Google has always linked to other people’s stuff, and stayed out of retailing bits itself. Over time it’s blurred that line, without ever really crossing it. This was a line that Microsoft never really crossed either, although Windows Marketplaces were announced, then came and went phut, as regularly as Service Packs.

Now we can confirm that Google is gearing up for a Music Store – CNet’s Greg Sandoval hears this could be upon us as soon as the autumn, it may decide this high-minded distinction is no longer one worth preserving. The rumours strongly suggest Google will be integrating music into search – no surprise, there – but there’s plenty of speculation that it will go the final step, and retail the music directly.

Let’s put aside for a moment the China experience, where Google – with the full blessing of the major labels – launched a free MP3 download service, entirely supported by ads. This was a very unusual situation, where China’s dominant search portal Baidu was serving up MP3s without a license, hosted on an ever-changing network of obscure domains that nobody else could reach. Rights holders aren’t about to repeat the experience here – and with a market of willing buyers, there’s no reason why they should. So disregard it as a precedent.

The reason for Google’s reluctance to sell digital bits is pretty obvious: its market dominance as a search engine puts it directly into competition with online retailers, and puts them at a potentially crippling disadvantage. If Google is the first port of calling for getting to stuff on the web, why would anyone find a second? Google takes you directly to the checkout. It spells the end for any online retailer without massive scale, and the brand and resources to match.

But you can see the thinking, here, even if you don’t approve. For some time Google has eyed the rise of price comparison sites with some irritation. What value do they add, a Googler might ask? Most are little more than crummy pseudo-editorial sites, in the pocket of the largest vendors. Surely a classic case for intervention by algorithm. Well those price comparison sites are already earmarked for extinction and few will mourn their passing – they don’t really add much value. But then again, that doesn’t mean Google will be pushing out the bits itself. It may simply subsume price comparison into its existing apparatus.

And once again, a Googler might ask – why on earth go the extra step? It’s not as if the Chocolate Factory wants to sell you lawnmowers or TVs, the high-margin end of Amazon’s business. It’s only an MP3. In terms of scale, the world’s music is somewhere between 25 million and 35 million MP3s, but then only a small proportion of that really matters to a mass market retailer – you’ll recall the study that showed that of 12 million songs in (what we assume to be) the iTunes catalog only 3 million sold a copy in one year. Google has plenty of capacity and bandwidth – why not remove the extra step and sell it directly?

It has demonstrated how. Three weeks ago Google unveiled a section of the Android Market that sells music. (Yes, the Android store is Google’s only example of selling bits itself.) From the China experiment, Google knows who to call. Whether it wants to is another thing. For any global operator acquiring rights is a world of pain – the music business is still territorial, and the fragmentation of music publishing rights means it can take weeks or even months of work simply to find who owns what. This is not a problem an algorithm can answer.

Google is now so large it could probably buy the entire sound recording industry for small change – certainly less than a quarter’s revenue. Even if it does, the licensing headache doesn’t go away. So it will certainly be more effective for Google to employ an intermediary to sort this out.

If Google were to employ the same ruthless approach to music as it did with books, Google Music could be a serious challenger not just to every music retailer on the planet, but every producer and rights owner too. We’ll have to see if the company has been chastised by the experience, in which governments eventually turned against the landgrab. I suspect it hasn’t.

And there’s something else unusual. Here’s a group of record companies that are doing well, both critically and commercially, which think the internet has helped them to this success, and can’t wait for the future to get here.

Beggars’ four labels XL, Rough Trade, 4AD and US stalwart Matador Records scooped up a fifth of the Times Top 100 records of the decade. The company recently scored the first indie number one for twenty years (Vampire Weekend), looks to have the critics choice for 2010 sewn up (Gil Scott Heron), and with The Xx has a band whose music suddenly seems ubiquitous, sprouting from every trailer and advert, as well as the BBC’s Election coverage.

Mills himself resigned from the BPI “years ago” and helped set up two powerful industry groups as a counterweight to the major labels: the Association for Independent Music (AIM) and Impala, a Brussels-based business network of companies and trade associations. Impala was crucial in persuading the Courts to overturn the European Commission’s decision to bless the Sony BMG merger. The collective licensing group Merlin, sometimes called a ‘fifth major’, also owes much to Mills’ desire to give more strength to the indies at the bargaining table.

The Beggars setup is also quite unusual, a bag of apparent contradictions. Mills still signs every cheque, and watches the weekly cashflow, but the labels, such as Richard Russell’s XL, have a lot of freedom. The core of the Beggars Group is an operations unit for the labels, but he doesn’t do budgets or ask the labels to do them for him. It’s impossible to predict how music will sell, he says, so why waste the time? In a business that became increasingly populated by suits in the 1990s, this is very unusual.

Mills spends a lot of time thinking about how to make money, but his distaste for “music corporations” is matched by concern about the “corporatisation of the individual”. You can’t imagine a New Media Strategist setting foot in the place, or surviving very long if they did. People work at Beggars for the love of music, and are good at finding it and promoting it.

So there’s a lot of reasons to pay attention to Beggars, and Mills’ thoughts on the future of music. We had a very wide-ranging interview last week covering everything from digital marketing to the Digital Economy Act. A few facts first, though.

The Beggars Banquet label grew out of an Earl’s Court record shop in 1976. Three years later it had picked up Tubeway Army, and found itself with a global pop star. But unlike other indies of the era it didn’t embark on overnight global expansion. This may be why unlike other contemporaries such as Stiff, Rough Trade or Factory, it survived. 4AD was launched in 1979, XL a decade later. It picked up Matador in 2002 and Rough Trade three years ago.

The group now employs around 130 staff worldwide. Between them, the labels invest in 20 new acts a year. Digital revenues are around 50 per cent of the total, far higher than the industry average. The Vampire Weekend number one sold 126,000 in its first weekend, of which 70,000 were digital downloads. In the UK digital is about 20 per cent (up to 30 for new releases, says Mills) while in Europe the ratio is much lower.

There’s also a distinctive profile to the success: Beggars’ labels are much better at selling full-length albums.

“We are four times as likely to convert a fan into an album buyer, rather than a track buyer. It makes a fan that we engage worth ten times as much to us. If you look at The Xx album, they’re selling three tracks for every album, a 1:3 ratio. The industry average is more like 1:10 or 1:12.”

The internet has improved things radically for independents, something borne out by the US success, with its more mature digital market.

“There’s fewer gatekeepers now. We don’t have to knock on a TV station’s door or a radio station’s door and it’s made us far more competitive. We released the MIA film yesterday and within minutes, it was everywhere. We didn’t have to go through a process to try and persuade someone to give it an exclusive. Our ability to get the message out without intermediaries is unencumbered,” he says.

“There’s a wide highway in front of us we can go speeding down, and it wasn’t there even two years ago. It means the majors are looking at a world where only 35 Gold Albums a year are certified compared to ten times that recently. But going above Gold in the US is not a problem for us.”

The internet has revived interest in music, thinks Mills, by encouraging people to experiment.

“It’s made so much more possible – a greater and deeper love of music. It’s re-stimulated my own involvement in music generally, rather than just my business. The links people send you allow you to go off down a path and discover something great.

“People who in their 30s a few years ago who may have stopped listening to new music, or were listening to iterations of music they heard in their late teens or early twenties, are now able to discover entirely new things. You’ve got new artists being discovered by 30, 40, 50 and 60 year olds. You’ll now have a group of friends talking about music and sending links. I think that comes from the integration of the laptop into both our working and our personal lives, the internet is so great at spreading the word.”

It’s also made production cheaper.

“The scale of our investment has changed. Recording is cheaper these days. Film making is cheaper. You can make the raw materials that we invest in miles more cheaply. The excesses of record deals largely disappeared, so we much more able to invest at a realistic level, rather than an insane level, which we sometimes had to do, and sometimes we still do. But we’re probably signing 20 new artists a year across the 4 labels, and investing significantly in all of them. We still spend 20-30 per cent of our turnover on artists. So although it’s at a level more sensible than it was, it’s still very significant, and it’s what we do.”

In recent years, the Beggars labels have had established acts knocking on their door, such as Radiohead. I wondered if this altered the investment pattern?

The artists we’ve done we thought were truly exceptional. We’ve no desire to be where Sanctuary were in their heyday. We’re all about getting a band to a stage where you can see it’s working.”

The reason for the independents singing a different tune to the majors, he suggests, is quite interesting.

“You read the industry is 60 per cent of the size it was ten years ago. But that 40 per cent that has gone is almost entirely the cream at the top. Records that sold two million now sell 500,000 – that’s where that’s gone. At the same time it’s easier to sell those slightly smaller levels.

“What’s called pejoratively ‘the new middle class’ is someone like, say, Calexico or Midlake, who can sell 100,000 plus records every time they put out a record; they can play to 3-4,000 people in 30 or 40 cities around the world. And they can make a pretty good living out of that, doing what they love doing, and can do it on their own terms, and that’s fantastic. We’ve got a bunch of bands like that, they’re not necessarily seeking stardom or riches. That’s incredibly healthy.”

But it’s still recorded music that drives the success, most of the time.

“99 per cent of what you hear about artists who can survive on their own playing live is crap. It’s recorded music that drives success in other areas. Something like Enter Shikari was clearly a contrary example, and Mumford and Sons are something of an exception too – they built a large live following before putting out records – but there are very few exceptions.”
Radical Reforms needed

Despite the sunny outlook, and his belief that its “probably bottomed out, the onslaught of free music is retreating”, Mills says the industry needs to reform itself radically, and lose its fear of commercial experiments. The future is in new services we haven’t seen yet – but it’s still too hard for these services to start selling music.

Some kind of statutory licensing would help the next Spotify or We7, he thinks. Not an open-to-all statutory, where punters could come and help themselves to all the world’s music for a fiver a month – but a B2B experiment – something to help intermediaries obtain licenses.

“We have to make licensing easier and faster, not necessarily cheaper, but easier. We’d like to see some kind of short-term government-endorsed trial structure that we could experiment with for 12 or 24 months, and see the impact of it.”

What would stop some joker turning up, who had no business plan, or maybe even no intention of ever paying for the licenses?

It would need some kind of government agency to approve licensees. But regulators already decide who can run a TV station, or call themselves a bank – there is a threshold. “You’d have a validation process so not everybody who turned up got one.”

Mills says the flat-fee collective licensing of ISPs, touted by some as a panacea with a zeal bordering on the religious, doesn’t have much industry support.

“Peter Jenner has been very vocal about that for a long time. He likes to characterise himself as a crazy eccentric. He’s a lovely guy but there isn’t a huge amount of support in the music industry for something that radical, and it’s not needed. A lot of markets are working quite well. Look at the growth of the download market, it’s pretty healthy. We have 5 to 10 per cent growth a year in digital albums, it’s heading to 30 per cent of the market now.

“Having a single way of consuming music for a fixed amount, that’s same for everyone around the world, is nuts I think. It’s not needed.”

It would also be bad for independent labels who cater to music lovers. By contrast, he’d welcome an offering of a fixed bundle of downloads, via an ISP.

“Unlimited all-you-can-eat offers would hurt us badly. Our market is dedicated high-spending music fans. If you’re Universal, sacrificing the few high-spending fans they have to get many more low-spending fans is probably a good bet. We’re on the other side of the mirror. Much as I would embrace it philosophically, I can’t embrace it practically. There has to be a limit or cap. It would hurt our artists.”

The industry also has to create a global database of repertoire, he says.

“We need a database to track and identify tracks properly and who the performers are. We should have had it ten years ago, it becomes a bigger task with each year. It’s a minefield of partially-attributed rights. When you license a song for a compilation in Australia, you don’t know where the money will end up.”

The Mandybill: was it necessary?

On to the subject of piracy then.

“We know some of our best purchasers are also pirates,” says Mills. “People consume our music in a mixture of ways. Some only pay for it, some pay for none of it, and some do both. We accept that, and don’t want to attack our own fans.

“You’re never going to get rid of free music, partly because we know you can’t, and any time you put a price on a copyable monopoly good, you’re going to get copied, but also because we’re in the business of circulating music for nothing. I can’t remember the last album we didn’t post one MP3 from. We’re using that in a controlled manner, as part of the process of making it available for sale. It’s managed, and it’s what the band wants to happen.”

The argument that P2P leads to purchases has a grain of truth to it, but it’s probably been over-emphasised:

“I think there’s certainly a percentage of file sharing usage, historically, which provided a discovery process that led to sales. There’s also a percentage which was a direct substitute for sales. Now, you’ve got the likes of Spotify and I think that it drives a coach and horses through that argument. You don’t need to file share to discover music now. If you want to discover things and listen to them you can do it legally, though I do think we should make tracks available for sale as soon as they’re being played on air.”

Other factors played their part in the decline of sales, he notes, not just P2P. “CD burning made the most immediate and obvious difference. I don’t believe swapping should remain outside copyright, we should enable private copying in return for a right to remuneration.”

Yet despite Mills’ long-running battles with majors, and a much more nuanced view of file sharing, he welcomed the passage of the Act.

“Your comment recently, that it was an astonishing result in the circumstances, was really right. The forces ranged against it happening were huge and well funded, and completely dwarfed the rights industries, not just the music industry. The government made it happen against the odds. There’s a long way to go, and a lot of it is still undecided, but the principle is now there, and the principle as now supported by Parliament – which is that creators have to be rewarded for their work. That has to be valuable.

“It was not perfect but it had to be done.

“I find it quite hard to understand the right to free music, or the right to an internet connection. If you don’t pay your water bill, you get cut off.

“The BPI doesn’t represent the whole industry. It represents the major record labels. I think that the creation of UK Music has helped – it’s given the industry a more moderate collective voice. The big record companies are hardliners, and they have every right to decide how they want to play the game, but the independents are bit different.

“That said, I think the BPI is more open to debate than it used to be.

“It’s not in anyone’s interests for the majors to do badly; they become defensive. We’re at the mercy of the market leaders, they frame the market, and we have to operate within it.”

Mills stresses that it’s now up to the industry to get better at selling music, in all kinds of ways:

“I’m still astounded that you need a credit card for iTunes, something beyond the reach of most teenagers, while you can’t buy music by text message.

“The last ten years shows the record industry is not able to provide its own solutions – you need an iTunes to do it.” He says the industry has to recognise the skills of retailers again. It’s never been very good at introducing these things, “perhaps understandably, because it’s not their business … majors tend to be about control”.

But he thinks even though music is digital, independent music stores will come back again, as places to discover music again.

It’s unusual to hear an optimistic view of selling music, but Beggars and the leading British Independents point the way to a revival.

Music House — HQ for a number of the UK music industry’s trade groups — was in a lock-down situation this lunchtime as an Open Rights Group Flash Mob descended, protesting against the Digital Economy Bill.

As many as seven protesters could be seen outside the Berners Street offices, according to staff who phoned us from beneath their desks. This is slightly down on the nine who had pledged their support on Facebook.

Twitter was a hive of activity, too. We’d counted two Tweets on the protest in an hour. Photographic evidence below suggests that after an hour, the number had swelled to almost double figures.

In a simultaneous gesture, over at the BPI’s HQ, three protesters handed in a “disconnection notice” to chief executive Geoff Taylor, who apparently wasn’t in.

Music House, the focus of the main protest, is home to the PRS For Music performing rights society, the Music Publishers Association, the Musicians Union, the Music Managers Forum, the British Academy of Composers Songwriters and Authors, and umbrella trade group UK Music.

The ORG’s FlashMob was trailed as a “Stop Disconnection April Fools Flashmob” with the question “Are we being made fools of?”

But with a turnout of less than a dozen, that’s a question that answers itself, really.

Last week, a much-trumpeted demo in London at Parliament saw around 100 activists leave their garden sheds — although we spotted many journalists and even music business spies in the huddle.

The point is that numbers don’t always matter, though, if the organisers are media savvy. A few protestors can go a long way, if a group’s core communication skills are imaginative enough.

Alas, the Open Rights Group seems completely bereft of these. It timed the event for Budget Day, so there was no coverage in the papers the next day. ORG had made 150 blank placards, and taped up their mouths. Passers by were perplexed: they had no idea what it was about.

High concept, low impact.

More fail is due next week: the ORG has raised some cash to run anti-Mandybill adverts — but wants them to go out on Tuesday. That’s the date of the announcement of the General Election.

Anyone want to guess the media impact that will have?

Maybe you if you think the Mandybill is rubbish, you should consider lending your weight to someone competent: ISPA, for example. Or you could start your own digital rights campaign.

The ORG can’t seem to organise a pissup in a brewery.

The work was led by Patrice Geffon, an economist at Paris Dauphine University, for consultants Tera. It uses the WIPO definition of creative industries, including software, databases and printing as core jobs, and support and consultancy for example as non core jobs. It’s likely to strengthen calls for legal measures to deter downloaders, since picking up unlicensed music, movies and software is currently largely pain and risk free.

“Stemming the rising tide of digital piracy should be at the top of the agenda of policy makers,” the authors conclude.

But it’s not going to be without controversy. Debate over such studies focuses on the net substitution effect – the degree to which a digital download substitutes for a genuine purchase, minus any positive effect of spending on a legitimate good which might not otherwise have taken place. This ratio varies significantly across various types of goods.

For digital music, most academic studies put the figure at 1:10: for every ten CD downloads, the consumer typically forgoes one legitimate purchase. This is significantly lower than the 1:1 ratio some music industry figures insist upon. But still it’s a net negative effect.

One well known academic study by Oberholzer-Gee and Strumpf (2007) calculated a net positive effect, but this is an outlier, and despite its popularity with downloaders (it makes it look like a “victimless crime”) has been contradicted by others. There’s a deeper and more subtle problem with estimates of losses of substitution – I’ll come to that in a moment.

The UK bears the brunt of unlicensed downloads, reckon the academics, because of its high proportion of jobs in creative industries. Tera estimates that 6.2 per cent of UK jobs are in core creative sectors, with a further 3.4 per cent in interdependent and support sectors, such as software consulting for example. The figure includes a slice of telecoms and retail, and comes to 2.7 million workers. The value of the sectors combined amounts to €175bn annually.

The study calculates future trends by multiplying the current substitution estimate for various goods by the future growth rate for IP traffic across the EU.

For music, the academics suggest that “the decline in recorded music sales across the EU is too dramatic to imply a simple coincidence” – a 36 per cent in gross physical sales from 2004 to 2008 was barely compensated by the rise in licensed digital sales, leading to a 26 per cent decline in the retail value of music.

Estimating substitutions in software is harder, and the team use a 50 per cent ratio. Most piracy, they acknowledge, is still “friends and family” sharing an installation CD. A lower amount is 34 per cent is via unlicensed P2P downloads. But is this fair?

One counter example may be the widespread home use of Adobe Photoshop, one of the most popular Bittorrent downloads, and a $500 purchase. If Photoshop wasn’t so easily available, many users may use a cheaper photo editing program. Is it therefore fair to say $500 has been lost?

I said earlier that there’s a bigger, and more subtle problem than squabbling over substitution ratios; it’s that substitution studies tend to be self-fulfilling. They don’t estimate how much a business sector could grow if it engaged with new technologies. The DVD market is a classic example. More recently, games developers have fought an onslaught of piracy by focusing more on social networked games, and closed platforms.

While only a hardcore freetard would dispute that unlicensed downloads hurt (and there are plenty of people for whom this is politics-as-a-hobby) we’re not counting what could be gained. When a business sector commissions one substitution study after another, it’s hard to conclude that its problem is anything except substitution

Two thirds of people don’t download unlicensed music at all, it’s a minority pursuit. But that “honest” mid-market is not only losing the habit of buying CDs, it hasn’t acquired the habit of buying digital songs either. NPD found that between 2007 and 2009, about 24 million Americans stopped paying for music in any form.

The number paying for digital song downloads fell year on year in 2009, the analysts estimate, by 600,000 to 34.6 million. None of this is particularly surprising – and gives impetus to the call that the music business start treating the public as customers again.

But what really put the cat amongst the pigeons was a comparison between free streaming services such as Spotify and on-demand radio services, such as Pandora. Spotify is the major labels’ darling: they invested in it, hold potentially lucrative shareholdings, and gave it preferential royalty rates to get it off the ground. Yet when people joined a streaming service it led to a 13 per cent decrease in paid downloads. Interestingly, NPD found that paid downloads by Pandora listeners increased 41 per cent. Why the difference?

“More listening just means more listening and tends to lead to less purchasing,” reckoned NPD’s Ross Crupnick.

Spotify wasn’t mentioned by name by Crupnick, it hasn’t yet launched in the US, and NPD only looked at US consumers and services. It should also be noted that Spotify has a “paid” option, as well as a link to purchase downloads. Yet, as we revealed last year, the conversion rate from free to paid was a third of what Spotify was boasting.

One major label refusenik is showbiz veteran Ed Bronfman, who runs Warner Music: he’s wary of cannibalisation and suspicious of rival Universal constantly talking up its investment in Spotify. NPD’s research has given him the ammunition he’s been looking for.

The argument for free streaming services is that they bring people in from pirate territory, a more subtle form of “behaviour change” than hitting them over the head with a hammer. This is the case put by We7, which targets a young demographic. But for hardcore music fans, who were pretty happy buying CDs in big numbers, Spotify gives them every justification for spending money on something other than music. Maybe the roof needs fixing.

“The technology was sort of there. That software was there, and it was good – I wouldn’t do it that differently now. The basic model was just as appropriate then as it is now.”

– Chris Castle.

Read more at The Register

An answer to the music industry’s woes slipped into the IFPI Annual Report last week, but its significance went unnoticed. Before I get to it, though, here’s a poser.

“We screw the struggling artist, and pay the suit,” Nick Carr mused recently. Carr was examining a contradiction: information has never been less free, it’s never had as much as much value attached to it. Once you add up your Sky Sub, mobile broadband bill, and the many other information services, we pay a fortune for information, most of which is entertainment. He continued:

“It’s a strange world we live in. We begrudge the folks who actually create the stuff we enjoy reading, listening to, and watching a few pennies for their labour, and yet at the very same time we casually throw hundreds of hard-earned bucks at the saps who run the stupid networks through which the stuff is delivered,” he wrote.

elsewhere and you’ll find people saying they make a point of principle not to pay for entertainment digitally, because entertainment companies are wicked. The principle is that two wrongs make a right, which makes withholding the payment justified. Maybe even morally superior to paying.

But as Nick points out, we all actually pay a fortune to suits – they’re just different suits. They’re suits at large telcos, advertising middlemen (eg, BT) and service companies. The answer seems simple.

If you’re a copyright business, then to appease the copyright militants, you must pretend that you’re not. You must say you’re in plumbing, or infrastructure. Or anything, actually. For the world’s biggest record company, Vivendi, this will be a case of returning to one’s roots. Universal’s parent Vivendi began life as Paris’s first monopoly water supplier – it only changed its name from CGE and spun off the water and sewage businesses in 2000. And look, we can mention sewage and The X Factor in the same sentence without berating the obvious.

But I digress.

If the music business has suits, it must be the IFPI, and last week the international trade body for sound recordings published its annual global music survey. IFPI pointed to $4.2bn of new digital business since 2004, but of sales down 30 per cent overall. In some markets, sound recordings are truly in the tank. Spain started very late down the digital route, and digital sales there are negligible – overall sales have crashed to a third of what they were in 2001. In Brazil, which has been nurtured by the Berkman crowd as a laboratory for its post-copyright cybernetic utopia, full price sales of CDs by new artists are down by 80 per cent. I bet those artists are sending thank you emails to Messrs Lessig, Zittrain and Nesson as you read this. They’ve liberated them from the chore of being paid!

I have no doubt that most people lie in the middle ground between enforcement against fill-yer-boots infringement, and introducing new services which make enforcing casual infringement unnecessary. That’s a great big blurry middle ground, and it means fulfilling the anything anytime but-at-a-price pledge. But the IFPI emphasis is still heavily on enforcement. IFPI puts the blame for the 30 per cent fall in revenue firmly on wholesale casual infringement. IFPI notes that only 8 per cent of internet users frequently buy music. That’s a shocking indictment of the music business: it’s lost a lot of regular customers.

Worse was to follow when examining some of the comments by Rob Wells, CGE’s head of water transportation facilities management (as we might have to call him), but better known today as Universal’s head of digital. Two of Rob’s comments confirmed that doing business digitally is a bit of an oxymoron.

"We’re closer to ‘the utopia’ where a million people pay €1 rather than ten thousand paying €10,", he said. I’m not sure why that’s a utopia, it sounds more like a stealth tax: and when a million people suddenly realise they’re losing a pound by stealth, then that’s a million people with an added resentment against music. It’s an example of customer-phobia – a prejudice against customers.

Even more worrying were Rob’s bullish comments about Spotify, which is doing so well it, er… can’t afford any more customers. Rob called it "sustainable", defining sustainable as money going to Universal. A sustainable business is one in which revenues exceed outgoings, and using this more conventional definition, it’s evident to world+dog that Spotify is anything but sustainable. (UMG has an investment in Spotify.)

Alongside Spotify, the IFPI report features a sequence of losers: there’s Nokia’s Tero boasting about Comes With Music, some ropey scheme in Denmark which (like Spotify) gives people a reason not to buy music (to become ex-punters), and so on. It’s really a sorry sight. But salted away on page 10 is a graph showing how various creative ‘industries’ cope with digital. The games business sees 32 per cent of its revenue from digital sales.

Now piracy is rampant in games, so it shouldn’t be doing quite so well. What has the games business tried that the music business hasn’t? Well, it’s tried enforcement, and it’s tried DRM. It’s got (some) closed platforms, which must help a bit. Not so many people complained when the Xbox 360 door was closed recently: modders accepted it and got on with gaming. But none of these individual factors explains why it’s a sector that’s expanding, not contracting.

What games developers have done is create gaming "experiences" that are shared – that wouldn’t be possible without the network connection. Participants are paying to share their gaming time with a particular service. There are music services where you can sort of share, but it’s not much fun. With Spotify, Omnifone, it’s more theoretical than practical – and you certainly can’t keep the music you share. That’s really lousy. By refusing to monetize sharing, the music business has failed to give people a positive reason to pay for music.

The Lords this week discussed new compensation for copyright holders this week – including a voluntary ‘Hail Mary fine’ payable by file sharers, instead of suspension – but nobody noticed.

It was late on Wednesday night, and the Lords were six hours into their fourth session this month discussing the Digital Economy bill. Lord Lucas moved Amendment 156, giving an infringer a choice:

[It] requires the payment of an additional fee by the subscriber for the maintenance of unrestricted internet access, which is to be remitted to a licensing body established under the Copyright, Designs and Patents Act 1988.

Lucas said he anticipated a more progressive licensing regime, similar to the performance right on compositions, which is non-exclusive:

"No one stops a person performing, but if they do perform, they have to pay a fee… Given the fact that someone is having a technical obligation imposed on them, it seems that they might choose to pay a fee to such an agency, which would go to relevant copyright holders. Terminating, suspending or limiting someone’s internet access just does someone harm."

Read more at The Register…

Of course, out of the ten subject areas, the one labelled ‘online copyright infringement’ has attracted the most attention from their Lordships. Lord Mandelson made a number of modifications acknowledging these concerns this week – including some substantial changes to the processes. It’s the procedure rather than the principle that is vexing the Lords.

Nobody – not even those who support the Bill – is entirely happy with the procedures. Yet there is no great grassroots outpouring of opposition. While 500,000 people may have paid 79p in one week to register a protest vote for the Christmas Number One single, fewer than 500 have signed up to the Open Rights Group’s “Message to Mandelson” campaign – and some of those are supportive. We spotted one ‘Go Mandy’ from a major record label staffer and another urging his Lordship to bash the ‘freetards’.

Read more at The Register

The amendments would grant copyright holders injunctions against websites and service providers similar to the US DMCA act – but with no ’safe harbour’ provision to verify whether the claim is merited, according to documents seen by The Register.

The BPI amendments would introduce an entirely new Section 97B of the 1988 Copyright Design and Patent Act, and would be granted when an ISP had refused to take down infringing material. The Secretary of State would have the ability to review and amend the provision "by allowing the injunctive relief available to the Court to evolve and to keep pace with technology".

As it stands in draft form, the Digital Britain bill would compel rightsholders to identify and notify infringers, in a "graduated" response, ultimately ending in temporary suspension of Internet access. The revised Section 97B, if passed, would dramatically switch the burden from rights holder to publisher.

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