The Money-Go-Round: Musicians, Big Tech, and Piracy

January 9, 2014

by Adam Witkowski, Director of Organizing for Local 802 (New York City)

The following article was reprinted from the October 2013 issue of Allegro, the magazine of AFM Local 802 (New York City). For more background, see www.Local802afm.org.

The fight against music piracy has often been a battle waged against regular people. “Don’t pirate!” we’re supposed to tell our kids. Yes, it’s absolutely true that individuals shouldn’t pirate music, but now we know that piracy is more than a morality game. It’s a big business, with lots at stake.

First, the good news. Recent reports have shown that music revenues in 2012 actually increased for the first time since 1999. While the $16.5 billion reported by the International Federation of the Phonographic Industry is nowhere near the $30 billion of the 1990s, at least it’s a start in the right direction.
One of the main reasons for this paradigm shift is that digital sales grew 9% and accounted for $5.6 billion in sales. Reports of people using illegal sites have fallen, while reports of people switching to legal sites rose.

This all sounds like great news, right? Well, it turns out—as it often does in the music industry—the musicians are the last people to feel the positive effects.
The fight for musicians to be fairly compensated in the recording industry is mainly being fought on two fronts.

Online Piracy

Music piracy has not gone away. Billions of songs are downloaded from illegal sites every day, which in turn becomes billions of dollars for the people running these sites. There have been highly publicized efforts to crack down on these sites (remember the huge lawsuits the Recording Industry Association of America filed against teenagers and middle class families using sites like Napster and LimeWire?) and some not as widely known.

The record industry has launched the Copyright Alert System in conjunction with the major Internet Service Providers (ISPs), with the intent of flagging IP addresses that are allowing illegal access to copyrighted materials. Those flagged then receive punishments from the ISPs based on the amount of activity on the site.

So even though legitimate music sales may be increasing, piracy is still happening and people are illegally making tons of money off it. But if the music is being downloaded for free, how are pirate sites actually making money? The answer to that question may surprise and enrage you.

Most websites make their money from advertising, and pirate music sites are no exception. Companies track how many hits their sites receive and how often people return to their site. They then report those numbers to companies interested in advertising on their sites. So the companies running illegal sites are receiving millions of dollars in advertising money while exploiting musicians.
Who would advertise with companies that make a living solely on exploiting artists and that thrive on creating an environment where musicians are encouraged to think that giving their music away for free is the only way to make it in the digital world?

Thanks to EthicalFan.com, which is dedicated to defending content creators’ rights, we know the disturbing answer to this question. AT&T, Time Warner, Verizon, State Farm, and Microsoft have all been spotted with ads on pirate sites. It’s hard to convince people to stop giving away artists’ intellectual property when they have a fat paycheck from Microsoft coming their way for doing so.

Why would Microsoft and other legitimate big-name businesses actually place ads on pirate websites? That would appear to be bad for their public image. The answer is: they may not know (or admit that they know) that their ads are being placed on these sites. The reason for this is complex, and it has to do something called online ad exchanges. In an ad exchange, businesses bid on the right to place their ads on whatever website suits their demographic best. The ad exchange uses automated computer software to match companies with websites. Pirate sites participate in these ad exchanges and may become the winners of ads. (One of the largest ad exchanges is DoubleClick, owned by Google.) The outcome is that an ad for a legitimate business like AT&T may end up on a pirate site.

There have been recent efforts to keep this from happening, but many complain these efforts fall short. A group of major companies—including Google, Yahoo, and Microsoft—have teamed up with the Interactive Advertising Bureau and the White House to put forth a set of best practices aimed at flagging and removing ads from illegally operating sites. The main way they hope to achieve this is through a “notice and take-down” mechanism that allows copyright holders to make a request to ad agencies to remove ads from sites that are illegally distributing their work.

The problem with this, however, is that it basically forces artists and copyright holders to police the entire Internet by themselves. That’s both ridiculous and impossible.

Big Tech and Copyright Law

The second front musicians are fighting on is the legal use of their music. In a nutshell, companies like Pandora and YouTube (owned by Google) would like to pay musicians less. Right now, if Pandora or YouTube wants to stream or transmit a piece of music, they have to negotiate with the copyright holder of the music. Instead, the two companies would prefer a system where they could use whatever music they want and just pay the artist a small fee, called a broad compulsory license. Likewise, Pandora and YouTube and other companies would like to avoid the burden of tracking down artists to pay them. They would like certain works to be called “orphan works” that anyone can use.

Big tech has allies in Congress. The Copyright Principles Project is a group that recently put out a white paper offering “directions for reform.” This paper was the subject of a hearing in May conducted by Bob Goodlatte (R-VA), chair of the House Intellectual Property Subcommittee.

Musician and activist David Lowery, who Marc Ribot calls the “foremost independent advocate for musicians’ rights,” says that the Copyright Principles Project was introduced as a “consensus” on copyright—but with a major flaw. The so-called “consensus” did not include one single creator. While multi-billion dollar companies like Pandora and Google are lobbying for broad compulsory licenses and limiting protections for orphan works, there are no artists allowed in this group who could testify how these policies will steal their income. Decisions are being made without artists at the table—and then artists are later told to be thankful for the exposure these exploitative companies are offering. (For more, see David Lowery’s website: www.TriChordist.com.)
Local 802 knows that creating music is a labor of love, but a labor nonetheless that deserves protection against theft and exploitative policies. We all need to stand up now. Who knows when a national debate over intellectual property rights will happen again?

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