Pandemic: Livestreaming is Silicon Valley’s Great Step Forward to the Venue DNR

Livestreaming was intended to be temporary.  It was a bridge between a pre and post COVID reality.  But it’s not.  The biggest of Big Tech companies intend it to be permanent and they mean to control it.  And you have to believe that a very high percentage of venues may not be coming back.

Live music venues are closing permanently at a rapid clip.  Cities like Austin and festivals like SXSW and ACL Fest are changed forever.  We know that the real estate developers are licking their chops at the idea of dumping those live music venues and onboarding Uber Eats, Google, Facebook or something really important.  (See “I Don’t Need Another Email Whining About COVID“)  But they are not the only ones who have no intention of helping live music recover in a venue-free future.

Facebook/Instagram is probably leading the way on this Great Step Forward, followed closely by TikTok and of course YouTube.  Facebook in particular is adopting policies to limit DJ-type listening parties on the platform.  (This very well may backfire.)  The elephant in the room is that Facebook seems to have gotten religion on music licensing after a 17 years growth binge of shredding artist rights.  While asserting “You are responsible for the content you post” Facebook also tells us “Unauthorized content may be removed.”  Why not track it and monetize it?  Because they can’t be bothered.  It does seem that Facebook intents to permit artist-branded live-streaming events which is nice of them, but it also seems like the new policy clears the way for Facebook to monetize live streaming events and take their cut.

It has become obvious that whenever audiences decide to come out of the lock down, there may not be any venues for them to go to.  (Or restaurants for that matter.)  As I have said almost from the beginning of the pandemic, Austin is about to become another college town with a Google/Facebook campus and the City government itself is just thrilled about that expanded tax base.  Cynical?  Not really.  Spend a little time getting condescended to by the City of Austin and you will get the idea that they would just as soon that live music was in the rear view mirror.  If that happens to Austin, which had styled itself as “The Live Music Capital of the World” to the great gnashing of teeth by almost every other sector starting with tech, it will happen in a host of cities around the world.

Of course Big Tech cannot be seen to be leading the charge to live music oblivion.  That would be quite impolitic (if not actionable).  But the vibe from governments in the erstwhile “music cities” like Austin, Denver, Seattle,  and even San Francisco is similar to the efforts of Spotify, Facebook, Google & Co. to support the venues that create the value and the fan base that drives traffic to the live streams they think are the future.  These politicians and Big Tech companies want to be seen to be helping, but not too much.  They don’t want to help so much that most of the venues might actually recover.

Evidence?  Talk to anyone at Facebook who has contact with artists and labels.  (And if you ever wondered who doesn’t click “Skip Ads”, it’s them.)

Facebook certainly is building its “Stars” tip jar model that is in closed beta but will be rolled out soon.   That’s partly because Facebook views live streaming as a permanent part of the data mining ecosystem that Facebook is uniquely positioned to control.  Facebook Stars will prove to be a key component of the venue free future after the COVID and Facebook duo deliver the venue DNR.  And in case you didn’t quite get how Facebook values music, a Star is worth 1¢.  That’s right–one penny.  (Which will make it easier to switch Stars scrip to Facebook Bucks aka Libra.)

Don’t forget, Tencent led the way on this “gifting” concept.  Tencent allows users (all users, subscription or ad-supported service) to make virtual gifts in the form of micropayments directly to artists they love.  (The feature is actually broader than cash and applies to all content creators, but let’s stay with socially-driven micropayments to artists or songwriters.)

Tencent, of course, makes serious bank on these system-wide micropayments.  As Jim Cramer noted in “Mad Money” :
“Tencent Music is a major part of the micropayment ecosystem because they let you give virtual gifts,” Cramer said. “If you want to tip your favorite blogger with a song, you do it through Tencent Music. In the latest quarter we have numbers for, 9.5 million users spent money on virtual gifts, and these purchases accounted for more than 70 percent of Tencent Music’s revenue.”
And that’s real money.  Tencent actually made this into a selling point in their IPO prospectus:
We are pioneering the way people enjoy online music and music-centric social entertainment services. We have demonstrated that users will pay for personalized, engaging and interactive music experiences. Just as we value our users, we also respect those who create music. This is why we champion copyright protection-because unless content creators are rewarded for their creative work, there won’t be a sustainable music entertainment industry in the long run. Our scale, technology and commitment to copyright protection make us a partner of choice for artists and content owners.

So in case you were wondering why we haven’t seen Big Tech really step up to contributing money to support venues in line with the value of the data they scrape from all the fans driven to live streaming, it’s because they don’t want live music venues to be sustainable.  They’ve been trying to break down live music for a decade and the pandemic presented the disruption opportunity for them to actually do it.

Facebook and their counterparts are getting all kinds of free content (and the corollary free data) from desperate bands in the latest example of pandemic price gouging.  Those desperate artists are now forced to consider the option of the Data Lords coin of the realm–advertising and brand integration.  The effect may well be that the only artists who survive the venue DNR are those willing to take the King’s shilling.  Welcome to the company store.

The Data Lords have finally found a way–fear of death–to get fans to substitute away from live music.  There’s nothing quite as disruptive as the threat of dying.  If you ever thought that the live experience was the last stronghold of authenticity against the onslaught of Silicon Valley disruption, you probably never thought that fear of mortality would drive the nail in the coffin of the backstage pass or burn the velvet rope.  Stars in every pot and a drone-delivered Big Box on every doorstep.

But you’d be wrong.  As we slip into the twilight days of live music and festivals, Facebook stands ready with their venue DNR orders.  And live-streaming will be driven by desperation to be the Data Lords’ venue free meal ticket.

Why is this bad?  Because if you talk to any of the label relations types at Facebook, Google or TikTok it is a name droppers paradise.  They don’t really understand how to do the careful spadework that is necessary to break an artist to have an actual career.  They have major artists handed to them after that work has already been done, and done long ago in many cases.  There may be the odd “influencer” who gets a movie or a commercial, but the jury is out on whether these platforms can build careers.  (Or whether there will be many movies for influencers to get a role in.)

Not so of venues.  We know what they do and they’ve been doing it for a long, long time.  But we have to face the harsh reality that unless something changes very quickly, the Data Lords may have just piggybacked the massive income transfer of their DMCA and 230 safe harbors into another takeover of our business.  And they’ll do it in a way that could leave the entire live music economy and workers flopping like fish on a beach.

Pandemic: Abacus Shines a Light on the COVID Gap with New Poll of Musician Attitudes on Touring

It could be called the revenge of the middleman.  In one of the greatest wealth transfers of all time, the value of recorded music has been largely transferred to the new middlemen at companies like Spotify, YouTube, Apple and Amazon.  Record companies with large market shares are doing well with streaming, but those returns are also below where the market should be.

The running dogs of Big Tech have for years told artists that what the solution to their problem with DMCA whack-a-mole was to get out on the road and sell those t-shirts.  The artists didn’t have much choice–we saw Levon Helm essentially die on the bandstand because he couldn’t stop touring.

The forced choice made by artists under DMCA duress allowed the “value gap” to spread into what could be called the “COVID Gap.”  The sudden constriction of touring income to zero or near zero acts like a reality superspreader—the streaming deal is both grotesquely unfair and supremely enlightening.

We know why it’s unfair: Fans pay for music they don’t listen to.  But its enlightening because the tale of the tape demonstrates that recorded music does have tremendous value and that value is being captured by the middlemen, especially Spotify and more particularly Spotify’s President for Life Daniel Ek’s personal fortune.  There’s no rational reason why Spotify should have a market cap that is 300% of the Warner Music market cap.

SPOT Comparison Covid

Canadian polling company Abacus has completed a study that everyone in live music should read very carefully.  The poll tells us a lot about artist attitudes toward the recovery of live music and it is the only one of its kind that I know of.  Why we don’t have something similar in the U.S. or in the U.K. is a mystery, but I doubt that it would tell you anything different.

It highlights the main factor that seems to get overlooked a lot—great that people want to open up venues, great that there is some bit of money being thrown at venues (although nowhere near enough), but even if the venues manage to survive and even if they manage to attract fans to come back, who exactly do people think they are going to get to perform?

Artists are presented with a patchwork quilt of rules and regulations that show a rather hair raising maze to drive through (because nobody’s going to be flying).  Artists have families just like anyone else, so before you even get to the economics, you have to protect the children.

I strongly recommend that everyone read carefully the Crowded Out study and think hard about what it means.  As an Austinite, I can tell you that I fully expect that Big Tech will be granted its fondest wish–Austin will become just another college town with a Google campus and they can finally jettison this “Live Music Capitol of the World” moniker.

If you don’t want that to happen to New Orleans, Nashville, Memphis and Atlanta, or a host of other cities, then you need to have some answers to the Crowded Out research.

You also need to have the fortitude to renegotiate those streaming deals to eliminate both the Value Gap and the COVID Gap.

Pandemic: The Local Culture Card Solution Lets Public and Private Sectors Cooperate to Save Our Local Musicians and Retailers

The Local Culture Card would be a limited purpose debit card that permits the cardholder to purchase goods or services from a designated group of “local arts vendors” who would be artists, retailers or nonprofit arts organizations operating in the locality of the user.  It would be like a targeted gift card sponsored by state or local government, local corporations, radio or television stations.

Local culture cards would be distributed free of charge to local residents charged up with a minimum payment that must be spent within 30 days of activation.  Once funds are used, the issuer or sponsor could elect to replenish the funds on the same 30 day basis.

Alternatively, the local culture card could be sold like a gift card on the same terms.

The purpose of the Local Culture Card would be to empower consumers with purchasing power to directly inject cash into a local artist community—and quickly.  This would help everyone in the supply chain from vinyl manufacturers to one-stops to local record stores to the artists themselves and their songwriters.

Those local arts vendors would sign up to accept the Local Culture Card as payment for goods or services.  The Local Culture Card could not be used at Amazon, Spotify,  Target, Best Buy, Apple or other big box retailers because the benefit would be too diffused and would not retain local funds in local communities.  The card could instead be used for purchases at a local brick and mortar store’s online operation or to make a Venmo contribution for a live stream performance for a local artist (or purchase directly from the artist’s Bandcamp account).

The Local Culture Card would initially be charged with a minimum amount of credit or could be purchased like a gift card.  It could be branded by locality, state or region and could also be branded as a sponsored card by either state or local government or other private sector sponsor.  It could be included or branded as Record Store Day collateral or similar commercial efforts as it will be effective in both commercial and noncommercial applications.

For example, an Austin Culture Card could be sponsored by the Austin Music Office or the City of Austin Economic Development Department.   City funds would be used to charge up the card with a minimum amount of spending power, say $50.

Artists like Guy Forsyth or Dave Madden could sign up to accept payment through a webpage for their direct online sales or contributions through Venmo or Paypal for live streaming events.  Local retailers like Waterloo Records could sign up to accept the Austin Culture Card for purchases at their online store of recordings by any artist.  Ballet Austin could sign up so that patrons could use the Austin Culture Card to donate to that organization.  Alternatively, Austin Creative Alliance could sign up to accept donations for any of its member organizations.

The same process could be repeated by the Texas Music Office for artists statewide through the TMO’s “Music Friendly City” operation, or by the Small Business Administration for regional or national artists, retailers or organizations.

Alternatively Local Culture Cards could be sponsored by corporations and distributed to their customers or radio stations and distributed to their listeners.  Indie labels could sponsor cards as a tie in with local record stores that carry the label’s recordings.

The only other requirement for using the Local Culture Card would be that the money had to be spent within 30 days of issuance or it would expire.   Ideally a bank issuer would agree to provide the card as either a physical or virtual credit card for a zero transaction fee.  Remember–the Local Culture Card is not scrip, it’s cold cash placed directly into the hands of artists, retailers and arts organizations  by their fans.

While the examples I’ve given are from Austin, there is nothing unique about Austin.  The Local Culture Card would be relevant for any city with a cultural community from New York to New Orleans–that the fans want to retain during and after the pandemic.

 

Pandemic: Should Government Ordered Shut Downs Be Government Backed “Business Interruptions”?

There will, no doubt, be several rounds of body blows to the U.S. economy as the result of an unprecedented shut down of business activity–ordered by the government, be it federal, state or local.  This will send insurance agents and underwriters scurrying to their policies to see if there’s a way to deny coverage for business interruption.  Both government and the insurers are acting rationally–one is trying to prevent the spread of the virus, the other trying to avoid massive claims.  But why is this government-ordered shut down not a “business interruption”?  And why shouldn’t the taxpayer in the government unit ordering the shut down also guarantee business interruption coverage payments?

Small business, including restaurants, festivals and live music venues are caught in the middle in a sudden contraction that they no doubt thought they were insured for under overlapping policies that included losses from business interruption.  We are already seeing small businesses–which are something like 90% of all jobs–lay off employees.  This creates the kind of demand side collapse that leads to a true depression and unemployment at 30%.

Beware the Ides of March

So far all of this has happened in March.  April is just around the corner and on April 1, rent or mortgages are due.  When businesses are ordered to shut down, they will have to start depleting their cash reserves or drawing down on credit lines.  When employees are laid off, they will do the same.  When April 1 comes, both employers and employees will need to make some hard choices, and thus the cascading effects of the denial of coverage really begin to accelerate.  It is only a matter of time before they will fail to pay their credit cards or loans or rent (some states are passing emergency rules that prohibit eviction for the duration), and when that happens on this scale it can have catastrophic  effects.

Because guess what?  All that debt is still being sold in a very similar way to the commoditization that lead to the 2008 financial crisis.  If your business loan or mortgage was with the local bank and you couldn’t make your payments, you could go sit with your banker and figure it out.  Your banker wants to keep you in business, and you want to keep being able to borrow from your banker.

But when your loan is sold as part of a financial instrument, there’s no one to talk to and you either make your payments or the loan defaults.  Green light or red light.  No amber.

The challenge then today, and I do mean today, is to get cash into the bank accounts of small business so they can keep at least some of their staff and pay their rent.  Ideally, this needs to be done by April 1.

No Live Music Capitol With No Live Music

Assuming of course you want them to reopen at some point in the not too distant future.  As I am regrettably fond of saying to people in Austin, it’s kind of hard to be the Live Music Capitol of the World when there’s no live music.  And without venues, there’s no live music, and without live music there are far fewer bars, restaurants, condos, Uber, or increasing property values, not to mention far fewer hotels, airline tickets and rental cars.  So all of those intricate economic relationships come down to musicians, songwriters and venues.  (See the Austin Music Census.)

You have to be pretty naive to think that you can just put all that on hold and then weeks or months later it will just snap back to where it was before the government shut it down.  So do we agree that the situation is beyond dire?  It is life changing.  Perhaps for all the right reasons, but that doesn’t make it any less life changing.

Austin, San Francisco, New Orleans, Memphis, lots and lots of cities outside the “centers” need to solve this problem right away.  Otherwise, Austin will just be another college town with a Google campus.  I promise.

Solving for Business Interruption Coverage

Solving this problem will require different tools for different reasons, but on the small business side, one way to do it would be for the federal government to deem the shutdowns ordered by various levels of government to be a business interruption covered by business interruption insurance and to guarantee payments under those policies.  There is already a billing relationship between those carriers and their insureds and the transaction costs of handling it this way will be far less than the government essentially re-creating the exact same financial structure.

Along the way, thought can be given to how to solve for those who are ordered to shut down who do not have business interruption coverage.  Some strings could be put on the use of funds, so that the payments must be used to pay rent, suppliers and employees.   Insurers should be prevented from price gouging and should be required to cap their administrative costs.  This would not be a loan, it would be a direct payment of an insurance casualty benefit.  We may need to look into special bond offerings to finance these payments.  (For comparison, the World Bank issues a parametric catastrophe bond that covers pandemic risks as part of its Pandemic Emergency Financing Facility.)

Making America Creditworthy Again

Alongside this type of bold move would be a requirement that any defaults on credit following a government ordered shutdown cannot be reported to the credit reporting agencies or taken into account for a borrower’s creditworthiness in the future.  That step needs to be covered, too, because that’s just exactly the kind of kafka-esque shenanigans that these people would come up with if left to their own devices.

I want to encourage everyone to read the op-ed by Ben Bernanke and Janet Yellin in the Financial Times. You may have to register to read the post, but it’s a vitally important step to understanding the real issues with the current crisis.  Here’s the key paragraph from the FT post:

If critical economic relationships are disrupted by months of low activity, the economy may take a very long time to recover. Otherwise healthy businesses might have to shut down due to several months of low revenues. Once they have declared bankruptcy, re-establishing credit and returning to normal operations may not be easy. If a financially strapped firm lays off — or declines to hire — workers, it will lose the experienced employees needed to resume normal business. Or a family temporarily without income might default on its mortgage, losing its home.

To avoid permanent damage from the virus-induced downturn, it is important to ensure that credit is available for otherwise sound borrowers who face a temporary period of low income or revenues.

I’d add that to avoid permanent damage from the government-ordered downturn, it is also important for the government to ensure that cash is available before April 1 for business interruption losses that would otherwise be denied because of unseen underwriters denying coverage.

 

Pandemic: Virtual Venues, Old School Collections and Audits Become a Practical Reality

As the effects of coronavirus quarantine efforts keep expanding, artists who were able to survive into the second decade of the age of piracy are now watching their live show revenue dry up, too.  From festivals to major tours, club shows, everything is cancelled or cancelling, sometimes months out.  Show guarantees are evaporating.  Even if there were a vaccine and a cure tomorrow, it will take months for the industry to reorient itself and rebook cancelled shows–assuming the venues survive.  Many will not.  (If you doubt this is happening because it hasn’t happened to you–yet–see David Crosby’s sobering interview with GQ.)

And that’s the crux of it.  We need to keep the artists alive and we also need to keep the venues alive, including the bars and restaurants that provide the infrastructure for “entertainment districts”.  I’m working on the “Keep Austin Weird Pledge” that is focused on the venues, but this post is going to focus solely on the artists.

Artists facing a sudden constriction in their base line revenue really have to bust a move right about now.  I think you need to plan for the worst and hope you are pleasantly surprised.  But realize that you may also be unpleasantly surprised.  Like the First Rule of Electronics Repair, you have to make sure that you are collecting what you are owed and perhaps consider auditing your royalties, particularly for indie labels and publishers.  Signing up for collections, reviewing black box and the more complex virtual venue set ups are all things you can do from isolation as long as you have a phone and an Internet connection.

Remember–just like you can’t pay your rent with exposure or data, social media alone won’t save you.  It’s time to start monetizing.  We are leaving the age of promotion and entering the age of sales.

Virtual Venues

Virtual venues have been a growing sector for years now, often as an afterthought for artists who are accustomed to higher end touring.   No longer.  A virtual venue relationship is not a “nice to have” anymore.  Getting paid is not something to be sneered at as a “paywall”, an expression invented by the ad supported, but this requires some thought.

The grand daddy of virtual venues is Stageit run by Evan Lowenstein and backed by partners like IBM.  (I’ve been a fan of Stageit for years, starting with a 2011 post.)  There are a handful of others as well as listed in a good checklist generously assembled by Cherie Hu that is well worth reading and following as she updates it.

Not only will virtual venues exist as part of an artist’s commercial repertoire, they may actually come to be part of reality for brick and mortar venues, too, a la the old Digital Club Network.  If a venue has a strong brand, just like an artist with an active fan base, there may be value in considering an installed simulcasting package.

Make Sure You Are Signed Up With Collecting Societies

The first thing that an artist should do when concerned about cash flow is make sure that  you have tied down the obvious–if you are a songwriter, make sure your PRO  knows where to find you and that they are not holding any money for you (this would be ASCAP, BMI, GMR, SESAC).  On the mechanical side, check in with HFA, Audiam, CDBaby for the same reason.

For artists and label owners, be sure you have joined SoundExchange.  To my knowledge, SoundExchange is the only PRO that pays on a monthly basis.  I always urge artists and labels to join SoundExchange as a member (as opposed to simply registering) as you can tap additional income streams.

SoundExchange also has a look up portal so you can see if they are holding money for you, which is a box you need to check.

You should also check and make sure that the union intellectual property funds are not holding money for  you or can’t find you.  If you are a union member, check with your local to see if there are any residuals floating around that haven’t found their way to you yet.

Although it’s not a collecting society, you should also check the Spotify class action claiming portal at Song Claims (powered by Crunch Digital).

If you were signed to a record company or music publisher at some point in the past, even if you are currently signed, make sure they know where to find you.  They may have money for you.  If you have your own distribution agreements, then take a look at those, too.

You can also look at companies like Lyric Financial that may give you an advance on more substantial royalty earnings, and companies like AdRev can go out to collect YouTube monies for you.

Audits

While not an immediate source of funds, it may be worth it to consider a “royalty compliance examination” or “audit”, particularly if you are a label or publisher with audit rights against digital distributors.  Audits can be conducted largely remotely, and sometimes even a desktop audit can shake loose some monies based on undeniable mistakes.  Consult your business manager or accountant to look into this as desktop audits can be conducted remotely.