MIXCLOUD
“When we started out we knew virtually nothing about copyright,” says Nico Perez, co-founder of Mixcloud, a four-year-old online music service that already boasts more than 3 million users a month. A kind of Internet radio, Mixcloud is free to consumers, allowing users to stream but not download content (DJ mixes, for example) uploaded by other users. It’s social media meets music provider: a YouTube for radio.
From knowing nothing about copyright four years ago, Perez is now something of an expert, regularly speaking to European Commission meetings about digital policy and copyright, as well as to industry conferences worldwide. It’s been a steep learning curve, but an essential one.
When Mixcloud started, he says, “we didn’t know anything about licensing, didn’t know who you had to speak to, didn’t know that there were several different copyrights within a musical work, so we all ended up learning about it”. As the person in charge of the product side, Perez took the lead. “I was responsible for trying to work out what we can do legally, and what was the area we had to work within. For example, can we do downloads? [Te answer was no.] Can we stream? Can we show a track list? All these seem like minor technical questions, but there’s actually quite a lot of friction with what you’re able to do with certain licensing.”
Digital start-up Mixcloud had to confront copyright issues early. WIPR talks to co-founder Nico Perez about how to stay out of trouble as a start-up and why the models need to change.
Being based in the UK meant that such questions had more expensive answers than they would have done in US. While Perez acknowledges Mixcloud’s
good relationship with the UK
Performing Right Society for Music (PRS) and various other collecting societies, he points out how difficult it is to run this kind of business in Europe. “Here in the UK, for example, and in every single EU country, you’ve usually got one collecting society that
represents artists,
and one that represents labels and essentially, they’re de facto monopolies because they have no competition and they only operate within their country.”
www.worldipreview.com
Tat means there is no price competition for streaming music and songs, and there’s no-one else to negotiate with who can bring some sort of leverage. “Because ultimately, it comes down to ‘how much should someone pay?’,” Perez says. “What is the economic value of listening or downloading a piece of music or film or book? Our argument is that because there are these monopolies in place, it’s very difficult to set a fair value. Te result is that a lot of US radio companies like Pandora are not operating in Europe or the UK because the rates just don’t work with the reality of the economics of the Internet.”
Early days
For an Internet start-up facing copyright challenges for the first time, there’s a certain paradox. While record labels shout very loudly about the importance of their IP, until a company gets to a certain size, it’s difficult to get the labels to listen. “At first we tried to speak to the labels directly,” Perez says, “and the feedback we got varied from ‘sorry you’re too small, we don’t have the resources to deal with everyone asking for licences’, through to some people who said ‘just go, do it and if you reach a certain scale, that’s when you can begin to have the conversation about licensing’.”
While this sounds like a strange attitude from an industry that is notoriously twitchy about infringement, it makes a certain sense. “I can understand where they’re coming from, because they probably have a dozen digital music services knocking on their door every day, and they don’t know which will survive and which will waste their time,” says Perez. “From their point of view, it’s easier to wait until someone grows to significant scale and then have that conversation.”
In most countries, it’s a threshold question for Mixcloud. Its listener base is increasing exponentially, but given the challenges of having licensing in place before launching operations in a given country, the team waits for listener numbers to go up before those deals are made. “We’ve thought about it from the beginning, but especially in Europe, it’s really difficult to get licensed everywhere at the same time,” Perez says. “Our approach has been a pragmatic one, of waiting until we reach a certain scale within a country, especially if we’re starting to do commercial projects there. So when we’re doing a big ad deal in a country, that’s when we start looking at licensing. Around 300 to 500,000 visitors a month is the sort of scale where we start looking at getting licences from the country.”
The rates
Te cost of running a business like Mixcloud varies from jurisdiction to jurisdiction, as do
World Intellectual Property Review July/August 2012 21
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