piracy woes, the global recording business notched its first significant revenue uptick in almost two decades last year, according to a new industry report set to be released on Tuesday.

The International Federation of the Phonographic Industry’s 2015 digital music report will show that revenue rose more than 3 percent, topping $15 billion, in 2015. That’s the first significant jump since 1998, when global revenue rose 4.8 percent.

While the long-awaited gain should have the industry singing an upbeat tune, the big record labels are far from happy with the state of music streaming.

Most of last year’s revenue growth came from paid subscription services, a category that includes Apple Music, and Spotify’s premium tier. That’s a business the labels would like to keep growing.

But the industry is less than pleased with the revenue artists and others collect from ad-supported services such as YouTube, where users flock to stream music and watch videos for free.

The IFPI report is expected to throw more shade on the Google-owned video platform, which is facing licensing negotiations with the big three record labels.

YouTube’s deals with Universal Music Group, Sony Music and Warner Music have either expired or will this year, the Financial Times reported on Sunday.

Last month, the Recording Industry Association of America slammed YouTube in a separate report, saying it doesn’t pay its fair share of royalties despite surging usage. That report revealed the music labels derived more revenue from vinyl than all the ad-supported YouTube consumption created in advertising revenue.

The IFPI report is expected to add to the noise surrounding ad-supported services by showing that just 4 percent of global revenue, or around $600 million, is derived from ad-supported platforms, of which YouTube is by far the biggest.

By comparison, paid subscription services generated an estimated $2 billion in revenue in 2015.

Total paid-music subscribers grew to 68 million in 2015, up from 41 million the previous year, the IFPI report will show. But that’s dwarfed by YouTube’s 900 million users.

“The main concern is the fact that ad revenue is not climbing in line with views,” said a top industry source. “The value of a stream is dropping and we want to make sure there’s a floor in the per stream rate.”

YouTube’s chief business officer, Robert Kyncl, has been making the industry rounds to explain how the music business can better monetize its advertising on its platform. Kyncl’s has been preaching that “free is the future, ad supported is the future,” one source said.

“To date, Google has paid out over $3 billion to the music industry — and that number is growing significantly year on year,” YouTube said in a statement to The Post.

“Only about 20 percent of people are historically willing to pay for music. YouTube is helping artists and labels monetize the remaining 80 percent that were not previously monetized.”

Here’s why the music labels are furious at YouTube. Again.

April 12, 2016

Peter Kafka recode.net  4/11/16

You’ve heard this song before: The music industry is mad at YouTube.

In the old days, the music business used to complain that YouTube took their music and didn’t pay them. Now the complaint has changed: Now the music guys say YouTube doesn’t pay them enough.

The music labels have been grousing about YouTube for a while now, but they have recently turned up the volume.

Last month, the RIAA, the labels’ American trade group, lobbed a volley at Google’s video service, arguing that YouTube doesn’t pay a fair price for all the music it gives its users for free. The IFPI, the label’s global trade group, should have a report out shortly which repeats the same charge.

The complaints come as the big three music labels — Universal Music Group, Sony and Warner Music Group — are set to renegotiate contracts with YouTube.

It would seem like the best way to get more money from YouTube would be to get a better deal this time around. But the labels say their bargaining power is reduced by the 1998 Digital Millennium Copyright Act, which gives broad protection to YouTube and other services that rely on content that users upload.

I asked RIAA head Cary Sherman to explain his industry’s beef with both the DMCA and with YouTube. Here’s an edited excerpt of our conversation. There’s also a response of sorts from YouTube at the end.

Peter Kafka: I don’t understand why the industry is complaining about YouTube and its use of the DMCA again. Viacom spent years on this in court, and got soundly defeated. Hasn’t everyone learned to accept this by now?

Cary Sherman: We accept the inevitability of death. It doesn’t mean we have to like it. There is now under way a study of whether the DMCA is actually effective and fulfilling its intended purpose, being conducted by the Copyright Office, and it has given us an opportunity for the community to collect our thoughts about just how dysfunctional the DMCA actually is. And to actually tell the government about it.

A lot of people would argue that the DMCA allowed Silicon Valley to build really big, really amazing and wonderful things. And that on the whole it’s a net plus for the U.S. and the world.

That assumes that only with the DMCA, as it was written in 1998, would that have been possible. We feel like the 1998 Internet is not the Internet of 2016. It’s a dramatically different Internet, and it’s time to take a fresh look at whether the balance that was struck in 1998 is effective in 2016.

And the answer is clearly “no.”

Just look at Silicon Valley. They’ve done an extraordinary job, and their market cap is worth gazillions of dollars. Look at the creative industries — not just the music industry, but all of them. All of them have suffered. We’re half the size we were. And we’re flat, and we haven’t been growing. And that’s true of all of the creative industries.

For the music industry, 70 percent of revenues now come from digital. We’ve licensed every different kind of model, but the revenues just aren’t coming in.

One of the problems is piracy, which continues to be a problem. The other is under-monetization, and that’s because of things like the DMCA, where some companies get the benefit of being able to distribute our content, without taking fair market value kind of licenses.

When you compare what we get when we get to freely negotiate, with a company like Spotify, vs. what we get when we are under the burden of an expansively interpreted “safe harbor,” when you’re negotiating with somebody like YouTube, you can see that you’re not getting the value across the platforms that you should.

What’s the single biggest change in the DMCA that you’d like to see?

Notice and stay down, instead of notice and take down. There are 100 copies of a song. We can’t just say to YouTube “we didn’t license this Pharrell song, take it down.” They will not just take down all 100 copies. They’ll take down only the one file that we’ve identified. We have to find every one of them, and notice them, and then they’re taken down, and then immediately put right back up. You can never get all the songs off the system.

If we had a system where once a song was taken down, you had a filtering system that prevented it from going back up, we wouldn’t have to be sending hundreds of millions of notices on the same content over and over again.

Maybe then we’d begin to make a difference with all the pirated copies on all of the websites. But as long as there isn’t a stay down, we can’t deal with that. It’s just not possible.

The labels do have deals with YouTube. If they don’t like those deals, why not negotiate better ones or walk away? All of them expire this year.

The way the negotiation goes is something like this: “Look. This is all we can afford to pay you,” YouTube says. “We hope that you’ll find that reasonable. But that’s the best we can do. And if you don’t want to give us a license, okay. You know that your music is still going to be up on the service anyway. So send us notices, and we’ll take ’em down as fast we can, and we know they’ll keep coming back up. We’ll do what we can. It’s your decision as to whether you want to take our deal, or whether you just want to keep sending us takedown notices.”

That’s not a real negotiation. That’s like saying, “That’s a real nice song you got there. Be a shame if anything happened to it.”

So you’re saying the labels aren’t really free to walk away from YouTube — that their music stays up there whether they want it to or not.

We have experience with this. Because Warner Music, a few years ago, decided that they didn’t want their music on YouTube, because it was hurting all the rest of their deals. So they didn’t do a license with YouTube. A year later, they threw in the towel. What was that year like? They spent a fortune trying to take down their music. They could never even keep up with all the counter-notifications that were constantly being filed, so the music was going right back up anyway. And they were earning no revenues at all. So finally they threw in the towel, and accepted the licenses.

That’s what it’s like to negotiate, when somebody can claim the benefit of an expansive safe harbor. They’re taking the benefit of a safe harbor that was intended for people who were passive, neutral intermediaries. People like Verizon, where the content is just passing through their system. They’re not making money off of distributing content. YouTube does.

Katy Perry, among other people, is lobbying on behalf of the music business. It seems like getting rich musicians to press your case won’t help you change the laws. Do you think there’s a practical chance that will happen?

Two different questions. First: Katy Perry. The petition she filed makes clear that she’s worried about the next generation of songwriters and artists that are coming up. She isn’t complaining that she isn’t making enough money.

She made that money in the era that you’re complaining about. She made that money as a YouTube star.

Yeah. Well, the reality is that the industry is more stratified than ever. There are some people who have done really well. But it’s harder and harder for more musicians to make a living. Because the revenue that they’re getting from streaming isn’t keeping pace with the revenue that they used to be able to earn. We’re trying to get to a point where the streaming ecosystem works for everybody.

In terms of whether Congress will do something about it? We don’t know. It’s hard to get anything through Congress. But Congress has been taking a look at the copyright law for 3 years now. We want them to understand that one of the most important things affecting the value and ability of copyright to survive, is to take a fresh look at the DMCA

It’s complicated, right? The labels used to be investors in YouTube, right before it sold to Google. Two of the labels are partners with YouTube in Vevo. It doesn’t look like they’re in real opposition. It looks like they’re partners who don’t like terms of a deal they did.

I think the record companies would like to be partners with YouTube. But it’s a little hard to call it a partnership when it’s so one-sided in terms of the negotiating leverage.

Some of the loudest voices against YouTube used to be the video companies – movie studios, TV companies. Viacom was the one who sued them. They’re not vocal in the way that the music labels are now. Why aren’t they joining you?

Maybe it’s because YouTube is not the place where you go for your pirated movies. But it certainly is the place you go for your pirated… I shouldn’t call it pirated. It’s “user-uploaded.” They’re putting up an entire album, and a picture of the artist, and therefore YouTube has become the largest on-demand music service in the world.

———————-

I offered YouTube executives the chance to rebut Sherman’s argument via a separate Q&A, but they declined. The company did point me to the response they offered when the RIAA criticized them last month:

“To date, Google has paid out over $3 billion to the music industry – and that number is growing year on year. This revenue is generated despite the fact that YouTube goes way beyond music to include popular categories such as news, gaming, how-to, sports and entertainment. And with the recent launch of the YouTube Music app, we recently launched a new, dedicated music experience with the goal to deliver even more revenue to both artists and the music industry more broadly. Past comparisons to other audio-only, subscription music services are apples to oranges.”

YouTube and Google have also responded in more depth, via the comments they’ve filed to US Copyright Office as part of the study Sherman mentioned. Here’s a passage that deals with many of the RIAA’s complaints:

Some in the recording industry have suggested that the safe harbors somehow diminish the value of sound recordings, pointing to YouTube and blaming the DMCA for creating a so-called “value grab.” This claim is not supported by the facts. As an initial matter, it is important to understand that YouTube has had license agreements in place with both major and independent record labels for many years; it is simply incorrect to say that YouTube relies on the DMCA instead of licensing works. Those pressing the “value grab” argument also assert that the royalty rates in these licenses are too low, allegedly because the DMCA’s notice-and-takedown process makes it too difficult for record labels to withdraw their works from YouTube in the face of users re-uploading those works. This claim, however, ignores Content ID, which has been in existence since 2008 and which record labels (and many other copyright owners) use every day to monetize their works on YouTube. Thanks to Content ID, record labels do not have to rely solely on the DMCA’s notice-and-takedown process on YouTube—they can remove any or all user-uploads of their works from the platform on an automated and ongoing basis. Indeed, since January 2014, over 98% of all YouTube copyright removal claims have come through Content ID. Although business partners can be expected to disagree from time to time about the price of a license, any claim that the DMCA safe harbors are responsible for a “value gap” for music on YouTube is simply false.

Will Streaming Music Kill Songwriting?

February 9, 2016

John Seabrooke NewYorker.com 2/08/16
For many songwriters, the wake-up call comes when they have their first streaming hit. For Michelle Lewis, an indie-rock singer-songwriter who now writes primarily for other artists, it was the song “Wings,” which she co-wrote for the British girl group Little Mix. Lewis and her writing partner, Kay Hanley, the former lead singer of the band Letters to Cleo, had been busy working on a Disney show (children’s TV relies heavily on alt-rock music), and at first she didn’t realize how popular the song had become.

“We were emerging from this bubble,” she told me, “and I realized, ‘I have this hit. This is going to be good! Nearly three million streams on Spotify!’ And then my check came, and it was for seventeen dollars and seventy-two cents. That’s when I was, like, ‘What the fuck?’ So I called Kay.”

“And I said, ‘What the fuck?’ ” Hanley recalled.

“And then we started reading and talking to our friends and fellow-songwriters,” Lewis said. Eventually, they found their way to Dina LaPolt, a music lawyer in Los Angeles, who specializes in copyright and songwriter issues.

Lewis: “And Dina said to us, ‘Where the fuck have you bitches been?’ ”

Hanley: “She literally said that.”

LaPolt told them that unless streaming rates were changed and the music-licensing system were overhauled for the digital age, the profession of songwriting was on its way to extinction. And they were on their own, she added, because, while everyone loves a songwriter, members of the profession have no actual bargaining power, whether via a union or another powerful institution, and so, when the money in the industry dries up, they’re in serious trouble.

“Our jaws were on the floor at the end of talking to her,” Lewis said. “And then it was, like, ‘We have to tell our friends.’ ”

If streaming is the future of music, songwriters may soon be back to where they started. Stephen Foster, America’s first professional songwriter, was also the first to die broke. His songs, which include “Oh! Susanna,” “Camptown Races,” “Old Folks at Home” (a.k.a. “Swanee River”), “My Old Kentucky Home,” and “Jeanie With the Light Brown Hair,” made lots of money for other people—music publishers, music-sheet sellers, minstrel-show promoters, concert-hall owners, and star performers. But not very much of that money reached the chronically impecunious Foster, who died, in 1864, in New York City, at the age of thirty-seven, with three pennies in his pocket, some Civil War scrip, and a scrap of paper on which the songwriter had written “Dear friends and gentle hearts.” His best-known melody, “Beautiful Dreamer,” came out only after his death.

Over the next century and a half, American songwriters’ prospects improved dramatically, largely thanks to the Copyright Act of 1909 and subsequent government intervention. Under the regime that emerged in the first half of the twentieth century, composers own the “publishing” rights to their songs—the copyright on the song’s words and melody, as they exist on paper. Most songwriters assign part of these rights to a music publisher in exchange for an advance and for marketing services. If the music publisher succeeds in getting a song recorded, the songwriter then grants the backers of the recording—a record label, generally—what’s known as a “mechanical license.” (The word “mechanical” derives from the days when player-piano rolls were the primary commodity of the nascent record business.) With each copy of the record sold, the owners of the master recording, as the audio copyright is known, pay a mechanical royalty to the owners of the song’s publishing rights. Today, that royalty rate works out to about nine cents per copy.

Songwriters also earn performance royalties when a record is played in a large commercial venue, such as a restaurant or a theater. With the spread of broadcast radio, in the nineteen-twenties and thirties, performance royalties became a significant part of a songwriter’s potential income. Generally, when a song plays on the radio, the station pays the publishing-rights holders a fixed rate that represents a percentage of the station’s advertising revenues. The owners of master recordings, on the other hand, don’t make anything from radio play, nor do the performers. The reasoning behind this bizarre arrangement, which apart from the U.S. exists only in Iran, North Korea, and China, is that the promotional value of radio play is recompense enough; the labels and performers can make up the difference with record and ticket sales.

In 1941 the Justice Department issued what’s known as the Consent Decree, which allowed performing-rights organizations (P.R.O.s, or collecting societies) to process the licensing fees for large numbers of songwriters, collectively, for obvious reasons of efficiency. In return for an exemption from what would normally be treated as an antitrust issue—private owners banding together to set prices—the music publishers agreed to let a federal court set the royalty rates, if the parties disagree on them. The Consent Decree also mandated compulsory licensing, requiring songwriters to make their entire catalogues available to whomever pays the licensing fee. Accordingly, songwriting is now the most heavily regulated of the creative arts. Seventy per cent of a songwriter’s income comes from rates set by the government, rather than by the songwriters and publishers, on the free market.

Regulation helped to insure that songwriters avoided Stephen Foster’s fate and were paid fairly for their work. Today, the system supports perhaps a million American songwriters. (The estimate is based on the memberships of the two largest collecting societies, ASCAP and B.M.I., and a guess about the much smaller SESAC, which doesn’t publish its numbers.) It offers a decent living for many in the trade, and the prospect of extraordinary wealth for a few. Indeed, the amount of money that a hit song can earn for its composers is staggering. Court papers in a recent infringement dispute involving Pharrell Williams, Robin Thicke, and the estate of Marvin Gaye have revealed that the song “Blurred Lines” earned almost seventeen million dollars in under two years, mainly from radio play, with Thicke and Williams each getting more than five million dollars. And a long-running suit launched by the family of Randy California, the former front man of the band Spirit, whose 1968 song “Taurus” is alleged to sound a lot like “Stairway to Heaven,” calculated that the Led Zeppelin song, which was released in 1971, had earned half a billion dollars by 2008. Since copyrights last for up to seventy years, depending on when the song was released, the rights to a couple of hit songs can support an entire family for several generations.

The remarkable worldwide popularity of American music is often ascribed, rightly, to the talent and diversity of the country’s artists and musicians. But it also happened because of a system that inspired and allowed songwriters to devote themselves full time to their craft. (Of the top ten most-downloaded songs in the U.S. in 2015, according to Nielsen, only one, Fetty Wap’s “Trap Queen,” was written solely by the artist.) The system not only rewarded proven talents; it also let promising novices secure advances against future earnings, affording them the time to learn their craft gradually, until they too had a hit and could begin nurturing the next generation of talent.

But as the music business began to be slowly and agonizingly stretched across the rack of the digital age, the songwriter’s comfortable spot amid music’s royalty flow started slipping away. The steep decline in album sales—the result of a shift from brick-and-mortar distribution to digital retail, and now to streaming—has dealt a blow to songwriters’ mechanical-royalty income. (In the album era, even a throwaway track on a best-selling LP earned as much for a songwriter as the hits that made people purchase the album in the first place.) And, as Lewis’s experience demonstrates, the performance-royalty rates that songwriters command from streaming services such as Pandora, Spotify, YouTube, Amazon Prime, and Apple Music are in most cases far lower than the ones they get for terrestrial-radio plays—the entire royalty payout, remember. Typically, under terms that the record labels worked out with the streaming services (and somehow persuaded the federal rate courts to sign off on), when a song is streamed, sixty per cent of the income goes to the owners of the sound recording, thirty per cent goes to the service itself, and ten per cent goes to songwriters and publishers. When a song is streamed on an Internet radio site—Pandora is by far the largest—the holders of publishing copyrights receive a thousandth of a cent per stream.

Why are streams worth so much less than radio spins? The standard reason given is because a stream is generally a one-to-one transaction, whereas a spin goes out to thousands or even millions of people at a time. But if millions of people hear your song on YouTube, and you still haven’t received a check, you begin to sense that something is amiss. Also, why is the value of the publishing copyright worth so much less, relative to the sound-recording copyright, in the streaming world? There appears to have been a digital land grab by the record labels, who own most of the master recordings for the U.S. catalogue. Having lost out, historically, on income derived from performance royalties and sound recording for terrestrial radio, they were careful, in the digital era, to guarantee themselves income, and in some cases equity interest, from streaming.

Kara DioGuardi, a longtime songwriter known for her turn as a judge on “American Idol,” told me recently, “I’ll be at a party and I’ll hear a friend’s song, and then I’ll realize it’s being streamed. And I’ll think, ‘Wow, that sucks,’ because I know the songwriters aren’t getting paid what they deserve.” For songwriters, there are both big, sweeping rationales and smaller, more nuanced reasons to hate streaming services. Perhaps the greatest outrage, apart from the primal sense that the services are picking their pockets, is directed at the corporations benefitting most from streaming music—Google, Amazon, Apple. These companies, which are among the wealthiest on earth, use music to draw traffic to their sites and keep people within their ecosystems, but for them, the business end of music is hardly more than a rounding error. In 2015, for example, the global music-copyright industry brought in twenty-five billion dollars, barely more than a tenth of Apple’s revenues for the year. What makes the situation positively Kafkaesque is that under the terms of the Consent Decree, which was created in part to prevent songwriters from monopolizing the market, composers are now often compelled to license their songs to these monopolistic behemoths at absurdly low rates.

As for the more nuanced reasons, some streams are worse than others. Spotify’s free, ad-supported platform has been the source of much complaint, as has YouTube’s. Spotify’s total revenues from its ad-supported tier in the first half of 2015 were a paltry hundred and sixty-two million dollars, sixty million less than the revenues from the sales of vinyl albums and EPs over the same period. Revenues from the company’s paid tier are usually marginally better than from its ad-supported one, but it’s still having issues with publishing royalties there. It appears that while the company was assiduous about getting the licenses for the audio-recording copyrights from the labels, it was less thorough about obtaining all of the necessary mechanical-publishing licenses, partly because the metadata needed to identify the rights holders is missing from many song files. Spotify is holding about seventeen million dollars in royalties in a segregated account until these copyright holders can be identified (publishers say that the number should be closer to twenty-five million), and is in the process of building a database that will make it easier to identify them.

In late 2015, David Lowery, the frontman of Cracker and Camper van Beethoven, and a persistent industry gadfly, filed a class-action lawsuit against Spotify, charging the company with willfully infringing the mechanical rights to a number of his songs, and those of others, and seeking up to a hundred and fifty million dollars in damages. According to TechDirt’s breakdown of the suit, Lowery is arguing that Spotify is failing to obtain the necessary mechanical licenses for many of the compositions in its database, including some of his; the case may hinge, among other issues, on whether the company properly complied with technical requirements for situations in which it didn’t know who the copyright holders were. (A second lawsuit was filed by the singer-songwriter Melissa Ferrick in early January.)

Certainly the missing names did not slow co-founder Daniel Ek’s quest to license all the world’s music. However, it’s not entirely clear whether Spotify even needs a mechanical license to stream music. A stream isn’t a copy in the same way that a download is—in many ways, it is more like a performance. The Copyright Act of 1976 is too dated to provide much useful statutory guidance.

Amid all of the anger and uncertainty, last year LaPolt, the copyright lawyer, brought together Lewis, Hanley, and some hundred other songwriters, and inspired them to found an education and advocacy organization, Songwriters of North America (SONA), that seeks major reforms in the song-licensing system, to better suit the digital era. There are already a few legislative initiatives under way, nationally—among them the Songwriter Equity Act, a bill first introduced by Doug Collins, a Republican from Georgia, and Hakeem Jeffries, a Democrat from New York, and then in the Senate by, among others, Orrin Hatch, who is himself a prolific songwriter. (Copyright issues make for strange political bedfellows.) It would amend two sections of the Copyright Act of 1976, to raise the rate songwriters get from streaming services. Another effort, the Fair Pay, Fair Play Act—which would require terrestrial-radio companies to begin paying royalties to audio-recording-rights holders, as well as to songwriters, alongside some reforms to the digital-music industry—was introduced in the House of Representatives in 2015.

In LaPolt’s view, the best hope for real change is a major revision of the Copyright Act of 1976. Bob Goodlatte, a Republican congressman from Virginia and a techie, has made copyright reform a signature issue of his tenure as chairman, for the past two years, of the House Judiciary Committee, holding twenty subcommittee hearings on the issue, and inviting a number of songwriters, including Rosanne Cash and Sheryl Crow, to appear. LaPolt thinks it is unlikely that Goodlatte would leave the chairmanship (in 2017) without at least trying to effect significant reform.

Songwriters have never really had to organize before, but they’re learning, Lewis said. “It’s because we’ve been doing fine. As long as the checks showed up it was, like, ‘This has nothing to do with me.’ But about two years ago people started saying, ‘Hey, who moved our cheese?’ ” Even now, she added, some writers are loath to complain, because “the psychology is, ‘I can’t believe they’re paying me to do this at all, and I’d better not rock the boat or they’ll find out about my scam!’ ”

Savan Kotecha, whose “Love Me Like You Do,” was recently nominated for a Grammy, told me that songwriters are increasingly aware of the stakes. “It affects how you plan for the future and whether you invest in new talent, because in the streaming world you won’t necessarily see any return on your investment. For now, terrestrial radio is holding out. But radio could go away, because everyone has phones. And once streaming gets into cars in a big way, it’s over.”

Indeed, music listeners continue to embrace streaming. On-demand streaming-service usage rose ninety-three per cent in 2015, with three hundred and seventeen billion songs streamed, in all. Adding YouTube and other unpaid services pushes the total into the trillions. Meanwhile, album sales, the longtime mainstay of the business, continued their decline, in spite of the record-breaking success of Adele’s “25”, which accounted for three per cent of the entire U.S. album market in 2015, according to Billboard. For a songwriter, taking a stand against streaming can seem like taking a stand against your own future.

Performers are facing many of the same challenges, but they, at least, have the option of going on tour. Without royalties, songwriters will have only dear friends and gentle hearts to support them. That didn’t work out so well for Stephen Foster.

Discogs Turns Record Collectors’ Obsessions Into Big Business

December 30, 2015

By BEN SISARIO NYTimes.com 12/29/15

BEAVERTON, Ore. — In the beginning, Kevin Lewandowski just wanted a way to keep track of his techno records.
Now, 15 years later, the free website he set up for that purpose, Discogs.com, has become a vital resource for record collectors and the music industry, with a sprawling database of more than 6.5 million releases. And with an online marketplace through which nearly $100 million in records will be sold this year, Discogs has carved out a valuable niche in a market dominated by companies like Amazon and eBay.

Borrowing from Wikipedia’s model of user-generated content, Discogs has built one of the most exhaustive collections of discographical information in the world, with historical data cataloged by thousands of volunteer editors in extreme detail. The site’s entry for the Beatles’ White Album, for instance, contains 309 distinct versions of the record, including its original releases in countries like Uruguay, India and Yugoslavia — in mono and stereo configurations — and decades of reissues, from Greek eight-tracks to Japanese CDs.

“Discogs is vital, essential, irreplaceable — a resource I use every day,” said Rob Sevier, a founder of the Numero Group, a Chicago label that specializes in reissuing particularly obscure material.

Discogs’s goal of cataloging the world of recorded music is supported through the site’s marketplace, which lets sellers link to specific versions of each release — that particular Uruguayan White Album, for example — and has endeared Discogs to collectors and record dealers.

“There’s no way an independent record store can stay open without it,” said Stephen Benbrook, the owner of Zion’s Gate Records, a store in Seattle, who said Discogs was his primary outlet online, with about 500 orders a month.

The Discogs marketplace has 24 million items for sale, while eBay’s music section lists almost 11 million. Through October, Discogs processed $79 million in sales, and, with more than 80,000 orders a week, the site is on track to do nearly $100 million in business by the end of the year, said Chad Dahlstrom, its chief operating officer. Discogs takes an 8 percent fee on orders, which Mr. Lewandowski said made the company comfortably profitable.

On a recent Monday morning at the company’s headquarters in an office park just outside Portland, Mr. Lewandowski, 40, described how he was a fan of dance music in the 1990s. He connected with other collectors online, he said, but wanted a detailed reference site for the music along the lines of the Internet Music Database.

“There’s a record-collector gene,” he said. “Some people want to know every little detail about a record.”

Moonlighting from his job as a programmer at Intel, he started a basic, open-source database using about 250 of his own records — the first entry was for a double 12-inch single by the Swedish D.J. the Persuader — and revealed it to fellow collectors in October 2000. Two years later, he took a buyout from Intel and devoted himself to Discogs.

The site, once run from a computer in Mr. Lewandowski’s closet and originally restricted to electronic music, has grown rapidly. It now has 37 employees around the world, 20 million online visitors a month and three million registered users. It eventually opened to all genres of music and has a mission of cataloging every record in existence.

The site’s supporters, including the more than 260,000 people who have contributed content, pursue that mission with zeal, but they still have a long way to go. Competing collector sites, like 45worlds, have plenty of titles that are missing from Discogs, like a 78 r.p.m. acetate of the Beatles’ “Devil in Her Heart” from 1963. And proprietary databases like Gracenote, owned by Tribune Media, claim more titles over all.

Casual users may simply consult Discogs to check the text on old labels or to see whether a record was released in colored-vinyl variations. Those who sign up for accounts can also tag items as being part of their collections, as well as communicate with other users and buy or sell copies. The most dedicated create and edit listings, actions for which there are strict and elaborate guidelines. The first rule: “You must have the exact release in your possession.” A 40,000-word post lays out how to identify run-out information — the obscure codes marked on the inner portion of a record, closest to the label.

“We are trying to approach it from a very factual point of view,” said Nik Kinloch, the first employee hired by Mr. Lewandowski. “You have the music release in front of you. What does it say on it? That is the source of truth for building the discography.”

Like Wikipedia, Discogs has sometimes heard from people or companies that want to remove unflattering information. But with Discogs, those requests tend to be more about D.J.s wanting to update old stage names than about the right to be forgotten.

“The funniest one I’ve heard,” Mr. Lewandowski said, “was from a D.J. in Vancouver, B.C., who said his family was Pentecostal and they don’t allow dancing. ‘Can you remove my name from the site so they don’t find out?’” the D.J. asked.

Out of principle, Mr. Lewandowski said, the site does not remove historical data.

The site’s marketplace business is global: About 60 percent of its customers are in Europe, and a growing portion of its listings are in Japan. (The biggest seller in Japan this year: Michael Jackson’s “Black or White” 45. Seventy copies sold to customers there.) And Discogs’s growth has closely mirrored the explosion of vinyl sales. Those records have far exceeded all other formats on the site; almost 2.8 million vinyl records sold this year, compared with 628,000 CDs.

But as much as it has grown, Discogs still represents a small niche of the overall collectors’ market. EBay has 159 million active buyers, and in the third quarter alone they spent $19.6 billion on transactions through the site — in which music is just one sliver of its offerings — according to company statistics.

Mr. Lewandowski, who is the sole owner of Discogs, said he had no interest in selling the business. He has watched other players enter the field over the last 15 years, including Amazon, which in 2008 introduced SoundUnwound, a Wikipedia-like site for music. But it was quietly shut down four years later. Discogs may have survived because of the innovation of its marketplace, giving collectors an incentive to expand the database with every imaginable detail.

“I want it to go on forever,” Mr. Lewandowski said.

Smaller music companies find it hard in face of offerings from big technology groups

December 4, 2015

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Robert Cookson, FT.com 12/13/15

Smaller music companies find it hard in face of offerings from big technology groups

Singers such as Rihanna have embraced streaming services
For record labels, music streaming is big business. They earned $2.2bn from services such as Spotify, Deezer and Pandora last year — a figure that has quintupled in five years. It is also a golden age for music lovers, as listening to songs has never been easier.
But for the streaming services themselves, survival is a struggle. None of the most popular services has ever turned a profit and some people doubt any of them ever will.
Last month, Rdio, a US-based streaming start-up launched in 2010 by Skype founders Niklas Zennström and Janus Friis, filed for bankruptcy — owing its creditors more than $210m. Pandora, a larger rival, plans to buy some of Rdio’s assets for $75m.
A month earlier, French streaming service Deezer aborted an attempt to raise €300m in an initial public offering after investors baulked at its touted €1bn valuation.
The future appears bleak for companies whose sole business is music streaming. An increasing number of investors and people in the record industry expect that digital music distribution will be dominated by a few large, cash-rich technology groups — in particular, Apple, Google and Amazon.
“When you have the likes of Apple fighting against you, it becomes very difficult to survive,” says Mark Tluszcz, chief executive of Mangrove, the venture capital firm and one of the original investors in Rdio. It sold its shares several years ago after concluding that no matter how many subscribers the streaming service managed to attract, it would never be able to turn a profit.
“As a streaming platform, your relative value is nil, because you don’t own the content,” he says. “This is not a good business to be in.”
The fundamental challenge for streaming services is that they are largely at the mercy of music copyright holders — including Sony Music Entertainment, Vivendi’s Universal Music Group, and Warner Music Group. These three record companies alone control about three-quarters of the $15bn-a-year global recorded music market.

To stand a chance of attracting a large number of subscribers, a streaming service must offer a broad catalogue of songs from all three major record companies. That means that streaming services essentially have no choice but to agree the licensing terms demanded by the majors, no matter how onerous.
Even Spotify, the market leader in streaming, is heavily lossmaking. The company has more than 20m subscribers, who pay about $10 a month for on-demand access to a catalogue of more than 30m songs. It also offers a free version of the service, which gives users less control over what songs they hear and includes advertising.
Under the terms of Spotify’s licensing contracts, it must pay out 70 per cent of its revenues in the form of royalties to record labels and music publishers. As a result, while the company’s revenues surged last year to almost €1.1bn, it incurred an operating loss of €165m.
Spotify can absorb its losses for the time being. The company raised more than $500m this year in a funding round that valued the Swedish company at $8.5bn.
But venture capital has all but dried up for smaller streaming companies, and many are disappearing. The number of licensed digital music companies has declined by about 100 in the last three years to about 400, according to IFPI, a record industry body.

Anthony Bay, chief executive of Rdio, whose operating expenses were more than double its monthly revenues of $1.6m, says that “it’s incredibly difficult for an independent company to be successful in streaming, when no one in streaming is profitable”.
Making matters harder for independent operators is that they have to compete against technology groups that subsidise their streaming operations to achieve wider commercial goals. Apple, whose annual revenues exceed $230bn, has long used music as a loss-leader to help it sell devices such as the iPhone, first with the iTunes download store and now with streaming service Apple Music.
“Apple doesn’t care if the margins suck,” says Mr Bay.
Google, Amazon and a number of telecoms companies are also using music streaming to lure internet users into their spheres of influence — and are happy to pay record companies handsomely for the privilege. In the short term, this is boosting revenues for the record industry.
But Mr Bay warns the lack of profits in streaming bodes ill for the sector in the long term.

“There are no healthy industries on this planet where the distribution channels don’t make money,” he says.
Others are also concerned about the way that digital music distribution is evolving.
Lohan Presencer, chief executive of Ministry of Sound, an independent record label, says that “it’s very dangerous relying on companies whose primary business is not music to subsidise the music industry”.
One day, he forecasts, these companies will lose interest in music and they will seek to drive down prices.
Mark Mulligan, analyst at Midia Research, adds that if the record industry is to maximise its revenues from streaming in the future, the market “needs innovation from smaller players”. Allowing the technology groups to dominate, he warns, “locks the digital music market into a very narrow trajectory”.