Google received 21-million copyright takedown requests in the past month

Tuesday, October 8, 2013 - 7:10am

Does Internet radio solve piracy? Let’s be clear about the question.

By “Internet radio” we mean all forms of interactive listening that reflect the consumer trend to access as a new form of ownership. In other words, reaching for the celestial jukebox instead of hoarding song files in local storage, whether or not those files are obtained illicitly.

By “piracy” we mean any music consumption unauthorized by music owners, regardless of whether that behavior displaces legal downloading or listening. (Displacement has been a much-argued question for 15 years.)

Now that we’ve clarified the terms, let’s admit that the answer is unknowable. There is logic to the idea that streaming music, and music subscriptions, offer an easier, safer, and more satisfying path to soundtracking one’s life than unauthorized methods. If Spotify had existed in 1998, during Napster’s heyday, it is possible that the novel delights of file-sharing would have been substantially undermined.

Enough speculation. Here are some numbers. Google reports receiving 21.5-million copyright removal requests in the past month, and nearly 6-million in the past week. The accelerating pace of those requests is breathtaking (see the graphic), and likely due to increased surveillance as much as it is due to supply or demand for unauthorized music.

What is a copyright removal request to a search engine? Google is not a peer-to-peer file-sharing network, but it does serve as a directory that points to file-sharing platforms. As such, it must respond to DMCA-compliant takedown requests. These requests emanate in the greatest volume from industry groups like the RIAA (Recording Industry Association of America) and its British counterpart, the BPI (British Phonographic Industry). Those two alone are responsible for about 10-million takedown requests in the last month, nearly half the total. Another top-three request source is Degban, a technology provider that uncovers unauthorized services. Microsoft gets into the act, too.

All these groups, and others, want search results removed from Google. Google complies with 97 percent of requests.

The meaning of all this is debatable. It is wrong to imagine that 21.5-million new file-sharing networks popped up in a one-month period. Most takedown links point to individual files on a P2P platform. There could be a million requests related to one underground service. As to actual use, Google’s disclosure does not hint at clickthrough, or offer any measurement of how popular unauthorized file-sharing is. The ongoing request-and-removal process has become systematized through technology, and functions as a tamping-down method of keeping illegitimate music distribution partly hidden.

Music streaming and music piracy live side-by-side. We’ll take streaming any day.

RIAA, NARM appeal to IT managers to allow employees their streaming music

Tuesday, August 13, 2013 - 12:50pm

The music industry website WhyMusicMatters.com has posted an open letter on the site encouraging businesses to allow employees to enjoy licensed streaming music services while at work.

WhyMusicMatters.com was developed by the Recording Industry Association of America (RIAA) and NARM (a trade association for the music business) to steer consumers towards licensed and "authorized" digital music services. "An Open Letter To IT Executives: Don’t Block The Rock" is signed by NARM president Jim Donio and RIAA chairman and CEO Cary Sherman.

It cites research that supports the idea that music in the workplace can have beneficial effects. It describes a healthy digital music industry with legitimate, licensed services (the usage of which poses little danger of spyware or viruses). And it breaks down typical bandwidth usage for services like Spotify and Pandora to demonstrate that employee enjoyment of streaming services won't tax the system.

"Nearly half of IT administrators are blocking, throttling or banning access to legitimate music streaming services like Spotify, Vevo and Pandora on employee computers and mobile devices," the group claims. "It doesn’t add up, and we believe it’s time for business leaders to rethink their current IT policies: don’t block the rock."

Traditionally, services like Internet radio have seen highest usage during the Monday through Friday, 8am to 6pm standard work day. Even as listeners increasingly using mobile devices to tune in (see today's story on the growth of listening via mobile phone here), on-the-job music lovers can simply use the office WiFi to connect.

WhyMusicMatters does add the warning: "Of course, there are still illegal sites out there, and that’s why we wholeheartedly encourage administrators to remain vigilant about bandwidth hogging file-sharing sites rife with malware and configured with settings that can expose a company’s top secrets to the world."

Read the open letter at WhyMusicMatters.com here.

Pink Floyd parrots record industry talking points for anti-Pandora tirade in USA Today

Monday, June 24, 2013 - 3:50pm

The three surviving members of rock royalty Pink Floyd attacked leading webcaster Pandora today for its efforts to reduce its music licensing costs in USA Today.

An op-ed from the band seems mostly constructed around oft-repeated talking points from the RIAA and music industry lobby group musicFIRST.

After the record industry corralled recording artists for its campaign to stop the "Internet Radio Fairness Act" (more here) in the last Congress, Pandora began to reach out to artists for support. The webcaster hopes to show Congress that there are recording artists who value Pandora as a promotional vehicle, and understand that royalty relief may be vital to its survival.

Again, using the well-worn tropes of earlier music industry efforts, Pink Floyd characterizes Pandora's efforts as an attempt to "trick artists" in their efforts to "slash royalties." Even the peril of an "85% artist pay cut," and the accusation that Pandora wants "growth of its business directly at the expense of artists' paychecks," are nearly word-for-word rehash of SoundExchange press releases.

One more-interesting sentiment from the band's op-ed: They want Pandora's help to get them royalties from AM/FM radio.

"Artists would gladly work with Pandora to end AM/FM's radio exemption from paying any musician royalties," Pink Floyd wrote, in apparent belief that webcasters' lobby on Capitol Hill could achieve something the record industry's can't.

Read Pink Floyd's op-ed in USA Today here.

Industry expert MacDonald figures nearly half of SX's $502 million revenue was Pandora royalties

Thursday, April 4, 2013 - 12:30pm

According to a guest columnist in Audio4cast today, nearly 50% of the over half a billion dollars SoundExchange collected from services last year came solely from Pandora!

SoundExchange is the music industry body that collects and distributes royalties for the digital use of copyright sound recordings. When services like webcasters, satellite radio (SiriusXM), cable radio (Music Choice), and business establishment services (DMX) perform copyright sound recordings, they pay SoundExchange, which then distributes money to copyright owners (labels) and performers.

SoundExchange last week released its 2012 financial report (here), revealing it had collected $502.2 million total from services last year (up 35% from 2011's $372.2 million). Digital media attorney Angus MacDonald compared the SoundExchange report with Pandora's most recent 10-K filing (here) and concludes that the top webcaster alone accounts for all of SoundExchange's 2012 revenue growth.

"Pandora paid 55.9% of its revenues to SoundExchange for the fiscal year that ended January 31, 2013," MacDonald wrote in Audio4cast today. "Pandora’s total revenues last year were $427.1 million. Based on the above figures, Pandora paid SoundExchange over $238.7 million ($427.1 million multiplied by 55.9%)" in that fiscal year. "That $238.7 million figure represents 47.53% of SoundExchange’s total royalty revenues ($502.2 million) in 2012," says McDonald.

Pandora paid about $132 million more for royalties in 2012 than in 2011. So while SoundExchange's collections increased by $130 million in a year, that means Pandora completely footed that increase (and a little more). MacDonald also points out that Pandora's FY 2013 royalty bill ($238.7 million) was close to its total revenue for the previous year ($274.3 million for FY 2012).

Pandora strongly backs legislative efforts (such as the Internet Radio Fairness Act, more here) to reform the process that determine royalty rates, in the hopes of decreasing that obligation. Recording industry groups like SoundExchange and the RIAA have strenuously opposed such efforts.

"With Pandora’s ever-surging listening hours and royalty payments, SoundExchange (as well as the record labels and artists who split the royalties collected by SoundExchange) need a healthy Pandora as much as Pandora needs a reasonable Pureplay-like rate for the next royalty term (2016-2020)," MacDonald concluded.

RIAA CEO Cary Sherman recently told The Verge's Greg Sandoval, "Access models" (industry terminology for services that license digital recordings, like Pandora, but also Spotify and YouTube) "are our present and our future... [This] underscores how vital it is to protect these increasingly important revenue streams."

Read MacDonald's guest column in Audio4cast here.

The RIAA issued its revenue report recently which showed $462 million of its 2012 digital revenue -- about 45% -- came from non-interactive digital services like Pandora and SiriusXM (see more in RAIN here).

Labels made $1B+ from streaming last year, 45% from sources like Pandora and SiriusXM

Tuesday, April 2, 2013 - 12:40pm

Yesterday (in this article) we alluded to RIAA financial statements that revealed streaming revenue from sources like Pandora, Spotify, and YouTube (known as "access models") amounted to $1.0328 billion in 2012, accounting for 15% of total industry revenue.

$462 million, or about 45% of the digital total, came from non-interactive digital services operating under statutory licenses (Internet, satellite, and cable radio) via SoundExchange.

Physical retail sales (CDs/vinyl) amounted to about $2.584 billion, down 18.5% in a year. Downloads amounted to $3.02 billion.

See the RIAA revenue summary sheet here.

Columnists see matter of Pandora viability through very different lenses

Monday, April 1, 2013 - 1:00pm

The Verge columnist Greg Sandoval cites an RIAA report and statements made by SoundExchange (which collects sound recording royalties from licensed webcast services and satellite radio) to report "Pandora contributes about 25% of all the money the labels receive from the access models. (Incidentally, SoundExchange's revenue was up 58% last year.)" ("Access models" is label terminology for licensed streaming services.)

And this, according to Greg Sandoval in The Verge, is precisely why the labels need to play hardball with Pandora and Internet radio.

"Access models" "are our present and our future," RIAA CEO Cary Sherman told The Verge. "[This] underscores how vital it is to protect these increasingly important revenue streams."

In other words, the labels need to avoid destroying these revenue sources -- yet maintain the upwards pressure on royalties because they also need to maximize profit (and these services are labels' only bright spot right now). Rocco Pendola, columnist for TheStreet, says this shows "the music industry needs Pandora just as bad as -- or, dare I say, worse than -- Pandora needs them. Same goes for the rest of Internet radio."

"If access models fail," Sandoval writes, "the labels risk ending up back in a world where a single player like Apple holds all the power." Industry sources told The Verge that Apple and labels are increasingly close to a deals that would pave the way for an Apple "iRadio" streaming service.

In fact, should the record label give Apple royalty rates that are actually more affordable than the statutory streaming rates, Pandora would have "plenty of ammunition to argue on Capitol Hill that web radio is getting screwed."

Despite this, The Motely Fool is warning investors against Pandora. In a posted video, Motley Fool CTO Jeremy Phillips says Pandora is open to competitive disruption because it doesn't own the content it streams, and any deep-pocketed competitor can easily enter the business. In fact, companies like Google, Amazon, or Apple could operate streaming services at a loss to widen the market for their other businesses.

TheStreet's Pendola strongly disagrees, saying Pandora's Music Genome (its proprietary database of human collected characteristics about each song it plays that drives its algorithmic music programming) is a great example of intellectual property that can't easily be duplicated by a competitor. He also points to the fact that Pandora has been assembling both national and local sales forces to compete with broadcast radio, another accomplishment that won't be easy for a competitor to duplicate.

He writes, "Competitor after competitor has come in and done absolutely nothing to slow Pandora's growth. In fact, the growth has never stalled. In terms of listener hours and revenue, particularly on mobile, the company is as healthy as it has ever been. Don't expect that trend to reverse, even if Apple hits the market with an iRadio product."

Read Sandoval in The Verge here, see video from The Motely Fool here, and read Pendola in TheStreet here.

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