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Future of Music Coalition wants to rewrite rules of music business
Submitted by jonathan on Sat, 2009-04-11 13:28
by John Timmer, Ars Technica
As revenues from sales of traditional media have plunged, the music business has been looking for alternate ways of making money from its products, including a variety of subscription services, ad-supported streams, and blanket licenses. The focus of these efforts has largely been on how to ensure that revenue gets collected by the industry in general instead of disappearing into the black hole of piracy, but there's a related issue that doesn't receive as much attention: how that money gets distributed once it's collected. In an attempt to highlight this issue, the Future of Music Coalition has released a set of principles (pdf) for the compensation of musicians. Although the document focuses on money from new distribution models, it reads much more like an effort to rewrite the rules of the entire business.
The FMC calls itself a "research and advocacy organization that seeks a bright future for creators and listeners," two groups which tend to have contentious relationships with the major record labels. Based on the document and an accompanying explanation, the FMC isn't a big fan of the labels, either. So, for example, one of the principles calls for the ability of artists to audit the flow of cash related to their works through the record label's coffers. In explaining this, the FMC states, "Music industry history is full of stories—anecdotal and otherwise—of misleading accounting by copyright owners."
That's hardly the only place where the copyright owners get slammed, as the discussion also states that, "the history of the music industry is littered with stories of artists who have not been paid anything for the sales of their recordings." That appears in the explanation of the first principle, which is that revenue should be "equitably shared" between music's creators and the copyright holders. Of course, said holders presumably think that the existing system is fair, which explains why a big portion of the document is spent resetting those rules.
The most critical aspect of this probably occurs in the statement on "direct payment." Here, the principles say that any transfer of revenues to copyright owners are limited to three years. This would eliminate one of the common business practices, in which record companies would pay for recording, distributing, and promoting music, and then count that as a debt that entitled them to recoup their costs from the artists' share of any profits. Were these principles adopted, the labels would have three years to get their costs back, after which they can write it off. The concept of direct payment is meant to ensure that the labels would never have access to this money in order to take their share past this point.
A lot of the remaining principles focus on the fact that many of the online services get their music through agreements that abstract a lot of the relationship between music and revenue. So, for example, the labels got an equity stake in MySpace in return for providing the contents for MySpace Music. Other bulk catalog licensing deals exist where the value of the license is a bit easier to determine. In either case, those deals are ultimately dependent upon the content produced by artists, and FMC wants to make sure they get their cut. The same goes for money recovered from copyright infringement lawsuits.
Many of the other items are a grab bag of artists' rights issues. So, for example, in a digital distribution model, it should be possible to accurate track precisely what songs are getting played, so there's no excuse to not have accurate reporting of this, and revenues distributed accordingly. The FMC also doesn't want independent musicians and minor labels left out of agreements negotiated with the major labels and, as mentioned above, wants to see transparent accounting of the revenues from these agreements, along with a right to audit for artists.
It's unlikely that artists will get the sorts of rights that the FMC envisions; there are too many entrenched interests involved, and a lot of groups with a financial interest in blocking these proposals from being adopted. Still, the statement of principles is a good reminder that the music business is far from a monolithic entity, and there are many within it that have conflicting goals. As a result, even if one of the new revenue models winds up being successful, that's unlikely to mean the end of the power struggles.article originally published at Ars Technica.