Literature Is News That Stays News



There have been recent developments in some news stories we reported in 2012. Let's catch up.

1. The Voices of the Little Monsters Were Exceedingly Unpleasant

In 2012 scientists at the Lawrence Berkeley Labs used non-contact 3D imaging technology to "play" the audio from an 1888 tin sound cylinder from an Edison Talking Doll. This feat enabled the cylinder to be enshrined in the Library of Congress National Recording Registry of "culturally, historically, or aesthetically significant" recordings.

Now, they've done it again, digitally recovering a 128-year-old recording of Alexander Graham Bell's voice, enabling people to hear the famed inventor speak for the first time. The recording ends with Bell saying “in witness whereof, hear my voice, Alexander Graham Bell."

In the case of the Bell recording, 2D scanning technology was used to map the surface of a circular disc to rectangular format, a technique developed over many trial runs harvesting audio from damaged 78 rpm records. The great inventor's voice can be heard here. Details and images from the project are here as Cat. No. 287881-A.

2. The Social Bandwagon: Everyone {Likes, Retweets +1's} a Winner

Artistic works that build their audience slowly and sustain it for long periods are becoming rare. Most works live and die with their debut. Hollywood has known this for a long time. Cast, director, genre, story, and production values are irrelevant. The only thing that can predict the long-term box office success of a film is its opening weekend numbers.

But now,  according to the New York Times, a former statistics professor named Vinny Bruzzese has started to aggressively pitch a service he calls script evaluation. For as much as $20,000 per script, Mr. Bruzzese and a team of analysts compare the story structure and genre of a draft script with those of released movies, looking for clues to box-office success.

At best, the results confuse correlation with causation, the so-called Nickels Paradox. At worst, the analysis ignores originality. While, according to Mr, Bruzzese, bowling scenes tend to appear in many films that fail [TGD: for other reasons] and are thus "statistically unwise," bowling figures prominently in the enduring hit The Big Lebowski. Bet on the Coen Brothers for a hit, no matter what the historical numbers say.

3. Would Pandora Survive Russian Winter?

Since October 2012, Apple has been hinting they would introduce a streaming audio service in iTunes to compete with Pandora. Google already beat them to the punch, announcing Google Play Music All Access for $7.99/mo. But I don't think Google is a Pandora-killer.

However, Marketplace Radio now reports that an Apple announcement is imminent. Using their industry clout, Apple is securing support for "more functionality, like the ability to rewind or advance or announce the next five songs that are coming up. Things you can’t do on Pandora.” The temperature is dropping.


            Vinyl-to-Digital Restoration #57            

Artist: Steve Kuhn

Title: Last Year's Waltz
Genre: Jazz
Year: 1982





[Amazon.com] For a time, singer Sheila Jordan was a regular member of pianist Steve Kuhn's quartet, a group also including bassist Harvie Swartz and drummer Bob Moses. This live set finds the band performing five Kuhn originals, one apiece by Swartz and Steve Swallow, plus "I Remember You," "Confirmation" and a brief medley. Although Jordan functions as a member of the band, her highly appealing singing is the main reason to acquire this memorable and well-rounded disc. (The presence of this disc in my library may explain why I also own one title by Bob Moses as bandleader. Follow the metadata.)


© 2013 Thomas G. Dennehy. All rights reserved.

A Consumer-Driven Marketplace Has Been a Hallmark of Innovation

Pandora CEO Joseph Kennedy, NAB spokesman Bruce Reese, and venture capitalist David Packman recently testified before a House Judiciary Subcommittee hearing on music licensing, speaking in favor of bill H.R. 6480. To summarize their reasoning: current music licensing standards prevent select investors from making big money in internet radio.

Speaking against the bill were economist Jeffrey A. Eisenach, music producer Jimmy Jam, and SoundExchange President Michael Huppe. To summarize their reasoning: current music licensing standards enable the free market to get artists fairly compensated for use of their work.

The core issue of the debate over the bill, subtitled The Internet Radio Fairness Act (IRFA) of 2012, is whether "fairness" would be established by having services like Pandora pay less in music licenses in order to fix their unsustainable business model, or whether other services should pay more.

The statutory licensing model, under which a service pays a set percentage of its revenue in licensing fees for music content was established by the Digital Peformance Rights Act of 1995. The so-called Willing Buyer Willing Seller (WBWS) model, under which a commercial service pays a set per-play license fee, was introduced by the Digital Milennium Copyright Act of 1998. Services in existence as of 31-December-1997 were exempted from the new standard. Terms of the DMCA have been modified three times since passage to narrow the definition of services to which WBWS applies

So, currently, who pays what?

• AM/FM Radio. $0. The USA is the only developed country that does not impose music performance license fees on over-the-air radio.
• SiriusXM and Muzak. So-called pre-existing streaming services under the DMCA. Grandfathered to statutory license fee, currently set at 8% of revenue.
• Microcasters. A microcaster is defined as a service with annual revenue < $5000 and that streams < 18,067 aggregate tuning hours (ATH) per year. (That is equivalent to two sumultaneous 24/7 listeners.) Microcasters pay a flat annual fee of $500 + $100 optional fee to be exempted from recordkeeping requirements.
• Non-commercial Pureplay Webcasters (defined by their tax status per IRS Section 501). Annual payment of $500 or per-play royalty of $0.0012/play paid on monthly ATH in excess of  159,140, whichever is greater. (159,140 monthly ATH equate to roughly 200 simultaneous 24/7 listeners.) Stations that are CPB-supported or members of various Public Radio consortia do not have to file records. Under the terms of their settlement  agreement, NPR’s Public Radio Interactive is making those payments. These stations will be contacted by Public Radio Interactive with regard to their obligations.
• Small Pureplay Webcasters (annual revenue < $1.25M). 12% on the first $250K in revenue and 14% on revenue > $250K. In exchange, the webcaster receives an ATH limit of 10 million monthly — essentially unlimited streaming — plus additional benefits. Payment obligation is subject to a minimum of 7% of operating expenses
• Large Pureplay Webcasters (annual revenue > $1.25M). 25% of revenue or per-play royalty of $0.0012/play, whichever is greater. Unfortunately for Pandora, which falls into this group, a "play" is defined as a song delivered to an individual device running a its client app, including songs a listener skips after listening for a time and songs that are pre-fetched for playback, but never actually initiated. These inflate their play count. Reports estimate Pandora's total payments at $0.02/ATH, which works out to the average listener touching 16 songs per ATH.

Proponents of the IRFA argue that Pandora pays too much in licenses — more than 50% of revenue — relative to its peer services, amounting to a commercial disadvantage, and needs relief. Opponents argue that WBWS is the fair model for artist compensation, and should be extended to services like AM/FM radio and SiriusXM, ending their "subsidized mandate to exist." No one wants small and non-commercial webcasters unduly burdened by new license fees.

The debate will continue not only in  the U.S. House but in the U.S. Senate. "A consumer-driven marketplace has been a hallmark of innovation on the Internet and the same market forces should decide the value both of competing music delivery services and the music content they deliver."

Stay "tuned."

             Vinyl-to-Digital Restoration #47             

Artist: Chuck Mangione

Title: Children of Sanchez
Genre: Soundtrack
Year: 1978





Chuck Mangione composed this music for a film soundtrack in 1978, but it quickly took on a life of its own when it was released as a two-LP set. While the movie Children of Sanchez didn't make much of a commercial impact upon release in 1979, the music won Mr. Mangione both a Golden Globe® and a Grammy®, garnering fan loyalty the film never enjoyed. The repetitive themes necessary for a cohesive film soundtrack make end-to-end listening of the LP somewhat tedious. (Where is the skip button?) But the tracks in weightless digital form equate themselves quite well individually.


© 2012 Thomas G. Dennehy. All rights reserved.

Would Pandora Survive Russian Winter?

If the world was fair, a new rival entering your market would have to compete head-to-head on features. Innovation would rule. But the world is not fair, and new rivals often enter your market specifically because they can win with inherent advantages that make head-to-head comparisons irrelevant. The software industry coined a term for this—Russian Winter. (Why?) And Pandora may be about to experience it.

Russian Winter has been a factor in the rise and fall of many products. Two examples:

• Mosaic, the first inernet browser, was invented at NCSA. Netscape commercialized Mosaic in 1994, and Netscape Navigator commanded 80% market share at its peak in 1996. Microsoft countered by introducing Internet Explorer. Whether or not it was a better browser than Netscape Navigator was irrelevant. As a stand-alone product, you can't compete with "pre-installed with Windows." Microsoft achieved 80% market share by 2000, 95% at its peak in 2002, completely defeating the invasion of its Desktop.

• Similarly, the market for simple chart-drawing software was once dominated by Visio and Autodesk Actrix. Feature-for-feature, you could make the case for either one. But when Microsoft bought Visio (the company) in 1999, the climate became much chillier. As a stand-alone product, you can't compete with "bundled in Office." Autodesk cancelled Actrix almost the same day, ceding the market to Microsoft.

In both cases, the victory virtually shut down disruptive innovation in these technology areas.

Pandora invented user-customized radio. You select a song and it will program a stream of more like this music based on its musical "genome." It now streams more than a billion user hours per month. Consumer awareness of Pandora is 50% among internet users, double that of its nearest competitors.

But a new competitor may be entering the market. The Wall Street Journal and New York Times reported that Apple is preparing an audio streaming service to compete with Pandora. How does Apple bring Russian Winter to the streaming audio market? Five things are immediately apparent:

1. Installed Base. You can't compete with "pre-installed on 365 million iOS devices."
2. Halo Effect. There is no brand loyalty like Apple brand loyalty. Not only will an Apple streaming service trigger an exodus of Pandora users who were there merely because there was no equivalent Apple service, the cool factor of Apple will bring many new users into the sector who were sitting on the sidelines. Pandora desperately needs these subscribers.
3. Lack of Transparency. Pandora is having trouble turning a profit, and has to say so every fiscal quarter in SEC filings, incurring negative brand image. Apple will bundle its streaming service with iTunes, burying the costs inside the rosy financials of the world's largest music retailer.
4. Leverage. The New York Post reported that Apple is negotiating directly with music labels for content, rather than adopt Pandora's disadvantageous statutory licensing model. Apple doesn't need Congressional support to make its business work.
5. Game-Changing Ability. Pandora's service defines user-customized radio. But, with more that $100B in cash and securities available, Apple could raise the stakes by introducing new capabilities requiring capital investment that Pandora couldn't match in its current financial condition. Or, taking another cue from the software industry, Apple could offer its service free to listeners. In August 2012, UK retailer Tesco announced that it was closing its MP3 store, citing the rising capital costs of trying to stay competitive with the big players, Apple and Amazon.

Could it be that the real target of Apple's ambitions is Amazon? By adding a streaming music service to iTunes, Apple would force Amazon to roll out a similar service to stay competitive. Being acquired by Amazon could be Pandora's way out of the cold.

            Vinyl-to-Digital Restoration #43             

Artist: Paul Winter Consort
Title: Earthdance
Genre: New Age
Year: 1977



I'll admit, I chose this library title for this piece because of the artist name. But The Paul Winter Consort is a foundation group in my collection, with metadata tentacles radiating through many other titles. Among the descendent links: the groups Oregon and Gallery, and the musicians Glen Moore, Paul McCandless, Collin Walcott (1945-1984), David Darling and Ralph Towner.

© 2012 Thomas G. Dennehy. All rights reserved.



What If Your Cloud Suddenly Vanished?

You have abandoned music possession and are now completely dependent on streaming services in the cloud to deliver their vast-but-low-bit-rate song libraries for your listening enjoyment. Are you prepared for the day when your cloud, or any other cloud, may no longer be there? From all indications, that day may be inevitable.

The most popular streaming services, Pandora and Spotify, have unsustainable business models. If these two pioneering giants can't survive in the long run, what chance does any other service have? Maybe music possession isn't as quaintly 20th Century as pundits would have you believe.

Pandora, which had its IPO in 2011, has never been profitable. Its revenues are growing steadily, but so are its losses. For the quarter ending July 30, 2012 revenue was up more than 50% year-to-year to $101.3M, but its quarterly losses of $5.4M were 3x last year's. According to filings in Spotify's home country of Luxembourg, the company lost $57M on $236M in revenue for fiscal year 2011. The red ink cannot continue indefinitely.

"Cost of sales" is the highest contributing factor to the sustained losses. Pandora operates as a limited-play radio service and does not have to negotiate royalty deals with individual labels. Still, last year the company paid 54% of its revenue out in royalites under the provision of federal copyright law that lets it use (almost) any song. Spotify operates as an unlimited on-demand music service and negotiates directly with labels and publishers for the songs it makes available, paying a staggering 97% of its revenue on licensing fees and distribution costs. (Source: NY Times.)

To climb out of its hole, Pandora is lobbying Congress for a copyright license deal more aligned with satellite radio and cable outlets, the so-called Internet Radio Fairness Act. The licensing rate for satellite is set at 7.5% of gross revenue. Cable music services pay 15% of gross revenue. On the other hand, Pandora pays 2 cents per hour for the more than one billion streaming-hours it runs per month. (Source: LA Times.) Music publishers, becoming more dependent on revenue from streaming as CD sales continue their decline, oppose any change. Additionally, statutory licensing is unique to the USA; overseas growth for Pandora will be hard to achieve without similar license deals in other countries.

To reverse its current fortunes, Spotify faces the daunting task of trying to make monopoly economics work. If the EMI sale closes, there will only be only three major music labels. As explained by Michael Robertson of MP3tunes.com, the jaw-dropping secret licensing demands of record label monopolies would not be tolerated in any other industry as they "crush innovation, as well as any hope of profitiability." Since failure to reach a deal with any of the labels would put a huge hole in Spotify's catalog, the company really has no choice but to concede to industry demands.

Listeners have embraced streaming audio services in the cloud. At least 33 million people have tried Spotify, more than 150 million have registered for Pandora. But maybe now is not the time to abandon music possession completely in favor of streaming; the current cost structure of the industry is unsustainable. Are you prepared for the day when there is nothing but blue sky where your cloud used to be?

            Vinyl-to-Digital Restoration #42             

Artist: Willie Nelson

Title: Stardust
Genre: Country
Year: 1978



Willie Nelson has never been one to do the safe or expected, and this Booker T. Jones-produced album of pop "standards" from the '30s and '40s certainly fits the profile. The success of Stardust paved the way for the late-career standards album of virtually any singer you can name. I had never heard more than a couple lines from Irving Berlin's cloud-free "Blue Skies" (via montage in the movie White Christmas) until picking up this album as my introduction to Mr. Nelson's work.


© 2012 Thomas G. Dennehy. All rights reserved.