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January 30, 2014

The Siren Song of Efficiency in Music Licensing, Part 2


A recent TechByte, “The Siren Song of Efficiency in Music Licensing”,  discussed the complications of music ownership and licensing which sometimes result in music not being made available to consumers via new and interesting services as efficiently or as easily as some critics might wish. But too often the suggested solution is that government must change the rules of property protection with some hope that a more efficient market may result. To take this idea too far is a mistake: Efficiency is a virtue, but protecting intellectual property rights is a basic principle.
There is no silver bullet. Older licensing contracts that did not contemplate new services, such as streaming, may be troublesome for a while. Going forward, licensing challenges are being resolved allowing for even easier access to music. But even now, all evidence demonstrates that the market is addressing concerns without need for government intervention. For example, digital music services have worked through the licensing landscape to launch and grow successful music delivery companies.
Today, a greater volume of music is being delivered to a greater number of people than at any time in history because of streaming music services. Spotify, with six million paying customers as of early 2013, and Pandora, with around three million at the end of 2013, are still in their infancy, but the increasing uptake for both of these (and other) services fits with a worldwide trend--that is, by end of 2012, 25 percent of U.S. Internet users said they had listened to Internet radio. The data shows the same trend globally, with Germany, Italy, France, the UK and China reporting similar numbers. This potential is huge compared to even the peak of CD sales.
At the same time, artist’s choices for how they license their music are increasing. They no longer “need” to work with a label. They can choose to go it alone using technology for production, promotion and distribution, taking on the various roles and the accompanying expenses themselves. Internet technologies can be leveraged for promotion, and for those with the fortitude for the big gamble, there are seemingly countless television shows constantly searching for new talent.
Artists could also choose to hire “consultants,” called label services companies, which  leaves the decision-making about promotions, marketing and distribution to the band, offering them potentially greater reward (but also greater risk) from their decisions. This arrangement also does not come with an advance from a record company for recording and other costs.
The market is well on its way to providing a variety of choices for artists and delivering a variety of listening choices for music fans. Gratuitous bashing of music labels and demands to weaken copyright protection suggest that critics are unaware of or are ignoring the innovation well underway.


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