Greetings from Legrand Network

Wishing you a fruitful and prosperous year 2014

River runnin' free you know how I feel 

Blossom on the tree you know how I feel 

It's a new dawn, it's a new day, its a new life for me 

And I'm feelin' good

(Written by Anthony Newley and Leslie Bricusse

and performed by Nina Simone, among others)

The end of the European Music Office

By Emmanuel Legrand

The European Music Office in Brussels is closing down. At times when digital services are beefing up their troops in Brussels, this is quite unfortunate and sends very negative messages.

For most in the music business, this organisation was unknown. Yet, it served a purpose. There are several bodies representing the interests of the various constituents of the music community in Brussels: IFPI and Impala for record labels, ECSA for artists, ICMP for music publishers and GESAC for authors' societies, among others. 

But the EMO was different in that it did not have a strict “political” agenda. It was the voice through which European authorities could be evangelised about today's music business and understand certain issues, especially those linked to the circulation of artists within the European Union.

The EMO was set up over a decade ago by the late Jean-Francois Michel, with the support of a few backers. His reasoning was that while the film industry enjoyed significant support from the European Union, the music industry received virtually no support from Europe. And something needed to be done.

Michel set shop in Brussels and started to “massage” the European Commission. There were a few positive outcomes, first of which were the European Border Breakers Awards, supported by the EC. Another important purpose served by the EMO was to feed information and dat to the Commission. This was the reason why the EMO undertook the massive research on the circulation of European artists within the European Union penned by yours truly.

With this regard, the EMO was pushing hard for the EC to adopt a music-related programme to help the circulation of repertoire across Europe. We're still far from it and without an organisation to bang the drums about its need on a daily basis, the likelihood of seeing the Commission's doing something is quite remote.

Time shave been hard recently for the EMO with sources of financing drying out, leading to drastic measures. Staff is now gone and a board meeting next week will pronounce the end of this initiative.

Aside from tearing down Michel's dream, it shows that the music industry is not capable of financing an outpost that can speak to the European Commission about today's music business from a cross-industry perspective. And anything that reduces today the visibility of the music community in Brussels is not helpful.

It's a sad outcome.

[Typed while listening to Arcade Fire's 'Reflektor' (Merge)]

The new mix: Technology, music & VCs

by Emmanuel Legrand

[This story was originally published in Record of the Day]

It is fascinating how the thesaurus of words used in the music industry has evolved in the past decade. A whole new jargon – usually borrowed from the digital world – has entered the day to day working vocabulary of music executives. Take the recent SF MusicTechSummit which took place in San Francisco October 1. The buzz words there were, among others, ‘freemium models’, ‘scalability’, ‘customisation’, ‘personalisation’, ‘intuitive experiences’, ‘superfans’, or even ‘stem track music publishing’.

The SF MusicTech Summit is one of these “boutique” conferences that – because of its location, next to Silicon Valley, tries to bring together the music and the tech world, according to Brian Zisk, Executive Producer of the event. And technologists there were aplenty, and some good ol’ music biz executives too. But – and again, it has probably a lot to do with the location of the conference – there was a genuine enthusiasm from all participants who view innovation as a key factor for change, and music as the driver for innovative digital solutions.

One such enthusiasts is Fred Han, Director of Marketing and Communications for Pulselocker, a web-based service for DJs. “What makes San Francisco so special for music services stems from the combination of two key social and environmental elements,” Han tells RotD. “First, SF is a hot bed of technological innovation and full of very bright people who aim to create products that improve our lives, be it marginally or substantially. Second, the music scene is embraced and supported by a vivacious community. This acceptance of virtually all forms of music has fostered a culture that empowers people to find the genres and styles that fit their unique tastes. The combination of these two elements has created a unique eco-system where people can build products that feed both passions.”

This eco-system was under the microscope at the SF MusicTech Summit. Streaming services, for example, got a thumbs down verdict by a panel of “enablers”. To sum up, the Pandoras and Spotifys of this world are seen as good music services but offering poor consumer experiences. “Do these services get it right?” asked moderator Stephen White from Gracenote during the panel Making streaming work: The Enablers. “No” was the answer from the panel. “There are people out there for whom Pandora or Rhapsody is the answer, but we are not yet to the point where the user can customise the music and also the experience. These services need to work on personalisation,” said Daryl Ballantine, CEO of LyricFind. “Too often there’s just the music and too often it is not a good experience.”

Streaming services could display a wider range of services that would help enhance the experience, explained Ballantine, citing artist bios, imagery, lyrics, information about the recording, liner notes as some of the perks that could “create a compelling experience for users.” Added Michelle Engel, Director of Content and Programming at Samsung, “If all is integrated in a way that stands in the way of the music, it is a loss.” And it also has to be made simple and attractive. Speakers agreed that streaming services will have a sound future if they manage to fine tune their offer to consumers, mostly through better customisation, rationalising their business models, especially by pushing users to premium services, and achieving greater scale by adding users and subscribers. As for scale, well, it’s about being global, said Ballantine. He elaborated, “Being able to reach scale beyond one country is a big differentiator. All these services need to achieve massive scale to reach profitability. It’s really tough to do that in one country. You need massive scale to support the royalty structure and a truly high quality streaming service. With scale, all the complaints about royalty rates will go away. The problem now is that not enough people are paying $10 a month.”

Scale was also a key word on the panel titled Music, Tech & Money which saw a handful of representatives from VC firms explaining what made them tick as investors. And guess what? Music is not on top of their priorities. Even though they professed their love of music, only a few of them were investing in music-related projects. Probably the best way to summarise the VCs attitude to the music industry was when not-so-neutral moderator Hany Nada, a partner in GGV Capital, brought his hands to his ears and said, “Every time I hear licensing I go ‘la la la’.”

It was a sharp contrast from an earlier panel during which Omnifone’s Bolte responded to the question ‘Is the process of licensing content getting in the way of innovation?’ by stating that blaming the licensing process for not being able to develop music services as “an easy way out” for some digital services. “Rights holders have been very engaged and have tried to facilitate innovation as much as they could. They want to grow the pie and at the same time protect their rights. It’s about working with them [digital services] closely and close the perception gap. Everybody is looking for ways to grow the pie.”

Larry Marcus, MD of Walden Venture Capital, identified two areas of potential development for music services: The “virtual space” where he believes a lot of will take place, although he did not really explain how, and “stem track music publishing”. And to really allow streaming services to develop, Marcus called for “a statutory licensing for ondemand streaming [that] would create a lot of innovation in the streaming field,” under which regime services would not have to negotiate single deals with each category of rights holders and would be able to use all the music available under a blanket license, similar to the one for terrestrial radio.

Tim Chang, Managing Director of Mayfield Fund – who once featured in Forbes magazine’s Midas list of top venture capitalists – was very pragmatic about the music sector. “We may be passionate about music but the business models do not align with this passion,” he said, identifying three primary types of services for music: 1) those based on self content, but their “margins are low;” 2) those based on building mass communities and monetising them with advertising, but “it’s hard to achieve;” and 3) those that create and sell tools to those who aspire to be in the music field.

“It is cheaper to launch a [music] company but it is difficult to scale these businesses,” said Chang who also warned aspiring start-ups: “You have to be careful with us because we can mess up your business big time because this is how our business is structured. We’ll push your business off the cliff because we’ll want it to be a $1bn business.” And how many digital music services have reached a billion dollars? That is probably why many music start-ups exist primarily because of angel investments, before VCs step into the game. “We are all super happy about how much angel investment there is because it gives us more options as to where to invest,” said Marcus. “But the hit rate is very low."

[Typed while listening to Arctic Monkeys's brilliant new album 'AM' (Domino) and vintage soul from Freda Payne's 'Band of Gold' (Invictus).”

Time to Think About 'The Next Great Copyright Act' in the US?

[This is an extended version of the story initially published in OneMovement for Music – Issue 6]

By Emmanuel Legrand

US policy-makers have launched what could be the biggest overhaul of copyright law in the past 40 years in America. The whole creative community, along with Silicon Valley, advocacy groups and consumer organizations, are getting their troops in marching order for what could also be the defining fight of the digital era. And the rest of the world will be watching with a mix of anticipation and anxiety, depending on which side of the equation they stand, too see how things will unfold.

Maria Pallante

The impetus to this ambitious project was given by the US Register of Copyrights, Maria Pallante, who started the process with two carefully and strategically planned interventions, one un early March via a lecture at Columbia Law School on the “The Next Great Copyright Act,” the second a few weeks later at a hearing before the Committee on the Judiciary of the House of Representatives. “The law is showing the strain of its age and requires your attention,” said Pallante to legislators .

She added, “I think it is time for Congress to think about the next great copyright act, which will need to be more forward thinking and flexible than before.” She explained that in the current environment, “authors do not have effective protections, good faith businesses do not have clear roadmaps, courts do not have sufficient direction, and consumers and other private citizens are increasingly frustrated.”

Most of America's copyright legislation stems from the Copyright Act of 1976 (which took most of two decades to be discussed and voted upon!). The law was updated and modernized in 1998 with the Digital Millennium Copyright Act under the Bill Clinton presidency, to take into account the digital developments induced by the rise of the internet. All parties – pro-copyright or copy-left movements – agree that the time has come to adapt US copyright framework to the modern use of content on the internet. But that's probably the only thing on which the parties agree.

“There is always room for improvement,” noted Sandra Aistars, executive director at the Washington-based cross-industry organization Copyright Alliance, at the DMW Music conference in New York in February, before Pallante announced her overhaul. For Casey Rae, Deputy Director of the Washington, DC-based Future of Music Coalition, Pallante did “an admirable job of describing the many varied interests in American copyright, as well as some of the tensions. I especially agree with her assertion that, when it comes to copyright, creators and the public interest aren't odds. Or at least they shouldn't be. Whether or not we end up with 'the next great copyright act,' it is crucial that the needs of creators are taken into close consideration in every debate that impacts their livelihoods.”

Creative Commons reacted, “A strong push for copyright reform is currently occurring around the world through domestic reviews and in international fora like WIPO — coming both from those wanting increased recognition of user rights and those calling for tighter author controls. With the United States one of the leading nations advocating for stronger copyright protection through treaties such as ACTA and the TPP, the international community will be closely observing any movement in U.S. domestic law.”

But the creative industries are wary that the process set in motion by Pallante will open the Pandora's Box of copyright and that advocacy groups and the tech sector – with Google at the forefront – will do their upmost to reduce the scope of copyright. They stand to lose a lot, and not simply in financial terms.

What has changed in DC is the climate toward copyright-related industries. Since DMCA was passed 15 years ago, advocacy groups and activists have stepped into the copyright debate and made their voices heard, as the SOPA and PIPA victories have shown. So any discussion on copyright will take place in a highly polarized environment.

And both Congress and stakeholders will have to deal with a vast array of issues – probably too vast an array. Pallante said that updating the DMCA has become urgent and that Congress should act “comprehensively.” She admitted in her statement that the list of issues she wanted to tackle “is long”: “clarifying the scope of exclusive rights, revising exceptions and limitations for libraries and archives, addressing orphan works, accommodating persons who have print disabilities, providing guidance to educational institutions, exempting incidental copies in appropriate instances, updating enforcement provisions, providing guidance on statutory damages, reviewing the efficacy of the DMCA, assisting with small copyright claims, reforming the music marketplace, updating the framework for cable and satellite transmissions, encouraging new licensing regimes, and improving the systems of copyright registration and recordation.”

For music publishers, one of the touchiest issues will be the requirement that a new registration must be made 20 years before the end of a term, or it falls into public domain. “From our standpoint, it is awful,” said a source affiliated with publishers. “It's the last thing heirs of musical work copyrights need to worry about – many will forget to file.” Publishers will also certainly fight against Pallante's project of “small claims courts” that are meant to solve copyright issues without having to go through costly litigation.

Many issues are highly contentious, such as the DMCA's takedown notices, or the possible legislation on orphan works, and the first sale doctrine applied to digital files, to name but a few. The ReDigi case, for which a court has found in favour of Capitol against the digital service that proposed to acquire “used” digital copies, has opened a debate on the issue of first sale when it comes to digital files. The court decision regarding ReDigi might trigger a lot of lobbying action on Capitol Hill. According to a Washington, DC-based source, “Apple and Amazon have patents or are trying to get patents on a process to sell digital copies of musical works - they will most assuredly be going to the Hill to press for legislation after the ReDigi case.”

For the recorded music side of the equation, it could well be the opportunity for labels and performers to finally benefit from performance rights paid by terrestrial broadcasters, similar to the one paid online by the likes of Pandora. But no doubt the National Association of Broadcasters will fight tooth and nails to prevent that from happening.

So has Pallante set herself too high of a task? She is not really a newcomer in the field: When she was appointed by the Librarian of Congress as the new Register of Copyrights, replacing Marybeth Peters who had served in this position for over 16 years, Pallante was already working at the Copyright Office, last as Associate Register for Policy and International Affairs. She was appointed Register in June 2011 and started making her mark by setting a series of policy priorities. She will have further occasion to outline her plans in a keynote speech she will make at the World Creators Summit in Washington DC on June 4.

Two key players in this Capitol Hill game are the Chairs of the Committee on the Judiciary at the Senate and the House of Representatives, respectively Senator Patrick Leahy (D-Vermont) and Representative Bob Goodlatte (R-Virginia). Goodlatte, who was one of the legislators quizzing Pallante, did not seem to fully warm up to her plans. One source in Washington believes that Pallante may "may have jumped the gun somewhat. She did not really clear it [the agenda] with Congress, and we know there has been some pushback because of that – and it is also why some of the questioning at her hearing was a bit confrontational."

“The reason they don't like the way this was handled on the Hill is that the agenda is too grand,” added the source. “They will have to prioritize some and not others; and it will make them look like they are a little slack on important issues – not a good position to put Congress.”

But for many stakeholders, the process started by Pallante will be a way to deal with fundamental issues, not least those related to creators. “On the music side, which is where I live,” Casey Rae, Deputy Director of the Washington, DC-based Future of Music Coalition said, “there's a lot of issues that could stand to be addressed. Pallante herself remarked that, 'music licensing so complicated and broken that if we get that right, we can get the whole statute right.' There's also a need to examine how copyright currently works for creators in a broader sense. How can we best serve the delicate balance laid out in the Constitution, given rapidly evolving technology and shifting consumer expectation? I'm optimistic that this question can be answered, but it will take sober-mindedness and a willingness to compromise — qualities too often lacking in copyright debates.”

[Typed while listening to Depeche Mode's 'Delta Machine (Venusnote) and Brandt Brauer Frick's 'Miami' (!K7)]

The US music industry works to expand the digital pie

by Emmanuel Legrand

The US music business is enjoying some sort of renaissance. Amid the merger process that has seen the market reaching new levels of concentration, the digital market is growing and the the eco-system is getting each day more complex, driven by technology and consumers' behaviour. 

These trends were in evidence at the recent DMW Music, which took place in New York Feb 20-21. Here's a bullet point version of things seen and heard in New York – a kind of State of the Nation address. (All the quotes in this piece are from executives who spoke at the conference.)

1 – Rejoice, rejoice! The pot is growing!

Digital sales are up n the US, slowly taking over physical, digital revenues at rights society SoundExchange have reached $460 million, brands are getting increasingly involved with artists and digital platforms, and music is reaching consumers in many more forms than before, mostly thanks to the rise and rise of streaming platforms. For lawyer Ken Hertz, a senior Partner at Goldring Hertz & Lichtenstein, 2012 was the year when the music industry stopped being a cottage industry and “finally became part of the convergence process” – which integrates films, music, advertising, games – and is now part of “a much bigger business”. As an example, Hertz said the fragrances backed/created by celebrities such as J-Lo, Lady Gaga, Beyonce, Celine Dion, J-Lo and Katy Perry represent $2bn worth of business for these six artists alone. “We're seeing the next music business as much larger than the one we're lamenting the demise of,” concurred Michael Simon, CEO of HFA, the society providing mechanical licenses. Added David Israelite, president & CEO of the National Music Publishers’ Association: “We've left the 'theft period' where the music industry was focusing on stopping theft of music and now we are into how to monetise music.”

2 – Social media is driving the change

The role and function of social media has also changed, according to Hertz, who quipped that social media “was about a kid telling you that an act was great. Now everybody is into creating content and jumping into the media stream and make money.”

“If I am an artist I want a sincere relationship and as broad as possible with my audience,” added Hertz, who warned that there was “a tyranny about transparency: You cannot lie about anything, this is the nature of connectivity. People don't care about privacy. So the key is to become more transparent. To be more honest, less contrived.”

The new element in the mix has been Twitter. An unknown entity a couple of years ago, the 140-character message platform has not only become a way to connect with fans, but also a tool to discover music. “There has never been a better platform for music engagement than Twitter,” said Jamie Sampson of Schematic Labs.

3 – The next playgrounds? Cars and living rooms...

Be warned: A revolution is coming near you. This time it will affect living rooms and cars. “In the next few months, the living room will be a big focus for us. We see tremendous growth on mobile and extended platforms. We expect to be far more active in the living room through over-the-top boxes, consoles or any other ways,” explained Alex Kisch, SVP business development & business affairs for Vevo, the three-year-old platform co-owned by Universal Music and Sony Music. Vevo's primary business of to deliver music video – now in ten territories – and monetising them. “Mobile tablet is by far the most important platform to focus on.”

Meanwhile, John Quain, The New York Times technology contributor said that the “automotive industry is going through one of its biggest upheaval, and it is happening extremely fast. With a lot of these connected cars come connected services.” There is already some serious players in the field, from satellite platform Sirius/XM to Pandora. And Spotify recently announce an agreement with Ford. But it does not come easy. Jake Sigal, founder & CEO of Livio, it is “a huge undertaking to get music into the car”. There are as many systems as there are services and devices. “The iPhone 5 does not have a video connection, so imagine if a car manufacturer has build all its system around video,” said Sigal.

“It is going to get more difficult and crazier with the multiplication of options,” confirmed George Lynch, VP Automotive BD at Pandora. “There are too many platforms.There is not going to be one standard.” The greatest danger with cars is that the level of entertainment can become a source of distraction for drivers. “We are working really hard with the car companies to minimise driver distraction,” said Lynch, who admitted his fear of seeing people and watching video at the same time. Quite rightly so!

4 – Technology empowers artists

With so many options for entertainment, there are more ways than ever “to reach the fans” according to Marty Diamond, who runs the Paradigm Talent Agency's East Coast Music Division.“The barriers of entry have been eroded,” he explained. But to get fans “engage beyond one song and start spending money” is the real challenge for the industry. “They do not have to leave their couch and my job is to get them to leave their couch,” said Diamond.

The next frontier for artists is to figure out what to do with the cloud. "Innovation happens when creative people bring their insights to technology,” said Paul Campbell, CEO/founder of The Amazing Media Group, who believes that artists using the cloud will eventually find a way to create new usages for the cloud.

5 – Artists are entrepreneurs

It was refreshing and enlightening to hear two young artists-turned-entrepreneurs: J Sider, CEO/founder of Bandpage, and Evan Lowenstein, founder & CEO of Stageit. Sider had the idea of a platform that would connect bands, and after moving to Silicon Valley, raised $19m, and built a service that is now used by half a million musicians. “What I do, I trust my gut. If I feel like I can trust you, I will talk to you about my idea,” said Sider, whose relentless drive got him to meet thousands of people in San Francisco and built a team of aces for his project. “What I did was I said yes to everyone for four months. It sounds crazy but that's how I met my engineer,” he explained.

Lowenstein created Stageit when, being a musician, he was constantly being frustrated by the lack of venues available, and by the way concerts were monetised. “Artist by the very nature are entrepreneurs, we create things and we sell them every evening,” he said. “I have been driven from the start. My drive as an artist has left me being an entrepreneur.”

Lowenstein added that his platform is “very transparent” and that he took pride in having create “entire new revenue stream, and did not cannibalize any other streams”. Very much an artist of the 21^st Century, Lowenstein constantly balances between the two sides of copyright protection. “As an artist, I support record label rights to protect copyright; and I also need to side with my fans,” he explained, while adding that he wanted to be “a bridge between the music industry and Silicon Valley”. He finished by urging all artists to let their entrepreneurial spirit blossom, and not be afraid of entering areas which could be very crowded: “Of course there's a lot of competition, but competition should never stop you from creating your company.”

6 – Artists are brands and brands love artists!

In the 60s, artists would do anything to stay away from big brands, the epitome of the capitalistic world that they were ideologically trying to stay away from. So who would have thought that 30 years down the line, rock, pop, and even hip-hop acts would entertain such a close, almost incestuous relationship with brands. It is now natural to see will.i.am batting for Intel, Justin Timberlake for Bud, while Alicia Keys is a Blackberry ambassador. Matt Ringel, managing partner at New Era Media & Marketing and Red Light Management, was extremely open and honest about the type of relationship that artists and brands could build. “Brands are focused on creating programmes that are authentic with artists, and artists want to work deeply with brands,” he explained. “One of the trends is seeing these relationship getting closer.” Brands, he added, want to interact with artists “on multiple touch points” with a range of integrated marketing activities, involving content, social media, and cooperative development. “There are artists whop are marketing machines, will is, pitbull is,” he said.

But it has to be a good match, not one that consumers can perceived as constructed and fake. “Alicia [Keys] was looking for close technology partnerships,” said Ringel. “She's tech savvy. So the question was of finding the right partner. Blackberry not done much in smart phone market and was coming with the new phones. Alicia fits the bill. It's a real role. She has business cards, she is in contact on daily basis, talking to developers and developing interesting programmes. How does this become authentic is the key issue.”

So what are the risks for both sides? Obviously a credibility factor. A wrong association brand-artist can damage both an artist and a brand. “There is a risk to the artist,” admitted Ringel. “But we have to be realistic in setting the roles. Some categories are easier to control, some are not. Most deals will have very specific restrictions. There has to be an alignment and it has to be good for both or don't do it. If it's the right relationship, no need to look elsewhere.”

7 - Artists are also...er...artists!

When so many people are trying to take artists for a commodity – monetised as well as dependable (hello Simon Cowell) – a few voices at DMW had a fresh and almost old school approach to artistic endeavours. John Rubey, the president of AEG Network Live talked about “respect” for the artist, which also meant that sometimes you had to know when not to ask or force artists to do something.

“My artist’s integrity is what I’m hired to protect,” added Marty Diamond, who runs the Paradigm Talent Agency's East Coast Music Division. He added that his responsibility as an agent is risk management, and find “what bands are comfortable with.”

Diamond explained that he's seen the rise of a new generation of clients who have new skills and who are totally in synch with the digital environment. For him, these artists will navigate through the new eco-system and will be far more self-sufficient.” He added, “The grace for me is that some of these bands get to hone their craft..and that's when you really got something. They learn their craft and move from being a good band to being a great band.”

8 – But is copyright broken?

That was the key question asked more than once during DMW. There even was a panel dedicated to this issue that did not fully meet its promises but kind of circled around the issue. “I don't think it is broken and there is always room for improvement,” noted
Sandra Aistars, executive director at the Copyright Alliance. “We do not agree on what copyright is. Some believe it is a property other a human right,” added Jay Rosenthal, general counsel for the National Music Publishers’ Association. BMI executive director for business development, new media and strategic development Michael Drexler argued that there were “some cracks and some disconnects” and that in these “radical times” maybe it was time “to re-think regulatory restraints” applied to rights management societies like BMI. Colin Rushing, general counsel for performance rights society SoundExchange said that there were “some important parts of the law that need to be changed, but there are also all the aspects of metadata that needed to be fixed.”

Meanwhile, Michael Petricone, SVP of government affairs for the Consumer Electronics Association (CEA)
refered to the US Constitution, in which copyright is tasked to promote progress and the arts. “By that measure things are OK,” he said. But in the same breadth, he said two contradictory things: a) that the CEA wants is “to make sure creators are compensated,” and b) that they want “a healthy eco-system especially for the streaming services”, which is interesting since certain streaming services like Pandora are doing whatever they can to lower the rates set to compensate creators for the use of their works. Which prompted the following reaction from NMPA's Rosenthal, “There are some who think that maybe Pandora has to figure out a business model that will bring in revenues, rather than say that 50% goes in fees. We want Pandora to survive as a good business model.”

9 – Seriously, isn't copyright broken?

Well, if it's not broken, it needs to be fixed (at least in the US). BMI's Drexler noted that rights societies in the US operate in a regulated market that needs to be revisited. He said, “We operate under consent decree. We can't say no if somebody comes to us for license. If we disagree on rate we have to go to court and it can be a very long and expensive system.” This situation has led some major publishers like Sony/ATV, EMI Music Publishing or Universal Music Publishing withdrawing their digital rights from societies like ASCAP and BMI. This “experimentation” leads to increasing fragmentation of rights but seems to be the only way for publishers to enter into negotiations with digital platforms and negotiate better rates than the ones applied to societies.

For NMPA's president and CEO David Israelite, the key issue is not that copyright is broken but rather that “licensing is completely broken”. Why? Because the two sets of copyright – the one on recordings and the other on the compositions – that are regulated differently. Record labels are operating within the realms of a free market, while music publishers have been regulated since 1909. “We are regulated by three judges,” said Israelite. “ASCAP and BMI are under consent decree. This makes licensing scheme impossible for platforms.”

He also offered a solution: “DiMA [the trade body representing digital platforms] and NMPA have largely agreed on what to do. We have a solution. In performance, there are three PROs. ASCAP and BMI control a large part of the market. What if you had four [PROs] and each with a 25% of market share, then maybe the government would leave them alone. And for platforms, it is not too difficult to go to four people. If a PRO can't say no, then that is a broken system for the songwriter.”

Another imbalance noted by Israelite concerns the split of royalties between the two sets of rights. “We need to address the re-balancing of the value of the two copyrights,” he said. He pointed out that if Pandora paid 54% of its revenues to music rights holders, that 54% is divided 96% for labels and 4% for publishing. “The only way to fix the copyright issue is rebalancing of the two copyrights,” concluded Israelite.

10 – Leave an impression...

The award for best off-the-cuff reply went to litigation lawyer Barry Slotnick, partner at Loeb & Loeb, who bluntly replied “I certainly hope not” to moderator Ted Cohen's question “Are we reaching a consensus [in the industry]?”... He also added, “We apply market correction: We identify people who are not doing things properly and we take action.” Ah, lawyers!

The award for funniest quote went to aforementioned Cohen of TAG Strategic, who introduced a discussion on copyright by stating, “It's the bar mitzvah of broken copyright, time for copyright to be a man.”

The award for the most unexpected quote went to George Lynch, VP Automotive BD at Pandora, who said, “Voice recognition still has a long way to go. It is hard to say 'Chaka Khan' in the car and get the voice recognition to actually play 'Chaka Khan'.”

The award for stating the obvious but it was good to hear it anyway went to Andrew Kippen, VP marketing at Boxee, who said, “There's a mentality in the tech world that you get the audience first and then you think of ways you can make money.”

The award for best quote of the conference went to Ken Hertz, of Goldring Hertz & Lichtenstein, who said, “Like my dad would say, 'If you try to make an impression that's the impression that you make'.” One to meditate...

[Typed while listening to Nick Cave And The Bad Seeds' 'Push the Sky Away' (Bad Seeds) and Veronica Falls' 'Waiting For Something To Happen']

Kobalt wins big in building 'transparent' rights management service

(This story was originally published in One Movement for Music Issue 5)

by Emmanuel Legrand

When flat is the new growth, like it's been for many music companies for a while, those who can swim against the tide are a rare breed. For ten years now, London-based Kobalt has been bucking the trend, posting growth year on year. And 2012 has been a stellar year for Kobalt Music Group, according to founder and CEO Willard Ahdritz.

Speaking in Cannes during Midem, where he was a keynote speaker at the International Music Publishing Summit, Ahdritz boasted that for the first time in the 10-year history of the company, revenues exceeded $200 million for 12 months rolling. Kobalt's primary business is to administer music publishing catalogues on a global basis, but in recent years it has ventured into new areas such as management of neighboring rights – performance rights attached to performers or recordings – and label services.

Kobalt's Willard Ahdritz

“Publishing is profitable,” says Ahdritz, whose company has agreements with about 200 different publishers. “And we are now collecting neighboring rights in 26 territories,” explains Ahdritz, whose recent clients in this field include Bob Dylan, Dr. Luke, Gotye, Max Martin, Paul Simon, Ryan Tedder and Shellback, among others.

Kobalt now employs 180 people around the world and Ahdritz forecasts major growth in 2013, with the development of Kobalt Label Services, which handles digital and physical releases for independent artists. The  label services unit was launched in 2012 under the supervision of Paul Hitchman. “Paul started Playlouder when I started Kobalt. We met again at Midem 2011 and said that now was the time to work together,” says Ahdritz.

KLS recently inked a deal with Nick Cave and his company Bad Seed Ltd for the new album of  Nick Cave & The Bad Seeds 'Push The Sky Away', out on Feb 15. “I am pleased that such a great artist and a world leading management company [Brian Message of ATC] have chosen Kobalt,” says Ahdritz, who looks genuinely pleased and not sounding like he's telling some corporate lingo. 

While the new divisions are on a growing path, Kobalt continues to sign publishing deals, as exemplified by the recent signings of ex-Nirvana drummer and Foo Fighter frontman/guitarist Dave Grohl and Paul McCartney's MPL for a representation deal with Kobalt for the world excluding the US and the UK. 

“This is a great time for companies like Kobalt or mine,” says a New York-based publisher. “With all the consolidation taking place in the business, we now see artists coming to us that we could only dream of a few years ago.” 

Ahdritz accepts that he is now on the receiving end of all the top names who were previously signed with majors (publishers or labels) and who are looking for alternatives, but he adds that if Kobalt did not deliver on its promises, it would not work. “The business is becoming extremely complex: We are dealing with billions of transactions and you need to have the right systems in place,” explains Ahdritz.

And that's where Kobalt has a winning proposition. The secret to the company's success, says Ahdritz, lies in its rights management system and in its capacity to integrate digital management from the outset. For example, Kobalt can accurately match the use of music on user-generated content with the rights holders repertoire, and proceed to quick and accurate payments. “Clients must be able to access their money as soon as one month after the usage of their works,” says Ahdritz. To that effect, Kobalt has become a keen buyer of data from all sources about the usage of music. That way Kobalt can forecast revenues and pay clients before PROs make the payments.

A word that props extensively in Ahdritz's vocabulary is transparency. “The internet drives transparency. It is not acceptable that you do not provide full transparency when you are using other people's money,” says the Swedish executive. This is the reason why, he explains, he has built all the back office functions.

Transparency is also mentioned in the same sentence as the agreement announced at Midem with Swedish authors' society STIM. The two organizations will launch March 1 Kobalt STIM Aggregated Rights AB, a one-stop shop to license the rights to Kobalt catalogues in Europe to digital music services. 

“We are still investing,” says Ahdritz. “We are well funded and we have more capital than we need.” However,  Ahdritz admits that the company works on low margins, which has an impact on its operational profitability. In the same breadth, he adds, “We take a decent charge for the value that we bring to the table. We are a service company for rights owners. And we are here to maximize the copyrights of our clients, and that's why I am a very strong advocate of IP laws.”

[Typed while listening to The History of Apple Pie's 'Out Of View' (Marshall Teller Record) and Local Natives' 'Hummingbird' (French Kiss)]

The 'palace of data' is taking shape -- An update on the GRD

by Emmanuel Legrand

Is the GRD starting to get sexy? If judged by the attendance at the January 29 Midem session aimed at informing the music community about the latest developments regarding this project, the answer is yes. The Global Repertoire Database is the holy grail that will allow the music industry to jump into the digital world with the tool that will help – at least in theory – to identify all the musical works ever composed or written.

Yet, this initiative – probably the biggest and most complex joint project ever undertaken by the music industry – has remained so far a virtuality. Started four years ago, the project was first discussed and then discussed even more with the various stakeholders, namely authors' societies, music publishers, creators and digital services, with the support of Deloitte as the operator. It involved hundreds of people and dozens of companies and societies. And it was discussed so much that some in the industry started to doubt that it would ever see the light.

The message at Midem to the naysayers was: The GRD is alive and well, and significant progress has been made. To steer the project, a GRD Working Group was set up with a limited number of stakeholders to devise a strategy and a plan. It launched a Requirements and Design phase of work in October 2012 which is due to conclude in May 2013. The R&D phase will be followed by a phase of implementation of the database.

The session's moderator Stephen Navin, chief executive of the British Music Publishers Association, described the project in more than lyrical terms: The GRD is bound to become “the palace of data” and “ a new Jerusalem of data that will drive us forward”. History will say if it has also the potential to become a 'Gilded Palace of Sin' or not...

The task, said Navin, is one of massive complexity because it consists in combining the diversity of the data from collecting societies and other rights owners into one single set of data. Navin proceeded to ask very specific questions to panelists. I kept the same format, and left the verbatim answers from the speakers.

What's the point of having a GRD?

“It will be much more than just a database. It is going to be the single point of contact for publishers for agreements, a sort of holy grail for publishers. What's really going to be useful is that there will be a single acknowledgement feedback. Once registrations are in, there's going to be a single operating area that will reconcile the data, one centre from where multiple sources will be pulled together. The fact that it takes place in a single place will help us deal with conflicts. They will be spotted on the way in and the suppliers of data will solve the conflicts instead of having 50 or 60 sub-publishers having to deal with the conflict.”

Michael Battiston, Vice President, International Business Development, ASCAP

How much will it cost and who will pay for the GRD?

“During the process we asked the big questions about cost, funding and governance. How much, who pays and how is it run? We came with the figure of €30m euros, but it will probably be a refined figured. It will be funded by creators and rights owners through collecting societies.”

Jackie Alway, Director of Legal & Business Affairs International, Universal Music Publishing

Who will govern the GRD?

“In terms of governance, we recommended it to be a membership society with separate entities: A general assembly, a board of directors and a management board. There will be equal representation between creators, societies and rights owners.”

Jackie Alway, Director of Legal & Business Affairs International, Universal Music Publishing

What repertoire will the GRD incorporate and how?

“The world repertoire of music has to be there. Throughout the previous phase we thought of a big bang approach but decided that it was no the best approach so we went for a soft approach. We will start with the Anglo-American repertoire plus some continental repertoire. The sources of repertoire are STIM (Sweden), PRS for Music (UK), GEMA (Germany), APRA (Australia) and SACEM (France)."

Thimo Prziklang, Director of Corporate Development, GEMA

Who are going to be the users of the GRD?

“The key users are the core music industry: publishers, collection societies and the various licensing bodies and users [of music], but also record labels, ad agencies and print publishers who need licenses to use lyrics and notation. There will be different ways of using it.”

Pekka Sipilä, Executive Director, Finnish Music Publishers Association

What services will the GRD provide?

“Once data is in the GRD it will not do any good is stays there, so the idea is to get the data back out. The GRD is going to make possible for music users to have easy access to data. For example, if a producer is looking for synch rights, it will be there and it will be possible to do the search. Someone who is interested in using music will have far less trouble in identifying works.”

Michael Battiston, Vice President, International Business Development, ASCAP

What will be the benefits of the GRD?

“The digital age is global and for the first time we will have a tool that is global. For publishers, this is an opportunity to do it once and do it right. This will become the single point of registration for publishers, and rather than register in 200 societies, we will do it once for all. It will benefit all publishers, large and small. Their data will be distributed around the world and it will prevent the duplication of databases.”

Jackie Alway, Director of Legal & Business Affairs International, Universal Music Publishing

“There is real value in the fact that you have a shared copyright operation. The same kind of work was made within multiple societies so if we can have economies of scale through reconciliation of data, there is potential for major savings. But it is also a no brainer that if we have a clean, reconciled set of data that everyone can agree on, it will make all our lives easier.”

Michael Battiston, Vice President, International Business Development, ASCAP

“There is no database in place that people can refer to when it comes to licensing for digital services. Each and every licensors will have access to data rather than having to create their own repository of works. And there will also be just one place to identify conflicts before getting to market.”

Thimo Prziklang, Director of Corporate Development, GEMA

“From a licensee perspective, when we do licensing we have no idea what we are licensing. Now, we can actually see it. Getting rid of conflicts will be huge, since we spend to much time on small conflicts. And will be able to make the money flow much faster to our content partners who can also turn it around faster to authors, composers and publishers.”

Sami Valkonen Sami, Head of International Music Licensing, Google Play

What are the benefits for creators?

“Data access is high on our agenda. The GRD is the tool to make that part of the system transparent. We are determined to make life easier for rights owners and users.The GRD will be a tool for inventions not yet invented and music not yet composed. The GRD will be a facilitator for future inventions and for business models to be invented. It will also legitimate authors rights and copyright. It is extremely important.”

Alfons Karabuda, Executive Chairman, ECSA

What are the next steps?

“The R&D phase ends in May [2013], then we will move into building phase, and that will be a massive task. Before we go live, there could be a 13-month period but the complexity of data injection is something we have all dealt with. And we want to get it right so if it means that we need to push it back for a while, we will do it. It will be a very carefully managed process.”

Jackie Alway, Director of Legal & Business Affairs International, Universal Music Publishing

“We need to build it and fill it. It is all extremely complex but the progress is incredible. We are now past the point of no return. We've made huge progress: Last year the GRD was just a power point. We knew we needed to build the warehouse, and now there are now real people involved. But how long did it take us? Four years! Could it have been faster? Yes. But the fact that we resolved all the issues is fantastic and, as an industry, we should be proud of it. This can't fail any more. That is why important to have everybody on board. Let's get in done and deliver and if we do not deliver something in 2014, we fail.”

Sami Valkonen Sami, Head of International Music Licensing, Google Play

[Typed while listening to The Flying Burrito Brothers's 'The Gilded Palace of Sin' (A&M) and Local Natives's 'Hummingbird' (Frenchkiss Records)]

Licensing and Data Issues Dominate Music Publishers' Agenda in 2013

by Emmanuel Legrand

[This story was originally published in issue 4 of One Movement for Music]

Ask any music publishers who are on their way to Cannes for Midem what are the key issues this year and almost all of them are likely to answer “licensing,” “monetization” and “data.” This is not to say that they do not take to heart the role of finding, nurturing and developing talent, but music publishing today has become the art of milking the multiple streams of revenues offered by the new digital eco-system.

“We used to chase mechanical royalties from labels and public performances,” explains David Renzer, President of Music Ventures at Saban Capital Group, “but all this has changed. With digital sources of revenues, the business has fractured and has continued to get more complicated. We are now chasing micro-transactions. This means we have to put a lot of efforts into our systems in order to effectively collect and administer all the streams of revenue. And then we have to figure how to capture all the income streams and make sure that we license every opportunity that comes to us.”

For Jay Rosenthal, Senior VP & General Counsel for the National Music Publishers' Association in the USA, the development of all these new digital services has made it necessary for rights holders “to create easier licensing models for an industry that will focus more and more on bulk licensing of rights to users such as Internet services.” Renzer agrees that simplifying the licensing process is paramount to ensure that no opportunity is wasted. This means that there “will be pressure on collective management organizations in Europe and in the US to provide greater efficiencies and better collections too.”

Renzer – who used to run Universal Music Publishing Group – accepts that these new tasks can take the publishers away from the A&R role but he argues that it would be in nobody's interest to have the best roster of talent if there wasn't a strong admin structure behind it. “It is difficult for songwriters and composers to effectively administer dozens of sources of income. That's our role: Provide effective administration,” says Renzer.

Vital Song's Francois Millet

Every publisher is faced with the same challenge, regardless of size, says François Millet, founder and principal at Paris-based independent music publishing house vital song. “The more we move into the 'dematerialization' of content, the more crucial the management of the original music works will become,” he explains. “And publishers are the custodians of these works.” He adds that publishers are also those who can ensure that the various streams of revenue are checked and accounted for on behalf of songwriters and composers. To manage this increasingly complex matrix of data, Millet says that the development of sound metadata is paramount in order to be able to track the use of music works, collect royalties efficiently and then make sure that the appropriate rights holders are remunerated.

Data was certainly not high on the agenda of the industry, and the concept started popping up in conversation with publishers just a few years ago. Music publishers are involved in a key project, the Global Repertoire Database, or GRD, which will be the focus of a full session at Midem. To steer the project, a GRD Working Group was set up a couple of years ago, with the inclusion of music publishers, authors' societies, technology companies and Deloitte as the operator of the project. After many discussions about the scope of the project, governance and access, the GRD WG launched a “Requirements and Design Phase” of work in October 2012 which is due to conclude in May 2013 and pave the way for concrete developments.

“The summer of 2012 was spent ensuring that all parties were comfortable with the way forward,” explains Mark Isherwood, Chair of the GRD Working Group, “and that all the necessary resources for this phase of work were prepared and ready to engage in this phase of the project. This phase involves nearly 30 companies worldwide represented by nearly 100 individuals. The key outcomes of the R&D Phase will be the set up of a legal GRD entity, the completion of the business plan and the logical technology architecture for the system. The GRD entity will then take the project forward through technology build, data migration and launch.”

For the non-initiated, this must sound like a message from planet Mars, and that's probably what it is! Though many in this industry were pushing for this database to be created, few anticipated the complexity of the task, not least because of the multiplicity of stakeholders and perspectives. Yet no one under-estimated the crucial importance of this project. “Never has the need for improvement in worldwide data been more important,” says NMPA's Rosenthal. “The industry is involved through the GRD and WIPO is also involved [in the IMR project]. The resulting system will impact – at least theoretically – every music publisher on the planet. Publishers must understand and be able – and willing – to work with the new multi-lateral systems.”

[I will make a presentation on music publishing as part of the Midem Academy program on January 26 in Cannes at 2.30pm.]

Nibs from Groningen: Google, Martin Mills, C2C

By Emmanuel Legrand

> One of the most attended sessions at Eurosonic/Noordeslag was 'Google's view on music and the creative industry', and it was also the most frustrating (at least for this writer!). Google was facing the industry. So kudos to Simon Morrison, who works in London as part of the internet service's public affairs team (in other words, a lobbyist), for accepting to walk into the snake pit. But it was a walk in the park for him. First he gratified us with a nice fairy tale: Google is great for the creative community, copyright is important is for Google and Google can help 'you' maximise the value of your copyrights. Fair enough, since he was given time, at least he could place a few Google adverts. 

But what was then less pleasant was the inability from the panel – with included Billy Bragg manager Peter Jenner, Spotify's Will Page, Jeff Price and Buma-Stemra's head of public affairs Robbert Baruch – to come up (with a few exceptions) with questions that would destabilise the man from Google. Jenner started by asking why couldn't he get any clarity in the structure of the deal deal between Google and PRS for Music and why were there non-disclosure agreement (NDAs for the cognoscenti), and got a soft answer. 

Then Jenner and Price started bickering about the role of government in setting rates, and it went wrong from there (aside from Baruch who quite rightly pointed out that Google's lobbying aims are far from transparent – “we are quite transparent" was the answer) and Morrison was looking at it this circus with some sort of bemusement, and was probably very relieved to see that the focus had shifted. So the moral of all this: If the industry intends to take on Google, it'd better clean up its act beforehand and speak with at least some sort of united front...

> Beggars Group founder Martin Mills came across as clever, witty, unfussed, intellectually sharp and quite modest during the one-hour keynote Q&A at Groningen with yours truly. It was very pleasant and informative and it seems that the audience was listening. He was so weary and stressed before starting the interview that he asked for a glass of schnapps or “anything strong”. I guess the vodka got him going... My favourite quote from him (tweeted by Mark Mulligan): “[Former Warner Music chief executive] Lyor Cohen said '360 deals are our new religion' and I said 'Well, I'm an atheist then'.”

C2C at the Border Breakers Awards
(Photo: René Keijzer)

> C2C were the clear revelation of this year's European Border Breaker Awards. The gang of 4 French DJs proved that you can have dance music that can be both fresh and intelligent, whilst being also entertaining. Other winners/performers include Amor Electro from Portugal, French Films from Finland, Juan Zelada from Spain, Ewert and the Two Dragons from Estonia, Nahiba from Denmark and Dope DOD from the Netherlands, introduced by none other than the Dutch Minister of Culture, which in itself was quite a treat (how about hearing the word 'dope' from a politician...). Overall a good show for the tenths anniversary of the awards, hosted by a Jools Holland in good form. 

[Disclosure: As one of the founders of these awards, I am still in charge of the pre-selection of artists. To qualify, they must have released a debut album which has had some airplay and sales traction outside of the artist's country of origin (tracked through Nielsen data), plus having played live in several countries outside of theirs (especially through the ETEP programme). In addition, programmers from EBU stations chip in with some editorial suggestions. The EBBAs are supported by the European Commission.]

> After resisting for over a year, I have finally opened a Twitter account... You can now follow my words of wisdom @legrandnetwork

[Typed while listening to The Byrds's 'Younger Than Yesterday']