Of Royalty Problems and Distributed Ledgers

January has been a whirlwind of meetings and discussion around the idea of using 'blockchains' and other distributed ledger technology to help track and collect royalties on creative works, starting with music and the Digital DNA Genome Project. The potential is certainly there for a new ledger-based environment for creative works. But whether distributed ledger technology will address the root causes lurking beneath the biggest problems that the creative industry faces is another question. Here are some observations relating to problems in the music sector, which I know from other conversations and reports resonate in other creative industry sectors...

The current processes for producing and distributing music are clearly broken.  A trawl through the comments below this 'story' on how much YouTube pays in royalties to artists gives you some insight into the problems faced even by those who work really hard at tracking and claiming what they are owed. Responding to a Wall Street Journal report on claims that Spotify fails to properly account for royalties, musician and critic David Lowery wrote to the Attorney General of New York State demanding action. Civil litigation has followed, seeking $150m in unpaid royalties. 

But the more you dig into the royalty problems, the more you realise they are just a symptom, not the cause, of the music sector's woes. One has to be careful about apportioning blame among the multitude of different types of participant involved in the overall process for creating, distributing and performing musical works. What some see as misconduct can easily be attributed to poor systems and record-keeping and a failure to address the root causes of those failures. But, again, go easy on the blame: it's a huge and daunting task to figure out all the processes involved in such a diffuse sector and then how to improve and control each of them so you know when things are going awry and how to respond.

Ultimately, however, one can't help feeling that listeners are not getting access to the sort of range and quality of music that a more efficient sector could deliver.

So, where to start?

The high level problem statement is that the ability to efficiently monetise music has simply not kept pace with the ability to generate and consume it. Why? Well, let's say that the back-office processes have not kept up with the front of house processes. How so? Back office staff at record labels and collection agencies, artist's agents - and even the artists themselves - manually reconcile paper contracts and bank statements to figure out who is owed what; and royalties are often still paid by cheques, even for tiny amounts. At the other end of the process, consumers can stream music and watch video clips on their smartphones. The distribution processes in the middle are also far from operationally efficient. They don't properly track and account for what is made available to consumers at the front end, and don't interface efficiently with the back office.

Why? 

Well, this is where the sector seems to have stopped analysing the situation, which is what we humans tend to do in such situations. We leap to conclusions and solutions. "It's in the interest of the big labels to do nothing about it," has been the most popular refrain, although "Google and Spotify don't care" seems to the latest chart-topper. Current 'solutions' range from sending in the auditors, to filing law suits, to preferring to stage live gigs and concerts as the way to make money. From a technology standpoint, we have the Codec idea from Benji Rogers - not to mention the distributed ledger initiatives that we'll come to.

But these are really just solutions in search of the root cause to the sector's actual problems, spawned more by a sense of helplessness and frustration than any pure insight.

To identify the solutions that will give the most bang for the buck there is a lot more work to be done in understanding all the processes; defining the key problems more precisely, measuring which cause the most pain, then analysing the range of root causes of those problems; before then figuring out which improvements are worthwhile implementing. Finally, all that work will be lost unless there are controls in place to know when the processes are starting to fail again.

Any new system for monetising music efficiently must be “customer-centric” and not merely ‘consumer-centric’ or ‘artist-centric’. It has to cater for the entire set of end-to-end business processes and treat all industry participants fairly. We have to recognise that each participant may be a supplier in one step of the overall process, yet the customer of another step; and which hat they are wearing when they complain. One could argue, for example, that artists are perhaps most upset not in their role as suppliers of music, but in their role as customers in process steps related to distribution, consumption and payment.

To become sustainable, 'the system' must evolve in a customer-centric fashion at each step, otherwise the participant in the role of the ‘customer’ will not buy in to the solution for that step. Equally, however, no one can afford to get caught up in anger and blame. The whole sector needs to move along the change curve to accepting that the system is broken and participate positively in the work required to fix it.

So it's simply too early to say what role, if any, distributed ledgers have to play in solving the creative industry's problems. It's not about imposing a solution, but rather fostering agreement on root causes of the problems and the necessary improvements and controls to be implemented.

That's not to say work should not continue on the use of ledgers in relation to music and other works. It is exciting to see the work on releasing music into ledgers by Ujo Music and MyCelia; Audiocoin; Aurovine; Revelator; Colu; and OCL (One Click Licence); as well as the work of the Kendra Initiative on the wider development of a distributed marketplace; and collaborative forums like the Digital DNA Genome Project mentioned earlier. I just don't think we should saddle these initiatives with the responsibility for solving the current woes of the creative industry - the two can co-exist quite peacefully.

Greed Is Still Good

If you don't want to know the ending to the film Money Never Sleeps, stop reading now.

For the rest, I have to say I'm troubled by whether audiences believe the ending to this movie is a positive "Hollywood" resolution, instead of the grimly ironic testament to persistent greed that it actually is.

To cut the story short, Gordon Gecko, immortalised by the line "Greed...is good", leaves jail after doing time for crimes committed during Wall Street, only to trick his 'leftist' daughter and her naïve fiancé into returning $100 million of the ill-gotten gains Gordon had salted away in his daughter's name. She'd been going to give it to charity, but her fiancé convinced her to invest it via him and Gordon in a 'clean-tech' alternative energy company (the nature of whose connection with the fiancé is never satisfactorily explained). Gordon somehow diverts the cash, ruining their plans and their relationship in one hit. As a result, he's told he'll never see his grandson-to-be, which seems to be the only thing in the world that really bothers Gordon. In the final scene, however, Gordon is redeemed in the eyes of his daughter and her fiancé - and heals the emotional rift between them - by dropping by to announce that he's deposited a freshly laundered $100 million in the bank account of said energy company. Gordon can now spare the cash, he happily explains, because he's just made another fortune shorting the markets and managed to skim a little cream for himself via the Cayman Islands. Cue the wedding and dancing.

I guess one can't blame a daughter for wanting her dear old dad to be around her child, even if he is only anxious to teach the kid the equivalent of safe-cracking. But I was struck by the fact that she's also billed as a 'leftist' and that she and her fiancé share a passion for 'clean-tech' alternative energy. And I reckon the example of their easy forgiveness in the film might be a sign that audiences think that the Bernie Madoffs of this world - indeed our financial institutions - can redeem themselves simply by investing their ill-gotten gains in 'worthy causes' - or by repaying their bailout money - rather than by behaving ethically.

Or, in other words, that greed is still good.

This is chilling enough when you consider that such a view would endorse the illegality, or at least the immorality, of the mortgage brokers and bankers who gleefully shoveled the likes of NINJA loans into the bond markets and even simultaneously shorted the resulting bonds - all at the taxpayers' expense. But it's especially chilling given the recent sober reminder from Hank Paulson, formerly both Chairman/CEO of Goldman Sachs and US Treasury Secretary at the start of the financial meltdown (somewhat simultaneously, some seem to be suggesting):

"Speaking close to the two-year anniversary of Lehman Brothers' collapse, Mr Paulson said that while he welcomed much of the new financial regulation, it would not be enough to prevent another crisis. "We have to assume that regulation won't be perfect. We'll have another financial crisis sometime in the next 10 years because we always do.""

Timely, too, that UBS, the global investment bank, should announce today that it won't be pursuing the former senior managers who appear to have put in place “incentives...to generate revenues without taking appropriate consideration of the risks [that]...facilitated losses” because any such court action would be “more than uncertain”, expensive and “lead to negative international publicity and thus hamper UBS’s efforts to restore its good name in the markets” [my emphasis]. What's that a 'good name' for, exactly? And what sort of message does that meek surrender send to the current management, clients and other stakeholders?

Why, that greed is still good, of course.

Paulson, perhaps ironically, is right. No amount of regulation will change this cultural belief. It's a crisis of leadership, yes, but only because we get the leadership we deserve. Cultural change is something that must evolve bottom-up.

And that's what troubles me about the forgiveness, wedding and dancing at the end of Money Never Sleeps. If Hollywood had been confident that our values had changed, the only thing that would have united the young lovers would have been a strenuous and simultaneous citizens' arrest.

Hit Girl Kicks Agent Romanoff's Ass

I've recently been to see Kick-Ass and Iron Man 2. I enjoyed both, but Kick-Ass is the better movie. And it's the violent frolics of these two characters which makes the difference.

Ironically, these frolics seem 'wrong' in each movie (indeed, Hit Girl blows the lid off so many cans of worms you could write a book about it) yet might have fit better if they'd been swapped between characters. After all, an 11 year old girl should not have the combat skills to dispose of a highly trained secret agent.

Both movies are about super heroes. The 'lead' in both is a male role with some superhuman physical quality, 'supported' by a strong and aggressive female with no such aid. So far, so predictable - the 'wow' factor better be in the action and weird science. But in Kick-Ass the 'wow' comes when lead role is subverted - because he's an incompetent dreamer, regardless of his super-human ability - by the real (deeply flawed, psychotically aggressive and extremely violent but thankfully well-meaning) super hero: Hit Girl.

Kick-Ass director Matthew Vaughan says Hollywood wouldn't fund Kick-Ass. So he got it funded in the UK, which gave him greater creative freedom.

The result may be that Iron Man 2 is 'everything a super hero movie should be'. But Kick-Ass gives us Hit Girl. And gives the super hero genre an almighty kick in the arse.

Cue the ongoing resurgence of the British film industry?

A Fistful of Motorcycle

I shook off the chains of my regular commute last night to blast up to Bennington, where the church hall was packed to hear a talk by Austin Vince, renowned maths teacher, raconteur, authentic round-the-world motorcycle adventurer, author of Mondo Enduro and maker of the follow-up film, Terra Circa, about spanning the dreaded Zilov Gap in Siberia.

Austin has to be among the most entertaining speakers I've ever had the privilege to hear - ironically, more for the things he can't tell you than the topic of the evening, like his passion for spaghetti western posters. Yet his irreverent comparisons of life in far flung countries to daily English life are a tonic for the credit crunch blues. And his insistence that facing a challenge with nothing more than the bare minimum of equipment required, a sense of humour and a commitment to resourcefulness should be enough to inspire even the most dedicated 'weapon of mass consumption' to try eating life rare rather than well done.

Mondo Enduro traces the seemingly impossible round-the-world journey by a bunch of guys in their late 20's without experience, sponsorship, support vehicles, camera crews or even Ewan McGregor. I learned with some regret that it began in April 1995, a time when I'd recently arrived here at the same age, wondering what the hell I was going to do with myself. Listening to Austin, I could've done a lot worse than hop on a bus to Mill Hill that fateful April morning. 

Something Decent To Read

I rarely have time to read for the pleasure of it. So when I do get the chance to settle down with a book, I like to know it's going to be worthwhile. The joy of the Internet is finding great things you once read and working out from there. Reviews are helpful, as is knowing how someone else stumbled across the book.

My own tale of discovery really begins in 1976, when my father introduced me to Tom Wolfe's The New Journalism, which marked the shift from dispassionate news reporting to stories where the journalist is somehow involved. I was also captivated by Wolf's own collection of magazine articles wonderfully entitled The Kandy-Kolored Tangerine-Flake Streamline Baby. From there I meandered to Hunter S. Thompson (RIP) and The Great Shark Hunt and Truman Capote's In Cold Blood.

Much of the New Journalism was spawned by the Vietnam War, and some of the best writing from that conflict can be found in Tim O'Brien's Going After Cacciato and If I Die In a Combat Zone, as well as Michael Herr's Despatches. Norman Mailer seemed to find a similar voice in The Naked and The Dead, about the soldier's lot in the jungles of World War II (and recently Sgt Dan Mills captured it in the recent Gulf War in Sniper One).

Of course, Kurt Vonnegut took war reporting to a different plane in Slaughterhouse 5, about his experiences following the fire bombing of Dresden. His wondrous view of the world (partly via the planet Tralfamadore) can also be found in Breakfast of Champions. I've found some resonance of that in Nicholson Baker's brilliantly observed and highly entertaining The Mezzanine (the story of one man's lunch hour), Vox (a voyeuristic eavesdrop on a chat-line conversation) and his unashamedly voyeuristic tour de force, The Fermata.

Latin American magic realism has also tickled my fancy, from Gabriel Garcia Marquez's Love in the Time of Cholera and One Hundred Years of Solitude to Louis De Bernieres' The War of Don Emmanuel's Nether Parts and The Troublesome Offspring of Cardinal Guzman.

I actually studied English literature and modern American novels for my Arts degree. That turned me into a fiend for Hemingway (A Farewell To Arms, To Have and Have Not, For Whom The Bell Tolls), F. Scott Fitzgerald (Tender is The Night, The Beautiful and The Damned, The Great Gatsby) and, of course, Catcher in the Rye.

But it hasn't all been high literature. I love crime fiction, and Raymond Chandler was a maestro (Farewell My Lovely, The Big Sleep - a great film - and The Lady in The Lake), as was Dashiell Hammett (especially The Maltese Falcon - also a great film). Since the '50s Elmore Leonard has been king, I think partly because none of his characters is necessarily good or evil (try Pronto, Out of Sight, Freaky Deaky, Get Shorty, Be Cool and so on). Others include the darker, police perspective of Ed McBain (Kiss is great), the blackly comic Carl Hiaasen (Tourist Season, Skin Tight, Double Whammy, Native Tongue, Strip Tease, Skinny Dip and so on), the laid back but brooding Tony Hillerman (A Thief of Time, Fallen Man) and the chilling Michael Connelly (The Black Echo, The Last Coyote, Angels Flight). The story of a crack dealer, Clockers (by Richard Price), sits somewhere between New Journalism and crime fiction.

I had a stab at turning an old manuscript into a screenplay while living in New York in the mid '90s, and Syd Field's Screenplay: The Foundations of Screenwriting and The Screenwriter's Workbook were hugely helpful on plot and structure in particular. His dissection of Four Screenplays is a must, once you have the basic theory. Robert McKee is also very highly rated, of course (Story: Substance, Structure, Style and the Principles of Screenwriting). I also found Joe Campbell's The Hero's Journey a huge help in figuring out characters and their roles. I finished the screenplay, but it needed far more time and it was time for me to get back to London and earn some cash!). And a fantastic experiment in linking literature and film is to set aside a day to read Conrad's Heart of Darkness and T S Eliot's The Hollow Men, watch Apocalypse Now, then the film about the making of it (Hearts of Darkness) and, finally, read Eleanor Coppola's Notes: On the Making of Apocalypse Now. It's a fantastic journey accompanied every step of the way by the same sense of brooding malice.

While living in New York I became enamoured of JP Donleavy's The Gingerman, which I read after seeing a quote from the book in the bar of the same name. An interesting comparison is Jack Kerouac's On the Road, also written in 1955. It seems to have been the year for manic flows of consciousness. And I must say that chimes pretty well with my experience of living in NYC.

On the blogging front, I've found plenty of inspiration for my contrarian viewpoint in books like Liar's Poker (arguably, the story of where the ethos that powered the credit crunch began), The Black Swan (avoiding or exploiting situations and products that are predicated on their being no surprise events that will have a huge impact), The Long and the Short of It (you're on your own: pay less, diversify more and be contrarian), Blink (the power of the sub-conscious can mean decisions made quickly are as good as those we labour over - but see The Black Swan!), Freakonomics (basically, using data mining to re-appraise assumptions, like what determines a child's academic performance), Flat Earth News (confirmation - if you needed it - that newspapers can only make money if over half of the so-called journalism is a bunch of press releases - we need our news unbundled, like our music etc) and The Lexus and the Olive Tree (once globalisation hits your ville, there's no one you can call to stop it). More recently, I enjoyed Barbara Ehrenreich's Smile or Die, about the tyranny of positive thinking, and Gillian Tett's Fool's Gold, a very readable account of the credit crunch from the standpoint of the JP Morgan staff who somewhat unwittingly unleashed the Bistro-style CDS into an environment of such stunning irrational greed, negligence, recklessness and downright fraud that it's left even the insiders angered and aghast.

And last, but by no means least, are Dean Johns' acerbic reflections on his days in advertising in "Ad Nauseam", and his "punchy political essays" from Malaysiakini, collected in "Mad About Malaysia" and "Even Madder About Malaysia" - still as inspirational as the day he suggested I read Tom Wolfe.