Music & Media

Big Music Blames Streaming For Its ‘Woes’ But Industry Is Doing Just Fine

By Mike Montgomery

The annual Grammys award show is full of glamour and fantastic entertainment featuring incredibly talented artists and musicians. Grammys On The Hill, on the other hand, is the event’s corporate, big music, obnoxious cousin. Every year at this time, big music executives and a pocketful of artists descend upon Washington not to delight and amaze, but to cry poverty in the hopes of changing the laws around music licensing.

Today, the big multinational and multibillion dollar music labels will share their sob stories with members of Congress. They’ll attempt to convince policymakers that a lack of royalties for radio play hurts musicians, that songwriters deserve to make more and that streaming is harmful to music’s health.

Over the last decade, how we listen to music has transformed, giving consumers the power to choose what, when and how we listen to music — whether it’s on the radio, satellite or via streaming platforms. Innovation has changed the game. As I’ve said so often before that I’m now becoming a broken record, there’s no putting the technology genie back in the bottle.

But for the labels to be lamenting to Congress about their faded fortunes in this environment is a pretty ridiculous line of argument. Three music labels, Universal (owned by Vivendi), Sony, and Warner Music, account for 70 percent of all music revenues — meaning they still hold the purse strings.

And despite what they say, there’s more money going into that purse than at any time in recent history. The music industry reported last week that it had its best year in two decades. According to the Record Industry Association of America (RIAA), total U.S. retail sales from recorded music rose 11.4 percent last year, to $7.7 billion.

That’s great news that the labels should be celebrating. But that’s not the way the Big Three operate. They smell blood in the water and, like a pack of hungry sharks, they’re attempting to squeeze the rest of the industry in order to grab more for themselves.

They tell artists that the streaming platforms and the radio stations are to blame. They put up a united front before Congress, saying that we’re all in this together and that together we can fix the music industry.

Sadly, artists won’t realize the full benefit of growing record revenues because the music labels have done everything possible to preserve their pro-label, anti-innovation business models instead of embracing new technologies and the operational, market and marketing efficiencies they offer.

Like taxis fighting the consumer-friendly advent of companies like Uber and Lyft, record labels refuse to change. They still work “breakage” feesinto their artist deals, which was money that was originally meant to cover the cost of records or discs broken in transport. In the streaming world, that’s no longer an issue and it is but one tangible example of money that’s being funneled away from artists not by the streaming companies, but by the labels.

To find the voice of reason on all of this Grammys On The Hill have only to look to this year’s honoree: country music star Keith Urban. The Australian-born singer is one of the biggest acts in America and he’s beloved by music fans of all ages so it’s no surprise that big music would want him,not the corporate titans behind the curtain, as the face of their lobbying rodeo.

But he recently commented to Politico that he doesn’t share the same distaste for streaming platforms as his label overlords, stating that, “Owning music feels like a very foreign concept to me. Buying someone’s album feels odd to me. … But streaming to me seems to be a very obvious, fluid, quick, logical way for music to be heard in this day and age.”

And when asked about one of the main complaints of the Grammys On The Hill crowd, that they should be getting paid for radio spins, Urban very candidly said he still finds AM/FM radio to be a useful promotional tool that helps him reach fans. “A huge amount of my audience still listens to radio,” he told Politico. That’s where they get a lot of my music.”

For years, the labels have been clamoring for royalties for radio play. They claim it’s unfair that radio stations can spin hit songs and pay songwriters but not artists for the right. But if traditional radio play is so important to a huge star like Urban, the only reason the labels are seeking to alter the landscape is to further enrich themselves. This isn’t a rising tide argument. This is a testament to the self-aggrandizing nature of the record labels and their unending quest for greed.

We need to take a new look at how the big music is organized, subsidized and supported by Washington. And that should start with one simple word: transparency. Congress should ask the labels to detail how much of the $7.7 billion in revenues it took in last year went to  the artists they purport to represent. Get granular. Details are our friends.

Despite the whining from big music, what the RIAA revealed last week is that business is booming — for them. It’s time to stop catering to the record labels and create a system that is fair to everyone, rather than allowing the labels to continue telling their dirty little lies about the nature of music licensing laws.

This piece was originally published in The Hill.

Smart Companies Like Disney Show Why the FCC Is Wrong on Set-Top Boxes

by Mike Montgomery

t’s hard to see what’s missing at Disney. The giant entertainment company (one of the biggest companies in the world with a $147 billion market cap) already has Lucasfilm, Marvel, Pixar, ABC, ESPN, theme parks, hotels and TV channels galore.

But even Disney, as big and powerful as it is, must make deals with distribution partners such as Comcast, Netflix and Apple to get its movies and TV shows delivered to consumers in the manner they desire. So it wasn’t a huge surprise to many media watchers when Disney CEO Bob Iger announced earlier this month that the company was considering buying Netflix or Twitter in order to have its own distribution platform.

“The biggest thing we’re trying to do now is figure out what technology’s role is in distributing the great content that we have,” Iger told the crowd at the Boston College Chief Executives Club. “It’s one thing to be as fortunate as we are to have [our content] but in today’s world, it’s almost not enough … unless you have access to your consumers.”

Now, Disney may never actually buy either Netflix or Twitter, but the point is that when smart people in the media world are thinking about how to get close to the consumer, they are coming up with creative, market-driven solutions – not by asking the government for favors.

Over the past few years the way we consume entertainment has changed in unimaginable ways. People can watch what they want where they want when they want. Children coming of age today have no concept of a linear TV schedule where you have to be in your living room at a certain time to watch your favorite show. To them the world of TV and movies is just an endless giant living library that can be accessed from almost anywhere.

This kind of creative disruption is healthy for an industry and it’s exciting to see creators and innovators rising to the challenge.

And it’s crucial that this movement not be stopped by the FCC.

Read the full article here.

Statement Re: FCC’s Decision to Pull STB Plan From Meeting Agenda

“Today consumers, content creators and the larger innovation community were given a reprieve from government dictating how innovation should take place when the FCC pulled the set-top box item from the agenda. Innovative companies are already shaking up the set-top box market and don’t want or need the FCC’s help.

When more than 200 Members of Congress, Roku, Amazon and others oppose the Wheeler plan, the writing was already on the wall and it was wise of Chairman Wheeler to hit the eject button. CALinnovates stands with Congressman Tony Cardenas in requesting that the FCC release the order as it currently stands. Doing so will allow the public to comment. Keeping sunshine rules in place on this item is inappropriate and against the spirit of the APA.

The ecosystem is already headed toward an app-based solution and by potentially creating a compulsory licensing scheme, Chairman Wheeler stands in the way of progress, innovation and the promise of this new Golden Age of television.”

The FCC’s Perplexing Set-Top Box “Solution”

By Mike Montgomery

Federal Communications Commission (FCC) Chairman Tom Wheeler jabbed a sharp stick in Hollywood’s eye via an op-ed in the creative community’s hometown newspaper, the Los Angeles Times, by announcing his new plan to obliterate the set-top box (STB) in favor of an apps-based approach. But unfortunately this welcome development of the FCC finally embracing apps as the future of TV consumption comes paired with deeply troubling news — instead of empowering open markets and innovators to invent and develop new apps and services to replace yesterday’s set-top boxes, Chairman Wheeler seems intent on creating a new government-mandated IP Licensing Board inside the FCC that dictates standards for the video app market.

That is an enormous step backwards that will confound and delay the introduction of new consumer apps and put government exactly where it does not belong — in the heart of the innovative and creative process by which new products are designed, developed, and rolled out. The Wheeler Licensing Body is regulatory overreach on steroids that will freeze app innovation in place and comes out of left field as not a single public comment over a seven month period even contemplated such a bizarre conclusion to the proceeding.

The idea that an additional layer of bureaucracy will spur “speed to market” momentum is farcical. If anything, there may be a “speed to licensing body” followed by slow progress that will ultimately keep consumers waiting for the newest innovations to hit the marketplace after a tedious and clunky bureaucratic process concludes. This will set back innovation and investment, which ultimately harms the very consumers Wheeler contends he’s helping.

We would never accept this kind of “Washington first” mandate for the apps, services, and platforms that power the web, and we should not tolerate such an approach in the video space. It’s a deeply flawed double standard by an FCC that has careened far outside its jurisdictional lane into copyright standard setting and the licensing process that undergirds much of the entertainment and technology economy. We have already seen this play out in other industries, and similar regimes have only served to create confusion, impede innovation and create additional costs; there is no reason to invite these dynamics into the booming video space.

The music industry is a prime example of a regulatory structure the entertainment world should attempt to avoid. CALinnovates has been an outspoken voice on music licensing issues and everyone involved in that debate would unanimously agree that music’s licensing system has been a mess and that the industry would certainly choose a far different approach if it could take a mulligan.

Read the full article here.

The FCC’s Perplexing Set-Top Box “Solution”

By Mike Montgomery

Chairman Wheeler smartly embraces an app-based approach while simultaneously proposing a cumbersome licensing regime that will harm innovation and consumers alike.

Federal Communications Commission (FCC) Chairman Tom Wheeler jabbed a sharp stick in Hollywood’s eye today via an op-ed in the creative community’s hometown newspaper, the Los Angeles Times, by announcing his new plan to obliterate the set-top box (STB) in favor of an apps-based approach. But unfortunately this welcome development of the FCC finally embracing apps as the future of TV consumption comes paired with deeply troubling news – instead of empowering open markets and innovators to invent and develop new apps and services to replace yesterday’s set-top boxes, Chairman Wheeler seems intent on creating a new government-mandated IP Licensing Board inside the FCC that dictates standards for the video app market. That is an enormous step backwards that will confound and delay the introduction of new consumer apps and put government exactly where it does not belong – in the heart of the innovative and creative process by which new products are designed, developed, and rolled out. The Wheeler Licensing Body is regulatory overreach on steroids that will freeze app innovation in place and comes out of left field as not a single public comment over a seven month period even contemplated such a bizarre conclusion to the proceeding.

The idea that an additional layer of bureaucracy will spur “speed to market” momentum is farcical. If anything, there may be a “speed to licensing body” followed by slow progress that will ultimately keep consumers waiting for the newest innovations to hit the marketplace after a tedious and clunky bureaucratic process concludes. This will set back innovation and investment, which ultimately harms the very consumers Wheeler contends he’s helping.

We would never accept this kind of “Washington first” mandate for the apps, services, and platforms that power the web, and we should not tolerate such an approach in the video space. It’s a deeply flawed double standard by an FCC that has careened far outside its jurisdictional lane into copyright standard setting and the licensing process that undergirds much of the entertainment and technology economy. We have already seen this play out in other industries, and similar regimes have only served to create confusion, impede innovation and create additional costs; there is no reason to invite these dynamics into the booming video space. The music industry is a prime example of a regulatory structure the entertainment world should attempt to avoid. CALinnovates has been an outspoken voice on music licensing issues and everyone involved in that debate would unanimously agree that music’s licensing system has been a mess and that the industry would certainly choose a far different approach if it could take a mulligan. In STBs, Chairman Wheeler intends to create a brand new licensing bureau, with a number of questions still outstanding about enforcement, process, and legality. This isn’t as easy as Wheeler says, but ultimately the devil is in the not-so-transparent details, which the public will see in late October after the FCC votes on the issue in three short weeks.

Read the full article here.

In Tech-Driven Economy, FCC Needs to Step Up

By: Mike Montgomery

It’s clear that technology is a key driver of prosperity in today’s modernizing economy. Trillions of dollars in economic activity flow through the networks which make up the internet, making America’s digital economy the envy of the world. Networks are redefining the services people consume and the income people derive. For example, according to a Pew survey, 72 percent of Americans have used a sharing or on-demand service.

That’s why the Federal Communications Commission has never been more important. From last year’s Net Neutrality rules to current proceedings about set-top boxes, internet privacy and business services, FCC rules are shaping the future of the internet – and the broader economy that it fuels. Whether you agree or disagree with these regulations, everyone agrees they will have a profound impact.

That is why it’s so disconcerting to see the FCC disconnected from the economic impact of its decisions. In a report he published in July, the FCC’s very own former chief economist, Gerald Faulhaber, Ph.D., raised alarms about the agency’s dangerous turn away from economic analysis in its decision making.

In the report, Dr. Faulhaber asks: Why do the U.S. Department of Labor, the U.S. Environmental Protection Agency and the Consumer Financial Protection Bureau all conduct stringent cost-benefit analyses on their decisions while the FCC does not?

The FCC has simply become too important to the economy for it to fail to explore the economic impact of its decisions. For example, numerous economists warned the FCC that its decision to impose so-called Title II regulations on internet service providers, which treats today’s advanced broadband access in the same way as telephone services from generations ago, will have a negative impact on investment and innovation while not solving the issue we all want addressed: how to ensure that internet traffic is treated fairly across networks, regardless of where it comes from. Yet, when issuing its Open Internet Order, the FCC conducted no economic analysis of the impact its proposed rules would have on consumers, innovation or investment.

How is that possible?

The problems continue. The FCC is currently facing a major backlash from Congress, Hollywood and many innovators for its proposed new technology standards for set-top boxes.

Read the full article here.

Advertising sucks, but TV would be worse without it

By: Mike Montgomery

Given the opportunity, many of us choose to organize our TV watching to minimize ads as much as possible. We record, fast forward or pay subscription fees to services like Netflix and HBO to watch shows ad-free. But here’s the dirty little secret of television — advertising makes it go and keeps it affordable for the viewing public.

Which is why the Federal Communication Commission’s attempt to “open” the cable set-top box to competitors has the potential to be a giant disaster for consumers. Let me explain. Although advertising is becoming increasingly easy to skip, it still funds an enormous number of programs. Last year advertisers spent $79 billion on TV. That’s down slightly from 2014 but still makes it the largest slice of advertising spending in media beating out digital and (obviously) print.

Advertising makes up as much as 50 percent of revenue for programmers and 8.5 percent of revenues for the so-called multi-channel video programming distributors. The money flowing from these ads keeps the TV ecosystem going. Networks have money to invest in and pay the creators who make TV shows. Prestige shows like “Mad Men” and “Empire” are financed by ads. But it also allows MVPDs to keep subscription prices relatively low by providing another source of revenue — one that doesn’t come out of consumers’ pockets. That helps subsidize pay channels, which is why standalone HBO costs $14.99 per month but you can get HBO through your cable provider for $10 per month.

The FCC’s proposal to open the set-top box market to third-party developers would destroy this entire system. The MVPDs would be required to provide their programming streams to anyone who wanted to use them. These third-party box makers wouldn’t be required to follow the advertising deals that MVPDs have carefully contracted. They could alter or delete the original ads or pile on more ads and keep all that new revenue for themselves, driving down the value of the “original” ads and sucking up revenue that would ordinarily go to fund new programs. Chairman Tom Wheeler has claimed the new rules won’t allow this but experts recognize that the “rules won’t prohibit extra ads around TV channels.”

Read the full article here.

Why Every Entrepreneur Should Care About Nintendo’s Pokémon GO

By: Mike Montgomery

Pokémon GO has changed the game.

By that, I don’t just mean the world of video games. There’s no question that the mobile game, which at last count was being f you haven’t played, the game works with a GPS map that shows you where Pokémon are in the real world (you can tell a Pokémon is nearby via a virtual rustling of leaves). When they’re close enough, they appear as augmented reality on your phone and you try to catch them. The result is entertaining and adorable.

Although augmented reality has been around for years, this is by far the best use of the technology. Video game designers all over the world are probably scrambling to include augmented reality in whatever project they are currently working on.

But the impact of Pokémon GO is bigger than that. It’s even bigger than Nintendo’s 100% stock climb over the past few weeks. The game is also creating amazing opportunities for brick-and-mortar entrepreneurs.

Players don’t only try to catch Pokémon in the game. They also congregate at Pokéstops (where they can collect Pokéballs and other bonuses) and gyms (where they can battle other teams). Pokéstops and gyms are locations in the real world. Bookstores, churches, restaurants and murals that happen to be gyms or Pokéstops are suddenly being inundated by Pokémon GO players.

Businesses didn’t have a chance to sign up for this. The maps of key locations come from a previous game from Niantic (the studio behind Pokémon GO) called Ingress.

But they can take advantage of the business. For example, businesses can put out lures, which temporarily increase the number of Pokémon around that business. Inc calculated that lures only cost $1.19 per hour and they can drastically increase foot traffic. A friend who was playing Pokémon GO with her son noticed a lure at a local candy shop. Her son caught a bunch of Pokémon and she ended up buying him some candy.

Read the full article here.

The Disappointing Strategy Behind The Losing Battle To Force-Feed Set-Top Boxes To Consumers

By: Mike Montgomery

Despite the short window for public comment now being closed on the FCC’s unnecessary and harmful set-top box (STB) proceeding, efforts to rationalize and mislead the public continue in earnest. Yesterday, and likely in consultation with the FCC, a group of well-known individuals was assembled to push back on the massive group of detractors to the proposal.

We’re not talking about a few, scattered voices who dislike the FCC’s anti-innovation mandate. We’re talking about tech coalitions, business entities which would undoubtedly benefit from the proposed scheme, labor unions, broadcasters, content creators and an enormous bipartisan group of members of Congress (180 members!) that is seemingly growing by the day.

The best way for allies of the FCC’s ill-fated scheme to chip away at the groundswell of opposition that is rallying against the proposal is, apparently, to continue spewing erroneous facts and take personal potshots at members of Congress. It’s a strategy. But it’s not a mature strategy.

These proponents continue to bang away at the supposed size of the market, saying it’s a $20 billion dollar a year industry. They rely upon a Moore’s Law-ish theory that the price of consumer electronics falls over time and therefore the price of boxes should fall over time, but haven’t. These numbers and theories were pulled out of thin air. They fail to account for the innovation that has occurred. A few years ago, one couldn’t watch HD, couldn’t record a show and watch it later, and couldn’t watch video on demand. Today, I’m able to go all-HD, I can record, at the same time, far more programs than I can watch and can pull up an episode of Dora and Friends for my daughter or Mr. Robot for me — on demand. I can store hundreds of hours of programming. Do I love my box? Not really, but I don’t hate it either. I dream of a not-to-distant magical world where the box is marginalized, not demonized. I want a world where the box is unnecessary, not forced into my living room by government mandate.

Read the full post here.

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