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Old 17-12-20, 12:41 PM   #1
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Default Peer-To-Peer News - The Week In Review - December 19th, ’20

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December 19th, 2020

Big Tech Companies Grilled on Users Pirating Copyrighted Works
Ryan Lovelace

Lawmakers looking to strip Big Tech of legal liability protections have zeroed in on prosecuting those companies when their users stream copyrighted works.

Sen. Thom Tillis, who is leading the charge against online copyright infringement or “piracy,” grilled executives from Facebook, YouTube and other tech companies Tuesday about their complicity in the theft of intellectual property.

“Some in Big Tech aren’t serious about stopping online piracy, and I’m not sure why that is,” he said at a hearing. “Maybe it just isn’t a priority or maybe some companies are actually profiting off the piracy on their site.”

It was a shot across the bow for the looming battle over removing the host of legal protections that have been a cornerstone of the internet.

Mr. Tillis, North Carolina Republican and chairman of the Judiciary subcommittee on intellectual property that hosted the hearing, said he was just trying to get to the facts.

“I have no predisposition for any one platform,” he said.

His bill to make platforms such as Facebook and YouTube liable for users’ pirating has already gained bipartisan support in the Senate.

It is estimated that the criminal streaming costs the American economy nearly $30 billion each year. Many multinational and multibillion-dollar companies allegedly don’t use the tools they have to stop the theft.

YouTube and Facebook insisted that they work with copyright holders of all sizes to protect their work online.

Katherine Oyama, YouTube global director of business public policy, said her company is invested in its users’ content and has paid more than $5.5 billion to rights’ holders in ad revenue from content claimed through one of its copyright management tools.

“Our efforts to fight piracy on YouTube do not stop with our copyright management suite,” Ms. Oyama said. “As the challenge of online piracy evolves we are continually working with rights holders to improve our policies, tools, features, and functionality.”

Despite YouTube and Facebook claiming that they are working to better serve users and copyright holders, a reckoning from lawmakers is headed their way.

If the lawmakers’ felony streaming proposal is enacted, the copyright battles with Big Tech and video streaming platforms could mirror copyright legal battles that bankrupted Napster, an online music store, in 2002.

Twitter, which has been a focus of Mr. Tillis‘ effort, refused to attend the hearing.

Recording Industry Association of America CEO Mitch Glazier testified about Twitter‘s inattention to copyright complaints.

“Over the past two years, the music industry has sent Twitter notices of over 3 million infringements for over 20,000 works — so this is piracy at an industrial, massive scale,” said Mr. Glazier at the hearing. “This is not some small problem and unlike Facebook and YouTube, they have done nothing to at least build tools or to help prevent what is by its nature a viral system where pirates can spread literally in microseconds.”

Twitter did not respond to a request for comment from The Washington Times.

The felony copyright proposal could take effect before 2021 begins, as efforts to ensure its inclusion in the end-of-year spending package are underway.

Regardless of whether Mr. Tillis‘ crackdown on Big Tech succeeds this month, he said he is intent on pursuing the large technology companies for the next six years.

“Everyone knows legislating takes time, it’s painstaking and it involves many years of negotiations and compromise,” he said. “It is probably going to take my entire second term to get this bill across the finish line.”

Illegal Streaming Would Become Felony Under Proposed Bill
Michael Balderston

Currently, illegal streaming is classified as a misdemeanor

The punishment for illegally streaming content could soon be more severe, as a new bill currently before Congress would increase the penalty of streaming pirated content from a misdemeanor to a felony.

The Protecting Lawful Streaming Act of 2020, which was introduced by Sen. Thom Tillis (R-N.C.) and has bipartisan support, says that any persons who “willfully and for purposes of commercial advantage or financial gain” provide public digital transmission services of copyrighted works will have committed a felony act. The bill is currently attached to the omnibus spending bill under consideration by Congress.

According to a blog post from Seth Cooper of The Free State Foundation, under the existing law piracy of online content is classified only as a misdemeanor, while other forms of piracy, like downloading content, are considered felonies. Cooper says that streaming, which is becoming the most popular way for consumers to view content, is also becoming the predominant form of online piracy through “stream-ripping” websites and apps as well as illegal Internet Protocol Television services.

Citing an August 2020 Digital Citizens Alliance report, Cooper says that an estimated $1 billion in U.S. subscription revenues were generated by illegal IPTV services, with about 9 million subscribers to these services.

The COVID-19 pandemic may have increased the popularity of illegal streaming piracy, Cooper adds. Tracking firm Muso found a 43% surge in American visits to movie pirating sites during the last week of March 2020 compared to a month earlier, Cooper writes.

“Under existing law, criminals who operate illegal IPTV streaming services can only be charged with misdemeanor infringement, not felony infringement,” Cooper says. “As a result, operators of these illegal streaming services face less severe penalties than operators of online piracy sites for downloading copyrighted movies and music. There obviously is no reason for this disparity in the law.”

Read Cooper’s full blog on The Free State Foundation website.

This VPN Will Now Start Blocking the Pirate Bay and More

Users of Sophidea's VPN service will no longer be able to access popular torrenting sites
Anthony Spadafora

A US-based internet service provider (ISP) that operates a VPN service has agreed to block several major online pirating sites in response to a lawsuit filed by a firm that represents several major film studios.

As courts are increasingly awarding limited damages against individual file-sharers, law firms representing movie companies and other IP holders have adopted a new business model where they instead sue entities that are “higher up the food chain”.

One such entity is Hurricane Electric (HE) which provides backbone services to large internet-focused businesses including ISPs that have thousands of customers who are free to use their connections as they please. A law firm that represents the companies behind Rambo: Last Blood, London has Fallen, Dallas Buyers Club and other popular films recently demanded that Hurricane hand over the personal details of its pirating customers.

In an amended complaint filed back in August, HE provided further insight on the business model movie companies are now using to target its business instead of individual consumers, saying:

“HE is informed and believes and based thereon alleges that multiple Defendants, many of which share the same addresses, managing agents, and/or agents for service, are copyright assertion entities in the business of generating income primarily from threats of infringement lawsuits against legitimate technology companies that have nothing to do with any alleged infringements by unnamed end users of Internet connections.”

Targeting a Hurricane Electric customer

Although the main case against HE is still in progress, a third-party complaint made by Killing Link Distribution recently appeared on the docket targeting the ISP Sophidea Inc. which is one of Hurricane's customers.

According to the complaint, the ISP operates a VPN service through HE that enables its customers to access the internet via HE IP addresses. Killing Link claims that users of Sophidea's VPN service accessed “illicit notorious piracy websites” in order to download and share pirated movies.

Instead of seeking damages, the third-party compliant sought preliminary and permanent injunctions to prevent Sophidea from continuing to provide customer access to known pirating sites. Less than a day after the compliant was filed, a new document appeared on the docket revealing that the two companies had come to a new agreement.

To conclude the lawsuit, Sophidea will now block access to the Pirate Bay, RARBG, 1337x, fmovies, YTS, Cimaclub and other known torrenting sites. However, Killing Link will also be able to update the block list with new pirate sites found liable for infringement in a US court.

Not only does torrenting films hurt movie studios but doing so could also infect your devices with malware and other viruses.

Tech Giants Will Block Kazakhstan's Web Surveillance Efforts Again

They're blocking the country's government-issued root certificate on their browsers.
Mariella Moon

Kazakhstan is trying yet again to force its citizens to install a "national security certificate" on every internet-capable device in the country. That government-issued root certificate would allow authorities to keep tabs on people’s online traffic, essentially becoming a back door to access citizens’ data. As a response to the country’s latest attempt to spy on people’s devices, Apple, Google, Microsoft and Mozilla have teamed up like they did last year to block the certificate from working on their browsers.

In its announcement, Mozilla said it was recently informed that ISPs in Kazakhstan have recently started telling customers that they’re required to install the digital certificate to be able to access foreign websites. ZDNet reported earlier this month that Kazakh IPS have been cutting people’s access to websites like Google, Twitter, Facebook, Instagram and Netflix unless they install the certificate.

As the publication notes, this is far from the first time the country’s government tried to keep a close eye on its citizens’ online activities. It made a similar attempt back in 2015 and then again in 2019, but tech giants helped to put a stop to those plans by blocking the certificate like what they’re doing now.

When users in Kazakhstan who complied with their ISPs’ demand try to access websites on their devices, they’ll get an error telling them that the certificate shouldn’t be trusted. The companies are also encouraging those users to research the use if VPN or the Tor Browser for web browsing and to change the passwords for their accounts.

Tech Companies Shift Their Posture on a Legal Shield, Wary of Being Left Behind

Some of the industry’s critics are skeptical, however, about a new flexibility to changes to Section 230 of the Communications Decency Act.
David McCabe

For more than two decades, the tech industry had a cohesive message to Congress about a law that shields internet platforms from lawsuits: Don’t touch it.

But now, as tech companies face intensifying attacks from political leaders, more of them are saying something else: Let’s work something out.

Numerous industry leaders have said in recent weeks that they are open to changes to the law, Section 230 of the Communications Decency Act. Mark Zuckerberg, Facebook’s chief executive, has said that the law should be updated, and Twitter’s chief executive has proposed possible “expansions” to it. Google has acknowledged “legitimate questions” about the law. On Tuesday, a group of smaller companies — including Snap, Reddit and Tripadvisor — plan to say that they are open to discussing reforms, too.

The shifting rhetoric comes as both Republicans and Democrats have threatened to make major changes to the legal shield or repeal it entirely. The law, passed in 1996, limits companies’ legal exposure for the words, photos and videos posted by users of their sites.

President Trump has threatened to veto a critical defense funding bill because it did not include a repeal of the protections. President-elect Joseph R. Biden Jr. has called for the shield to be “revoked.” Lawmakers in both parties have proposed major trims to it.

So far, the talk coming from the industry is not about repealing the law, or giving it an overhaul. The rhetoric is more about being open to tweaks around its edges while defending its core legal protections. But their new posture could change the dynamics of an increasingly heated debate over how to handle hate speech, extremist content and child pornography online.

“A lot of this is these companies understanding that change is coming one way or another,” said Mary Anne Franks, a professor at the University of Miami School of Law who has criticized aspects of the legal shield. “And one of the best ways to keep your interests in the center is to acknowledge that change is coming and try to shape it.”

The attacks on Section 230 are part of a larger effort by the government to rein in the tech giants. Two months ago, the Justice Department and a group of states accused Google of maintaining an illegal monopoly over online search. Last week, the Federal Trade Commission and 40 states filed their own antitrust lawsuits against Facebook, in a move that could ultimately result in the company being broken up.

Facebook, which has been criticized by liberals for allowing misinformation to spread and by conservatives who claim that the company takes too much right-leaning content down, has been the most outspoken about the need to change the law.

During his October appearance before a Senate Commerce Committee hearing, Mr. Zuckerberg said that Congress “should update the law to make sure that it’s working as intended.”

He proposed measures that would make it more clear to the public how content is moderated online. He also suggested that lawmakers could make it impossible for companies to use Section 230 protections in lawsuits when sites are “intentionally facilitating illegal activity.”

The company, like others in Silicon Valley, long pushed back vigorously against any talk of changing the law. Then, in 2017, Facebook and one of its lobbying groups supported a bill that eliminated the protections for sites that knowingly facilitated sex trafficking, a decision that frustrated some smaller companies.

Still, until recent months, the company resisted other changes to the law.

The new public posture taken by Facebook and other tech companies faces some skepticism.

Is this helpful?

“It is a rhetorical shift but in their action, they are continuing to actually oppose real reform,” said Senator Richard Blumenthal, a Democrat from Connecticut who has sponsored multiple pieces of legislation to limit the reach of the legal protections. “They are deeply averse to real changes.” Mr. Blumenthal said he was receptive to arguments that any changes shouldn’t disproportionately hurt small websites.

Tech companies may benefit from the political realities in the debate over the law. Many Republicans believe that it should be changed to force the platforms to keep more posts up, namely from conservative publishers and personalities. Many Democrats believe that by amending the law, they can encourage the platforms to remove more instances of drug sales, exploitative content and discriminatory advertising. A compromise has remained elusive.

Some smaller technology companies have acknowledged the possibility that lawmakers might alter Section 230, and the businesses are increasingly targeting their lobbying efforts at shaping any changes that might occur. In part, they fear that Facebook and other large companies could support a set of rules that only the biggest companies have the resources to follow.

Twitter’s chief executive, Jack Dorsey, appeared alongside Mr. Zuckerberg in October, and suggested ideas that could be “expansions” to Section 230. He has identified three possible areas for change: making platforms’ moderation processes more transparent, developing clear ways for users to appeal their decisions and giving users more choices about the algorithms that sort their content.

“We believe that the fundamentals of online speech, which are addressed through Section 230, remain; however, we should build upon Section 230 to reflect the realities of the modern digital age,” said Lauren Culbertson, Twitter’s head of public policy in the United States, in a statement. She said that unwittingly aiding dominant companies “should be avoided at all costs.”

Executives at Tripadvisor, one of the smaller companies that will announce Tuesday that they are open to the possibility of changes, said they understood that they will need to work with lawmakers to make sure any adjustments to the law reflect their concerns.

“We’ve definitely been engaged in other ways,” said Caitlin Brosseau, a senior director of government affairs and public policy at the company. “But I think we see this as an important element to overall engagement, education, advocacy that’s going to be necessary to getting a good outcome, if there is to be one.”

The lobbying efforts for the group of smaller companies, called Internet Works, are being run by Josh Ackil, a partner at Franklin Square Group, a firm that has long specialized in technology issues. The group has already met privately with congressional staff members looking at content moderation issues, Mr. Ackil said.

“This coalition brings new voices and diverse perspectives to Washington’s current Section 230 debate, which too often focuses on the largest internet platforms,” he said in a statement. The group plans to explain to policymakers how the companies see the core Section 230 protections as essential to the way they do business.

Ms. Brosseau, from Tripadvisor, said that their work would be aimed in part as making sure that if changes come, they are not “directed at a few instances or actors.”

“Whereas before, you might have gone in and it was just assumed, maybe, that you were there to oppose action,” she said.

FTC Issues Orders to Nine Social Media and Video Streaming Services Seeking Data About How They Collect, Use, and Present Information
December 14, 2020
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The Federal Trade Commission is issuing orders to nine social media and video streaming companies, requiring them to provide data on how they collect, use, and present personal information, their advertising and user engagement practices, and how their practices affect children and teens.

The FTC is issuing the orders under Section 6(b) of the FTC Act, which authorizes the Commission to conduct wide-ranging studies that do not have a specific law enforcement purpose. The orders are being sent to Amazon.com, Inc., ByteDance Ltd., which operates the short video service TikTok, Discord Inc., Facebook, Inc., Reddit, Inc., Snap Inc., Twitter, Inc., WhatsApp Inc., and YouTube LLC. The companies will have 45 days from the date they received the order to respond.

The FTC is seeking information specifically related to:

• how social media and video streaming services collect, use, track, estimate, or derive personal and demographic information;
• how they determine which ads and other content are shown to consumers;
• whether they apply algorithms or data analytics to personal information;
• how they measure, promote, and research user engagement; and
• how their practices affect children and teens.

The Commission voted 4-1 to issue the 6(b) orders to the nine social media and video service companies. Commissioner Noah Joshua Phillips voted no and issued a dissenting statement. Commissioners Rohit Chopra, Rebecca Kelly Slaughter, and Christine S. Wilson issued a statement on the matter.

The Federal Trade Commission works to promote competition and to protect and educate consumers. You can learn more about consumer topics and report scams, fraud, and bad business practices online at ReportFraud.ftc.gov. Like the FTC on Facebook(link is external), follow us on Twitter(link is external), get consumer alerts, read our blogs, and subscribe to press releases for the latest FTC news and resources.

Law Banning “Rental” Fees for Customer-Owned Routers Takes Effect Sunday

New law also targets hidden cable-TV fees and lets users cancel without penalty.
Jon Brodkin

Broadband and TV providers will finally be required to stop charging "rental" fees for equipment that customers own themselves, thanks to a new US law that takes effect on Sunday.

The bogus fees were outlawed by the Television Viewer Protection Act (TVPA), which was approved by Congress and signed by President Trump in December 2019. The law was originally scheduled to take effect on June 20, but Congress gave the Federal Communications Commission leeway to delay enforcement by six months if the FCC "finds that good cause exists for such an additional extension."

The FCC in April granted the six-month delay to ISPs, claiming that providers needed more time to comply because of the coronavirus pandemic. That decision delayed implementation of the new requirements until December 20, 2020.

Frontier must finally stop bogus charge

The change is good news for customers of Frontier Communications, which has insisted on charging $10 rental fees to customers who use their own routers. As we wrote in July 2019, Frontier claimed it charges the fee to cover higher support costs for customers who use their own equipment. But Frontier said at the same time that it "cannot support or repair non-Frontier equipment," contradicting its own justification for charging the fee.

Frontier took advantage of the six-month delay, telling Ars in June that it would "comply with the requirements when the law goes into effect" in December. Unlike Frontier, other major ISPs such as Comcast let customers avoid rental fees when they use their own routers.

The law's implementation will "put an end to the unconscionable business practice of charging consumers a rental fee for cable modem routers even if consumers do not use them!" consumer-advocacy group Public Knowledge said in a blog post. "This common-sense correction will permit consumers to continue to use their own equipment, and not be forced to pay for something they neither asked for nor needed."

When contacted by Ars today, Frontier said it is now "in compliance with the Television Viewer Protection Act. Customers that are charged for covered equipment may return equipment and will not have equipment charges. If a customer uses their own equipment, they may face compatibility issues with their service depending on the equipment, and Frontier may not be able to provide technical support."

The new law, passed as part of a budget bill, creates a "consumer right to accurate equipment charges" that prohibits TV and broadband providers from charging for "covered equipment provided by the consumer." Covered equipment is defined as "equipment (such as a router) employed on the premises of a person... to provide [TV service] or to provide fixed broadband Internet access service." The companies may not charge rental or lease fees in cases when "the provider has not provided the equipment to the consumer; or the consumer has returned the equipment to the provider."

New cable-TV transparency rules

The law also includes a right to transparency that requires TV providers to inform customers of the total monthly charges, including all company-imposed fees and a good-faith estimate of all government-imposed fees and taxes, before they enter into a contract. This notice must specify the amount of promotional discounts and when those discounts will expire. The law also gives customers a 24-hour period in which they can cancel new TV service without penalty.

The new rule won't prevent TV providers from raising prices on existing customers, even when they're under contract. For years, cable companies have been regularly increasing the "Broadcast TV" and "Regional Sports Network" fees that are excluded from advertised prices and requiring all customers to pay the higher rates regardless of their contract status.

But the new transparency requirement is a step in the right direction. "For years, consumers have been misled by pay-TV providers advertising service for one price and then charging another," Public Knowledge Senior VP Harold Feld said in a press release today. "Until now, consumers have had zero recourse for dealing with these surprise fees other than ending service and paying an unfair termination fee for the privilege. Not anymore."

Public Knowledge said the required 24-hour cancellation period will help prevent situations in which consumers sign up for TV service and then realize, after it's too late to cancel without penalty, "that they'd be charged hundreds of dollars a year in unexpected fees." Public Knowledge's blog post also said the law's implementation will help prospective Comcast customers, though not existing customers:

Importantly, this legislation will go into effect just in time to help consumers who are considering signing up for pay-TV service from Comcast. The company recently announced it would be raising its company-imposed fees like the Broadcast TV Fee and the Regional Sports Fee starting on January 1, 2021. These skyrocketing fees could cost Comcast customers an additional $78 a year. While the TVPA doesn't do much to help existing pay-TV customers, who will now be forking over enough money for a month or two of car insurance despite not knowing they would be doing so when purchasing their service, it would help new customers avoid signing up for a service they can't afford.

While the ban on charging rental fees for equipment that customers own applies to both TV and broadband service, the other transparency requirements affect only TV service. "Although the TVPA helps new customers avoid signing up for a budget-busting pay-TV service marketed at a significantly lower price, it doesn't extend to Internet service," Feld said. "We urge Congress to expand the requirements to Internet service providers so no consumer gets surprised by—and locked into paying—outrageous telecommunication fees."

Senator Tries to Block Frontier’s FCC Funding, Citing ISP’s Various Failures

Senator: Frontier mismanaged previous funds and shouldn’t get new gigabit money.
Jon Brodkin

A Republican US senator from West Virginia has asked the government to block broadband funding earmarked for Frontier Communications, saying that the ISP is not capable of delivering gigabit-speed Internet service to all required locations.

Sen. Shelley Moore Capito (R-W.Va.) outlined her concerns in a letter to Federal Communications Commission Chairman Ajit Pai last week. Capito told Pai that Frontier has mismanaged previous government funding and seems to lack both the technological capabilities and financial ability to deliver on its new obligations.

Frontier, which filed for bankruptcy in April, is one of 180 ISPs that won funding in the FCC's Rural Digital Opportunity Fund (RDOF) reverse-auction results announced last week. Frontier is due to receive $370.9 million over 10 years to bring broadband to 127,188 homes and businesses in eight states. Frontier's biggest payout is in West Virginia, where it is due to receive $247.6 million over 10 years to expand its broadband network to 79,391 locations.

Frontier won over two-thirds of the funding that the FCC allocated to West Virginia despite failing to hit FCC deadlines for a previous round of subsidized broadband deployment in West Virginia and other states. Under the previous funding allocated in 2015 via the FCC's Connect America Fund, Frontier was originally required to meet the build deadlines by the end of 2020. Frontier told Ars today that it will now meet that deadline "by the end of 2021."

“Pattern” of missing deadlines

Capito urged Pai to block Frontier's new funding by rejecting the ISP's long-form application, which must be completed by winning bidders in order to receive the allocated money. "The stakes are simply too high to provide nearly $250 million to a company that does not have the capability to deliver on the commitments made to the FCC," she wrote.

Under FCC rules, winning bidders must deploy broadband to 40 percent of required locations in each state within three calendar years, to 60 percent within four years, 80 percent within five years, and 100 percent within six years. Because Frontier won funding in the gigabit tier, it is required to offer download speeds of 1Gbps and upload speeds of 500Mbps along with monthly usage allowances of at least 2TB.

Capito described her reasons for concern about Frontier's ability to meet the requirements as follows:

Frontier's mismanagement of prior federal funding through the Broadband Technology Opportunity Fund program, resulting in $4.7 million in funds repaid to the federal government for improper use, raises significant questions about their ability to manage federal funds of this magnitude. Furthermore, Frontier has a documented pattern of history demonstrating inability to meet FCC deadlines for completion of Connect America Fund Phase II support in West Virginia. The inability to deploy federal funds in a timely fashion to make improvements to a network delivering broadband service at speeds of 10/1Mbps or higher should raise significant concerns about their capacity to build out a network delivering one hundred times that level.

Specifically with regards to Frontier's assigned performance tier, I urge you to exert the utmost scrutiny to ensure they have the technological capability to deliver gigabit level service in West Virginia. As stated in the Federal Register dated June 18, 2020, the FCC reserves the right to reject an applicant's long-form application if they do not meet the technical qualifications for the performance tier in which they were permitted to bid. Based on Frontier's current and previous performance, I am concerned they lack the technological capabilities in West Virginia to transition from a provider that struggles to deliver the FCC minimum standard of 25/3Mbps to a provider that is able to provide gigabit level service to 95 percent of the required number of locations in the state.

In April, we wrote about an audit report ordered by the West Virginia Public Service Commission, which found that Frontier's "copper network has at least 952,163 connection points that are susceptible to moisture, corrosion, loose connections, etc. that may cause interruptions of service to customers." The report also found that Frontier repeatedly failed to meet a service-quality benchmark that 85 percent of outages should be fixed within 48 hours. Frontier has about 300,000 customers in West Virginia, most of whom subscribe to DSL Internet service.

When contacted by Ars today, a Frontier spokesperson said that "due to quiet period regulations," the company "cannot comment beyond what has been made publicly available by the FCC." Frontier told the FCC it would use fiber-to-the-home to deliver gigabit speeds and will have to provide more detail on its network and funding plans in the long-form application.

We contacted the FCC about Capito's letter today and will update this article if we get a response.

Frontier’s bankruptcy

Frontier's bankruptcy also worries Capito. As the FCC subsidies apparently won't cover the full cost of deployment, she wrote that Frontier "would need to raise over $250 million in private capital to fund the buildout of a gigabit network in West Virginia."

Nationwide, the FCC awarded $9.2 billion to ISPs despite initially making $16 billion available. The reverse auction format resulted in lower payouts because ISPs compete for the funding. Capito wrote to Pai:

I urge you to closely scrutinize the financial capability of Frontier to finance these investments, particularly as they emerge from a Chapter 11 financial restructuring. Because of the nature of a reverse auction, it is entirely possible, if not likely that a bidder will be required to invest their own funds to cover costs above and beyond the subsidy provided by RDOF. Emerging from a financial restructuring requires significant private capital and I am concerned about the ability of Frontier to raise sufficient capital to both complete their financial restructuring and fund the construction of a network that will deliver the required gigabit level service in the locations they successfully bid in the RDOF auction. The expense of constructing a network capable of delivering gigabit service is an expensive and daunting feat for a company in a strong financial position, let alone one that is in financial turmoil.

At the time of its bankruptcy, Frontier acknowledged to investors that its "significant under-investment in fiber deployment" contributed greatly to the company's decline. Frontier has also faced investigations and complaints of chronic outages in New York, Minnesota, and Ohio.

Derek Turner, research director at advocacy group Free Press, is skeptical about Frontier's ability to deploy fiber-to-the-premises (FTTP) in remote areas. "Can Frontier handle FTTP deployment at this scale in rural areas? I can’t say; what I can say is that they bought most of their existing FTTP assets from Verizon, so their deployment track record is limited," Turner told Ars today. Turner has also criticized the FCC for awarding much of the RDOF funding to various ISPs in wealthy urban areas.

“I think the state is going to get screwed”

Capito is not the only official from West Virginia who has objected to Frontier getting federal money, as shown in a West Virginia Public Broadcasting report last week. Mike Holstine, secretary-treasurer of the West Virginia Broadband Enhancement Council, called Frontier's new funding "unbelievable."

"'I think the state is going to get screwed again,' [Holstine] said, referencing the Broadband Technology Opportunities Program scandal in which West Virginia was forced to return nearly $5 million in federal funds in 2017 after regulators discovered Frontier had wasted it," the news report said.

Frontier has said it expects to emerge from Chapter 11 bankruptcy in early 2021. Besides West Virginia, Frontier also won FCC funding in California, Connecticut, Florida, Illinois, New York, Pennsylvania, and Texas.

In May, Frontier completed a sale of its Northwest US operations to a newly formed ISP called Ziply Fiber. Ziply, referred to as Frontier Communications Northwest in FCC filings, participated in the RDOF auction and won funding in Idaho, Montana, Oregon, and Washington state.

After Leading Frontier into Bankruptcy, CEO Steps Aside
Alex Soule

After leading Frontier Communications into bankruptcy, Bernie Han is leaving the company with a United Kingdom telecommunications veteran to take his place as CEO starting next March.

Frontier installed Han as CEO entering December 2019, then filed for chapter 11 bankruptcy protection last April. The Norwalk-based company is currently seeking approval from states to exit bankruptcy, including in Connecticut where Connecticut Attorney General William Tong and union leaders have voiced skepticism over unanswered questions about its operating plan going forward.

Frontier has rejected the AG’s demand that the company guarantee it will keep its headquarters in Connecticut as a condition to having its bankruptcy approved, while giving no indication it has any plans to move elsewhere.

Incoming CEO Nick Jeffery, 52, has led Vodafone’s United Kingdom operations since 2016, previously heading up its Cable & Wireless subsidiary. Frontier will pay Jeffery a $1.3 million annual salary and a $3.75 million signing bonus, and he will be eligible for more than $8 million annually in additional bonus and equity awards. The company indicated it considered one or more existing Frontier executives for CEO, without specifying other candidates by name.

Jeffery inherits a broadbad company with billions of dollars in debt still on the books after exiting a bankruptcy that eliminated $11 billion in debt, while saving it $1 billion in annual interest payments in the years to come. While Frontier has failed to stem defections in its broadband, telephone and TV businesses, it reported a $15 million profit in the third quarter on revenue of $1.7 billion, down 4 percent from just three months earlier.

Frontier is pegging its prospects to rolling out fiber optic cable into neighborhoods to provide bigger bandwidth than its copper lines can achieve, even as rivals expand into other businesses like mobile plans. The company cites Connecticut among the states where it intends to invest in fiber going forward, telling state regulators is eyeing 10,000 initial endpoints statewide for the new gigabit-bandwidth service, and committing to reaching 100,000 locations over four years after clearing bankruptcy.

“Although it is still very early in the process, our [fiber] offer is very appealing to customers,” Han said Tuesday morning in a web conference call with investment analysts, during which he and other executives did not field questions. “Customers appear to welcome an alternative to cable. ... There are some signs of cable [companies] taking preemptive steps against us.”

Frontier took on a large chunk of debt executing former CEO Maggie Wilderotter’s deal to take over Verizon Communications territories in Florida, Texas and California. With Wilderotter having retired to run her family vineyard and inn east of Sacramento, Calif., Frontier promoted Dan McCarthy to the corner office to integrate the Verizon territories. McCarthy failed to put Frontier onto a growth trajectory before debt obligations became imminent, triggering the bankruptcy filing.

Whereas Han and McCarthy kept low profiles during their respective tenures running Frontier, Jeffery has been a vocal leader at Vodafone, both on the company’s official blog and through occasional posts on social media. In a post Tuesday morning on his LinkedIn page, Jeffery predicted “a bright future” for Frontier.

The Communications Workers of America is keeping an open stance on Jeffery’s hiring, according to Dave Weidlich Jr., president of CWA Local 1298 based in Hamden, who critiqued the compensation package in the context of benefits for rank-and-file workers. Weidlich added that Han had some success in instituting a better culture of customer service at Frontier, even with the challenges of managing a bankruptcy filing in the depths of the COVID-19 pandemic.

“There’s been a lot of practical things that [Han has] done that made common sense, ... that weren’t being done before,” Weidlich said. “Customer experience became a bigger priority with him, and small steps of progress were made. ... Bernie came in with a mission and got the ball rolling, and hopefully this guy picks it up.”

Amazon’s Answer to SpaceX Starlink Delivers 400Mbps in Prototype Phase

Amazon offers peek into development of antenna for Project Kuiper user terminal.
Jon Brodkin

Amazon's competitor to SpaceX Starlink is moving through the prototype-development phase, with the company announcing yesterday that it has "completed initial development on the antenna for our low-cost customer terminal."

Amazon said its "Ka-band phased-array antenna is based on a new architecture capable of delivering high-speed, low-latency broadband in a form factor that is smaller and lighter than legacy antenna designs" and the "prototype is already delivering speeds up to 400Mbps." Performance will get better in future versions, Amazon said.

Amazon in July received Federal Communications Commission approval to launch 3,236 low-Earth orbit satellites. The company says it plans to invest over $10 billion in its satellite-broadband division, which it calls Project Kuiper.

Ka-band antennas

To reduce production costs, Amazon said it must "decrease the size, weight, and complexity" of the antenna. But this is difficult with Ka-band equipment, which needs "more physical separation between transmit and receive antennas to cover its wide frequency range," Amazon said. "For this reason, legacy Ka-band antennas place the transmit antenna and receive antenna next to one another, requiring a larger surface area and increasing production costs."

Amazon said its solution is to use "tiny antenna element structures to overlay one over the other. This has never been accomplished in the Ka-band... Our design uses a combination of digital and analog components to electronically steer Ka-band beams toward satellites passing overhead." This method let Amazon create a "single aperture phased array antenna that measures 12 inches in diameter, making it three times smaller and proportionately lighter than legacy antenna designs," the company said.

FCC filings said that Amazon's satellite plan calls for using frequencies of 17.7-18.6GHz and 18.8-20.2GHz for space-to-Earth communications, and 27.5-30.0GHz for Earth-to-space transmissions.

Antenna “passed all” tests

Amazon said it has tested the prototype with a geostationary satellite, though it will use low-Earth satellites when it eventually offers broadband to customers.

"Amazon engineers have tested the antenna in multiple environments to ensure it will meet customers' standards for speed and performance," the company said. "The antenna has passed all corresponding tests for speed and latency—offering maximum throughput of up to 400Mbps, and streaming 4K-quality video from a geostationary (GEO) satellite, which is stationed at an altitude approximately 50 times farther from Earth than where Project Kuiper satellites will be deployed."

The antenna is being designed and tested at Amazon's new research and development facility in Redmond, Washington. Amazon is hiring for numerous open positions at Project Kuiper.

Amazon also published an interview with Nima Mahanfar, senior manager of Project Kuiper's antenna development. He provided more detail on how Amazon combined transmit and receive antennas:

The key advancement was combining transmit and receive phased-array antennas into one aperture. This can be done in other frequency bands, but Project Kuiper plans to operate in Ka-band, which has transmit and receive frequencies that are much further apart from one another. This makes it difficult, nearly impossible in fact, to combine transmit and receive into one aperture. Phased arrays are a class of radiating system, where multiple antennas—it could be two, it could be thousands—are on the same aperture, creating a focused beam of radio waves. The distance between the antennas—or the relation between these antennas—is decided by the frequency. If the frequencies are close to each other, as with Ku-Band, you can combine the transmit and receive function into one and it works. When the frequencies are far apart, as with Ka-Band, it's much more difficult to utilize the same lattice for both. This has never been done before—until now.

Our design involves hundreds of antennas in each aperture, with receive antennas operating at 18 to 20 gigahertz (GHz) and transmit antennas operating at 28 to 30 GHz. Our breakthrough came from the realization that we could get to a single lattice by looking at each antenna element uniquely—helping reduce the size and cost of our entire terminal.

Despite that complexity, the antenna must be simple enough to be "mass producible by mainstream circuit board manufacturers, allowing us to take advantage of economies of scale and produce millions at low cost," Mahanfar said.

Amazon prioritizes download speeds

Amazon had to balance tradeoffs between transmit and receive capabilities, with Mahanfar saying, "We always err on the side of improving receive performance" to ensure good download speeds. "On the transmit side, if you compromise performance, you can always increase the transmitted power by a little," he added.

Going forward, Mahanfar said he thinks Amazon can make the phased-array technology more affordable "by developing new technologies and architectures that could be fundamentally different from today's approach."

He also briefly discussed the phased-array technology that Amazon is building for the satellites it will launch into space. "Solving power challenges in space is hard, and dissipating the heat from that power is even harder," he said. "There's no air to cool it. So having a low-power system that can provide many gigabytes of service to customers is key. How can we reduce the power consumption of these space-borne phased arrays? That's one of the other big challenges facing anyone deploying phased array antennas in low earth orbit."

Amazon didn't provide any updates on when Kuiper will be ready for customers. FCC rules give Amazon six years to launch and operate 50 percent of its licensed satellites, with a deadline date of July 30, 2026. Amazon would have to launch the rest of the licensed satellites by July 30, 2029. Amazon previously said it plans to offer broadband to customers "once the first 578 satellites are launched."

SpaceX Starlink satellites are already delivering broadband to beta customers, with the company promising initial speeds of 50Mbps to 150Mbps and latency from 20ms to 40ms. SpaceX said it plans significant performance enhancements by summer 2021. See our previous coverage for details and images of SpaceX's user terminal, known as "Dishy McFlatface."

Amazon is also behind OneWeb, which recently exited bankruptcy and is planning satellite launches this month and "throughout 2021 and 2022." OneWeb yesterday announced a deal in which Hughes Network Systems, a traditional satellite provider, "will produce the gateway electronics for the OneWeb system as well as the core module that will be used in every user terminal."

Why Content is King

How media creates power
Nathan Baschez

Strategy trivia time! Here’s a fun quote from 1996. Do you know who said it?

“Content is where I expect much of the real money will be made on the Internet, just as it was in broadcasting.”

If you guessed it was a media tycoon, like Ted Turner or Rupert Murdoch, then you’d be wrong. It was actually Bill Gates! He wrote it in an essay titled “Content is King.”

I find this quote kind of amazing. Today, most of Gates’ peers (technology executives and investors) would vehemently disagree with it. I know this because I’ve experienced it personally. If I had a nickel for every VC that’s told me media is a bad business and I should really stop fooling around with content and build a proper software startup, like a civilized person, I’d be, umm, well-capitalized

And, look, I get it. Technology businesses really are amazing. Bill Gates might have been wrong in 1996. But I think great media businesses are massively underrated and misunderstood in technology circles.

In my experience with Hardbound, Gimlet, Substack, and now the Everything bundle, I’ve come to believe that content can create incredibly strong moats. There are properties inherent to narratives and ideas that make them naturally powerful — kind of like how social networks, marketplaces, and platforms are inherently power-prone.

But not every media business benefits from them. There are winners and losers. To understand why — and, in the process, improve your chances of building and picking winners — we’ve got to dive into the mechanics of how these powers actually operate.

I have long searched for a book or essay that lays it all out, but couldn’t find a comprehensive guide. So this is my attempt to create one.

It’s also important to note that I’m putting my money where my mouth is — these principles inform the conversations Dan and I have every day about the work we’re doing to build the bundle. It’s far too soon to tell if it will work yet, and it’s far from the only factor that will determine our outcome, but we’re happy with our progress so far.

So, here’s the plan:

We’re going to analyze media from a systems perspective, and explore the properties that make it a good source of power. We’ll use my favorite framework, Hamilton Helmer’s 7 Powers, to structure our exploration. If you haven’t read 7 Powers, that’s totally fine. Basically all you need to know is it’s a list of the different types of powers businesses can have, which enable them to maintain profitability and resist competitive arbitrage. For each power type, I’ll explain the ways content can create it.

Ready? Great! Let’s dive in.

1. Scale Economies

Content can be infinitely copied and distributed for free. There are basically no variable costs — it’s all fixed. This creates a situation where scale economies rule the day. The bigger you get, the more you can invest in creating ever higher-quality content. And the better your content, the more cash it generates, the more you can reinvest to increase the quantity and quality of your output. It’s a positive feedback loop.

The key phenomenon to focus on here is how correlated increased investment is with increased success. It’s easy to spend more than your competitor on creating content, but it can be hard to translate that increased investment into predictable increases in value to audiences. For example, Joe Rogan’s podcast costs very little to create, and no matter how much other podcasts spend, his audience keeps on listening.

But the dynamics in audio are unique. Other mediums, like video games and movies, require massive investment, making it extremely difficult for anyone except the biggest studios to compete at the highest levels. For example, in 2019, Disney created 7 of the top 10 grossing films. There are a lot of reasons for that, but certainly one of the biggest is sheer economies of scale.

Here’s a scatter chart of the top 50 grossing films from 2019 with budget on the y-axis and worldwide box office returns on the x-axis. There’s a slight linear correlation between budget and returns, but more importantly, none of these films cost less than $20m, and the average film cost $129m to make.

This dynamic isn’t unique to film. In many forms of content, we see that the most successful organizations also tend to spend the most in absolute terms. The New York Times pays journalists to travel all over the world and gather evidence that may or may not yield an important story. TikTok stars rent mansions and invest heavily in makeup, wardrobe, personal trainers, and chefs. Newsletter writers who spend all their time researching and writing tend to outcompete those who only spend a couple hours a week. Low-budget winners like Joe Rogan and Blumhouse are the exception, not the rule.

This is the thing many tech investors I’ve spoken with don’t get about content: they think of it as more like a variable cost than it really is. They think content businesses are about churning out an enormous volume of material, so if you want to grow you have to keep hiring more content creators. But this isn’t how successful content businesses work. They don’t primarily scale by increasing quantity, they scale by increasing quality. They’re aiming for hits. And they develop creative ways to reduce that risk by spending more.

One of those ways is massive marketing campaigns. That may seem like a waste, but when it comes to potential blockbusters, it actually makes the product itself more valuable when more people are aware of it.

Which brings me to the next power, the one I find most fascinating...

2. Network Economies

Most people think network effects only apply to communication platforms like Facebook, YouTube, and Slack. But narratives can also have network effects.

When we watch a movie, read a book, or listen to a podcast, we never do so in isolation. We’re equipping ourselves to understand the people around us. Have you ever met someone who hasn’t read Harry Potter? They’re treated like sinners by the Wizarding World faithful! Same with Game of Thrones, Star Wars, The Avengers, and any other popular franchise.

Why should people care if anyone else has seen their favorite show? Because shared experiences are the basis of mutual understanding. Even if we’ve never talked before, I can learn something important about you when we talk about our complex feelings towards Harry and Ginny’s relationship. You can send me a reaction gif with McGonagall giving “the look” and I will know exactly what you mean.

And this force doesn’t just apply in pop culture. Having a shared set of narratives, concepts, and symbols is the basis, ultimately, for all culture — religious, national, ethnic, commercial, scientific, etc. How can you operate in biology if you’re not familiar with Darwin? How can you operate in tech if you’re not fluent in Aggregation Theory? You can’t. Even if you think the ideas are wrong, it’s important to understand them so you can understand the things the people around you are saying and doing.

Ultimately, each new unit of content is a new unit of culture. The more popular the unit becomes, the more it gets woven into the basic fabric of society, the harder it becomes to avoid knowing it.

When you think about it, languages are just networks of words; culture is just networks of narratives; and content is the thing we do to extend the network. It’s completely obvious why languages have network effects — the more people that speak a language, the more valuable it is to speak that language — so why shouldn’t content not reflect that basic dynamic?

The practical upshot is you should focus on doubling down on your wins. Once you have something that feels like it has the potential to be a narrative that many people connect with, it’s probably better to amplify and extend that than it is to muddle the waters with a bunch of other stuff. As Nathan Barry, founder of ConvertKit, once told me: you want to build a skyscraper, rather than a strip mall.

Disney understands this — just look at how they’ve prioritized worlds like Star Wars and Marvel. Love it or hate it, the “franchise” model works.

But of course, no matter how powerful a networked world may become, it’s always possible that a new generation wants something different. And in those situations, new narratives may find strength through...

3. Counter Positioning

This term is a Hamilton Helmer original, and describes situations where startups have power relative to incumbents, thanks to a superior business model that can’t be copied without damaging their existing business. For example, Vanguard counter-positioned active investors by giving customers the ability to simply index the market, and charged rock-bottom fees. This was difficult for active investors to compete with because it required them to reduce their fees, and because the entire premise of passive fund management calls into question their core value proposition.

Content can counter-position other content, too. For example, think of Barstool Sports vs ESPN, or TMZ vs People. We often see turnover in content brands that’s caused when new brands discover something important that younger audiences want, but is incompatible with the values of the incumbent brand. The incumbents can’t copy the startups’ content, or they’d make the product worse for their existing customers.

But, honestly, I think this force is relatively weak compared to the others in this essay. There are many examples of successful media brands that change with the times and continue to attract new audiences. Just look at The New York Times (169 years old), Marvel (81 years old), and The Atlantic (163 years old). And even if an individual editorial brand can’t stand the test of time, it’s common and easy for a single corporation to own a portfolio of brands and rotate them out over time as they fade.

If you’re building a new media brand, it can help to do things your establishment competitors wouldn’t be willing to countenance. It might be a bit scary, because maybe you’re starting the business in the first place in order to impress those people, but once your audience starts growing perhaps you won’t need their validation so much.

If you’re managing an incumbent media brand, it can be useful to incrementally stretch towards new, younger audiences as much as you feel you can stomach. Of course you don’t want to lose touch with your core. But it’s important to reconsider each year what editorial guidelines are helping you, and which are harming.

But even if you fail to evolve, you might be able to retain a good portion of your existing audience, because media properties can actually have quite powerful...

4. Switching Costs

Businesses with high switching costs tend to be highly profitable, because it’s so painful for their customers to leave that they’re willing to stay and pay a premium, even if an attractive new option comes along. Typically high switching costs are caused by products that are highly complex, and deeply integrated into their customers’ operations. Salesforce, for example, has fantastically high switching costs. Once you’re in, you’re really in.

This happens in a weird way with content, too. Imagine a teenager who spends dozens of hours a week creating and consuming content about BTS, or an academic who spends years mastering a specific subfield within economics, or a die-hard 4th generation Yankees fan. These people are all literally invested. Imagine how much work they’d have to do to get the same kind of satisfaction from another subject! All their built up knowledge can be leveraged to make future content more meaningful and interesting to them. Without that history, new subjects just aren’t as compelling.

This explains why, once I fell into the Vlog Squad rabbit hole on YouTube, I chose to spend more time listening to their podcasts and watching their TikToks than seeking out new creators. I already have a ton of context, which makes even little things interesting. I don’t feel like I have time to get into some other world, unless there’s a compelling reason to do so.

This whole phenomena is connected to the more general pattern where people tend to have stable interests once they reach adulthood. Sure, they’ll dabble in new things and even pick up entirely new interests. But this is rare, and usually happens when an existing interest forms an easy bridge into a new one.

And the switching costs get even higher when communities form. For example, maybe I originally got interested in startups because I wanted to build one, but now I know so many people and I have so much of my own relationships and reputation based on it that I can’t imagine leaving.

But loyalty isn’t purely enforced by the costs of switching. With media, people also stick around because they get so much value from...

5. Branding

Brands are the sum of the perceptions people have about products and companies. They can be a source of power in two main situations:

1. When quality is uncertain, and

2. When people want to associate with the brand in order to signal something about themselves

For example, chain restaurants have power because of the former, and luxury brands have power rooted in the latter. Content brands have both in spades.

Let’s look at uncertainty first. This is especially important in media, because content is, for the most part, consumable. This creates a problem that we all must solve for ourselves each day: finding new good things. This is why branding is so important in content. Most content out there is junk and not right for us. But some of it is amazing. Brands are the only way we can reliably navigate to the good stuff.

The second source of branding power, social signaling, is also extremely common in content. It’s a lot easier to imbue specific meaning into media than into other types of goods like cars, diamonds, and furniture. What content lacks in its ability to signal wealth, it makes up for in its ability to signal extremely specific attributes and affinities. For example, I couldn’t tell you the difference between fans of Cowboy Bebop and Dragonball Z, but I’d wager a lot of money that millions of anime fans could go on for hours about the subtle differences in who likes one or the other.

This signaling attribute also helps explain why content has network effects. We tell people about stuff we like in order to communicate something about ourselves, but it only works if other people know what the signal means. On the other side, one of the main ways people decide what content to consume is by listening to recommendations from people they respect. So it forms a self-reinforcing cycle that makes some content wildly popular, and keeps other content from spreading. For example, I probably enjoy Scuttleblurb a bit more than Stratechery, but I mention Stratechery way more, because there’s a much greater chance that people will know what I’m talking about.

So yeah, branding matters a lot with content. But there’s an interesting difference between content branding and other forms of brands: content is much more closely tied to its creator. Which leads us to our next power...

6. Cornered Resource

This power happens when, for some reason, a business has an exclusive claim to a scarce and valuable resource. For instance, Lipitor generated nearly $100 billion for Pfizer between 1992–2001, because for most of that time Pfizer owned the exclusive patent on the drug.

With content, the ultimate cornered resource is creative talent. Creators can’t be separated from their creations. Taylor Swift has an irrevocable monopoly on Taylor Swift, no matter what derivative rights some suits may try to buy and sell. Her fans are ultimately loyal to her.

This strong bond between content and creator is a weakness for many media businesses, forcing them to pass big chunks of their profits along to talent, rather than keeping it to themselves like most businesses. This phenomenon is actually why the word “talent” exists — to distinguish absurdly expensive non-commodity employees from relatively commoditized workers.

You could look at this and say it’s a weakness of media companies, and you’d be right, but I look at it and say it’s an example of just how much power emanates from content. It’s like fire — useful, but it can burn you.

Some media companies manage this problem by devising systems that generate content without relying too much on any particular creator. Morning Brew, theSkimm, and SNL all have formats that work even if one creator leaves. The goal is to build a locus of value that lives inside the system, rather than specific individual’s brains.

Other companies exploit this strong linkage by empowering creators to go independent. Substack, where I used to work, is perhaps the most notable example. This year we’ve seen dozens of prominent journalists break away from their publications in order to go independent on Substack. The reason it’s possible is because their fans care about their creativity more than the company they used to work for.

There’s something magic that’s hard to replicate about their process that gives them power, which ties nicely into our final section...

7. Process Power

Companies that master a compex, opaque process to create superior value are said to have “process power.” The key here is that the process be extremely difficult to copy, and yet be critical to creating the benefits customers most value. The poster child for process power is Toyota. They successfully competed with US automakers by making a thousand tiny improvements to the process of car creation. When layered together, it made a huge difference. But it was so complex it took a long time for competitors to copy it.

The same force helps explain the dominance of top content creators. The creative process is also incredibly complex and opaque. Every successful creator has to cultivate their own information ecosystem, prototyping process, and methods for polishing their work. This takes years to learn, and every individual and team has to, to some extent, figure it out on their own.

Take the movie industry for example. Even if I gave you $100m, the chances are vanishingly low that you’d be able to produce a hit without enlisting the help of someone who knows the process. It takes a huge amount of complex knowledge to organize this kind of work. The same goes for any other creative endeavor — songwriting, book publishing, game design, etc.

This is pretty much the textbook definition of process power.


If you want to understand why some media businesses are so much bigger and more profitable than others, look no further than the powers we outlined above. You can use each of the seven to analyze any company, and you’ll probably have a pretty good understanding of what makes it work — or not.

If you want to create successful content, unfortunately I don’t think this essay will help you much. But if you do manage to create content that people love it can help you understand what power you do have, so you can manage it more effectively. For example it may empower star writers to go independent, extend their hits, invest in marketing so they reap the advantages of network effects, etc.

This Man Is Betting $1.7 Billion on the Rights to Your Favorite Songs

Merck Mercuriadis thinks songwriters deserve more credit — starting with blockbuster paydays for their catalogs. But not all artists want to sell out.
Ben Sisario

Merck Mercuriadis was sitting in a small office at Abbey Road Studios, pecking away at a vegan breakfast bowl and calmly laying out his plan to dismantle the part of the music business that he loves the most.

A longtime record executive and artist manager who counts Guns N’ Roses and Elton John among his former clients, Mercuriadis has become the industry’s most polarizing figure by storming the ramparts of the music publishing world — the lucrative if lesser-known side of the business that handles the licensing and royalties of songwriting catalogs.

“The traditional music publishing model,” Mercuriadis said, in the steady tone of a general planning out his big offensive, “is something that I want to destroy.”

Whole swaths of the music business, like touring, shut down in 2020, but music publishing has had a stunning bull market. The action has all been in catalogs: bundles of songwriting copyrights that, if popular and long-lasting enough, can collect steady, predictable streams of income. Thanks to plentiful investment coffers, rosy projections about online streaming and, less happily, the need of many artists to raise cash during the pandemic, there has been a flurry of deals this year, often at staggering prices. Stevie Nicks sold a majority share in her catalog for $80 million. Bob Dylan signed away his entire corpus of more than 600 copyrights for a sum estimated at $300 million to $400 million.

The company that has driven the most transactions, and done so the fastest, is Hipgnosis Songs Fund, which Mercuriadis introduced on the London Stock Exchange in July 2018. In just two and a half years, Hipgnosis has spent about $1.7 billion scooping up the rights to more than 57,000 songs from an enviable list of writers. Hipgnosis owns, in full or in part, 108 songs by the hip-hop producer Timbaland; 188 by Jack Antonoff, a collaborator of Taylor Swift; 197 by Debbie Harry and Chris Stein of Blondie; 814 by RZA of the Wu-Tang Clan; 315 by Mark Ronson; and 1,068 by Dave Stewart of Eurythmics.

But to hear Mercuriadis tell it, the business structure that has sustained the publishing market — and the livelihoods of songwriters — for more than a century is fundamentally broken and needs to be rebuilt.

“People look at songs as being inanimate objects; I don’t,” he said. “I think that they’re the great energy that makes the world go ’round, and I think that they deserve to be managed with the same level of responsibility that human beings do.”

In a series of interviews with The New York Times this year, Mercuriadis shared his plan for Hipgnosis, which is inseparable from his critique of the music publishing establishment. The big publishers — which are all divisions of the major record conglomerates — own far too much material to exploit it all properly, he says. Sony/ATV, for example, has nearly five million songs in its portfolio. (Among them are two of the industry’s ultimate trophies: the Beatles and Motown songbooks.) The term publisher, Mercuriadis has said, is “a euphemism for someone that collects your money but doesn’t really add value to the song.”

In its place, he posits a bold but somewhat vague plan called “song management,” in which leaner companies look after smaller collections of high-value hits, and each track is held to a profit-and-loss analysis to ensure its value is maximized. Hipgnosis, he says, will eventually have no more than around 150,000 titles.

Mercuriadis’s pitch, and the big bucks Hipgnosis has paid, have gotten the industry’s attention. And in headline numbers, at least, Hipgnosis is off to a successful start. Its latest financial results, published this month, reported that the “fair value” of its catalog, as determined by an independent reviewer, rose 10 percent from April to September.

Hipgnosis’s growing collection means that its songs are everywhere. It recently acquired a slice of “All I Want for Christmas Is You,” Mariah Carey’s inescapable holiday standard, and the new season of Netflix’s hit show “The Crown” uses four songs from the Hipgnosis portfolio.

But Mercuriadis has drawn a backlash from the establishment he has provoked. They question whether Hipgnosis can ever earn back the sums it is paying, and whether “song management” is any different from what other music publishers do every day.

“One thing that Merck is doing really well is persuading people with deep pockets that music publishing is a simple business which others are doing badly,” said Jane Dyball, the former chief executive of the Music Publishers Association, a trade group in Britain. “In reality it’s not a simple business.”

Even his critics, however, acknowledge that Mercuriadis has raised the temperature of the business, and that by paying top dollar to buy out songwriters’ work, Hipgnosis may be driving a fundamental change in the industry. (In the sharp-elbowed publishing world, though, the other guy’s deals are never as golden as one’s own.)

“He’s stirred the bottom of the barrel,” said Larry Mestel, the founder of Primary Wave Music, whose portfolio includes Nicks, Bob Marley, Burt Bacharach and Smokey Robinson. “Merck has been getting a lot of splash because he’s closing a lot of high-multiple deals, but he’s not closing the quality we’re closing.”

In person, Mercuriadis, 57, comes across as less a corporate raider than a colossally ambitious music nerd, with a clean-shaven head and an ever-present black Prada jacket. He grew up in a small town in Nova Scotia and tells of record-buying pilgrimages to Halifax. Hipgnosis Songs Fund is named after Hipgnosis, the British design firm whose high-concept album cover art for Pink Floyd, Led Zeppelin and others redefined rock marketing.

Mercuriadis, who skipped college to work for the Virgin Records label in Toronto, spent much of his career at Sanctuary, a label and management company that went on a buying spree of its own before its share price collapsed and the company was sold to Universal Music in 2007. Mercuriadis, who rose to become Sanctuary’s chief executive, blames its demise on the broader crisis of the post-Napster music industry.

At Sanctuary, Mercuriadis built a reputation as a shrewd industry player and a vigorous advocate for talent. His fanboy charm gives him an advantage with artists and songwriters, who have often been conditioned not to sell.

“He’s always been bonkers obsessed about songs,” said Stewart, who has known Mercuriadis for three decades. “He can recite lyrics to the most obscure B-side of a Eurythmics song. He can actually mumble them. Well, he’s not a great singer.”

Harry likened Mercuriadis to the “real music men” of the old-school industry. “This was their life; they did it because the music inspired them,” she said. “I got that feeling about Merck as well, which is really important for a person like me.”

Hipgnosis, like other publishers, fills its portfolio with both old and new songs. It has 73 songs by Starrah, for example, who has written for Rihanna and Camila Cabello, along with 917 recorded tracks by Barry Manilow.

Mercuriadis, who is the founder of Hipgnosis as well as the chief executive of its affiliated investment adviser, makes a persuasive case for songwriting copyrights being undervalued assets.

Streaming, which helped turn around the moribund fortunes of the 21st-century music industry, has also cemented a pop production model in which few stars write their own material. Instead, they are furnished with songs by a network of writers and producers — yet industry formulas generally split streaming royalties in a way that pays performing artists around five times more than songwriters.

“We are now in a paradigm where 90 percent of artists that are being signed are reliant on songwriters to help deliver hits,” Mercuriadis says. “And yet the songwriter is now the low man or woman on the totem pole when it comes to getting paid.”

By building a portfolio of top songs, and gaining the endorsement of major writers — who may have given up their rights, but were paid handsomely for them — Mercuriadis believes he can gain leverage to “change where the songwriter sits in the economic equation.”

Mercuriadis also says that next year he and Hipgnosis will endow a “songwriters’ guild” to lobby for changes to the industry’s status quo. That may be difficult, however, since, in the United States, the publishing business is heavily regulated by federal statute and antitrust agreements.

Mercuriadis’s pitch to investors is that the royalty streams of proven hits are a more stable investment than gold or oil, given the inelastic demand for music — a premise that has largely held up during the pandemic.

“Music has been able to prove itself out this year as being uncorrelated to the overall marketplace,” said Nari Matsuura, a partner at Massarsky Consulting, which estimates the value of music catalogs on behalf of investors and publishers, including Hipgnosis. “Investors are increasingly attracted to music since other industries are under turmoil.”

A confluence of factors, including low interest rates and high stock prices, has made music royalties appealing to institutional investors like pension funds and university endowments, which tend to favor safe and steady growth. Hipgnosis, which pays an annual dividend of about 7 cents per share, counts the Church of England among its major investors.

When publishing catalogs are sold, the price is usually set as a multiple of their annual earnings. Lately those multiples have been skyrocketing. According to Massarsky data, a decade ago most catalogs were trading at multiples of nine or 10. By 2018, collections of “standards” — popular songs from before the year 2000 — were going for an average of 13.5 times earnings. In 2019, the multiple grew to 16. This year, it is 17.5.

Hipgnosis has disclosed that its average multiple is 14.76, although Mercuriadis said that for some “important” catalogs it has paid multiples as high as 22. Hipgnosis’s competitors accuse it of driving up prices; Mercuriadis says his deals are guided by thorough price analyses and portrays other players’ complaints as sour grapes.

“The only ones that say I overpay,” he said, “are the ones whose access I have killed.”

Nile Rodgers of Chic, who is on Hipgnosis’s advisory board and is managed by Mercuriadis, dismissed the very idea of overpaying for music that is timeless. “You can never pay too much because the life of hit songs is forever,” he said in an interview.

“At some point in time you’ll be in black ink, no matter what,” he added. “It just depends on how you structure your business.”

Rising prices for catalogs also means bigger rewards for writers who sell — a temptation being hotly debated behind the scenes.

The music industry has a troubled history of artists’ selling their copyrights and losing control of their treasures. Stories like that of Brian Wilson of the Beach Boys, whose father sold the group’s songwriting catalog in 1969 for $700,000 — a pittance in hindsight — still haunt many artists and their advisers.

“My whole training has been: Don’t sell out. Keep the money,” said one veteran manager. “I was brought up thinking that everybody sold out cheap.”

From its earliest days, the music publishing business has been portrayed as a “river of nickels,” bringing in a few cents in royalties here, a few more there. But for valuable, long-lasting copyrights, which tend to be recorded over and over again — think of the many versions of Leonard Cohen’s “Hallelujah” — those nickels add up to millions.

Successful singer-songwriters tend to view their catalogs as their most valuable asset, and Hipgnosis has pushed the envelope in seeking to buy out those assets entirely.

The publishing business splits the income and ownership of songs between a writer and a publisher. A writer is typically paid half of a song’s earnings; the rest of it — and the ownership of its copyright — may be divided between writer and publisher, or either party might own it outright. In most cases, a publisher retains control and administers the use of the song.

For most of its deals, Hipgnosis buys 100 percent of a songwriter’s control, including the copyrights. Those deals were once rare, but lately they have become more common. Dylan’s recent sale, for example, gave Universal total ownership of his work.

For many writers, the sums now being offered have changed the calculus of whether to sell.

“It’s almost like a stock-trading business; you can say hold on to a stock, but sometimes the price is really at its peak,” said Dion Wilson, the producer and writer known as No I.D., who has worked with Kanye West, Jay-Z and many others, and in August signed a deal giving Hipgnosis control over his share of 273 songs.

Still, many artists complain that they have no choice but to consider selling their most prized asset because of the loss of touring income during the pandemic and anemic royalty rates from streaming services.

“We’ve been forcibly retired,” said David Crosby, who added that he is in active negotiations to sell his publishing rights. “I don’t have savings and I don’t have any retirement program. But I did have my publishing. It’s the only option that’s open to me to take care of myself and my family.”

Mercuriadis sees his deals as a recognition of the great value of songwriters’ work and a source of empowerment for them — their paydays, he said, have “de-risked” their futures, making them less reliant on the industry’s status quo.

“I wanted to be able to do something,” he said, “that would contribute to having the music industry recognize that the songwriter and the producer are really the star of the show.”

Streaming Is Stalling: Can Music Keep Up in the Attention Economy?

Has streaming volume really peaked in the U.S., or is the current stalled growth a blip?
Will Page

Music streaming services have continued to add U.S. subscribers this year, according to MIDiA Research, growing by 11 million paying users from January to September, to 117.9 million. But in a potentially troubling sign for the recorded music business, the number of total streams has remained the same.

For the past four months and counting, audio music streams have averaged 17.5 billion a week. That’s up slightly from the early March pre-pandemic peak, before the lockdown cut music listening down by 13% to a year low of less than 15 billion streams, as consumers stopped commuting and obsessed over the news. Streaming gradually rebounded, increasing 15% by the end of June — but has plateaued since.

This could actually be good news for streaming services, which for the past two years have been pouring money into podcasts, which cost them less. Streaming companies don’t have to share as much revenue on podcasts — a growing number of which they own — as they do on streams of music, most of which they don’t. But for record labels, publishers, songwriters and artists, this may be the calm before the storm. In the short term, at least, the lack of growth in the number of streams won’t impact the music industry’s aggregate streaming revenue — if subscribers are added and consumption stays flat, rights holders just make more per stream. But a move toward podcasts could cost rights holders leverage in licensing negotiations.

Perhaps more important, with some 55,000 new tracks being uploaded onto streaming services every day — up from the 40,000 reported in April 2019 — you have a dilemma: more songs (and more users) competing for a fixed number of streams.

Has streaming volume really peaked in the U.S., though, or is the current growth freeze just a blip?

A number of factors seem temporary. Label sources point to the previous year, where cyclical trends in the release schedule led to finite periods of flatness. The presidential election also appears to have cut into music time, given the sharp dip in streaming during election week itself. Thanksgiving has also historically seen a 2% to 3% dip in music streaming. (The U.K., by comparison, where neither occurred, saw streaming dip 5% when the pandemic hit but regained momentum in three weeks and has continued to edge upwards since.) Another obvious factor limiting music streaming time for now is the lack of commuting, with most offices still closed.

Other forces are putting permanent pressure on streaming volume, though. Gaming is competing for attention with music. Market research firm IDG Consulting reports increasing average gameplay hours per user across the board. Counter Strike Global Offensive play increased 40% since the pandemic started and Defense of the Ancients is up 38%. Roblox, which appeals to kids 9 and up, hit 120 million global monthly active users in June 2020, and IDG Consulting now puts that figure at about 160 million — a fifth of which are likely in the U.S. That’s a 33% increase in just the past five months.

TikTok is also giving music streaming platforms a run for their money. The company claimed 100 million U.S. daily active users in September. For context the U.S. online population under the age of 29 is only 110 million, meaning TikTok may have already soaked up its addressable market. The app has been installed more than 66 million times this year, according to app analytics company Sensor Tower, and 37% of that activity happened between April and June. The company estimates that 40% of TikTok’s U.S. growth was accumulated in 2020. (From July to September, installs dropped by 31%, possibly indicating a saturation point.)

Tom Silverman, founder of Tommy Boy Records, views kids' obsession with swiping 30-second clips on TikTok as a new era of the sub-song, asking, "If a single used to be an ad or trailer for an album, is a sub-song a trailer or ad for a single?"

If young kids are hooked on Roblox, and older kids are TikToking, then their parents may increasingly be listening to podcasts. Between 2014 and 2019, time spent with music was down 5% and time spent with spoken word was up 20%, according to a report by NPR and Edison Research. The lack of authoritative data on podcast consumption, however, makes it difficult to gauge its impact on music streaming. Measurement is difficult: a download of a podcast on the Apple app does not constitute a listen, while Spotify claims that 22% of its users engaged with podcast content in the third quarter, up from 21% the prior quarter, but does not define what that means.

When artists resume touring and releasing big albums to drive ticket sales, music streaming could still return back to growth, but the new attention economy guards against such complacency. With these three “attention merchants” competing for consumers’ increasingly scarce time, it’s likely that music streaming will struggle to grow even when things return to normal. We know that songs are getting shorter, and without more songs being consumed, music is already losing the battle for attention.

The Highest Fidelity

Sound engineers have better ways to trick listeners’ ears
That will improve those listeners’ experiences

HUMAN BEINGS are good at locating the sources of sounds. Even when blindfolded, most people can point to within ten degrees of the true direction of a sound’s origin. This is a useful knack for evading danger. It is also an extraordinary cerebral feat. Partly, it is a matter of detecting minute differences of volume in each ear. Partly, it comes from tiny disparities in the time it takes a sound to reach two ears that are not equidistant from its source. The heavy lifting of sound-location, however, involves something else entirely.

Audio buffs call it the head-related transfer function. A sound is modulated by the body parts it encounters before it reaches the eardrums. In particular, the various tissues of the head attenuate higher frequencies, weakening the top notes of sound waves that have passed to an eardrum through the skull compared with those from the same source that have arrived directly through the air. The cartilaginous ridges, troughs and protuberances of the outer ear also alter sound before it is transduced into nerve signals. Sounds arriving from different angles are therefore modified in consistent ways that the brain learns to recognise.

For all of their acoustic spatial awareness, however, brains can still be fooled by appropriate technology into believing a sound is coming from somewhere that it is not. That sounds like the basis of a big business. And it is.

Sounds good

One way to simulate the “immersive” sound of reality through a pair of earbuds is by using a pair of recordings made with microphones embedded in the ear canals of a special dummy head. These heads are made to have the same shape and density as those of their flesh-and-blood counterparts. That means they modulate sound waves passing through them in a realistic manner. Recordings made using them therefore log what would arrive at the ear canals of someone listening to the sound in question for real. When they are played back, what a user hears recapitulates that experience, including the apparent directions from which the sounds are coming.

Dummy-based binaural recordings of this sort have been around for a while. But making them is clunky. It is also expensive. A good dummy head can cost $10,000, and time in a professional recording studio is hardly cheap. These days, though, the process can be emulated inside a computer. And that is leading to a creative explosion.

The trick that the emulator must master is a process called phase modulation. This involves retarding a sound’s high, medium and low frequencies by the slight but varying fractions of a second by which those frequencies would be delayed by different parts of the ears and head in reality. So writing the appropriate software starts by collecting a lot of data on how sound waves interact with a human head, and that means going back to the studio to conduct special binaural recordings, often using people instead of dummies. The resulting signals can then be decomposed into their component frequencies, which yields an understanding of how to modulate a given frequency to make it seem as if it is arriving from a particular location.

Demand for software to mix sound in this way has shot up says Lars Isaksson of Dirac Research, a firm in Uppsala, Sweden. Dirac developed its own version of such software, known as Dirac 3D Audio, by using a year’s worth of recordings it made that encompassed each degree of rotation, both side to side and up and down, around a listener’s head. This panaudicon provided, Mr Isaksson says, notable smoothness in the simulated movement of sound sources. Makers of video games are a big market for such stuff.

Dirac is not alone. Half a dozen other firms, including Dolby Laboratories of America and Sennheiser of Germany, also now make immersive software. To use it, a sound engineer employs a graphic interface that includes a representation of a sphere surrounding an icon representing the listener. The engineer uses a mouse to move sound channels—vocals, percussion and so on, if the product is music—to the points in the sphere from which their outputs are intended to originate. Software of this sort provides a way to take any recording and “project it in 3D”, says Véronique Larcher, co-director of Sennheiser’s division for immersive audio.

Sennheiser’s product is called AMBEO. Dolby’s is called Atmos. This has generated the soundtracks of more than 20 video games and 2,500 films and television shows, as well as many pieces of music. Immersive sound may even come to videoconferencing. Dirac is promoting software that makes the voices of participants seem to emerge from the spots on the screen where their images appear. The software uses a laptop’s camera to track listeners’ heads. To those who look, say, left, it will sound as though their interlocutors are off to the right. Dirac is in talks with videoconferencing firms including
BlueJeans, Lifesize and Zoom.

Facebook, a social-media company, is also designing “spatialised audio” for video calls that use its Oculus virtual-reality headsets. Ravish Mehra, head of audio research at Facebook Reality Labs, is coy about how long it will take his team to perfect the aural illusion that this is intended to create. But he says software the firm has in development can modify the frequencies and volumes of sounds so that they match the virtual surroundings chosen for a call, as well as the speaker’s perceived position. The acoustics of a beach, he notes, are unlike those of a room.

Tin pan alley

Such stuff is for the professionals. But amateurs can play too. For the man or woman in the street who wants to jazz up a record collection, many simpler programs now permit people to give a more immersive feeling to their existing recordings by running them through software that modulates the sounds of those recordings to achieve that end.

Programs of this sort cannot handle different parts of a recording differently in the way that studio-based systems manage, but they do create an illusion of sonic space around the listener. Isak Olsson of Stockholm, who has put together two such packages, 8D Audio and Audioalter, describes them as seeming to increase the size of the room. This helps to overcome a phenomenon known as the “in-the-head experience”. And, as Michael Kelly, head of engineering at Xperi, an immersive-software firm based in California, observes, sounds that appear to come from outside the head are more comfortable.

At the other end of the technological scale from such do-it-yourself kits, a number of firms, Dirac, Dolby, Facebook, Sony and Xperi among them, are working on a bespoke approach to sonic immersion. They are tailoring it, in other words, to an individual listener’s anatomy.

One method, that being used by Sony, is to ask potential customers to upload photographs of their ears. Another, which may be adopted by Xperi, is to repurpose data from the face-recognition systems that now unlock many people’s smartphones. If this way of thinking works, it will bring with it the ultimate in high fidelity. This is a recognition that, in the real world, even if what they are hearing is the same set of sound waves, every listener’s experience is different—and that this needs to be replicated in the world of recorded sound, too. With that realisation, acknowledgment of the head-related transfer function’s importance has reached its logical conclusion. And the term “headbanging” may take on a new and positive meaning.

Magnetic Tape has a Surprisingly Promising Future

Re-record, not fade away

THE WHIRR of spooling magnetic tape is more likely to evoke feelings of nostalgia than technological awe. Yet tape remains important for data storage, with millions of kilometres of the stuff coiled up in the world’s data centres. Indirectly, says Mark Lantz of IBM, most computer users thus rely on tape every day.

Though tape may seem archaic, it is still getting better. In 2015 Dr Lantz’s team unveiled a version capable of squirrelling away 123 gigabytes per square inch (19Gb per square centimetre, but tapemakers still use Imperial units). In 2017 they reached 201Gb/in2. And on December 15th they revealed a design that has a density of 317Gb/in2. That rate of growth is unmatched by any of tape’s competitors.

Tape’s heyday as a data-storage medium for computers was in the 1950s. Hard disks, introduced in 1956, were quickly seen as superior because they required no time-consuming spooling. Decades of selective investment mean they now also have a better density of information storage than tape. The best can manage more than 1,000Gb/in2. As a result they are in high demand—2018 saw the sale of more than 800bn gigabytes-worth, which is eight times the figure for tape. But disks have drawbacks. They are costlier than tape, have shorter lifespans and their spinning platters generate far more unwanted heat.

This leads to tape being the medium of choice for the so-called “cold” storage of data that need to be looked at only infrequently. And disks’ advantages elsewhere may be slipping. In the 1990s hard-disk storage densities doubled every year. Over the past decade that rate of growth has dropped to 7.6%, as manufacturers run out of headroom. Smaller magnetic particles need more energy to keep them in line, and the magnets which provide this are approaching the theoretical limits of their strength. The storage density of magnetic tape, by contrast, has been increasing steadily, by 34% a year for nearly three decades. As a consequence, tape may catch up with hard disks within five years.

To maintain this blistering rate of growth, Dr Lantz’s team concentrated on three matters. First, they reduced the size of the magnetic grains that form a tape’s recording surface, by substituting strontium ferrite for the current industry standard of barium ferrite. Second, they shrank the size of the read heads by a factor of 30, permitting data to be packed onto narrower tracks. Third, they developed systems able to track and correct the position of the tape with nanometre accuracy as it flowed under the smaller heads, stopping it going off-track and distorting the signal. Though it may take a decade for these technological improvements to make their way into products, this sort of progress bolsters confidence in tape’s long-term utility.

Other innovations may be coming, too. Ohkoshi Shin-ichi of the University of Tokyo, for example, advocates using particles of epsilon iron oxide. This material is particularly magnetically stable, meaning its grain-size can be reduced (and thus storage density increased) without any risk of the field flipping randomly and thus changing what is encoded.

Taped up

Demand for more storage will certainly be there. Estimates suggest that four times more data will be generated in 2025 than in 2019. In the part of the data-storage market where tape currently reigns supreme, it is likely to remain so for a while.

The biggest threat to tape comes from the flash-drive technology used in SD cards and USB sticks. Flash relies on a flow of electrons through transistors, rather than on magnetised particles read by mechanical components, so it is capable of better data densities even than hard disks. Lack of moving parts also makes such solid-state devices faster at writing and retrieving information. Flash drives are, however, more costly than magnetic storage and do not last as long. This makes them ten times more expensive per byte per year of storage than hard disks, and nearly 50 times more expensive than tape. They are therefore too dear to use for anything but the most important jewels in the data vault. Until that changes, the reel is likely to continue.

Publishing Saw Upheaval in 2020, but ‘Books are Resilient’
Hillel Italie

Book publishing in 2020 was a story of how much an industry can change and how much it can, or wants to, remain the same.

“A lot of what has happened this year — if it were a novel, I would say that it had a little too much plot,” said Simon & Schuster CEO Jonathan Karp.

Three narratives ran through the book world for much of the year: an industry pressed to acknowledge that the status quo was unacceptable, an industry offering comfort and enlightenment during traumatic times, and an industry ever more consolidated around the power of Penguin Random House and Amazon.com.

To its benefit and to its dismay, publishing was drawn into the events of the moment. The pandemic halted and threatened to wipe out a decade of growth for independent bookstores, forced the postponement of countless new releases and led to countless others being forgotten. The annual national convention, BookExpo, was called off and may be gone permanently after show organizers Reed Exhibitions announced they were “retiring” it.

The industry had long regarded itself as a facilitator of open expression and high ideals, but in 2020 debates over diversity and #MeToo highlighted blind spots about race and gender and challenged the reputations of everyone from poetry publishers to Oprah Winfrey, from book critics to the late editor of Ernest Hemingway. Employees themselves helped take the lead: They staged protests in support of Black Lives Matters and walked off the job at Hachette Book Group after the publisher announced it had acquired Woody Allen’s memoir, which Hachette soon dropped. ( Skyhorse Publishing eventually released it.)

Through it all, books managed to sell, keeping a steady pace at a time when film and theater, among other industries, faced dire questions about their future.

“My main takeaways from 2020 are that books are resilient and that the industry has indicated a willingness to change (about diversity) and to make opening gestures towards sufficient, industry-wide change,” said Lisa Lucas, executive director of the National Book Foundation, who next year will take over at two prestigious Penguin Random House imprints, Pantheon and Schocken Books.

An alarm bell rang early in the new year. Jeanine Cummins’ novel about Mexican immigrants, “American Dirt,” had been widely cited as a top seller and critical favorite for 2020 and was likened by “The Cartel” author Don Winslow to John Steinbeck’s Depression-era classic “The Grapes of Wrath.” In January, Oprah Winfrey announced she had chosen it for her book club and Cummins began a nationwide tour.

But to the surprise of the publisher, Macmillan, and Winfrey, Latino authors and critics alleged that Cummins had reinforced stereotypes about Mexico and Mexican immigrants. Along with Cummins, Winfrey invited a panel of detractors who faulted an industry that is an estimated 75 percent white, and the talk show host herself for choosing few works by Latino writers. Cummins’ tour was called off after Macmillan cited threats of violence, even as her book remained on bestseller lists.

In the following months, leaders at the National Book Critics Circle, the Poetry Foundation and International Thriller Writers resigned or were forced out amid allegations they had failed to address issues of diversity and racial justice. The Center for Fiction removed the late Maxwell Perkins’ name from its award for editorial excellence, noting that besides working with Hemingway and F. Scott Fitzgerald he published books by eugenicists supporting white supremacy.

Publishers, meanwhile, responded with such high-profile hirings as Lucas and Dana Canedy, the first Black woman to head Simon & Schuster’s flagship imprint. Macmillan met with some of its critics and agreed to an “action plan” on diversity. Penguin Random House, among other initiatives, asked all employees to read Ibram X. Kendi’s “How To Be an Anti-Racist.” Kendi later presided over a company town hall.

“I think there were several people on a learning curve, but serious about learning,” Kendi told The Associated Press recently. “And there were other people who had been on a learning curve longer and were open to thinking about race and racism.”

Lucas and others questioned if the underlying structure of publishing would change. Saraciea J. Fennell, who leads the advocacy group of book professionals Latinx in Publishing, worries that the wave of new hirings and imprints is simply cyclical and asked, “How long are they going to last? Is all this going to be around in 10-15 years?”

Macmillan CEO Don Weisberg, who cited a wide range of diversity programs at the publishing house that began before “American Dirt,” said he “understands the skepticism.”

“It’s not going to happen overnight,” Weisberg said. ”You’ve got to build an entire infrastructure that makes it part of the norm.”

The CEO of Penguin Random House U.S., Madeline McIntosh, noted how well book publishing could meet the public’s needs during the pandemic and other events of 2020. The early days in March led to a surge of sales for children’s activity books as schools shut down and parents looked for ways their kids could fill time and continue to learn. Summer bestseller lists were filled with filled with books on race, from “How To Be an Anti-Racist” to Robin DiAngelo’s “White Fragility,” as many responded to the killing of George Floyd and the Black Lives Matter protests. Ahead of the November elections, readers turned to such best sellers about President Trump as Bob Woodward’s “Rage” and Mary Trump’s “Too Much and Never Enough.”

But relief over the bottom line ran parallel with concerns over who benefitted most. As Barnes & Noble CEO James Daunt acknowledged to the AP: “This was Amazon’s year,” when the online retailer was ideally positioned for a public turn toward the internet not just for convenience but for safety. Daunt said Barnes & Noble managed better than he had expected, but still results were “spotty.” The superstore chain ended 2020 with fewer employees than when the year began, he said.

For independent stores and publishers, the pandemic amplified the divide between the industry’s biggest players and everyone else. At the same time Penguin Random House was preparing to buy Simon & Schuster, a transaction that if approved would create the largest publishing entity in U.S. history, smaller companies such as Archipelago and Cinco Puntos Press were starting GoFundMe campaigns.

“It’s been very hard to survive,” said Archipalego publisher Jill Schoolman. “The cash flow is really tough and we owe our printers.”

Some of the country’s leading independent stores, including City Lights in San Francisco and Anderson’s in suburban Illinois, relied on customer support to stay in business. Len Vlahos, co-owner of the Tattered Cover in Denver, called the financial impact of the pandemic “devastating” and sold the store in December to a group of local investors. Vlahos, who will remain in an unofficial capacity through June, added that even with the lift from Barack Obama’s “A Promised Land,” holiday sales would likely be a “pale shadow” of the previous year.

“We hold out strong hope for a vaccine in the first quarter of 2021, so life can once again return to normal,” he said.

Goodreads Is Retiring Its Current API, and Book-Loving Developers Aren’t Happy

‘Now there’s just no point’
Angela Lashbrook

Last week, some Goodreads users received a disappointing message: The popular book tracking website is disabling access to its API for users who haven’t used the product in more than 30 days. The company says it “plans to retire these tools” altogether and that, as of December 8, it will no longer issue new keys. It’s unclear when or if Goodreads will close off its API to active users.

“When I found out, I was pretty upset,” says Karen Ellett, a software developer in South Carolina who uses the Goodreads API to power a private tool that tracks book series. The tool, which she had hoped to eventually release for other people to use, keeps track of new releases in book series she reads, which is a function Goodreads doesn’t currently offer. When a new book gets added to the series, Ellett’s tool updates automatically, so she doesn’t have to go looking for it on her own when she’s ready to dive back into the series. Since she’s read 172 books this year, it’s not easy for her to mentally juggle all the new additions she wants to get to on her own.

“I’ve put so many hours into developing this tool not just for myself, but with an eye towards it being utilized by other people. I’d say I was probably about 70–80% done, and now there’s just no point,” she says.

As Goodreads is a stagnant product that has barely improved its functionality and features since it was acquired by Amazon in 2013, thousands of readers with basic coding skills use the Goodreads API to power their own better features and tools. On a thread about the change for Goodreads developers, one user says the Discord book recommendations bot he was in the process of building suddenly stopped working. Another says his tool, which analyzes statistics related to the authors on a Goodreads user’s “read” list, will be shut down, nullifying countless hours of work he put into the feature.

Ellett still uses the API daily, so her access to the API hasn’t been shut down — yet. She heard about it from a friend who forwarded the email to her. Many Goodreads API users complain that communication from Goodreads has been terrible, with people only hearing about the change from intermittent users whose access was suddenly terminated.

In a statement to Debugger, Goodreads confirmed it plans to retire “the current version” of its API tools. “While we assess the value of APIs to determine how to support in the future, we continue to support active API users who meet our terms of service,” it says.

Matthew Jones is a moderator for r/Fantasy, a fantasy-book-focused subreddit with 1.2 million members. He helps run the subreddit’s annual Stabby Awards in which members of the subreddit choose their favorite fantasy reads of the year. Jones was almost done with a Goodreads API-based tool that would have improved his ability to manage the Stabby Awards, but when he returned from vacation, his access to the API had been revoked. He spent much of 2020 working on the tool, he says.

“It’s pretty infuriating” how Goodreads has managed communication of the API change, he says. Support has been disappointing for years, making it obvious to API users that the company doesn’t care about them, but “I’ve never heard of a service that just completely cut off their members like that. No warnings. No end of life email. Just a ‘sucks to be you’ notice that everything you’ve been working on is instantly obsolete,” he says. The subreddit will have to go back to what has been done in previous years — using Google forms and “verifying everything by hand.”

Goodreads has little information about the impending changes on its website or developers discussion board, but one user on the forum says Goodreads support told them that it “will not continue to support API endpoints moving forward.” Good e-Reader, a blog dedicated to covering e-reader and digital book industry news, estimates that the shutoff will be complete within the next couple of months. “This is a serious blow” to developers whose tools rely on Goodreads API, writes Good e-Reader editor-in-chief Michael Kozlowski.

Those affected by Goodreads pulling the plug on its API say they’re baffled as to what Goodreads and, by extension, Amazon have to gain by limiting access to its datasets. “I don’t understand the motivation since maintaining their APIs was so low-lift for them. But Amazon has a reputation for being ruthless and disfavorable to cooperation,” says Stephanie Wilkinson, an engineer whose popular tool, Yonderbook, will cease functioning when the API changes take effect. “Goodreads has been frozen in time since 2013 when Amazon acquired them.”

Yonderbook is an excellent example of what untold numbers of readers have to lose when Goodreads kills its API. The tool analyzes Goodreads users’ reading statistics and allows them to see which of the books on their lists are available through their local library on Overdrive. It also connects to Bookmooch, where users swap books for free. If you’re anything like me and have hundreds of books on your TBR (to-be-read) list, it would take a very long time to manually search Overdrive to see which books you can check out for free from your local library. Connecting a reader’s Goodreads list to Overdrive makes it much easier for people to use their local libraries and find their next free read.

Joe Alcorn, who runs the book website Readng, blogged about the change over the weekend. Goodreads has failed to innovate, he argues, and is pivoting to squashing competition instead. “The sad thing is it really only hurts the hobbyist projects and Goodreads users themselves. Anybody seriously attempting to compete with Goodreads is well aware of the Amazon-shaped elephant in the room and is likely prepared,” he writes. “It’s the users and the hackers that this move will harm, and if anything it further reinforces the need for viable alternatives.”

It’s difficult to know exactly how many people this change will affect. The Goodreads developers discussion board has 2,602 members, a tiny percentage of the 45 million monthly users on the site. But these are some of the company’s most dedicated and passionate users — people who love reading so much, they want to take what Goodreads has to offer and improve upon it on their own time.

Goodreads’ core ideas and gigantic pool of users were the primary reason Amazon acquired Goodreads in 2013, says Venkatesh Shankar, PhD, the director of research at Texas A&M University’s Center for Retailing Studies. But “without a self-sustaining strategy, the site and app have lagged in usability and usefulness. Other social cataloging sites like Open Library, LibraryThing, The Reading Room, Libib, and BookLamp, each with its own limitations, offer alternatives.” Amazon may be exploring ways to monetize Goodreads’ 90 million users instead of continuing to allow API access, he says.

People I spoke with indicated that the change would compel them to seek other tools rather than moving their book activity into the inner Goodreads ecosystem. “It could be that [Amazon] just doesn’t want anyone innovating. Which sucks if they don’t plan on giving us the functionality themselves,” says Ellett. “I think by doing this, by pushing people to other sources, Goodreads runs the risk of hurting themselves.”

“There are a ton of new book apps coming on the scene. People have been frustrated with the lack of features in Goodreads,” says Wilkinson. “It seems like instead of improving Goodreads to stay competitive, they are choosing to cut off access.”

Up to now, many of these competitor websites — such as StoryGraph, Italic Type, and Readng — have remained relatively small. Many less techy users like myself stick with Goodreads out of habit while those with more programming skills are making their own sites and tools that depend on the Goodreads API. But as this community of dedicated readers finds the tools they’ve perfected no longer work, they’ll look to other APIs (such as that offered by the Internet Archive’s book project, Open Library), transition to another one of the current competitors, or even start their own.

Amazon might be hoping that by drawing the curtain around its product, it will be bringing its more creative users in with it. But Amazon and Goodreads may have just landed the last blow on this group of readers that sends them on their way to create and strengthen their own communities.

Seuss-Star Trek Mash-Up Crashes and Burns at Ninth Circuit
Bianca Bruno

“Victory is life” not for Star Trek, but for Dr. Seuss, whose publisher emerged victorious Friday in a copyright fight at the Ninth Circuit over the children’s classic “Oh, the Places You’ll Go.”

Dr. Seuss Enterprises sued publisher ComicMix in 2016 over the crowd-sourced Star Trek mash-up “Oh, the Places You’ll Boldly Go,” written by Star Trek episodes writer David Gerrold.

The children’s book publisher claimed the mash-up competed with the Seuss classic in the graduation gift market.

Seuss’ children’s book — with its message of accomplishing individual success in the face of adversity — is often given to graduates embarking on their careers. It shoots to The New York Times’ bestsellers list every spring during graduation season.

A Ninth Circuit panel found Friday that the lower court was incorrect to find in favor of ComicMix in the copyright dispute.

The work was not fair use permissible under copyright laws, U.S. Circuit Judge M. Margaret McKeown wrote in the 34-page order, remanding the copyright case to U.S. District Judge Janis Sammartino for disposition.

“‘Boldly’ is a mashup that borrows liberally — graphically and otherwise — from ‘Go!’ and other works by Dr. Seuss, and that uses Captain Kirk and his spaceship Enterprise to tell readers that ‘life is an adventure but it will be tough.’ The creators thought their Star Trek primer would be ‘pretty well protected by parody,’ but acknowledged that ‘people in black robes’ may disagree. Indeed, we do,” McKeown, a Bill Clinton appointee, wrote.

The Star Trek mash-up’s use of Dr. Seuss’ copyrighted works was not fair use — it’s not a licensed work of Seuss or otherwise authorized by Dr. Seuss, which was the top licensed book brand in 2017, according to the order.

McKeown noted ComicMix “does not dispute that it tried to copy portions of ‘Go!’as accurately as possible” with the creators of the book using a side-by-side comparison chart to “match the structure of ‘Go!’” The illustrations also closely mimic those in the Dr. Seuss original, McKeown wrote in the order, which included side-by-side images from both works.

Under the fair use doctrine of copyright law, a work can be considered fair use if it is “transformative” or “adds something new, with a further purpose or different character, altering the first with new expression, meaning or message.”

Parodies, for example, are permissible under the fair use doctrine even though they “mimic” an original work in their commentary or criticism of it.

The makers of the Star Trek mash-up had argued their book was a parody of “Oh, the Places You’ll Go,” but the Ninth Circuit panel found that to be untrue.

“’Boldly’ is not a parody. ComicMix does not seriously contend that ‘Boldly’ critiques or comments on ‘Go!.’ Rather, it claims ‘Boldly’ is a parody because it situated the ‘violent, sexual, sophisticated adult entertainment’ of Star Trek ‘in the context of [Dr. Seuss]’ to create a ‘funny book,’” McKeown wrote.

The panel noted they rejected a previous claim involving another Seuss classic “The Cat in the Hat,” which retold the O.J. Simpson double-murder trial in “The Cat NOT in the Hat! A Parody by Dr. Juice.”

Likewise, the Star Trek mash-up was not transformative of “Oh, the Places You’ll Go,” the panel found, rejecting Comic-Mix’s argument the work was transformative because it replaced Seuss characters and elements with Star Trek material.

“While ‘Boldly’ may have altered Star Trek by sending Captain Kirk and his crew to a strange new world, that world, the world of ‘Go!,’ remains intact. ‘Go!’ was merely repackaged into a new format, carrying the story of the Enterprise crew’s journey through a strange star in a story shell already intricately illustrated by Dr. Seuss,” McKeown wrote.

“Although ComicMix’s work need not boldly go where no one has gone before, its repackaging, copying, and lack of critique of Seuss, coupled with its commercial use of ‘Go!,’ do not result in a transformative use,” the panel added.

ComicMix also “sidesteps the fact that it intentionally targeted and aimed to capitalize on the same graduation market as ‘Go!,’” McKeown wrote, noting the planned release date was scheduled to launch “in time for school graduations.”

As the copyright holder, Dr. Seuss Enterprises has also authorized many derivative works of “Oh, the Places You’ll Go!” which is set to be turned into an animated motion picture by Warner Animation Group in 2027.

“ComicMix does not overcome the fact that Seuss often collaborates with other creators, including in projects that mix different stories and characters. Seuss routinely receives requests for collaborations and licenses, and has entered into various collaborations that apply Seuss’s works to new creative contexts,” McKeown wrote.

But the panel did not find ComicMix violated Dr. Seuss Enterprises’ trademarks and affirmed Sammartino’s denial of the trademark claim.

Dr. Seuss Enterprises is represented by DLA Piper partner Stan Panikowski, while ComicMix is represented by attorney Dan Booth. Both attorneys did not return call and email requests for comment.

Sammartino is a George W. Bush appointee. U.S. Circuit Judges N. Randy Smith, also a Bush appointee, and Barack Obama appointee Jacqueline Nguyen joined McKeown’s opinion.

Until next week,

- js.

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