MUSIC STREAMING


By July 2011, turntable.fm had gone ‘legit’, signing licensing agreements with music publishers ASCAP and BMI. In March 2012 it announced that it had made deals with Universal, Sony, Warner and EMI, the four record major labels in the US (EMI has since been absorbed into the other three).


However, by December 2013, turntable.fm had to close its doors for good. “T e cost of running a music service has been too expensive and we can’t outpace it with our eff orts to monetise it and cut costs,” said the site’s administrators.


T e service was undoubtedly innovative and popular with music enthusiasts—more than 400 million songs had been played in one million ‘rooms’ at the time of its demise—so why did it fail?


“T ey had a really amazing product,” says Gregor Pryor, a partner at Reed Smith LLP in London. “T ey weren’t too late to enter the market—they had a very compelling music experience—but the business (costs) didn’t stack up. T e royalties were too high.”


Does turntable.fm’s fate point to a fl aw in the licensing structure that means streaming services will always struggle to make money?


“T e question is: are they making enough money in the fi rst place?” Pryor says.


“Are they selling enough advertising and doing enough to monetise the content? And is £9.99 for a monthly subscription the right price point? I know some people would argue it’s far too cheap; I know others who would say it’s far too expensive.”


Most, if not all, streaming and download services would say that the royalties are too high, he adds. “T ere’s not a huge amount of margin … there’s what the consumer is prepared to pay and what the artist expects to be paid, and they’re oſt en very diff erent.”


However, Pryor says that the amount a songwriter can expect per stream far


exceeds the royalties they receive per play on commercial radio.


“T e economics of digital are far superior to


the economics of tangible, good old-fashioned terrestrial radio. Digital, on a per user basis, is massively more remunerative to songwriters and artists than commercial radio.”


Futureproofi ng


If digital steaming services represent the future of how we consume music, and hold the potential to reimburse musicians in a fairer way, they’re going to need better protection on a governmental level.


In November last year, the European parliament (EP) and Council agreed on a directive that would make it possible for online music providers to get licences in countries across the EU, instead of negotiating with diff erent organisations in each EU member state for national licences.


T e directive would boost the creation of EU-wide music services, better protect the rights of creators and ensure that more quickly.


they receive royalty payments


EP rapporteur Marielle Gallo said the new piece of legislation “clearly demonstrates that copyright can be easily adapted to the digital era”.


Sarah Byrt, a partner at Mayer Brown LLP in London, says negotiating rights in individual member states “makes little sense in today’s digital world”.


“T ese changes herald a revolution in the way that music licensing works and that new business models and new players will emerge,” she says.


“T is should be better for rights owners, in that anything which makes licensing easier should in principle help reduce piracy, and in that making collecting societies more accountable to members should help maximise effi ciency and royalties.”


Angus McLean, a managing associate at Simmons & Simmons LLP in London, says support for improvements in the area at a senior European level is a positive development. Such a directive will make licensing music for online platforms more transparent and democratic in the EU. But what about the wider picture?


Pryor says that in order to reach a solution for fi xing a structure that doesn’t work for the artists or the service providers, we must fi rst agree that there’s a problem: the songwriters’


concerns


“THIS SHOULD BE BETTER FOR RIGHTS OWNERS, IN THAT ANYTHING WHICH MAKES LICENSING EASIER SHOULD IN PRINCIPLE HELP REDUCE PIRACY.”


are not the same as those of the streaming service providers.


“I don’t think there’s any silver bullet that’s going to solve a straightforward commercial tension,” he says.


“Here’s where the problem lies: people don’t buy CDs any more. As people aren’t buying CDs, and piracy has taken such a huge amount of money off the table, there’s just less to go around. T at’s the reality of it.”


Gina Durham, partner and DLA Piper LLP in San Francisco, says: “T e industry is in fl ux—it’s diffi cult to point to one solution.


“Certainly players in the industry would say a government-supervised statutory licence would be a right solution, as there’s a public need for it. T ere should be some control on royalty rates that enables these types of services.


“However, others will say that this kind of situation will not fully recognise the contribution of the copyright holder. T ere’s still a lot of dispute, mostly because the revenue models aren’t necessarily born out in the industry and there are so many moving parts.”


Fakler says the rates demanded by the record labels are simply too high, and that things will change only when this is addressed: “T e royalties scale up when the customers scale up—it’s not like a fi xed cost.”


One thing is certain: online music streaming isn’t going anywhere, but is reaching a point where the royalties structure isn’t going to sustain itself for much longer, even as the EU proposes improvements to the structure. But as we’ve all got used to paying a certain price for the music, one of the main challenges is changing the model while keeping the music aff ordable so that consumers don’t start heading for illegitimate platforms.


With so many parties wanting a big slice of the same pie, something’s got to give. 


16 16 Trademarks & Brands Online Volume 3, Issue 1 www.worldipreview.com


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