The New Music Business, Part Two

The New Music Business, Part Two
Exactly one year ago, this column featured a two-parter on Digital Rights Management (DRM) and managing digital rights; it concluded with the warning that everything was likely to change. A year on, the entire music business has abandoned DRM and now Microsoft has announced that it will not longer support its own PlaysForSure DRM technology — meaning that if you were one of the poor saps who legitimately bought a music file laden with DRM and it crashes, well, too bad for you.

With that final customer-hating lash-out, we are now in the format-neutral world for good, which is really great. But there’s one small problem: if we can’t keep track of the consumption of digital music, how will we make money from it? And by we, I mean everybody in the music business, starting with musicians. Digital retail sales are thankfully trackable, and these are growing exponentially, although not as quickly as the industry would like. There are internet radio stations and streaming music services galore, which come under various licensing and royalty obligations. Then there is a vast emerging digital market sector, which counts on providing music as content to attract users. YouTube and MySpace are obvious examples, but there are a zillion more businesses out there that feature music as an inducement for users to stick around. The more and the longer users hang out, the more valuable the site’s ad space becomes, and the more profitable it gets. (Then it sells to Mega Corp for a gazillion dollars and musicians get zippo.)

There are a couple of factors that prevent musicians from deriving monetary satisfaction from the value their music provides. Many digital start-ups live in a licensing grey area, where it is unclear whether their use of music falls under a compensable category under copyright law. Many services should be but aren’t licensed by master copyright owners, royalty organisations or telecommunications authorities — and indeed, they’re counting on their lack of license to remain profitable. Many record labels aren’t properly engaged in the digital licensing arena — they don’t know who’s got their music where. So even signed artists may not get what’s coming to them.

Meanwhile, more and more music is coming into the digital marketplace and every day millions of kbps are expended by music fans shuttling favourites and new finds through bit torrents and file sharing networks. As the industry frequently and loudly moans, no money is changing hands there, either.

So basically, it’s anarchy. Anarchy can be a time of creative explosion or of bloody violence, but either way, it’s a state of affairs that historically doesn’t tend to last, especially not when there are capitalists about.

In the last year, the industry has become polarised in the debate over how to legalize and monetize the anarchy. Some cling to the idea that through industrial and governmental engineering, we will find a way to make new business models conform to the familiar "one sale/play/use equals one payment” paradigm. If that can’t be done, such models should be outlawed.

Meanwhile, music futurists like Gerd Leonhard (see last month’s Need to Know) describe the ubiquity of music on the internet and elsewhere as being like water, splashing and flowing in every direction, bubbling up from the ground and falling from the sky. Attempting to regulate specific uses of this flowing, bubbling stream is like grabbing hold of a leaky hose: you squeeze here, water shoots out there. Many in the music industry and its peripheries in the digital world are beginning to come on side to the idea that if we can no longer control the flow of music in the way we used to, we’re going to have to find a way to monetise music in a way that is not contingent on the one-to-one paradigm. An all-you-can-eat fee (or a "blanket license”) seems like one way to go. Last November, the Songwriters’ Association of Canada startled everyone when it came forward with a bona fide, researched proposal whereby ISPs would collect a levy of five dollars per month from their customers, who in exchange would be able to download, stream, store and share all the music they wanted.

Reaction to the proposal has varied, but the most bluntly opposing stance is that of the ISPs themselves, whose position is, essentially: "Make me.” (Note that the ISPs, at least one of which — Bell — has recently admitted it is actively trying to throttle the bit torrents out of business, have a vested interest in preventing unlimited access to music on the net: it puts their own music stores out of business.) Other detractors worry that, if successful, the proposal will put music distributors and labels out of business. Non-music-loving internet users reject the notion that they’ll have to pay for others’ pleasure. Others reject blanket licensing on the ground that it amounts to a culture tax. And many musicians, who otherwise like the idea, fret that the money collected will wind up in the mitts of whoever has the most influence in the creation of the distribution framework.

All these are valid points; yet, with all of the problems inherent in the idea of a blanket license, thinking in the new music industry may be trending that way. Significantly, Warner Music Group recently hired digital music veteran Jim Griffin to lead research into its own controversial plan, which could see unlimited access to Warner’s catalogue bundled into ISP plans.

Every musician — with or without record deal — should be taking sharp notice of these developments. Signed artists will have serious issues related to division of revenues coming out of these bundled plans, for I would be surprised to find one single record contract in the country that clearly sets this out. And for all musicians, the most serious issue is of representation. If blanket licensing becomes the norm, everyone in the music industry will be clamouring for a share. Although songwriters and union players have representation to some degree, musicians as a whole are the only party in the value chain who do not have a representative organisation that can speak up for their interests.

In the past, the industry has relied on, and indeed profited from, the lack of knowledge and power on the part of musicians. At this moment, in the calm before the storm, musicians should be getting their shit together, because united, they stand a chance of forging a new music business in which they — creators whose work underlies an entire multi-billion dollar industry — can be more than simple grist for the mill.