It’s time for “Free” to get some serious face-time.

February 10, 2008

2007 was quite the conference year for me. Music industry folks rubbing shoulders and what not. But as I mentioned RE: the Bandwidth conference, for all of the discussion of “new business models” there was very little talk of one of the most significant new models that applies to the new music industry – Free.

If you need a recap, “Free” or “The Economics of Abundance” simply states that when copies are super abundant, they become worthless. When copies are super abundant, stuff which can’t be copied becomes scarce and valuable.

Founder of Wired and The Whole Earth Catalog, Kevin Kelly, has recent post called “Better than Free” which is a very eloquent example of how to monetize the scarce elements in any industry where “Free” is a viable part of a business model. It’s a wonderful jumping off point and I’d encourage any new artist to seriously consider the guidelines here if you want to become an independent music business in your own right.

Not only that, but it’s a concept that’s been around for a while. Techdirt’s Mike Masnick’s “Free” based business model, suggested back in 2003, was recently adopted by former major label artist Kristen Hirsch. And author of “The Long Tail” and Wired editor Chris Anderson is also a proponent – Chris is releasing a book on the subject, called “Free”, in 2009. It’s been talking to and reading these gentlemen’s ideas that have set me on my current course.

It perfectly natural to be resistant to “Free”, of course. The music industry has been built on monetizing the artifact (CD, wax cylinder, whatever) of recorded music for over 100 years. And like most technological transitions there are no absolutes – the sale of recorded music is still a multi-billion dollar industry and one that Penny Distribution, via our digital distribution agreements with artists and labels, still sees as an important part of our model now and in the future.

But I don’t think it’s a stretch to say that it’s impossible to create a viable music business based on the sale of recorded music alone.

The question is: Why is “Free” not a larger part of these new business models?

Here’s a little experiment: try telling a label, or artist, that their catalog of recorded music has been devalued to the point where it’s almost worthless. You won’t even have time to explain the concept of monetizing the scarce features of their catalog before you get a look of incredulity and an end to the conversation.

And the reason? Because Label 1.0 (and indeed Recorded Music 1.0) is based entirely on the worth of sound recordings – most record labels require that they own outright the sound recordings that they pay for artists to make – and the “right” to decide how much to sell them for and to whom is the cornerstone of their business model.

As I mentioned before, working for a Label 1.0 made me realize how closely we cling to our ideas of how a certain business “works”. To do business in any other way goes against the patterns label owners and artists used to make their fortunes for, sometimes, over half a decade. Like any habit, it’s hard to break.

There are often emotional responses to ideas such as this: “How will music survive?” label heads say, “How will artists make money?”, “Won’t someone PLEASE think of the children?!?” It’s arguments such as these that organizations like the RIAA have made in the past in defense of it’s campaign of lawsuits. But we knew then, as we know now, that P2P is an inevitability.

And “Free” is an inevitability by extension. The question is not “How do we stop it?” but “How do we take advantage of it?”

There are no definitive answers here: “Free” isn’t the ONLY answer, but should be at least part of a viable music business solution.

Subscription models were seen as a “savior” early in the decade, but disappointing performance from Napster and other major players (Coke, AOL, MTV) highlighted the many flaws, not least the fact that if you stopped paying the service, you lost all the music you’d downloaded.

The latest buzz is about Ad-Supported music (Imeem, We7, qTrax), but evidence is arising that basing your business on whether or not people click on ads in a social network environment may be a bad idea.

It’s high time “Free” (with intelligent implementation along the lines of Kelly’s article) got some serious consideration – and if major labels want to ignore another elephant in the room, Penny Distribution and others like us will be happy to pick up the slack.

Both of Penny Distribution’s debut releases, Departures by Tom McShane and Mistake: Do Over by The Terribles (Artwork, Lyrics, 320kbps MP3s) are available for free. Tell your friends, take ‘em with you and spread the word if you like them. These and future releases will use “Free” to it’s fullest advantage.


Radiohead and In Rainbows – Pushing the boundaries in Publishing, too

January 6, 2008

There seems to have been a touch of serendipity at play in Radiohead’s decision to offer their latest album as a pay-as-you-want download. As the band’s managers told David Byrne in his recent Wired interview (Audio entitled “You have had years…) about 5 weeks before the band announced the imminent release of In Rainbows, Radiohead’s long-time publisher Warner-Chappell (“WC”), approached the band with what they described as an “experimental” idea.

WC’s proposal was a simple one (see article from Billboard, reproduced below).  In short, with Radiohead’s permission, WC would act as a global one-stop shop for the administration of the copyrights of In Rainbows.

Under the old publishing administration system, the artist and publisher would have to negotiate deals with collecting societies in each of the 27 EU territories separately, and the length of time between the purchase of a track until the time the artist is paid, could be a year or more.

The new deal allows WC and Radiohead to sidestep this enormously complex system, to the ultimate benefit of consumers (with music getting to market more quickly), artists (who are paid more quickly) and the music industry (by the reduction in bureaucracy) by allowing WC to be the collector and administrator of the rights for In Rainbows on a global basis.

Just to clarify, WC, although owned by Warner Music Group, is a separate company and one of the few profitable arms of a company who’s stock hit an all time low of $5.31/share today. WC handles the administration of the songwriting copyright for thousands of artists, including Radiohead.  EMI controls the sound recording copyright of all of Radiohead’s albums except In Rainbows. By not resigning with EMI, Radiohead maintained control of their sound recording copyrights for In Rainbows, but choose to allow WC to continue to administer the songwriting copyrights.

Although there are two separate copyrights (sound recording and songwriting) at work in every piece of recorded music, they are virtually useless when used independently of each other – digital downloads, using the music in a movie, making a CD, licensing the song to a video-game etc. all rely on the agreement of the sound recording owner (in this case, EMI for their seven prior albums, Radiohead themselves for In Rainbows) and the songwriting copyright owner (jointly Radiohead and Warner-Chappell Publishing for all albums).

The removal of EMI from this equation, and consequently the removal of many time- and-cash consuming “stakeholders”, may well have streamlined this whole process – on January 3rd, in a move that seemed to give credence to WC/Radiohead deal, the EU published it’s Creative Content Online In The Single Market paper.

It called for “the (music) industry to set aside piracy concerns through “innovative and collaborative solutions” and make more content available digitally” and “that there is ”an underlying need” to tackle “the lack of multi-territory copyright licences, (which) makes it difficult for online services to be deployed across Europe and to benefit from economies of scale”.”

It’s long been said that the new music industry would require bold moves and a re-thinking of old paradigms. Radiohead’s album release was certainly such a move: but it’s refreshing and exciting to see a company with “old industry” ties such as Warner Chappell lead the way in publishing, despite the obvious risks involved.

Even though success is far from guaranteed at this point, these moves may well be to the benefit of the next generation of great musicians, songwriters and industry entrepreneurs.

Warner-Chappell have agreed to answer any questions I might have about the deal they signed with Radiohead (thanks, Paul!). If you have anything you’d like to ask them about the deal, please post it as a comment and I’ll try and forward it along.



Radiohead’s “In Rainbows” has again chartered new territory—this time in terms of its digital licensing.

The British alternative rock act and its publisher Warner/Chappell Music have launched a unique “all rights” digital licensing service for the album’s release, aimed at streamlining the licensing process for works on the 10-track set, Billboard has learned.

The “one-stop shop” solution enables potential rights users worldwide to secure licenses from a single destination, effectively side-stepping the label and traditional collecting society networks.

Jane Dyball, Warner/Chappell senior VP of European legal and business affairs, hails the development as “groundbreaking,” noting that it allows the publisher to administer all digital rights for “In Rainbows,” including mechanical, performing, synchronization, lyrics, master recordings, image and likeness. The publisher will also license synch rights for publishing and master rights for TV and film synch uses.

“We can do it because we are not under a contract with a major record company,” says Radiohead manager Bryce Edge of Oxford, England-based Courtyard Management. “No major label, in my experience, would let a band sign a deal without the digital rights being attached.”

Like many aspects of Radiohead’s seventh studio set, the new digital licensing solution was “experimental,” says Dyball, but one that promises benefits to all parties. She stresses that the deal applies only to this album, and that it is still too early to gauge whether the system will provide a template for other acts to do the same.

“We’re able to do this because of the band’s unique circumstances, their history with Warner/Chappell and our combined willingness to try new approaches,” she says. “So it’s not something that can be immediately rolled out to others. But, as with any experiment, we will learn things along the way, which will be fed back into our business.”

The only constraints for third-party digital licensing, Edge says, is that download stores must sell works encoded in a bit rate of 256kps and higher, and that the content be offered digital rights management-free.

The convoluted process for licensing publishing rights in Europe alone typically requires a service to negotiate with one or two societies in each of the 27 European Union member states. Master rights are treated separately. The Radiohead deal is a step beyond Warner/Chappell‘s MIDEM announcement of plans to offer Pan-European licenses for its Anglo-American repertoire.

“To do that kind of experiment on a bigger scale, you had to have a buy-in from lots of different stakeholders and everyone would have to agree,” Dyball says. “On this, we had hardly any stakeholders, just Warner/Chappell and Radiohead, which really allowed us to try it.”

The album finally receives a physical release through ATO Records Group (United States), Hostess Entertainment (Japan) and XL Recordings (rest of world) in late December/early January (see story, page 18).

“We are intending to share the revenue that we receive through the one-stop shop from the master exploitation with XL and ATO,” Edge says. “It’s just we are collecting it.”

All licenses as part of the new Warner/Chappell arrangement are subject to band approval.

“We will certainly be starting to talk with licensees now, in conjunction with the band and management,” Dyball says. “But it’s too early to talk about deals.”

Edge confirms that Radiohead’s camp is in talks with iTunes about carrying “In Rainbows.” The band’s previous albums are not available through Apple’s music store.

Warner/Chappell says the licensing service will operate at standard industry rates.

“We’re working with the band,” Dyball adds, “and they are working with their non-digital partners. The idea is that we’re all pushing in the same direction.”