Business Matters: Are Royalties and Windowing Legitimate Controversies for Subscription Services?

Web Trends: Listen To Spotify's Most Played Song Of 2011

Web Trends: Listen To Spotify's Most Played Song Of 2011

Are Royalties and Windowing Legitimate Controversies for Subscription Services?
-- The recurring theme -- or broken record -- of digital music in the last few months has been the "controversy" regarding artists' discontent with subscription services. A handful of key releases get withheld from Spotify, and a vocal few complain about streaming royalties, and all of a sudden an entire business model is in jeopardy.

Well, the controversy continues. Marillion band member Mark Kelly perfectly summed up the two views of subscription services. "As a [consumer], I love Spotify, as an artist, I'm worried," he said at MusicTank's streaming music seminar in London, according to a report at paidContent. Kelly's feelings were echoed by Pink Floyd manager Paul Loasby. "The music is so undervalued," Loasby said. "The rightsholders, in my opinion, have sold it too cheaply."

What paidContent didn't point out is that U.S. Spotify users currently have access to 30 different Marillion titles. Kelly may be worried, as many artists are, but the band is typical in that it puts its music up on Spotify. Yet bloggers and tech writers are constantly drawn to the story of a handful of artists -- two handfuls at most -- holding out from subscription services. The truth is a relatively small number of well-known artists are Spotify holdouts. Sure, there are plenty of independently released albums missing, but this contrived controversy is focused on a handful of big names like Coldplay and the Black Keys.

OK, so let's focus on the big names that are getting all the attention. And let's say there are about 10 marquee albums that get held back from subscription services in a given year. Those 10 albums represent just 0.013% of the total number of new releases (there were about 75,000 new releases in 2011, according to Nielsen SoundScan, and there will probably be about that many in 2012). Now, those 10 albums were certainly account for more than 0.013% of album sales, but they certainly don't account for much if you're trying to measure overall artist sentiment about an emerging business model.

The latest bogeyman is artists' windowing strategy. Windowing is when a title is given staggered release dates, similar to how a movie goes from the theaters to DVD to online to TV. In a Q&A with Fast Company, Spotify chief content officer Ken Parks called windowing "a very bad idea" and mind-boggling." Last week, Rhapsody president Jon Irwin told Fast Company windowing "[is] fundamentally the wrong thing to do."

Windowing may be bad from the point of view of a subscription service trying to offer the most compelling service possible. It's certainly going to be portrayed in a poor light by the executives of subscription services constantly under fire for barely perceptible holes in their catalogs. And it may be a nuisance -- maybe even a deal-killer -- to some consumers. But if windowing is a controversy, it's not specific to the current debate. Put simply, windowing is everywhere. It may not always be a part of a release strategy, but release windows are nearly ubiquitous. When an artist sells music through Bandcamp or Topspin before it is sold at iTunes via a digital distributor, that's a form of windowing. When an artist has a ticket pre-sale, that's a form of windowing. As soon as a song is heard on the radio it can be found on YouTube -- another form of windowing.

Exclusives given to one retailer are a form of windowing, too. Exclusives are controversial yet commonplace in the retail world. They're somewhat common in the streaming world, too, but they're not yet controversial. Take Spotify, for example. In the last few months, Spotify has debuted exclusive, pre-release music from the Cranberries, Gorillaz, the "Twilight Saga -- Breaking Dawn Part 1" soundtrack and Idle Warships, a collaboration between Talib Kwali and Res. During the time of each exclusive that music was not available to subscribers of competing subscription services unless they temporarily switched teams, which is possible since most subscription services allow for free listening.

Chalk these "controversies" up to the growing pains of evolution. As Spotify's Parks noted this in his Q&A, these aren't new issues. "There was an uproar at the notion of selling records on an unbundled basis," he said. "There were high-profile holdouts including Radiohead, who thought it marked the end of the world."

But sentiment changed over time and iTunes went on to become the world's biggest music store -- before some notable holdouts like the Beatles finally went digital. So why should subscription services have it any easier?

Bloggers Misinterpret BitTorrent Study
-- An academic study found that BitTorrent sharing has a negative impact on the international releases of U.S. films due when films are released in European markets after an initial U.S. release. The researchers did not find evidence that BitTorrent hurt U.S. box office sales, however, although they admit the experiment for detecting U.S. piracy is "less clean than for international piracy."

Guess which part of the paper got all the attention? As the Wall Street Journal noted, the paper's conclusion was actually spun a different way by prominent technology commentator and author Cory Doctorow and tech blog TorrentFreak. In his post at Boing Boing Doctorow faulted movie studios for releasing movies at different times in different markets and argued that Hollywood's anti-piracy efforts are "about profit maximization, not survival" -- as if a basic tenet of capitalism had suddenly fallen out of vogue.

Joel Waldfogel, one of the paper's co-authors, saw how his research was being portrayed and was compelled to write about the study -- perhaps to make their conclusions more accessible to the layperson -- and say the authors were "surprised" by bloggers' incorrect interpretation of the paper. "We think our marquee result is the opposite: we do find evidence that piracy depresses international sales," Waldfogel wrote. He went on to explain the study used a "weaker" approach for detecting a BitTorrent impact in the U.S. (it had to change strategy because Hollywood movies are usually released in first in the United States).

Welcome to public policy in the digital era. Bloggers pick out items that fit with the theme of their blogs and the interests of their readers. Details and objectivity are often ignored or buried many paragraphs below the headline. As the online outrage against SOPA showed us, journalism and activism are easily and frequently mixed -- and it can be a potent combination when a blog's readership is large and active as well.

To be fair, reporting about academic papers is an easy task. To be honest, even a well-meaning blogger can misinterpret a researcher's conclusions. Parsing the concepts and translating academic language into readable copy is difficult and fraught with potential for error. And regardless of its bias, any blog is going to create a headline that grabs the eye and makes some kind of statement. In contrast, academic papers often use neutral language and hedge against the kind of certain conclusions laypeople would prefer.

But the authors clearly expect more out of the people who report and disseminate their work. "We'd blame ourselves but lots of these bloggers don't seem to read carefully," Waldfogel wrote. "Some of the posts have me at Mizzou, rather than Minnesota. So much for the wisdom of crowds."
( Digitopoly, via Copyhype)