The Future of Music: is Entrepreneurship

About a month ago, we posted about a study we sponsored entitled The Sky is Rising. The findings of the research confirmed that the moral panic surrounding the purported demise of creative industries (music, film, publishing) is largely unwarranted. The fact of the matter is, fuelled by increased exposure and new methods of distribution, our creative industries are actually growing rapidly. What’s more, the artists are seeing more direct financial benefit than before, and are more in control of their careers — which goes a long way toward explaining the chagrin of traditional content distributors (record labels, big name publishers), who lose out in a scenario where a middle man is no longer required.

Today in Austin at SXSW Music, the Future of Music Coalition released research that explores the revenue streams of musicians. The findings of the research follow the same vein as The Sky is Rising: artists across all genres are collecting a relatively low percentage of their incomes from affiliations with record labels, and instead are generating revenue across many different, self-directed revenue streams (The FMC identified over 40 different revenue streams associated with a music career).

The upshot is, musicians — and especially musicians who are “full-time” and earn all of their income from music — are a lot more like entrepreneurs than anything else. While the findings showed an across the board reliance on revenue streams associated with performing, and performing costs were not scalable, performances were crucial to generating other revenue streams — such as sales of CDs and merchandise. The FMC study not only presents a valuable data set, it also gives us a new way of conceptualizing the music industry. New technologies, like it or not, have changed the face of the industry; traditional gatekeepers no longer dominate the industry and there is now much more room for the “self-employed” artist.

We encourage you to go and check out the study, and chew on the findings. Let us know what you think. Will small-business music ever really replace traditional record labels?

Advocating for the Intersection of Policy and Technology at SXSW

The Engine Advocacy crew is on its way home from its first SXSW. We found ourselves among friends there: entrepreneurs trying to build partnerships, consumers looking for the next great app for business or personal use, investors in search of the next high growth or long-run bet, reporters who actively engage with new media channels, and activists who, like us, want to advance policy that fosters new technologies and technology startups.

Engine’s panel featured a cohort of voices that had been active against SOPA and PIPA — Andrew Rasiej, the chair of NY Tech Meetup; Mark Stanley, the leading communications voice from the Center for Democracy and Technology; Laurent Crenshaw, the legislative director for Rep. Darrell Issa; Mike McGeary, Engine co-founder and director; and Boonsri Dickinson from Business Insider, who moderated the panel.

The panel was both a discussion of the tactics that made the SOPA/PIPA protests so effective, and of how to use those tactics and others to mobilize the SOPA and PIPA protesters to take a proactive stance on tech policy issues in the future. This has consistently been a sticking point,for all types of advocacy — how do you take the momentum gained from one urgent campaign, and turn it into sustained, positive action to advance a long term agenda? While the tech community might find it easy to block or defend against a piece or type of legislation, we have yet to determine the best advocacy tools for actively promoting legislation we like.

Our stance: the community needs compelling data that it can take to members of Congress to expand the knowledge on specific legislation, and we need to connect members of Congress directly with startups that employ their constituents.

In essence, we need to facilitate a really effective conversation.

This became more and more evident as we circulated the conference, meeting with entrepreneurs who were pitching innovative, useful products and services and building the businesses to support them; and seeing a fundamental disconnect between this sphere and that of policymakers. This was cemented when we met with Senator Jerry Moran (R-KS), who restated his commitment to assisting startups and fostering high-growth businesses in Kansas, and throughout the country. He highlighted the divide between the tech and non-tech communities by pointing out his own sense of being an outsider sitting at the table with a bunch of tech folks. This discomfort, which seems to be a common problem for members of Congress, clearly stems from a lack of effective communication.

The best possible outcome would be to educate policymakers about what we do; to make technology less alien, and to present them with hard data that proves the overarching value of what we do.  The Kauffman Foundation leads on researching these issues, but there are many other groups working toward this goal. We’re working on some exciting research as well that we think can help shift the debate. This easy, effective communication we’re talking about may not happen overnight, but we’re confident that it will happen. Getting together in Austin was a great next step in the process. We look forward to the next phase — the action phase — as we move forward.

IPO On-Ramp For Emerging Growth Companies

Bill of the week: S.1933, or the Reopening American Capital Markets to Emerging Growth Companies Act of 2011. You might also know it as the Sub $1 billion Revenues IPO Act — a shortened working title conferred by Fred Wilson at A VC, who championed the bill last Friday.

The bill amends the Securities Act of 1933 and Sarbanes Oxley to ease the time and financial burden of regulatory compliance for small companies going public. Specifically, the legislation would give “emerging growth companies” — companies with revenues of less than $1 billion — five years to comply with SEC regulations for an IPO. The temporary exemptions would allow smaller companies an eased path to IPO, while maintaining compliance obligations that protect investors. Eased regulations for IPO would give smaller companies greater access to markets and capital at a critical stage in their growth.

This bill corresponds to part of the Obama Administration’s Startup America Legislative Agenda, a detailed list of priorities released a month ago to spur job creation by addressing the needs of start-ups. We wrote about the agenda in detail here.

You probably already know how vital start-ups are to job growth — Kauffman research shows that start-ups are responsible for nearly all net new job growth in the country since 1977. But in case you need a refresher, this video is short, sweet, and explains the issues well. Bottom line? Election year or no, stimulating job growth and the economy is a non-partisan issue.This is an important bill, and one that we want to see passed sooner rather than later.

Beyond SOPA/PIPA at SXSW

We’re pleased to announce an upcoming panel we’re hosting at this year’s South by Southwest Interactive Conference in Austin, and we hope that you can join us for a lively discussion. We’ve put together a great collection of people from the intersection of tech and politics who will take a look at the next phase in advocacy for the tech community on the whole, what we learned from SOPA and PIPA, and how we can keep people engaged to take a more active stance on tech policy and legislation going forward to help guide that debate and work with legislators and regulators to make better choices when it comes to tech and government.

Joining us for the discussion are:

Michael McGeary, Co-Founder/Director, Engine Advocacy

Andrew Rasiej, Founder, Personal Democracy Media

Mark Stanley, New Media, Center for Democracy and Technology

Laurent Crenshaw, Legislative Director, Office of Rep. Darrell Issa (R-CA)

Boonsri Dickinson, Reporter, Business Insider

EVENT DETAILS:

Beyond SOPA/PIPA: Moving Forward with Tech Advocacy

5:00pm CST, Saturday, March 10

AT&T Conference Hotel, Salon C

Note: As this is an official SXSW event, a badge must be presented to join us.

We hope to see you there!

User/Entrepreneur

A Kauffman Foundation study shows that innovative startups are largely founded by users who create products for their own use and then commercialize them — an inspiring statistic that bears witness to the fact that innovation is closely related to democratic entrepreneurship and economic growth.

A study released today by the Kauffman Foundation looks for the first time in any significant detail the statistics on “user-entrepreneurs” — entrepreneurs who make products for their own personal use — and found that these types of entrepreneurs were particularly prevalent in innovative startups, comprising 46% of innovative startup founders.

The study tells us what we have known anecdotally for some time - innovation is intuitive, personal, and easy to sell. User entrepreneurs are not only more likely to get venture capital financing from the outset for products they build with a business purpose than other kinds of startups, but those who create their products for personal use are also more likely to have women and minorities as founders.

Read more about the study here. We’re looking forward to seeing more research that hones in on the amazing potential of bottom-up innovation.

Spectrum: Solved? Not Quite.

A week ago, H.R.3630 passed the Senate, ending the spectrum stalemate that had been ongoing between mobile broadband operators, cable companies, and innovators to gain access to a dwindling supply of spectrum licenses. We wrote a longer piece examining the issues behind the stalemate and tentatively hoping the legislation could help us avoid a spectrum crunch.

 Larry Downes wrote a really informative post on CNET this week warning that this may not be the case, for the following reasons:

 

  • The FCC said that mobile users will need an additional 300MHz of spectrum by 2015, and an additional 500 MHz by 2020. Problem is, legislation or no legislation, there isn’t that much usable spectrum to go around. Nowhere near enough, according to Downes.
  • There is spectrum which is not being used(including swathes of warehoused government spectrum), or not being used to its full capacity, but the nature of the FCC’s “increasingly outdated licensing system” makes it extremely difficult to re-purpose this spectrum to be more effectively used with today’s technologies. The new legislation takes steps to fix this, but we won’t see results of this for probably 10 years — seven years too late for the aforementioned 2015 deadline.

All of which sounds pretty sinister.

But Downes advocates for the following short to medium term solutions to help close the gap and keep us from mobile broadband disaster. While not negating the threat entirely, they might at least constitute better solutions than burying ones head in the sand and hoping against all hope that spectrum learns how to multiply itself organically.

  • Let them merge. When mobile carriers merge, they tend to make better use of limited bandwidth.
  • Build more cellphone towers. Local zoning authorities can make it difficult for cell phone companies to update and add to their core infrastructure, which is the next best option for these companies to optimize their services without additional spectrum.
  • Let’s all get new phones. Newer technologies make better, more efficient use of spectrum, particularly in the 4G LTE band. If everyone switched over, and there was tiered pricing plans for data use, we could suck a little more spectrum toothpaste out of the tube.

Ultimately though? We’re with Downes on this one: we need to rethink spectrum. We need to spend time hashing it out and crafting legislation alongside innovative processes that will work with our constantly evolving needs. We need to turn spectrum licensing into a responsive and nimble machine instead of a lumbering beast that needs massive overhauls every decade just to keep the system from complete collapse. So let’s look at this as an opportunity, rather than a disaster; as a chance to help shape long-term policy that fosters innovation.

Let us know what you think. Head over to Step2 to tell us your thoughts on spectrum as part of the innovation agenda.

Shoring Up Our Safe Harbors

Today, our friends at Public Knowledge launched the Internet Blueprint, where they will be hosting new ideas for positive policymaking where people can vote up or down ideas and help them draft legislation. We encourage you to take a look at all the bills, they’re proposing. We’ve found one in particular we’d like to support, right out of the gate.

A much needed amendment to the Digital Millenium Copyright Act of 1998 has been proposed by our friends over at Public Knowledge to modernize and improve the legislation. The Strengthening and Protecting DMCA Safe Harbors Act would amend section 512 to penalize bogus takedowns — like the takedown of an anti-SOPA Techdirt post we wrote about previously.

The amendments include penalties for anyone who knowingly or recklessly misrepresents that material or activity is infringing, including liability for damages incurred by the alleged infringer and reasonable legal fees if the takedown is proven to be without merit.

The proposed legislation would require proof that the alleged infringer was served with a notice, or an explanation of why this did not occur, as a safeguard against surprise takedowns. The legislation also calls for a free, publicly accessible, and searchable database of all takedown notices and counter notices to increase transparency and guard against bogus takedowns.

Finally, the proposed amendment seeks to protect subscribers to infringing sites with due warning of takedown and prompt return of files owned, in order to protect users who subscribe to services which turn out to be infringing.

Click here to read more from PK’s blueprint for DMCA Safe Harbors.

Now that the dust has settled after the fight against SOPA and PIPA, it’s time to take positive action in becoming involved in shaping future policies that protect an open and vibrant internet, one which is safe for commerce and property, and one that fosters innovation. Legislation like the Safe Harbors amendment, and others already listed on the Blueprint are the kinds we at Engine would like to see more of, and the sooner more work can be done on these important issues, the better.

JOBS Act Announced. Let’s Get to Work.

The Senate is stalling on actions taken by the House to grow job creation, and if they won’t take them up individually, House Majority Leader Eric Cantor (R-VA) hopes the Senate can consider the bills all at once. Cantor today announced House Republicans would bundle a number of entrepreneur-friendly bills focused on aiding startups in gaining better access to markets and capital, easing regulations to allow crowdfunding, and raising thresholds for compliance. Cantor detailed the plan, dubbed the Jumpstarting Our Business Startups (JOBS) Act, in a POLITICO op-ed published earlier today.

The package includes the following bills:

H.R.2940, - Access to Capital for Job Creators Act

Passed in the House, this bill would revise regulation D offerings to relax limitations for qualified investors to sell securities. Currently, regulation D allows some businesses to sell securities without registering them with the SEC. H.R.2940 would make it simpler for startups to raise capital through crowdfunding by removing the regulation D prohibition of general solicitation and general advertising for accredited investors.

H.R.1070, S.1544 - Small Company Capital Formation Act of 2011

This bill would amend the Securities Act of 1933 to exempt from SEC regulation a class of offerings between $5 million and $50 million, with a provision to review and increase this figure biennally. The Securities Act of 1933 capped exemption at $5 million and is long overdue for an update. Increasing the breadth of exemption would make it simpler for startups to raise capital and still be in compliance with SEC regulations.

H.R.1965, S.556, S.1941- To amend the securities laws to establish certain thresholds for shareholder registration, and for other purposes.

This bill would amend the Securities Exchange Act of 1934 to increase the threshold from $1 million to $10 million for shareholder registration for an issuer of securities. As with the Small Company Capital Formation Act of 2011, this would ease regulations and make it simpler for startups to gain access to capital and still be in compliance with the SEC.

These bills are no-brainers, and what’s more, many of these provisions appear in the President’s Startup America legislative agenda, released in late January. In our view, what’s good for startups is good for job creation and the overall economy. Now let’s get them through the Senate.

What else should legislators consider this year? Tell us over at Step2 and help define the Innovation Agenda.

Techdirt Hit by Phony DMCA Takedown

Another SOPA-in-practice moment: Our friends at TechDirt have had an anti-SOPA/PIPA post taken down in the name of the Digital Millenium Copyright Act (DMCA).

Only problem is, there’s no infringing content to be found anywhere near the post. Not in the post itself, not in any of the comments. Nowhere. Which, since the post has now been surreptitiously disappeared from search engine results, is more than a little worrying, as it gives substance to the fear that anti-copyright measures can be and are used to suppress free speech. The Techdirt team was given no notification of the takedown or opportunity to remove the so-called infringing content, either. They stumbled on it a month later doing a regular Google search.

And given that the post that was taken down was a primer on how to fight SOPA/PIPA copyright legislation, it all leaves a pretty bad taste in the mouth.

Read the Techdirt post here. We’ll be watching what happens.

What’s Next?

We want to know what issues around technology and innovation are important to you. Our friends over at Techdirt have created a Q&A platform on which you can vote up the issues you care about most, and add your voice to the conversation about how to implement positive policy change.

In the fight against SOPA and PIPA, the internet community proved itself to be active, engaged, and capable of achieving real influence in Washington. A groundswell of action against these bills erupted all over the nation, and through this action, we as a community were able to directly influence the policy that affects us.

Even though we halted the beast, we still have a long way to go on making sure any future antipiracy policy is developed with reference to the needs of the internet community.

We need to get involved in these discussions sooner.  We need to bring to the table what matters to us, and get involved in shaping policy that works for us so we’re not just reacting to bad legislation.

Let us know what matters to you most, and we will work with you to help implement policy that will work for you, your company, and your future.

Visit the Techdirt/Engine Innovation Agenda thread to let us know what matters to you.