FutureSound Panel Explores Why Digital Licensing Is 'Still Painful,' But Getting Less So
FutureSound Panel Explores Why Digital Licensing Is 'Still Painful,' But Getting Less So

futuresound (L-R): Jon Vanhala, SVP Digital & New Business, Island Def Jam & Universal Republic, Universal Music Group; Richard Conlon, SVP Corporate Strategy, Communications & New Media, BMI; John Frankenheimer, Partner & Chairman Emeritus, Loeb & Loeb LLP; Bertrand Bodson, EVP, Global Digital EMI; Brad Prendergast, SoundExchange; Matt DeFillippis, VP New Media & Technology, ASCAP in panel on "Innovation and Licensing". (Photo: Arnold Turner)

The road to market has been littered with casualties, but the bodies are becoming fewer and further between as rights holders and technologists slowly close the cultural gap.

That was the conclusion from a panel of senior music executives who discussed the effect of music licensing on digital innovation at Billboard's FutureSound conference in San Francisco Friday.

"Clearly, there has been progress," said John Frankenheimer, partner of Loeb & Loeb, who represents both artists, rights holders and technology companies. But "it continues to be a painful process."

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The good news? Initiatives such as OpenEMI has allowed startups to explore EMI's music catalog to begin prototyping and building proofs of concept without having to pay upfront fees or draw up cumbersome contracts. The OpenEMI program gives entrepreneurs a risk-free "sandbox" with tens of thousands of EMI songs, including songs from the Blue Note catalog.

With EMI's integration into Universal Music Group, the group is looking to eventually broaden the OpenEMI catalog to include tracks from Universal, as well as other labels to create "OpenMusic," said Bertrand Bodson, EMI's executive vice president of digital.

"There are a lot of reasons to say no" when startups ask labels and publishers for licenses, Bodson said. "Our approach is that we should start by saying yes."

The bad news, however, is that acrimony continues to be part of the negotiating landscape for music licensing. Pandora's efforts to adjust its royalty rates through legislation, for example, has been met with vitriol from various interest groups.

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"The danger is that when these disputes come up, it puts a wedge between creators and innovators," said Matt DeFillippis, vice president of new media for ASCAP, a rights organization that is opposing Pandora's effort to lower its royalties. "They need to work together to create a rising tide rather than fight over the" royalty splits.

At the end of the day, however, economics continues to drive the licensing discussions. For startups that want to strike a deal with rights holders, that means coming up with "believable business models," said Jon Vanhala, senior vice president of digital at Island Def Jam and Universal Republic.

"If you can drive that and construct 'believable models,' we can actually do deals where we can get paid on the back end, which is very different from where it was," Vanhala said. "But it has to be believable."

Labels and publishers, for their part, have to work harder to be "more flexible," Vanhala said. "Now we just have to be way more progressive and flexible. We have to mutually drive value for this to work."

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