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The seaside town of Hamburg is playing host to the Reeperbahn Festival, a conference with a spirit and conception to Austin's South By Southwest, bringing bands like Vienna's emerging production duo Mieux and the neon-and-unitard psych-pop of Fever the Ghost alongside some of the global music industry's brightest and most powerful minds.

At a Friday morning discussion in the Schmidt Theater, a black-and-red burlesque venue out of character for the morning audience, the verbose and fast-talking Paul Pacifico (CEO, Featured Artists Coalition), Alison Wenham (chairman and CEO of Association of Independent Music), Mark Williamson (head of artist services, Spotify) and Desiree Vach (founder, Snowhite) tried to parse the problem around artists rights, money and equality in the digital age.

Addressing a pervasive intuition felt by many, Pacifico pointed out that "the industry feels about halfway through the transition from the old to the new world" and lamented that the current back-and-forth between majors, independents, streaming services and artists is ill-served by the "constant attempts to apply old world models to the digital world."

Transparency around digital distribution was a central talking point, referenced by Williamson, whose employer has served as a punching bag for artists complaining of low royalty payments received from streaming services. (That attention was somewhat alleviated by the leak of a 2011 contract between Spotify and Sony Music, which redirected much of the attention to the major labels for the requirements placed on streaming services. Many majors issued statements in the wake of the leak saying they would, or have been, paying the breakage that arises from the massive royalty advances that often exceed the royalties accrued.) "In ten years time," Williamson said, "we'll get to a position where we can say 'told you so' -- but when we do get there, it's crucial that the old economics aren't present."

Those "old economics" Wenham referenced include major label contracts that deduct royalties for delivery fees, a holdover (like the term 'breakage' itself) from the physical era of music whose sun is still setting. But these relics of a previous era may recede as independents, whether individual artists using label services companies or labels like Beggars Group, take center stage. While majors are often said to be seeing the lion's benefit from streaming, Wenham made clear that independent labels and artists aren't simply standing on the sidelines. "What we're seeing from our market data is that the indies are doing extremely well, they're over-indexing massively on the premium services" -- the most lucrative source of revenue in streaming -- "where you've got music lovers who pay for subscriptions, indies are over over-indexing massively."

Music Streaming Now Generates Trillions Of Plays... 
But Are Royalties Keeping Up?

The trickle down of equity in streaming services like Spotify or the soon-to-be-public is one way the growth of the digital pie may be shared with stakeholders big and small. Though their percentages are diminutive in comparison to the majors', the fact that one panelist owned equity in Spotify and wasn't even aware of it speaks volumes to the complexity of this business, as well as the changing tide. If streaming is embraced, and organizations like Merlin successfully negotiate for their own piece of ownership, the more intimate contracts between indies and artists could begin to yield a true trickle down of a nascent industry's success. "To have equity be a part of the remuneration makes a huge amount of sense," Pacifico said. "It makes sense that the labels would participate in Spotify's success -- what's missing is to share the benefits of that equity with the creators on whose work that stake was taken."

On the other side is safe harbor-based business like YouTube and SoundCloud. "[SoundCloud] is a bit of a cat amongst some pigeons," Wenham said, when asked of British rights organization PRS for Music's recent filing of a suit against the user-upload streaming service. "The artist community loves SoundCloud, and it's built an amazing platform, with 170 million users. [But] there are some fairly hairy little terms and conditions tucked away in the back... SoundCloud now needs to evolve." 

Part of that evolution needs to include the intrinsic artistic value of collaborative platforms like SoundCloud, beloved by producers and DJs, whose (re)mixes, mashups and re-grinds present an intractable problem for remuneration. That question was addressed directly in a discussion on derivative works the day previous, led by Tommy Boy founder Tom Silverman. "In dance music, probably 20 percent or more of all dance music ever contains samples," noted Ronny Krieger, a consultant for Digitally Imported and director of content for Native Instruments. "Ninety-nine percent of that is un-cleared" for licensed use on platforms like SoundCloud. These uses are happening everywhere -- the whole approach of trying to reject it is not going to solve it."

The panel instead directed its attention to identifying in-mix samples, a technological hurdle that is, apparently, near a solution. Krieger explained his first attempt at putting Geo Track ID, the stem-analysis startup of fellow panelist John Atherton, through its paces. 

"In a dance music context, [sampled] music is being played at different tempos, different keys, and for the most part the existing [sample identifying] algorithms fail. But we came across GTI... I selected two types of DJ mixes -- one simple, one complex -- and two versions of each mix, with extensive effect use, because that is often where the algorithms fail, and GTI identified all of it. There was zero failure. I think it was a major relief for GTI as well [laughs]."

A technology able to cleanly and reliably identify the innards of derivative works and sample-based music could give platforms like SoundCloud, whose talks with Sony Music ended with the major pulling its music off of the platform, could have a silver bullet negotiating tool. That the company could tell its label partners it can identify and pay -- pay what is an entirely separate headache -- for the derivative works on its platform could be an important step towards a future where the creativity (and reach) of an artist is only limited to their ideas.

"What if they create a new work, in which the new creator and the old creator each own a part of it?" asked Silverman. "Your original song just had thousands of babies."