Will the Government regulating the internet mean more or less money for the music space? Internet Service Providers (ISPs) say the net will die if the Fed gets involved. Content Companies say the opposite; the FCC will keep the net “free.” Who should you believe?
Moses Avalon
The Google-Verizon deal (abbreviated “G/V” in this article) has been on countless front pages, blogs and RSS feeds in the still-free internet. Panic and anger is settling in as people in coffee shops everywhere are afraid that they will have to get real jobs and find dates by developing their human interaction skills.
The G/V deal has also come to symbolize the very essence of an elusive term, “net neutrality,” and completely confused what little many of us did understand about the issue. We hate government regulation, but we want a free net, but to have a free net it must be regulated. Since when does free = regulated? I thought regulation made things less free. Can anybody explain this issue to me like I’m a five year old and tell me what side, as a music professional I should be on?
Yes. I’m going to do just that right now. Get some coffee and free WiFi (while you can) and kick back. It’s not a short read, but you know me, I’ll make it as entertaining as possible. (If you just want the answers and not my fun jokes, pokes and theory, skip to the last section.)
What the Heck is Net Neutrality?
Short answer: no one person can say because it depends on who you ask. If you ask Google they will say, it means whatever we damn well want it to mean, and today it means that we’re not responsible for how people behave when on-line. People are free to do what they want and we remain neutral about that.
But, if you ask most content creators and the FCC, it means keeping the net free from toll-keepers who would charge for “premium access.” Every URL and data dump should be neutral in the eyes of the net. Notice how both philosophies employ a component of “free” and “neutral?”
The second answer is the one used most for the G/V discussions; currently there is only one data stream and everyone travels at the same speed on a one-lane freeway. The G/V deal (and the other deals it would inspire) will create a net where some “premium” data/content gets to travel on a priority road with higher speed limits, if the content distributor wants to pay the ISP. What will “premium” content be? No one knows that either yet, but you can be sure it’s the content that turns the most cash (or cache): movies, music, etc. and that means it going to effect the music space in a big way.
Critics of the G/V deal say this “tiering” of the net would amount to hi-tech censorship gamed only by those who can pay fees to ISPs. The FCC agrees and they want to stop the G/V deal and keep the net a neutral, one-lane, road. Proponents of the G/V deal say regulation, or net neutrality, will stifle innovation and also, that this is patently unfair under the rules of free enterprise. Why shouldn’t there be a way for the rich to have a better internet experience?
But all this is theory. The key question for us today is, as a songwriter or artist, or someone who services them, which side of this issue should you be on? To understand that we need to look at bit of history, because there isn’t just one answer to that question either. It really depends on your situation and your politics.
What They Used To Say
From 1999 to 2005 ISPs like Verizon argued to Congress that they could not stop P2P theft of music because their technology did not allow them to differentiate between a music file and anything else, like an email. Data was data and they were, to use their expression, “dumb pipes.” Like the electric company that has no way of knowing if you’re using the voltage they supply to turn on a light or power a bomb. Likewise, ISPs can not be held responsible for the criminal actions derived from their service.
This argument worked and one key result is the “safe harbor” provision in the DMCA that disallows anyone to sue an ISP for copyright infringement. Would you hold the telephone company responsible if two people planed a crime using the phone? No.
So, this safe harbor provision is why the RIAA was left with no other recourse but to sue the individual users of P2P instead of going after the big guns; ISPs were exempt from law suites of this kind. All this because they claimed under oath to the government that they did not have the ability to discriminate between different types of files that use their “pipes.” (This was not the fault of the Bush administration, as a Huffinton Post writer claimed. The safe harbor provision was a hang over from Clinton.)
What They Say Now
Starting in about the middle of 2008 you could see it coming, but by 2009 it was completely in our face: not only can ISPs tell the difference between deferent types of data, but they want to charge accordingly. Media files, they claim take up a great deal of bandwidth and it should come with a premium charge.
Content companies were quick to respond: well, if you can tell the difference, and you are a gate-keeper and not just a dumb pipe, then what about blocking illegal P2P?
Oops. ISPs got sorta caught in a lie and had to back-peddle a bit.
No, say the ISPs, that would not be constitutional because of freedom of speech and privacy issues. Suddenly they were defenders of liberty. But besides, they said, P2P makes up such a significant portion of the Internet traffic that shutting it down just because a few people (might be) stealing music (depending on how you define the word “steal”) seems extreme, compared to the millions that don’t. And also, we don’t have to because we were given safe harbor, remember, you agreed to it? So, let us charge what we want to whom we want.
ISPs, now rich from their decade of success due to safe harbor, want to end all this crazy net-socialism and get into the capitalist distribution business, making themselves not just super smart highways but toll keepers for the faster roads.
But, a cause set in motion can be a difficult thing to change when it comes to government policy. The US Supreme Court and Congress really bought the dumb pipes argument and now the FCC says, you said you were dumb and dumb you shall stay. ISPs are fighting back with claims of overreaching.
So, it’s clear what would make ISPs happy is if they got to be neutral when it comes to protecting copyrights, but selective when it comes to charging for delivery of them. Can ISPs have it both ways? And should an artist side with them? We’ll see is a second.
Why Have ISPs Changed Their Position?
It’s not hard to figure out. Movies and music content delivery takes big bandwidth. So why should Netflix pay fees for steaming a movie as when you or I can send an email for free. ISP answer: because they can afford it and its more essential to their business model, and they can afford it. Oh, I said that already.
But it can be hard to make clients out of the people you have been victimizing for a decade or so. So, now ISPs have started to make deals with their new BFFs, content companies, (specifically record companies) and because of this, ISPs have developed a greater interest in protecting copyrights over helping others “trade” them.
You cannot charge for a toll road if you’re not going to police the bandits hiding in the bushes. Right?
But you can try to play both ends against the middle and say things like, we’re doing the best we can to help you catch these terrible P2P people (who are also our clients) but we can’t find them, but if you keep paying us we’ll help catch the really, really nasty ones.
From this logic you get the so-called “three strikes” or as its actually called, the Graduated Response Program, which gives illegal P2P file sharers who “trade” music three warnings before they get their service permanently turned off.
Music companies, beleaguered and somewhat brow-beaten by the public have caved to these crappy compromises. They don’t have much choice. But their big-bother movie companies have not. They are not lining up to make deals with the internet gods because they see the writing on the wall: once you let them charge a toll, the toll will only go up over time.
Haven’t the movie studios learned anything from the past ten years? Not really. You can not negotiate with God. Movie companies know this, but the problem is, the studios think they are God.
Film studios arrogantly feel that their content costs more to make, earns more revenue and therefore can garnish better leverage in deal making Boy are they wrong. They are forgetting that all data looks to the same to the pipes. Movies and music all break down to ones and zeros. As processing speeds increase it will soon be just as fast/easy to download a full length movie as it was to download an MP3 in 2005. Where will their leverage be then? Right were record companies were in 2008. In the P2P toilet.
Who will prevail? Anyone’s guess right now, but it could depend on people like you, reading articles like this and what you deiced to do about it.
If more alliances form between ISPs and media creators it will increase ISP interest in protecting copyrights. Then you’ll begin to see high-profile arrests and stronger penalties for trading music and movies. In theory, music revenue will start to climb back up from its tortured 2005 position. But it may not for reasons I give at the end of the this piece.
But, if content companies resist giving into the force that has plotted to weaken their grip on distribution for the past decade, then the war continues. You’ll see more two-faced arguments like, net neutrality that delay a resolution. So far, history shows that the long war favors the ISPs. They can hold out and grow stronger while content revenues shrink.
Can You Have It Both Ways?
You can not have it both ways. Even though the ISPs are spending millions in legal fees to try and end up with 1) an unregulated internet that also allows them to 2) charge different rates but 3) does not take any responsibility for infringement, they know in their hearts that they are not going to win all three points.
A likely outcome will be a two-tired system, one that is free and unfettered and one that is “for pay.” And guess what, we sort of already have that.
In my cable/internet package I can pay extra for higher speed. While this does not effect the internet content I receive, only the speed at which it will stream, let’s not kid ourselves, we are only a megabyte away from that option. “Hi-speed content” it will be called, or “HD content” something like that; available only to those with TimeWarner Deluxe, or some such pitch. It’s coming folks and there is no stopping it, but we might be able to regulate it. But should we?
Which Side Should You Be On? Or:
Okay, You Explained Like I’m Five, Now Explain It Like I’m Drunk
It depends on your interests. (Good pro-con piece here)
IN GENERAL: If you’re a “tech-head,” a term I use to define those who have drunk the Silicon Valley Cool-Aid and believe everything that they read on Google News (these are also known as subscribers to Wired and Digital Music News) then you want zero enforcement of a free net. You trust VerGoogle to decide what you need to see and at what speed. You think (deep breath) that copyrights are passé and all this debate about “censorship” is propaganda by music/film companies to extort money from ISPs–who just want to make our lives better–and gauge music fans, who are entitled to free music because artists don’t make real money from music sales anyway.
But, if you think like the Founding Fathers and believe in protecting copyrights, then you are opposed to a tiered internet. You’d side with the FCC; government doing what it’s supposed to do, stopping monopolies and maintaining free enterprise.
There is no clear answer because no single solution will serve everyone. However, if you’re making money in the music space there a few caveats. So, here are some guidelines to help you argue these issues while drunk:
1) ARTISTS: If you are an artist who makes real and significant income from downloads on iTunes and other well known digital stores, (Napster, Yahoo,) or plan to in the future, then you’re against the G/V deal and other such deals. Digital stores like iTunes are certainly premium content and they will be paying larger fees to ISPs which means lower profit margins for you.
2) LABELS: If you are a label you hate the G/V deal even more for all the reasons above, but on steroids. All your revenue comes from recorded music sales and these will be effected harshly by bandwidth fee schedules.
3) SONGWRITERS: Mechanical royalties are paid at a fixed rate in the US, so you don’t care if the label/artist’s profit goes down on sales. But, if you’re someone who makes your money from Public Performance licensing, like on radio, (right now that is mostly songwriters/publishers, but in the near future this will include producers, labels and artists) you favor the VerGoogle and LOVE this tiered concept b/c eventually all digital radio will likely be considered “premium” content and will have to pay BIG blanket license fees to PROs such as SX, ASCAP, BMI, HFA, etc. (Right now it’s a piece-meal patchwork of payees.)This money will eventually trickle down to you. But this is only how you really feel in secret. Publicly you have to side with the artists favoring FCC regulation, or you’ll appear greedy, unsophisticated and end up with no music friends.
4) INDIES: If you give away your music and your model is built upon live show revenue, you are against FCC regulation and their desire to maintain the “dumb pipes” position. You want “premium content’s” fees to go up and profit margins to go down, down, down. Since you don’t care about sales of recorded music there is no profit margin for you anyway. And since the tiered system would not take away your fan base, that you have direct access to, G/V type deals would level the playing field a bit between you and your competitors, the major acts, who rely on viral marketing to feed their “grow or die” mentality. They will have to pay more for that mentality in the G/V world. But, be careful what you wish for. Someday, if you’re successful, you will be in category 1 and 2 above and you’ll be changing your tune then.
5) MANAGERS/LAWYERS: If you handle a major label act then you tell the singer that he should hate the G/V deal, but you tell the writer he should love it. If they are both the same person then have the conversation twice at different times when they are on different substances so they can not remember what you said last time. As a lawyer, you have no side to take, because you’re in the acrimony business and as long as there are sides to take, you’re in business.
Bottom Line
What you’re about to read is the opposite of what most people will tell you.
I you’re an emerging artist trying to level the playing field then support the “no” effort for FCC regulation and yes for VerGoogle deals, because even though you will be traveling in the slow lane of the new web, the fast-lane fees will cost your competition more to maintain their supremacy.
But if you’re an established artist or label then support the “yes” effort for FCC regulation and no to VerGoogle deals, because if the deal goes down, your profit margins will shrink and garage bands will be able to more easily compete with you.
This analysis is by no means exhaustive. Arguments could easily be made in the opposite of what I’ve written above. I hope only to spark intelligent discussion in our space. Although I am not often wrong in my predictions on industry trends, this is a very tough issue for which to see the light at the end of the tunnel. It’s anybody’s call.
What’s yours? Respond below and be heard.
Moses Avalon
