Licensing Remains Essential But Elusive For Digital Music Providers

By Monika Ermert for Intellectual Property Watch
CANNES – Giving licences to digital music providers has been on top of the agenda of the world’s largest music fair, Midem, and its technology forum Midemnet for about a decade now. But simple solutions still are not on the horizon and more and more governments are considering options to solve the riddle.

At this year’s Midem, British music industry and internet service provider representatives promised they would strike a deal soon, reacting to reports that the United Kingdom government was thinking about possible regulatory steps.

Regulation or No Regulation

“To regulate or not is the question,” said Nicholas Lansman, secretary general of the Internet Service Provider Association of the UK and a founder of EuroISPA, the European Union-wide association of ISPs. Lansman said he had waited ten years for the invitation to talk about a possible joint solution. ISPs are often claimed to be beneficiaries of illegal file-sharing as a source of growing traffic on their networks. This year a possible deal between ISPs and the rights owners was named the “big issue” of the annual music fair in Cannes, France.

Talks in the UK, according to Lansman and Feargal Sharkey, CEO of UK Music, a new super organisation of the British music industry including labels, publishers and collecting societies, were ongoing and very positive. “I would be disappointed if we would be here in 12 months time without a deal, “said Sharkey. Lansman agreed that talks were ongoing and a deal was close.

The problem is the price for possible licences that would allow ISPs to provide their broadband customers with a legal offer to use and share music over their networks, Lansman said.

Licensing is time-consuming and very complicated because of the various layers of licensing – from labels to collecting societies. “The music industry has been fractured and bewildering to everybody outside it,” Lansman said. “To count streams is a disincentive.” In the end, the price for the licences and the necessary investments in the ISP systems has to pay off.

Nevertheless, Lansman agreed with representatives of the music industry on a possible blanket licence. “It could be regarded as a tax,” he said, adding that he would favour “commercial deals” which also were flexible to address different models between ISPs and rights owners.

Un-beloved: the blanket licence

“The record business is not close to making it simple,” said Peter Jenner, ‘emeritus president’ of the International Music Managers Forum (IMMF). There would be no radio, warned Jenner, had it been as complicated as it is today to get licences for digital music providers.

As he did not see any indication from the music industry to make it easy, Jenner urged people to go for a blanket licence, a small fee to be paid for every broadband account to compensate rights owners and musicians. Jenner said it would be naïve to say government had no role in reaching the solution: he saw no way the government could not intervene to get to a solution in this.

Representatives from the Isle of Man (UK) announced at Midem that they wanted to establish their island as a test region for the blanket licence model. With a one hundred percent broadband connection, Ron Berry, advisor for e-Business to the Treasury of the Isle of Man, said the blanket licence per account could be a small fee. “It can be as low as a euro or fifty cents per month,” said Berry, adding that this would compensate for private file-sharing while not preventing digital music providers from offering value-added music services at the same time.

A remaining question for that model, however, proposed in 2006 in French legislation that failed in Parliament, which is how to allocate the flat fee to the various rights holders in the chain. While Jenner said it was good to “get a big chunk of money and to hack it out between us,” Lansman, Sharkey and Geoff Taylor from the British Phonographic Industry (BPI) Association all said they were sceptical.

Paul Brindley, cofounder of the consulting group Music Ally, told Intellectual Property Watch, “The blanket licence may appeal for its simplicity.” But he added that licensing is itself a complicated business, and musicians might have less income with a blanket licence.

Legal Offer and Enforcement

Universal Music Publishing Group Chairman and CEO David Renzer and Bernard Miyet, chairman of French collecting society SACEM, together announced their approach to easier licensing. The major publisher and the collecting society now offer DEAL – Direct European Administration and Licensing. It would allow an easy licensing for multiterritorial online and mobile exploitation of the joint repertoire of Universal and SACEM. Renzer announced the first DEAL licences with Nokia for its “Comes with Music” service, Amazon Europe for its MP3 download service and British online music provider Spotify.

Renzer said DEAL should send a strong signal that the music industry is working to “ease the licensing process.” On the other hand, Renzer welcomed the French government’s legislative initiative that would allow file-sharers to be thrown off the internet. “France has taken a leadership position in enforcement,” said Renzer. The draft law if passed by the French Parliament in March would “give us the teeth to enforce our rights,” he said.

French Culture and Communications Minister Christine Albanel said that French providers and the music industry when signing an agreement at the Palais de l’Elysée in 2008 (similar to an agreement the British providers have with the music industry) had agreed on a double strategy of “fighting piracy and developing the legal offer.”

But while British ISPA-Secretary General Lansman said the French plan to cut the internet access of users considered to be file-sharers after two warnings for up to a year was “too draconian” and might be rejected by the European Commission as conflicting with fundamental communication rights, Albanel rejected such concerns when asked by journalists during a press conference.

What if Napster had not been sued?

Filing complaints against users and against new technical platforms to offer or share music have been two strategies to stem the downturn of sales that the music industry links to ever-new possibilities to get music for free. This year there were some tough questions for music industry representatives about the effectiveness of the effort, citing the announcement of the stopping of complaints against individual users by the Recording Industry Association of America they said saw only one out of 30,000 complaints filed go to court.

“This complaint ended as a mistrial,” said Gerd Leonhard, music and tech industry consultant who for years has preached that the labels and rights owners should embrace the digital business.

Would the music industry look different today if music downloading service Napster, instead of getting sued, had got licences? That was the top question of Midemnet Visionary Committee Chair Ted Cohen to former EMI CEO Eric Nicoli, who conceded mistakes of the industry in the first years of the digital music revolution.

The industry was “change-averse and technophobic” and the personalities in the top management positions wanted to keep “gatekeeper positions,” said Nicoli. “We did find it difficult or impossible to collaborate in the first five years,” he said.

The “propensity to sue every new platform” blocked the way for innovation of the labels, said Michael Robertson, founder of MP3.com. Robertson is still fighting a complaint against his newest venture MP3tunes, filed by EMI.

He predicted that recorded music would come to a complete end in the coming years and innovation for digital music distribution was coming from “the dark side of the internet.”

Ian Rogers, former co-developer of Napster follow-up system Gnutella and founder of Topspin, said to sue Napster was the “most stupid thing I ever heard of.” Topspin belongs to a category of new ventures that might take over some of the old music label business using ever more avant-garde technical marketing and promotion technologies.

Some of these technology and platform providers presented themselves at the Midem fair. Sellaband, for example, allows musicians to collect $50,000 dollars from their fans, helps them to produce their first album with the money and manages the sharing of the income in the first five years. Since 2006, 29 musicians managed to collect the $50,000.

The company Kyte, on the other hand, offers an advanced video and streaming platform to so far a few hundred artists for self-promotion. Just before the Midem, Kyte announced a global partnership with Universal and now expects to be used by many Universal musicians. At least some technological innovation seems not to be lost to the old-fashioned industry.

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