The one question I always get asked by young entrepreneurs
setting out to create legitimate digital offerings in the digital music space
is where do they go to get licences to use music, and make payments ? Well,
there is no easy answer. In 2012 Daniel Ek, the creator of Spotify, pointed out
that the European Union alone had 27 different
music collection societies for songs – and a similar number for sound
recordings as well as the the four major labels dealing directly for digital rights: Ek said the service’s
U.S. debut was then still a few months off as Spotify worked through a maze of
licensing issues with publishers, labels and collection societies, saying that
to create a new above-board music platform in America under current copyright
law required big reserves of money, lawyers and perseverance. And that’s just
America! At the time Johanna Shelton, senior policy counsel for Google Inc said
“The Internet is a simple distribution platform … [but] we’ve made things
unnecessarily complex,” noting that calls for a music rights organisation, a
one-stop shop to deal with all licensing issues, had gone unheeded. But we all now
know that in default of legitimate services ……. piracy fills the void - and then no-one gets paid.
Martin Mills, the much respected boss of independent Beggars
group whose labels include XL, 4AD and Rough Trade and home to Adele, The
National, The Prodigy, Sigur Ros, Jack White and Vampire Weekend amongst
others, recently admitted that rights owners - especially the bigger ones - had
made various mistakes in the way they licence online content services in the
last fifteen years, and that the music rights industry still needed to work
harder on developing better cross-territory licences. That said, Mills told an audience at the MIDEM convention "I don't believe that the present day
music industry is a reluctant licensor" adding "we do not need to
have control of our rights taken away from us, to be forced to licence that in
which we have invested at uneconomic prices, to simply allow huge tech firms to
make even huger profits. Yes, music companies needed tech companies just like
tech companies need content, but "as someone who invests in music - and
when I looked at the numbers a few years ago we had written off £25 million in
unrecouped advances to artists over the years - it makes me fume when
politicians cosy up to the big techs at our cost and spout philosophically
about the needs of the modern world, about us being dinosaurs, and about
music's irresistible urge to be liberated and free".
European digital commissioner Neelie Kroes has been a
staunch advocate on opening up digital licensing and said last year “Too many
barriers still block the free flow of online services and entertainment across
national borders [in Europe]. The Digital Agenda will update EU Single Market
rules for the digital era” saying her aims were to boost the music download
business, establish a single area for online payments, and further protect EU
consumers in cyberspace. Kroes called on content owners of Europe to construct
a "simple, consumer-friendly legal framework" for making digital
content available across the Union saying the traditional content industries
had not developed their licensing models fast enough to cope with the new
demands of internet services saying "Digitisation has fundamentally
changed content industries, but licensing models simply have not kept up with
this. National licensing can create a series of Berlin cultural walls. The
price, both in pounds and frustration, is all too real, as creators are stifled
and consumers are left empty-handed. It is time for this dysfunction to end. We
need a simple, consumer-friendly legal framework for making digital content
available across borders in the EU".
Mills took issue with some of Kroes' comments, saying
"All in life needs balance and vision, and the likes of Neelie Kroes miss
that point. When businesses make money out of music, music rights owners must
have the right to a fair share of that income". Noting also that the music
industry pumps a lot more into the tax system than many of the tech giants
putting pressure on rights owners, Mills concluded: "I'm incensed about
the discrimination and the lack of understanding with which those like us who
spend their lives creating art that brings people joy, can get treated by those
in power. I very much hope that we can all be a part of changing that, because
unless we do, the ladder we climbed will not be there for those who follow
us".
I have recently blogged on the ongoing progress to establish
a Global Repertoire Database for music (Global Repertoire Database Tunes Up): In Europe SACEM (France), SGAE (Spain) and SIAE (Italy) have joined forces to create ‘Armonia’, the first pan-European hub for licensing of online services, gathering together more than 5.5m works (the rights of which are managed by
the three collecting societies), and addresses online exploitation and/or
mobile uses over a territory of 35 countries. Other commercial developments
include the collaboration between the PRS (UK) and STIM (Sweden) with a
jointly-owned commercial service centre for back room operations;
Publisher EMI has joined up with GEMA
(Germany) and PRS and formed a ‘one-stop shop’ for the licensing of online
rights and the UK is in the process of
working out how a Copyright Hub – the Digital Copyright Exchange – might work -
the place where any copyright owner can choose to register works, the
associated rights to those works, permitted uses and licences granted and the
place for potential licensees to go for easy to use, transparent, low
transaction cost copyright licensing – streamlining copyright licensing and
facilitating the licensing of copyrights on a 'one stop shop' basis with a
registry of copyright data and copyright owners, and potentially with licensing
mechanisms.
But conversely comes the news that Universal Music
Publishing has confirmed its intention to withdraw it's digital rights from US performance rights organisations ASCAP and BMI.
CEO Zach Horowitz confirmed the planned move in a statement to Billboard,
citing an inability from both societies to achieve market rates with digital
services; the move will follow Sony/ATV/EMI's lead, and will allow UMPG do direct
deals with streaming services, with Horowitz saying "In order to ensure
that our songwriters are fairly compensated, we believe the best approach is
for us to negotiate directly with these services”. Recently Sony/ATV (now
controlling the EMI catalogue) struck a direct deal with Pandora which seems to
secure the Sony publisher a bigger cut
of the royalties available for song rights from the streaming company. Billboard
sources also report that BMG Chrysalis has also negotiated the option to do the
same but is yet to decide if it will use a direct strategy, a a move away from
blanket licence deals negotiated by the collecting societies.
So, if the bigger rights owners, who generally have more to
gain from direct deals, move away from collective licensing, where does that
leave the concept of a ‘one stop shop’? If a new digital music business has to go to all of the major publishers in the USA or
elsewhere – and all of the major record labels - that means even more ‘stops’
than when Ek was trying to set up Spotify. And surely this must be a huge deterrent to legitimate business models? That said, one can see the attraction to the big rights
owners to go it alone - higher royalty payments and
upfront advances, or even shareholdings, and
also labels, publishers, songwriters and artists can retain vetoes over certain
tracks - and have a more hands on approach to licensing. And indeed, whilst it may be only ‘one’
company out of many that need to be cleared – that label or publisher may be
able to offer a global licence – a near must in most digital business plans.
The whole issue is complicated further by the fact that
no-one seems quite sure how advances from (or shareholdings in) digital
operators are treated. For example how
do Universal and Sony account for their shareholding in Spotify to their
recording artistes? An important question if you are a recording artiste or songwriter!
But we clearly have two way tension (at least): Universal’s move
reveals the wish of content owners to manage their own digital rights –
possibly on a global scale – but this should be balanced against the clear
advantage of collective licensing and the fact without global one stop licensing
the music industry runs the risk of promoting piracy through over complicating
the legitimate market. Do we really want to exclude innovative but cash-strapped start-ups who could be blocked
from the market? Do we want to marginalise smaller rights owners – who are
further down the food chain from the major music publishers and recorded music
groups? But as Martin Mills rightly says, it seems equally wrong to force rights
owners to “licence that in which we have invested at uneconomic prices, to
simply allow huge tech firms to make even huger profits”. A conundrum? As ever, maybe some of our 1709 community may have a view!
And see the Max Planck Institute's comments on the draft EU Directive on collective rights management here http://ipkitten.blogspot.co.uk/2013/02/max-planck-comments-on-draft-directive.html
