Musicians Should Stick To Writing Music
I know I’m a little late writing about this, but I’m going to anyway. A few days back Billy Bragg wrote an article in the New York Times opinion section called The Royalty Scam that made me wonder if the Gray Lady isn’t in need of a logic editor. Maybe someone whose job it is to sift through articles and remove all bad arguments.
Of course if they had such a thing, this article wouldn’t have much left other than the date and the name of the author, as everything in it is pretty much a steaming load of horse manure. The author, in record time, proved that he doesn’t understand how the music industry or social networks or startup investments typically work, or how capitalism functions in general.
In the article, Bragg posits that since Bebo has some music on its site (which was put there voluntarily by musicians who had signed an agreement saying they were owed nothing for it) and it sold to AOL for $850 million, the owner should be sending checks to them.
His logic had me laughing out loud:
The musicians who posted their work on Bebo.com are no different from investors in a start-up enterprise. Their investment is the content provided for free while the site has no liquid assets. Now that the business has reaped huge benefits, surely they deserve a dividend.
Yeah, lots of startup investors give companies money with no clear understanding of what’s in it for them. “Here’s a check for $5 million. Don’t worry about any paperwork. We’re sure you’ll take care of us if you hit a liquidity event.” I know a lot of founders and a lot of investors, and this just doesn’t happen. You might get the occasional “we’ll deal with the paperwork later” between good friends for a relatively small amount if one is in a pinch, but even that is extremely rare. Almost always there is a clear written contract detailing what each side is giving and what they are getting in return.
(As a side note, we at Draftmix are not really looking for much more investment now, but if anyone wants to fund us on these terms, email me. We’re always open for that. I can just see a term sheet that says nothing but “You give us money, and if we feel like it later, we’ll give you some back. k thx.” Maybe I’ll send that in to Sequoia through the contact link on their website.)
The musicians on Bebo were more like strategic partners. They posted their works there because they wanted the increased exposure that comes with it. They knew when they did it (assuming they read the agreement that they clicked ok to) that they wouldn’t get a red cent directly from the company, even if it sold for $850 trillion. But they hoped that the extra audience would make them some money in CD and ticket sales, and one would assume that for many, it did. That sort of thing built many careers recently. See Dane Cook.
He continues:
The claim that sites such as MySpace and Bebo are doing us a favor by promoting our work is disingenuous. Radio stations also promote our work, but they pay us a royalty that recognizes our contribution to their business. Why should that not apply to the Internet, too?
First of all, Bragg should Google for “payola”. Until fairly recently, record labels were paying radio stations more than they were getting in return for airing new music. Even when that became illegal, it was almost immediately routed through a third party, and business as usual resumed. In fact it still occurs to an unknown extent today, and where it doesn’t, it’s not because the labels wanted it to end, but rather due to radio stations wanting to avoid being prosecuted. So it would seem that free publicity is, in fact, a favor to artists, or at least they and their labels think so.
Also, royalties actually do apply to the internet. At least they do to internet radio stations and other sites that play music without strict agreements with the artists (usually through their labels) to the contrary. There’s a royalty rate for that, just like there is for terrestrial radio stations, and not paying it is just as much a crime for the operator as it is for Clear Channel.
The primary difference between Bebo and a radio station, online or off, is permission. The Foo Fighters didn’t upload their song to 100.7 WMMS and click a button agreeing that The Buzzard could play it for free. The radio stations just play whatever songs they wish, without the artist’s involvement, then pay the requisite amount (generally through ASCAP or BMI) as per applicable laws and agreements. It’s all agreed upon in advance.
Likewise, Bebo and its artists have an agreement that the musicians can upload any song they wish, and Bebo won’t pay them anything. So no, the artists are not owed any dividend. It really is that simple. Agreements are the backbone of capitalism. The whole system falls apart without them, which is why we have the legal system we do. You cannot simply expect Bebo to pay musicians who have digitally signed an agreement that they were owed nothing.
In less than one minute of searching (and note that this was the first time I had ever been to the website) I found this in Bebo’s Terms:
The license you grant to Bebo is non-exclusive (meaning you are free to license your Materials to anyone else in addition to Bebo), fully-paid and royalty-free (meaning that Bebo is not required to pay you for the use on the Bebo Service of the Materials that you post), sub licensable (so that Bebo is able to use its affiliates and subcontractors such as Internet and WAP content delivery networks to provide the Bebo Service), and worldwide (because the Internet and the Bebo Service are global in reach).
I’m certainly no IP lawyer, but I’m pretty sure that that means that if I post a song on Bebo, I’m not getting paid for it.
Bragg’s idea that musicians who contribute to a site should acquire a stake in it becomes even scarier when you apply it to other forms of intellectual property. For instance, Facebook and Myspace are full of writings and photographs submitted by their users. Are those any less valid or deserving of royalties than music? They aren’t in the real world. You can’t legally go around selling bootleg copies of Harry Potter any more than you can Abbey Road or Moon and Half Dome. Did the YouTube founders owe LonelyGirl16 a check when Google bought them?
Let’s apply his silly logic to me. My blog entries and comments have probably created tens or even hundreds of thousands of clicks and page views for Hacker News. Hacker News is owned by Y Combinator, which invested in and therefore owned a portion of Auctomatic, which just sold for $5 million. (By the way, congrats on that guys!). By Bragg’s logic, PG owes me a check.
Social networks, and all websites that host user generated content for that matter, exist only because people are allowed to sign agreements giving away their intellectual property.
Technology is advancing far too quickly for the old safeguards of intellectual property rights to keep up, and while we wait for the technical fixes to emerge, those of us who want to explore the opportunities the Internet offers need to establish a set of ground rules that give us the power to decide how our music is exploited and by whom.
Those ground rules already exist. They’re called user agreements. Bebo forces you to agree to one before you sign up, and when you do so, you are deciding how your music is exploited by Bebo. Don’t like the terms? Don’t sign up. It’s that simple.
It’s unreasonable to expect some sort of law governing user agreements in that way, given that the market can clearly regulate them. If Billy Bragg thinks the terms are unfair, he can start his own social network that pays royalties. If that works out, the market will have decided that social network user agreements should involve royalties to musicians. None of the ones that don’t pay royalties can seem to turn a profit though, even with billions of page views, so I don’t like his odds.
We need to do this not for the established artists who already have lawyers, managers and careers, but for the fledgling songwriters and musicians posting original material onto the Web tonight. The first legal agreement that they enter into as artists will occur when they click to accept the terms and conditions of the site that will host their music. Worryingly, no one is looking out for them.
So essentially what he wants are lawyers and agents for struggling musicians. Or maybe some sort of union/approval body that warned them when a deal was beneficial for them and when it wasn’t. Both are fine ideas, and probably a good solution to what might become a real problem. But expecting Bebo to pay artists who agreed they were owed nothing is not only anti-capitalist, it threatens the future of the entire modern internet. Thankfully for those of us in the business, he hasn’t got a legal leg to stand on.
April 17, 2008 at 7:13 pm
From a logic standpoint, you make some good points.
Legally, however, it actually isn't as simple as you'd like it to be.
“Take it or leave it” contracts prepared entirely by one side, with no discussion or negotiation of terms, and presented with no opportunity to make changes, are not legally valid. They're called “contracts of adhesion”, and are invalidated every day in courts throughout the land.
We all love the free market, but too often the reality is a lot of “market” and very little “free”. Suppose you're an who artist willing to post your song on Bebo, but would like to ask for a stipend should the company blow up? That's not an option. You check “I agree” or you don't,. There's no equality of bargaining power, any more than when you stuck that Word disk you bought at Best Buy in your computer and it wouldn't let you install until you agreed to whatever it said.
You might not llike this, and would do it differently if you were king, but you're going up against a thousand years of Common Law, the basis of every single state constitution in this great land of ours. Apparently the guys wearing robes and banging gavels still think it's a good thing.