Pandora’s Box - tech start-ups vs the music business
Techcrunch report that Internet radio station Panorda have issued a statement saying “they’d likely shut down rather than continue to pay exorbitant fees to play music to listeners of its massively popular service”.
As someone who has worked on both sides of the fence; my view is the technology and creative industries (not just the music business) need to understand one another much better than they currently do. It is very sad that in 2008, almost ten years since the original Napster launched, that many of the same arguments from back then are still being debated now.
Taking the technology viewpoint firstly; if you are a Web 2.0 start-up your immediate goal must be to develop your offering to attract users and ensure the user-experience is strong and intuitive to continue to build usage and users. If your start-up relies on using other people’s copyrights, paying advances to rights owners can eat up most of your start-up capital and initial revenues. This does not encourage the growth of services that could potentially help promote and sell more music over time.
Music companies, especially the major labels and collection societies can be incredibly difficult to deal with. What is interesting about Pandora is that as I have a UK IP address, I cannot access the service. The Internet is global; but the rights are granted on a territorial basis. This is partly historical, as many acts used to sign to one label for the US and another for the UK and Europe, etc. This leads to an administrative and cost burden for the technology company.
But taking the music (and creative) industry point of view, rights owners DO need to be paid. And that means paying the performer as well as the writer. If a track is played on the radio, played in a coffee shop, used in a movie soundtrack or TV show, included on a complication, a newspaper giveaway, a download or a stream; someone somewhere has to be paid.
The situation is distorted in the US because terrestrial radio has not traditionally paid performers (although writers do get paid). In many other territories around the world, including the UK, performers receive payment for radio and TV play. There has been a great deal of lobbying in the US to reverse this situation, which is only fair in the modern age – if internet companies must pay, so too must traditional radio. Up until now, the US radio market has been the exception rather than the rule.
The principle of payment for performance, even though performance helps the profile of the individual artist, is fundamental. Network television executives would not ask Oprah Winfrey to work for free on the basis the exposure of her TV show helps her sell more books and magazines; equally technology companies should not expect performers and rights owners to give them their rights for free because the acts get “promotion”. Some acts don’t tour or sell merchandise and so are more reliant on this sort of income.
So what is the solution?
Licensing needs to be simpler and easier from an administrative perspective. Wherever possible, right should be granted on a global basis. Advances – ideally – need to be less; rates should increase incrementally as services grow, BUT they do need to grow so that performers are fairly paid.
Will any of this ever happen? Well … things are improving, but we have a long way to go.
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