Portrait Soundbite is very nice

Discover the murky lines where artificial intelligence clashes with copyright law in our music industry exploration. When a Drake-style track, birthed by AI, got snared in Universal Music Group's legal net, it sparked a debate we couldn't ignore. We're wading into this modern-day conundrum, dissecting AI's power to craft content that blurs the boundaries between homage and theft. As we unravel the threads of creativity and originality, prepare to have your notions of artistic ownership challenged by the digital age's latest frontier.

Transitioning from the digital canvas to the strategic boardrooms, we tackle the art of monetizing services without losing the loyalty of your audience. How do giants like Netflix juggle the tightrope of introducing ads without pushing away their crowd? We share our insights on navigating these business waters, discussing how ad-supported and ad-free tiers can coexist to satisfy diverse consumer appetites. So, tune in, as we shed light on balancing customer contentment with the relentless pursuit of profit, all within the flux of service monetization strategies.

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Transcript

Speaker 1 0:01

John, I just want to formally extend my gratitude to Universal Music Group, traditional friends of the tech industry. You know. No surprise that. You know it would be be be allied with them. But uh, so there was this, this song, ai Drake. I posted the song as part of my article and, of course, I downloaded the video first.

Speaker 1 0:22

But one thing by and large, more and more, as I post videos on Shritchackery, I do usually host them myself, and the reason is because videos will just disappear if you embed them from someone else. Right, and you'll get. You have a broken link. No one wants broken links. Obviously, broken links are a scourge on the web generally, but if something is embedded in the page and part of the article, I don't want that to break. So, like a few years ago, I actually went back all the way to being in Shritchackery. We got the original videos of almost everything that I posted and I hosted myself.

Speaker 1 0:50

In this case, I did not embed my own video because I was like there's a good chance that this is going to get taken down. If it gets taken down, I don't want to be a part of that. But then, number three, if you load the article and there's a black box that says video unavailable. This video is no longer available to due to a copyright claim by Universal Music Group. It kind of makes the point of my introduction. So they, they, they accommodated me. They came in a couple of days later. There's now a black box on the article and you know what. It's going to stay there.

Speaker 2 1:22

I can't say I'm the biggest Drake fan in the world, you know because I'm not, but the song is an absolute sensation and I guess if it weren't AI generated, is it that good? I don't know.

Speaker 1 1:37

Yeah, it's hard to separate, like the novelty factor in your head, from appreciating whether or not it's a good song.

Speaker 2 1:43

Right, but it's like a nationwide or worldwide, you know pop sensation. You know it, it, it. It's like the first one and I think that's that's the thing that has really opened people's eyes.

Speaker 1 1:55

Yeah, the first one that's broken through, to be clear.

Speaker 2 1:58

There's been a lot of these floating around, but yes, Right, but if this is the first, only the first one that's broken through, where is? Where is this going in the future in terms of how people are going to make original mashups from you know, and if? If the music industry thought sampling a beat was a problem before, Now they're simulating the vocals of an artist, Right?

Speaker 1 2:24

I mean that's. That's exactly what I think is interesting, because this gets back into a lot of these lawsuits and copyright questions that are going on, which is, when you're sampling a beat, you are literally copying the beat right, even if it's a very small section, whereas this other stuff it's it's new production, it's so is this so it's down because of a copyright claim? But is this a copyright violation? It's not clear. It's not clear that it is.

Speaker 2 2:52

Very much so Right, and it's because the AIs have abilities that humans just don't Right. It's, like you know, there's always the, the trope of the person with a quote, unquote, photographic memory which really doesn't exist, but AI can be fed the entire text of a novel and, of course, all of these AIs have been fed the text of thousands of novels.

Speaker 1 3:19

They've been fed the text of Daring Fireball, as you heard the other day.

Speaker 2 3:22

Right and Stratechery. I'm a little ahead of you and I was surprised. I was expecting Stratechery to perhaps be better fodder for the AI.

Speaker 1 3:32

No, but a lot of it's behind a paywall, so I think that's part of the thing. Yeah, it's funny because, unlike the website I mean not that anyone cares, but like the website rankings, things Stratechery is always relatively low, I think, to the actual number of readers, in part because Stratechery is successful when I get people to stop reading the web page. Right and to read like an e-mail right, Right Forwarded or whatever it might be. But sorry, continue.

Speaker 2 3:57

Right, but you know, or you know it has you know perhaps, if it's been. You know it seems, according to the Washington Post analysis, the Google one has been fed up to some certain date the entire corpus of Daring Fireball. So it's ability to mimic my style is inhuman in terms of its ability to keep all of that in its proverbial head at one time, and so humans have been able to. I mean and I always say I mean writing is the one thing I feel like I can maybe give younger people advice on. But read as much stuff that you love to read as you want and think critically. Why do I enjoy reading this, you know, and then use that to infuse your own writing. That's the nutshell of my advice to somebody who wants to write is you've got to be a reader first. Think about what it is that you love, about the stuff you love to read, and don't copy it, but just let that infuse your style.

Speaker 2 4:57

Every writer is inspired by writers. They, like Every musician will tell you they're inspired by the musicians. They like Every filmmaker is inspired by the filmmakers who came before them, who they love and who they watch their movies over and over again. But the ability of AI to duplicate that. It isn't like anything we've seen before and, like you said, it is fair. Is it copyright? Because they're not actually copying it. It's just that AI has the ability to replicate things that we once thought were unreplicatable without copying.

Speaker 1 5:29

But the answer here because it's not like this is going to go away. Right, people are calling this a Napster moment, and it does feel like a Napster moment because the solution to Napster was ultimately to do something better, to figure out a way forward. That sort of made sense and I don't know, we're sort of rehashing a bit of what we got into last episode. But number one, you know, we should be able to know for sure what sort of is from Drake and what isn't, and this, by the way, I think is going to be.

Speaker 1 6:01

There's always been this issue around user generated content sites, whether that be social media, whether that be YouTube, whether you can be Spotify, where it's very easy to walk up and sort of create an account, and part of the problem with this with this person is they did sort of put it on Spotify. I think that one of the things these platforms are going to have to start doing and is going to be a differential that they provide and will preserve relationships with human creators, is a much stronger verification process, and that is, in some respects, not ideal, because they benefit from basically not having to put in any costs into the upload process, so you just get content sort of like crazy, but I do think that's going to have to change. Like like, these platforms are going to have to make a shift in response to the fact that generated content is now zero cost, and it's on them, I think, actually more than anyone, to solve this problem.

Speaker 2 6:59

It's constantly surprising, though, what AI generated blank can come up with. Right, and it is. I get the Napster thing. It seems it makes Napster seem so simple in hindsight. Right, it was just distribution of copies, but there is it. It's not a bad analogy, though, because there it is Clearly a sort of can't put the toothpaste back in the tube sort of scenario, right Like there's whatever the path forward for the, you know, if we're just talking music for the music labels, it's not somehow make this not be possible, because it is possible and it's going to keep happening.

Speaker 1 7:42

Yeah, One thing, by the way. This is sort of an orthogonal take. Netflix's earnings came out this week and one of the. I'm not surprised, but it was, I think, a pleasant surprise. I'm not shocked, but it was a pleasant surprise.

Speaker 1 7:57

The extent to which their ads are, you know, kicking ass right. So they had this basic with ads was their plan, where you have the fake HD. It was like 720p and only one stream and it cost. It was cheaper than their regular basic plan. But because they were making so much money on ads in the US and Canada, that plan was actually making Netflix more revenue than their standard plan, which is 1550 a month and it is real HD and two streams. And so they upped that plan to being basically the same real HD, two streams, and it seems super clear that they woke it up to.

Speaker 1 8:34

It's actually in our interest to push people to this free plan and it also, by the way, actually makes it possible we might see a free Netflix down the line where it's just sort of ads reported and the main thing you get for sort of paying is maybe 4K or the ability to download or sort of you know, no ads obviously is sort of the biggest allure.

Speaker 1 8:57

But it's really interesting because there's a bit where, if Netflix gets there, it's almost shifting more towards the YouTube direction, where obviously there's this big distinction which is Netflix is all paid for content and produced content and YouTube is all this user-during content with some of the other stuff sort of on top.

Speaker 1 9:17

But the business models end up being kind of similar where there's a ad-free version and then YouTube also has the pay and don't see ads, which, by the way, is like the biggest bargain on the internet. I boggles my mind when anyone does not have YouTube premium. But it's interesting because also you might have this issue where YouTube is starting to have more costs in terms of user-during content. User-during content might start getting more expensive for these platforms precisely because this verification function may become more of a burden than it's been sort of to date. And there's always been the cost of moderation has been a cost of having, you know, user-generated content. But if you have to actively have some sort of verification program, the economics of it do start to break down just a little bit more. And it's not to say Netflix will be YouTube, it's obviously not going to be, but it's just. It's interesting how there's sort of a convergence in some respects about the overall cost structure of these businesses.

Speaker 2 10:14

Yeah, it's again a side note on a side note, but I was checking on which family subscriptions everybody's using and which ones I should keep and I double checked with my son like hey, you're still using our family thing for YouTube premium and he's never freaked out so badly. He was like, oh my god, don't cancel. Like I think I I could cancel anything else. Like if I canceled Disney Plus, he'd be like, okay, you know, or one or the other, even Netflix maybe, but YouTube premium. He was like don't do that, I'll come home and kill you.

Speaker 1 10:50

I was totally wrong on YouTube premium. I thought it was a bad idea when they did it because, like you're, you're sort of filtering out your best customers, which are attractive to advertisers right now. There is a certain self-interest bias in here, which is I love YouTube premium so much. I can't imagine if if it didn't exist. So maybe that's part of the motivation. But it's also YouTube is so big. They're totally fine without having some number of subscribers that are willing to pay and the price. You know they. I think they keep raising the price and, yeah, I mean it's funny that it just seems like this. You know it. Just it's fascinating that Netflix may end up in the same place a free tier where you pay to not have ads and I think, like, if you go back, even a couple years or especially before YouTube launch premium, the idea that one day YouTube and Netflix might have the same business model would have been crazy.

Speaker 2 11:38

But that very well may be where we end up right, and it's fascinating to compare with our other recent topic, hbo, where for years and years and years the comparisons with Netflix were always to HBO and the.

Monetizing Services

Speaker 2 11:49

Can HBO become Netflix faster than Netflix can become HBO? It Super fascinating because that made a lot more sense and was like yeah, it seems like a natural rivalry, whereas Netflix, being compared to YouTube, didn't seem like something that we'd be talking about, even though now that it's happening, it's like oh, it does kind of make sense. And I guess the big lesson to come out of it is you always have to try stuff to see how it works rather than go with your intuition. So, like like you, my intuition would be Something that is entirely ad-based. You don't want to offer an ad-free version because you'd be losing your quote-unquote best customers, whereas it seems like lots of things that do that and try that it works out fine where the ad product keeps making the same money from ads because plenty of good customers don't want to pay, and you just get this separate segment of people who are Super happy to pay to make the ads go away.

Speaker 1 12:49

Yeah, and vice versa. Right, I think. Oh, you know, in retrospect it's funny how, out on a whim, I felt by saying that Netflix should have ads, and now it's like. Now it's like could you imagine if Netflix had not instituted ads? Right, right right.

Speaker 1 13:03

And it does know it to your point it doesn't have any impact on regular Netflix subscribers. It's still totally fine and you know, I think it's a reminder it's easy to get very precious about this stuff and, at the end of the day, these are big companies. It's a huge market and, yeah To your point, being dogmatic is actually where it which is arguably Netflix's biggest problem is. They were too dogmatic for too long about this point and the fact that Netflix effectively, with this ad and you see why they want to push people there because they can, it's basically they can raise prices indefinitely, because the price that's being raised is the attractiveness to advertisers, the amount they can charge per ad, which is not felt by the consumer. It's actually, it's a win-win. It is a good thing for everyone.

Speaker 2 13:52

Yeah, I saw people freak out at the news that they're making more money per user with the lower price thing with ads, because people who don't Want to see ads on Netflix were freaked out because they're like, well, they make more money. They're just gonna make us all do that and I don't think that's gonna happen. I think they're happy to let people who really feel strongly about paying the Nazi ads Make less money from them per month, although the price prices yeah, they're happy ways prices, but but that's why, like right, if it's important to you, you should be happy to pay.

Speaker 1 14:20

You can't have your cake and eat it too, right?

Speaker 2 14:22

Yeah, they'll keep the product. You just might have to pay more. You know it is. It's not that, oh, I'm gonna be forced to see ads. It's more like you're gonna be forced to pay two or three dollars more a month in any year later and other two dollars.

Speaker 1 14:35

No, I've always. This has always been very clear to me. The end all be all of business is not making your customers happy, and the way I always put it is it would make my customers very Happy if I made sure techery free, and that's definitely not what I'm going to do. So that I'm pretty clear that's not the end of y'all.

Speaker 2 14:53

All right right here. Free food would be great too, but it does no way to run a restaurant. Oh,