The Clash of Cultures: The disconnect continues between rights owners and tech companies

Posted by | March 11, 2011 | 5,524 views

I was at a conference this week (that I highly recommend; Music 4.5 focuses on being refreshingly informative). There were rights representatives and digital music services represented. One of the music services put forth that there is nothing beyond “business” in the equation of rights licensing and they are just trying to get on with digitally distributing music. It is an interesting point since business does require a number of things to get up and running.

When you need electricity you look for a plug; water, a tap. The bill comes at the end of the month. With music; where’s the plug? Where’s the toll free number? Music is not a utility and should not be treated like one. The big boys in the “business” of digital music distribution are looking to secure rights to music in order to attract and maintain customers and they want a toll free number and a monthly bill. They will also use their muscle to push governments to get there. So if music technology companies need content as part of their business and the music business needs to keep in line with the ways that their music is delivered to the consumer, I ask, why can’t we all just get along? The disconnect started decades ago. When Microsoft for instance was constructing a music offering it looked around the campus for a couple of minutes and put the onus of contacting the labels on a techie. You love music, right? Go out and get us the rights.

At the same time hundreds of hours where spent on building the Microsoft culture while little or no thought was given at all to the fact that there might be a music business culture. What should have been a series of great bedfellows ended up a contentious mess partly fed by arrogance (on both parts) but in the end it was just a lack of respect. Cut to the era of ring tones licensing, where the disconnect was forced wider when digital distributors either grossly under reported or didn’t report content use at all. With the assets rushing out the door for free, what is a rights owner to do? Once again, the people in technology who became responsible for bringing the music to the people turned their back on to the people who facilitate the creation of that music.

The consumer is King. We used to say content was King until technology outstripped the ability of social structures to make rules against piracy. Technology trumped content. Morality was left up to the individual. Self-regulation in these matters doesn’t always work. So the music business declines and declines and the artist suffers. Hargreaves (knowingly or not) and the major players looking to cut fire sale deals for music rights are kicking the industry when it is down. Why can’t we all just get along? Like Aretha says, it’s about R-E-S-P-E-C-T. If techies and their business partners would just respect the rights owners enough to bring them into the business model creation process BEFORE the last screw is tightened the relationship would change from contentious to cooperative. In the good old days the labels supported their distributors and retailers. After all if a record store didn’t sell the product they could return it AND BE RIMBURSED. What a deal.

Nowadays the labels are struggling to make ends meet financially, making it impossible for them to throw money at a new on-line or mobile digital music service provider models. But the value they can add is being proactive in the building of the product that provides a superior service to music consumers, because that is what they have always been in the business of doing. When was the last time a head of digital at a label was asked by a licensing hopeful, “what kind of a model have you been dreaming of”, or “how do you see the future” or ” let’s build something together”? Instead, the new music models are often created in a vacuum by well-intentioned smart folks full of hope; but without any regard for the culture of the rights owners who are so desperately needed in the equation. Disrespectful in a way; you can see why wounds don’t close.

I also heard at the 4.5 conference that rights negotiations shouldn’t be good ‘ol boy’ sessions but rather hard cold and aggressive negotiations. I don’t agree. If you know your rival negotiators’ way of thinking, culture, you have a much better chance of coming to some agreement even if it means agreeing to agree. I have proof. Some deals I have made for new experimental licenses could not have been made if I didn’t have colleagues/friends at the board level and above all approached the process with respect for the culture of the other side. All too often the rights owners grit their teeth when the phone rings as one of the usual subjects wants to set a meeting to hammer away at the rights structure with little regard for the culture or the sanctity of the intellectual property at stake. And for the future of music and all who love it, that has to change.

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Posted by on Mar 11 2011. Filed under Digital, featured, Labels. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

2 Comments for “The Clash of Cultures: The disconnect continues between rights owners and tech companies”

  1. Gilbey. Good to hear from you (birthday mate-May 12th right?). What have you been up to? I don’t see too many Australian friends anymore unless it is at MIDEM.
    The role of morality is too me more the issue your context. Technology has a way of outdistancing and disrupting societal norms leaving tough choices up to the individual. The anomaly in the modern music business of illegal file sharing is not so related to the value of music as it is to the mind set of a looter after a catastrophe. Not to say the labels don’t have many fences to mend and that they may actually inhibited the licensing of content process but really who could plan for something like unbridled, unenforceable stealing of your assets? At the very least I agree with you that alternative economics should have emerged (like volume pricing) but at the critical juncture (the original Napster) the labels where not only afraid that they didn’t have the right (existing artist contracts) to adjust the wholesale pricing model but they actually thought they could beat illegal file sharing. All I was trying to convey is that nothing good happens to the digital distributor of IP if they have nothing to distribute – legally. Working together with mutual respect is one option to get to the perfect model and price point.
    Hope all is well buddy,
    Rick

  2. Hey Rick: Its good to see that you are still out there stirring the pot!

    Its a complex problem and it is being made all the worse by a lack of understanding of the new and evolving ecosystem.

    I don’t think that techies can plan how to manage rights – the fact is that the cat got out of the bag years ago with the advent of P2P and torrents etc.

    But those are now diminishing in their impact.

    Now people get their new music from YouTube. What they do with it afterwards in anyone’s guess.

    But I think that there is one fundamental issue that music business execs are ignoring in order to repeat the mantras that they know best. That is what the real price of music should be.

    There was some research undertaken at the University of Leicester a year or so ago by a criminologist there because of the decrease in break and entering crime statistics in the UK over a lengthy period of time.

    Now most people think that crime is on the increase in most places. That’s because people don’t get elected for telling the electorate that things are getting better. In fact, certainly in the UK, breaking and entering has declined.

    To cut to the chase, the research concluded that the reason for this was that cheap Chinese white goods (DVD players etc) had become price competitive with “hot” goods. As a result the consumers in the pubs, the favoured venues for shifting the hot product, determined that the comparative price of the hot good and the legit good made it more compelling to choose the legit and inexpensive Chinese product.

    The result was that there was not enough margin in stealing DVD players and people stopped doing it. It didn’t stop crime, but it impacted a certain area of crime.

    The moral of the story is this: Given the choice between a free piece of content and a legitimate piece of content, the price differential needs to be close to zero in order for the consumer to choose to make the purchase of the legitimate good. Threats of prosecution are of no avail.

    So the price of content needs to be reconfigured to meet the reality of the marketplace, rather than the market needing to be reconfigured to meet the fantasy price points that used to stand up historically in the days when content was not abundant but which don’t stand up in a totally networked hive society.

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