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Killing The Golden Goose (Again); How The Copyright Stranglehold Dooms Spotify

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Killing The Golden Goose (Again); How The Copyright Stranglehold Dooms Spotify

Postby MrFredPFL » Mon Mar 12, 2018 11:42 am

Story :

For many, many, many years, we've talked about how the legacy entertainment industry will seek to kill the Golden Goose by strangling basically any innovation that is helping it adapt to new innovations. We saw the same pattern over and over and over again. The simple version of it goes like this: the legacy entertainment industry sits around and whines about how awful the internet is because it's undermining its gatekeeper business model that extracts massive monopoly rents, but does nothing to actually adapt. Eventually, companies come along and innovate and create a service (a) people want that (b) actually is legal and pays the legacy companies lots of money. This should be seen as a win-win for everyone.

But the legacy companies get jealous of the success of the innovator who did the actual work. They start to overvalue the content and undervalue the innovative service. The short version of this tends to pop up when a legacy entertainment exec says something like "why is innovative company x making so much money when all it's doing is making use of our content?" Of course, if the service part was so obvious, so easy, and so devoid of value, then the legacy entertainment companies would have done it themselves. But they didn't. So with the jealousy comes the inevitable demand for more cash from the innovator. And, usually, demands for equity too, which the innovator has basically no ability to resist, because they need to have a "good" relationship with the content companies. But the demands for more (and the jealousy) never go away.

The end result, of course, is that tons of innovative businesses that created amazing services that people liked get crushed. Completely. Venture capitalist David Pakman (who founded one of the companies, which I used way back in the day, that was eventually crushed, called MyPlay) detailed how the legacy recording industry used this strategy to bury more than 150 companies over the past two decades. It's the same story over and over again. Any company becomes too successful and the legacy copyright holders squeeze them to death, whining the whole time about how they don't pay enough. As Pakman wrote:

The music industry complains loudly about the “leverage” these giants have over them. First they criticized Apple iTunes for not agreeing to raise prices above $0.99, then they went after Pandora and other webcasters by insisting webcasting rates were too low, then they attacked Spotify for not paying them enough, then they insisted Apple Music pay them more than Spotify did, and now, just as the YouTube licensing agreements are coming up for renewal, they complain YouTube doesn’t pay them as much as Spotify.

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