[Glyptodon]

> "On the contrary, it seems quite likely that others should be paying more."

Not that have knowledge of royalty proportionality, but it also seems unfair to have royalty costs dwarf any other business costs. I have no idea how much it costs Pandora to stream a song, but if it's a fraction of the ~$0.0012/listen they seem to pay in royalties, it seems like the royalty is disproportionate and unfair. On the other hand, if the royalty is more than ~2 orders of magnitude less than cost to stream a song, then maybe there is an argument that it's too low.

(of course the above is assuming you agree with royalties at all.)

[dillona]

> Not that have knowledge of royalty proportionality, but it also seems unfair to have royalty costs dwarf any other business costs.

Why? Their business model is to take other people's work and distribute it to subscribers.

It seems to me that acquisition of the actual product should be the majority of their cost.

[Glyptodon]

Excessiveness in the injection of normative notions to a market seems like a bad idea.

In any case, the content is only an aspect of the value, and without the value add many services would be rather useless. If the cost of content dwarfs the use's value add, something with potential becomes something untenable.

I mean without streaming, multiple platform support, browsing/searching, etc., what would Netflix be? The delivery method and interface themselves have value, and it's not insignificant at all.

Remember the purpose of copyright isn't to give creators rights. It's to drag as much out of them for as little cost as possible for the sake of the enrichment of society as a whole.

[monkeyspaw]

Apple's store does the same stuff and takes a 30% cut. They aren't directly comparable, but they are charging the 30% for similar services (streaming/downloading, platform support, browsing/discovery, and they add payment and distribution on top of that...)

[whiddershins]

I'm sorry, but what you are writing here is incoherent. If what you were suggesting made any sense, as Pandora lowers their infrastructure costs and overhead, so too would the royalty payment go down, and all the profit would go to Pandora only. The one has nothing to do with the other.

[Glyptodon]

You're the one expressing a non-sequitur. Proportionality of royalty should enable other services to compete with Pandora on the same playing field, so profit would also be proportional to decreased costs or Pandora would risk being wiped out by competition. There'd be no ability for collusive cartels of copyright holders to act as market deciders, or for single players to succeed at profiting disproportionately with respect to their costs.

I guess maybe this would require a corollary of compulsory licensing, but I'm pretty sure that already exists to a large extent.

[klodolph]

Amazon pays a 70% royalty for ebooks that were published directly by the author. Is it unfair for this royalty to be so large?

(I realize that this is more complicated than "70%", see https://kdp.amazon.com/self-publishing/help?topicId=A29FL26O...)

I think it's a sign of efficiency that a large portion of the money goes to content creators. Content creation will get cheaper as technology improves, sure, but in fields like music and writing, content creators struggle to make a decent wage. Therefore as content distribution technology improves, the percentage of money given to content creators should increase.

[mullingitover]

> Content creation will get cheaper as technology improves, sure, but in fields like music and writing, content creators struggle to make a decent wage.

As well they should--it's an ultra-competitive field, swarming with competitors, the market is so flooded it makes New Orleans after Katrina look like a kiddie pool. Unless you're the cream of the cream of the crop, you're going to struggle in this industry. And not one of the content creators has an inherent 'right' to make a profit from their work. The market decides winners and losers, and inevitably in this market it's going to be mostly losers. Whether or not it's 'fair' is irrelevant, life isn't fair.

[klodolph]

> And not one of the content creators has an inherent 'right' to make a profit from their work.

Agreed.

> The market decides winners and losers, and inevitably in this market it's going to be mostly losers.

But the problem is that royalty rates are decided by law, rather than by negotiation between interested parties. This isn't a market economy, this is a planned economy.

[mullingitover]

> But the problem is that royalty rates are decided by law, rather than by negotiation between interested parties. This isn't a market economy, this is a planned economy.

Those are the breaks. Copyright itself isn't a market economy, it's a "temporary" monopoly that's granted by the people and it comes with stipulations. The royalty rates perhaps aren't what the content creators would like them to be, but complaining about that when the term lengths for copyright are so outrageously generous just smacks of greed. For most working people, you get paid for your work once, and not for the rest of your life plus an additional 70 years.

[klodolph]

> The royalty rates perhaps aren't what the content creators would like them to be, but complaining about that when the term lengths for copyright are so outrageously generous just smacks of greed. For most working people, you get paid for your work once, and not for the rest of your life plus an additional 70 years.

This is a non-sequitur. "Musicians are paid royalties for the rest of their life plus 70 years, therefore they should not complain about how large the royalties are." Obviously if our top musicians earned $10 over a 120 year period they would rightly complain about wages. Also obvious is that a $2 million per year royalty due for a song whose composers died nearly 100 years ago is excessive and wrong.

What is not clear is how to pay musicians. Since you seem to care about this problem, suggest something.

[mullingitover]

I don't have the answers. I'm just pointing out that writing, recording, and selling music doesn't entitle one to profits, and if you're in a saturated market like the music business you should expect that you're probably going to fail in your business ventures there unless you're in the top 0.1%. Perhaps the answer is for musicians to lower their expectations about making a business out of their art, because even with the system working as designed most of them already operate at a net loss.

[strickjb9]

Apples and oranges. Amazon - a customer pays them money - 30% net margin Pandora - ad-based revenue

[x0x0]

On what basis do you believe as content distribution technology improves, the percentage given to content creators will increase? This is in direct contrast to historical examples such as monopolies and amazon clearly wants to become a near-monopoly; further, even if the percentage increases, if the absolute amounts fall the content creators still end up worse off. See eg recent articles on HN about the economics of movies being damaged by the move from dvd purchase to $4 or $5 digital rentals.

[klodolph]

Go read that article again. That article talks about how content creators needed a ~10% profit margin to survive. The introduction of DVDs meant that half of that profit moved into long-term DVD sales, so studios decreased short-term margins and made bets on long term gains. When digital distribution took profits from DVDs, content creators were suddenly running at ~5% margins because the long-term bet had flopped. Or, in summary, we are in the middle of a market correction.

I don't know much about the movie business, and I'm not sure about my predictions. But I wouldn't want to draw conclusions by narrowing my focus to big-budget Hollywood movies with traditional distribution models, especially if the newer content distribution technologies are disrupting that model.

I also wasn't trying to make a statement about absolute amounts.

[ianterrell]

Why do you think other business costs are pertinent to royalty rates at all?

[ChuckMcM]

One way they would be pertinent would be if the royalty rates are the reason the business is unsustainable, then the question arises if the goal is to have other folks hear the music or not.

So there is a cost to deliver songs (servers, bandwidth, devops, engineering) which is analogous to the old radio days of the engineer, power, transmitter, tower maintenance, etc. And there is the revenue from advertising and/or subscriptions. And there is the royalty rate.

If you are managing your on-going costs to a minimum, your ability to sell advertising/subscriptions is a market thing (people will or won't buy the service based on the perceived value to them) and then your royalties come out of that.

How would make an argument that royalty rates aren't pertinent?

[Glyptodon]

Well, I don't really believe in royalties to begin with, but if you're going to have them...

I think royalties should be set in a way that maximizes what I'd call the versatility of utility. If royalty costs are far beyond the actual infrastructure or service costs, it seems as though entire industries and uses of content cease to exist.

It also seems pretty clear that huge differences between prices and real world costs are what lead to extensive piracy - people develop a perception of being cheated when you try to charge $25 for an e-book or album download. On the other hand most consumers seem to feel fine about paying $1 or $5 for a song/album/e-book.

You could argue that 'oh, the creator should have the right to control what they make as much as they want and charge whatever they feel like,' but it seems pretty clear that given free reign, copyright holders feel entitled and abuse copyright in ways that entirely undermine the whole system.

I'd say that if you believe in copyright there's a legitimate interest in restraining royalties to reasonable amounts so as reinforce the legitimacy of the whole system. After all, the perceptions of gouging and rights abuses create large masses of people like me who no longer believe in copyright as a whole to any great extent.

Ensuring the liberalization of restraints and apparent reasonableness of exercised privileges allowed creators seems key to creating a copyright institution that can survive and appear legitimate in the long run.

[chaz]

I think content is always the majority of the cost in these revenue share deals.

  Hulu: 70% [1]
  YouTube: 55% [2]
  Google Adsense: 68% [3]
  Spotify: 70% [4] 

[1] http://www.businessinsider.com/henry-blodget-hulu-turns-prof... [2] http://www.theverge.com/2013/3/4/4062810/youtube-partners-co... [3] https://support.google.com/adsense/answer/180195?hl=en [4] http://m.diamondbackonline.com/mobile/diversions/article_f94...

[samspenc]

NetFlix has the exact same problem. Its an issue with any industry where you are trying to resell a primary service.