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<nettime> a free letter to the fcc
Felix Stalder on Wed, 18 Jun 2014 10:18:25 +0200 (CEST)

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<nettime> a free letter to the fcc

While we are debating somewhat abstract free licensing issues, the
independent music labels are fighting real monopoly power.

Google is threatening to ban their music from Youtube, if they do not
accept conditions worse than the major music companies for the new
streaming venture that Google is in the process of creating.

This is a classic example of why "vertical integration" is so

Here's an excerpt from an open letter, sent by the head of the the
American Association of Independent Music ("A2IM") to the Federal
Trade Commission.



Today I am writing to draw your urgent attention to recent action
taken by YouTube with regard to music recordings from Independent
music rights holders.

The Independent music sector is made up of small and medium size
enterprises (ÃÂÂSMEÃÂÂsÃÂÂ) which the past two Presidential
Administrations have seen as the growth engine of the U.S. economy via
increased exports improving the U.S. balance of trade and creating
commerce abroad and creating jobs at home. The U.S. Independent music
sector employs 80% of the industryÃÂÂs workforce and accounts
for well over 80% of all new commercial music releases. Independent
record companies act as investors in creativity and culture, searching
out individual talent and giving them the starting point to build a
sustainable career in the creative industries. They perform a vital
role both economically and culturally in meeting consumer needs and
providing musical diversity. Every new genre and trend in music has
been kick- started by the Independent sector.

 Even though Independent labels are individually smaller entities than
the three individual ÃÂÂso calledÃÂÂ major record labels, based
upon copyright ownership collectively the Independent music labels
are the largest music label industry segment. According to Billboard
Magazine, Independent labels altogether were 34.6% of the overall U.S.
recorded music market in 2013.

You Tube is a dominant Internet source of music with approximately 80%
of Internet users engaging with You Tube for video streaming. As you
know, YouTube has been a wholly owned subsidiary of Google since 2006.
YouTube is expected to launch a new audio music streaming service to
compete with established services such as Pandora and Spotify, and is
attempting to force contract terms upon the Independent sector which
we understand from our members are significantly inferior to those
offered to the international non-U.S. owned ÃÂÂmajorÃÂÂ record
companies (Sony, Warner and Universal).

Our members have been informed that if they do not sign up to these
revised terms, YouTube has given notice to them that YouTube will
remove/block our membersÃÂÂ and their artistsÃÂÂ musical
repertoire from the entire YouTube service, not just the new audio
music streaming service. As YouTube is one of the leading music
outlets the effect on our members on the promotion and monetization of
their artists will be severe as the premium videos our members create
will be blocked and the User Generated Content videos created by
consumers using our members artists' music will cease to be monetized
via advertising. Our members will then be forced to engage in the
"whack-a-mole" process of getting these non-monetized videos off of
YouTube, so as not to detract attention from services that are paying
our Independent members, as was not anticipated when Congress enacted
the DMCA in 1998.

According to our members, the terms currently on offer to Independent
companies from YouTube are non-negotiable and highly unfavorable, and
in many cases, unworkable (for example insisting on global rights
which the Independent may not be able to grant). They also undermine
existing rates in the marketplace from music streaming partners such
as Spotify, Rdio, Rhapsody and others but are reportedly planning to
launch their service charging consumers a subscription fee similar to
or at the same rate as what these competitor services charge. All of
these competitor companies chose to pre- license Independent content
at terms which are comparable to the majors, something which YouTube
has never attempted to do.

If this threatening and intimidating behavior does not stop, the
implications are very serious, not only for the music industry,
but for all creative and rights based industries. We face the very
real prospect of all internet based trade in creative output being
controlled by three non-U.S. owned companies who seem intent on taking
as much value for themselves, and passing as little value as possible
back to those companies and artists creating the very content on which
their businesses are built, and are dependent upon, to the detriment
of our primarily U.S. owned and based Independent membership. There
are parallels in the book retailing world: it is now a matter of
public record that Amazon is punishing publishers who refuse to sign
new terms which amount to a transfer of value, not a benefit to the

Google has shown little willingness to play fair on issues such as tax
responsibility, and it now shows a similar lack of regard for cultural
diversity and creativity and marketplace access. We would argue that
a dominant player such as YouTube forcing SMEs to accept lower rates
than non-SMEs constitutes abuse of a dominant position, with regard to
the digital music and video streaming market.

 We ask the U.S. Government to urgently intervene, in order that
other creative sectors are not forced into expensive and wasteful
litigation against dominant players such as Google. We call on the
U.S. Government to provide injunctive relief to prevent You Tube from
blocking these Independent companies from their music platforms while
our members seek a commercial solution.

The significance of this issue is such that our European Independent
music sector colleagues, through their Brussels based lobbying body
IMPALA and worldwide Independent music label umbrella organization
WIN, are also requesting that action be taken at the European
Commission level on this matter as a matter of urgency. Our
international colleagues across the rest of the work are also
contacting their governments requesting action.

We would be very happy to provide you with further information on this
matter. Sadly, all our fears about the effects of the Universal/EMI
purchase are coming to pass. More scale has been created and the
effects of the Universal and Sony duopoly leveraging that scale are
visible everywhere. When rights owners license to fixed-pie digital
services - those where there's an income pie to share, rather than
a wholesale price ÃÂÂ French owned Universal and Japanese owned
Sony demand more than their copyright ownership market share, and
those excesses ends up coming out of the indies' share. Independents
which are primarily U.S. owned music labels who traditionally have
introduced new musical trends and who are the custodians of our U.S.
music culture in genres such as Reggae, Jazz, Blues, Americana, etc .,
genres that have largely been abandoned by the three non-U.S. owned
major labels. Our Indie music community is often an early adopter of
new consumer friendly digital services, as opposed to those larger
creators who inhibit market innovation and often block marketplace
entry. As Lucien Grange, Chairman of Universal Music Group, noted in
his February 16th Billboard Magazine Power interview:

"Power is about who calls who and whose call you take. That's power.
Power is a combination of the ability to write checks, the ability to
make things happen, the ability to block things -- political power,
the ability to testify and the requirement to testify at a Senate
hearing and have five commissioners against zero in favor of what
you said. Power is the ability to buy and sell businesses. Power is
the ability to stop new services. Power is the ability to create new
services. That's power."

Collective licensing has enormous benefits for the music market and
consumers. It provides broadcasters and services with a one stop
license for the world's repertoire under compulsory statutory licenses
with rate setting by the Copyright Royalty Board. Collective statutory
licensing as set by Congress under the DSPA in 1995 and DMCA in 1998
which recognized that each song is created equal and each copyright
holder should be compensated equally for each song, and that size
of the creator of the song performance or the economic power of
the investor in the sound recording should be irrelevant. The only
differentiation in pay should be based upon consumer demand for the
music, e.g. the number of streams each receives, not the ownership
company. That's the basis of the compulsory statutory license; each
individual jazz song, blues song, pop song or classical song should
all have the same basic single usage value. The non-interactive
compulsory statutory licensing regime ensures equity and fairness for
all copyright owners and allows greater music service marketplace
access resulting in greater consumer choice

Unfortunately for non-statutory services requiring direct
licenses under U.S. anti-trust laws, collective negotiation of
interactive-on-demand licenses by Independent music labels is limited,
which, instead of promoting competition, and thus allowing consumers
greater choice and broader music service choices as barriers to music
usage are lowered, reduces competitiveness of Independent labels and
their artists. This lack of ability to collectively negotiate a group
license also bars certain services from access to "so called" major
label music should they decide not to license and to a wide swath
of Independent music which they need to successfully launch in the
market place due to more difficult licensing logistics. We come to you
today to request government intervention related to YouTubeÃÂÂs
proposed blocking of our member's content since we are forbidden under
anti-trust laws to negotiate collectively or collectively advocate a
boycott of a service.

While the Universal/EMI merger has been completed the repercussions
continue to be felt. We hope you'd agree that the importance of a
robust and competitive music market place is still a worthwhile goal
for the U.S. economy, consumers, and emerging technological services.
I would most appreciate being able to have a conversation with someone
from your offices regarding our concerns about both YouTube and the
Universal/Sony duopoly. My thanks for your time and I look forward to
hearing from you.


Rich Bengloff

President, American Association of Independent Music ("A2IM")


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