YouTube Under Fire

YouTube. What is it good for?

Not for making a living, apparently. According to new research by Matthias Bärtl of Offenburg University of Applied Sciences in Offenburg, Germany, 96.5 percent of YouTubers trying to make money from their videos won’t earn enough from advertising to exceed the official U.S. poverty line of $12,140 a year.

That’s in part due to YouTube’s low advertising rates, but mostly due to the fact that a tiny slice of videos grab nearly all of the views. According to Bärtl, 3 percent of most-viewed channels in 2016 attracted almost 90 percent of all views.

There’s a broken heart for every “like” on YouTube.

While Bärtl’s research may say more about the unwarranted expectations of most YouTubers than about anything YouTube itself is doing, another new study this week cast the Google-owned site in a more sinister light. Read More »

Disney Sees Red Over Ruling on Download Codes

Ever since sales of DVDs and Blu-ray Discs began their long eclipse behind the rise of more convenient digital alternatives the Hollywood studios have sought ways to extend the life of the high-margin disc business by finding ways to integrate disc sales with the broader digital economy.

The most systematic effort was the UltraViolet initiative. By creating an UltraViolet account, consumers could register their purchase of a DVD or Blu-ray Disc and obtain access to a digital version of the same movie, which they could then stream to connected devices without a DVD or Blu-ray drive, via participating streaming services.

Disney, which never joined the UltraViolet consortium, had its own version it called Disney Movies Anywhere (now re-christened simply Movies Anywhere and incorporating most of the former UltraViolet studios). Disney packaged its discs with an insert containing a code, which, when entered by the consumer in her online Movies Anywhere account allowed her to stream the movie through participating online services, or to download the movie onto up to eight registered devices.

DVD rental kiosk operator Redbox has likewise struggled with consumers’ declining appetite for DVDs and Blu-rays. It’s main strategy has been to keep its rental prices extremely low, which has often put it at odds with the studios, who by and large would prefer to see the low-end rental market wither away. But Redbox, too, has sought ways to make itself digitally relevant. Read More »

Modernizing Music Licensing

Just before Christmas, a bi-partisan group of lawmakers introduced the Music Modernization Act, which, among other things, would create a new blanket license for mechanical reproduction rights to musical compositions and establish a new entity to collect and distribute mechanical royalties.

The bill is meant to address one of the abiding sources of friction within the digital music streaming business. Musical compositions in the U.S. are subject to a compulsory mechanical license, meaning anyone can record a song and sell copies of that recording by sending a notice of intent (NOI) to the composition’s copyright owners and paying a per-copy royalty set by the Copyright Royalty Board.

Unlike the public performance right, however, where performance rights organizations (PROs) like ASCAP, BMI and SESAC aggregate millions of compositions and offer a blanket license covering their entire repertoires, anyone availing themselves of the compulsory mechanical license is required to identify and pay the appropriate copyright owners individually. Where the copyright owners cannot be identified or located, the user can file the NOI with the U.S. Copyright Office and the royalties paid are held in escrow until the rights owners are located.

The system worked well enough for many years when it was rare for anyone or any outlet to make bulk use of the mechanical reproduction right. With the rise of digital streaming, however, which has been held to implicate both the public performance and the mechanical reproduction right, the lack of an efficient system for administering mechanical rights has been a constant source of tension, between digital service providers like Spoity and Apple Music on the one hand, and music publishers and songwriters on the other.

That tension has frequently erupted into litigation, including the $1.6 billion lawsuit filed against Spotify in December by Wixen Music Publishing over Spotify’s alleged failure to pay required mechanical royalties.

Should it become law, the Music Modernization Act could go a long way toward easing those tensions. Since it’s introduction, in fact, the bill has gained broad support throughout the industry. In a rare show of unity, a group of more than 20 industry organizations representing music publishers, songwriters, record labels, PROs, and service providers issued a joint statement earlier this month endorsing the bill and urging its passage.

Much of the credit for the bill’s introduction and for rallying support behind it belongs to the National Music Publishers Association (NMPA) and its CEO David Israelite, who worked closely with the bill’s sponsors on Capitol Hill and helped broker the joint statement. Israelite will sit down with me for a special fireside chat at Digital Entertainment World on February 5th to discuss the Music Monetization Act, as well as other issues facing the industry, including the music industry’s notorious data challenges, and the future of performance rights licensing in the wake of recent court cases.

This week, we asked Israelite a few preliminary questions to set the stage for his fireside chat:

Concurrent Media: Last week, a group of music industry organizations jointly endorsed the Music Modernization Act, the Classics Act and the AMP Act. To what do you attribute the sudden outbreak of cooperation among so many different stakeholders?

David Israelite: We have a window of momentum and consensus that is ripe for action. Congressional leaders like Judiciary Committee Chairman Bob Goodlatte, who retires this year, has made copyright reform a priority, and with songwriter champions like Rep. Doug Collins (R-GA) and Rep. Hakeem Jeffries (D-NY) offering consensus bills like the MMA – and the Senate hopefully following suit – there is a real opportunity to move legislation that will significantly help the future of songwriting. Additionally, the MMA is not a wish list for music publishers and songwriters – it is a bill that took months to negotiate because it helps both the tech and music industries. No one got everything they wanted – but both sides are better off with the MMA. DiMA, which represents the biggest tech companies in the world is supportive, as are the biggest songwriter groups in the U.S.

Largely because of the momentum around the MMA – the music industry has coalesced around other music bills that will help legacy artists and producers. As I have always said – we are stronger together – and we have a great opportunity to not just help our segment of the pie – but to advance the whole creative class. After years of trying to develop and unite around reasonable reforms, it is truly exciting that today we stand together and that Congress is invested in these changes as well.

Where do you think the debate over the BMI/ASCAP consent decrees goes now in the wake of the 2nd Circuit decision?

BMI’s win sends a strong message that the DOJ cannot simply reinterpret decades of industry practice and upend the lives of thousands of songwriters. The new leadership in DOJ’s antitrust division hopefully offers a new path forward, and I believe they are looking at the consent decrees with fresh eyes. My hope is that they will ultimately abolish them altogether and give songwriters the free market that other intellectual property owners enjoy.

3) What is NMPA’s position on the various PRO database initiatives (ASCAP/BMI; ASCAP/SACEM/PRS)?

The PROs currently offer searchable repertoires. Their efforts to create a single database will bring clarity to the industry – however these initiative will take time and money. I look forward to seeing their progress in the coming months.

Click here for information on how to register for Digital Entertainment World.

Explaining Blockchain With Cats

When Satoshi Nakamoto introduced Bitcoin into the world, whoever he, she, or they were set the total number of coins that can ever be released (“mined” in Bitcoin parlance) at 21 million. While individual bitcoins can be sub-divided into an infinite number of smaller units (fractions of bitcoins), the total whole number of units is finite.

CryptoKitties fat cat Mack Flavelle

That inherent scarcity is one of the reasons for the dizzying run-up in the price of bitcoins: At any given time there is a fixed number of bitcoins in the world.

The key to establishing that scarcity is the blockchain, which leverages cryptography to ensure that individual bitcoins (and their subdivisions) are unique, identifiable, unalterable, and un-reproducible. Unlike the internet, where sending a digital file from one computer to another inescapably involves creating a new copy, bitcoins themselves are not really “sent” or transferred over a network so there is no need to create a copy. Instead, the shared ledger that records ownership of bitcoins is updated to reflect the new network address (i.e. owner) of a cryptographically unique asset on the network.

Those properties, of uniqueness and scarcity, are part of what has attracted many artists to blockchain technology. What is unique and scarce can have and hold value, and what has value can be bought and sold, traded and collected, or held as an asset in the expectation of appreciation.

Getting people who are not steeped in cryptography and are accustomed to the infinite reproducibility of digital files on the internet to become familiar and comfortable with the concepts of digital scarcity and uniqueness, however, is a challenge. Without that buy-in from consumers, the blockchain hopes of many in the media and creative industries could be broken.

It was that challenge that Mack Flavelle and his team of developers at AxiomZen set out to tackle. Their solution? Cats.

The team came up with a collection of digital illustrations depicting goggle-eyed, cartoon cats they called CryptoKitties and created an online game allowing people to buy, sell and collect CryptoKitties using Ether. The game also leverages smart contracts to make the kitties “breedable,” based on their unique “DNA,” creating new, unique CryptoKitties.

Why cats? While there are other blockchain-based digital collectibles on the market, most are targeted at limited audiences, such as RarePepes, based on the adopted alt-right mascot Pepe the Frog. Flavelle’s goal was to appeal to a broader market and introduce ordinary consumers to digital collectibels. “Cats are part of the internet,” Flavelle tells RightsTech.  “People are already familiar with the idea of trading cat videos.”

Trading in CryptoKitties has been robust. At one point, it became the dominant application on the Ethereum network, to the annoyance of others trying to use the network.

According to a third-party site that tracks sales of CryptoKitties, some virtual kittens have sold for the equivalent of more than $100,000, based on the then-current value of Ether.

Flavelle, who’s title is Fat Cat, will sit down for one-on-one fireside chat with me on February 6th, as part of the RightsTech track at the Digital Entertainment World conference in Los Angeles.

We’ll discuss the origins of CryptoKitties, what their creators have learned about the market for digital collectibles, what their popularity portends for consumer adoption of blockchain-based applications, and whether CryptoKitties are a fad or will prove to have nine lives.

Click here for information on registering for Digital Entertainment World.

 

Nothing Neutral About Disney’s Bid For Fox

It was fitting, albeit likely coincidental, that the Walt Disney Co. announced its $52 billion acquisition of most of the movie and TV assets of 21st Century Fox on the day the Federal Communications Commission voted to repeal its own net neutrality rules, because the deal is very much about the future of content delivery over the internet.

Disney CEO Robert Iger

Under the deal, Disney would absorb the 20th Century-Fox film and TV studio and its library, including the first three “Star Wars” films; most of Fox’s cable networks group, including National Geographic, FX, and 300-plus international channels but excluding Fox News or Fox Sports; and 22 regional sports networks (RSNs). The deal also includes Fox’s one-third interest in Hulu, giving Disney majority control over the streaming service.

Assuming the deal passes antitrust muster — highly likely given Rupert Murdoch’s closeness to Donald Trump — it will give Disney control over vast new libraries of content as it prepares to significantly expand its direct-to-consumer streaming business. Strategic control over Hulu will also give Disney a solid foundation from which to challenge Netflix and Amazon directly as an over-the-top content aggregator.

Yet, while the coming showdown with Netflix has grabbed most of the headlines about the deal, there is another important streaming dynamic likely to play out that has gotten less attention but which could be directly impacted by the repeal of the net neutrality rules.

Whether, or not, the bulked up Disney succeeds in challenging Netflix and Amazon, its growing direct-to-consumer ambitions give the Mouse a major stake in the coming contest between programming services and broadband providers over the terms and conditions of engagement on last-mile networks.

The over-the-top streaming business has so far developed very differently from traditional movie and television delivery businesses. In the traditional TV business, the owners of the last-mile pipes — cable and satellite operators, local broadcast affiliates — pay program providers for access to their content.

Disney, in particular, has been successful in leveraging that dynamic, earning ESPN the highest per-subscriber carriage fees of any cable network.

Unlike a cable TV system, however, internet access networks have utility and value independent of any particular content, allowing access service providers to build their networks — and subscriber bases — without having to pay for the content moving across those networks.

If anything, the monopoly or duopoly status most internet access providers enjoy within their footprints has raised concerns that ISPs could use the leverage of their control over their networks to compel content providers to pay for access to their subscribers.

The FCC’s original Open Internet Order was designed in part specifically to deny ISPs that leverage, by prohibiting the blocking or throttling of data based on its source, or accepting compensation for favorable treatment of data from a particular source. Those rules left the status quo in place, at least for the time being. But they left open the possibility that the streaming business could eventually develop more like the traditional TV business, in which access providers are compelled to

The FCC has now voted to lift those rules — their ultimate fate awaits the outcome of inevitable litigation — potentially upsetting the current balance of power.

Determining who will ultimately holds the leverage in that balance remains a work in progress, however. One way to read Disney’s bid for Fox is as an attempt to position itself not only against Netflix but against last-mile network operators for the inevitable battles ahead.

From that perspective, the real trigger event for Disney was AT&T’s (still pending) acquisition of Time Warner. Assuming that deal goes through, it will mean that two of Disney’s (and Fox’s) major competitors — NBCUniversal, now owned by Comcast, and Time Warner — will be owned by major broadband providers. That could leave Disney at a disadvantage in the struggle for leverage over the terms of OTT distribution.

One option would have been for Disney to sell itself to a network operator. But the only one out there with the scale to do it and not already betrothed is Verizon, and Verizon execs have made it clear they’re not in the market for a major studio.

By buying Fox, Disney is hoping to gain enough scale as a content provider to treat with network operators on equal or better terms.