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Great ideas in music distribution
1. Great ideas in music
distribution…
..and how copyright law affects
the shape of music business models
Kristin Thomson, Future of Music Coalition @kristinthomson
5. When you
hear a song,
or buy
a single
Musical
composition
notes and lyrics
Sound
recording
what’s captured
on tape/
what you hear
there are two copyrights embedded in the recording
6. The musical composition and
the sound recording are treated as
different entities in copyright law,
with their own exclusive rights.
7. Exclusive rights
The writer of the musical composition is granted the
right to:
1. Reproduction
2. Public
performance
3. Distribution
4. Digital
transmission
5. Derivative works
6. Public display
8. Exclusive rights
The owner of the sound recording is granted the
right to:
1. Reproduction
2. Digital public
performance
3. Distribution
4. Digital
transmission
5. Derivative works
9. The music industry consists of
many institutions that were built
to fit with – and take advantage of –
copyright law and the
exclusive rights it grants.
17. copyright law + business practice
• Also determines how musicians and
composers are paid.
• Framework that determines how music
is performed, distributed and sold.
19. 1. Devise a business model that doesn’t require a
license
2. Negotiate direct licenses with multiple
rightsholders
3. Build a model that relies on statutory licenses
4. Propose a model that modifies licensing
conventions
5. Build a company that facilitates music economy,
but needs no licenses
How does innovation happen?
20. 1a: “no license” concept
• Free
• Robust music catalog built by users
• Transferable to various devices
25. Napster
• Napster thought they could operate without
explicit licenses from rightsholders.
• Napster lost a number of legal battles, and
shut down in 2002.
26. 1b: “no license” concept
• Free
• Robust music catalog built by creators
• Transferable to various devices
29. SoundCloud
✓ Free for users, can be free for creators
✓ Robust music catalog built by creators
✓ Transferable to various devices
✓ Ran without licenses for many years.
Recently forced to acquire licenses by
some record labels
30.
31. 2: “direct license” concept
• Feels free (monthly charge to credit card)
• Robust, licensed music catalog
• Seamless user interface
• Music streaming “on demand”
35. ✓ Robust, licensed music catalog
… but it wasn’t easy to build.
✓ Music streaming “on demand”
…but it is expensive to offer users so
much control.
Subscription music services
36. Licensing challenges
• On-demand streaming services must
acquire direct licenses for both the
musical composition and the sound
recording for every recording in their
catalog (over 20 million).
37. Licensing challenges
• Direct negotiations with each of the big
record labels, big music publishers, plus
smaller labels and publishers represented
by aggregators/publisher groups.
• A “no” from any rightsholder means
music cannot be made available.
38. Licensing challenges
• There is no global authentication
database that notes who owns what (on
either the publishing side or the sound
recording side).
• Early-to-market streaming services didn’t
even know who to negotiate with.
39. Licensing challenges
• In addition to labels and publishers,
needed blanket licenses with PROs and
other collective societies.
• Technical capacity to be global, but
copyright law is a sovereign issue.
• Negotiations happen territory-by-
territory.
40. Licensing challenges
• Also expensive. Reported that many
on-demand streaming services pay:
• per-stream royalties +
• minimum guaranteed payments to label owners +
• equity shares.
41. 3. statutory license strategy
• Music fans want to discover new music
based on existing musical tastes
• A “lean-back” experience
• Free
• Decent music catalog (but not everything)
48. Limits and tradeoffs
• Statutory licenses are much simpler, both
on the permission side, and on the
payment of rightsholders.
• No direct negotiations required.
• License fees set by an impartial body. In the US,
it’s the Copyright Royalty Board (CRB).
• Some certainty in rates, plus a simpler conduit
for payments.
49. Limits and tradeoffs
• Business model structure is constrained by
limits of statutory license.
• Webcasters cannot broadcast in advance what they
are about to play.
• Webcasters cannot play a certain artists’ songs
consecutively (no Springsteen only channels).
• Users cannot directly choose what they listen to.
• Users can only “skip” 6 songs/hour.
50. Limits and tradeoffs
• Digital broadcasting/webcasting is not a
right available in all territories yet, so
webcasting is somewhat a sovereign
issue.
• Pandora only available in US, Australia and New
Zealand.
• SiriusXM only in US and Canada.
51.
52. 4a. change the rules
• Affordable digital store
• Robust, licensed music catalog
• Simple transactions
• Music portable to other devices
• Can buy digital singles or albums
55. iTunes Music Store
iTunes defined their store as a digital retailer:
• no special contracts
• no licenses with publishers
• no direct or one-on-one negotiation with
rightsholders
56. iTunes: how?
• Apple’s unprecedented market position
• Labels’ lack of ability to come up with
their own solution, and fear of disrupting
their business model
57. 4b. change the rules
• Free
• “Lean-back” radio-like experience
• Available in 100 countries worldwide
60. Apple Beats Radio
Technically, a webcasting service similar to
Pandora or Sirius XM but…
• launched with hundreds of stations
• launched in 100 countries simultaneously
• live DJs, curated stations
61. Apple: how?
• Apple’s unprecedented market position
• Possible for Apple to negotiate a suite of
rights with record labels and publishers
that made webcasting available in
hundreds of countries.
• Also (reportedly) did a direct deal with
labels to avoid statutory license process.
62. 4c. change the rules
• Free
• Robust, licensed music catalog, plus
content uploaded by users
• Global reach
• Audio *and* video?
65. YouTube: how?
• DMCA-compliant service. When rights
holders report copyright infringement,
YouTube has to take it down. However:
• Labels and publishers pushing YouTube to
adopt take-down/stay-down strategy.
• Push to reform DMCA.
76. The biggest elephant
Lack of global authentication database
dot Blockchain Music project
Search for “Benji Rogers” and Blockchain Music
77. 1. In past 20 years, lots of different experiments in
revolutionizing delivery of music to consumers.
2. Copyright law, sovereign rules, incumbent power,
venture cap ambitions all impact the structure of
music business models.
3. Consolidation in the space is happening. Bigger
players may be only ones left standing.
4. Exciting models happening on the B2B side.
Takeaways
