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Sony Has Plans for Blockchain, But How Big?

Sony Corporation, along with Sony Music Japan and Sony Global Education, this week issued an intriguing but rather vague press release announcing the development of “a rights management system for digital content that utilizes blockchain technology.”

According to the release, the new systems “is based on Sony and Sony Global Education’s previously developed system for authenticating, sharing, and rights management of educational data,” that Sony developed last year using IBM’s blockchain platform. The latest version, however, includes additional “features functionality (sic) for processing rights-related information.”

That last part appears to point to a system that could accommodate user-generated, or at least third-party content not created or owned by Sony, as the release kinda, sorta spells out:

Today, advances in technologies for digital content creation allow anyone to broadcast and share content, but the rights management of that content is still carried out conventionally by industry organizations or the creators themselves, necessitating a more efficient way of managing and demonstrating ownership of copyright-related information for written works. This newly-developed system is specialized for managing rights-related information of written works, with features for demonstrating the date and time that electronic data was created, leveraging the properties of blockchains to record verifiable information in a difficult to falsify way, and identifying previously recorded works, allowing participants to share and verify when a piece of electronic data was created and by whom. In addition to the creation of electronic data, booting up this system will automatically verify the rights generation of a piece of written works, which has conventionally proven difficult.

The most intriguing part of the announcement, however, is Sony’s claim that the system, “lends itself to the rights management of various types of digital content including electronic textbooks and other educational content, music, films, VR content, and e-books.”

That suggests Sony could have big plans for the system, and indeed, the release states the company “is contemplating possible uses in a wide range of fields.”

Just how big those plans might be, however, is hard to tell from the announcement. The system is still in prototype, and according to the announcement, plans to commercialize it are still under discussion.

Sony wouldn’t be the first major media company to dabble in blockchain only to let it go, should nothing come of this week’s announcement. Disney developed its Dragonchain private blockchain platform back in 2015 and 2016, only to spin it off as an open-source project under the auspices of a non-profit foundation.

But the Sony release contains additional hints that blockchain is a genuine priority for the Japanese conglomerate.

“Sony Group is also considering innovative ways to make use of blockchain technology for information management and data distribution in a host of different fields,” the release said. “Through the technological development and commercialization of blockchains, including with this new system, Sony will continue exploring the possibilities that blockchain technology holds for Sony Group’s diverse and wide-ranging business domains.”

Earlier this year, Sony applied for two blockchain-related U.S. patents that may contain clues as to what sort of information management and data distribution applications it has in mind.

One filing, 20180218027, describes a new type of crypto-mining hardware that includes additional circuitry to compress the data that goes into a new block before adding it to the chain, reducing the storage requirements of the chain. Further, the blockchain supported by the new hardware would incorporate the compression processing into its proof-of-work consensus mechanism.

“As mentioned, the mining process of a block which shall be added to the distributed ledger includes compressing data of the block,” the filing says. “In some embodiments, the mining process is won by the electronic node which provides the smallest block which is to be added, i.e. the block having the best compression may win.”

Each block could also consist of multiple sub-blocks “wherein a sub-block may include at least one of: transaction data, video data, image data, audio data, document data or the like.”

The other filing, 20180219686, describes a type of distributed ledger maintained in part by a number of “virtual nodes” that could continue to maintain the ledger “when the number of [physical] nodes is small, and consensus may be maintained when some devices go offline.”

Together, the filings could point to some sort of restricted, or perhaps permissioned, blockchain-based, peer-to-peer content distribution platform that could accommodate large data payloads by compressing them before adding the data to the chain.

Whether all of those threads ultimately tie together is unclear at this point. What is clear is that Sony is looking hard at potential blockchain use cases.

 

Podcast: Investing in Rights and Rightstech

With the 3rd annual RightsTech Summit approaching, RightsTech co-founder Paul Sweeting was interviewed by the Copyright Clearance Center‘s Christopher Kenneally for CCC’s Beyond the Book podcast.

Sweeting and Kenneally discuss the growing investor appetite for rightstech companies, the emergence of securitized rights and royalties as a financial asset class, data and transparency, and plans for the RightsTech Summit.

“What’s happened in the last two decades at an accelerating pace has been a transformation of the primary mode of consumption from one based on ownership to one based on access,” Sweeting noted. “What that’s done to the media businesses and rights-owning businesses is it’s fundamentally changed how they make money. They no longer sell or they no longer predominantly sell copies of things. They have recurring revenue streams resulting from licensed access. That recurring revenue stream model has meant recurring payout obligations to those media companies.”

Where you have recurring revenue streams, Sweeting explained, “you have a measure of predictability of the returns on rights, because you can measure the recurring revenues and make projections with a reasonable degree of confidence as to what those revenue streams will be five years out, 10 years out. So where you have a measure of predictability in returns, essentially rights are becoming something like a financial asset class in their own right, because investors are always looking for predictability of returns.”

The full podcast is embedded below, but is also available on CCC’s website, and on Apple Podcasts, Google Play and Stitcher Radio.

The full transcript is available here.

 

Investor Appetite Grows for Rights and Rightstech

One of our goals in launching the RightsTech Project was to help draw attention to the growing amount of, as well as the growing need for, investment in the business-to-business layer of the media value chain.

That’s the layer that connects the creative end of the pipeline with the consumer or market-facing end of the chain. It’s the layer where intangible rights are supposed to get translated into tangible forms of commerce so that market demand can be met and authors and rights owners can capture the monetary value of their work, or at least a portion of it.

Hipgnosis Songs Fund CEO Merck Mercuriadis, left, with advistory board member Nile Rodgers

Over the past two decades, both the creative and market-facing ends of the value chain have been utterly transformed, in scale and velocity, by digital technology. But the middle layer, the B2B layer, until recently remained stubbornly analog, opaque and slow. The result was a highly and increasingly inefficient system for translating market transactions into remuneration for creators.

There are many reasons for that inertia. Unlike the creative and market-facing ends of the pipeline, the B2B layers is not governed by ordinary supply and demand but by a complex web of contracts, business arrangements, statute, legal precedence, treaty, and tradition, all of which are difficult and resistant to change.

Even where there has been a will to change, however, the means were often not available, due to a significant under-investment in B2B systems, from both a technological and financial perspective. You can’t simply make old systems run faster; you need new systems, which takes both money and imagination.

More recently, though, that investment has started to come, particularly on the technological side. The gradual construction of a large-scale, cloud-based computing and storage infrastructure has made it economically feasible to develop and deploy the sort of secure, enterprise-scale rights management and payment systems media companies need to cope with the scale and velocity of transactions generated by new modes of content creation and consumption.

The emergence of new technologies such as blockchain and artificial intelligence has also attracted entrepreneurs and developers bent on disrupting — or at least improving upon — legacy systems.

Now, the financial side is starting to catch up. In June, the Hipgnosis Songs Fund successfully raised $260 million through an initial public offering to invest in acquiring song catalogs. The capital raise represents a clear bet not just on the future growth of the subscription streaming business and other new revenue sources for music, but on the capability and capacity to translate those revenue streams into value for rights owners and investors.

This fall is expected to bring an announcement regarding what may be the first rightstech-focused VC fund, led by long-time music industry executive and consultant Göran Andersson and former Armonia Online CEO Virginie Berger. The pair are looking to raise a $50 million war chest, with half to be earmarked for musictech startups and half for non-music focused rightstech ventures.

This week brought the announcement of a deal by City National Bank to acquire artist payment platform Exactuals, which recently expanded from its base in managing film and television residuals payments into managing music rights and payments.

Exactuals has plans to target additional media businesses with its payments platform in the future as well, according to CEO Mike Hurst, who also foresees increased financial investment in the rights and rights-management space.

“I think you’re going to see increased in investment in the sector for a couple of reasons,” Hurst said in an interview with RightsTech. “Number one is scale. The volume of uses has just exploded and there’s a real need for automation” of business systems to keep up. “Ten or 15 years ago, in the TV business, you had maybe 20 cable channels that wanted four or five movies a year from any given studio and that was your residuals business. It was almost all in the U.S. and the number of deals was very manageable. Today, every country has 100 channels looking for content, and you have global players like Netflix who don’t just want to buy four or five movies, they want everything you’ve made for the past 11 years. So you need systems that are agile and scalable in a way they weren’t before.”

A second factor, Hurst said, has been the emergence of rights as an asset class in themselves.

“These rights have become tradeable commodities and there’s just a huge amount of rights changing hands now,” he said. “Moving these assets around is very difficult, because of the scale and because there are a lot of moving parts.”

Hurst also sees several factors likely to attract financial investors to the sector as well.

“The returns [for investors] can be very good, it’s a more interesting business than 10-year treasury notes, and the streaming business is exploding,” he said. “So, even if you think you’re paying a high multiple [for rights] today, in five years it could turn into a really tremendous investment.”

That’s certainly the view of the founders of the Hipgnosis Songs Fund, which last month paid $23 million for a 75 percent stake in the 302-song catalog previously owned by composer Terius Nash.

“When we talk about gold, oil or diamonds, we talk about things that the financial world feels are priceless and investable. My ambition is that in the future they will feel the same way about songs,” Hipgnsos CEO Merck Mercuriadis told RightsTech last week. “Today 90 percent of the artists that are being signed are singing someone else’s song. So the song and the songwriter is clearly the most important component of today’s music industry,”

That growing investor interest in rights-based assets can also translate into demand for rightstech investments as well, according to Hurst.

“In our case, we make money when we make payments. And we make payments when uses happen,” he said. “As the market grows, we will make more payments, which will generate more revenue on a relatively fixed cost base. So from an investment perspective, you’re getting the underlying value of the company plus the value of the growth in the market. So it’s sort of a double dip in terms of ROI.”

Mercuriadis will be featured in a special fireside chat at the RightsTech Summit on Oct. 5, along with Hipgnosis advisory board member and Grammy-winning artist and producer Nile Rodgers.

Click here for information on how to register for the summit.

 

Spotify: The global music copyright business grew by $1.5bn in 2016 

In the calendar year of 2016, the latest year we can capture across all income sources, the global value of music copyright in worldwide revenue terms was nearly $26bn – representing growth of $1.5bn (+6.1%) on 2015. That’s a much bigger figure than IFPI’s value of recorded-music-only in the same year, at $16bn.

The $1.5bn annual growth is exciting when you consider that, in the prior year, the total annual global copyright revenue figure grew by a significantly smaller amount – $941m.

Source: How the global music copyright business grew by $1.5bn in 2016 (and why that’s amazing news today)

As Clock Ticks, New Hurdles Mount Against the Music Modernization Act

The revised and amended Music Modernization Act that got the okay from the Senate Judiciary Committee June 28 was still garnering accolades from all sides of the music business days after its passing. Yet, the proposed amendments to the bill — some that were added in the Senate and some that are still under consideration by lawmakers — are also raising new questions and concerns, including how to pay for the proposals.

Meanwhile, the clock is ticking: the Senate needs to act on the bill before this Congressional term ends; otherwise lawmakers and music industry lobbyists must start the legislative process again next year after the fall midterm elections bring new officials into Congress.

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Source: As Clock Ticks, New Hurdles Mount Against the Music Modernization Act

YouTube to Launch Tool to Detect Re-Uploaded Videos Automatically

YouTube could be about to make a big step toward solving a longtime irritation for creators: It’s about to roll out a tool that will identify videos that are stolen and reposted by someone else — and let the original creator pull the ripoffs down.

After almost a year in beta-testing, YouTube’s new Copyright Match tool is scheduled to launch next week for creators with more than 100,000 subscribers. With the new system, after a user uploads a video — and YouTube verifies it as the first iteration of the video — YouTube will scan other videos uploaded to the service to see if any of them are the same (or very similar).

Source: YouTube to Launch Tool to Detect Re-Uploaded Videos Automatically

Will Supreme Court Nominee Brett Kavanaugh Gut TV Broadcasting As We Know It?

What Trump’s nominee said last year during a hearing could send shivers down the spines of broadcasters and other copyright holders. One of the best examples of how Kavanaugh might act on the Supreme Court is a case that never actually resulted in an opinion. It was also a case that held enormous significance to the television industry. That’s Fox Television Stations v. FilmOn.TV Networks, which was heard at the D.C. Circuit Court of Appeals in March 2017.

After the hearing, Neal Katyal, the attorney for the broadcasters not to mention the former Acting Solicitor General, called the two-hour event the “longest oral argument of my life.” This might explain why the broadcasters then chose to settle the case rather than risk a disastrous ruling.

Source: Will Supreme Court Nominee Brett Kavanaugh Gut Television Broadcasting As We Know It?

EU Poised to Rewrite Rules on Uploaded Content, Aggregation

The European Union’s controversial Copyright Reform Directive took a major step toward becoming law across the continent Wednesday as the European Parliament’s Legal Affairs Committee voted narrowly to approve the measure. The vote establishes the Parliament’s official position on the proposed new rules ahead of final negotiations with the European Commission and the member states, although opponents of the measure on the committee could still force a vote by the full Parliament before those negotiations could begin.

The proposal has been the object of intense lobbying over the past two years both by copyright owners and technology companies, particularly regarding the directive’s Article 13, Article 11, and Article 3.

Article 13 requires “online content sharing service provider[s]” to obtain a license for any copyrighted material uploaded by their users or face liability for copyright infringement. As a practical matter, critics of the measure argue, online platforms would be forced to implement sophisticated and expensive content recognition and filtering technologies, similar to YouTube’s Content ID system, as it would be impossible to obtain all of the licenses they might potentially need.

Supporters counter that the provision is tailored to target platforms such as YouTube and Facebook, whose business models are based in part on profiting directly from the presence of unlicensed copyright content, such as by selling advertising against it. Online services operating in a non-commercial capacity, “such as online encyclopaedia, and providers of online services where the content is uploaded with the authorisation of all concerned rightholders, such as educational or scientific repositories,” are exempt from the new requirements, as are services providing cloud-based hosting of content that is not made directly available to the public.

Article 11 creates a new neighboring right for news publishers that would require search engines and aggregators to obtain a license before displaying snippets of articles. Unlike similar “link tax” laws in Germany and Spain, which failed to boost the profits of publishers, the new rules would apply EU-wide, making it difficult for aggregators to circumvent them by obtaining the content from other countries.

Article 3 would put limits on the use of text and data-mining software where the content being mined is not owned or licensed by whoever is doing the mining (The Next Web has a useful summary of the arguments for and against the three provisions).

This week’s vote comes on the heels of the EU’s General Data Protection Regulation (GDPR) taking effect, which was similarly targeted at reigning in the power of major online platforms. Although GDPR rules legally apply only within the EU, their imposition has had a global effect since many non-EU based services collect data on and from EU citizens, forcing millions of websites around the world to retrofit their data collection and privacy policies or face exclusion from EU countries, making the EU the de facto global standard-setter for data collection and privacy practices (see our updated policy here).

The new Copyright Directive, if fully enacted, could have a similar global effect. The new EU rules could give impetus to investment in and development of more sophisticated content recognition technologies, as well as more efficient, automated systems for obtaining licenses and paying rights owners.

In addition to being a boon for rights-tech companies, the development and successful deployment of such technologies could give rights owners outside the EU much stronger grounds to argue that the means to effectively police user-uploaded content and obtain licenses are available and should be deployed globally.

That could shift the terms of the debates currently underway in the U.S. and elsewhere over the proper scope of the copyright safe harbors afforded online services and platforms.

The potential impact of the EU Copyright Reform Directive, as well as the Music Modernization and Copyright Alternative in Small-Claims Enforcement (CASE) acts in the U.S. will be among the topics of discussion at the RightsTech Summit on October 5th in New York. Click here for information on to register for the conference.

 

Face Off: Studios Battle SAG-AFTRA Over ‘Digital Replicas’

Digital technology has given rise to a host of novel questions concerning the authorship, ownership, and exploitation of creative works, from the right to re-sell digital copies to the copyright status of works produced by artificial-intelligence agents. But a new legislative skirmish in New York State could take the debate beyond the realm of copyright into the realm of privacy and the right of publicity.

Cage, Nick Cage

Assembly bill A.8155B would create a new right of publicity for individuals concerning the use of their likeness in a “digital replica.” In what is believed to be the first such legislative effort by a state, the bill is meant to prohibit the use of “face-swapping” artificial intelligence technology to overlay an individual’s face onto another actor’s body without the individual’s consent, particularly for pornographic purposes.

According to the bill, “Use of a digital replica of an individual shall constitute a violation if done without the consent of the individual if the use is in an audiovisual pornographic work in a manner that is intended to create and that does create the impression that the individual represented by the digital replica is performing.”

The bill is strongly backed by the Screen Actors Guild-American Federation of TV and Radio Actors (SAG-AFTRA), which claims it is necessary to combat the growing scourge of “deep fake” videos, in which well-known individual are made to appear to be performing pornographic scenes.

“Individuals turn to image rights to sue corporations that use social media accounts or publicly available images to promote products or services without consent or compensation. These rights will also provide individuals, often women, relief if they are inserted into commercialized Deepfake sex scenes.,” SAG-AFTRA said in a statement supporting the measure.

With time in the legislative session running out, however, the major studios and the Motion Picture Association of America (MPAA) have mounted an all-hands effort to block the bill, according to the Hollywood Reporter, claiming the bill’s imprecise language could limit the production of biographical films of real-life individuals and chill technology innovation.

“If adopted, this legislation would interfere with the right and ability of companies like ours to tell stories about real people and events,” the Walt Disney Co. wrote in a letter the bill’s author. “Unfortunately, the proposed bill would transform New York from a jurisdiction that is friendly to and protective of such expressive endeavors to one in which they become encumbered by uncertainty and risk.”

In a separate memorandum, NBCUniversal warned, “The bill creates an unprecedented new category of protection for “digital replicas” of
living or deceased individuals. These provisions have potentially far-reaching implications, yet there is scant time left in the session for New York’s legislators to explore and consider them.”

The bill is still pending and it’s fate is uncertain at this point. Either way, though, it’s unlikely to be the last word in the debate over the uses (and misuses) of face-swapping technology and other forms of artificial intelligence in the creation of media content.

We’ll tackle some of those questions at the upcoming RightsTech Summit , at a panel titled What to Make of Machine-Made Art? Click here for more information on the summit, and for information on how to register.

 

SEC Chief on ICOs: Come See Us First

Securities and Exchange Commission chairman Jay Clayton on Wednesday offered some of his most definitive comments to date on whether the sort of crypto-tokens offered by many blockchain-based startups to fund initial development of their technology represent securities akin to stocks and bonds, and therefore subject to regulation by the SEC and other government agencies.

“A token, a digital asset, where I give you my money and you go off and make a venture, — you have some company you want to start or something –and in return for me giving you my money you say, I’m going to give you a return, or you can get a return in the secondary market by selling your token to someone, that is a security. And we regulate that,” he said in an interview on CNBC. “We regulate the offering of that security and we regulate the trading of that security.”

Asked whether that meant that, in his view, “most” initial coin offerings (ICOs) being marketed today are in fact securities Clayton replied, “correct.”

Clayton distinguished ICO tokens from cryptocurrencies like Bitcoin, which he said do not fit the legal definition of a security.

“Cryptocurrencies, these are replacements for sovereign currencies — replace the dollar, replace the yen, replace the euro with Bitcoin — these are not securities,” he said.

He was less definitive regarding crypto assets like Ether and Ripple, which can serve multiple functions, saying the determination of their status would be fact and circumstance dependent, but added “We are not going to do any violence to the traditional definition of a security that has worked well for a long time.”

Clayton’s comments hold obvious implications for many startups, including many rights-tech startups, that have issued virtual tokens in connection with their launch and initial capitalization strategy. In most cases, those tokens are offered via self-published “white paper,” which typically includes far less information about the issuer and the risk factors in the offering than in the registration statements companies issuing conventional securities are required to file with the SEC.

Token issuers also generally do not follow SEC rules regarding quarterly and annual financial disclosures.

Most crypto startups have sought to side-step the question of SEC registration by claiming their tokens are functional elements of their platform or application, such as by limiting access to their networks to token holders, or giving token holders a rule in network governance, and are therefore not equivalent to equity ownership in the venture. But many ICOs also carry at least an implicit promise of appreciation in value as network usage increases, which could bring them within Clayton’s definition of a security.

The SEC and the Commodity Futures Trading Commission (CFTC) have been wrestling with whether and how to regulate the issuing and trading of crypto assets, and the uncertainty around their status has both roiled markets and led to a mini-gold rush among ICO issuers looking to cash in before regulators come knocking.

The largely unregulated ICO market has produced a high failure rate even by the standards of startup enterprises, as well as instances of outright fraud. According to a tally by Bitcoin.com, 46 percent of ICO crowdsales in 2017 had already failed or vanished by February 2018.

That may start to change.

“If you have an ICO, or a stock, and you want to sell it in a private placement, follow the private placement rules,” Clayton said. “If you want to do an IPO with a token, come see us.”

 

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