Music Property In The 21st Century: Our Streaming Age

A solution to the billion dollar problems of Spotify, Apple, and the major labels

(Previously published in Arc Digital)

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This is the second installment of a two-part series on music property in the 21st century. You can read Part I, posted earlier this week, by going here.

A Vision For Music Property In The 21st Century

A solution to the billion dollar problems of Spotify, Apple, and the major labels

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What is streaming?

It’s hard to know what a thing is when it first arrives in its non-refined state. Over time, ideas develop and change; companies pivot. When Twitter launched in 2008, they thought they were a micro-blog. It took a few years to realize they were a personalized news service. As rival companies launched to compete for users in the social sphere, these companies helped each other to define their respective products and positions within the social marketplace.

Facebook was initially understood to be a “social network,” a description so vague it hardly qualifies as a description at all. As other social products came to market that did statuses better, or photos better, or locations better, we, and they, realized that Facebook, due to its global ubiquity, was best positioned in our minds as an active address book — a function that best embodies their name anyway.

In their infancy, Apple was similarly agnostic about their core product proposition. They started out as a personal-computing company, but eventually realized that they were primarily a phone company. This trajectory was manifest all along — after all, what is the logical conclusion of squeezing ever-increasing computing power into increasingly smaller spaces? The commodity that resulted from this method of innovation had to be a useful computing device that a person could take anywhere. Hence: a very advanced mobile phone.

A micro-blog and a customizable news service are not the same sort of thing. A computer company and a phone company are not the same sort of thing. The passing of time, and an acute sense of consumer demand communicated via market forces, was necessary to determine these distinctions. Streaming services are no exception.

Initially, for streaming, musicians and their representatives assumed that Spotify, Apple Music, and similar companies were the digital equivalent of record formats where each play could equal a fraction of an old purchase. But time and use have proven this assumption to have been an expensive mistake.

Just as it is necessary to define terms in order to understand an argument, it is also necessary to define what a streaming platform is in order to understand the business relationship it should have to music copyright law. When the terms of an argument are not defined — even under the slightest pressure — the argument will fall apart. When it comes to dealings between music rights holders and streaming companies, this is a basic exercise we have forgotten. But it is never too late to replace ambiguity with precision.

So what is music streaming? Streaming services can be functionally understood as personally curated on-demand radio stations.

The music files (copies) exist at the streaming service source (network storage), and the person tuning in selects which file will be accessed, i.e. what music will be played. Much like “calling in” to a radio station to choose the play order of broadcasted songs, a person using a streaming service dictates his or her playlists remotely via a computer or mobile interface.

Leaving aside some caveats for offline listening — where music has to be copied and distributed — music streaming services are access networks. Like radio, they do not copy or distribute music to remote listeners. This means that mechanical royalties and damages are not relevant to them. And it also means that the appropriate royalty to apply to streaming services is the performance royalty, just like for radio.

The idea that streaming has nothing to do with mechanicals is not an insight exclusive to me. In 2017, Spotify’s own lawyers claimed that the mechanical did not apply to the service. Spotify’s executive suite have stopped short of echoing this idea, going as far as walking back the comments of their legal team to assure those who like the status quo that it won’t change. What’s going on here?

Judy Dunitz pours cold water on the enduring viability of the “streaming mechanical” concept.

The ‘streaming mechanical’ is a fiction, never declared by any court in interpreting the Copyright Act.

At best, it was a quick fix by well-meaning commercial stakeholders to enable an embryonic technology to launch

The revenue distribution from streaming services to musical compositions is unconscionably inadequate. Musical compositions deserve more of the pot of streaming revenue.

If the streaming mechanical is a fiction, what would constitute a reality-based approach to this novel problem? If a correct conceptualization of streaming is not hard to find, why hasn’t it been applied? To answer these questions we need to probe the prevailing attitudes of the music business and the tech industry.

Graham and Lefsetz — Hollywood And Silicon Valley

Since the internet upended the old order of things, two ways of viewing the present situation have prevailed. The first, which I’ll call the “tech view,” argues that because streaming services, and the habits of the masses who use them, are not easily reconcilable with the laws that recognize and govern intellectual property, the difficult-to-abide-by laws should be changed to accommodate the newly arrived technology, not the new technology to accommodate, or adjust to, the arcane laws.

Paul Graham, patron saint of Silicon Valley, summed up the “tech view” in an essay on the topic in 2012, stating, “What counts as property depends on what works as property.” A nice aphorism, to be sure, but is it useful on the ground? Is it applicable to reality?

In reading Graham’s essays, one gets the impression that, in his mind, if it is too complicated for technologists to figure out how to compensate music artists for their property when it is streamed, it may be better to no longer conceive of music as property in its own right.

According to Graham, considering the present state of technology, it would be better if music were understood to be something else — a sonic commodity whose origins we ignore in order to avoid the rather unpleasant obligation of compensating the creative labor that gave rise to it. It’s too complicated, he says, and therefore not workable.

But Graham is a very smart man — he is a philosopher, an artist, a chess player, a Silicon Valley investor. He has all the mental tools at his disposal to fairly assess the complicated legal problem that exists between music and technology, but his judgment seems to be skewed by his dogmatic faith in the irreproachable rightness of tech in all things. It’s almost as if, according to Graham, technological innovation is the great purifying agent for all that yesterday, with its technological inferiority, has delivered to us all stained and sullied. Technological advancement cleanses, saves even — and it should should stop for no one.

At bottom, however, this just amounts to having it so Spotify can make money off, say, Adele’s songs, but Adele can’t. Think about this intuitively: Does it strike you that Spotify should take a sizable portion of the revenue generated by clicks on Adele’s music? If streaming didn’t exist, would we still have access to her songs? Of course we would. So, a service that is entirely expendable, within an industry that while useful is not necessary for demand to be satisfied, somehow is eligible to a lion’s share of the money generated? Remarkable.

The second view floating around is one that has crystallized across many mass emails from L.A. entertainment apologist and sometime lawyer, Bob Lefsetz, a man who could rightly be said to represent the “big music” view, or major label thinking on these issues of streaming and music property.

Lefsetz believes that the music business is a zero-sum game. There are two kinds of musician he says: “the have’s and have–nots.” For him, the “haves” — usually on the major labels — make hits and thus the real money, and the independent “have-nots” make albums and legacies, and rightly make close to nothing. He writes in one of his many blog posts:

All that hogwash about musicians being fairly compensated for their work…yeah, that’ll happen when you can force people to listen to your trash, and that’s never gonna be, you’re competing against the best music of all time, you’ve got to be just that good.

Elsewhere in the world of Lefsetz’s hastily banged out missives, when it comes to the problems between musicians and streaming companies, he appears either too aloof to take up the challenge of coming up with a nuanced answer to a nuanced problem, or he just hasn’t got the chops. As such, Lefsetz represents that small ruling part of the music industry with no patience for the time and effort it takes to discover an elegant solution to the property questions of most musical artists who are more middle class than top 1 percent pop titans.

In Lefsetz’s mind, pop music is the only music worth compensating, and the only pieces of music worth listening to are the thin flash-in-the-pan hits that are here today and gone tomorrow. A proposition just as preposterous as saying that the only burgers in the world worth eating are the ones sold by the billions from McDonald’s. But the presence of a great neighborhood burger joint enriches our lives, doesn’t it? And don’t they deserve to operate under the same laws as the bigger chains?

Lefsetz’s position lacks depth and breadth. Most pop hits are written within artistically mono-dimensional parameters — designed to illicit every bit the same vulgar mental hunger of the yellow and red colors employed by the twin arches company. Contra Lefsetz, the property rights of those musicians who write songs in a more pastoral style are no less worthy of protection than those who make pop music. Systematic and helpful laws could harness the democratic nature of the internet and leverage it in such a way that generates more and better music for us all. Yet Lefsetz’s approach would not achieve this.

We have seen where the solutions of Hollywood and Silicon Valley have lead us: Musicians already tried accommodating streaming companies with a made-up royalty (the “streaming mechanical”) which has ended in legal quagmire, and the message that musicians should just figure something else out or abandon creativity in pursuit of pop hit success has done nothing but put musicians out of business and make the industry less vibrant.

In sum, neither of these approaches — the blindly faithful “tech view” of Graham, or the careless “big music” view of Lefsetz — is capable of coming up with a solution to the serious legal questions facing the majority of musicians in the industry today.

Additionally, neither Graham nor Lefsetz are recording artists, which means neither of them are close enough to the music-streaming problem to feel its real fiscal pain. As such, they have no serious motivation — or stake in the matter — to make them take an honest look at the legal and ethical issues that currently plague the music industry. So we are forced to look for a third way.

The “Why” Of Property

Generally speaking, lawmakers throughout the ages have cared about ensuring the laws they’ve proposed or established have reasonable foundations. Though Graham hasn’t come up with a solution to this problem, he has rightly identified the underlying issue: property.

What is property? In the past, this question has been associated with the idea of ownership. We speak of things we can and can’t own: land, inventions, tools, people, etc. One way we might get clearer on what can be owned and what can’t is to ask the “why” of property.

There are generally two views. The first is a social recognition model. On this view, things are property when they are the things others in society agree to see as property — the things everyone else agrees you can own. Closely connected to this view is the concept of utility. Since it is useful for people to own things, and for people’s labors to not end up being in vain, and since ownership encourages production, society grants the right of property to people who cultivate special relationships with things by collecting, changing, inventing, or ordering them.

This is the historical, default position. To safeguard property between people the individuals in a society with the most power — chiefs, warlords, monarchs, or just the strongest, most influential person or group in the area — would enforce the community agreement concerning property. So this first view is property by common consent. People consent to the majority power, or to property by “what works” for them, if we want to use Graham’s language.

The literature on property is an industry unto itself, so it won’t shock you to discover this view has come in for criticism.

Here’s a problem people raise. What society agrees is useful now may not be what society perceives to be useful later. Since a population’s ideas about utility can change, for whatever reasons, that means that property can change. As things are, history shows that this idea of agreement leaves property on an unstable foundation and can put the fruits of people’s labors at risk. There’s too much inherent volatility with this view. One might think property needs a surer foundation.

The second view of property we’ll look at promises to be more stable than popular agreement or consent.

Like the first view of property, the second view of property maintains its adherence to public utility. However, it is not exclusively, or perhaps even primarily, based on the agreement of the masses about its usefulness. The second view of property depends on an argument from human creative activity. In its most simple version it holds that all people are born with free consciences, and since no person is born owing the choices derived from his or her conscience to another, any of the products of this conscience, any of the labors of this conscience, including that which is created, cultivated, or altered on account of one’s conscience, is something that belongs to him or her.

There is much in our American Constitution that reflects this ideal.

An example of this second view in action might work this way: I am a musician, and if I decide by my own free conscience (my free will) to exert my mind and body to write a song, the song that results from my freely chosen efforts — and which would not exist without me having decided to spend my time crafting it into being — has a special and unique relationship to me. No one else can claim a right greater than that unique relationship that I enjoy with that song, at least not without my agreement.

On this premise of the free human conscience, intellectual property law — that protects this music I made as mine — is merely the written recognition of the reality that I have a special relationship to the fruits of my labors: i.e. the song I made.

Notice that while social agreement still plays a role under the second view of property, what grounds the legitimacy of a person’s claim to his or her intellectual property is that flows from the creative efforts of the artist. Others cannot come to own the fruit of another’s creative efforts unless allowed. And the law must respect the primacy of the art’s creator by placing him or her in the most commercially advantageous position.

Yes, it does take agreement in order to implement the second view, just like the first. Nevertheless, it is not the agreement that makes the second view real, it is the fact that people cannot own the fruit of other people’s free choices unless by agreement.

Instead, the situation we’re in is one in which musicians are not being compensated fairly. In essence, they’re effectively being robbed. Meanwhile, streaming companies who own infrastructural channels, channels that aren’t even necessary for the music to reach the consumers in the first place, are reaping the majority of the benefits.

The Solution To The Music Industry

If I have accomplished my goal in this essay, I will have shown that one of the major problems the music industry faces is that it has not recognized what kind of thing a streaming network is. From this, it has followed that we’ve been unable to properly connect streaming to the relevant intellectual property laws — laws that justly recognize the human property rights of music creators.

Streaming, as a music access technique, is here to stay. All the more reason for us to get clear on how to reconcile intellectual property law with the mass utility of streaming distribution. I have argued that all of the problems and lawsuits and questions about the law can be solved if we accept one basic premise: that streaming services do not copy and distribute; rather, they allow access to content. Thus, the mechanical royalty is completely inapplicable to streaming services. In place of the mechanical and “streaming mechanical” licenses we should apply performance royalties to the songs that streaming services use.

For streaming technology, though it may look and work like magic, we know it isn’t actually magic. Though it has complicated our understanding of music copying and distribution, it has not completely eluded our grasp. Technology is a tool that we use like any other tool. We used logic and science to build it, and we can use the same to understand how it works in facilitating more harmonious interactions between people.

So the solution to the music–streaming problem lies in reconnecting the elements of the problem to reality. Our understanding of streaming technology should reflect what streaming actually is, not what some technocrats and Hollywood music moguls wish it to be. Our ideas for why musicians really do own the music we make — I include myself here because I am a musician — should not be merely sentimental. I hope I have shown there are reasons for correcting course.

Law is not just for lawyers. And the basic and fundamental right of freedom of conscience is not just for philosophers and history books. Everyday people who build businesses and make art ought to know on what basis we exchange the things that we make and own. If property is derived from being a fruit of someone’s consciously chosen labor, then to deny musicians property is to deny them free conscience. The laws exist to facilitate the security of property and the pursuit of our happiness.

Choosing to be a musician should not amount to choosing to be part of an unprotected class with fewer property rights than others.

The internet is the great democratizer. If you are a musician and you are good enough at what you do, and you push hard enough and smart enough, you should be able to thrive. There are many ways for you to make this happen outside of just the classic avenues of record sales, radio, and sync licensing. Recently, I saw Jack Conte of Patreon give a great TED talk on the history of music over the last 100 years, and how his company is working toward making music a more widely viable profession in a time when it seems like such a precarious choice.

We need to keep clear that streaming services are simply libraries that sell access — they do not copy or distribute, therefore mechanicals do not apply to them. It is not so radical to presume that music creators—those from whom the art flows—should be in the driver’s seat as it relates to benefiting from the art, is it?

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Yes, and whether intellectual property belongs to musicians is a question to be determined by reason and fairness, not Silicon Valley policy.

Menashe David Israel is an American musician, songwriter, and essayist. 
He is an alumnus of Berklee College of Music, and one half of Jungle Fires.