Compensation issues between musicians, music streaming services and record labels are extremely difficult to resolve. However, there may be a solution.
The Berklee College of Music’s Institute for Creative Entrepreneurship is creating what it calls the Open Music Initiative. Most of the major music streaming services and several large record labels have signed on to participate. The goal is to clarify who the rightful owners of songs are, and to give them — and the people who distribute their music — access to data that will tell them where, and how much, their music is being played and shared.
Panos Panay is the founding managing director of Berklee’s Institute for Creative Entrepreneurship. He spoke with The Frame's John Horn about how this new shared protocol will help databases within the music industry talk to one another.
How complicated and obscure is the present system for identifying and compensating the rights owners for digital music?
It's a system that has never really been designed to accommodate the way that music is created and consumed today. This is really no particular entity's fault. You're ultimately talking about an industry that is over a hundred years old and that has gone through multiple transformations and multiple changes. I think this is one of the strengths of the industry, but when it comes to the ways that music rights owners and creators are being identified and compensated, that complexity is not really working in favor of the creator or in favor of the overall industry and its ability to grow.
Musicians complain that for all of the growth in music streaming — YouTube has one billion streaming users, and more than a third of all U.S. music revenue now comes from streaming — they are making less money than ever. Could the initiative rectify this so that the creators of the music are actually getting fairly compensated?
Yes. The objective of the initiative is to fundamentally make it such and create the conditions for creator compensation, irrespective of the medium where the music is ultimately being consumed. Think of all the music that is being shared right now across social networks and all the user-generated content that exists. So the hope behind this effort is ultimately to make identification and the distribution of money a lot more efficient for the people that are making this industry run, and that's the creators and the rights holders.
Is the idea that, if the initiative is successful, an artist or a record label will have a place that they can look and figure out who has bought what and how much they are owed?
Well, right now, a global hit could have [many] ways of deriving revenue. Then, to multiply the complexity, a modern song often has multiple creators, there's multiple owners associated with that composition. So the complexity is on both sides. There's been a multiplication of different ways that music is being consumed, but on the other hand, correspondingly, there is a lot more people that are involved in ownership with that particular asset. So even the distribution of money has become a lot more complicated. Again, our initiative is about creating a shared framework so that organizations, companies and entrepreneurs can build applications, systems, products and services on top of this shared protocol.
How do you think it will benefit artists? Will they be able to understand better how and when they're getting money?
Without a doubt. If you talk to any artist right now, there's tremendous complexity in them understanding where their money is coming from. There is an enormous lag time between, let say, the time that your song is played on the radio or in a bar somewhere, and the time that you get paid — if you ever manage to get paid. If your song is getting played in a totally different country, or if your song is being shared on social media or somebody creates a mashup of your song, there's all kinds of ways right now that music is being consumed. We believe that a world where not only are you able to accurately track where your music is being consumed, but also one where that money reaches the creator a lot faster. That's ultimately what we're striving for because by doing that, everybody benefits. If the creator benefits, then certainly at the end of the day, we will be looking at a far more rich and far more robust music industry that is able to drive value to the people that are creating the music, and an industry that is able to grow and thrive on innovation.