Arguably one the of the biggest challenges facing the music industry is what comes next. Streaming has provided the short term answer but how do fandom and social platforms work together?
Nick Bennett analyses the historic limitations of music licensing and what it might take for the music industry to get the most from the new wave of social platforms.
Licensing music has never been easy and it was never meant to be. The system was always designed to work for the rights holders and unfortunately (or fortunately depending on your view) things were only made more complicated from there. Even from the basics of having to track down who owns both the master and the publishing to your chosen track can be a challenging task. Once you’ve run into the first obstacle you then need to advance to trying to actually negotiate usage of the rights you need, for a price that matches what you can afford to pay.
No one has a guaranteed right to use a track and it was this situation that created the opportunity for library music to evolve with their ‘simple’, easy to license catalogue that was created specifically for media usage. This equilibrium with limited distribution channels (TV & Radio) evolved very slowly over the latter part of the 20th century. Even with this static model of high priced, scarce commercial music and an established library music sector there were constant challenges. The music industry has never been a stranger in regards to copyright infringement and David Dundas was one of the early examples of brands and advertisers not wanting to play by the rights holders rules.
As complex as music rights and licensing can be there are simple mistakes that seem to recur time and time again when those that are used to getting whatever they want get told no by the artist or the label. The aforementioned Kenco Coffee advert and David Dundas soundtrack is an example of spectacular arrogance where the would-be licensee gets offered a quote for the rights, decides it’s too expensive and commissions what can only be described as a ‘soundalike’. Although this isn’t a particularly clever solution to their problem it still beats simply using the original track without a license, which is far more common than it should be (more on this later).
Outside of these occasional missteps the system, which was designed for a slow, manual and linear process, functioned quite well but this would be short lived with the increased speed of production and explosion of distribution channels. The shortened production time required to create a commercial and the immediacy of distribution via social media pushed the pressure onto music companies to respond and although many of the incumbents didn’t, there were plenty of opportunities for those willing to fill the gap.
Alongside this shortening of the production and distribution timeline, the limited options for channels to clear for distribution exploded. To respond to this demand music companies (record labels, publishers, libraries, composers) now had to rapidly understand the new channels and either fit them into their existing pricing structure or create new ones entirely. This started off relatively tamely with digital mostly being used for low budget behind the scenes type content, however, it soon gathered pace with the ad spend increasing distribution across platforms such as Facebook, YouTube and other connected ad networks. This posed a problem for the licensing world, where previously with TV and Radio the size of a brand had a relative connection to the budget they had for a license (big brands had big budgets) but with cheaper ways to produce content and reach their audience, even the biggest brands were creating lower budget content and enabling different brands with different budgets at different times to license the same music was increasingly challenging.
Unfortunately the history between the tech and music industry has mostly been a fraught one.
Alongside this challenge in the actual sync right, digital threw up another challenge via public performance. As with the labels and publishers, the PROs had also become quite comfortable with the standardised way to collect performing rights via big broadcasters in a reasonably manual approach to collective licensing. This shift towards digital started to cause them a major headache trying to understand, license and distribute money from each of these new channels, with some major resistance from the channels themselves.
Unfortunately the history between the tech and music industry has mostly been a fraught one. The tech industry has mostly viewed the music industry as a burden that they undervalue and would rather not have to pay, however, the music industry has been very slow to make themselves easy to work with, assuming the platforms need what they have. This has led to countless lawsuits and the approach from most platforms is ‘wait to get sued’ including YouTube, Soundcloud and many others.
The biggest underlying challenge stems from a lack of clarity on the business model of both new platforms and the music industry in general. From the time of the demise of the album model the music industry has been searching for what comes next and moved heavily towards brands, however, since the growth in streaming (thanks, Spotify) they’ve placed less weight on that approach. The recent UK parliamentary inquiry has also shone a spotlight on the business model not just of the broader music industry but also of the musicians and artists themselves. This means the challenge for platforms isn’t just to license music in a way that the major rights holding companies find acceptable but also considers the music creators (although most care more about the PR than actually helping).
The two broad questions that platforms need to answer is how do they license and pay public performance and how to enable syncronisation (or at least try to make sure content that appears on their system has a license).
Rights holders have another question to answer entirely, which is not well understood across the industry. What is the future business model for music and where does revenue growth come from? With streaming growth stalling, all eyes should be on what’s next. At the heart of it is this statement from Mark Mulligan:
“The biggest music industry opportunity is not licensing music. It is monetising fandom.”
It’s time for music execs to place their bets and those decisions will have a huge impact on what the solution is for the platforms too. Of all the major social platforms, YouTube appears to have come closest to appeasing both users and rights holders, however, with all the money they generate and time they’ve had it’s hard to give them that much credit.
The biggest challenge new and existing platforms (even YouTube) are still facing stems from the music industry business model uncertainty.
The biggest challenge new and existing platforms (even YouTube) are still facing stems from the music industry business model uncertainty. Although there are less of them around, six figure sync deals still exist and equally the rise of millions of creators wanting to license that same music for single figures too. Can you enable both? Which is more lucrative? Does allowing micro licensing (or collective licensing) create the kind of fandom people have been talking up?
All of these are essential strategic questions that have to be answered by the rights holders before there can be progress.
The best example to reference is TikTok. Much heralded as the music industry’s best tool for breaking new artists, the continued evolution of the platform creates havoc for rights holders and the platform itself, continually working out how to license appropriately for the user behaviour.
The user generated content (UGC) on the platform has always been heavily focused towards music and a karaoke style approach has led to huge viral hits for artists such as Lil Nas X. This is essentially simple to license for most rights holders. A traditional collective licensing deal can be arranged via PROs and shouldn’t cause much more of a headache than any previous TV channel deal, if the platform is willing to pay and that’s always a big IF. Equally, bigger rights holders such as Sony, UMG and Warner are also able to issue those rights directly, which can affect the complexity of what everyone else does or where the platform actually chooses to go to do the deal.
Assuming this is the simple part of the deal, where does the complex part come in? Brands.
The question of what constitutes an ad on TikTok and how much should be charged for it is a question with a thousand possible responses.
The range from full blown, agency created digital ads all the way down to product placement in a UGC video is a challenging one and everything in between presents a huge range of opportunities and challenges for rights holders. Knowing who to license, how to license and getting the pricing right is extremely challenging. There are also new license requirements springing up every day.
The most recent of these is an agency or brand attempt to create a viral video on the platform that will be emulated by millions of users. The issue here is the rights for the music will also potentially need to be cleared for the UGC content as well as the original ad, depending on the level of the brand recognition or involvement.
Knowing who to license, how to license and getting the pricing right is extremely challenging. There are also new license requirements springing up every day.
The continued impact of this uncertainty has already been felt by brands like Gymshark and Bang. Undoubtedly there is a large amount of responsibility sitting with those that requested clearance but then use music without the license but as we’ve seen before (Napster vs Spotify), if you make it easy and clear enough then most people will pay. And that’s just what some are trying to do.
Whilst we sit in this limbo state there has been some great progress from companies like Lickd and Songclip. Finding a way to enable creators and social media users to legally use music has been no mean feat, however, the work of licensing catalogue from every rights holder to ensure any track is available is incredibly challenging. If you combine this with the ever evolving needs of the users/brands then you get a bit of a mess. Lickd is a great example of someone that has run into this problem. The initial offer to license commercial music for UGC on YouTube and other platforms works really well but where perhaps this is more of a challenge is when you ask rights holders to grant anything for brand involvement. Not only is there the pricing challenge but also the issue of existing deals that may already be in place directly. Trying to capture this opportunity at scale is an attractive proposition but one that comes with immense challenges.
Trying to capture this opportunity at scale is an attractive proposition but one that comes with immense challenges.
In addition to these emerging solutions, platforms like Synchtank allow rights holders to offer content creators a range of licensing options, from individual requests to automated, blanket licensing or micro-licensing for pre-cleared subsets of their catalogue. However, the issue of scale still sits with the rights holders in terms of how they want to view their relationship with new platforms.
Alongside this progress is the tradition of uncleared usage and legal battles (see Roblox) and others, including MIDiA’s favourite Twitch creating ‘Soundtrack’ to circumvent the issues of licensing that they’ve run into so far. As MIDiA also point out, there is a host of up and coming pre-cleared music companies like Epidemic Sound ready to grant the rights needed right off the bat if the commercial music side of the industry proves too challenging to work with.
What’s clear is the solution, if there is one, hasn’t been found yet. The mindset of the music industry is struggling to shift from ‘you need us’ to perhaps one where ‘we need you’. Unless the strategic questions about the future can be answered it’s likely everything will continue to be this state of limbo, jumping between unlocking small amounts of opportunity (and revenue) and the friction of infringement and lawsuits.