Will The Old Music Industry Giants Be Exchanged For New Ones?

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CANNES, FRANCE–The red carpets were still there at the Midem, the world’s largest music fair, but they have become shorter. The industry shattered over the years by the decline in physical sales and fighting fiercely against digital piracy this year praised the revenue from digital sources which have overtaken physical sales in some countries. But it remains to be seen – can the old giants partner with the new, digital platform giants, and survive?

Digital service providers touted their huge figures at high-level panels, at a YouTube special conference and in the smaller discussions that tried to look at rights issues. Dan Rose, Facebook vice-president for partnerships, said that since Facebook had integrated the option of sharing music by going through streaming services like Spotify and Deezer four months ago, “five billion songs have been shared by Facebook users.“

Digital Platforms Speak of “New Currency” – Likeonomics?

How many persons have shared a song in Facebook, he said, would become the “new currency in the music industry”. How many of Facebook’s 22 million members had talked about a band would be the metric for success of a band, and would tell you what is hot. Plus, with regard to the European market “the app economy that has been built on Facebook has created 232,000 jobs,” he said.

“Likeonomics” is going to happen, said music industry analyst Gerd Leonhard, and it open new possibilities, but also be a rather Darwinistic system.

Google’s Director of Content Zahavah Levine fell in line with the thinking: “We see Google Music activated on 215 million Android devices already since the start, with 700,000 thousand devices being activated every day.” While earlier mobile music consumption was a sheer monopoly governed by Apple’s iTunes, Android users have been an “under-served market.”

Partnering with three of the four major record labels and also the indie network Merlin for the rights, Google sought to change that, Levine said. YouTube, while still much smaller in terms of mobile use, also trumpeted about growth: now 60 hours of video are uploaded every hour, according to Patrick Walker, senior director for Content Partnerships at YouTube EMEA (Europe, Middle East and Africa).

There is literally no one who does not believe that streaming will grow exponentially with new services cutting deals with rights holders here and there. A deal between German collecting society GEMA and the French Deezer was announced during the Midem.

Already digital is looking further down the road to “cloud services”. Instead of having to move songs around from device to device, once bought and stored in the digital locker, users can access the services from everywhere, Levine explained. Google Music already allows users to store up to 20,000 songs they own for free on their account.

The Cloud as Illegal File Laundering Machine

“If such services are for free,” Thierry Desurmont, vice-president of French collecting society SACEM, asked, “where does the money for rights holders come from?” Desurmont said that “when someone has bought content and wants to access on different devices, he has to make a copy of his content to these devices.” This triggers private copy levies, according to the French and European model. But when such copies would no longer be necessary, “how will the protection of rights owners be organised?”

According to experts, there is a huge discussion about the legal nature of streaming from one’s private locker sitting on a cloud server – which in fact, as Mitch Rubin from Nokia said, “is nothing else than an internet server.” In the United States, under the fair use provision the copy made to the locker is fine. “But these are complicated services,” Richard Conlon, vice president of US collecting society BMI, told Intellectual Property Watch. “Sometimes there is also the possibility to share with friends.”

The experts also ponder whether cloud services might organise the access to the same song not by storing the same song in millions of lockers, but by giving access to one file for everybody who has the song stored in his locker – “and what about the fact that the song is provided to the user over the network again and again?” one rights holder asked.

For some, the cloud is just an even more evil battleground, and a “laundering machine for illegal content”, as Jens-Markus Wegener, of AMV Talpa GmbH, a German-Finnish label warned. “When all content goes up to cloud services, this is a big, big issue, because there are more and more illegal files and it is all mixed up.“

From a user’s perspective, storing one’s legal content on a server for access does not look much different than using one’s home server with all the data for remote access. Not many would think of it as something they should pay once more, after having already paid to buy the music and paying a higher price on devices to cover levies.

So while the prospects for cooperation between the giants have never looked better than at this year’s Midem, caution still rules.

Rob Wells from Universal said he agreed that as long as people are looking for pirated content, there is still not enough choice from legal offers. With regard to the streaming market, he said, there are under-served customers in genres like jazz and classical music. But Wells also asked for Google to fully embrace the legal model, saying that he was “hoping that the whole Google machine could acknowledge the value of being in a legal system.”

Enforcement Not Off the Agenda

Search engines are high on the agenda of some rights holders in their campaigns against unauthorised content next year, for example GEMA, the German Collecting Society. In the UK there is a debate about a voluntary code for search engines to list sites that lead to non-licensed content deeper down on search result sites. Heker said, “I am glad that support with regard to enforcement is coming from Brussels and Berlin this year.”

Kerstin Jorna, vice-head of Cabinet of EU Internal Market Commissioner Michel Barnier, announced two directives to be tabled in 2012: a renewed IP enforcement directive in September and another one on a framework of collecting societies.

With regard to the integration of criminal law sanctions in IP Enforcement Directive – something that has resulted in fights between the Commission and the EU Parliament before, Jorna said, “that has not been decided yet. But the Commission intends more to go for cooperation with providers, especially financial providers, to be able to follow the money.”

In the US, too, according to three copyright and licensing lawyers from the US, the discussion on harsher enforcement is not over. US antipiracy bills PIPA and SOPA “are dead in the water for now,” said Michael Sukin, Boss of Sukin law firm, heavily criticising the protest by a “few IT companies who decided to shut down the internet” – a not completely accurate description of the anti-PIPA/SOPA campaign. His college Kenneth Abdo told Intellectual Property Watch he is convinced that the proposals will pop up again.

The Artist and the Hacker

Andrea Johnson, assistant professor of the Berklee College of Music, said: “I do not think the industry is up to speed yet. We need more partnerships and less egos.” Berklee College for the first time partnered with Midem doing seminars on entrepreneurship and new distribution models for artists. Between 600 and 700 musicians came to Midem and half performed in concerts around Cannes, but the other half came to participate in seminars or talk about their own business models.

Johnson recommended the artists do much more diversify, and licence their music out or partner, for example, with hotels, but also other companies that look for their own “brand” artist. Coca Cola, which has long used music in building its brand, announced a strategic deal with streaming provider Spotify for the London Olympics, for which artist Mark Ronson has already composed the song “Move the Beat”.

Zoe Keeting, a former classical cello hopeful turned IT consultant in Silicon Valley and now back to her music career, described how she was using the internet to make money from her music. In her studio at home she plays and composes metal cello music, she uses the site BandCamp to distribute her albums to her audience. “I do not set a price. The average price people pay is 12 dollars,” she said.

Over Facebook and Twitter she is trying “to get out my story,” she said. Using the social media, she takes recommendations on what fans want to hear at a planned concert. “My programme is often totally directed by my audiences,” she said. Occasionally she also takes recommendations for cover songs. In short, the internet is her the marketing manager. “I never hired anybody,” she said. But at MIDEM she turned to the hackers, who were invited to hold a second Music Hack-Day alongside the conference and fair in order to come up with even better tools for do-it-yourself artists like Zoe.

Johan Uhle, ex-programmer at SoundCloud now heading back to finish his degree at the Hasso-Plattner-Institute in Potsdam, Germany, glued the programmes Flattr and SoundCloud together to create Flatdrop and hosted it on the Cloudapp-Server service Heroku. With Flatdrop, users can – by just clicking – send the money they want to spend while downloading the song. With an easy revenue stream, even if just a drop at the beginning, the claim that artists had to be compensated for their work would be satisfied, Uhle said, when presenting the hack.

Other tools that could help artists are for example Tourrent Plans from hacker Ben Fields which might prove useful for artists planning a concert tour. This tells where the artist’s music has the biggest fan base, checking the number of filesharing instances in a given area, based on MusicMetric.

“In the old music industry, the labels, but also the media with their charts were the gatekeepers”, Uhle told Intellectual Property Watch. “Now it is technology.”

No wonder, he added, that stories have already been written recommending artists to fire their manager and hire a programmer instead. The independent artist like Zoe, he said, could certainly use technology to make a living from their music. “But this does not work when you treat music as a product”, he said.

Music as an experience is the future trend, with musicians that can be followed and somehow touched. Some tools developed for down-to-the-fan musicians like “Imogen Takes Questions” (developed for Imogen Heap to allow questions and answers from fans to be recorded), now have been handed over to everyone, even politicians, over the platform “Everybody takes questions.”

Despite the positive examples and the artists like Zoe who decided to first do it on their own and without a company and advance money from a contract, there is a price for this. Keating said her music career could come to a halt when people do not continue “to follow” or turn their attention to something/somebody new. The acceptance of constant change and as a declared flexibility to check out something else might look not as attractive for artists. Certainly it does not look attractive to the traditionalists at labels and publishers in the music industry.

“In Western countries with its vested interests, we will first hit the wall, before we come to the necessary collective, easy solution,” said futurist Leonhard. What this mean? “We will not have all this cool tools, and services like Spotify, Simfy Grooveshark will be strangled,” Leonhard said. In the end, countries like Brazil, Russia or Indonesia would lead the way, along with Africa.

Monika Ermert may be reached at info@ip-watch.ch.

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