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BAD DATA IS THE WORM IN THE APPLE FOR STREAMING MUSIC

2016 is proving to be tricky year for streaming rights. No sooner did it start to look like artists and labels were beginning to feel comfortable with streaming then along come a veritable flood of songwriter class action suits in the US, against TIDAL, Rhapsody and Spotify, twice. At the heart of the legal action is the issue of streaming services not paying mechanical rights to songwriters because they have not identified and / or not been able to identify, all of the the songwriters. The streaming services counter that they a) have been adhering to the rules as they stand and b) that it is difficult / impossible for them to track everything. It is a complex issue that may even have some of its underlying assumptions turned upside down (in favour of streaming services). For a good introduction to the issues see this balanced MusicAlly piece. Whatever the legal intricacies though, there is a crucial underling issue: bad data.  Or, to be more precise, a complete lack of data.

International Music Licensing Is Excessively Complex

International music licensing is highly complex and anyone who tries to tell you differently is either wrong or lying. That is not to suggest for a moment that music services should somehow not have an obligation to invest time, effort and resource into licensing music, far from it. But it does mean that the current system is not fit for purpose.

Recorded rights, the ones licensed by record labels, are relatively straight forward, if expensive and inflexible. But as soon as you move beyond label rights, things get complicated, fast. There are performing rights (which don’t include radio in the US, but do in most other markets…oh and then there are separate radio and video performing rights, often called neighbouring rights, for labels that are often licensed by an entirely different set of bodies than songwriter performing rights), mechanical rights, synchronization rights and others too.

In practice it is highly unlikely you’ll ever need all of those rights but in most use cases you’ll need more than one. And if you are a streaming music service you will need a few. Add into the mix that in every major music market globally there are normally a few different licensing bodies that you have to get rights from. Oh, and the bigger music publishers have often removed some, but not all, of their rights from those bodies that license on their behalf. You get the picture.

Complexity Favours Vested Interests

The sheer complexity of the global music licensing landscape favours no one other than those who benefit from that very complexity. For example, the consensus is that something in the region of 20% of collected music royalties are never paid back to songwriters or artists because they are not successful identified by the parties that collected the royalties on their behalf. This ‘black box’ revenue then either gets redistributed to identified artists on a share basis or gets fed straight into the bottom line. Some entities work tirelessly to identify the creators, others do not.

Rights complexity is not however a new thing, what is though, is the sheer volume of data. It is under the weight of this streaming data that the old system is buckling. What you would expect in such a complex and convoluted system is a central database that enables all parties to cross reference each other and reduce risk of misreporting. No such database exists. Publishers, rights bodies and music services spent a decade trying to fix it by designing the Global Repertoire Database (GRD). But that stuttered to a juddering halt last year.

Publishing Rights: A Right To Go Fishing

The GRD would in fact only have fixed the songwriter side of the equation, no such database exists for label rights either. The reason the issue is less pressing for label rights though is that when a music service licenses a label’s catalogue it receives the catalogue to ingest into its system. No such thing happens with publishing licensing. In fact, one executive referred to publishing licenses as “no more than license to go fishing for rights, they won’t tell you what is included.” Even this would not be an entirely insurmountable problem in itself if it wasn’t for the fact that there are often multiple songwriters on songs, each represented by different publishers with varying shares of ownership. And to complicate things even further still, collections of songwriter rights often get sold on and associated records don’t always get updated.

This is the unsightly mess that is songwriting rights.

Label Data Sucks Too

And it’s not just on the publishing side that bad music data exists. Labels are supposed to issue individual identifiers to every track they release. The principle is sound enough however these ISRC numbers are often rife with errors and duplicates, due to the fact they are often assigned by junior staff at labels using excel spreadsheets.

Unless something is fixed, fast, the entire model is going to buckle. If streaming services are faced with continual class action suits and no effective mechanism for cleaning up their acts they could be compelled to drastically reduce their catalogues to those works they are certain of rights ownership, which of course will inevitably favour the superstars and hurt the long tail.

Fixing The Problem: An Independent, Accountable And Transparent Database For All Rights

So who could fix the problem? One interim solution is for labels to assume some responsibility, after all the big record labels are part of the same corporate entities as the big publishers. Even though rights typically do not map from one major publisher to one major label, there is massive opportunity for both sets of companies to reach out and collaborate, to create joined up datasets for music services they license to.

The streaming services themselves clearly need to improve their own systems and they are indeed working on them. But that is a sticking plaster, no more. An independent, comprehensive rights database is required. This database must be the following:

 

  • Be independently administered, transparent and wholly accountable
  • Reflect the real time nature of streaming music with, at least, monthly reporting
  • Map all rights for every song
  • Enable rights holders to upload their own data and to edit existing data (if they can prove ownership – any disputes, and there will be plenty – will need to be arbitrated by the database administrators)
  • Use APIs to plug directly into systems of music services, rights holders, rights administrators and others
  • Be regularly audited by an independent auditor
  • Be co-funded on an annual subscription basis by record labels, publishers, PROs and other rights bodies, music services, trade associations, with subscription fees based on market share

On Behalf Of, Not For Rights Holders Or Streaming Services

Who would be best placed to create this system? A good starting point would be a collaborative effort between the, currently competitive, back end music service providers such as Medianet, Omnifone and 7Digital. Each of these have implemented music services for a host of 3rd parties and have a unique perspective of clearing rights and reporting. They are also, relatively, neutral middle men between rights holders and music services. In fact, only last week Omnifone announced the launch of its Global Metering Hub to enable real time reporting to rights holders. This is the sort of technology building block that needs to be built into the end-to-end rights database.

The GRD failed for many reasons, one of which was that it was essentially relying on industry to police itself. For a global database solution to work, it must be built and administered by an external third party on behalf of, but not for, rights holders no for streaming services. There are countless arguments why such a database is an insurmountable challenge, but with enough will, it can happen. Until it does, the current malaise will worsen and it will be the small guys that will suffer, both on the rights side and on the service side.

As one senior executive at one of the biggest global tech companies once told me “We love rights fragmentation and complexity: it makes it really difficult for anyone without really deep pockets to compete with us in this market.” And therein lies the rub. Do songwriters want a system that favours big tech companies who are only interested in music as a tool to sell their (non-music) core products, or one that is accessible and transparent to all?

COULD FACEBOOK BE ABOUT TO GET INTO PREMIUM VIDEO CONTENT?

Last Thursday Variety reported that Facebook is considering  bidding for the NFL streaming rights for Thursday night games. The National Football league is auctioning off the digital rights to stream 18 regular season games on OTT services (Non-Traditional-internet based video streaming services.) However, mobile rights are exempt from the offering as they are already held by Verizon Wireless for streaming on its ad-funded Go90 mobile video service. If Facebook is really serious about acquiring these rights then it would be a watershed moment in the social-media platform’s development and represent the first significant step in its evolution into becoming a media platform. Up until now Facebook has relied upon third parties to upload content to its platform which it then monetizes through demographically targeted advertising. If it acquires the digital OTT rights to these games it will become a content owner in the traditional media sense, and this will have significant implications for how content is utilized on the social networking site.

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GUARDIAN CIRCLE TAPS INTO THE ‘LIGHT EMERGENCY’ OPPORTUNITY

Guardian Circle is a new app, which allows you to build groups of ‘guardians’ consisting of personal contacts that you wish to rely on. You can send alerts to these groups immediately bringing your guardians into an ‘alert room’, where they see your location and can chat with you to figure out how to best help you. It’s currently available on iOS, with an Android version to follow soon.

The app can help in situations like transport delays when there is no baby sitter, busting a tire, a child needing to be picked up unexpectedly, all the way to being ‘saved’ from a Tinder date that’s not going too well. You can create multiple guardian groups with different contacts for specific purposes.

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MUSIC PIRACY HASN'T GONE, IT HAS MERELY CHANGED ITS SPOTS

While the music industry slowly got its head around the brave new world of digital in the 2000’s piracy used to be the dominant focus of record labels and their trade associations. Now, with so much momentum and scale among legitimate services that focus has understandably lessened. However, one of the key reasons for the softened focus is a misplaced sense that piracy has somehow gone away or dwindled. It hasn’t. Instead it has merely changed form.

P2P piracy was tailor made for the 2000’s when:

  1. Home internet connections were slow
  2. Most content consumption was desk top based
  3. People still liked owning music

Now in the streaming era all three of those market dynamics have lessened massively. So little wonder then that piracy technology has evolved to meet the needs of the streaming consumer.

With YouTube the number one digital music destination, and with a catalogue that no other music service will ever be able to match, it makes complete sense that YouTube rippers have emerged as one of the key strands of music piracy tech. Many of which transform YouTube into a fully offline, on demand, ad free, high quality music service.  The most popular new piracy tech – free music downloaders – are platform agnostic but fit a similar mould. These piracy app categories share crucial characteristics:

  1. They are mobile, so focus on creating mobile music experiences on the go
  2. They are available from the Apple and Google Play app stores so have a veneer of legitimacy
  3. The create snack based music experiences and are not designed for the hoarding use case of P2P (Digital Natives after all have all the music in the world available at a swipe of finger on YouTube so why do they need to fill their hard drives with entire back catalogues)

When Napster first emerged it changed consumer behaviour for good. That genie was out of its bottle long ago. Now the genie just became a shape shifter.

THIS WEEK'S DATA POINTS OF THE DAY

Other stories that caught our eye:

Flipagram plays the ‘do first ask forgiveness later’ card 
Sony Red turns to YouTube for A&R 
Original movies are "are essentially advertising” for Amazon 
Netflix expands VPN and proxy blockade 
Can Facebook reinvent its youth appeal by becoming more useful? 
FCC gives Verizon a slap ‘gentle touch’ on the wrist over super cookies
US Commerce Department slaps export restrictions on ZTE for (alleged) sales to Iran

NEW MIDiA RESEARCH REPORT

MOBILE COUNTRY FOCUS: FRANCE
France is one of the leading European app markets. Like other key markets in the region, the French app market is already maturing with annual revenue and app buyer growth set to slow to single digits by 2020. With this shift in market dynamics, average revenue per user (ARPU) will gain importance. Though Mobile Network Operators (MNOs) traditionally do not actively participate in shaping the app market, there are two potential ways for them to do so. MIDiA Research clients can read the report here.

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