[x-pubpol] Copyright and Innovation: The Untold Story

[Joly MacFie]

A new report - Copyright and Innovation: The Untold Story, <
http://papers.ssrn.com/sol3/**papers.cfm?abstract_id=2099876<http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2099876>
**> - tells the sorry tale how the music industry, starting with Napster,
crippled innovation in distribution and business models in the last decade..


>From Torrentfreak:
http://torrentfreak.com/how-big-music-threatened-startups-and-killed-innovation-120709/

It started with a drain on cash. Interviewees reported that venture capital
funding for digital music*"became a wasteland"*, a*"scorched earth kind of
place"*housing a*"graveyard of music companies."*With the big labels
choosing where and when to sue, funding was hard to come by.

Nevertheless, some innovators didn't give up, although when the labels were
through with them many probably wished they had. The report details
instances where innovators tried to get label approval but found themselves
in extremely difficult situations.

One recalled that the labels*"don't license you if you don't have
traffic"*but once enough footfall is achieved then "they want to get paid
for 'infringement' and the longer it takes to license you, the larger the
'infringement' number they can justify charging you."

Another described a litigation*"Ponzi scheme"*whereby settlements and other
fees extracted from startups were used to fund the labels' ongoing
litigation strategy. However, like all Ponzi schemes there was a problem --
maintaining momentum.*"Once you stop suing new people there are no new
settlements to pay for the ongoing litigation,"*one interviewee reported.

But the labels weren't always unreceptive to new ideas -- as long as they
were bad ones. The report notes that the labels were happy to take "big,
up-front fees" of "10, 20 million bucks" from startups they knew wouldn't
make it. Carrier reports that a leading officer from one label admitted
that they would*"cripple the companies by demanding such advances and
guarantees that they go belly up."*

Established services couldn't make progress with the labels either, even
when they did everything they could to avoid copyright issues. One, that
boasted several million users and "interest from top-tier VCs -- really the
top of the top," was also sued by the labels.

"After they sued us, our opening offer to them was: 'You guys made your
point; we will charge anything you want to charge, and you can take any
percentage you want to take," a respondent reported.*"It was literally an
offer of a blank check."*The labels refused and said they wanted the
service shut down instead.



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