Month: May 2008

collateral damage of no-embedding policy

In reaction to my posts on music video embedding, Greg commented:

What about the labels ability to recruit and retain artists? If the effect of preventing embeds is to reduce videos’ viral impact and hence the sales/attention driven by that impact, labels that follow this policy will find themselves less able to develop new artists and less able to stimulate new interest in catalogue artists.

And labels that are inclined to follow this ‘enforcement’ strategy are likely following it across the board rather than just in regards to music videos, i.e. they’re working harder to bust mp3 bloggers, p2p distributors, and all of the other new web-scale promotion channels.

Unless all of us who believe in the efficacy of these channels are totally crazy, in the long run, the artists on these labels should see reduced success: fewer fans, smaller sales numbers, less traction with live audiences.

In a separate but related post on common digital marketing mistakes by record labels Lucy posted on the underlying mental habit:

If we let people embed and distribute our content it will dilute our brand

No, actually, it will make your brand more pervasive and more relevant.

I know of several large corporations who do web 2.0 completely half-assed. They want to be down, so they create, for example, video content and destination sites, but they are so afraid of losing control over their content and brands that they do not allow embedding of their content. In other words they want to work exponentially harder just to get people to go to their site and “interact with their brand”, when they could have thousands of people working for them and spreading their brand to every nook and cranny of the internet by simply enabling users to copy and paste videos into their blogs, profiles and emails.

Here’s a couple of culprits:

Def Jam blocked embedding of their video content

Universal prevented their artists from uploading full length streams of songs to MySpace

Victor commented on damage to the music video business as a whole:

I was working in the video promotion dept. of CBS when they pioneered the 30-day MTV exclusivity deals. Before that, my job involved pushing videos to dozens of video outlets – after the MTV deal, that job didn’t exist anymore. Within months there was only one channel showing music videos.

The MTV exclusivity deal turned out to be a disaster for the labels. MTV stopped showing music for the most part — they mainly do lifestyle programming now — and with the other distribution points for music videos gone there was simply less promotion as a whole. So this is a problem with the majors’ internet strategy. By orienting their embed policy towards negotiations with a few major distribution partners like Myspace and Yahoo, the labels are putting themselves in a precarious situation. The internet changes fast. In five years there will be different providers at the top, and if those providers didn’t come up with music videos it’s unlikely they’ll switch over. Five years ago Myspace and YouTube didn’t exist, and if the majors had been able to cut an effective exclusivity deal with the megasites of the day they wouldn’t now be benefitting from Myspace and YouTube.

The internet does not work by 1-1 deals. There are too many players and the landscape is too fluid. You set a blanket policy that can be negotiated using internet standards and let the best startups take advantage of automation.

Per gurdonark:

The use of the technology in viral media spread evolves so quickly that the traditional record companies have to make very quick decisions on a market which changes so rapidly as to make past experience a dubious guide.

It’s a tough dilemma, which requires solution if the record industry is to avoid complete marginalization, as I do not think that consumer demand for flexible media which can be shared will abate.

And Greg:

Unless all of us who believe in the efficacy of these channels are totally crazy, in the long run, the artists on these labels should see reduced success: fewer fans, smaller sales numbers, less traction with live audiences.

In a world where distribution is free, the only value the labels provide is the power of their promotion engines. Denying themselves access to the promotion outlets with the fastest growing reach seems like a serious long term strategic mistake in these conditions. If all of the artists jump ship in order to take advantage of these new outlets directly (or in favor of new enterprises that will help them do so, as has already happened in a number of high profile cases) what will the labels be left with?

business impact of requesting to disable embedding of music videos in label channels on YouTube

A top pop star comes out with a new music video. The video is played on television, where a fan records it, digitizes it, and posts it to YouTube. The video is also posted on YouTube in the star’s label’s channel. The version in the label’s channel has disabled embedding by request. The version in the fan’s channel has not.

Someone sees the label version and likes it. They want to embed it in their Myspace page to tell their friends about their discovery, but they can’t. Someone else sees the fan version and decides to embed it in their Myspace page, and this time the embed works.

A friend of the embedder visits their Myspace page. They watch the video. They decide to add it to their own Myspace page. A friend of theirs visits their Myspace page and sees the video. Etc.

The net effect of blocking embedding is to move views from official label channels to unofficial fan channels. Also, it reduces overall views by preventing viral spread from views within label channels; most fans won’t bother to find an un-official embeddable version.

Who is the label punishing? Itself? The star? Myspace? YouTube? The fans?

Their intent is to punish Myspace. Specifically, the goal is to get Myspace to cut a direct deal with the label. (Myspace is just an example here; this is a hypothetical situation). So what does the label get out of this, and how does that compare to what it loses?

The label reduces the number of monetizeable views in several ways. It prevents viral spread, which can be a massive source of traffic. It pushes traffic to unofficial sources, which are harder for YouTube to identify for the purpose of paying royalties. (And their agreements with the labels may not include royalties for fan-supplied content). It also pushes traffic to other stars and other labels.

As far as direct revenues go, the label is moving less units (where a unit is a paid play of the video) so has to make more per unit. In terms of the deal it cuts with, for example, Myspace, this means that it has to earn *higher* royalties per view. But that’s unlikely because the deal terms for major distribution points will always tend to parity. Google, Myspace, Yahoo, etc all get more or less the same deal, eventually. So the label and star are probably losing short term revenues by blocking embeds.

The label also has contractual and marketing benefits from blocking embeds: it wants to keep the Miley Cyrus video off of sexxxylolitas.com. These sites can still embed the fan version of the video, but at least the label can say that it tried. This seems like a clear win for the label and maybe for the star.

To the extent that the purpose of music video online is to spur CD sales, the reduction in viral spread reduces CD sales. These CD sales go to other stars and labels. (Probably to Warner, which is the only one of the four majors not to block embeds).

What about long term revenues? What’s the strategic benefit? I have no doubt that the labels see negotiations with major distribution outlets like Myspace, Google, and Yahoo as a primary business opportunity. In the same way they relied on a few major retailers in the 20th century, they will soon rely on a few very large ad-sponsored web sites. The potential upside is massive.

So overall I would say that requesting to disable embedding is about negotiations with the web behemoths, and it’s a deliberate tradeoff of short term revenues for long term potential.

embedding permissions #3: strategic dominance

Among the problems that have led 3/4 of the majors to block embeds in third party sites of their videos on YouTube is the strategic need to maintain strength in negotiations. In a comment on the first post in this series, Jay Fienberg articulated the issue this way:

Adding to your leverage item: the labels are likely concerned that any very successful site or combination of sites becomes a primary interface between fans and recording artists, i.e., that takes the record labels out of the equation, or at least makes them only a small factor in the transactions between artists and fans.

The success of sites like YouTube potentially give these sites and/or artists and/or fans leverage over the record labels. For example, an artist can get a video seen on YouTube without a big label-type marketing budget, and so that fact could potentially weaken a labels’ negotiation in a record deal. Or, YouTube could become like a radio station and seek payola from labels to promote certain artists, etc.

The labels must want to curtail especially singular successes, like iTunes music store-type successes. These sites could become so big as to become more or less like monopsonies (buyer’s monopolies), where they have more power over the labels than vice versa.

embedding permissions #2: on internet standards

In my post on the ability for third party sites to embed video from the major labels, I concluded with a dire point: Imagine a web in which every relationship had to be negotiated by hand. It would be the opposite of the internet.

I don’t want to beat up on the labels, which tech bloggers like myself do all the time, and which is dumb. There is no point to that. The labels operate under severe contractual and business constraints, with pop stars on one side and internet juggernauts on the other. What I want is to challenge them to learn how to prosper on the internet proper, and for the tech world to understand the details of the labels’ problems.

The labels need to learn how to make internet standards work for them. This is hard because everything about their business is predicated on manually negotiated agreements, while everything about the internet is based on automated agreements. An internet standard is a method of automating agreement between arbitrary participants. By definition a standard makes room for all comers on an equal basis. No matter who you are, if you write to the standard you can work together with other parties that write to the same standard.

The majors have a lot of problems, no doubt, but this is the one that matters. The internet is made of standards. Everything else can and will change. TCP/IP will go away someday. HTTP will go away. Everything will go away but standards. For the major labels to prosper on the internet they have to learn how to work with, instead of against, internet standards.

making commercial use of non-commercial CC tracks

In the community of people interested in Creative Commons licenses there is a permathread about non-commercial licenses. Many musicians are willing to put out music with a permissive license but want to get paid if any commercial use is made of their music. Many people with a background in free software, myself included, feel that a license with a strong viral clause such as the CC Attribution-ShareAlike license is better. The Free Culture wiki has a good article on the topic.

The topic came up in an interesting interview with Victor Stone, the CC Mixter lead and a musician with several excellent releases on Magnatune. Magnatunes’ releases are commercial, so you can’t use sources with a non-commercial clause attached. This means that Victor can’t use NC sources from CC Mixter on his Magnatunes releases. Once you’re commercial the CC license has no bearing and you have to negotiate rights to samples exactly as you would with samples from big hits.

The interviewer at emxr asks:

While Magnatune artists as well as ccMixter artists give remixers the rights to work with their materials, (in most cases) that (Creative Commons) license applies to non-commercial derivative works. Since you are publishing your remixes as commercial releases, how do you go about licensing the needed tracks for your work? In the traditional music industry, that can be a dishearteningly complicated process. How does that work in your world?

Victor answers:

For Magnatune artists it’s easy, the label takes care of it all for me. The royalties of every sale or license are deducted from my account and funneled into sampled artists’ accounts. For most other cases I’m dealing with individuals so I just pay cash up front, or like with the DJ Vadim tracks make arrangements with the label. If a big license comes through on a track they sang, played on or produced then I manually pay them. But I only work with artists who have put material into the Commons because that, to me, is a green flag that they are willing to be reasonable.

His answer gets to a soft benefit of Creative Commons licensing. It’s a green flag that they are willing to be reasonable.

embedding permissions

Official music videos on YouTube from three out of the four major labels can’t be embedded in third party sites. You can embed Warner, you can’t embed UMG, Sony BMG, or EMI. If you use unofficial versions of the videos posted by a third party you can embed them, but not the official versions posted in the labels’ channels.

The back story is that the labels spent the last few years having a huge fight over royalties from user-driven video sites, and successfully got YouTube to pay for rights. (I’m don’t know for a fact that YT pays, but from what I know about the industry I’m sure it’s true.)

The issue of embedding has nothing to do with whether or not the labels get paid. They get paid on embedded plays. (Again, I haven’t see any contracts on this, but I know enough to have confidence).

But now they want a secondary benefit — to control distribution. Allowing third parties to embed videos from YouTube frees them from having to do 1-1 negotiations with the labels, and the labels want to be able to negotiate with each and every site that shows music videos.

I imagine the majors have three motivations. One, to be able to charge different rates depending on the site, so that they can raise rates depending on how deep the embedding site’s pockets are. Two, to be able to meet various contractual and marketing requirements. For example they may have morals clauses for wholesome artists like Hannah Montana, which would be both a legal and a marketing issue. Three, they have other negotiations in which they want to be able to use music videos as leverage. For example they might have an ongoing negotiation with LimeWire in which LimeWire wanted the ability to show YouTube music videos along with the ability for users to share MP3s. (In reality the labels’ desire there would probably be just to freeze out LimeWire completely).

Imagine a web in which every relationship had to be negotiated by hand. It would be the opposite of the internet.

soundcloud

Soundcloud is a really well-defined product. Limited in scope, easy to explain, original, and immediately useful. They have given themselves a strong chance of winning just by picking their battleground well.

It’s good to see a high degree of craftsmanship at that level of the development process. The product definition is the most important part of a project, and usually it’s the weakest part.

no more passwords

When I forget my password, don’t use my email to confirm that I have authority to reset it, use my email to log me in. Just treat an email address as a flavor of Open ID and we’ll all get along fine.

I don’t even save passwords for a lot of sites. I auto-generate a new random password, use it to login or create the account, and use password recovery by email whenever the site logs me out.

covers getting legal on YouTube

YouTube has struck a deal with a Japanese publishing company to allow YouTube users to do legal covers of compositions in that catalog. According to Billboard:

Under the new agreement, users can legally post video clips to YouTube in which they play and sing e-License-managed songs. Uploading music data from CDs and artists’ promotion videos remains prohibited. E License, which manages some 17,800 songs, is the second Japanese copyright agency to sign a blanket licensing contract for music use on YouTube after Japan Rights Clearance.

Once Google has achieved broad enough coverage with these deals, musicians will be able to do covers online legally as long as they publish them on YouTube. If the publishers can create enough legal risk related to covers, Google will have a big competitive advantage over other video sharing services and over independents who publish their own media.

Google’s risk is that this pushes YouTube’s operating costs up, and it’s already hella expensive to run. However, user-contributed music where Google only has to pay royalties on the publishing and not the sound recording is still relatively cheap compared to the stuff iMeem is paying for.

This isn’t an academic point. The recent ruling on payments owed by webcasters to publishers gives a yardstick for operating costs associated with publishing, and it is not a trivial amount.

hit, git and split

In Rolling Stone’s current piece on the best music blogs of 2008 (update: link corrected), three out of the four winners which do MP3s are using Yahoo! Media Player. That’s a pretty good score, and it shows that the media player has found a place in the world. I feel great. It’s like seeing your kid graduate from college and get a decent job. To see that the software has grown up, or at least reached its decadent 20s, means the completion of a long project.

Early work on the software now known as Yahoo! Media Player began in fall of 2004 as version 2.0 of Webjay. My vision was to move outwards from Webjay’s centralized form, and rather than have a site for authoring playlists have any old web authoring tool on any old site be able to create playlists using HTML. The difference would be ease of use — rather than go to Webjay, it would come to you. When Webjay got acquired by Yahoo! this unreleased software was picked up and began a new life as a project codenamed “goose.” During my first year at Yahoo!, while Webjay proper was going down, the new version was coming up, and right around the same time that we officially shuttered webjay.org we also bootstrapped a good development team for goose.

The first goose release went live on July 31, 2007 in the most modest way I could arrange — as a player for 30 second samples in an easter egg page within Yahoo!’s massively trafficked music site. The power of an AJAX-based player was evident in a subtle way, though, in that it supported Yahoo’s subscription service in off-the-shelf Internet Explorer on Windows. The subscription service wasn’t an impressive product, but the underlying code was truly hair-raising and couldn’t have been done with a traditional Flash MP3 player.

The next major iteration was in January of 2008, when we released a version of the player which could handle third-party content and run in third-party pages. It was a dramatically more open piece of work and we got great buzz right out of the gate, with articles all over blogdom and a warm reception from users. From there we picked up the pace on the release schedule quite a lot, turning the crank on a new rev a month later. Along with user interface changes based on feedback, we introduced the ability to open XSPF playlists that weren’t available to straight AJAX or Flash apps, as well as an integrated screen scraper that could turn almost any page on the web into a playlist just by linking to it. A month later we did the last rev of the first version of the player. This had many fit and finish improvements, auto-attribution for MP3 hosts being deep-linked, a buy button with an affiliate program for web publishers, and a “Find in page” button to help you associate a track with the place in the page that it came from. The first major version was complete. We went into quiet mode to work on version 2.0, which will be out in alpha form very soon and will have significant improvements.

And with that, my part in this is done. There is an excellent team to run the show, the product has good support on the business side of Yahoo!, there is a healthy user and developer community, and the software has good market share. It’s time for me to let go and move on, and so today is my last official day at Yahoo!

I don’t know exactly what I’ll do next, though I do have general ideas about areas to explore. What I do know is that tomorrow morning I’ll sit down to start work on whatever comes next.

Thanks for everything, y’all. See you on the flip side.