Down Stream
Spotify
Spotify has been in the news lately, mostly due to controversy over Joe Rogan’s podcast. Lost in the culture war are the musicians complaining that the streaming platform pays them a pittance:
“We're grateful that Neil Young was able to cause this critical mass and get all of this attention on Spotify. That’s making our boycott effort possible,” Max Collins of the band Eve 6 told Fortune. “It's making people more receptive to our message, but at the same time it obscures the more interesting and devastating story, which is Spotify’s predatory business practices.”
The argument goes, Spotify pays musicians much less money per stream than other platforms like Apple Music or TIDAL. Which is true! But Spotify’s predatory business model goes far deeper than that - like many tech companies, its attempts to classify itself as a platform rather than a publisher allow it to skirt laws that have (loosely) governed the music industry for years.
I learned about this from an interview with musician Damon Krukowski on the Odd Lots podcast. His explanation of the music industry writ large is worth listening to, but I’ll sum up.
Prior to streaming, record labels signed artists to recording deals in exchange for ownership rights of their catalog and a cut of the royalties from their music. Typically this was a large cut, and all but the biggest artists could expect little money from record sales, if they got any at all. Artists did make money from touring, or licensing their music for commercials or movies. It wasn’t a great industry, and the labels had near monopoly power, but from the 1950s onward, there were rules about how it operated.
Payola is a derisive term in the music business, describing supposedly neutral third parties receiving money to boost a song’s popularity. The US government made payola illegal after years of DJ and radio scandals. Radio stations now had to disclose whether they’d been paid to play songs, and as recently as 2007 the government was still prosecuting payola cases, typically against big labels.
So. what does payola have to do with Spotify? Well, as a platform they aren’t subject to payola rules. Spotify does have to pay royalties to play licensed music, however meager they may be. But, Spotify does create first-party playlists, curated selections of songs it displays prominently to its users, which generate lots of listening hours.
As an aside - Spotify does not allow artists to negotiate royalties for their streams. It has negotiated deals with the three major labels and a variety of other licensing groups, but it requires artists to go through one of them to get their music on the platform. Krukowski describes the artist experience on Spotify - it is a barely customizable area you can use to upload your music and change a few things about your bio. The artist has zero contact with anyone at Spotify, they simply receive an earnings statement each pay cycle. In contrast, when I signed up for an advertising account with Spotify to poke around I got a personalized email from an Ad Studio Sales Specialist with a link to schedule a call to “learn more about my advertising goals.”
Labels are not allowed to pay radio stations to play their artists’ songs by law, but you can log on Spotify and with a few clicks you can start paying for listens, and get detailed metrics (of course!) on the people who listened to your song:
This behavior is forbidden everywhere else, but not Spotify! They’re just a platform! Spotify experimented with a different model of payola, offering artists a “boost” to their listens if they took a reduced royalty rate on songs. As Krukowski points out, Spotify claiming it can boost listens up to 40% with financial incentive means it can easily manipulate what shows up on listener streams, or in playlists.
Back to the playlists - so Spotify is pushing curated playlists, which generate lots of listens. Sounds like…a radio station, right? Subject to payola? Of course not. How does Spotify curate the lists? Surely it’s based on popular music trends, or something? Believe it or not, the company has been caught paying producers to create tracks for Spotify (no royalties!) to push on their popular playlists:
Multiple cast-iron sources have informed us that, in recent months, Daniel Ek‘s company has been paying producers to create tracks within specific musical guidelines.
We’re also hearing that these producers receive a flat fee for their work, in addition to studio and musician expenses – but Spotify holds on to the master copyright.
The publication went on to release the names of 50 artists in response to Spotify’s denials, which had racked up 520 million streams at the time, the equivalent of $3 million Spotify didn’t have to pay labels or artists.
So Spotify treats artists so poorly it won’t even talk to them, ignores payola rules, and even cuts artists out of the mix entirely by paying producers to write songs under pseudonyms. Such stingy behavior seems at odds with the billions the company has invested in other streaming media, like podcasts.
Guess what! Podcasts don’t have royalties. Spotify bought the rights to Joe Rogan’s podcast and his catalog, and he doesn’t get any sort of compensation for listens (unless he wrote that into his contract, which, good for him I guess.) The company also owns Prince Harry and Meghan Markle’s single podcast episode, perhaps the most valuable podcast on the planet at the moment.
Spotify is betting that it can use its unprofitable music business to make money on podcasts and - like most tech companies - depend on user growth to drives its stock price. A careful parsing of the CEO’s words reveals the plan:
Spotify is focused on "capturing the share of time listeners spend elsewhere." This is why Ek talks about "audio" generically, because it doesn't matter specifically what those listeners are doing elsewhere, Ek just wants them doing it at Spotify instead.
The unfortunate reality is that streaming music now accounts for more than 80% of listening:
While the corporate music industry does suck and treats many of its artists with nearly as much disdain as Spotify, it isn’t the entire music industry. For decades, independent record labels could survive and independent artists could make a living writing songs and touring. The pandemic taking touring off the table, and streaming squeezing royalties to nearly nothing have landed a one-two punch to artists who might have been able to survive a few years ago.
The streaming model doesn’t have to be bad. For years, critics of Spotify pointed to Bandcamp as a model for how artists could publish music online. Now Bandcamp has been sold to Epic Games, and it remains to be seen what the company will do with it - hopefully the backing of a deep-pocketed owner will keep Bandcamp a viable option for independent artists.
The problem facing artists now is that Spotify controls one third of all streaming, and with live performances back on the menu, the platform can be the best way to get their music in front of potential fans. By doing so they are, in some small way, financially supporting a tech company bleeding the music industry dry in pursuit of shareholder value.
Note: While we’re discussing music, I have to admit I made a factual error in my post about David Solomon. An expert on Lollapalooza (my girlfriend) informs me the festival does not have tents, and therefore ten thousand people in Chicago would have to stand around outside to watch the Goldman Sachs CEO DJ poorly, on a stage. I deeply regret the error.
Texas
We’ve talked about trucker protests before, but this month’s protest at the Mexican border was for a different reason - the governor had ordered state police to “inspect” trucks coming into the country:
State troopers inspected more than 6,000 commercial vehicles over the past week, according to the Texas Department of Public Safety. Nearly 1 in 4 trucks were pulled off the road for what the agency described as serious violations that included defective tires and brakes.
State authorities have no power to inspect what’s inside trucks coming across the border, which the federal government already does:
Trucks are inspected by U.S. Customs and Border Protection agents upon entering the country. Texas began its own inspections after the Biden administration said pandemic-related restrictions on claiming asylum at the border would be lifted May 23.
So the governor of Texas ground cross-border trade to a halt for weeks and sent state police to inspect trucks for broken taillights, all because Biden said they were reinstating pre-pandemic asylum laws in May. A pandemic the governor doesn’t think Texans need any protection from.
His political stunt cost the country an estimated $9 billion in GDP, and Texas lost around $4.23 billion.
This is a trend in Texas politics, it turns out, predating Abbott. For the past 17 years, Texas governors have strategically rolled out border security initiatives costing the state billions of dollars with little to no oversight:
Operation Lone Star has helped increase the state’s budget for border security to more than $3 billion through 2023 by deploying thousands of DPS troopers and National Guard members and allocating funding to build border barriers. As part of the operation, troopers are also arresting some immigrant men crossing into the U.S. on state criminal trespassing charges.
Except the state is using all sorts of irrelevant data to make these claims:
But the state’s claim of success has been based on shifting metrics that included crimes with no connection to the border, work conducted by troopers stationed in targeted counties prior to the operation, and arrest and drug seizure efforts that do not clearly distinguish DPS’s role from that of other agencies…
Abbott, technically unable to enforce immigration law, has found especially cruel workarounds:
In launching Operation Lone Star, Abbott went further than any other governor in recent history, attempting to curtail immigration by using state trespassing charges to directly target those who cross the border on private property.
These misdemeanors are punishable by up to a year in jail, and make up the bulk of arrests by the new task force. After pushback in some border communities, the governor targeted areas he was trying to win votes in:
In June, the governor shifted the operation’s emphasis from the Rio Grande Valley, where political leaders opposed some of his efforts, to a vast rural region of mostly private ranches around Val Verde County, about 170 miles west of San Antonio.
It’s not only the lives of immigrants Abbott is destroying to try to get reelected. The troops his government has deployed to the border work under lousy conditions:
To support the increased demand on Guard resources, the state has started involuntarily activating thousands more troops in recent weeks, state officials confirmed to Army Times.
[…]
What is clear, though, is that many of the troops called up in recent weeks have yet to receive copies of their orders and have been experiencing significant pay issues.
The governor’s office is forcing deployment of state Guard troops while slashing their pay and disrupting their lives to score political points.
The GOP has created an alternate universe, where immigrants are piling up at our borders ready to swarm in and create chaos, and while some governors have engaged in bizarre political theater to stoke racist sentiment among their voters, border governors like Abbott are able to loot state budgets and blow holes in the economy to further their political ambitions. The worst part of the whole charade is it’s likely to work, and the people of Texas will foot the bill.
California
Not to let blue states off the hook - California cities received billions of dollars in federal stimulus during the pandemic. Some of the funds were earmarked for public health and housing, or salaries for healthcare workers or small business aid. Where did California cities spend most of that money? Cops, of course:
But most large California cities spent millions of Arpa dollars on law enforcement. Some also gave police money from the Coronavirus Aid, Relief and Economic Security (Cares) Act, adopted in 2020 under Donald Trump.
Come on, man! Some cities were truly egregious:
In Fresno, the city allocated more than double of its Cares money to police than it did to Covid testing, contact tracing, small business grants, childcare vouchers and transitional housing combined.
This is to be expected when police departments make up increasingly large chunks of city budgets as leaders cravenly refuse to cut or even scrutinize spending on law enforcement. Cities had budget shortfalls caused by the pandemic, they got funds from the government to help with said shortfalls, and plowed that money into making sure cops got paid because they’re quick to refuse to do their jobs at the slightest inconvenience.
School Boards
A disturbing trend in America right now is school boards banning books and the teaching of things like racism and homosexuality. The GOP has had electoral success reaching parents with a message of fear and division, under the guise of keeping kids safe from things like transgenderism or admitting slavery happened.
Before this latest ginned up moral panic, serving on a local school board was a pretty thankless job. Generally, you had to listen to the kind of parents who take time out of their Tuesday evening to show up and complain about stuff. I doubt many people attend school board meetings to lavish praise on the unfortunate members who probably thought they were doing something good for their communities. Now, school board members trying to keep students safe during a pandemic had to deal with zealots threatening to kill them or coughing in their faces while screaming about horse paste.
With this in mind, it turns out you can buy a bunch of school board seats in a ‘blue’ state - Pennsylvania - for pretty cheap!
I told a friend I was working on a profile of Paul Martino, the Bucks County venture capitalist who put more than $500,000 into school-board races across Pennsylvania last fall in a largely successful effort to swing those elections in favor of candidates determined to open public schools that were closed because of COVID — and keep them open.
Martino cut 50 checks for $10,000 to PACs all over the state who could field a candidate who supported keeping schools open during COVID:
Some 70 percent of Martino-backed candidates were Republicans — that number changes somewhat depending on who’s doing the counting, though Martino agrees a solid majority of his support ended up going to conservatives. Sixty percent of the candidates he backed won seats, according to Martino.
Unsurprisingly, using criteria as broad as “wants to reopen schools” meant Martino also backed people spewing dangerous nonsense like QAnon conspiracies, but hey, whatever works, right?
Martino is a guy who happens to have money and got mad that his kid’s school wasn’t reopening quickly enough during the pandemic. So he invested a modest amount of his wealth and got 30 right wing school board candidates elected across the state. If one pissed off guy with these views can impact a few dozen local elections, it’s no surprise that the 24/7 outrage machine the right wing has built around schools and education has attracted huge investments from a political party that doesn’t care how it wins or hangs on to power.
Insteon
What happens when your smart home system goes down permanently? Stacy Higginbotham reports:
I’m getting reports from dozens of Insteon users that as of Friday their smart home hubs have stopped working. So far, none of them have heard from the company, and Insteon’s Twitter account hasn’t been updated since June 2021.
Not a great sign! Also not a great sign when the executive team of the company that supposedly maintains your smart home system has quietly quit or scrubbed it from their LinkedIns entirely:
Matt Kowalec the president and COO lists his role at Smartlabs as ending in 2020; and Tom Carter, the CIO doesn’t list his role in the company at all.
The company may well have simply shut down operations, leaving thousands of Insteon app and smart home software users out of luck. It’s a problem we may see a lot more of as more consumers get in on the smart home craze.
Short Cons
The Inquirer - “Federal financial regulators are demanding that four remaining defendants in the Par Funding scandal pay $360 million to investors who lost money in a plot that the regulators for the first time have flatly labeled a “Ponzi scheme.””
MIT Tech Review - “From 2016 to 2018, crypto mining in upstate New York increased annual electric bills by about $165 million for small businesses and $79 million for individuals, a recent paper found.”
Daily Beast - “As it turns out, the anti-vaccine activist got that unscientific medical advice from Dr. Edward Group, a chiropractor who is a pal of Alex Jones, and who sells online coursework for learning the benefits of drinking the “golden nectar.””
Tips, thoughts, or payola to scammerdarkly@gmail.com