[MUSIC] Current trends are moving towards internet based listening. There are a lot of different kinds of online and streaming music listening services, webcasts, digital radio, and in nearly all cases there is a social media component where people can share information about what they've been listening to. There's also an ability to gather a lot of data about people's listening habits and other details, I guess demographic details about where they are and who they are and various companies can share this information. I would like for you to take a second and think about how much of your listening is on the grid, or trackable or traceable. And how much of it is off the grid. Passive listening refers to environments where listeners do not choose the specific songs they listen to and that is an important distinction in terms of the way the business is conducted in different online streaming services. With streaming radio stations you have online versions of terrestrial radio stations. There are satellite radio stations like Sirius xm, I tunes radio, Pandora, and so forth. And in all of these cases you're listening to a station and maybe you've said what style of music you want to listen to but you're not picking the individual songs or bands that you're listening to. And because of this those services can operate under a blanket license. That means that companies like Pandora do not have to approach individual record labels and publishers for permissions to play specific songs. Music fans love this recommendation service, because the companies are able to learn about your taste and predict what you like, and it's a wonderful way to discover new music that you might not have heard otherwise. These companies however have also come under fire from musicians for various reasons, low royalty payments which are not equal among artists. Streaming services make deals with record labels in exchange for favors, this is perfectly legal but, for example, Pandora recommends artists who are affiliated with a company called Merlin. Which is a consortium of independent record labels more often then they recommend artists that are not affiliated with Merlin. This is because Merlin signed a deal with Pandora agreeing to lower royalty rates for their musicians in exchange for increased air play or recommendations on the part of Pandora. Once again, this is perfectly legal. But musicians are not required to be consulted when these deals agreeing to lower royalty rates are made. So they are typically not consulted when those deals are made. On demand streaming operates under a different set of rules because it is considered active listening. Listeners choose the songs and so on demand services have to make deals with individual labels and publishers in order to license specific songs, specific music. Royalty rates, again, vary drastically, depending on the deal that's been cut of. For that particular record label or that publisher. The details of these deals are not required to be made public and so in general they are not made public. That's why it's difficult to get a clear sense of what an average royalty rate for these streaming services might be. It's because they're all over the place. It's also why media headlines on the subject vary greatly. Some musicians have resorted to taking snapshots of their royalty statements and posting them online to prove just how little they're being paid per spin. And there's some high profile news stories that came out about songwriters who had written giant hit songs, and only made a couple hundred bucks for these worldwide hits, and so forth. The rates are really all over the place. I want to think a little bit more about this idea of streaming and the issues involved. The first time a music fan experiences Spotify or Beats Music or Tidal, it is a magical kind of thing. To think that all of this music is at your fingertips, and you can listen to it however and whenever you want. Most people agree that this is the future of music listening. It can be a wonderful way for artists outside the mainstream to get known too. Some of the issues, I guess, that still need to be worked out include the royalty payments that especially are going to be paid to songwriters. That has been one controversy that's come up a lot. There are concerns as well about the free tier that is on certain services and the fact that that might teach young listeners that music has no monetary value. The idea that music wants to be free or should be free is something that frankly makes a lot of working musicians just really angry. People who put a lot of time and money into making music do not believe that music should be free. Other controversies include the fact that listeners are not always aware of the business deals, and the sort of machinations behind what they're listening to. For example, some of these services are partly owned by record labels. And that means that artists on those labels receive royalties but have no ownership stake the way that the labels do. Once again the artists are not required to be at the table when the deals are made, so they're typically not at the table. This is part of the reason that Jay-Z launched his service which was marketed as a service that was artist friendly that allowed artists an ownership stake and there was a big sort of splashy roll out awhile back. But it featured multimillionaire musicians in the ads and there was some criticism in the press among poor musicians saying well that's not doing a lot to to convince people that musicians need to be paid more. How about featuring some of us who are sort of barely eeking out a living? I think that these things will get sorted out eventually and in the meantime, a lot of interesting things are happening. One of the other, I think important, issues that has to do with streaming and listening to streaming are privacy concerns. Huge amounts of data are collected about listeners, what they're listening to, where they are, how old they are, and oftentimes, your credit card number is attached to the services that you got, and advertisers, in addition, are targeting consumers based on their listening. This is a trade-off that I think, once again, reasonable people can disagree about, but I think it's important to think critically about these things. The streaming services are able to be more and more accurate about finding music for you that you're going to love. And this is especially important in such a crowded marketplace. They know more and more about you. That's why they can find the music that you love more and more accurately. The question is whether this is okay with you. And to what degree you want to share that information about yourself in exchange for new music being introduced to you that you are likely to love? [MUSIC]
