We’re All in it Together: @USSupreme_Court Friend of Court Brief in Google v. Oracle by @helienne, @davidclowery, @theblakemorgan and @SGAWrites

[Editor Charlie sez:  The Oracle v. Google case is going to be the most important copyright case in a very, very long time.  Oracle won the case on appeal twice and Google got the Supreme Court to review.  The case is about two issues being copyright in software and whether Google’s taking of Oracle’s code is fair use and permissionless innovation.    Because of the fair use argument, this is not just some battle of tech companies because no one knows better than us that Google will take any win on fair use and push it even farther.

So all artists, songwriters, photographers, film makers, authors–all of us–are in the same boat with Oracle on this point.  Sure Oracle is a big company, but Google is an even bigger company with a trillion dollar market cap and Google is trying to roll over Oracle the same way they roll over us.

In a must read “friend of the court” brief, Helienne Lindvall, David Lowery, Blake Morgan and the Songwriters Guild of America make this case as independent artists, songwriters and labels all harmed by Google’s policies that are out of touch with the market starting with YouTube.

SCOTUS Brief Cover Page

As Beggars Group Chairman Martin Mills put it, “[P]olicing the YouTubes of this world for infringing content is a herculean task, one beyond all but the largest of companies. For my community, the independents, it’s a game of whack-a-mole they can only lose.”

Helienne, David, Blake and the SGA put that case squarely before the U.S. Supreme Court in this must-read friend of the court brief.]

Independent creators rely on copyright protection to safeguard their works. This is true not just of songwriters and composers, but of countless creators, including recording artists, photographers, filmmakers, visual artists, and software developers. Copyright is, in fact, of existential importance to such creators, who would be utterly lacking in market power and the ability to earn their livings without it.

Google’s business model is a prime example of the need for strong copyright protection. Since Google’s founding, Amici have experienced, observed and believe that Google has used its unprecedented online footprint to dictate the terms of the market for creative works. By tying together a set of limited exceptions and exclusions within the U.S. Copyright Act and analogous laws in other countries, and then advocating for the radical expansion of those exceptions, Google has amplified its own market power to the great detriment of copyright owners. Thus, where fair use is meant to be a limited defense to infringement founded on the cultural and economic good for both creators and the public, Google has throttled it into a business model.

Read the brief on the Supreme Court of the United States.

 

Must Read: @Unite4Copyright Creator Interview with @TheBlakeMorgan on #irespectmusic

[Editor Charlie sez:  Read this interview and it will but some beauty in your day.”

It still comes as a shock to some people that The United States is the only democratic country in the world where artists don’t get paid for AM/FM radio airplay. Stations are allowed to broadcast my music, without my permission, and without paying me. I’m not sure what your definition of “stealing” is, but that’s mine.

My best advice is to remember that copyright is a human right, supported by reason, history, and the United States’ Constitution. That like all human rights, it’s worth fighting for––even in the face of seemingly hopeless odds. The corporate and unethical forces applying downward pressure on artists’ ability to make a living may seem invincible at times, and the downward trajectory may feel inevitable. But it isn’t. Their side is only fighting on behalf of greed. We’re fighting on behalf of justice, and truth, and for an elemental part of what makes each of us human.

Read the post on Unite4Copyright Creator Spotlight with Blake Morgan

Another Bad Artist Relations Week for Spotify–Music Tech Policy

Spotify released one of their groovy ad campaigns last week. This time celebrating their freebie subscription campaign. You really do have to wonder where they find the people who come up with these things. Blake Morgan, David Lowery and David Poe all laid into Spotify with their own tweets.

via Another Bad Artist Relations Week for Spotify — Music Technology Policy

@_davidturner_: Spotify Is in the Business of Selling You Spotify, Not Music

Make no mistake—Spotify is only interested in selling you Spotify.

On Monday, the Huffington Post’s contributor platform published a storyby #IRespectMusic founder Blake Morgan, detailing a heated exchange between him and an unidentified Spotify executive that took place in 2014. Titled “Spotify’s Fatal Flaw Exposed: How My Closed-Door Meeting with Execs Ended in a Shouting Match,” the piece was removed from the website hours after posting.

Morgan’s piece was reposted on the Trichordvist, a community blog that is, according to their website, “for those interested in contributing to the advancement of a Sustainable and Ethical Internet for the protection of Artists Rights in the Digital Age.”

Read the post on Track Record

What’s Up With HuffPo’s CEO and his Spotify History?

As ARW readers will know, the Huffington Post censored my friend and whistleblower Blake Morgan who posted his story from a few years ago about a particularly teachable moment involving his encounter with Spotify’s tone deaf executive class.  (A teachable moment that was reported at the time by Harley Brown at Billboard which makes HuffPo’s lame editorial excuse ring even hollower.)

As producer Michael Beinhorn noted:

My friend Blake Morgan wrote an article criticizing Spotify which was published yesterday on the Huffington Post website. This article began developing traction, but within 2 hours of posting, it was removed from the website and Blake received a vague email from someone at HuffPo as to why. It has since been republished by David Lowery on the Trichordist website, and now includes the email Blake received after HuffPo excised it from their site. One has to wonder why the Huffington Post- which represents itself as a hotbed of liberal thought and free speech, would publish- and then unpublish- something so important (and summarily/subsequently ban its author as a contributor to their website). Could this decision have anything to do with the fact that the current CEO of HuffPo is the former General Counsel and Global Head of Corporate Development at Spotify? Can you say “conflict of interest” or “a threat to my stock options”? Please read and judge for yourself….

Michael makes a very good point here.  According to The Lawyer, the HuffPo CEO, Jared Grusd, exited Spotify in 2015 after working there for four years–2011 to 2015.  While we don’t have knowledge of Mr. Grusd’s dealings with Spotify, we can infer a few likely interesting points from that situation.

First, Mr. Grusd’s tenure (2011-2015) apparently overlapped with Jonathan Prince, Spotify’s head of communications and ex-Clinton and Obama official who formally joined the company in 2014.  My assessment of Mr. Prince is that part of his job would not only be placing positive news about his employer Spotify, but would also be suppressing negative stories like Blake’s post.  To my knowledge, Mr. Prince is still at Spotify.

The particular years that Mr. Grusd was employed by Spotify would start around the time of the company’s U.S. launch and continue for four years, a customary stock option vesting period.  We don’t know what percentage of the company Mr. Grusd owns, but we can assume for the sake of argument that it’s around 1% of the then outstanding stock and that Spotify did not repurchase his shares when he left the company.  Of course, since Mr. Grusd is obviously a very important person and had two roles at Spotify, he could well own (or have the right to buy) a greater portion of the company, but probably less than 5%.  He would probably have been considered something of a late-stage founder for purposes of truing up his initial stock grant and could also have been granted further stock bonuses.

A stock option is the right to purchase stock at a fixed price, usually below market and maybe way below market.  Stock options “vest” over time as a way of incenting employees to stay in their jobs (and are often called “incentive stock options”).  You cannot exercise stock options until they vest.  It’s not uncommon for a company to grant a bunch of these incentive shares to an employee but require the employee to stay at the company for at least 12 months in order to vest at all (called a “cliff”), with monthy vesting thereafter of the remainder of the grant on a prorated basis.  These “incentive stock options” may have certain tax advantages.

So if you were to get 100 stock options on a 12 month cliff with monthly vesting, after one year of employment you’d be able to exercise 25 shares, and each month thereafter you’d be able to exercise 1/36th of the remaining shares, or 25% per year.  (Which can be one reason you see people leaving some startup jobs after four years.)  These shares are almost invariably common stock grants.

How many shares of Spotify stock Mr. Grusd owns and his exercise price will, of course, depend on the number of shares outstanding at the time he was hired and the value of the common stock at that time (leaving aside the “cheap stock” issue), but lets assume that Mr. Grusd got 500,000 shares and that he owns all of them.  But realize that he could easily own much, much more.

When a company goes public, those shares become very valuable because the exercise price of the option is almost always substantially less than the market price of shares.  (Plus, there is something called a “cashless exercise” which allows holders to avoid having to pay anything at all for their stock, “collars” which allow holders to sell their position to a third party, and other tricks of the trade that allow people like Mr. Grusd to “get liquid”.)

Also remember that Spotify’s proposed stock offering according to press reports is to be a “DPO” (a “direct public offering”) not an “IPO” (an underwritten “Initial Public Offering”), an unusual choice by the company which evidently means that there are no underwriters involved.  This move has been criticized by some but lauded by others (which may be evidence of Mr. Prince’s hand).  One feature of the DPO is that it might be easier for someone like Mr. Grusd to sell his shares immediately or at least sooner than with an IPO.  My sense is that Spotify will be under a lower transparency standard between the DPO structure and the fact that Spotify and its Chinese partner Tencent will probably be filing as a foreign issuer (on SEC Form F-1 and not the traditional S-1 for those reading along).  This remains to be seen.

However–Dr. Beinhorn has correctly put his finger on Mr. Grusd’s problem.  If Mr. Grusd has Spotify shares that he holds personally (and not through a blind trust) and as a former Spotify “insider” (for securities law purposes) he appears to have every incentive to keep the murky Spotify story as postitive as he can.  In his current role at HuffPo Mr. Grusd is uniquely positioned to suppress bad Spotify news for his personal enrichment even if Spotify hasn’t offered him anything to do so specifically.

Whether any of this happened, we can’t be sure.  But it sure looks funky.

Another thing that’s funky?  Mr. Grusd was evidently General Counsel of Spotify during the time (2011-2014) that many if not all of the licensing failures occurred that lead directly to all of Spotify’s current litigation problems.  It would be typical for a General Counsel to sign off on something as legal and as critical to the company as its licensing practices (or failures).  Whether that’s leverage for Mr. Prince to extract compliance from Mr. Grusd is something you’d have to ask them–or Spotify’s D&O insurance carrier.

Either way, potential Spotify stockholders buying shares in the public market should be able to hear the good and the bad about the company’s management or mismanagement which Blake was trying to tell them.  I don’t know if a former insider has a legal fiduciary duty to the public (or even to existing stockholders) in this regard, but at a minimum it would certainly be a better look not to suppress stories that could inform the investing public if your CEO really does have a conflict of interest.

So on balance, I think Michael Beinhorn has put his finger on something of extraordinary importance to public policy and the well-being of the investing public in general about which the HuffPo’s readership and potential investors in Spotify ought to educate themselves.

 

@theblakemorgan: Spotify’s Fatal Flaw Exposed: How My Closed-Door Meeting with Execs Ended in a Shouting Match

[Editor Charlie sez:  After this post started to take off on Huffington Post, Blake Morgan was told that HuffPo was killing the link on a flimsy excuse.  The Trichordist has reposted the piece along with correspondence from the HuffPo editor.]

I love streaming.

I love making playlists, I love being able to download streamed music so I can listen when I’m offline, and I love being able to bring that music with me. In short, I think it’s a great distribution method.

What I don’t love is how little musicians get paid for all that streaming. It’s not fair––not even close. What’s more, middle-class music makers are the ones who are hit hardest, whose businesses are threatened, and whose families are put at risk. So how can I be against the way streaming companies treat musicians but not be against streaming itself?

The same way I’m against the electric chair, but not against electricity.