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stories filed under: "distribution" 

Tue, Aug 21st 2018 9:32am

artists, distribution, inefficiencies, middlemen, music, musicians, revenue


Only 12% Of Music Revenue Goes To Actual Artists

from the rent-seeking-is-profitable dept

Back in 2010, we posted an infographic from The Root showing just how little money that was spent on music actually went to the artist: In 2015, using a report put out by Ernst & Young, we put together our own graphics showing how much of streaming went to the actual artists: You may be noticing a pattern? Very little of the money being made actually goes to the artist. Now we have even more data on this. Citibank recently released a massive and incredibly thorough report on the entire music industry showing how and where the money is made. There's lots of interesting and useful information in the report, but the headline grabbing fact is that musicians end up with just about 12% of global music revenue. As I said, the report is incredibly thorough (and a really useful read if you want to get a sense of just how convoluted and complex the music business really is), but the key is that there was ~$43 billion spent on music in 2017. Approximately $25 billion of that went to everyone (outside of the labels) who helped make the music available: digital streaming services, retail stores, concert venues: That leaves $18.2 billion in money distributed out to the labels. But of that amount, only about $5 billion actually goes to artists, which means right around 12% goes to artists: Of course, it's especially notable that a significant chunk of that revenue going to artists actually comes from... live performances: This shouldn't be a surprise. Hell, we've spent the better part of two decades here talking about how artists need to embrace "scarcities" where they can make money, with live shows being a big part of that. And we kept having people from the recording industry scream about us saying that, but the numbers above don't lie. Citibank notes that one of the big reasons live drives so much artist revenue: You don't have the same amount of monopolistic middlemen sucking the artists dry:

If we divide artists’ incomes into four groups — Concerts, Music Platforms (Spotify, Apple, YouTube, Sirius, FM radio), Music Publishing, and Music Sales (CD, digital downloads) — it’s clear that concerts have, by a wide margin, contributed most significantly to the growth in an artist’s income. That’s because music labels don’t directly participate in concert economics. But, they do participate in the revenues collected by the various music platforms (like Spotify, Apple, Sirius and YouTube).

That statement isn't 100% accurate, as many artists these days are signed to so-called 360 contracts, in which some of their live revenue also goes to the labels, but the general concept holds. In short, reading through this report, you see that the entire music ecosystem is a huge mess. And it's not hard to see how this developed. Basically with each new layer of innovation, rather than rethinking how we handle music and copyright, we simply slapped on another set of royalties and rights. That's why there are so many different kinds of royalties that have to be paid to do basically anything in music (synch rights, mechanicals, performance rights and more for each the sound recording and the composition). In the Citibank report they show this nice graphic, which I'd argue overly simplifies the reality: But each of these really seems to be a use of copyright to prop up another set of middlemen, and remove the effects of competition and innovation from ever touching them. And so we keep building this ever more convoluted house of cards, built on a giant mess of a copyright system, where massive inefficiencies mean that these propped up middlemen end up taking home most of the money.

And, as the Citibank report nicely summarizes, thanks to the internet, artists could connect much more directly with fans and take home a lot more money: Oh, and the real kicker in all of this? For years, the record labels (and some musicians) have been screaming about how piracy is to blame for people no longer spending on music. Except, of course, that's hogwash. As we pointed out a few years back with our very own Sky is Rising report (and, to a lesser extent, with our Carrot or the Stick? report) there's still plenty of spending happening on music. Indeed, the Citibank report shows consumer spending at an all time high: In short, lots of money is still going towards music, but thanks to a ridiculous historical legacy of copyright law that kept piling on new rights, rather than cleaning out obsolete ones, there's a massive inefficient infrastructure whose only purpose basically seems to be to collect a bunch of the money for themselves, leaving 12 cents on the dollar for the actual artists.




Fri, Dec 1st 2017 7:39pm

asset forfeiture, copyright, criminal asset forfeiture, distribution, doj, martin shkreli, once upon a time in shaolin, wu tang clan


What Happens If The DOJ Ends Up With Martin Shkreli's Sole Copy Of The Wu Tang Clan Album?

from the questions-questions-questions dept

So, this story has been bouncing around the internet quite a bit today, but in case you somehow missed it, the Justice Department is seeking to get its hands on the only copy of the Wu Tang Clan album Once Upon a Time in Shaolin. In case you somehow missed this story, there are a few separate background pieces that are necessary to explain. First up, as a combination business model experiment/publicity stunt, back in 2014, Wu Tang Clan announced that it would be selling just a single copy of their latest album. It was an interesting attempt to bring some sort of scarcity back to music and see how the market would respond.

A year and a half later, a totally different story dominated the news. A story about a pharmaceutical company most people hadn't heard of, named Turing Pharmaceutical, buying up the rights to a drug called Daraprim, that many AIDS and cancer patients relied on... and jacking up the price on it from $13.50 per pill to $750 per pill. Soon after that, the young CEO of Turing, named Martin Shkreli, had his smirking face plastered all over the news for his trollish "I'm a villain, but so fucking what" response to all the hatred directed his way.

What does one story have to do with the other? Well, sometime after Martin Shkreli became everyone's favorite villain, it was revealed that he was the one who had purchased Once Upon a Time in Shaolin for $2 million. While Shkreli, at times, has hinted at releasing the music, or even reselling it, nothing much has come of it. At the very end of 2015, Shkreli was arrested -- not over jacking up drug prices, but for securities fraud.

Right after the arrest, Sarah Jeong wrote a fantastic article about how the arrest might lead to the album getting out. The 4th item on the list... asset forfeiture:

If Shkreli is convicted, the direct proceeds of his crimes will now belong to the government. This is what is known as criminal asset forfeiture. (The government has not sought civil asset forfeiture here, which is a slightly different form of seizure that does not require convicting a person of a crime.)

The United States has requested the forfeiture of "any property, real or personal, which constitutes or is derived from proceeds traceable" to the crimes in the indictment against Martin Shkreli. But when the US attorney said he did not know where the funds for the purchase of the Wu-Tang album came from, he was implying that the album would not be the subject of criminal asset forfeiture.

However, in our wild and improbable hypothetical, the album is implicated in the case and ends up being seized. If Shkreli is convicted, then the album might then become the subject of criminal forfeiture. The multi-million-dollar work of art would then end up on GSA Auctions, alongside dilapidated drug-running Chevrolets and extremely questionable lab equipment.

So... it's now two years later and that "wild and improbable hypothetical" has become fact. The government has filed for criminal forfeiture of Shkreli's assets. You may recall that he was convicted earlier this year and is in jail. As a quick side note: this is different than civil asset forfeiture -- the process we regularly complain about involving law enforcement taking money and assets from people without ever charging anyone for a crime. This is criminal asset forfeiture, after the person has been convicted of the crime, and where the government seeks to disgorge them of the profits from the criminal activity.

Here, the Justice Department notes that Shkreli owes them a lot of money. And it wants to get at his assets:

The Court should hold Shkreli financially accountable for his criminal conduct by requiring him to forfeit the amounts above, which total $7,360,450.00, and enter a forfeiture money judgment against him in that total amount. As set forth herein, this total amount represents a conservative computation of the proceeds Shkreli personally obtained as a result of his three different securities fraud crimes of conviction. Furthermore, pursuant to 21 U.S.C. § 853(p) and Fed. R. Crim. P. 32.2, the government seeks forfeiture of certain substitute assets of Shkreli in order to partially satisfy the forfeiture money judgment.

Got that last part? Basically, he should cough up this money, but if he can't we're going after his other assets... including:

Specifically, the following substitute assets owned by Shkreli have, to date, been identified and now that Shkreli has been convicted, the Court should direct that they be forfeited to the United States in partial satisfaction of his forfeiture money judgment: (a) $5 million in cash that is currently held in an E*Trade brokerage account ending in the digits “0258” as security for Shkreli’s bond, pursuant to orders of the Court dated January 7, 2016, August 24, 2016 and October 19, 2017; (b) Shkreli’s interest in and the monetary value of any and all shares held in an entity called Turing Pharmaceuticals; (c) the album “Once Upon a Time in Shaolin” by the Wu Tang Clan, as well as any proceeds derived from the sale of such album; (d) the album “The Carter V” by Lil Wayne, as well as any proceeds derived from the sale of such album; (e) an Enigma machine, as well as any proceeds derived from the sale of such machine; and (f) a Picasso painting, as well as any proceeds derived from the sale of such painting.

The other album listed, the Lil Wayne one, is another one that Shkreli claims he's the sole owner of. Except, of course, that one appears to have been a leak of some sort, and not through a Wu Tang style sale.

Of course, does this mean that once the US government gets it, the Wu Tang album can be released to the public? It would be a strange world if the US government were suddenly the record label for what would likely be a hugely popular album. But... that's unlikely to be how it works. Wu Tang Clan likely still holds the copyright (there was no indication that they also transferred the copyright with the album, though it's possible?). Jeong went through some of the scenarios in her post two years ago:

The weird thing is that it's not clear what happens to the contract that Shkreli signed when he bought the album. Presumably, the contract allowed him to transfer his limited distribution rights if he ever sold the physical record to another person. But what happens if the record gets seized by the federal government as part of a criminal forfeiture?

Let's say the government seizes the record, sells it on GSA Auctions, and then I buy it and upload the whole thing onto the internet. If Shkreli had uploaded the whole album for free, Wu-Tang couldn't sue him—as per the terms of the contract. But if I do it, there's no contract preventing Wu-Tang from suing me, even though I'm now the rightful owner of the One True New Wu-Tang Album.

That is, unless the government manages to successfully seize Shkreli's intellectual property rights in the Wu-Tang album.

Seizing the actual rights to the album would certainly be an odd move, but not unprecedented. In May, the federal government tried to seize the trademarks of the Mongol Nations motorcycle club after securing criminal convictions against many of its members, and then bringing a RICO indictment against the club itself. They ultimately failed—but not because trademark seizure isn't possible.

Still, the Mongol Nations forfeiture was likely targeted at suppressing future use of the trademark, rather than setting up a government-owned Mongol Nations swag shop. "I don't think the FBI will start a Wu-Tang imprint," said Parker Higgins, copyright activist at the Electronic Frontier Foundation.

And, of course, don't expect to FOIA it away from the government either. Attempts to get other copyright-covered works via FOIA haven't worked out so well.

Still, prying it out of Shkreli's hands, at least increases the possibility that wherever else it ends up may be more likely to figure out a way to get it out into the world...




Wed, Sep 6th 2017 9:33am

bob gaudio, copyright, distribution, mechanical rights, music licensing, reproduction, streaming



Spotify Finally Realizes That Streaming Isn't Reproduction Or Distribution

from the copyright-conundrums dept

Hold on tight: we're going to get down into the weeds a bit on a copyright issue. In early 2016, we wrote about the "insanity of music licensing" as it related to streaming music, and Spotify in particular. This was in response to a series of class action lawsuits filed against Spotify by songwriters, claiming a failure to properly license so-called "mechanical rights." As I noted at the time, I talked the case over with a large number of copyright lawyers -- and many were left scratching their heads regarding what the lawsuit was actually about. Spotify, of course, is famous because it's a licensed music streaming service. That's it's whole thing. But, as we discussed, part of the problem is that there are a ridiculous number of different possible licenses out there -- many of which were designed for different types of technologies, and, when it comes to internet services, some people seem to assume that the services need to license roughly "all of them."

So, it was always known that a company like Spotify needed to secure negotiated license to use the sound recordings (that's from whoever holds the copyright on the actual recording -- not the composition). And they had to get public performance licenses from Performance Rights Organizations (PROs). But the question in these lawsuits was about an entirely different license -- the "mechanical" license. As you may have guessed from the name, a "mechanical" license comes from way back in the day, when the companies manufacturing records needed to get a license from the composer for the sake of reproducing and distributing the songs which those songwriters wrote.

And here's where we do some copyright 101. Section 106 of the Copyright Act includes a definitive list of six rights that copyright may grant the holder an exclusive right to (absent something such as fair use). These then are the specific exclusive rights under copyright law:

So, when Spotify is licensing sound recordings from copyright holders, it's licensing #6. And when it's getting PRO licenses, it's covering #4. So, here's where things get trickier. The mechanical license -- usually granted by the composers to whoever is manufacturing, say, a record or a CD, and done via someone like the Harry Fox Agency (HFA), covers the rights for #1 and #3 -- to "reproduce" and to "distribute." That makes sense in an age of vinyl records, tapes or CDs.

As we noted back when these lawsuits first came out, some of the copyright lawyers we spoke to couldn't figure out why Spotify would even need a mechanical license in the first place. After all, it's just "streaming" music. It's not "reproducing" the work, nor is it "distributing" the work. Or is it? That question gets pretty murky, pretty fast. You can argue that the process of streaming involves bits being "reproduced" and "distributed" -- but a counter to that is that that's happening in such an ephemeral way, in which the "recipient" ends up with nothing, that it's not at all the same thing. Indeed, this issue came up in an important case a few years ago, concerning the "transitory copies" that were made by Cablevision with its remote DVR. In that case, it was determined by the appeals court that transitory copies are not "copies" under #1 above. That is, they are not "reproductions." Here's from the ruling:

"Copies," as defined in the Copyright Act, "are material objects ... in which a work is fixed by any method ... and from which the work can be ... reproduced." ...The Act also provides that a work is "`fixed' in a tangible medium of expression when its embodiment ... is sufficiently permanent or stable to permit it to be ... reproduced ... for a period of more than transitory duration."... We believe that this language plainly imposes two distinct but related requirements: the work must be embodied in a medium, i.e., placed in a medium such that it can be perceived, reproduced, etc., from that medium (the "embodiment requirement"), and it must remain thus embodied "for a period of more than transitory duration" (the "duration requirement").... Unless both requirements are met, the work is not "fixed" in the buffer, and, as a result, the buffer data is not a "copy" of the original work whose data is buffered.

That said, it did appear that Spotify had made (via HFA) at least a half-hearted effort to secure mechanical licenses anyway, often using the "Notice of Intent" process, which allows for compulsory mechanical licenses if certain rules are followed. Of course, the half-hearted nature of this appeared to have some significant gaps (gaps that HFA later started scrambling to fill).

Either way, earlier this year, we wrote about Spotify settling the big class action lawsuits it was facing, and agreeing to pay out a bunch of money. As we pointed out when that happened, it appeared that no one seemed to really want to fight out the issue in court of whether or not Spotify even needed to pay mechanicals, noting that such a fight would, undoubtedly, get messy.

Well, things are getting messy.

After that settlement, not all composers were happy. Some of them, including Bob Gaudio, from the Four Seasons, sued Spotify over the same issue -- and argued that the settlement of the previous lawsuits was an "empty gesture" given just how massive the copyright infringement was on Spotify. In other words, these new cases seemed a lot less willing to settle. And that means, the issue we never thought was going to get tested in court... is looking like it's going to get tested in court. As first covered by Eriq Gardner at the Hollywood Reporter, Spotify has now directly argued that its service does not reproduce or distribute the songs it streams. From the filing:\

Plaintiffs allege that Spotify “reproduce[s]” and “distribute[s]” Plaintiffs’ works..., thereby facilely checking the boxes to plead an infringement of the reproduction and distribution rights. But Plaintiffs leave Spotify guessing as to what activity Plaintiffs actually believe entails “reproduction” or “distribution.” The only activity of Spotify’s that Plaintiffs identify as infringing is its “streaming” of sound recordings embodying Plaintiffs’ copyrighted musical compositions.... But “streaming” – by its very definition – cannot infringe upon either the reproduction right under 17 U.S.C. § 106(1) or the distribution right under 17 U.S.C. § 106(3). As a consequence, Plaintiffs’ allegations simply do not inform Spotify how Spotify is alleged to have violated the law.

As Spotify's lawyers admit (as we described above), it's clear that streaming implicates #4 and #6 of copyright's exclusive rights -- and it has licenses to cover both of those areas -- but not #1 and #3:

In short, the act of streaming does not reproduce copies of sound recordings or musical compositions, and equally does not distribute copies of either sound recordings or compositions. This is not to say that streaming has no copyright consequence. Streaming does result in a public performance of both sound recordings and musical compositions. See 17 U.S.C. § 106(4) (granting copyright owner the exclusive right to “perform the copyrighted work publicly” in the case of musical works) and § 106(6) (granting copyright owner the exclusive right to “perform the copyrighted work publicly” in the case of sound recordings).... But Plaintiffs do not allege that Spotify has violated their public performance rights, and such an allegation would be futile. Spotify has paid hundreds of millions of dollars to license the public performances of the musical compositions it streams, including those allegedly owned by Plaintiffs, through negotiated licenses administered via ASCAP, BMI, SESAC, and GMR – a group of licensing agents known collectively as “performance rights organizations” or “PROs.” In sum, Plaintiffs’ Complaint, which rests upon Spotify’s “streaming,” leaves Spotify guessing about what it has done that, in Plaintiffs’ view, constitutes a violation of Plaintiffs’ reproduction and distribution rights.

If Plaintiffs are indeed alleging an instance of copying (as opposed to streaming) that allegedly violates Plaintiffs’ reproduction and/or distribution rights, they can amend their Complaint to say so. Depending on what that allegation is, Spotify will advance a number of defenses. If Plaintiffs’ real complaint is with, for example, a particular instance of alleged temporary copying, then, among other things, Spotify may assert a defense of fair use. Spotify may also assert defenses of compulsory license, implied license, negotiated license with copyright owner or co-owner, statute of limitations, and others, depending on the nature of the specific allegations. But Spotify should not be forced to guess and aim its defenses at an unknown claim. Spotify believes that every element of its service is either fully licensed or otherwise permitted by law, and Plaintiffs’ Complaint offers no notice as to what Spotify conduct it thinks violates its copyrights or what conduct would require additional licenses.

Spotify also argues that the point of this lawsuit is really to try to convince composers to opt-out of the settlement from earlier this year, and to join in this action, which may explain why Spotify is taking an aggressive stance here. But this case, should it move forward, could become quite important. Because if a court somehow goes against earlier precedents and argues that streaming actually impacts four out of the six different exclusive rights granted under copyright law, that would be quite amazing.

As we've noted many times in the past, one of the problems with copyright law is that each time a new technology comes along that threatens "the old way" of doing things, rather than rethinking copyright itself, Congress tends to just duct tape on a new right that requires licensing. And that works fine until the next innovation comes along. Now, in the internet age, where things look a little like their analog predecessors, but also with other features, it's no surprise that some copyright holders are trying to argue that ALL THE LICENSES must apply. But if you actually look closely at what Spotify does, what copyright law covers in terms of those six exclusive rights, and what previous cases have held, it does seem likely that streaming should really only implicate two of the exclusive rights.

Read More | 30 Comments



Wed, Feb 24th 2016 10:36am

copyright, copyright office, distribution, making available, peter menell


Copyright Office Decides To Rewrite Copyright Law Itself, Blesses A 'Making Available' Right That Isn't There

from the not-such-a-good-look dept

The Copyright Office has decided to take a stance on copyright law that requires two slightly odd things. First, it requires ignoring what the Copyright Act actually says and then, separately, it requires pretending that the law says something that it clearly does not say. That's pretty incredible when you think about it.

For quite some time now there have been ongoing legal fights in the copyright world over whether or not there's a "making available right" in copyright law. The issue is actually super important. 17 USC 106 lays out the only six exclusive rights granted to rights holders under copyright. They are: Now a quick reading of this would suggest that you've most likely violated 106(3), the "distribution" right (assuming it's not a situation where there's fair use or some other such defense), if you share a digital file. But there's a technical problem with this, which is that the "Definitions" part of the law says that the word "copies" only applies to "material objects." Digital files, as you might note, are not material objects. Now, to be clear: courts have almost universally rejected this argument when it comes up. Basically because it's inconvenient. But it is what the law says.

But there's also a separate question here: what if you, say, had a file of a copyright-covered work, and put it in a folder that was "available" via a peer-to-peer network... but the file was never actually downloaded. Then what right listed above would you have violated? Notice that the distribution right not only appears to require distribution (which would mean the actual complete file transfer) but even limits distribution further to "by sale or other transfer of ownership, or by rental, lease, or lending." If there's no "transfer of ownership" -- such as if someone just makes a copy -- then is that distribution? Or is it just an issue that can be covered by 106(1)'s "reproduction" right?

This is the big question around "making available." A number of people (generally speaking they come from the traditional copyright legacy industries) simply try to whitewash this whole thing and argue that simply having the possibility of distributing is distribution itself. Courts in the US have been very mixed on this issue. We've been covering rulings that have gone both ways for over a decade now. But should "making available" -- even if no actual distribution happens -- be considered "distribution" in light of both what the law actually says, and the basic knowledge of what "distribution" means?

Lately, the "making available" crowd has been trying to force the issue, either making sure that "making available" is explicitly included in any copyright reform and/or by making sure it's in various trade agreements. And now the Copyright Office has weighed in on the matter insisting that, despite plenty of evidence to the contrary, "making available" already violates the distribution right. A key issue in this new paper is the WIPO Copyright Treaty (remember what I said about sneaking this issue into international treaties?). Article 6 of that treaty defines the "right of distribution" to include:

Authors of literary and artistic works shall enjoy the exclusive right of authorizing the making available to the public of the original and copies of their works through sale or other transfer of ownership.

It's noteworthy, of course, that a key reason for large parts of the WIPO Copyright Treaty was a way for Hollywood to push through the DMCA, which Congress had previously rejected. As the crafters of the DMCA are now totally proud to admit, after Congress turned them down, they ran to Geneva to put the same ideas into WIPO and then ran back to the US and got the DMCA approved in 1998. However, while the DMCA included a bunch of other stuff, it's notable that it did not change the existing language (seen above) around a distribution right. The Copyright Office interprets this to mean that Congress assumed that the existing 106 rights include a making available right.

During the past two decades, U.S. government officials have uniformly maintained that the Copyright Act’s exclusive rights, taken together, cover the full range of conduct encompassed by the making available right, meaning that such conduct will implicate and be governed by one or more of the Section 106 exclusive rights, including, for example, the distribution, public display, and public performance rights. Subsequent Congresses have reaffirmed this conclusion through their approval, between 2003 and 2011, of a dozen free trade agreements with foreign nations obliging the United States to provide a making available right, determining in each case that adoption would not require changes to U.S. copyright law.

The paper dismisses the courts who have ruled that there is no making available right in the US as "failing to discuss or even acknowledge the international obligations of the United States." As we first discussed well over a decade ago, the second you hear someone claim something about "the international obligations of the United States" in regards to copyright law, they're trying to hide the fact that the law doesn't really say what they want it to say. That's the case here.

Besides, a more complete reading of WIPO suggests that it doesn't support a making available right to the extent the Copyright Office now claims. For example there's a footnote on that "distribution" right definition in the WIPO agreement that says "As used in these Articles, the expressions “copies” and “original and copies,” being subject to the right of distribution and the right of rental under the said Articles, refer exclusively to fixed copies that can be put into circulation as tangible objects." Notice that, just as with US law and "material objects," WIPO says it only applies to "tangible objects." Based on that, it actually seems fairly clear that even if there's a "making available" right in the distribution right, it couldn't apply to purely digital files, which are not "tangible objects."

The Copyright Office basically says, okay yes, sure that's what US law and the WIPO treaty say, but let's just ignore that part because, man, what the law actually says is hellishly inconvenient for what we want it to say. It waves off the "tangible" or "material" objects argument as simply being nonsense, despite the fact that it's written into both the WIPO Copyright Treaty and US copyright law:

Such a narrow view of the distribution right, of course, would wholly upend protections for copyright owners online and therefore defeat the very purpose of the WIPO Internet Treaties—that is, to confirm exclusive rights for copyright owners in the digital age.

The Copyright Office similarly rejects the other limiting factor on the distribution right under US Copyright law, the part that says that distribution can only be made "by sale or other transfer of ownership, or by rental, lease, or lending." But, the Copyright Office just laughs that off as well as just being silly talk, despite being what the law actually says.

In fact, the Copyright Office explicitly claims that the distribution right in 106(3) not only includes a making available right, but that it clearly applies to purely digital files. Because it says so:

Within the particular context of downloads, U.S. law provides the making available right through the exclusive right of distribution under Section 106(3). While some courts have failed to find distribution in the absence of evidence of completed transfers, and therefore declined to recognize claims based solely on making copies available to the public for download, the Copyright Office concludes that the appropriate reading of Section 106(3) in the context of making available claims is that it covers offers of access.

In short, the only way to reach the conclusion the Copyright Office reaches is to (1) ignore what the law actually says and (2) add in something that the law does not say. And then say that Congress must have intended it that way.

There's a lot more in the full paper which is worth reading, but it looks as though the Copyright Office basically decided to side with Prof. Peter Menell, who has been pushing this theory of making available for a while. This was countered by Prof. Rick Sanders who noted that Menell (who also basically rewrote a key section in the popular Nimmer on Copyright treatise on this subject) appeared to be focusing on what he wanted the law to say rather than what it actually said -- and that he appeared to be jumping the gun before the courts had truly decided the issue. This debate has resulted in quite a bit of back and forth sniping at one another. If you feel like really delving into the issue, I'd suggest following a bunch of those links -- the last one of which gives a fairly compelling argument for how Menell totally misrepresents the historical arguments he relies on to make his point.

Either way, it's not necessarily a huge surprise that the Copyright Office came down the way it did. In fact, it's not a surprise at all. But it is at least somewhat disappointing that the Copyright Office has decided that it can create a right that isn't written into the law and insist that must be what Congress meant all along, while at the same time ignoring the stuff that is written in the law and saying that couldn't possibly have been what Congress meant.



Wed, Apr 8th 2015 1:31pm

distribution, journalism, platforms, reliance

facebook, spotify


Journalists Worry About Facebook Hosting News; Is That Similar To Musicians Worried About Spotify Hosting Music?

from the questions-to-ponder dept

For the last few years, Facebook's role in online journalism has been a hotly debated topic. Many sites have relied heavily on Facebook for traffic, often looking for ways to "game" the system to get more shares on Facebook (which brought us the rise of "clickbait"). You can go back years and find stories of news sites trying to figure out how much they should change their practices to "adapt" to whatever Facebook was doing at the time. And lots of journalists worry and fret about how Facebook might change its algorithms in ways that mess up all the hard work they put into gaming the system.

And then... a few weeks ago, the NY Times reported that Facebook was working with some publishers to get them to publish their news directly to Facebook, using the site not just as a platform for getting links to your news stories, but as a platform for hosting the news stories themselves. Not surprisingly, journalists have mostly reacted negatively to this deal -- with many referring to it as a Faustian bargain in which publications may get more attention and a larger community, but in exchange for giving up their souls. Mathew Ingram (in the link above) even argues that it's worse than that:

In some ways, dealing with Facebook is actually worse than Faust’s deal: The German scholar chose to cut a deal with Satan primarily because he was vain, but media companies are forced to work with Facebook whether they want to or not, because the platform plays such a huge role in how millions of people come into contact with the news. With that kind of clout, news entities can’t afford to not be on the network, but the more content they put there, the more they risk losing even more control over their business — and the only one in a position to dictate the terms of such a deal is Facebook.

Some others, however, have really embraced the platform. Josh Stearns recently had an interesting article discussing the success of Jersey Shore Hurricane News -- a publication that has existed almost entirely on Facebook since it was founded back in 2011 (and where it's built up a strong community).

My gut reaction is to agree with those like Mathew, who see relying on something like Facebook as a risky proposition. But I think the key there is in the issue of whether or not you're truly relying on the platform. To some extent, this debate sounds like the nearly identical debate from just a few years ago concerning various websites focusing so much on getting more traffic from Google, and all the fears about how Google had too much power to make or break a site (famously leading up to its famed Google Panda release, that did actually "break" some sites that relied too strongly on Google for all their traffic.

At Techdirt, we've always tried to be somewhat agnostic to all of this -- focusing instead on just writing good content with the focus on building a community that (hopefully) will keep coming back to see what we're doing, regardless of how other sites treat us. But even we're not immune to ebbs and flows as other sites change. A few years ago, we suddenly started getting a ton of traffic from StumbleUpon, though I still have no idea why. That lasted for about a year and then went away when StumbleUpon changed its algorithms. Then Reddit drove a ton of traffic to us for a while. It still does, but less so recently, after Reddit admins demoted two of the subreddits that seemed to drive the most traffic (r/technology and r/politics). And so we just keep focusing on writing what we write, and hoping that people like it enough to share however and wherever they want. We don't have a "social media manager" or a "social media strategy" and perhaps that's a mistake in terms of gaming whatever system to get traffic, but we'd rather just focus on writing what we think is good content.

Still, this big debate over whether or not news sites should "embrace" Facebook has me thinking about similar debates in other fields, like whether or not musicians should embrace platforms like Spotify or YouTube for their music. Many musicians have responded the way that journalists have responded to Facebook, fearing what happens when they give up control to those big platforms who could change important concepts on a whim, and who keep most of the important details (who's accessing your content, how do you reach them?) and monetization options to themselves.

There are some key differences of course -- in part in how people consume music vs. news. Music is more inherently something that you want all in a single place and on a single platform. News is a little different. But there are some similarities as well. In the end, it seems like the best strategy remains the one where you experiment widely with whatever your biggest fans want while making sure you don't become too reliant on any one platform. I still think that musicians should be putting music on various platforms, and news publications should be experimenting on different platforms (including Facebook), based on where they see their communities/audiences going. But they should always be focused most on creating the great content that brings in more people, and try to make sure they don't become totally reliant on any single platform.

In the music space, that means putting music on Spotify and YouTube, but making sure you're not solely reliant on those for your business. Make use of other platforms as well -- your own website, Bandcamp, Patreon, Kickstarter, Soundcloud, etc. -- just as news sites should be willing to experiment with Facebook and others (like Reddit, Medium, Flipboard, LinkedIn, etc.). The trick is just in balancing these things so that there are always other options if one of those platforms goes off in a direction you dislike.

Given all of that, I have trouble buying the "Faustian bargain" argument that some have made about Facebook. It seems like it's just another platform with some benefits and some negatives. There will be ways to use it well -- which some will find. There will be ways that it is abused. And Facebook may eventually change its strategy entirely, leaving those who relied too strongly on it out to dry. In the end, it seems the strategy worth taking is being willing to experiment, while keeping other options open, so that you're not entirely at the whims of another company. Years ago, we wrote about being careful about whose platform you became reliant on and that still holds true today.

But the key there is not fearing others' platforms, but fearing reliance on them. Use them to your advantage, and always keep the doors open to other opportunities.



Thu, Feb 5th 2015 8:02am

artists, contracts, copyright, distribution, music, record labels, revenue, streaming

deezer, snep, spotify


Yes, Major Record Labels Are Keeping Nearly All The Money They Get From Spotify, Rather Than Giving It To Artists

from the who-are-you-blaming-now? dept

A small group of very vocal musicians has decided that the new target of their anger, after attacking cyberlockers, search engines and torrent sites, should be legal, authorized streaming services. They've decided that the payouts from these services are simply too low, even though almost none of these services are anywhere close to profitable, and most are handing out the vast majority of their revenue to copyright holders. The complaints are often nonsensical. Way back in 2012, we noted that the target of these musicians' anger appeared to be misplaced, as the CEO of Merlin (which represents a ton of indie labels) admitted that the real problem was that Spotify paid lots of money to labels and it was the labels not giving that money to the artists. Yet, rather than blaming their own labels (or their own contracts), these artists lashed out at Spotify and other streaming services. Just a few months ago, we covered this issue again, with even Bono admitting that the real problem was the lack of transparency from the labels.

And, it appears, there's a decent reason why those labels haven't been eager to be transparent: because they're keeping most of the money. The Music Business Worldwide site has the details on a new report put together by Ernst & Young with the French record label trade group SNEP, concerning where the money from streaming services Deezer and Spotify ends up. Spoiler alert: it's not with the artists. Here's the overall share of the 9.99 Euros that people pay for a premium account on these services: As you can see, the labels get the lion's share, with songwriters/publishers splitting 10% and the performers getting less than 7%. And, if you look at the specifics of the actual post-tax payout, you can see the contrast more starkly: The labels end up with nearly 75% of the total payout, with actual artists and songwriters left with the scraps.

Of course, since this project was paid for by SNEP, which represents the major labels, it then tries to spin this as being not only perfectly fair, but a good thing for the artists themselves. What, you say? How can that be? The report claims that 95% of that money that goes to the labels goes to cover all of the "expenses" those poor poor labels have to endure to record and... um... upload(?) the actual music. Sure, in the past, it may have been reasonable for the labels to take on large fees for distribution -- but that's when it meant manufacturing tons of plastic and vinyl and then shipping it to thousands of record stores around the globe. In this case, there's no manufacturing, and distribution is an "upload" button. Sure, there are some marketing costs, but the numbers ring pretty hollow (especially for many of the artists for whom the labels do little to no marketing).

So, again, rather than blaming these streaming services, it appears that perhaps they should be discussing things with the labels.


by Sherwin Siy

Wed, Jan 21st 2015 12:32pm

canada, copyright, distribution, first sale, james bond, public domain, public performance


Die Another Eh: What Does It Mean Now That James Bond Is In The Public Domain In Canada?

from the but-what-does-that-mean dept

As of this year, James Bond is in the public domain in Canada. Since the term of copyright in Canada is the life of the author plus fifty years, and Ian Fleming died in 1964, the copyrights in all of his James Bond novels and short stories expired on January 1st. That means that Canadians can freely make copies of the Bond novels, make their own film versions of them, and write stories featuring James Bond in his role as a member of the British Secret Service. (It doesn't mean they can distribute copies of the movies at will, though—those copyrights exist separately from those of the books.)

US fans of the series shouldn't start casting their home adaptations of Thunderball just yet, though., Since copyright terms in the US were retroactively extended in 1998, we have to wait another 20 years before Bond hits the public domain in the US.

But Bond is nothing if not a world traveler, and Canada is just a step away. What happens if Canadian reprints of a Fleming novel make their way here?

The New Books Can Come In

The first sale doctrine (embodied in the US Copyright Act here) says that if a copy of a work is lawfully made, someone who owns that copy can legally import it into the United States. So according to that law (and bolstered by a 2012 Supreme Court decision), someone should be able to fill a bag with paperback Bond novels in Toronto and bring them back into the US for sale. (Note: this may not stop that someone from getting sued, but they should win under the current law. Eventually.) The margins on this sort of activity seem like they would be low enough that I doubt that US branches of book publishers are too worried about declining sales of the novels.

The same should be true of audiobook versions—with one odd caveat: if I try to play the audiobook to a public audience, or if I arrange a public reading of one of the stories, I'd be infringing the copyrights of the works. That's because while the law lets me distribute copies that I own, I still can't make public performances of the copyrighted works. We'll get into this more as we talk about film adaptations.

The New Films are more Complicated

But enough about the books; what about film? Bond might have his origins in text, but he's more famous as a screen character. What if a Canadian made a new film based upon the Fleming novels? So long as they take nothing that came from the existing movies, but did a novel-based reboot of sorts, they'd be in the clear in Canada. But could copies of those new Canadian Bond movies come into the US?

While making an adaptation of a copyrighted work would be an infringement, someone merely importing a copy of that adaptation isn't the one making the adaptation. Their copy is already made.

Let's assume that all of the adapting is being done in Canada. Since Bond is in the public domain there, the adaptation is lawfully made. Now, let's assume that the new filmmakers produce an authorized DVD—that's lawfully made too. So if I buy a few copies of that across the border and come back with them, I should be in the clear just as much as with the paperbacks.

Showing a Boring Film Would be A Problem

But what happens when I try to arrange a public screening of one of these movies? Things get a little weird. If the "adaptation" were something as direct (and as dull) as a film of someone reading the novel aloud verbatim, I might have a problem. See, while the first sale doctrine gives the owner of a lawfully made copy the right to distribute it without permission, making a public performance of that same work is still prohibited. So even if I had a legally made Canadian copy of Dr. No, I still couldn't read it aloud as a public performance in the US without permission. It doesn't matter where the particular copy I'm reading from was made; the words I'm saying are the same, and still infringing.

Our boring "adaptation" of, say, Alex Trebek reading the book aloud would likely be analyzed under the same framework. In this case, the adaptation, while a new work, still embodies the old one. If I exhibited this movie, I'd likely be sued for publicly performing the original novel, not for exhibiting the movie, which would, in Canada, have its own copyright, with completely different copyright owners.

Showing an Interesting Film May Be

But movie adaptations of James Bond are not exactly known for their fidelity to the books. What if the new Canadian production of Goldfinger included only the occasional phrase from the original, or even had all of its dialogue rewritten, had scenes omitted or amended, and its setting changed?

Sure, it's a derivative work, but remember, that's not the question. What is at issue is whether or not you can discern a performance of the original novel inside the elements of the new movie.

To see whether someone's "performing" the novel by exhibiting the film, you first have to ask whether or not the copied bits, taken as a whole, are protectable. Things that aren't protectable include general ideas, or standard plot tropes, or stock characters. If, in adapting the novel into a film, I've removed all but these, I'm probably not infringing the original novel.

You then have to ask if the performance of the film contains those copyrightable elements in a way that is encompassed by the rights of the original novel. If the new movie still resembles the novel enough to be considered an actual adaptation, though, it seems like it might still carry within it enough of the original novel for my public screening to be considered at least a partial "public performance" of the novel, and thus infringing.

But fidelity to the original story isn't necessarily a hallmark of the Bond oeuvre. The underrated 2008 Quantum of Solace movie bears zero relation to the Fleming short story from which it takes its title, and it's hardly the first Bond movie to fit that pattern. What if our Canadian filmmakers make a James Bond movie, title it The Spy Who Loved Me, and make it about a plot to hack British military drones instead of a tense standoff in an Adirondack motel?

Which Bond is Best? (Or Why Character Copyright Makes No Sense)

Having removed the potential infringement from the book, we're left with whether the mere use of the character known as "James Bond" is enough to support a copyright infringement based on public performance in the US. Showing the Canadian movie arguably is a "public performance" of the James Bond character, which is still in copyright in the US—but what does that even mean? The character isn't a known series of words, sounds, or images; it's in many ways more akin to an idea, and ideas in themselves are definitely not copyrightable. But the current state of the law allows characters to be separately copyrightable in their own stead.

This, for better or worse, is where a court's more subjective sense of literary merit might have an effect on the outcome of a case. If it thinks Fleming's characterization of Bond is flat, it might classify him as a sort of stock character of a secret agent and find that simple concept uncopyrightable. But it doesn't take a ton of shared details to make a stock character something that the courts will recognize as copyrightable. (The fact that many different actors with different styles have played adaptations of Bond could cut both ways here: in indicating that the scope of the copyrighted Bond character is broad, or, conversely, that he's just a flat stereotype—a stuffed tux.) The fact that our Canadian-produced James Bond shares the same name and job description as Fleming's might be enough, in this case, to block screenings of the film in the US.


Don't worry, it gets weirder. Imagine a copy of this new Canadian Goldfinger movie is imported into the US, and then copied here, without the permission of the Canadian filmmakers. Let's assume that the copy wasn't made as a fair use. Can the Canadian filmmakers sue the US copier?

Actually, the answer seems to be yes. While the Canadian moviemakers might have created a work that would be infringing to exhibit in the US, since the movie takes elements from works with an active US copyright, they also will have added copyrightable expression of their own in creating the film. And while someone taking from the Fleming-created expression embodied in the movie might not be able to be sued by the Canadians (though they'd certainly be open to a suit from the Fleming rightsholders), taking from their newly added creativity opens you up to a suit from the new creators. Basically, making unauthorized copies of the unauthorized Canadian James Bond movie could get you sued by two different people.

So there you have it. James Bond is in the public domain in Canada, and that single fact throws into relief a number of open questions and absurdities in the first sale doctrine -- what parts of a work can and can't be protected by copyright, how characters can be copyrighted apart form the works in which they appear, and how infringers can be rightsholders in their own right. It's a wealth of complexity and gray areas, in many ways in desperate need of a solution.

Clearly, that solution is to just reduce our copyright terms to match Canada's.



Fri, Aug 2nd 2013 9:03am

copyright, distribution, economics, infringement, losses


Piracy Doesn't Create A Loss To 'The Economy,' But To A Particular Industry

from the good-point dept

For years, we've pointed out that many claims of "losses due to piracy" are incredibly misleading, but there are different levels of misleading. The first is the claim that every download is a lost sale. While that was popular in the early days, most researchers (finally) avoid this sort of claim, though a few will still try to sneak it in as something along the lines of "value of pirated goods," and then the press will run with that number without making the distinction. A second order of misleading is the claim that whatever "losses" are calculated are "losses to the economy." We see this all the time, with various maximalists insisting that without stronger protections that somehow this money goes away from the economy entirely.

Matt Schruers, over at Project DisCo has a good post discussing this exact point, noting that infringement leads to a redistribution of income. We can argue over whether or not that redistribution is good or bad (or societally beneficial or not), but to claim it's an overall loss to the economy is clearly wrong. He notes how rarely this even comes up in the discussion, which is unfortunate. However, he also points us to this hilarious Adult Swim ad, that I'd not seen before, which explains how piracy feeds babies (except, of course, TV piracy): Matt makes it clear that this is, in no way, a defense of infringement, but rather just a reality. If we're going to be talking about copyright reform, the discussion should be honest, and that means not pretending that the money just disappears from the economy entirely. Like any redistributive economic system, it creates some winners and some losers, and a thorough economic analysis would study carefully who those winners and losers are, and whether having those winners and losers matches up with what the law is supposed to do. Similarly, recognizing that there are always some losers whenever you shift around a redistributive system, it can be worthwhile to look at whether or not it's necessary to do something to help out those who end up with the short end of the stick.

Matt's article is well worth reading -- and remembering, when the next group of "studies" claims massive losses to the economy. However, I'd argue in some ways, he actually understates the nefariousness of the "economic loss" claims that are often used. That's because one of the favorite "loss" stats that maximalists like to use -- such as the annual report that IPI puts out done by Stephen Siwek -- makes use of ridiculous "ripple effect" calculations. That is, they don't just say that "movie piracy costs the economy $6 billion per year," but they then add in a multiplier effect, claiming that this is to count the "ripple effects" of the money not spent on the movie. This is simply bad economics in a variety of ways. First, it's counting the same dollar over and over again:

So not only are they recounting the same dollar over and over and over and over and over again, pretending it's new each time, they're also only counting such ripples in one direction. That is, they assume that the money saved by not purchasing the content in question doesn't go back into the economy productively elsewhere. And, like the "piracy feeds babies" joke above, at times, the "ripple effect" in the other direction can be quite beneficial for the economy. For example, say a small company uses unauthorized copies of expensive software to build an amazing tool that drives all sorts of productivity growth elsewhere. That may be wrong and illegal, but the impact on the economy can actually be quite positive.

Again, the point of all of this is not to say that infringement has no economic impact at all -- or that it's good or bad. There are a lot of different variables at play here. And that's the key point. Any serious look at the economic impact of changing the laws needs to take a look at all of that in determining the overall economic impact, and not just at the aggregate economic impact, but the economic impact throughout the chain. Unfortunately, so far, very few studies appear to go that far, and, instead present very misleading statements about the overall impact on the economy.



Mon, Apr 1st 2013 12:01pm

copyright, distribution, fair use, first sale, mp3s, reproduction, transfer, used mp3s

columbia records, emi, redigi


ReDigi Loses: You Can't Resell Your MP3s (Unless You Sell Your Whole Hard Drive)

from the a-big-first-sale-loss dept

This is hardly a surprise at all. In fact, we expected this kind of ruling all along. ReDigi, the company that was trying to build a "market" around "used MP3s" has lost at the district court. As you may recall, ReDigi tried to set up a system that monitors your own files, so that if you "sell" a used MP3, you have to make sure it's been removed from your own system. As you might imagine, that system is not foolproof, but some effort has been made (and it's only allowed for reselling MP3s ReDigi can prove you've purchased, such as via iTunes, and not for files just ripped from CDs). While I fully expected ReDigi to lose, the ruling is still fairly distressing in just how badly it distorts other parts of the law, which may harm other, even more reasonable uses. Hopefully, ReDigi will appeal and fight back against the more extreme interpretation from the district court here.

First, the court looks into the question of whether or not a transfer of a copyrighted file, where only one file remains at the end, still violates the "reproduction" right. That is, if Bob transfers a file to Alice, and Bob's copy of the file is immediately deleted, is that still a reproduction under the Copyright Act? The court says yes:

...courts have not previously addressed whether the unauthorized transfer of a digital music file over the Internet – where only one file exists before and after the transfer – constitutes reproduction within the meaning of the Copyright Act. The Court holds that it does.

The Copyright Act provides that a copyright owner has the exclusive right “to reproduce the copyrighted work in . . . phonorecords.” Copyrighted works are defined to include, inter alia, “sound recordings,” which are “works that result from the fixation of a series of musical, spoken, or other sounds.” Such works are distinguished from their material embodiments. These include phonorecords, which are the “material objects in which sounds . . . are fixed by any method now known or later developed, and from which the sounds can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.” Thus, the plain text of the Copyright Act makes clear that reproduction occurs when a copyrighted work is fixed in a new material object.

Of course, that same bit of the Copyright Act also makes clear that "copying" does not apply to purely digital files, but the court tap dances around that argument. Basically, it says whether or not there are more in the world is meaningless. All that matters is if a copy was made, even if the original was destroyed.

Simply put, it is the creation of a new material object and not an additional material object that defines the reproduction right. The dictionary defines “reproduction” to mean, inter alia, “to produce again” or “to cause to exist again or anew.” See Merriam-Webster Collegiate Edition 994 (10th ed. 1998) (emphasis added). Significantly, it is not defined as “to produce again while the original exists.” Thus, the right “to reproduce the copyrighted work in . . . phonorecords” is implicated whenever a sound recording is fixed in a new material object, regardless of whether the sound recording remains fixed in the original material object.

Basically, under this interpretation, you can never "transfer" a digital file. You can only make a reproduction under copyright law. And, yes, computers transfer files by making copies of them, but it seems a bit ridiculous that the whole concept of a transfer can be wiped out because of that. In fact, by this interpretation, even streaming (which still involves all the data being temporarily copied to your local computer) would count as reproduction. ReDigi pointed this out, noting the possibility of merely cleaning up your own hard drive being considered infringing, but the court buys Capitol Records's (EMI) argument that such uses are protected under other theories.

Moving on to the question of distribution, ReDigi doesn't deny that it's distributing files, but says that it's protected by fair use and (more importantly), first sale. Again, however, the court doesn't buy it. Part of the issue may be that ReDigi "abandoned" an argument it made earlier that merely transferring a file to a cloud locker for personal use is fair use, so it's left arguing that other aspects of its service are covered by fair use, but that's much more difficult under the basic four factors test. On this part, it's not that surprising that ReDigi failed to convince the court, as I'm not sure I see the fair use argument either.

The first sale part is where it gets more troubling. Effectively, the court wipes out first sale for digital goods, arguing that because (as above) each transfer is not really a "transfer" but a "copy," first sale doesn't apply. That is, first sale only applies to the initial "copy" "made under this title." But, the court argues, because the sale involves making a new copy, it's not covered by first sale.

In addition, the first sale doctrine does not protect ReDigi’s distribution of Capitol’s copyrighted works. This is because, as an unlawful reproduction, a digital music file sold on ReDigi is not “lawfully made under this title.” ... Moreover, the statute protects only distribution by “the owner of a particular copy or phonorecord . . . of that copy or phonorecord.” Here, a ReDigi user owns the phonorecord that was created when she purchased and downloaded a song from iTunes to her hard disk. But to sell that song on ReDigi, she must produce a new phonorecord on the ReDigi server. Because it is therefore impossible for the user to sell her “particular” phonorecord on ReDigi, the first sale statute cannot provide a defense. Put another way, the first sale defense is limited to material items, like records, that the copyright owner put into the stream of commerce. Here, ReDigi is not distributing such material items; rather, it is distributing reproductions of the copyrighted code embedded in new material objects, namely, the ReDigi server in Arizona and its users’ hard drives. The first sale defense does not cover this any more than it covered the sale of cassette recordings of vinyl records in a bygone era.

That seems silly. Selling a legally purchased MP3 is absolutely nothing like selling a cassette recording of a vinyl record. When ReDigi points out that, under this interpretation, digital files have no first sale rights, the court hits back that this is not true. After all, it argues, you can still sell your hard drive with the original file on it. No, seriously. That's the court's response.

Section 109(a) still protects a lawful owner’s sale of her “particular” phonorecord, be it a computer hard disk, iPod, or other memory device onto which the file was originally downloaded. While this limitation clearly presents obstacles to resale that are different from, and perhaps even more onerous than, those involved in the resale of CDs and cassettes, the limitation is hardly absurd – the first sale doctrine was enacted in a world where the ease and speed of data transfer could not have been imagined.

The court argues that if such an interpretation is ridiculous (though it argues it is not) then it's up to Congress to fix it.

With that out of the way, the court says that ReDigi is guilty of direct infringement, contributory infringement ("the court finally concludes that ReDigi's service is not capable of substantial noninfringing uses"), and vicarious infringement. Basically, a triple play and ReDigi is completely out of the inning. While I'm still not convinced about the fair use argument, the court basically killing off first sale for digital goods is a pretty big problem, and hopefully higher courts (or, dare we dream, Congress?) will fix such an obviously nutty ruling.
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Mon, Mar 18th 2013 1:01pm


from the details,-details,-details dept