Youtube vs. GEMA & PRS, Kindle vs Book Authors, Google's free Music in China: so what is the value of Content?

I think 2009 will be a key year for the content industries, the creators, media companies, platforms, labels, publishers and other middle(wo)men.

In 2009, the value of content - starting with music and news - is being redefined for the Internet age. The gloves are off: the music rights societies want more money for each play, many journalists and writers are fearing a gloomy future as newspapers stop printing and shift to digital publishing around the world, and the book-authors guild is quarreling with Amazon about the Kindle2's robotic voice renditions of their works.

The bottom line is that the core logic and operating mantra that the 'Western' content industries have employed until now is becoming unstable and, economically speaking, increasingly unworkable. The Internet has severely disrupted  the traditional value chains, and the promised land of advertising-supported free content has not yet materialized.

Let me outline these shifts and challenges a bit more:

A) Controlling the distribution of content - whether by technical or via legal means - is increasingly becoming an utter 'mission impossible' unless you want to adopt a seriously totalitarian Internet regime (as seems to be proposed in France last week I fear...)

B) Closed systems and walled gardens (yes, those of the telecoms and mobile operators, too) are leaking everywhere. Closed and centralized ecosystems are becoming very expensive and thus hard to maintain, e.g. Microsoft Windows versus the ever-mushrooming Google Web OS (soon to include voice communications), Android and Symbian mobile OS vs Windows Mobile, free streaming vs paid subscriptions such as Rhapsody, open API-based platforms such as Twitter and (now) the Guardian's Open Platform versus proprietary offerings such as iTunes or the WSJ, and so on and on.

C) On the Net, just about every mode of content consumption -aka listening, watching, reading- does in fact create copies, too, so the traditional legal distinction of 'free use/listen/watch but paid copy' is... well, toast, I would say. This creates significant legal uncertainty and pulls out the rug under the value logic of the traditional publishing industries.

I like to refer to this tectonic shift as 'The challenge of 21st Century Content Economics' (see a related swf movie here); riffing off a similar phrase I picked-up at Umair Haque's very inspiring blog.

First, here are some of the most common questions I keep getting about the Future of Content:

• If everyone gets to make use of content (music, video, news, images) 'for free' or for much cheaper than before the advent of the Net, if just about everything but my dinner can be shared and remixed and forwarded, won't we just see a 'rush towards the bottom', i.e. all content gets cheaper, all the time, until it stops making real $ altogether? And how will 'open' content make any money, anyway? Who will pay for something that can be gotten for free? How can you compete with free? And beyond that, if everyone thinks they can be a creator, producer or broadcaster, too, who will still pay for the 'professionals'?
• When access finally replaces ownership on a large scale, e.g. printed newspaper-reading goes away and reading on mobile devices takes over, or streaming music on my iPod Touch overtakes buying single tracks on Amazon or iTunes (ps: I think it already does), who should pay for what, when, where and how? Is this kind of universal access monetizable like the 'copy' was?  How is the current law going to help us with this... or not? When the very definition of COPY becomes unworkable, what happens to Copyright?
• If we agree that not making your content available online seems like an unrealistic option (as it indeed robs the creators of the most popular platforms and ways to present, market and promote themselves to their audiences) is the traditional right to refuse permission, based on the exclusive right of the author (or their representatives i.e. the publishers and labels, studios, rights organizations etc) still feasible and realistic?  Can the law as it is now still be used to monetize our creations, or will the insistence on these pre-Internet laws just render us irrelevant, attention-wise and dollar-wise?  And if we need to make our content more available, where will the new money come from? In other words, if not Control, then... what...how...when?

Here are some answers that I have been investigating (please bear with me for a few hours while I find the definitive solutions ;):

1) I think content can be both free or cheap, and very expensive. This sounds paradoxical, perhaps, but the reality is that in a system that is no longer based on selling units or copies (i.e. CDs, DVDs, books, single-track downloads, cable slots etc), the value of content is very likely to be constantly re-determined by a multitude of surrounding and incremental factors.

So the correct answer to that key question of 'what's the value of content' should probably be a solid: 'it depends'.  As much as that may make the job of getting remuneration so much harder, I think it is also potentially quite liberating that we will no longer need to worry about controlling distribution so that we can sell more copies. Instead, as would be the case with the flat rate for digital music that I have been pushing for for the past 7 years, we could then shift our entire focus to getting and keeping Attention and Trust - 2 factors which now are the very foundation of any commercial success. In fact, I would argue that because of the de-emphasis on copies most content marketing and promotion tasks will get a lot easier (and much less costly) since we can now use the content as a marketing tool, itself.

Image by gleonhard via Flickr

2) So what are those future value-determining factors? Here are a few from a long list that I have been compiling:

• The best quality experience, at the perfect time. Compare listening to a low quality audio-stream on your mobile, in the train, to enjoying an HD recording on your living room (or car?) sound system. The first one could be feels-like-free or bundled, the other one could be a premium, paid-for service. The difference is just my particular use case, not the 0s and 1s.
• A new, attractive and convenient package (or shall we say, alternate user interface?) A powerful and very recent example is  'The Presidents of The United States of America' iPhone app: the user pays a one-time fee of $3 for free, on-demand streams and videos from the last 4 albums, and lots of up-selling is built right into the app. iPhone users that are fans are very likely to shell out $3 to get this cool widget, and in a way I guess they are now actually paying for what they would otherwise have gotten for free, anyway (i.e. to listen to their favorite music, on-demand). Plus, the band now has a direct and totally unique path to their biggest fans - and that is the new gold, in my opinion. Sounds like a great deal to me: package it nicely and it will sell regardless of free alternatives.
• Also note that this same phenomena is what still sells printed books. The words i.e. the content anyone can probably get for free, somewhere, but the feel and smell of the paper, the physical format, the touch, the familiar and comfortable user-interface (UI) is what I am actually paying for when I buy the good old, dead-tree version. In other words, I pay for the design, the printing and shipping, and only implicitly for the 'words'. It is important to note, though, that nice user interfaces will soon be available on electronic reading devices, as well, therefore leading us to that very same, original question: what will we pay for when we buy content, ultimately? We may soon enter the age of content-as-software-packages: many of us may soon no longer order the printed versions of books (last not least because of environmental concerns) but we may happily pay a few Euros a month for a digital book subscription, or add it in a bundle via our mobile phone bill, only to then buy the 20 Euro multimedia / virtual world edition of a book we really like - except that it won't be printed and shipped but also downloaded to my mobile device.
• Authenticity and timeliness. I foresee a future where I will gladly pay a bit more to make sure that what I get is the bona-fide real thing, from the actual creator, in its correct version and without any shortcuts or changes. An authorized, paid-for English translation of the new Paulo Coelho book (digital or otherwise) would certainly be more enticing to me than 'free' copy that is not stamped with his approval. And if I can get it the moment that it's finished, even better (and I pay another premium).
• Selection, expert curation, filtering, culling, context, annotation. In my experience, few people have time to find the best music for a specific occasion. Why would I bother looking for a great selection of ambient 'space music' for my yoga sessions when a true, bona-fide authority such as Stephen Hill (Producer of the superb Hearts of Space / HOS online radio show) has already done this for me?  My payment to HOS would therefore be not so much for the actual songs, it's more for the service of having them filtered and annotated by a real expert.

3) For the very same reason that content can be simultaneously worth a lot or very little (i.e. because of its disembodiment and the shift from selling copies to providing access), it follows that many rightsholders and their agencies may no longer be able to get fixed fees per copy, or even per use of a piece of content. Simply because if they continue to do that they will make it impossible-by-design to comply with their rules and legally use their content in all but the most highly subsidized cases, because most of the time a fixed fee will not be obtained on the other end  (i.e. the users), either.

Youtube simply cannot pay a fixed 1 cent per stream - even with Google's deep pocket behind it - because the Youtube users will not pay 1 cent (or even a fraction thereof, for that matter) per stream, and advertising revenues that would support these kinds of license fees are not within reach yet (because, just like content, the web's advertising and marketing logic needs to be reinvented first, as well !). This new business needs to be build together, from the ground up.

We are seeing this hairy issue creep up everywhere: GEMA (the German copyright organization) reportedly wants up to 12.9 cents per music video that is played on Youtube in Germany; the reason being - and this is my personal guess - that they probably treat each video-play as an on-demand performance which would be charged almost as much as an actual copy (i.e. a download). And of course, the reality is that those digital natives  are in fact using Youtube as virtual jukebox - watching my 15-year old son hang out in his room I can certainly attest to that.

So GEMA's (and PRS') point is as correct as it is pointless: these on-demand plays are very much like a download, in terms of how the users are using the content. Access is replacing ownership.

But here is the tough part that cannot be avoided no matter what: it's not the users, or Youtube (or Last.fm or Pandora or Hulu or Miro or Boxee etc) that are at fault here, it's how traditional content industry entities such as GEMA and PRS define the value of music (and other content). For them, a piece of content still has its fixed and minimum value, and if you want it, you'll need to pay up according to those rules.

As I am investigating more alternatives I will keep you posted so... stay tuned!

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YouTube Now Mutes Videos With Unauthorized Copyrighted Music - ouch! (via Mashable)

Mashable: YouTube Now Mutes Videos With Unauthorized Copyrighted Music. "Perhaps this has been going on for a while, but I’ve never noticed it before. YouTube users often create an original video using their favorite popular song as the audio. I’m afraid that they won’t be able to do that much longer, since YouTube has started muting videos that use unauthorized copyrighted music (and that pretty much means all user-created videos.) You can see some examples here, here and here. The official notice from YouTube under the video says the following: “This video contains an audio track that has not been authorised by all copyright holders. The audio has been disabled.”

Ouch. This will really hurt. Everyone. The amateur film makers, the artists, Youtube, us - the users. Yes, sure, I know: synchronization [the use of music in a public audio-visual production] is subject to a license by the writer, publisher, label, artist (and another dozen of parties), no matter how small the use. That's the law.
BUT: where will this by-the-book implementation of these laws lead us?  The answer is: criminalization.

Youtube (i.e. Google) will be virtually destroying 10s of millions of videos that millions of users have created and uploaded. I understand why Youtube would comply with demands for this, but this is really a bummer - would it not make sense for the music (publishing) industry to instead provide a non-commercial LICENSE for UGC content, and in return get traffic, referrals and shares of ad revenues? Would it not make sense for such a license to be created NOW rather then in 3 years? 

Another instance of music industry control obsession that just makes you want to scream if you haven't lived under a rock for the past 5 years. When is Compensation FINALLY going to be more important then Control?

PS: Mashable rocks. Read their blog!

UPDATE

Norwegian Dagbladet comments   Techcrunch rips into this topic   ReadWriteWeb

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• Great read on "Intellectual Property and new Copyright Law" with some nice Media Futurist -ic Quotes (via Japaninc.com)
• Warner withdraws music videos from YouTube following collapse of content-sharing talks

Great read on "Intellectual Property and new Copyright Law" with some nice Media Futurist -ic Quotes (via Japaninc.com)

This is a must read: Intellectual Property and new Copyright Law | Japan -- Business People Technology | www.japaninc.com.  Best snippets:

"But are things really that dire? Some would argue that these industries are healthier now than they ever have been. With the spread of information at a never before seen level, pieces of journalism are being read more now than ever, music artists are able to reach a broader audience than ever (some by bypassing the record labels all-together), and movies are being watched by more people in more countries..."

"The issue is control, and the embodiment of that control is copyright. The music industry is perhaps most illustrative of the issue..."

"Currently in Japan, new copyright laws are being debated which could make average users subject to civil law suits from record labels or movie distribution companies. Within the walls of mega-forum 2-Channel and the Japanese blogosphere, debate has been raging over the laws and what they will mean exactly for the average user. Specifically the outright banning of illegal downloads—music, movies and games being the main points of interest—is currently being investigated by a sub-committee appointed by the central government. Presently, Japan’s copyright law makes an exception in the case of downloads for personal use..."

"The industry veteran [IFPI's John Kennedy] says he believes a large increase in resources will not be needed to govern the Internet—warnings and enforcements will just need to be carried out in a similar way to any other law. “People call the Internet an ‘Information Super Highway.’ Well like any normal highway, it can be governed. If someone is speeding you give them a ticket and in extreme cases you take away their license.” But how about finding them? “People sit in their rooms and think they are anonymous but they are not—their IP address says exactly who they are,” says Kennedy..."

"Media futurist Gerd Leonhard [Me] says that in a globally networked world, with an expected 3.5 billion mobile users and Internet speeds increasing exponentially within the next two to four years, the traditional Western concept of exclusive copyright must be reviewed. “It is the purpose of copyright to generate sustainable and growing revenues for the creators, not to prevent new uses of their works that may eventually result in those new incomes. He believes that in the future, “many of these models will be more like flat-rated or bundled access models, rather than unit-sales based models.”

***"A recent case involving Google may help provide a blueprint for content creators. In October, Google settled a dispute with authors and publishers over its scanning of 7 million books for digital versions of printed material. The company paid $125 million to publishers and authors and will, from now on, provide a percentage share of the profits from ads and downloading fees. Under the agreement, Google would receive 37 percent of revenue while publishers and authors would get the rest. The settlement could pave the way for similar agreements within other industries..."

"Ito continues, “While it is important to protect copyright and the incentives that copyright (and intellectual property) provide, it is important that we do not prevent many of the basic things that people want to do with content or prevent some of the potential new ways that people will be expressing themselves and sharing this expression.”

"Futurist Leonhard says the key to making money in a post super-connected world is to embrace the concept of losing control. He believes that “a continued loss of control over IP and copyright and most other measures of restrictions is absolutely inevitable; and in fact, the less control we will have the more new revenues will surface.” Leonhard believes that “The future of creativity, content and media is bright, as it is the human creativity and its embodiments that will be even more valuable in a world of ubiquitous access and huge growth of output. It is the value and dollar system and logic that we need to rebuild and adapt—and the law is, of course, there to support this, and will therefore be adapted. This process is not new, just more drastic since the Web is often removing many old ways to get money out of scarcity while not yet offering the same profit in a plausible new way yet. This new logic needs more than 3 percent of the global population on broadband, and always-on, to generate increasing revenues from those new ideas. Another 24 months and we should have a much better take on this.”

This is really well-written and nicely researched, balanced column by Michael Condon - kudos!

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The Intend to Share is already a Criminal Act

Says the MPAA

"...the MPAA,...told Judge Davis that peer-to-peer users automatically should be liable for infringement. The only purpose for placing copyrighted works in the shared folder is, of course, to 'share,' by making those works available to countless other P2P networks," the MPAA wrote."

And more from the Wired blog: "You don't have to prove actual distribution. You need to prove there's works in the share folder, and that is distribution," said Joseph Geisman, MPAA's chief intellectual property attorney, as he described the so-called "making available" concept"

War is peace and peace is war. Right?

The Studios are Back in Control (says AlwaysOn)

Says Tony at AlwaysOn: The Studios are Back in Control | AlwaysOn.  Interesting: This interview was done with a Nokia N95!. He does not quiet explain how or why... but... maybe that's still coming?

Microsoft May Build a Copyright Cop Into Every Zune (via New York Times Blog)

Link: Microsoft May Build a Copyright Cop Into Every Zune - Bits - Technology - New York Times Blog.

"Mr. Perrette said the plan was to create “filtering technology that allows for playback of legitimately purchased content versus non-legitimately purchased content.... At the same time, it will be difficult for Microsoft to add features that consumers don’t like to its Zune products, which already lag far behind Apple in the market. Mr. Perrette said NBC understands the potential resistance. “In the short term, this will not win us a lot of friends,” he said. “In the long term, the consumer wants there to be quality premium-produced content, and in order for that to continue to be a viable business, there needs to be significant protection around it.”

Bizarre story - I can help wonder WHO WILL BUY A ZUNE if this is what happens. Help me out here...anyone?

OPINION: Content control (via ContentAgenda)

Good comments here OPINION: Content control ContentAgenda.com

"But of course, we know why the studios haven’t made those rights available....
But in other cases, they view digital distribution as an opportunity to reclaim the very degree of control they feel they lost with the advent of the video rental and sales business, in which the studios’ role is static and retailers are free to leverage the studios’ products to capture as much value as they can....

Imagine if every electronics device you bought that was capable of playing video—whether hand-held, set-top or portable—came with one or more embedded application that let you stream movies at will for a reasonable monthly subscription fee. Instead of a few, handpicked operators, you would have dozens, perhaps hundreds of retailers, and an untold number of device makers, competing to make your products available to consumers, investing in your business, cooperating to combat piracy.

Yes, it would mean letting those retailers and device makers capture some of the incremental value created by those services. But the alternative is frustrated consumers and under investment in the digital distribution business...."

Well said!   More pics and illustrations here