I recently attended a music industry conference that was presented by the Berklee College of Music in association with the Berkman Centre for Internet and Society and Harvard Business School.
Rethink Music examined the business and rights challenges facing the music industry in the digital era, with topics on licensing, cloud, and alternative business models factoring prominently in the discussions.
The music industry (much like the software industry) is going through profound change driven in part by digital distribution models and consumer shifts in demand. Just as in software, much of the debate focuses on enabling new business models while protecting rights holders and ensuring fair compensation along the value chain.
I attended the conference in search of some golden nugget of information that I could apply to my research on the software industry. Although I did come away with a few new catch phrases, like "ubiquitous legal consumption," and "it's not about how you compete with free, but how you turn free into paid", I am not sure that I found a singular piece of information that produced an "a-ha moment". There are no easy answers.
However, I learned something in every session that helped me put some more pieces of the puzzle into place. Here are some of those puzzle pieces:
1. Whenever there is a paradigm shift in an industry, a battle between those who make money under the old system, and those who might make money under the new system, ensues.
2. Those people invested in the old system typically have money, which they use to block the transition to the new system via government and legal influence, as well as customer lock-in.
3. The incumbents are adept at using licensing to help maintain the status quo. Legacy licensing models developed prior to the cloud and digital era form the root system of the giant trees that are the industry incumbents. The incumbents aren't going to rip out these root systems on their own. When they do make changes they will be surgically designed to disrupt as little as possible.
I believe that licensing can play a role in enabling new business models while protecting rights holders and ensuring fair compensation along the value chain. Here is what needs to happen in order for this to occur:
1. Licensing needs to be for everyone, not just the lawyers. The language needs to be more accessible, and all the stakeholders—rights holders, distributors, customers—should be involved in the discussion as we consider how licensing must adapt to new cloud- and otherwise digitally-dominated realities.
2. Licensing should not be used drive customers where content publishers want them to go. Instead, it should help publishers bring content to the customer where they want to consume.
3. Licensing does not mean ownership. The industry needs to move away from talking about ownership, not only because it is incorrect in the legal sense, but because customers don't want ownership. They want access.
4. Whether its music or software, value is created when experiences are created. Publishers need to make content easier to consume. Licensing needs to enable and enhance these experiences, not block them.
5. The value system is out of whack in the music industry, as it is in the software industry. There is no easy fix for this—these are intangible goods where the value is in the eye (or ear) of the customer. Behavioural economics comes into play here; some artists have successfully used voluntary payment schemes to align pricing with individual value perceptions. Business-value-based pricing in software can also achieve this goal.
6. Business processes surrounding licensing have to be streamlined. Complex models lead to higher transactions costs, making it very challenging to make enough money to fairly compensate the various players in the content creation ecosystem.
Personally, I like a challenge. One of the reasons I've enjoyed researching licensing for so long (a little over 10 years) is the fact that the problems are complex and multifaceted. Solving them will involve a cross-disciplinary effort that takes into account behavioural economics, copyright law, technology adoption, and cultural preferences. And, every member of the ecosystem, including you, will play a part in finding the rest of the pieces of the puzzle.
Posted by Amy Konary
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