Last year, I spoke with Cory Doctorow and Rebecca Giblin about their new book, Chokepoint Capitalism. It’s a book about artists and technology and platforms and how different kinds of distribution and creation tools create chokepoints for different companies to capture value that might otherwise go to artists and creators. In other words, it’s a lot of Decoder stuff.
As we were prepping this episode, the Decoder team realized it previews a lot of things we’re going to talk about in 2023: antitrust law; Ticketmaster; Spotify and the future of the music industry; Amazon and the book industry; and of course, being a creator trying to make a living on all of these platforms.
The best part of the book is that Rebecca and Cory have some good ideas about how to actually solve some of the problems they talk about. As you’ll hear Cory say, the book isn’t just expounding on all the problems — half the book is about solutions.
This episode is longer than normal, but it was a really great conversation, and I’m glad we are sharing it with you.
Okay, here are Rebecca Giblin and Cory Doctorow, the authors of Chokepoint Capitalism. Here we go.
The following transcript has been lightly edited for clarity.
Hello, everybody. I’m Nilay Patel, the editor of The Verge. These lovely people, Cory Doctorow and Rebecca Giblin, have asked me to help talk about their new book, Chokepoint Capitalism. Please introduce yourselves, Cory and Rebecca.
Cory Doctorow: Sure. I’m Cory Doctorow, and I’m one of the authors of this book, along with Rebecca. I write lots of different things. I’m the author of more than 20 books, including science fiction for adults, young adults and middle-grade readers; graphic novels; short story collections; and nonfiction. I’m also a special advisor to the Electronic Frontier Foundation and I have some academic affiliations in computer science and library science.
Rebecca Giblin: I’m Rebecca Giblin. I’m the author of three books, but this is the first one that anyone might actually read. I’m a law professor, and I obsess over artists’ rights and access to knowledge and culture. I do all kinds of things to try to generate evidence to figure out what’s really going on and how we can do a better job of achieving both of those things.
I most recently started a little publishing house, and we have published 160 books in order to create a new way for out-of-print authors to get paid and to find out what kind of culture we’re losing through that. I’ve known Cory for, we were just figuring it out, about 10 years now?
CD: Ten years or so, yeah.
I was going to start with a list of questions about Chokepoint Capitalism and the creator economy, but Amazon actually did us a great favor this week by lowering rates for creators on Twitch, in a way that I think fundamentally explains the thesis of your book. Why don’t we walk through that?
CD: Sure. You’ve all heard of Amazon, and you’ve presumably all heard of Twitch. Amazon bought Twitch in 2014, and for an important piece of context, this phenomenon of very large firms buying out parts of their supply chain is pretty new. Until the Reagan years, it was generally considered illegal for very large firms to buy out their supply chain. That wasn’t how companies grew.
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Now, you have a company like Google, which has made one and a half successful products in house — a search engine and a Hotmail clone — and then everything else they have made has failed. Everything that has been successful was bought from someone else, from their ad tech, to their mobile stack, to their videos, to their server management. This thing we have now just wouldn’t have happened historically. Growth through acquisition is a new phenomenon. Amazon bought Twitch, and they said what every monopolist who buys another company always says, which is, “There will be efficiencies and synergies. We’ll make this company work better.”
Now, Twitch has two sets of costs. They have fixed costs of developing the software and new features that help streamers get paid, and then they have bandwidth. The fixed costs are fixed no matter what. Whether you have 1 million streamers or five streamers, you still have to pay the same amount of money to develop those features.
Bandwidth, though, totally depends on how big you get. If you’re going to grow, you need cheap bandwidth. Amazon Web Services is the cheapest bandwidth you can buy. They are the world’s biggest consumer and wholesaler of bandwidth. They can do a real favor for Twitch with the bandwidth, so they said, “Here we go. Here’s our new service and we’re going to launch it.”
They went out to the creators and said, “Come onboard and we’ll give you a generous 50 / 50 split,” which is to say, “We’ll keep half the money you earn.” But, of course, there were some creators who didn’t want to give half of their money to Amazon, and to those creators, they quietly said, “Don’t tell anyone, but we’re going to give you 70 percent.” So that’s what they did, and they lured in a bunch of creators at that 70 percent rate. The cheaper guys were presumably subsidizing them.
Years go by, they become the leader in their sector by far, and now people are accustomed to using Twitch to watch streamers. They have the app, they have an account, and maybe they have subscriptions, and they’re just locked in. If you want to be a streamer, you really have to show up for Twitch, because Twitch has your audience all in a corral.
So then they turn around to these 70 percenters and they say, “We’re bumping you to 50 percent. We’re altering the deal. Pray we don’t alter it further.” Then they publish an account of why they’re doing it. The president of the company is like, “We are doing this for fairness, because wasn’t it unfair that all you working schmucks got 50 percent, but these superstars got 70 percent?” And it was. It was materially unfair and shady that they were doing it all on the down low.
It does raise this really obvious question, which is, “Why is the remedy for that not just giving everybody 70 percent?” After all, in his letter to his creative workers, he explains that they figured out how to increase the revenue per minute of video by some fantastic amount, so that each one of these people is making much more money for Amazon. So why don’t we use some of that money to change the split so that everybody gets this 70 percent rate? They could apparently afford it because they were offering it.
So this is a little parable about Chokepoint Capitalism. You stick all of the audience inside a walled garden and then you say to the creators, “I know you want to reach your audience and we want to help you reach that audience, but to reach that audience, you’re going to have to make some concessions. If you don’t make concessions to us, well, you can try and go out on your own, but I think you’ll find that everybody who wants to watch your entertainment is inside our little walled garden here.”
The particular part of this story that stuck with me was that Amazon published a justification.
RG: This is amazing. I just brought the quote up because that really stuck with me as well.
Oh, you have the quote. The justification is the rates.
RG: Yeah. This was Sam Biddle talking about this, who was just like, “Wait, Amazon is charging Amazon so much money to run the business via Amazon that it has no choice but to take more money from streamers.” That’s really the essence of Chokepoint Capitalism as well.
Right. The justification is that the published rates for Amazon Web Services are quite high, so to support one streamer, they have to pay $1,000 a year or something. The idea that Twitch is paying the published rates for Amazon Web Services is really quite ridiculous, because almost no big company pays the published rates for anything. Also, if Twitch wasn’t owned by Amazon, they could go to Google Cloud or Microsoft Azure. It’s the consolidation that creates the self-serving justification.
CD: It raises an interesting question. If Amazon wasn’t proposing to discount Twitch once it became an Amazon company, then what was the synergy? What savings do you realize from moving Twitch inside of Amazon? I think we see what the savings is, which is that you can suppress the wages of the creators who do the work, who generate the revenue, because you have become the only game in town. That is a demonstrable synergy that they’ve produced for their shareholders, not for the streamers.
RG: This is coming for other creators in the Amazon universe as well. When the publishers tried to resist Amazon’s play to get their e-books out so cheaply that it was going to decimate their physical book business, Amazon retaliated by changing its rates for self-published authors to give them a 70 percent split, which was far, far higher than any kind of royalties you could get from a traditional publishing deal. So a lot of authors did jump ship. Of course, those higher royalty rates are still only going to be in place until everybody is locked into that system in the same way they already are with Twitch. Then that is going to be ratcheted down too. That’s always the play.
All right. Let me push back on both of you. It should be obvious to the room that I agree with you, but let me put on my Bezos hat. Amazon does face some ferocious competition for streamers. YouTube exists. There was a platform, famously called Mixer, that Microsoft invested a lot of money in and paid streamers to stream exclusively there. Ninja, I think most famously, was paid by Microsoft to bring an audience to Mixer. It was a spectacular… I think it lasted less than three months, and now he’s back on Twitch.
CD: Yeah. I mean, I think you’re proving the point of that new market entrance struggle.
But the new market entrances here in this case are Google and Microsoft.
CD: You’re right that Google is number two. It’s not like YouTube is a bad business. There’s this amazing thing that happens when a sector is highly concentrated, which is that they arrive at a common position without ever having to sit around a table and collude. It just becomes a natural element of the culture. There are lots of reasons or theories to explain it.
If there’s only a couple of companies in a sector, then everyone who has worked at one has worked at the other. That’s how you become a senior executive; if there’s no room in the org chart for you, then you get poached by the other guy and you go back and forth. And in the meantime, you’re godparents to each other’s kids and executors of each other’s estates. You stand up for each other at your weddings, you go on vacations together, etcetera. That persists even after you leave the firm, because wouldn’t it be weird if you had to leave all your friends behind when you quit Amazon and went to YouTube? Of course they stay friends. So there’s this explanation, which is that they all just end up friends with each other and then they converge on it.
There is another explanation that sometimes they sit around a table and collude. One of the things that came out of the state’s lawsuit against the ad tech duopoly Google and Facebook, was the revelation that they had a project called Jedi Blue, where they sat down and illegally colluded to rig the ad market so that they could steal money from publishers and advertisers, put it in their own pockets, and make sure that nobody else could enter the market and offer better rates to either advertisers or publishers, or both. So that is the other thing they sometimes do, because it turns out that when there’s only two of you and you’re really chummy with each other, you can in fact sit around a table and just agree.
RG: You don’t even need to do that in highly concentrated markets. You can just do some public signaling. “Oh, we’re thinking about doing this.” Then the other one, two or three companies in the market are like, “We’re kind of thinking about doing this too.” Then once all the public signaling is done, which doesn’t get in any antitrust trouble, lo and behold everybody coordinates in lockstep and does the same thing. That’s how we often end up this way as well.
CD: Sure. I think a lot of people looked at that photo of the tech leaders around the leatherette billiard table at the top of Trump Tower after the election and said, “How can all these bastions of liberal erudite capitalism meet with this short-fingered vulgarian in his mountain aerie in Manhattan?” That’s fair enough, but what’s weirder is that everybody who runs the tech sector fits around one table. If there were 1,000 companies of similar size, not only would they not be able to agree on what their common lobbying position is, they wouldn’t be able to agree on how to cater their annual meeting.
“What’s weirder is that everybody who runs the tech sector fits around one table”
If you have ever tried to get 15 people to agree on dinner, you will know that there are exponential coordination costs when the number of firms that have to agree gets higher. We saw this in the early days of the tech wars, when the tech companies were all mostly small and the entertainment industry was mostly concentrated. There was this period where the entertainment industry had these fantastic legislative wins one after another against the tech sector — which was much larger in terms of total market cap — but they were just disorganized because there were a lot of them.
Cory, I came up reading you, and I think I became a deeply failed copyright lawyer because of you. I was not any good at it. A lot of that stemmed from consumer desires. “Why can’t I get all the stuff on this service? Why is your DRM in the way of what I would like to do with the content that I have paid for?” A lot of it was consumer preference to consolidate all of your experiences in one place or to build a user experience that you yourself would like.
CD: In the book, we do in fact talk about how a blanket license might deliver that. I think you’re absolutely right. Nobody wants to have three libraries they keep their media in. That’s why Audible having a mandatory requirement that you use their DRM if you publish with them is so scary, because those listeners who buy your audiobooks are forever locked to Amazon’s platform by the copyright locks that come with it that can’t be legally removed. Giving someone a tool to remove that is a felony punishable by a five-year prison sentence and a $500,000 fine, even though no copyright infringement takes place. So they get to lock audiences in.
I think you’re right, people like Audible because all the titles they want are there, but nobody is like, “You know what I like most about Audible, and if it went away I’d leave? It’s the fact that all of these books are locked to Audible.”
That’s not a unique selling proposition for anyone. People like iTunes having all the music, but nobody is using iTunes for the DRM. If you remove the DRM, all you get is a new market, where if I enter said market, I can say, “Hey, do you have a bunch of iTunes songs that are stuck in the Apple silo and want a better player that’s more full-featured and does stuff that Apple doesn’t do? Just click this button. I’ll import your library for you and I’ll give you all those features.” That is entirely compatible with this idea of consumer preference.
RG: The fact that Audible has managed to create this chokepoint with the DRM and capture such an enormous share of the market has resulted in one of the most egregious things that we write about in the book, which is a scandal called Audiblegate that some of you have probably heard about. What basically happened is that independent authors and smaller publishers got their books onto Audible via something called the ACX platform, which is also owned by Audible and Amazon. They have really opaque royalty statements, and they had this incredible shakedown that they were pulling.
Let me explain how it worked. You might have seen this if you have Audible yourself. There’s a really generous returns policy. You can return a book that you have listened to — even if you have listened to the whole thing, even if you liked it — no questions asked. This is only available to people who are actually subscribers of Audible.
What Amazon is doing there is what we were just talking about in the intro video we ran on the way in: they’re trying to use that to lock in subscribers. They want people to be paying every single month, and if one of the ways they keep people locked in is by allowing them to return these books, then they want to do it. But who pays for that? This was not at all clear in the contracts, and it was definitely not clear in the accounting. Every single time one of those books got returned — and, boy, was it happening a lot, because some people were using this like a library to get unlimited credits and keep listening to books every single month — the authors would have to pay all of those royalties back.
The outrageous bit with the accounting is that Amazon would say, “You’ve sold three units.” Those were net sales, so it wouldn’t be like, “You sold 13 units, but there were 10 returns.” That was all hidden. Then one day, there was a data glitch, and three weeks of returns all showed up in a single day. People finally realized what was going on and that allowed independent authors to mobilize against this. They have been fighting really hard in this campaign, led by an incredible author and now activist, called Susan May. They have managed to get some change, but it’s really hard to get Amazon and Audible to do anything other than the bare minimum to avert the scandal. It’s still absolutely outrageous what’s going on.
CD: They estimate the cost of the wage theft to be in the hundreds of millions of dollars that were taken from these authors. These independent books are produced at the author’s expense. They pay the narrators or they enter into royalty splits with the narrators. Either way, they all get screwed and Amazon locks them into…
RG: …incredible seven-year contracts, without investing anything in the production of the work. This author called Colleen Cross, who used to be a financial fraud accountant and now writes financial fraud thrillers, started really digging into it, like, “If they’re doing that, what else are they doing?” She started looking at what was going on with the royalties and she said, “Hang on a second. What we’re getting paid doesn’t actually make sense if they’re paying us according to what the contracts say we’re supposed to get paid.” She thinks they’re actually deducting the cost of those returns twice, and this is also where we get into the hundreds of millions of dollars.
Now, nobody knows for sure exactly what’s going on. Again, it’s really difficult to get any information out of Amazon and Audible. These authors are really atomized individuals — they’re not unionized because it is super hard to unionize as individual workers, especially here in the States. I’m just so outraged even talking about it, because it just stacks every single abuse that you can possibly think of onto all these people, hides it, and then there is essentially no redress.
CD: Those of you who backed our Kickstarter will know that we Kickstarted the audiobook so that we didn’t have to sell it on Audible. But we did take the chapter about how Audible has stolen hundreds of millions of dollars from creators, and we packaged it as a standalone audio book and published it using ACX as an Audible exclusive. The only part of the book that you can get on Audible is the part that describes the scam that is Audible.
RG: Please don’t buy it.
One thing that struck me as I was reading the book is that the first big chunk of it is about the music industry. You’re obviously describing Audible, which is another audio format, but there is another piece of the book about Spotify and podcasting. It seems like these chokepoints are stronger in audio formats than anywhere else. To me, the music industry is always the leading edge of the battle between the tech industry and the culture industry. Whatever happens to the music industry seems to happen to everyone else five years later. You could see it coming with Spotify and streaming, then it came with Disney Plus and HBO Max. It just came down the pike that, “We’re going to DRM everything and stream it to you.” Why do you think that is?
“Three record labels that still control almost 70 percent of the global recorded music market”
RG: Well, what’s really interesting about music is how these chokepoints stack together and interact. For example, we start with the fact that there are three record labels that still control almost 70 percent of the global recorded music market, and they own the three publishing companies that control almost as much. They have accumulated enormous reservoirs of copyright rights over time, not just from investing in the creation itself, but often by buying these up from distressed companies at fire sale prices over time.
Copyrights last a long time. We’re talking the life of an author, plus 70 years — it is a little bit different for sound recordings, but we don’t need to get too wonky here. Even though we don’t need record labels for production and distribution in the way that we used to, they still have outsized power over the future of the recorded music markets, because they control those rights.
So people criticize streaming companies a lot and they are outraged that it doesn’t pay artists better. What a lot of people forget is that it was the major record labels that decided how streaming was going to work and how it would pay. We have those copyright reservoirs, but then on top of that, we also have this really arcane, complicated system around music licensing that makes it really difficult to start a streaming company. There are so many incredibly passionate, knowledgeable people who care about artists, who really want to try different models and make things work in different ways, but because the licensing system is so complicated and expensive and because the record labels require such enormous investments in order to enter the market, people are just not able to do so in any kind of numbers.
This is why we have a streaming market dominated by Spotify and a few others that are owned by big tech. Those are the people that can afford to play. So there’s the interaction of those things. [Spotify CEO] Daniel Ek talks about how he would love the licensing system to be simplified and that this is something that is really limiting their growth. It’s expensive for Spotify to start up in new markets as well. But it also has the effect of limiting the competition that Spotify has to face. That’s a reality that really dramatically affects the way that people can get their music to market.
It does seem like the duration of the standard copyright regime around the world is a real problem here, but it also seems like there is an opacity in how the big companies manage copyright. They own a lot of it. They take really long licenses, and when you sign up for any social platform, you have given everything to Google from the jump every time you upload a YouTube video. Is that a place to undo the chokepoints? Is that a place where you can extract value back out of the system?
RG: Well, I’ll jump in again, because there’s one other thing that we can stack on to help answer this question. There are huge inefficiencies in this system around how we actually get the money that is paid to the streaming companies out to artists. Every country has its own collecting societies, for example, that are very often tasked with matching the revenues to the creators and getting it paid. They all have their own individual databases that they look after and maintain individually. It’s an incredibly inefficient system. Very often they can’t even work out who Beyonce is, right? It’s really expensive as well.
Even when you look at the money that is in streaming, the amount of it that gets siphoned away at other points in the value chain is a huge influence on the amount of money that actually gets paid out to creators. It’s a no-brainer. We should be looking at that and doing something similar to what was done with the Music Modernization Act on the publishing side, which was to say that the system just simply was not working. It didn’t work for anyone, so the incentives were there to fix it. We need to do that in other places as well. Get the incentives right, stop so much leakage, and get more money actually going to artists.
CD: One of the things that prompted us to write this book was having spent decades in a false binary debate, where people said, “Look, you either have to brief for team entertainment industry, which wants to make more copyright and make it last longer, or you have to brief for team tech, which wants, at best, different copyright or maybe less copyright.”
If you’re a creator, you have to just pick a side. You become a streamer, a traditional musician, or whatever, and hope that when this clash of the titans is over that you chose whichever giant emerges victorious, and that they will reward your loyalty by dribbling a few more crumbs for you once they manage to take over the industry. We thought that this was just wrong. There is an excluded middle here in the form of creators seizing their own power.
One of the problems is that so much of this debate ended up revolving around copyright, which as a “not great copyright lawyer” by your account, you’ll know that nobody understands. It’s a field that most artists, people in publishing, and people who work in culture ministries just don’t understand very well. It is often the case that basic factual errors emerge in these debates. The problem is that if you have a market where the thing that keeps artists from getting paid is that they have to pass through a chokepoint in order to reach an audience, then whoever has that chokepoint will take whatever copyright you give them and use it to whatever extent they can to make the chokepoint stronger. That way they can extract more things for more people to go through.
I compare it to having a kid who gets bullied every day for their lunch money. If your kid has all their lunch money stolen every day at school, it doesn’t matter how much lunch money you give them, right? They’re still not going to get fed. Even if the bullies go out and have a campaign like, “Feed America’s hungry children, give them more lunch money,” it’s not going to get your kid fed.
One of the things we decided to do with this book was to fully make half the book about what to do about these questions. When we were pitching the book around, we didn’t want to have what is called a Chapter 11 book, which is 10 chapters of eye-watering detail about how fucked up things are and an 11th chapter of bland nostrums for what to do about this. We made half the book shovel-ready, highly technical proposals. We found the leverage points that you could stick a lever into and yank on so that money would fall out on top of artists.
One of the things we talk about is a better database system. If we built a better database system for rights payments, we could simplify the mechanism by which rights are paid and ensure that nobody could proffer the excuse that the reason you didn’t get your money is that they couldn’t “figure out where you live, Beyonce.”
RG: I feel like we’re focusing a lot on streaming here when we talk about why musicians aren’t getting paid, but there are so many other parts to it. No matter what we do in terms of fixing the databases, there are heaps of musicians for which streaming is just not going to be the thing that makes the money.
“We always gave [people] an opportunity to be anonymous if they didn’t want to be identified. Almost nobody took us up on it except the folks we spoke to about Live Nation.”
For example, there are people who make really complicated music that just doesn’t get listened to ad infinitum on repeat. They might make money touring, but then we see that we have Live Nation shaking down creators and record labels in extraordinary ways. When we were writing the book, we interviewed a whole bunch of people. We always gave them an opportunity to be anonymous if they didn’t want to be identified. Almost nobody took us up on it except the folks we spoke to about Live Nation.
You should say what Live Nation is, because it’s the cloud that surrounds all of you at all times.
RG: Oh, yeah. Sorry. I guess I’m very, very deep into this, like, “Don’t we all know how evil Live Nation is?” Live Nation owns… It’s Ticketmaster, right?
RG: Ticketmaster. They also own a bunch of the biggest live music venues in the world, as well as a music promotion side. The ticket business gives them an incredible insider view at which artists are rising, which gives them an advantage in nabbing them before anybody else can. They have control over venues, and they act like mobsters.
There was an antitrust case brought by the DOJ last year or the year before. They had about six venues come forward anonymously because they were so afraid of reprisals, and they were describing mob shakedowns. I think, literally, one of them said they were told, “We’re not telling you that you have to go through us for your ticketing. We’re just laying out your options.”
CD: “This isn’t a threat. We’re just explaining what will happen if you make the ill-advised choice to do business with someone other than us, but we’re not threatening you.”
RG: “Yeah, we’ll never book anything in any of your venues again, and that’s too bad, because your business will be destroyed.” Outside of Live Nation, we also have radio. The US is part of a very small group of countries where radio does not pay artists for airplay of songs. You are in a tiny cabal with Rwanda and North Korea.
Always that list. It’s like, “The United States sucks at this thing, along with North Korea,” and it’s always that list.
RG: There have been literally dozens of bills that have been put to Congress to try and change this to get artists paid for that use, which is paid in almost every other country, but big radio manages to defeat them. We can see over and over again that copyright, contracts, and all of these other things we get into in the book, they’re all servants of big business, not servants of artists or the public.
So I want to remind everybody that if you care to use your monopoly-provided phone to go on the open web, you can ask us questions and we’ll take them. I do want to get to solutions, but before I make that turn, I want to go from one wonky system of law to another deeply wonky system of law.
We have talked a bunch about copyright law. We’re talking a lot about competition and how there should be more companies, and that artists and consumers should have more choices. We are right at the edge of, “Boy, wouldn’t it be great if the antitrust enforcement regime in the United States of America was extremely active and Joe Biden walked around with a hammer breaking up companies?” Is that one of your solutions?
CD: It’s not a thing we’re opposed to, we just think that it’s slow. There’s that joke from Ireland where the punchline is, “If you wanted to get there, I wouldn’t start from here.” Historically, competition regulators prevented monopoly formation because monopolies are very sticky and have a lot of power. They’re too big to fail and too big to jail. It took 69 years to break up AT&T. So yeah, let’s go after Live Nation — I almost said LiveJournal there.
Let’s go after LiveJournal everybody!
CD: Right. Let’s go after the Live Nation-Ticketmaster merger, the Instagram-Facebook merger, and the Google-YouTube merger, but it’s going to take 69 years. It’s a long-run process. While we’re waiting, we need other stuff. We do have more antitrust enforcement than we’ve had in 40 years. We have these three incredible trust-busters in the US government right now. There’s Lina Khan, who’s running the FTC; Tim Wu, who’s running the White House big tech antitrust; and Jonathan Kanter, who’s running it for the DOJ, and on his first day on the job quoted Jim Comey.
He said to his lawyers there, “How many of you have never lost a case?” To the lawyers who proudly raised their hands, he said, “You guys are the chickenshit club. If you’re not losing cases, you’re not going after the right people, because you’re just going after the easy pickings.” So they want to do it. It’s just a long-run process. What we focus on are these leverage points that we can attack while we’re waiting.
I’ll give you an example. If you sign a contract involving royalties, it usually involves the right to audit your royalty statements. That’s expensive and hard to do. I’m a member of the Science Fiction and Fantasy Writers Association. We, and lots of other creators groups, have a lottery, where a couple of times a year we’ll pick a member who can go get their royalty statements audited at the organization’s expense. The problem is that if you find missing money, generally speaking, they will say, “No, no, you’ve got it wrong. We don’t owe it to you. Sue us if you want to get it.”
Of course, you can’t afford to sue them, so they say, “You know, maybe you have a point. We’ll settle with you. We’ll give you the money, but you have to sign a non-disclosure.” Many of the people we interviewed for this book found large amounts of money missing — one person we spoke to found six figures worth of money stolen from them. This will shock and amaze you, but in nearly every instance of this, all but one that we encountered in our research involved an error in favor of the publisher, label or studio, and not the musician. I don’t know how that happens. It really is just a genuinely incredible set of coincidences.
RG: We’re talking tens of thousands of examples.
CD: Tens of thousands, and only one was in the artist’s benefit. So if you find that several hundred thousand dollars were stolen from you, you’re probably not alone. Those identically situated artists have also had large sums of money stolen from them. But to get the money, you have to promise not to tell others where to look for their own stolen wages.
All of these contracts, because of market consolidation, are consummated in California, New York and Washington state. Contracts of state matter. We could just introduce three very short bills that set as a matter of public policy that non-disclosure is not enforceable in the state of New York where it relates to royalty statement material omissions or errors in royalty statements. At the stroke of a pen, we would put more money in the pocket of more artists all over the world than all the copyright term extensions of the last 40 years combined. It’s literally a point where you stick in a two-paragraph bill, give it a little twist, and money just falls out of the system on artists.
So we devote half the book to this. We devote half the book to these kinds of proposals. One of the things that an editor told us while he was rejecting the book was, “I love this book, but I got to the end and I realized all your solutions were systemic, and none of them involved things that individuals can do.”
I feel very bad for the person who asked, “What can individuals do?” You are fine. You did great, and I appreciate your verve and your vigor.
CD: I understand the impulse.
I didn’t know Cory was going to dunk on you.
CD: I have to tell you, I understand that it feels futile, but you can’t recycle your way out of climate change and you can’t shop your way out of a monopoly. These are systemic problems and they need systemic solutions. What the individual can do is think of themselves as part of a movement. If you join a movement, then you and the people with you can make change, but not you on your own.
So let’s talk about that movement just in the day-to-day. This is, “What can I do as an individual?” There are a lot of iPhones in this room, and I’m assuming there are a lot of Netflix accounts. Well, now I’m just making claims about all of you, but a lot of people in this room probably have Spotify and Netflix and watch YouTube. Raise your hand if you don’t watch YouTube. Zero people.
It surrounds us. There’s a reason they call them clouds. We are in the vapor of the big services.
A lot of what you guys describe as “chokepoints” are distribution monopolies at the end of the day. If you want to reach the audience, the audience is all on Spotify. The artist has to go to Spotify. Should we be seeking out alternative distribution points?
RG: It’s hard, right? There’s a reason why we go to YouTube, because everything is there and it’s convenient. There’s a reason people buy everything on Amazon now. It’s been a few years since I’ve been in the city, and I’ve been so shocked to see all of the packages that come into my building that have Prime tape on them. I went to Whole Foods the other day, and it was, “Look how convenient it is to return your Amazon purchases. You can just do it right here. By the way, we’ll give you a discount on a whole bunch of groceries if you have Amazon, as well as free book rentals and free video.”
“Once we are all on Prime, we are getting choked as well”
It’s against your economic self-interest to not be part of Prime. Except it is so incredibly dangerous, because once we are all on Prime, we are getting choked as well. The kinds of things that we’ve suggested are like, “Well, how do we then make it easier for people to make different decisions without causing that inconvenience?”
One of the things we talk about is that if we were allowed to bypass DRM for a non-copyright-infringing purpose — which is all the copyright treaties asked of us, after all — then you could have some really subversive little plug-ins. For example, you could go read the reviews on Amazon, find the book or product that you want there, and then there will be a lovely little pop-up that shows you a local shop you can get it from instead. One of the reasons we use Amazon is because, well, who has the mental bandwidth to try and figure out where else you can get that weird item from?
So yeah, it doesn’t make sense to force everybody into all of this unnecessary labor to bypass these systems. It does make sense to make it easier for people to get genuine choice to support things that are much more in line with their values.
CD: During the Napster Wars, when the record label sued 19,000 children and accounted for 2 percent of the federal docket…
That is the thing that drove me out of the legal industry. I was like, “This job sucks.”
CD: Yeah. When that happened, there were a lot of people who said, “You should just not listen to music from the labels.” I was baffled. I was like, “You want to build a popular movement predicated on not liking popular music?”
RG: Just silence. Sit there in silence.
There’s a teenager streaming silence on Spotify now making six figures a day.
CD: I think it’s the successor to witch house or something. It should be self-evident that if you require people to not do things that are popular, you will not be popular. This should just come with the territory.
One thing that crystallized this for me is one of the best books I’ve read on antitrust and monopoly. It’s a book by someone who you should all be familiar with as New Yorkers, Zephyr Teachout, who ran for governor a couple of years ago. Zephyr wrote this book called Break ‘Em Up. At the end, she has this thing where she says, “Look, if you’re going to a union picket, and instead of being on the picket line you drive around for two hours to find a mom-and-pop to buy your markers from to make your sign so that you don’t buy them from Amazon, you are not helping the movement.”
I don’t want to be all Steven Pinker rationalist here, but you do have to think about the effective use of your time in making the change you want to make. If it’s running around looking for handcrafted, artisanal, made-in-China goods, rather than buying them from Amazon — instead of having the time to work on these issues in a systemic way or even having the time to relax with your family to recharge your batteries so that you can go work on these issues in a systemic way — and if you’d rather be frazzled from driving all over town looking for your whittled leather apron and wax mustache version of the product, then by all means, right? Choose your battles. Literally, don’t choose the meaningless consumer battle that conceives of yourself as an ambulatory wallet. Choose the collective battle that works on your collective strength.
Remember, the problem with Amazon is not that it delivers things efficiently and that it makes it easy to find the thing that you want. The problem with Amazon is the way it arranges the commercial relations between the participants in that value chain, including the manufacturers, the laborers of the manufacturers, the drivers and deliverers, the warehouse workers, the authors who supply the books and so on. Those are the problems.
The problem isn’t that the Kindle bookstore allows people to self-publish. That’s awesome. The problem is the social arrangements. No one came down off a mountain with two stone tablets saying, “Jeffrey, thou shalt arrange your self-publishing empire such that the authors get totally screwed.” You could absolutely make the Kindle store and take out the “screw the author” part, and it’d be great.
About that last piece around DRM, it was the book publishers that insisted on the DRM for the Kindle, not Amazon itself. I think that Amazon in another world would have asked for DRM and then had that request refused or denied. But it was the publishers themselves. It’s often the creators themselves asking for greater protections, but in a software world, those protections end up shooting you in the foot and increasing switching costs for consumers. How do you break that cycle?
CD: So the thing here is that DRM as a technical matter doesn’t work. I’m a pretend computer scientist; I have an honorary doctorate in computer science. Even as a pretend computer scientist, I’m here to tell you that nobody in the field, except for people who work for DRM companies, thinks that DRM can work. Making bits that are harder to copy is like making water that’s less wet. It’s just not a thing. It’s not a thing that we will ever do.
There are other ways we’ve shown that you can use to increase revenue. The best one is offering a good product at a good price. People buy that voluntarily, not the thing where you add these restrictions and then felonize making it. I’ll tell you how you know that DRM doesn’t work. It’s because there’s a law against breaking DRM. If DRM worked, you wouldn’t need the law, right? Because DRM would work. You would just say, “Oh, well, the DRM works, so nobody can make a thing to break our DRM.”
“I’ll tell you how you know that DRM doesn’t work. It’s because there’s a law against breaking DRM.”
What the law has done, in fact, is encourage firms to make shittier and shittier DRM. Today’s DRM is like a one-molecule thick layer wrapped around the digital file that falls apart if you sneeze on it. But it lets them take any firm that attempts to enter the market by unwrapping that DRM and charge them with a literal felony. Felony contempt of business model, basically.
So, publishers bought a bill of goods and record labels bought a bill of goods. I will tell you that the record labels turned around. Steve Jobs was like, “We’re going to launch the iTunes store and we’re going to save you guys from piracy by giving you DRM.”
A couple of years go by and they’re like, “We don’t want to charge 99 cents for all of our songs, and sometimes we want to sell whole albums and not individual tracks.” Steve Jobs said, “That’s not how things work at Apple. You’re holding it wrong.” They were like, “No, no, no. That’s what we want to do.” Steve said, “Yeah, I’m sorry. If you want to put DRM on it from the iTunes store, you’re going to have to do this. The iPod will only play DRM music from the iTunes store. When RealNetworks tried to put DRM on the iPod, we sued them for breaking the DRM that stops what software you can load onto the iPod. So really, if you want to protect your music, it’s going to have to be on our terms.” They came back with, “What are we going to do?”
Jeff Bezos turned around and said, “I’m going to launch an MP3-only, no-DRM music store, whose slogan is ‘DRM: Don’t Restrict Me.’” That was the launch slogan for the Amazon Music store. They turned around and were like, “Absolutely.”
Now, today they operate Audible, and they don’t let you choose whether you’re going to have DRM. They require you to have DRM. Although you can choose whether you want DRM on your ebook, the major distributors don’t. So our plucky, little lefty publisher is Beacon Press, which is 150 years old, owned by the Unitarian Universalists, and has published Howard Zinn. Albert Einstein once said, “If the world will survive, it will be because of the noble efforts of the Unitarian Universalists and Beacon Press.” They have an amazing brag sheet. They don’t distribute themselves. They’re distributed by Random House, which is the largest publishing monopoly in the industry.
Random House wouldn’t carry our ebook because we said you can’t put DRM on it. They were just like, “It’s too hard for us to tick the box that says no DRM on some of these books. We only distribute with DRM.” So the copy that you buy on Amazon — if you buy it on Amazon, and I don’t know why you would, (although many of you are buying it because it is the number one Amazon antitrust book right now, which is weird). But if you buy that, we self-publish that with Beacon. We put it in the Kindle store as a Kindle self-published title. It didn’t go through the Random House channel. So what’s happened now is that although maybe the entertainment industry provided the initial impetus, it has now become non-discretionary. You can’t sell a movie to Netflix for distribution and say, “But I don’t want the DRM.”
I want to take the last few minutes here for questions. Some of them fall into buckets. Here’s one that says, “It sounds like the labels and publishers are more of a problem than Spotify.” I think the second question here is basically the follow-up. “Say Spotify cut its rate from 30 / 70 to 90 / 10. Would that make a difference?”
RG: The thing is, the economics of streaming are really difficult. It does cost a lot to shift this. It costs a lot in the licensing and complying with those mazes that I talked about, and it’s a business that operates at scale. So it’s probably only ever going to be the artists that are the most commercial and have a lot of volume that are going to see substantial revenues from that. That is the nature of the beast. Music has always been a place where it’s really difficult to make money.
Yes, there are absolutely improvements that we can make. I think, in particular, one thing that would be really important here is more transparency. For example, Deezer has been trying for a number of years now to run a different kind of model, which is called a user-centric model. This is going to be slightly wonky, but stay with me.
The way that it works at the moment is that you sign up to a streaming platform, you pay your money, and then that all goes into a pool and it’s distributed proportionally to everybody based on how often everybody is streamed. If you are going onto Spotify and just listening to Zoë Keating 20 times in one month, your money doesn’t just go to Zoë Keating, your money goes into the pool and then goes to Drake.
Deezer has been talking about how they would really love to try a user-centric model where your money gets matched to the actual artist that you listen to. Somebody that listens to low-calorie elevator music, like those chill-time ambient artists or whatever, but is listening to it 24 / 7 to keep the voices out of their head, then those artists get relatively less. Somebody who is listening to more experimental, challenging music, or maybe just listens a little bit less, then their money would just go to the artists that they’re listening to.
Now, from our understanding and what we have seen reported, it’s the labels who are really blocking this kind of move from happening. The lack of transparency in this industry means we don’t even have any modeling to accurately know for sure who would be the winners and who would be the losers, because we don’t have transparency to find out how different ways of dividing up the pie would work. That means that we can’t have public debate around how it should be. I think the number one thing that we could do straight away — and we saw it with the Audiblegate example about how much change we can get by shining a light into dark corners — is that we need to have more transparency everywhere, including in streaming.
CD: Yeah, back to that joke from Ireland. I always want to call it an Irish joke, but an Irish joke means something different. It’s a joke from Ireland. “If you wanted to get there, you wouldn’t start from here.” The story of Spotify and the labels is really instructive.
You have the labels that control all the catalog, not because they invested directly in it, but because they bought their nascent rivals and their major rivals often at fire sale prices. Spotify launches, and in order to get access to that catalog, Spotify sells significant chunks of equity to the labels. The labels are investors in Spotify; they own a big piece of it. They negotiate a rate with Spotify that is very low per stream, and that means the revenue that Spotify generates doesn’t come to the labels in their guise as license source who have licensed music to them. It comes to them as investors who have made an investment, because now Spotify has a better monetary but cash basis. They’re paying less for the music they have, but they also have a “most favored nation status” deal. If you’re an independent label going in, you have to sell at the same rate that the labels themselves have done.
You can see how you get this knock-on effect where you have the monopoly that begets the monopoly and you have the dirty dealing that begets the dirty dealing. Then you have an enormous amount of opacity in the relations between the labels and Spotify. The labels go in and say, “Oh, well we’re going to take a lower per stream rate, but in order to protect our artists, we want a minimum monthly payout of $X million.”
Well, okay, if you get $X million every month, but because of the low stream rate, $20 million of it is not attributable to any given stream — because you’re not charging much for the stream — then that is unattributed revenue and you get to do what you want with it. You can distribute it to the artists you favor, you can put it in a special account that ends up spent on ivory-handle back scratchers, you can do whatever you want with that money. There’s no obvious way to know what’s going on. It’s all sort of hidden inside this very opaque set of interlocking commercial arrangements.
RG: Oh, can I jump in there?
RG: So that’s actually a great example of the value of transparency, because that’s how it used to be. There was the Spotify contract with Sony that was leaked, and everybody found out about the ways that these deals were structured.
Verge leaked that deal. Putting that out there. That was us.
RG: It was very nice. That’s right, it was you. You’re in the book with that one.
When that got leaked and everybody finally got confirmation that a lot of stuff they had suspected was actually happening, the major labels got publicly shamed into changing the rules around what they did with the black box money, the unattributable revenue. So again, as soon as you shine light on those dark corners, we can actually achieve change without having to wait for the 50 years it might take for an antitrust case to wind its way through.
CD: We have precedent for this. Before the Enron scandal, it was common for labels to run secret, off-the-books third shifts of CD pressings. They would press CDs literally in the dead of night, they wouldn’t show up on your royalty statements, and they would sell those. So they could just trouser a third of the money.
After Enron, they passed the Sarbanes-Oxley Act. Sarbanes-Oxley attributes personal criminal liability to executives who knowingly sign false financial statements. Then the third shifts ended. It turns out that if you threaten to put the decision makers who know about those third shifts in prison for them, it can reform their conduct. We know that if we change the incentives for the large firms, the large firms will do better.
I mean, this is one of the problems with the argument that you often hear, that if you’re not paying for the product, you are the product. It turns out that what really determines how a firm treats you is whether they face any penalties for mistreating you. It has nothing to do with whether you’re paying them. It has to do with whether or not they fear retribution. If they fear retribution, they will behave accordingly. As our friends on the right like to tell us, incentives matter.
All right. So I’m going to ask this question, and I would like to thank them, because now it doesn’t seem like my idea. I appreciate you. “What about Web3 and the blockchain?”
CD: So I would like to remind you that 98.7 percent of all conversations about the blockchain are nonconsensual. So, look…
“I would like to remind you that 98.7 percent of all conversations about the blockchain are nonconsensual”
I’m going to do my best. I want to point out that abstractly, the promise of the blockchain solves many of the problems that you have discussed.
CD: This is the thing. This is the part where me and the blockchain are on the same side. When I hear blockchain people talk about why they want to block the chain, they are always saying things that I agree with. They want to devolve control, they want to spread it out, they want to make a system where users have more control, and they want to make a system where there is exit to community so that communities can control the services they use. All of that sounds great to me.
Then I look at the technical and economic characteristics of the blockchain and I go, “This just doesn’t do that.” Not only that, but it can’t. Again, without getting into a lot of crazy technical detail, if you’re going to have a permissionless blockchain, you need civil resistance. You need to make sure that the people who are voting to make a change aren’t just the same person wearing 100 hats.
If you’re going to make it civil resistant, then you need to have disinterested third parties who don’t care about the outcome and who do a bunch of something, they stake something or they do some work or whatever. If you’re going to do that, then you have to have some way to incentivize them to do it. If they’re incentivized out of the goodness of their hearts, then you don’t even need any of this. You can just throw away all of this and the blockchain is unnecessary.
But if they’re maybe not so good, then you need a reason to incentivize them. That is going to be something involving speculation. So now your community-owned thing is grounded in the idea that it will be controlled by people who don’t give a shit about it, and who are only involved because they can gamble with it and make more money.
This is just a foundational misalignment in the story of worker-owned, community-owned, decentralized whatever. The actual, practical outcome of cryptocurrencies has not been a distribution of power in the sense of reducing the number of billionaires. What we have done is increase the number of banks where billionaires can hide their money. When I hear you say, “Well, we’re going to decentralize finance,” I think the part that I like the sound of is reducing the number of policy failure factories, which are billionaires. This is just making them more robust and harder to lay hands on. I’m just not all that interested in that.
There is a realm of distributed computation, peer-to-peer stuff that I’m very interested in that trades under the blanket name of subsidiarity, which comes out of 16th-century Liberation Catholicism. I just found that out this week. Subsidiarity is just this whole suite of technologies and systems designs that are grounded in socially situated knowledge, socially situated identity, and socially situated governance. It’s about not using speculation to organize your systems, and instead using solidarity to organize your systems. It’s really cool. I’m on board for it, and I’m on board for the goals of it. I just don’t think that you get those goals by doing the thing that they say they’re going to do.
I also don’t think it can ever be money. I just think that for a thing to be money, it needs two things. One is that there needs to be some liability that you can only settle with that thing. The reason US money is money is because you have to pay your taxes with it. If you don’t pay your taxes, they put you in prison. Which means that if you have US dollars, they will be valuable to someone, because they’re going to need US dollars on April 15th. People will accept your dollars for work, and that makes the US dollar valuable.
Nothing is for sale in cryptocurrency, except other cryptocurrency, NFTs and ransomware payments. You cannot buy a Bored Ape hamburger at the Bored Ape Hamburger Stand with Bored Ape coins, because of the other reason that cryptocurrency can’t be money, which is that any economist, whether they’re a Marxist or an Austrian, will tell you that if you have a commodity that has a fixed supply and a variable demand, that the price of that commodity will be variable. It will be volatile, because the number of people who want it will determine the price. Price is set by supply and demand meeting. That’s the Laffer curve.
If the supply never changes, if it’s fixed, then the changes in demand will make the price go “brpbrpbrp.” That’s why they don’t take Bored Ape coins for Bored Ape hamburgers. You’re paying for your ground beef in dollars, but the exchange rate between dollars and Bored Ape coins is different from second to second. So you go broke if you try to take cryptocurrency in exchange for things that are denominated in stable currencies. Stable currencies are stable because we have central bankers who alter the money supply based on the amount of demand we have for money.
So all of that is my wonky way of saying like 96 percent of all conversations involving blockchain are nonconsensual. I think that the goals of the cryptocurrency movement are very noble, at least for some of those people, but the actual use of cryptocurrency won’t achieve those goals.
Dear god, I’m going to do this. I’m going to ask a follow-up question.
I’m so sorry. Yeah, pre-apologies to everyone. That’s cryptocurrencies, but there’s the other side, which is the NFT.
RG: This was such a nice event, Nilay.
Look, I think we’re at time, so I’m just trying to do a little hall raker here.
CD: Again, it’s one of those things where it doesn’t do any of the things they say it does. So an NFT…
I didn’t even ask the question.
CD: So, NFTs. Anil Dash invented NFTs as a way of allowing artists to thank people who did something nice for them. If you paid me a compliment, gave me some money, or whatever it was, and it was related to something that I made, I could then put an entry in the blockchain that would be there forever — or as long as the blockchain was maintained — that said, “Nilay Patel. Cory Doctorow’s little brother. This date.” It was like a little plaque on the front of a building. Except that I could put any URL in there, so I could put this little plaque on anyone’s building.
That was why they were like, “This isn’t a thing you can sell, right? Because that would be bananas.” This is just a thing that is socially situated. Nilay values it because he knows that the building I put the plaque in front of is my building, but the only way Nilay can sell that to someone else is if they intrinsically trust him. If we actually try to trade them, it doesn’t make any sense.
So now you have this thing where people are able to issue NFTs that relate to any URL arbitrarily. Even if they control the URL, and they’re saying, “Oh, well, this is a testament to the uniqueness of this NFT that I just sold you,” they can just copy that thing at another URL.
So, it’s like there is an nft.html, and they could have another one called nft1.html. They could be byte-identical except for the file name. They could issue that. All the promises about the smart contracts that go along with it that pay artists are completely nonsensical. They say, “Oh, you have a smart contract that pays a royalty every time an NFT trades hands.”
Well, the smart contract is a little computer program that says, “If an event called ‘sale’ occurs, then create this royalty split and send the royalty to this wallet.” So if I want to sell the NFT to you and I don’t want to pay royalty, I don’t call it a “sale.” I call it a “sale_1.” The smart contract goes, “Was there a sale taking place?” It looks through its list of things and it goes, “I don’t have an event here for sale, I have an event for sale_1. That doesn’t relate to my business logic.” That NFT can now be transferred out of royalty.
“None of the claims made about NFTs stand up to even the most cursory scrutiny.”
None of the claims made about NFTs stand up to even the most cursory scrutiny. They are a tower of nonsense and the epitome of a speculative bubble. Again, they have to have a coherent story for us to critique them on a substantive level, but they don’t have a coherent story. The story is, on a technical level, incoherent. They’re like, “What if water wasn’t wet? What if gravity didn’t exist? What if three was equal to two? Think of all the cool things we could do.”
Sure, thought experiments are great. But then they say, “Guess what? Three equals two. Let’s go do those cool things.” You look and you’re like, “I’m pretty sure that’s three.” They’re like, “No, it’s two. It’s two.” At a certain point, you have to say, “Guys, you’re just making a lot of noise about nothing, and either you’re lying to everyone else to steal from them or you’re lying to yourself. Either way, I don’t want to have anything to do with you.”
Rebecca, you’re a copyright professor. When you examine the claims, do you have as visceral a reaction as Cory does?
RG: NFTs are a grift. They’ve always been a grift.
There’s a blockchain investor with $1 million outside, like, “Oh shit,” and he’s walking the other way. Well, I’ll just ask you a more philosophical question. A lot of the reasons that the chokepoints exist is because the physical scarcity of culture has gone away with the internet and technology. When artists would sell a CD to you for $15 a sale, you could see the transaction, you could have the second sale without DRM in the way, all these sorts of things.
Books are the same deal. Amazon could not DRM a physical copy of a book. You had to print the books, ship them, and lots of middlemen made money along the way there. We have disintermediated all of those middlemen. We now sell digital culture, and it is infinitely copyable. I know there is a chapter in the book about the difference between streaming and downloading, or at least a line, but we mostly stream it to people. We treat it as ephemeral and not as a collection of atoms.
NFTs, for all their many problems — and I agree with you on the many problems — are an attempt to reintroduce scarcity to digital culture. Is that the right philosophical direction to go in? Or is it to remake the business models for ephemeral culture?
RG: Can I push back on that idea that the chokepoints come from the transition to digital? We have always had these in creative labor markets. Right from when the very first copyright statute was created in England in 1710, the Stationers’ Company were the ones that were controlling everything. There was an attempt to take control away from the Stationers’ Company and give some to authors when those rights expired. Then those publishers just refused. They had a gentleman’s agreement with one another. They refused to publish the books of other publishers so that the authors still had no choice, and they still managed to sew them up. We’ve seen these chokepoints throughout history, with the music market being worse than anything else, when those record labels that I was talking about and those music publishers were the ones that controlled physical distribution into stores.
We saw in the early 2000s around the Napster wars that yes, there was carnage and blood on the walls. A lot of creators and people who worked in the music industry saw their incomes absolutely decimated. We don’t want to romanticize this period. But one thing that the switch to digital did was that it democratized access to these markets. It allowed musicians to reach audiences without having to go through those middle men.
I think that’s the secret. What we have to be doing to break these chokepoints, the philosophy we have to be aiming for, is to put the conditions in place where we can encourage new entrants and where we can support countervailing producer power in the hands of artists and investors. That is the philosophy we should be working towards.
CD: You have to remember that lots of things happened over the last 40 years. One was the growth of digital technology. The Apple II Plus went on sale in the summer of 1979 as Ronald Reagan hit the campaign trail. Digital technology is as old as neoliberalism, almost precisely as old as neoliberalism. One of the things that happened under neoliberalism was a dismantling of the regulations that we used to stop firms from accumulating power that they could use to put the screws to their workforce.
There’s a much more parsimonious explanation for what happened to give these companies power over their workforce, rather than the explanation that it has to do with digital lack of scarcity. It’s that they bought all their competitors and then sewed up their audience using law and technology. That then gave them bargaining power over their workers. You don’t have to reach to exotic explanations because it’s right there. How did Universal Music end up controlling so much of the music industry? They bought all their rivals. There is actually a great book called Creative License by Kembrew McLeod that we cite in the book about the history of sampling.
RG: Peter DiCola as well.
CD: Yes, and Peter DiCola. Thank you. When sampling started, the assumption was there was just no copyright interest and that it was either a fair use or it was de minimis, too short to bother with in the law. So people just made albums with lots of samples. Paul’s Boutique had hundreds of samples. It Takes a Nation of Millions to Hold Us Back had hundreds of samples. Two top-grossing hip hop albums had tons of samples and none of them cleared. Then we had a couple of court cases, and it became the norm that you cleared samples.
For a short period, heritage acts made a lot of money. People who made R&B and soul, who were almost all Black and were quite young at the time and didn’t know better, signed these terrible deals under super-abusive coercive conditions. They got paid for a while, but the other thing that happened was that in order to license music in order to sample it, you had to be signed to a label — because the labels didn’t want to return your calls if you didn’t originate with a label. Everyone had to sign the contract with a label if they wanted to make music that had samples in it. When you signed that contract, you signed away your right to revenue from your samples. You had this flywheel where everybody wanted to make music that had samples in, but they had to sign up and sign away the right to have their own music sampled, and it just ended up in the label’s pocket.
You can see how that mechanism worked. The shifting of value from performers’ side of the balance sheet to labels’ investors didn’t come about as a result of it being too easy to copy things. It came about as a result of this intermixture of copyright and negotiating leverage that allowed them to just take control.
When they say, “Oh, this is how it happened,” you need to ask, “What was the technical mechanism by which the lack of scarcity caused that?” If you can’t find the explanation, I think you should look somewhere else. We have a lot of those explanations. I’m not saying digital played no role. I’m saying let’s not overweight this as a clash of civilizations between the “information wants to be free” crowd and the “information wants to be expensive” crowd. Let’s look at it as a clash of material class interests related to monopolies in their workforces.
I feel like I could definitely do another full 90 minutes on whether you should pay for samples and argue both sides really quite ferociously, but I want to end here with a good question that I think all three of us probably have different answers to. It is a little individual action, but I think it’s the right place to end. How do we as individuals, particularly artists who are not getting paid enough right now, keep our heads up and survive? You have survived every version of the creative economy.
CD: I don’t kid myself that I’m not very lucky. I’m very, very lucky to have gotten where I am. When I talk to students that I teach as writers, I say that “don’t quit your day job” is not just a snarky thing; it’s actually sound advice. It gives you something to write about as well. The reason that I left EFF for a while to write full-time, and then went back, wasn’t just for money. Working for a nonprofit is not a lucrative thing to do. It was because I needed things to write about.
Also, of all the students I’ve taught and who have gone on to success, the ones who had the most success were not the ones who were the most promising, but the ones who stayed at it when they were discouraged. I think that in the arts labor world, irrespective of monopoly or not monopoly, it has always only ever been a tiny fraction of the people who wanted to make art who found a professional living doing it — lots of people have made art, but who were able to support themselves doing it.
The chances for success are so narrow, so few and far between, that you have to keep plugging in ways that don’t make any sense. I think one of the reasons that we get treated so badly is because the only people who stick with it are the people who can’t bear to quit. It’s like the joke about the kid who runs away and joins the circus. His dad finds him shoveling elephant shit and says, “Son, come home.” The kid says, “What? And quit show business?” None of that is a guarantee of success, but I think it is a necessary precondition for it, and that will be true no matter what happens.
My goal is not full employment for every artist, except in a kind of UBI way. My goal is that if your art makes money, that you get to keep the money. That’s a much more reasonable goal that we can reach. Also, I would like UBI for artists, but before we get to UBI for artists, we can just say, “If your art is making money, you should get that money.”
RG: Honestly, with a lot of my artist friends, I don’t know how they keep their heads up. The ones who are more successful at it — aside from everything that Cory said, which I agree with — I think it’s around connection, community, and talking. I think for a lot of people, when you’re not making very much money, it can feel like a real failure. You are slogging it out and you’re working so hard, especially if you’re writing.
It’s that sports reporter who said, “Writing’s not difficult. I just go over to my desk, sit down, open my typewriter, open my veins, and bleed.” It hurts, but by talking about it, by not trying to hide how hard it is and how little money you’re making, and then by understanding that it is like that for other people too, that is one of the places to find solidarity and to mobilize together. It’s one of the things we bang on a lot about in the book, but also just to make getting through the day-to-day a little bit easier.
My minor addition to this is that there’s a difference between having an audience and having an algorithmic audience. As I read the book, the thing that struck me is that we often misconstrue the audience provided by algorithms as actual audience, and that lets the chokepoint become ever stronger.
CD: I think that’s well said. Thank you, Nilay.
I don’t understand why I have the last word here, but it was my answer to the question. We have a few more questions. Does this room want to stay here for another few minutes?
RG: Feel free to just wander off and leave at any point. If he starts talking about NFTs again, do it.
Oh no, there’s a metaverse question here. That’s how we’re going to really end the room. The questions have gotten a little wonkier, but I think they’re actually quite interesting. “Why are the PROs, professional rights organizations, still around if the system isn’t working for anyone?” [Background laughter] That person obviously asked the question, whoever just chuckled ferociously.
CD: Future of Music Coalition founder Brian Zisk wants to know. You answer that, Rebecca.
RG: Okay. We’ve talked about these powerful interests throughout tonight, and the collecting societies are really powerful. One of the reasons for that, frankly, is that they very often used artists as stalking horses to mask other people’s economic interests. They speak for artists, but very often it’s in ways that put money directly into their own pockets and support these inefficient structures that we have been talking about. It’s much easier to set these things up than to get rid of them.
“Cory and I are both not huge fans of a lot of international copyright treaties.”
Cory and I are both not huge fans of a lot of international copyright treaties. There are a couple that do a great job, like the Marrakesh Treaty for the people with visual impairments, but I think this is a place where there is actually a really interesting possibility for an international treaty to get countries on board with creating a modern global shared database that gets rid of these inefficiencies — like a global pact to get rid of this corruption. I’m not saying #NotAllCollectingSocieties, but a lot of them. It gets rid of the corruption, the mismanagement, and the waste in order to get that money more directly into artists’ pockets.
CD: One of the things we talk about in the book is that these rights collecting societies, often if there’s money that comes in that’s not attributable to an artist, they get to spend it on whatever they want. If we mandated that they had to spend it on finding artists to give them the money, like building out better database technology instead of incentivizing them to not find the artist whose money they’re holding, we could make it so that they had to use that money to find those artists.
RG: Yes, and get the governance right too. We have collecting societies that put aside a certain percentage of the license fees that they collect into things like cultural funds. The idea is that it’s money that can go out to support new creations. Fantastic. Except in some countries like Australia, it’s the board of the collecting society that decides where that money goes without any kinds of guidelines or any kind of transparency around it. What that means is that artists are incredibly reluctant to speak up against them because they fear that one of the last remaining substantial sources of arts funding may no longer come their way if they do. We definitely have a lot of work to do on the governance.
You brought up international treaties and international law. We have a great question here. “A lot of what we talked about is based in the US, but there has been a lot of movement around the world. What’s the potential to affect change by passing legislation in non-US jurisdictions?” The example here is the GDPR, which I think is another potential hour of debate, but I’ll give you the Australian link tax situation, where Google and Facebook have to pay publishers.
RG: Well, I was actually going to ask if we could talk about the DSM directive instead, because that’s something that’s really interesting. The European digital single market directive has some pretty problematic stuff in it, but it also has some protections that are actually squarely aimed at helping creators. That includes a transparency mandate over things like artists’ pay, so that every member state has to enact laws to allow creators and performers to find out much more about how their works are being used and paid for. There are things like use-it-or-lose-it rights, where if the work is no longer being commercially exploited, the artists are able to get their rights back. Then there are requirements for fair and reasonable remuneration, effectively minimum wages for creative work.
I think that those are really important interventions that all other countries can learn from. We are seeing them get implemented right now, and we can see the ways it’s being done well and less well. We should be following that really closely and thinking about much more direct mandates to support authorship everywhere.
CD: One of the wild things about international copyright law is that often with the things that are actually good in the American system that other countries try to enact, the US trade representative will show up and say, “That’s communism.” The Parliament of South Africa has been trying to pass fair use law for years. I think they’re finally going to do it. It looks like they will. But the greatest impediment to this fair use law, which is basically a copy-paste of American fair use, has been the US trade representative who keeps showing up and going, “This is a terrible idea. Only a stupid person would have this law.”
RG: “By the way, that will violate your international obligations under the Berne Convention.”
CD: “Yeah. It’s illegal to have this law.”
RG: “I mean, we can have it, but nobody else.”
CD: One of the better elements of American copyright law that still has room for improvement is something called termination right, which Rebecca is one of the world’s experts on. It is the right after 30 years… no, 35 years.
CD: Thirty-five, yes. I knew as soon as I said it that I got it wrong. It’s the right after 35 years to send a letter to the copyright office, file some paperwork, and say, “I know I signed away my rights forever, but I’m taking them back.”
RG: That was a great idea in theory, right? In practice, you have these powerful lobbyists for the content industries in this closed-door room. There are transcripts I managed to track down, and it is just incredible to see the quiet parts that they were saying out loud.
They managed to water it down from the initial proposal, which was that 25 years after an artist transferred a copyright, they would just automatically get it back. By then, everybody knows what the work is worth. Maybe you license it back to the same company, maybe you get a fresh advance, maybe they invest something in publicity, or maybe you give it to a different kind of company.
We can see how different the music landscape would be if that original proposal had come out, because the record industries would know they couldn’t just rely on having your copyrights for 95 years. They would, every 25 years, have to be putting the conditions in place to make them more attractive than a competitor, and then they wouldn’t have such control over the future of the market.
Now what actually happened in that closed-door room is that they made it as impossible to use as they could. So now it’s after 35 years and it’s not automatic. You have so many hoops to jump through, and it’s really unclear exactly when it will be possible to do this successfully. There’s a study that my team did where we scraped the copyright office database and got every single copyright termination notice that has ever been issued since those laws were created in 1976. We looked at how it was actually being used, and they’re hardly being used at all, because creators know that there is going to be so much expense and uncertainty if they really want to push this, and that there’s absolutely no point. It’s a great idea in practice, but implemented in a terrible way. We have every possibility in the world of doing it better if we do actually want to take creators’ rights seriously.
CD: Some creators in the US have used it successfully. Sweet Valley High, Baby-Sitters Club, George Clinton’s catalog, a bunch of early Stephen King and Dean Koontz books, they are all terminated in this way. Now the heirs of Stan Lee are trying to get the characters back from Marvel Disney, which is pretty wild. The person who made The Game of Life has kids who are trying to get it back from the Hasbro Corporation. All of that is interesting. It actually has made a material difference to a small number of creators, but a substantial one.
Canada contemplated a termination right. I’m a secret Canadian. We’re like serial killers; we look like everyone else and we’re everywhere. Our homegrown hero, Bryan Adams, went out and stumped for this, and the US trade representative was like, “I’m sorry guys, that’s communism. You just can’t do this. It would be so bad for you. You don’t understand.” It’s amazing the extent to which the best features of American copyright law are the only ones that America doesn’t foist on the rest of the world.
Thank you so much, this was great.
CD: Thank you all for coming, and thank you Nilay.
Decoder with Nilay Patel /
A podcast from The Verge about big ideas and other problems.