Economist 6/27/16

  1. Since the Lisbon treaty came into force in 2009 there has been only one legal mechanism: the country that wants to leave EU must invoke Article 50, which sets out how it happens.Under Article 50 it is for the other 27 countries to decide, by majority vote and without British participation, the terms of Britain’s exit. The article sets a two-year deadline for this process, which can be extended only by unanimous agreement of all 27 countries. If no deal is agreed in that time, Britain would cease to be an EU member and revert to trading with the EU on normal World Trade Organisation rules.Once that is done, there will also be negotiations over Britain’s new trade relationship with the EU.And the new rules for trade will also have to be approved by all 27 remaining EU members and ratified by their national parliaments (and the European Parliament). That process could take many months: the EU-Canada trade deal agreed two year ago still has not been ratified.
  2. Taylor Swift has joined nearly 200 musicians and record labels in a campaign aimed at the largest streaming service, YouTube.Their call for a change in copyright law is sure to fail, but the underlying gripe with Google’s streaming service will find sympathetic ears. Streaming of music via on-demand video services more than doubled in America last year, to 172.4 billion songs, according to Nielsen, a research firm. Ms Swift, Sir Paul McCartney, U2 and others signed a letter, published in several Washington periodicals on June 20th, asking Congress to make it more difficult and costly for those streaming services to host versions of songs uploaded by users. Google and Facebook, among others, will vigorously oppose any change to the Digital Millennium Copyright Act, which grants them “safe harbour” from liability for copyright infringement.
  3. A more realistic goal for the music industry is to persuade YouTube to pay more for playing their songs. The service is the leading destination for on-demand music but a small source of revenue. IFPI, a trade body, reckons that 900m people used ad-supported user-upload services such as YouTube to listen to music last year, but that the industry got only $634m from those streams. Subscription-based services, including Spotify, paid $2.3 billion to musicians in 2015.Analysts reckon YouTube collected up to $9 billion in advertising revenue in 2015, some $5 billion of which would have been due to content creators and rights-holders. Those figures could double or even triple by 2020. By then YouTube might be making money.Three big record labels—Universal Music Group, Warner Music and Sony Music Entertainment—are negotiating new deals with YouTube that they hope will lead to a bigger slice of the pie.
  4. SoftBank’s official reason for Mr Nikesh Arora’s resignation is that Mr Son decided he wanted to carry on as chief executive for another five years or more. Mr Arora wanted to take over sooner. But his brief record at the company must have had something to do with his departure.Mr Son believed his protégé’s connections in Silicon Valley could land him the right tech deals. Mr Arora’s investment spree include a $1 billion punt on Coupang, a loss-making South Korean unicorn. Hundreds of millions also went into an array of cash-bleeding ride-hailing firms in Asia, including India’s Ola. But the mood has shifted. Now SoftBank’s activities are widely viewed as symptoms of the frothiness and mania that have gripped the tech sector.
  5. Mr Arora’s free rein to back startups particularly annoyed shareholders. One group of disgruntled investors led a campaign to oust him.When they listed their complaints earlier this year, Mr Son pledged “complete trust” in Mr Arora. On June 20th, a special committee of SoftBank board members concluded that the various complaints were “without merit”. Yet a day later he resigned.A particular issue was Mr Arora’s pay. In the 2014 fiscal year he took home ¥16.5 billion ($156m), and last year he pocketed ¥8 billion, in a country in which bosses receive on average around ¥100m a year.Mr Son is taking steps to reduce risk by selling assets and paying down some of the debts his firm has accumulated, in part through buying Sprint. SoftBank has agreed to sell some of its stake in Alibaba, a Chinese e-commerce giant, for $10 billion, and is to dispose of a stake in Supercell, a Finnish game developer.

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