Your data is for sale

 — and not just on Facebook

Nobody is gathering more information more quickly than the providers of digital services. But do you trust them?

Your data is for sale — and not just on Facebook
(Credit: Chookiat K via Shutterstock/Salon)

This is how the tech P.R. wars of the future will be waged: “Trust us, because we will take care of your precious information better than the other guy.”

On Aug. 21, Square, the mobile-payments start-up helmed by Twitter co-founder Jack Dorsey, announced the release of a new package of analytical tools available for free to any merchant that uses Square.

Small businesses, argued the press release, tend not to have the same access to advanced data crunching as larger operations. Square Analytics “levels the playing field” and “delivers sellers actionable data to increase sales and better serve their customers.” Want to know exactly how much a bad snow storm affected your cupcake sales, or what kind of advanced coffee products your repeat customers crave the most on Tuesday mornings? Square Analytics has the answers!

A few hours after Square’s announcement, I received an email from a man who handles press relations for Shopkeep, a company that offers point-of-sale processing via the iPad, and has apparently been touting its own small business analytics support for years. Judging by the accusations made in the email, Shopkeep was none too pleased by the debut of Square’s new service.

“Square is more interested in collecting and selling data than it is in helping small businesses grow,” read the email. My correspondent further alleged that Square’s “terms and conditions” gave Square the right to do anything it wanted with the data it collected on retail transactions.

Picture this: I order coffee at a coffee shop that uses Square … Square, not the cafe, seizes the data on that transaction and emails me a receipt. The company can sell that data to the highest bidder — another coffee shop up the street or the closest Starbucks. Then I could get an email from that other coffee shop, not the one I’m a regular at, offering me a discount or some other incentive to come in.

Shopkeep, in contrast, would never do such a dastardly thing.

I contacted Square and asked spokesperson Aaron Zamost if the coffee shop scenario was realistic. Unsurprisingly, he dismissed it out of hand. “No, we do not intend to do this,” said Zamost. “We do not surface, nor do we have any plans to surface individualized transaction data to any sellers besides the one who made the sale. Our sellers trust us to be transparent with them and respectful of what they share with us. If we were to violate their trust, or behave as other companies have been known to, they would leave us.”



I have no evidence to prove or disprove the allegations made by Shopkeep or the defense offered by Square. The  interesting point is that the nature of the accusation is an attempt to poke at what is clearly a sore spot in Silicon Valley in 2014. In these post-Snowden days, how tech companies handle data is a volatile issue. In fact, it might be the biggest issue of them all. Because Shopkeep and Square are hardly alone in their ability to amass valuable information. Every company that offers a service over your mobile device — whether processing a sale, hiring a car, locating a room to stay in — is in the data business. Everyone is a data broker. As Silicon Valley likes to say, in the 21st century data is the new oil. What rarely gets mentioned afterward, however, is the fact that the oil business, especially when it was just getting started, was very, very dirty.

* * *

Square has a cool product: A plastic card reader that plugs into the headphone jack of your phone and enables anyone with a bank account to start processing credit card transactions. Although Square has yet to turn a profit, and has weathered some bad press in recent months, the company does process $30 billion worth of transactions a year. That’s a lot of information available to crunch.

Of course, there are plenty of companies, starting with the credit card firms themselves, that are already slicing and dicing payment transaction info and offering analysis to whomever can pay for it. Square is just one more player in a very crowded field. But Square is nevertheless emblematic of an important trend — let’s call it the disruptive democratization of data brokering. Once upon a time, a handful of obscure, operating-behind-the-scenes firms dominated the data-brokering business. But now that everything’s digital, everyone with a digital business can be a data broker.

In an increasing number of cases it appears that the ostensible service offered by the latest free app isn’t actually what the app-maker plans to make money off; it’s just the lure that brings in the good stuff — the monetizable data. Square may be a payments processing company first, but it is rapidly amassing huge amounts of data, which is in itself a valuable commodity, a point confirmed by  Square executive Gokul Rajaram to Fortune Magazine earlier this year.

Similarly, Uber is ostensibly a car hiring company but is also poised to know more about our transportation habits than just about any other single player. Almost every app on your phone — even the flashlight app — is simultaneously performing a service for you, and gathering data about you.

Increasingly, as the accusations about Square from a competitor demonstrate, we may end up deciding whom we choose for our services based on whether we trust them as responsible safekeepers of our data.

Until this year, most Americans have had only the sketchiest knowledge of how huge the marketplace is for our personal information. In May the FTC released a report that looked at the nine biggest data brokers — companies that specialize in amassing huge dossiers on every living person in the Western world. The numbers are startling.

Data brokers collect and store a vast amount of data on almost every U.S. household and commercial transaction. Of the nine data brokers, one data broker’s database has information on 1.4 billion consumer transactions and over 700 billion aggregated data elements; another data broker’s database covers one trillion dollars in consumer transactions; and yet another data broker adds three billion new records each month to its databases.

The big data brokers build their databases by snarfling up every single source of information they can find or buy. Databases operated by federal, state and local governments are an obvious source, but the big data brokers also routinely scrape social media sites and blogs, and also buy commercial databases from a vast variety of enterprises, as well as from other data brokers.

Today, nobody is gathering more information more quickly than the providers of digital services. Surveillance Valley, indeed! Analytics companies know the constellation of apps on your phone, including your every click and swipe, down to the most granular level.

The rules regarding what can be done with this information are in their infancy. For now, we depend largely on what the companies say in their own terms and conditions. But we would be unwise to regard those as permanently binding legally promises. They can change at any time — something that Facebook has demonstrated repeatedly. What Square says now, in other words, might not be what Square does in the future, especially if the company finds itself in dire need of cash.

When everyone is a data broker, having standardized rules governing what can be done with our information becomes a pressing social priority. Right now it’s just a big mess.

 

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

 

http://www.salon.com/2014/08/29/its_not_just_facebook_anymore_in_the_future_your_data_is_always_for_sale/?source=newsletter

Companies sell mobile phone spying tools to governments worldwide

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By Thomas Gaist
26 August 2014

Cell phone location tracking technologies long used by the US National Security Agency and British GCHQ are increasingly available for purchase by other governments throughout the world, the Washington Post reported Monday.

Cell phone location data tracking systems, which include a range of associated intelligence gathering capabilities, are constantly being developed and marketed by private security contractors. The technology enables governments and private entities to track the movements of cell phone users across national boundaries, in many cases pinpointing users’ precise locations within a few meters.

One surveillance firm, called Defentek, boasts on its web page that its Infiltrator Global Real-Time Tracking System can “locate and track any phone number in the world.” The Infiltrator System is “a strategic solution that infiltrates and is undetected and unknown by the network, carrier, or the target,” the site says.

Analysis of cell phone location tracking software by the watchdog group Privacy International highlighted the role of Verint, a sophisticated Israeli-American private security and intelligence contractor that employs former government agents, including special forces soldiers.

Verint reports on its web page that the company’s systems are used by “more than 10,000 organizations in over 180 countries,” the Washington Post reported.

The spread of such cutting-edge surveillance systems by private security and intelligence firms is taking place with the help of the major telecommunications corporations. Verint states that it has installed location data capture software on cellular networks in numerous countries with the knowledge and cooperation of major telecommunications providers.

A confidential Verint advertising brochure posted online by Privacy International detailed the wide array of surveillance capabilities offered by Verint to clients. According to its advertising material, Verint’s “Solution’s Portfolio” includes “Cellular Interception and Control, Mobile Satellite Interception, Global Cellular Location, and IP Interception and Tampering.” The brochure notes that the company sells “Monitoring Centres that can operate at nationwide levels and has been known to have had installations in Slovakia, Ivory Coast, India and Vietnam.”

For the right price, Verint will also carry out and/or facilitate a number of other intelligence-related operations on behalf of its clients, including:

* Identifying potential targets and building an intelligence picture over cellular networks

* Passively and covertly collecting cellular traffic in an area and analyzing it in real time to identify potential targets

* Identifying suspicious communication patterns using a range of analysis tools, including Location, Speech Recognition, Link Analysis, Text Matching

* Intercepting voice calls and text messages of potential targets

* Identifying, intercepting, decoding, manipulating and analyzing WiFi-enabled devices such as tablets, smartphones, and laptops

Verint also claims that it can break into encrypted communications and remotely activate microphones on cell phones, and the company offers training sessions simulating a range of tactical scenarios with its in-house veteran military and intelligence personnel.

Reports from the summer of 2013 showed that Verint provided systems used by the Mexican government during the administration of President Felipe Calderon to capture and analyze all types of communications in that country beginning in 2007, as part of operations initiated in coordination with the US State Department.

In its report, the Washington Post noted that surveillance agencies and private companies are increasingly deploying “IMSI catchers,” also referred to as StingRays, which enable users to send fake text messages, inject malware into targeted phones, and intercept the content of various forms of cellphone-based communications.

In addition to using StingRays, surveillance agencies can tap directly into cell phone towers to identify movement patterns of nearby telephone users. Location data from cell phone towers, moreover, is regularly transferred in bulk to federal, state, and local security agencies across the US through a procedure known as “tower dumps.”

Revelations from December of 2013 have already shown that the NSA’s CO-TRAVELLER program gathers around 5 billion pieces of cell phone location data worldwide on a daily basis, and has been capable of tracking the location of cellphones, even when switched off, since 2004. Location data gathered by the NSA allows the agency to map the overall movement pattern of targeted individuals, their daily routes and habitual meeting places.

The US uses related technology to orchestrate its drone wars in Afghanistan, Pakistan, Yemen and elsewhere. As part of a program codenamed GILGAMESH, the NSA’s “Geo Cell” program, which sports the motto “We Track ‘Em, You Whack ‘Em,” guides drone strikes against alleged terrorists by tracking the location of SIM cards inside their cellphones.

All of these surveillance and tracking programs are part of the efforts of the US and other imperialist states to compile comprehensive databases on their respective populations in response to growing popular opposition to the growth of social inequality and attacks on democratic rights.

Why Burning Man is not an example of a loosely regulated tech utopia

The rules are important at Burning Man. But being rich means you get to do what you want, just like anywhere else

Why Burning Man is not an example of a loosely regulated tech utopia
El Pulpo Mecanico, at the Burning Man 2012 “Fertility 2.0″ arts and music festival, August 29, 2012. (Credit: Reuters/Jim Urquhart)

“Burning Man culture,” writes Gregory Ferenstein in Vox, “discourages money or bartering; the entire economy is a gift economy.”

Ferenstein, a regular attendee at the Nevada desert counterculture festival so beloved by Northern California’s tech-hipsters, is defending Burning Man from critics like the New York Times’ Nick Bilton, who have noted that in recent years, rich attendees have been setting up their own luxury camps within the confines of Black Rock City. Ferenstein makes some good points explaining why tech billionaires love Burning Man, but it’s still difficult to square his point on “burning man culture” with the details reported by Bilton.

“We used to have R.V.s and precooked meals,” said a man who attends Burning Man with a group of Silicon Valley entrepreneurs… “Now, we have the craziest chefs in the world and people who build yurts for us that have beds and air-conditioning.” He added with a sense of amazement, “Yes, air-conditioning in the middle of the desert!”

His camp includes about 100 people from the Valley and Hollywood start-ups, as well as several venture capital firms. And while dues for most non-tech camps run about $300 a person, he said his camp’s fees this year were $25,000 a person. A few people, mostly female models flown in from New York, get to go free, but when all is told, the weekend accommodations will collectively cost the partygoers over $2 million.

Such camps, reports Bilton, also included “Sherpas” that serve as servants.

Ferenstein writes that the tech execs have basically the same experience as everyone else. But he appears to be tone-deaf to the enormous offense of labeling paid employees “Sherpas” and doesn’t bother to mention the female models flown in from New York. That’s not the gift economy, and it’s not the sharing economy. And it’s surely not something that anyone even imagined possible when tripping around a very big bonfire on Baker Beach in the early ’90s.



Ferenstein also wanders into a self-combusting contradiction, of the sort that would look pretty good exploding  in the desert night. Burning Man, he writes, “is an experiment in what a city would look like if it were architected for wild creativity and innovation…. At Burning Man, sharing is the economy. It’s rather appealing to the Silicon Valley elite to see an entire city function on an economic idea that is at the heart of the knowledge economy. It’s an important glimpse of why the founders are so optimistic that a loosely regulated field of tech startups can outweigh the potential downsides of unregulated sharing.”

But Burning Man is intensely regulated. It’s got its own police force. Gun control is absolute. Attendance is limited to a set number of people who can afford the not-cheap tickets. The very layout of Black Rock City is a paean to planning and organization. Central control is as much the essence of Burning Man as is hedonism and fire.

We can argue about the proper extent of regulation. Is Burning Man more like Houston, which scoffs at zoning restrictions, or San Francisco, where plastic bags are outlawed? (The rules on trash at Burning Man might come off as pretty extreme to your typical happy-go-lucky free market polluter, after all.) But to use Burning Man as a model for what tech billionaires want for a greater society is to actually argue that rules are extremely important, and anarchy is a failure!

The key point made by Nick Bilton is that the very existence of a camp inside Burning Man where tickets cost $25,000 and female companionship is imported is a demonstration that Burning Man, far from being an alternative to society, is business as usual.

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

http://www.salon.com/2014/08/22/why_burning_man_is_not_an_example_of_a_loosely_regulated_tech_utopia/?source=newsletter

How Google and the Big Tech Companies Are Helping Maintain America’s Empire


Military, intelligence agencies and defense contractors are totally connected to Silicon Valley.

Silicon Valley has been in the media spotlight for its role in gentrifying and raising rents in San Francisco, helping the NSA spy on American citizens, and lack of racial and gender diversity. Despite that, Silicon Valley still has a reputation for benevolence, innocence and progressivism. Hence Google’s phrase, “Don’t be evil.” A recent Wall Street Journal/NBC News poll found that, even after the Snowden leaks, 53% of those surveyed had high confidence in the tech industry. The tech industry is not seen as evil as, say, Wall Street or Big Oil.

One aspect of Silicon Valley that would damage this reputation has not been scrutinized enough—its involvement in American militarism. Silicon Valley’s ties to the National Security State extend beyond the NSA’s PRISM program. Through numerous partnerships and contracts with the U.S. military, intelligence and law enforcement agencies, Silicon Valley is part of the American military-industrial complex. Google sells its technologies to the U.S. military, FBI, CIA, NSA, DEA, NGA, and other intelligence and law enforcement agencies, has managers with backgrounds in military and intelligence work, and partners with defense contractors like Lockheed Martin and Northrop Grumman. Amazon designed a cloud computing system that will be used by the CIA and every other intelligence agency. The CIA-funded tech company Palantir sells its data-mining and analysis software to the U.S. military, CIA, LAPD, NYPD, and other security agencies. These technologies have several war-zone and intelligence-gathering applications.

First, a little background to explain how the military has been involved with Silicon Valley since its conception as a technology center. Silicon Valley’s roots date back to World War II, according to a presentation by researcher and entrepreneur Steve Blank. During the war, the U.S. government funded a secret lab at Harvard University to research how to disrupt Germany’s radar-guided electronic air defense system. The solution — drop aluminum foil in front of German radars to jam them. This birthed modern electronic warfare and signals intelligence. The head of that lab was Stanford engineering professor Fred Terman who, after World War II, took 11 staffers from that lab to create Stanford’s Electronic Research Lab (ERL), which received funding from the military. Stanford also had an Applied Electronics Lab(AEL) that did classified research in jammers and electronic intelligence for the military.

In fact, much of AEL’s research aided the U.S. war in Vietnam. This made the lab a target for student antiwar protesters who nonviolently occupied the lab in April 1969 and demanded an end to classified research at Stanford. After nearly a year of teach-ins, protests, and violent clashes with the police, Stanford effectively eliminated war-related classified research at the university.

The ERL did research in and designed microwave tubes and electronic receivers and jammers. This helped the U.S. military and intelligence agencies spy on the Soviet Union and jam their air defense systems. Local tube companies and contractors developed the technologies based on that research. Some researchers from ERL also founded microwave companies in the area. This created a boon of microwave and electronic startups that ultimately formed the Silicon Valley known today.

Don’t be evil, Google

Last year, the first Snowden documents revealed that Google, Facebook, Yahoo!, and other major tech companies provided the NSA access to their users’ data through the PRISM program. All the major tech companies denied knowledge of PRISM and put up an adversarial public front to government surveillance. However, Al Jazeera America’s Jason Leopold obtained, via FOIA request, two sets of email communications between former NSA Director Gen. Keith Alexander and Google executives Sergey Brin and Eric Schmidt. The communications, according to Leopold, suggest “a far cozier working relationship between some tech firms and the U.S. government than was implied by Silicon Valley brass” and that “not all cooperation was under pressure.” In the emails, Alexander and the Google executives discussed information sharing related to national security purposes.

But PRISM is the tip of the iceberg. Several tech companies are deeply in bed with the U.S. military, intelligence agencies, and defense contractors. One very notable example is Google. Google markets and sells its technology to the U.S. military and several intelligence and law enforcement agencies, such as the FBI, CIA, NSA, DEA, and NGA.

Google has a contract with the National Geospatial-Intelligence Agency (NGA) that allows the agency to use Google Earth Builder. The NGA provides geospatial intelligence, such as satellite imagery and mapping, to the military and other intelligence agencies like the NSA. In fact, NGA geospatial intelligence helped the military and CIA locate and kill Osama bin Laden. This contract allows the NGA to utilize Google’s mapping technology for geospatial intelligence purposes. Google’s Official Enterprise Blog announced that “Google’s work with NGA marks one of the first major government geospatial cloud initiatives, which will enable NGA to use Google Earth Builder to host its geospatial data and information. This allows NGA to customize Google Earth & Maps to provide maps and globes to support U.S. government activities, including: U.S. national security; homeland security; environmental impact and monitoring; and humanitarian assistance, disaster response and preparedness efforts.”

Google Earth’s technology “got its start in the intelligence community, in a CIA-backed firm called Keyhole,” which Google purchased in 2004, according to the Washington Post. PandoDaily reporter Yasha Levine, who has extensively reported on Google’s ties to the military and intelligence communitypoints out that Keyhole’s “main product was an application called EarthViewer, which allowed users to fly and move around a virtual globe as if they were in a video game.”

In 2003, a year before Google bought Keyhole, the company was on the verge of bankruptcy, until it was saved by In-Q-Tel, a CIA-funded venture capital firm. The CIA worked with other intelligence agencies to fit Keyhole’s systems to its needs. According to the CIA Museum page, “The finished product transformed the way intelligence officers interacted with geographic information and earth imagery. Users could now easily combine complicated sets of data and imagery into clear, realistic visual representations. Users could ‘fly’ from space to street level seamlessly while interactively exploring layers of information including roads, schools, businesses, and demographics.”

How much In-Q-Tel invested into Keyhole is classified. However, Levine writes that “the bulk of the funds didn’t come from the CIA’s intelligence budget — as they normally do with In-Q-Tel — but from the NGA, which provided the money on behalf of the entire ‘Intelligence Community.’ As a result, equity in Keyhole was held by two major intelligence agencies.” Shortly after In-Q-Tel bought Keyhole, the NGA (then known as the National Imagery and Mapping Agency or NIMA) announced it immediately used Keyhole’s technology to support U.S. troops in Iraq at the 2003-2011 war. The next year, Google purchased Keyhole and used its technology to develop Google Earth.

Four years after Google purchased Keyhole, in 2008, Google and the NGA purchased GeoEye-1, the world’s highest-resolution satellite, from the company GeoEye. The NGA paid for half of the satellite’s $502 million development and committed to purchasing its imagery. Because of a government restriction, Google gets lower-resolution images but still retains exclusive access to the satellite’s photos. GeoEye later merged into DigitalGlobe in 2013.

Google’s relationship to the National Security State extends beyond contracts with the military and intelligence agencies. Many managers in Google’s public sector division come from the U.S. military and intelligence community, according to one of Levine’s reports.

Michele R. Weslander-Quaid is one example. She became Google’s Innovation Evangelist and Chief Technology Officer of the company’s public sector division in 2011. Before joining Google, since 9/11, Weslander-Quaid worked throughout the military and intelligence world in positions at the National Geospatial-Intelligence Agency, Office of the Director of National Intelligence, National Reconnaissance Office, and later, the Office of the Secretary of Defense. Levine noted that Weslander-Quaid also “toured combat zones in both Iraq and Afghanistan in order to see the tech needs of the military first-hand.”

Throughout her years working in the intelligence community, Weslander-Quaid “shook things up by dropping archaic software and hardware and convincing teams to collaborate via web tools” and “treated each agency like a startup,” according to a 2014 Entrepreneur Magazine profile. She was a major advocate for web tools and cloud-based software and was responsible for implementing them at the agencies she worked at. At Google, Weslander-Quaid’s job is to meet “with agency directors to map technological paths they want to follow, and helps Google employees understand what’s needed to work with public-sector clients.” Weslander-Quaid told Entrepreneur, “A big part of my job is to translate between Silicon Valley speak and government dialect” and “act as a bridge between the two cultures.”

Another is Shannon Sullivan, head of defense and intelligence at Google. Before working at Google, Sullivan served in the U.S. Air Force working at various intelligence positions. First as senior military advisor and then in the Air Force’s C4ISR Acquisition and Test; Space Operations, Foreign Military Sales unit. C4ISR stands for “Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance.” Sullivan left his Air Force positions to work as Defense Director for BAE Systems, a British-based arms and defense company, and then Army and Air Force COCOMs Director at Oracle. His last project at Google was “setting up a Google Apps ‘transformational’ test program to supply 50,000 soldiers in the US Army and DoD with a customized Google App Universe”, according to Levine.

Google not only has a revolving door with the Pentagon and intelligence community, it also partners with defense and intelligence contractors. Levine writes that “in recent years, Google has increasingly taken the role of subcontractor: selling its wares to military and intelligence agencies by partnering with established military contractors.”

The company’s partners include two of the biggest American defense contractors — Lockheed Martin, an aerospace, defense, and information security company, and Northrop Grumman, an aerospace and defense technology company. Both Lockheed and Northrop produce aircraft, missiles and defense systems, naval and radar systems, unmanned systems, satellites, information technology, and other defense-related technologies. In 2011, Lockheed Martin made $36.3 billion in arms sales, while Northrop Grumman made $21.4 billion. Lockheed has a major office in Sunnyvale, California, right in the middle of Silicon Valley. Moreover, Lockheed was also involved in interrogating prisoners in Iraq and Guantanamo, through its purchase of Sytex Corporation and the information technology unit of Affiliated Computer Services (ACS), both of whom directly interrogated detainees.

Google worked with Lockheed to design geospatial technologies. In 2007, describing the company as “Google’s partner,” the Washington Post reported that Lockheed “demonstrated a Google Earth product that it helped design for the National Geospatial-Intelligence Agency’s work in Iraq. These included displays of key regions of the country and outlined Sunni and Shiite neighborhoods in Baghdad, as well as U.S. and Iraqi military bases in the city. Neither Lockheed nor Google would say how the geospatial agency uses the data.” Meanwhile, Google has a $1-million contract with Northrop to install a Google Earth plug-in.

Both Lockheed and Northrop manufacture and sell unmanned systems, also known as drones. Lockheed’s drones include the Stalker, which can stay airborne for 48 hours; Desert Hawk III, a small reconnaissance drone used by British troops in Iraq and Afghanistan; and the RQ-170 Sentinel, a high-altitude stealth reconnaissance drone used by the U.S. Air Force and CIA. RQ-170s have been used in Afghanistan and for the raidthat killed Osama bin Laden. One American RQ-170 infamously crashed in Iran while on a surveillance mission over the country in late 2011.

Northrop Grumman built the RQ-4 Global Hawk, a high-altitude surveillance drone used by the Air Force and Navy. Northrop is also building a new stealth drone for the Air Force called the RQ-180, which may be operational by 2015. In 2012, Northrop sold $1.2 billion worth of drones to South Korea.

Google is also cashing in on the drone market. It recently purchased drone manufacturer Titan Aerospace, which makes high-altitude, solar-powered drones that can “stay in the air for years without needing to land,” reported the Wire. Facebook entered into talks to buy the company a month before Google made the purchase.

Last December, Google purchased Boston Dynamics, a major engineering and robotics company that receives funding from the military for its projects. According to the Guardian, “Funding for the majority of the most advanced Boston Dynamics robots comes from military sources, including the US Defence Advanced Research Projects Agency (DARPA) and the US army, navy and marine corps.” Some of these DARPA-funded projects include BigDog, Legged Squad Support System (LS3), Cheetah, WildCat, and Atlas, all of which are autonomous, walking robots. Altas is humanoid, while BigDog, LS3, Cheetah, WildCat are animal-like quadrupeds. In addition to Boston Dynamics, Google purchased eight robotics companies in 2013—Industrial Perception, Redwood Robotics, Meka, Schaft, Holomni, Bot & Dolly, and Autofuss. Google has been tight-lipped about the specifics of its plans for the robotics companies. But some sources told the New York Times that Google’s robotics efforts are not aimed at consumers but rather manufacturing, such as automating supply chains.

Google’s “Enterprise Government” page also lists military/intelligence contractors Science Applications International Corporation (SAIC) and Blackbird Technologies among the companies it partners with. In particularly, Blackbird is a military contractor that supplies locators for “the covert ‘tagging, tracking and locating’ of suspected enemies,” according to Wired. Its customers include the U.S. Navy and U.S. Special Operations Command. SOCOM oversees the U.S. military’s special operations forces units, such as the Navy SEALs, Delta Force, Army Rangers, and Green Berets. Blackbird even sent some employees as armed operatives on secret missions with special operations forces. The company’s vice president is Cofer Black, a former CIA operative who ran the agency’s Counterterrorist Center before 9/11.

Palantir and the military

Many others tech companies are working with military and intelligence agencies. Amazon recently developed a $600 million cloud computing system for the CIA that will also service all 17 intelligence agencies. Both Amazon and the CIA have said little to nothing about the system’s capabilities.

Palantir, which is based in Palo Alto, California produces and sells data-mining and analysis software. Its customers include the U.S. Marine Corps, U.S. Special Operations Command, CIA, NSA, FBI, Defense Intelligence Agency, Department of Homeland Security, National Counterterrorism Center, LAPD, and NYPD. In California, the Northern California Regional Intelligence Center (NCRIC), one of 72 federally run fusion centers built across the nation since 9/11, uses Palantir software to collect and analyze license plate photos.

While Google sells its wares to whomever in order to make a profit, Palantir, as a company, isn’t solely dedicated to profit-maximizing. Counterterrorism has been part of the company’s mission since it began. The company was founded in 2004 by investor Alex Karp, who is the company’s chief executive, and billionaire PayPal founder Peter Thiel. In 2003, Thiel came up with the idea to develop software to fight terrorism based on PayPal’s fraud recognition software. The CIA’s In-Q-Tel helped jumpstart the company by investing $2 million. The rest of the company’s $30 million start-up costs were funded by Thiel and his venture capital fund.

Palantir’s software has “a user-friendly search tool that can scan multiple data sources at once, something previous search tools couldn’t do,” according to a 2009 Wall Street Journal profile. The software fills gaps in intelligence “by using a ‘tagging’ technique similar to that used by the search functions on most Web sites. Palantir tags, or categorizes, every bit of data separately, whether it be a first name, a last name or a phone number.” Analysts can quickly categorize information as it comes in. The software’s ability to scan and categorize multiple sources of incoming data helps analysts connect the dots among large and different pools of information — signals intelligence, human intelligence, geospatial intelligence, and much more. All this data is collected and analyzed in Palantir’s system. This makes it useful for war-related, intelligence, and law enforcement purposes. That is why so many military, police, and intelligence agencies want Palantir’s software.

U.S. troops in Afghanistan who used Palantir’s software, particularly the Marines and SOCOM, found it very helpful for their missions. Commanders liked Palantir’s ability to direct them at insurgents who “build and bury homemade bombs, the biggest killer of U.S. troops in Afghanistan,” the Washington Times reported. A Government Accountability Office report said Palantir’s software “gained a reputation for being intuitive and easy to use, while also providing effective tools to link and visualize data.” Special operations forces found Palantir to be “a highly effective system for conducting intelligence information analysis and supporting operations” and “provided flexibility to support mobile, disconnected users out on patrols or conducting missions.” Many within the military establishment are pushing to have other branches, such as the Army, adopt Palantir’s software in order to improve intelligence-sharing.

Palantir’s friends include people from the highest echelons of the National Security State. Former CIA Director George Tenet and former Secretary of State Condoleezza Rice are advisers to Palantir, while former CIA director Gen. David Petraeus “considers himself a friend of Palantir CEO Alex Karp”, according to Forbes. Tenet told Forbes, “I wish I had Palantir when I was director. I wish we had the tool of its power because it not only slice and dices today, but it gives you an enormous knowledge management tool to make connections for analysts that go back five, six, six, eight, 10 years. It gives you a shot at your data that I don’t think any product that we had at the time did.”

High-tech militarism

Silicon Valley’s technology has numerous battlefield applications, which is something the U.S. military notices. Since the global war on terror began, the military has had a growing need for high-tech intelligence-gathering and other equipment. “A key challenge facing the military services is providing users with the capabilities to analyze the huge amount of intelligence data being collected,” the GAO report said. The proliferation of drones, counter-insurgency operations, sophisticated intelligence-surveillance-reconnaissance (ISR) systems, and new technologies and sensors changed how intelligence is used in counterinsurgency campaigns in Iraq and Afghanistan and counterterrorism operations in Pakistan, Somalia, Yemen, and other countries.

According to the report, “The need to integrate the large amount of available intelligence data, including the ability to synthesize information from different types of intelligence sources (e.g., HUMINT, SIGINT, GEOINT, and open source), has become increasingly important in addressing, for example, improvised explosive device threats and tracking the activities of certain components of the local population.” This is where Palantir’s software comes in handy. It does what the military needs — data-mining and intelligence analysis. That is why it is used by SOCOM and other arms of the National Security State.

Irregular wars against insurgents and terrorist groups present two problems— finding the enemy and killing them. This is because such groups know how to mix in with, and are usually part of, the local population. Robotic weapons, such as drones, present “an asymmetric solution to an asymmetric problem,” according to a Foster-Miller executive quoted in P.W. Singer’s book Wired for War. Drones can hover over a territory for long periods of time and launch a missile at a target on command without putting American troops in harm’s way, making them very attractive weapons.

Additionally, the U.S. military and intelligence agencies are increasingly relying on signals intelligence to solve this problem. Signals intelligence monitors electronic signals, such as phone calls and conversations, emails, radio or radar signals, and electronic communications. Intelligence analysts or troops on the ground will collect and analyze the electronic communications, along with geospatial intelligence, of adversaries to track their location, map human behavior, and carry out lethal operations.

Robert Steele, a former Marine, CIA case officer, and current open source intelligence advocate, explained the utility of signals intelligence. “Signals intelligence has always relied primarily on seeing the dots and connecting the dots, not on knowing what the dots are saying. When combined with a history of the dots, and particularly the dots coming together in meetings, or a black (anonymous) cell phone residing next to a white (known) cellphone, such that the black acquires the white identity by extension, it becomes possible to ‘map’ human activity in relation to weapons caches, mosques, meetings, etcetera,” he said in an email interview. Steele added the “only advantage” to signals intelligence “is that it is very very expensive and leaves a lot of money on the table for pork and overhead.”

In Iraq and Afghanistan, for example, Joint Special Operations Command (JSOC) commandos combined images from surveillance drones with the tracking of mobile phone numbers to analyze insurgent networks. Commandos then used this analysis to locate and capture or kill their intended targets during raids. Oftentimes, however, this led to getting the wrong person. Steele added that human and open source intelligence are “vastly superior to signals intelligence 95% of the time” but “are underfunded precisely because they are not expensive and require face to face contact with foreigners, something the US Government is incompetent at, and Silicon Valley could care less.”

Capt. Michael Kearns, a retired U.S. and Australian Air Force intelligence officer and former SERE instructor with experience working in Silicon Valley, explained how digital information makes it easier for intelligence agencies to collect data. In an email, he told AlterNet, “Back in the day when the world was analog, every signal was one signal. Some signals contained a broad band of information contained within, however, there were no ‘data packets’ embedded within the electromagnetic spectrum. Therefore, collecting a signal, or a phone conversation, was largely the task of capturing / decoding / processing some specifically targeted, singular source. Today, welcome to the digital era. Data ‘packets’ flow as if like water, with pieces and parts of all things ‘upstream’ contained within. Therefore, the task today for a digital society is largely one of collecting everything, so as to fully unwrap and exploit the totality of the captured data in an almost exploratory manner. And therein lies the apparent inherently unconstitutional-ness of wholesale collection of digital data…it’s almost like ‘pre-crime.'”

One modern use of signals intelligence is in the United States’ extrajudicial killing program, a major component of the global war on terror. The extrajudicial killing program began during the Bush administration as a means to kill suspected terrorists around the world without any due process. However, as Bush focused on the large-occupations of Iraq and Afghanistan, the extrajudicial killing program was less emphasized.

The Obama administration continued the war on terror but largely shifted away from large-scale occupations to emphasizing CIA/JSOC drone strikes, airstrikes, cruise missile attacks,proxies, and raids by special operations forces against suspected terrorists and other groups. Obama continued and expanded Bush’s assassination program, relying on drones and special operations forces to do the job. According to the Bureau of Investigative Journalism, U.S. drone strikes and other covert operations have killed nearly 3,000 to over 4,800 people, including 500 to over 1,000 civilians, in Pakistan, Yemen, and Somalia. During Obama’s five years in office, over 2,400 people were killed by U.S. drone strikes. Most of those killed by drone strikes are civilians or low-level fighters and, in Pakistan, only 2 percent were high-level militants. Communities living under drone strikes are regularly terrorized and traumatized by them.

Targeting for drone strikes is based on metadata analysis and geolocating the cell phone SIM card of a suspected terrorist, according to a report by the Intercept. This intelligence is provided by the NSA and given to the CIA or JSOC which will then carry out the drone strike. However, it is very common for people in countries like Yemen or Pakistan to hold multiple SIM cards, hand their cell phones to family and friends, and groups like the Taliban to randomly hand out SIM cards among their fighters to confuse trackers.

Since this methodology targets a SIM card linked to a suspect rather than an actual person, innocent civilians are regularly killed unintentionally. To ensure the assassination program will continue, the National Counterterrorism Center developed the “disposition matrix,” a database that continuously adds the names, locations, and associates of suspected terrorists to kill-or-capture lists.

The Defense Department’s 2015 budget proposal requests $495.6 billion, down $0.4 billion from last year, and decreases the Army to around 440,000 to 450,000 troops from the post-9/11 peak of 570,000. But it protects money — $5.1 billion — for cyberwarfare and special operations forces, giving SOCOM $7.7 billion, a 10 percent increase from last year, and 69,700 personnel. Thus, these sorts of operations will likely continue.

As the United States emphasizes cyberwarfare, special operations, drone strikes, electronic-based forms of intelligence, and other tactics of irregular warfare to wage perpetual war, sophisticated technology will be needed. Silicon Valley is the National Security State’s go-to industry for this purpose.

Adam Hudson is a journalist, writer, and photographer.

http://www.alternet.org/news-amp-politics/how-google-and-big-tech-companies-are-helping-maintain-americas-empire?akid=12149.265072.iCZIs-&rd=1&src=newsletter1016284&t=6&paging=off&current_page=1#bookmark

Not Content To Ruin Just San Francisco, Rich Techies Are Gentrifying Burning Man Too

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Artist Dadara‘s Facebook like altar from Burning Man 2013. Photo: Bexx Brown-Spinelli/Flickr

This will come as news only to people who have not attended Burning Man in the last couple of years, but the New York Times has just caught on to the fact that Silicon Valley millionaires (and billionaires) have been attending the desert festival in greater numbers and quickly ruining it with their displays of wealth. While we used to call Coachella “Burning Man Lite for Angelenos,” Burning Man itself is quickly becoming Coachella on Crack for rich tech folk who want to get naked and do bong hits with Larry Page in Elon Musk’s decked-out RV.

Burners won’t just be sharing the playa with Larry and Sergey, Zuck, Grover Norquist, and at least one Winklevoss twin this year. There will also be a legion of new millionaires, most of them probably Burning Man virgins, who will be living in the lap of luxury and occasionally dropping in on your parties to ask for molly.

Per the Times piece:

“We used to have R.V.s and precooked meals,” said a man who attends Burning Man with a group of Silicon Valley entrepreneurs. (He asked not to be named so as not to jeopardize those relationships.) “Now, we have the craziest chefs in the world and people who build yurts for us that have beds and air-conditioning.” He added with a sense of amazement, “Yes, air-conditioning in the middle of the desert!”His camp includes about 100 people from the Valley and Hollywood start-ups, as well as several venture capital firms. And while dues for most non-tech camps run about $300 a person, he said his camp’s fees this year were $25,000 a person. A few people, mostly female models flown in from New York, get to go free, but when all is told, the weekend accommodations will collectively cost the partygoers over $2 million.

“Anyone who has been going to Burning Man for the last five years is now seeing things on a level of expense or flash that didn’t exist before,” said Brian Doherty, author of the book “This Is Burning Man.” “It does have this feeling that, ‘Oh, look, the rich people have moved into my neighborhood.’ It’s gentrifying.”

The blockaded camps of the tech gentrifiers have tended to be in the outer rings of Black Rock City, as was previously reported in 2011 when a guest of Elon Musk’s spoke to the Wall Street Journal. “We’re out of the thick of it,” he said, “so we’re not offending the more elaborate or involved set ups.”

But as Silicon Valley assumes more and more of a presence on the playa, what’s to stop them from claiming better and better real estate, closer to where the action is?

You won’t see any evidence of this on Facebook, though. All of this happens without the tech world’s usual passion for documentation, since they do abide by at least that one tenet of Burning Man culture that frowns on photography. And at least, as of 2014, they seem to understand that their displays of wealth aren’t all that welcome, and should probably be kept on the down-low.

But seriously? Models flown in from New York? Gross.

[NYT]

 

http://sfist.com/2014/08/21/not_content_to_ruin_just_san_franci.php

Israel’s Most Important Source of Capital: California

The New Gold Rush

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by DARWIN BOND-GRAHAM

 

Last Saturday between one and two thousand protesters marched on the Port of Oakland to blockade one of its busy marine terminals and prevent an Israeli ship from docking. After confronting a line of police guarding the waterfront the protesters declared victory; the Zim Lines vessel hovered offshore, afraid to dock, they said, and port workers wouldn’t be unloading its cargo.

One protester, looking beyond the line of police guarding the port, explained that the purpose of the action was to “impede the flow of capital.” Stopping one of Zim’s ships—the company’s vessels arrive in Oakland about four times a month, according to Zim’s web site—was a small, but real economic blow against Israel.

But if it’s a matter of stopping the flow of capital, the ports are a relatively small conduit of trade between California and Israel. For over 20 years California’s technology industry has been channeling billions of dollars to finance the growth of Israeli tech firms. In that time, tech has become a key sector for Israel’s economy. The flow of capital between California and Israel is digital, transmitted as currency and intellectual property. And this flow of capital occurs mostly through the decisions of a small number private equity firms and perhaps as few as a dozen large corporations. These flows of capital supporting Israel’s economy are less susceptible to social movement pressure.

The amount of support of for Israel’s economy originating from Silicon Valley’s private equity firms is especially large. In 2001, during the first year of the Second Intifada, Sequoia Capital Partners, a private equity company headquartered in Menlo Park, raised $150 million to invest in Israeli technology companies. This was Sequoia’s second Israel-focused venture capital fund. Last year Sequoia raised its fifth Israel-dedicated fund, totaling $215 million. Since 1999 Sequoia Capital has injected over $789 million into Israel’s software and electronics industries. Much of this money managed by Sequoia Capital was contributed by California investors, including major tax-exempt institutions like the J. Paul Getty Trust, and the Gordon and Betty Moore Foundation.

Accel Venture Partners, another one of the giants of Silicon Valley private equity, set up its first Israel-focused investment vehicle in 2001. Joseph Shoendorf of Accel told the Haaretz newspaper in 2007 that Accel has invested over $200 million in 20 Israeli companies. He added that many of Accel’s investments in Israel are not the run-of-the-mill consumer apps and gadgets that are so popular in the Bay Area’s tech scene. Although Israeli engineers produce plenty of that, Shoendorf said, “the world’s security situation is expected to get worse, and as a result, inventiveness will increase. The armies of the world are seeking solutions to a problem, and will encourage technological answers.”  Last March, Accel successfully raised $475 million for a fund that will burn a lot of its powder supporting Israeli tech companies.

You’re starting to get the picture. Billions flow from California’s Bay Area into Israel to support chip manufacturers, Internet startups, and telecommunications companies.

A lot of California’s venture capital has been exported to Israel to fund military and cybersecurity startups. Israeli society, constantly mobilized for a counter-insurgency war and occupation, creates an environment in which the nation’s hi-tech firms see their main role as contributing to the security of the Jewish state.

But the U.S. tech industry is also steeped in surveillance and weapons companies, and even the big consumer and enterprise brands like Google, Microsoft, and Cisco produce militarized software and hardware for use in the “homeland” and abroad. The contributions of Hewlett Packard in creating Israel’s biometric tracking system to control the movements of Palestinians is well known. Hewlett Packard also maintains the Israel Defense Ministry’s server farms, a job IBM previously held.  What makes the California-Israel economic connection powerful, however, isn’t so much the nature of the technologies being traded, and the capabilities they provide the Israeli state and military, but more so the sheer economic value of these transactions.

According to the Organization for Economic Cooperation and Development (OECD) Israel received $1.846 billion in direct investment from U.S. investors in 2012, the most recent year for which statistics are available. This is about two thirds of the total military aid the U.S. government provided Israel the same year.

U.S. investors have built up large positions in Israel’s economy, mostly through ownership of stock in Israeli corporations. In 2012 U.S. investors held a $19.7 billion stake in Israel’s economy, more than double the interest owned by all European countries combined. And corporations registered in the Cayman Islands, a tax shelter where thousands of American investors establish offshore funds, owned another $8.6 billion of Israel’s economy. For example, the Sequoia Capital Partners venture firm of Menlo Park raised $215 million last August to invest entirely in Israel. The legal place of incorporation for this fund? The Cayman Islands.

California investors own and manage stakes in Israeli companies like Mellanox Technologies, Ltd.. In 2002 Silicon Valley venture capital firms and several U.S. tech companies provided Mellanox with $64 million in funding. The American investors included three Menlo Park private equity firms, Sequoia Venture Partners, U.S. Venture Partners, and Bessemer Venture Partners, as well as technology giants IBM and Intel. Using this capital, Mellanox, headquartered in Yokneam, Israel, grew from a small company into a transnational technology giant valued today at $1.8 billion. It’s a key supplier of hardware to Hewlett Packard, IBM, and Intel. It’s main office in Yokneam looks like any other tech campus you can see in San Mateo County off the 101 Highway with gleaming glass mid-rise buildings tucked among trees and grass.

Yokneam is in the heart of Israel’s Silicon Wadi (“wadi” being a dry stream bed in Arabic, meaning “valley” in colloquial Hebrew). Prior to 1948 Yokneam was called Qira, the site of a Palestinian village and farms, but the area was “depopulated” and occupied by Israeli forces, and later settled and transformed into one of Israel’s most affluent cities.

Lots of Silicon Valley venture capital firms have set up offices in Israel. The location of choice for California investors seems to be Herzliya Pituach, a posh ocean side district of the city of Herliya. North of Tel Aviv, Herzliya is named after Theodor Herzl, considered by many to be the intellectual father of Zionism. The Herzliya Pituach is one of the wealthiest spots in all of Israel, home to many of the nation’s elite families. Bessemer Venture Partners’ Israel office is located just a few blocks from the Marinali Marina yacht harbor, and a short drive from million dollar beachfront homes. Sequoia Venture Partners maintain an office on Ramat Yam in one of the high rise towers with views of the azure Mediterranean Sea.

The business links between Silicon Valley and Israel aren’t apolitical. Many of California’s venture capital investors and technology executives are staunch supporters of pro-Israel causes. They have established numerous nonprofit organizations to strengthen economic and political ties between California and Israel.

The California-Israel Chamber of Commerce, located in Sunnyvale in an office park filled with software firms, is funded by Silicon Valley investors, corporations and law firms including Intel, Paypal, Silicon Valley Bank, and Morrison Foerster. Executives from these companies sit on the Chamber’s board of directors. Their ties to pro-Israel political groups are numerous.

Zvi Alon, a director of the California-Israel Chamber, runs a family foundation out of his Los Altos Hills home. Alongside a donation of $9,900 in 2011 to the California-Israel Chamber, Alon also made donations worth $36,000 to the Friends of Israeli Defense Forces. Alon is also credited as being a founder of Israel21C, an “online news magazine offering the single most diverse and reliable source of news and information about 21st century Israel to be found anywhere.”

Operating out of offices on Montgomery Street in downtown San Francisco, across the Street from Israel’s consulate, Israel21C produces media promoting Israel’s technology companies. Recent articles published by the group include “20 top tech inventions born of conflict,” and a profile of the “maverick thinker” behind the creation of Israel’s Iron Dome missile defense system. A recent film produced by the organization promotes Tel Aviv as a startup epicenter similar to San Francisco.

The General Consul of Israel in San Francisco, Andy David, is a board member of the California-Israel Chamber, as is the president of Silicon Valley Bank.

Nir Merry, another board member of the California-Israel Chamber, was born and partly raised in Israel in the Ma’agan Michael kibbutz. His father worked in a hidden underground ammunition factory making armaments used by Jewish commandoes in the battles that created the state of Israel. In a talk to students at the University of California, Santa Barabara, Merry elaborated on the links between Israel’s technology companies and its military.

“I volunteered to become a commando. It’s quite related to the topic of innovation,” said Merry. “Because to be a commando we have to be very innovative.”

Silicon Valley’s financial and technological assistance to Israel is by no means only a private sector effort. In March of 2014 Governor Jerry Brown signed a memorandum of understanding with Israeli Prime Minister Benjamin Netanyahu promising to promote economic links between California and Israel. The setting for the signing ceremony, Mountain View’s Computer History Museum, underscored the centrality of the tech industry in the agreement.

On the same trip Netanyahu visited Apple’s Cupertino headquarters where he was ushered into the executive board room for a chat with the company’s leaders. He also toured Stanford University.

Netanyahu’s California appearance was designed to beat back the Palestinian solidarity movement’s boycott, divest and sanction campaigners who, in recent years, have increased pressure on California’s universities and other public institutions to divest from companies that do business with Israel. During the signing ceremony for the MOU that would give Israeli companies access to California’s technology infrastructure, Netanyahu thanked Governor Brown for California’s divestment from Iran. In 2012, California virtually barred insurance companies from owning Iranian assets. Earlier the state passed legislation requiring its pension funds to divest from Iranian companies. As a result of these laws, the state’s teachers retirement fund CalSTRS even consults with the American Israel Public Affairs Committee regarding its investments.

Netanyahu also thanked Brown for the economic benefits that California’s giant public employee pension funds, CalPERS and CalSTRS, provide to Israel. Both are major investors in Israel’s economy.

The California-Israel MOU originated from California assembly member Bob Blumenfield’s office. Blumenfield, the sponsor and author of several Iran sanctions bills, is now a city council member in Los Angeles. Blumenfield is a staunch ally of Israel, and has used his political offices, from Sacramento to the state’s largest city, to strike back against the boycott, divest, sanction movement aimed against the Israeli military occupation of Palestine. Most recently Blumenfield organized LA’s top elected officials, including mayor Eric Garcetti, to make a public statement in support of Israel.

“We stand with Israel against a Hamas regime that terrorizes Israelis from the skies and now, from beneath the ground,” Blumenfield told the public.

Mayor Garcetti called Israel “our strongest ally in a tumultuous region.”

Palestinian solidarity activists inside Israel’s biggest economic and military partner, the United States, and inside one of its biggest investors, California, have struggled for years to build a boycott, divest and sanction movement. They’ve asked pension funds and universities to divest from companies that do business with the state of Israel, and they’ve asked academics and musicians to boycott Israel by canceling concerts and shunning conferences. They’ve had some success, but as California’s continuing links to Israel show, their task is a difficult one.

Their struggle will continue long after Zim’s ship pulls anchor and leaves Oakland’s harbor. Supporters of Israel will be working to strengthen California’s ties to their cause and prevent any economic protest movement from gaining traction. This coming October the California-Israel Chamber of Commerce will be hosting an international business summit at the Microsoft Campus in Mountain View where innovation and investment will be among the topics of discussion. And between now and then another six to eight Israeli vessels will probably also moor along Oakland’s waterfront trading millions in goods.

Darwin Bond-Graham is a sociologist and investigative journalist. He is a contributing editor to Counterpunch. His writing appears in the East Bay Express, Village Voice, LA Weekly and other newspapers. He blogs about the political economy of California at http://darwinbondgraham.wordpress.com/

 

 

http://www.counterpunch.org/2014/08/20/israels-most-important-source-of-capital-california/

DIGITAL MUSIC NEWS

Multicultural Consumers Will Be Majority Of U.S. By 2043, Will Influence Music Trends

 

     According to current U.S. Census Bureau projections, the American consumer increasingly is a multicultural one. Since 1990, the share of the U.S. population that identifies itself as African-American, Asian-American, or Hispanic has grown from 24% to 37%, and these groups are expected to make up a majority of the U.S. population by 2043. Hispanics currently account for 17% of the U.S. population, while African Americans make up 14% and Asian Americans total 5%. Looking at just those consumers under the age of 18, however, 2012 U.S. Census projections anticipate the minority-majority tipping point to arrive by 2018.

Against this demographic backdrop, a new report generated as part of Nielsen’s Diverse Intelligence Series titled “Listen Up: Music and the Multicultural Consumer” takes on added significance – particularly when it comes to music. The report notes that multicultural consumers account for 31% of the total spend on music and therefore is increasingly influencing the U.S. music market.

African-American, Asian-American, and Hispanic consumers “represent the vanguard of musical trends in the U.S.,” the Nielsen report states. “They drive the development of musical taste and they’re readily adopting new ways of consuming music. So as this group of multicultural consumers continues to pioneer pathways of taste and adoption, companies interested in understanding the future of music would be well served to keep this growing demographic at the top of their engagement lists.”

 

New ASCAP, BMI Consent Decree Rules 

Could Place Pressure On Streaming Costs

 

     The last few months have seen a major push by the American Society of Composers, Authors, and Publishers (ASCAP) and Broadcast Music Inc. (BMI) to modify or eliminate the current “consent decree” structure that determines the rate a company must pay to broadcast or stream a song…or whether a song can be withheld from use entirely. A court decision last year found that neither rights group could selectively deny Pandora (or other streaming companies) the right to play certain works, leaving in place a structure that forces Pandora to pay a 1.85% royalty rate, while Apple’s iTunes Radio plays an industry-wide rate of 10%.

As reported by Wall Street Cheat Sheet, J.P. Morgan analyst Rod Hall says the changes would increase content costs for most music streaming platforms. “Upward pressure on streaming costs could be a negative for Apple’s newly acquired Beats Music unit,” wrote Hall in a research note. “Typically, attempting to pass this sort of cost increase through to customers after the low-price genie is out of the bottle is tough in a competitive environment.”

According to the Nielsen Entertainment & Billboard‘s 2014 Mid-Year Music Industry Report, the on-demand audio streaming market saw a year-over-year usage growth of 50.1%. Meanwhile, sales of digital albums declined by 11.6% and digital track sales fell by 13% over the same period. The motives behind ASCAP’s and BMI’s quest for changes in the rules are obvious, but the threat to Pandora and Apple are just as clear. As Cheat Sheet reports, “there’s no telling how high total royalty fees for all internet-based radio services could go.”

Consent Decree Battle Tied To Shift

From Analog To Digital Distribution

 

     “Without changes to the consent decree, ASCAP may face the complete resignation of certain of its largest music publisher members, a result that could be as damaging for music users as it could be for ASCAP and its remaining members. Without a robust collective licensing system, the increased cost of having to negotiate licenses with hundreds of thousands of individual copyright owners would likely be passed on to consumers and stymie the growth of innovative new services that would benefit consumer choice and experience.”

That, in part, is how ASCAP positioned its argument that the music licensing consent decree system be modified to allow for its members songwriters to negotiate with Pandora and other streaming services independently of the publishing organizations. But, as reported by the Nashville Tennessean, Pandora argues that if publishers are allowed to withdraw digital rights, it will lead to anticompetitive issues.

“The publishers and publishing rights organizations are frustrated by the extent to which the decrees fulfill their purpose,” Pandora claims in its own public comments. “More to the point, the PROs and publishers are unhappy because the consent decrees prevent them from implementing a scheme that has the purpose (and would have the effect) of raising prices across the board without regard to competitive constraints.”

In support of ASCAP and BMI, Nashville Songwriters Association International also got into the fray, issuing a statement saying, “Digital delivery models continue to evolve while more great American songwriters fall by the wayside. Nashville has lost 80% or more of those who claimed songwriting as a full-time occupation since the year 2000. This startling statistic alone demands changes in an antiquated royalty system.”

Vevo’s Label Owners Could Hamper Sale

 

     A number of potential suitors for Vevo have surfaced over the past few weeks, but many (if not all) of them might be turned off by one possibly insurmountable issue: the current owners. DreamWorks, AT&T, Yahoo, Verizon, Chernin Group, and Guggenheim Partners all have been linked to the acquisition, which is valued at somewhere between $700 million and $1 billion. But that price tag could be a stumbling block because Universal Music and Sony Music currently hold significant shares of the video streaming company and also control the licenses of much of the music that’s streamed.

As reported by Billboard, “The economics all depend on licenses from the major labels. If it’s sold, at what terms? The sellers can make Vevo look like it’s worth $1 billion or zero dollars…Whoever buys it will have to contend with the complications of dealing with rights holders.”

Music Ally points out that the same argument can be applied to Spotify, whose tires also are being kicked and which also is partly owned by the major labels. While license fees  didn’t stop Apple from paying $3 billion for to get its hands on Beats, the Cupertino-based company already has considerable experience dealing with rights holders (and subsequent complications). “Vevo will surely still find its backer eventually, but [this] is a reminder that while equity stakes make tempting golden geese for music rights-holders, they may still be perceived – within the tech/financial communities at least – as having the potential to scramble the golden eggs in the event of a lucrative exit,” Music Ally says.

Vevo Teams With Vadio To Launch Music

Video Service For Online Radio Services

 

Mobile Video      Music video website Vevo has formed a partnership with Vadio Inc. to distribute content through online radio services, including Richard Branson’s Virgin Radio. The Portland, OR-based start-up says it is looking to turn internet listeners into viewers by bringing Vevo’s 100,000-plus music videos to services hosted by Lachlan Murdoch’s Nova Entertainment and European Media Group. According to Vadio CEO Bryce Clemmer, the goal of the partnership is to help online radio services host music videos, which command higher advertising rates. Vevo’s videos and the ads that appear on them will provide additional revenue as competition for listeners grows from streaming services such as Spotify and Pandora, he said.

“What we’re doing is taking any audio stream, something like iHeartRadio, Pandora, or Spotify, and evolving it to video,” Clemmer said in an interview with Bloomberg News. “Most content delivered through services like Pandora is audio content, and that’s been very hard to monetize profitably.”

Vevo was founded in 2009 and is co-owned by Universal Music Group, Sony Music Entertainment, Google. and Abu Dhabi Media Co. Vadio is backed by current and veteran entertainment executives, including former NBC Enterprises President Ed Wilson and Robin Richards, the former CEO of Vivendi Universal Net USA Group.

BlackBerry, 7digital “Re-Establish”

Shared Music Service Bond

 

     “I’m not dead yet.” That seems to be the latest (and ongoing) cry from BlackBerry, which this week inked another pact with 7digital to launch a new music service. The news comes after the Canadian smartphone manufacturer said it is shutting down the music and video sections of Blackberry World last month in lieu of a licensing deal with the eCommerce giant Amazon, giving its users access to the Amazon App Store. That announcement caused 7digital’s share prices to plunge…hence the $1 million attempt to “re-establish the shared bond” between the two companies.

In announcing the new deal, 7digital said users will have to make transitions to new music lockers within the next 12 months. The company also is developing a new app for BlackBerry users for them to continue purchasing music. Additionally, the digital music firm will take over the sales of music from BlackBerry, “retaining all profit margin earned on track sales,” which previously was shared by the two companies.

As reported by Techie News, 7digital CEO Simon Cole said the company is “pleased to have agreed to new terms with BlackBerry and to serve the customers with music access.”

 

 

A publication of Bunzel Media Resources © 2014