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In Streaming, Licensing Means Far More Than A Huge Music Catalog

Posted by Glen Sears | July 9, 2015 10:08 am | No Comments

music licensing streaming

Key Takeaways

  1. For every song in a digital music catalog, there is a huge rights and licensing stack that is far more complicated to fulfill.
  2. Without a digital music platform that understands these relationships, potential for lost and escrow revenue increases dramatically.

 
At MediaNet we regularly see and hear music services touting the sheer size of their music catalog. On one hand, it’s the easiest number for regular folks to get their head around. A service has “this” many songs, and more is better. But where music streaming starts getting interesting (and difficult) is in paying for each song to get played.

The Problem

If you’re a music service, broadcaster, bar, venue, or other licensee of music, managing the process of calculating payments seems almost impossible. The large volume of digital usage, limited availability of ownership data, and the generally byzantine royalty structure all add up to one thing: lost payments.

Billions of dollars of digital payments are administered each year, $6.9 billion in 2014 according to the IFPI.

Rights holder losses are due frequently to old systems, unmatched pay, slow processing, poor ownership data, paper processing, and lack of open markets. We estimate these losses exceed hundreds of millions of dollars.

Content owners and legacy middle men (Labels, publishers, PROs, Societies) that license copyrights have a difficult time tracking, monitoring, and receiving payments from the 1,000’s of licensees in the U.S. and around the world. In addition, it can take up to 18 months for rights holders to get paid through these legacy systems.

These problems are a result of the transformation of music from a physical distribution and licensing framework to a digital distribution and licensing framework. Specifically there are two critically transformative changes: Volume, and License Laws and business models.

The volume of individual music transactions has increased massively. Not by factors of 5, 10 or even 100, but by an order of magnitude in the billions (yes, billions). Billions of lines of usage each month, compared to millions of sales of CDs each year.

License laws and business models are also very different in digital streaming and subscription models, requiring complex calculations and access to ownership data covering millions of content owners. The play of one song can require tracking and paying over 10 different entities, with royalty calculations of a single play monitored down to 6 decimal points (e.g. $.000003).

Incumbent services that have supported the music industry for almost 100 years, services that powered the entire royalty payments supply chain, simply were not designed to handle these volumes. They have managed to “get by” using older analog legacy systems (e.g. spreadsheets) and processes that are cumbersome and have numerous gaps in the workflows. These gaps cause loss of data resulting in loss of ability to properly account and completely pay all rights holders.

The Solution

When licensing, delivering, reporting, and paying on a world-class digital music library, it is imperative that the foundation be built with these things in mind. Any service that isn’t aware of plays and licensing isn’t built for the future.

Many companies are spending their time trying to consolidate and simplify licensing. Some are tracking down any number of the 900,000 revenue streams worldwide.Others are working toward combining mechanical and performance license servicing.

This is all great news. I fully support anyone who is working to make digital music licensing simpler and more efficient. But the question still exists: who will handle the digital fulfillment supply chain? Can they also get rights holders paid?

The answer? Here at MediaNet we’ve built and host a database of rights holdersspecifically matched and linked to Sound Recordings. Every time a song is delivered, we know who needs to get paid and how. Without any need for third parties. No third parties means less translation, better accuracy, and payments accounted for.

This is the way all future digital music platforms need to be built. From the ground up to be ready for any changes in licensing or publishing. A platform custom built to ensure that no matter what the contract says, everyone is getting paid.

-Frank
If you’re interested in learning more about how MediaNet can help power your service, I’d love to chat! Email me at fjohnson@mndigital.com or follow me on Twitter: @francjohnson

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Have questions about how Medianet can help your digital music business? Ask us here. Want a topic or insight published on this blog? Ask us here. Other questions or comments? Let us know!

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