Tag Archives: intellectual property

The Future of the Music Industry

Part 1 — The less than golden age

The 1990s were a heyday for the music industry. The major music labels were enjoying record profits, mostly from CD sales. 1999 was the pinnacle for the industry [1]. The graph in Figure 1 shows how steep the loses were after 1999, when digital music downloads (mostly illegal) started to encroach on their profits — and their way of doing business.

music-industry profits graph

Figure 1. US Recorded Music Revenue, 1973-2009. Recording Industry Association of America (2011).

Seen as greedy and bloated, major label bigwigs have been depicted as evil overlords. In his article for Wired Magazine, Tong Long says, “If there’s an industry where the Marxist exhortation for the workers to control the means of production makes sense, this is it.”[2] Indeed, many artists consider making a deal with the major record labels a deal with the devil.1 This attitude has long been a part of the relationship between artists and business people. We are now witnessing the major labels modifying their approach to new technologies in order to maintain control over their product. What is actually happening is the opposite of what many believe the Internet would accomplish. Instead of technology democratizing the music market it has increased the disparity.[3] What really happened can be explained in the volume of music that has been available for digital download. In 1982, with the introduction of the CD catalog, sales began to rise. Prior to 1991 there were between 7,000 and 8,000 new releases a year. With the advent of digital recordings in 1991 new releases of music have occurred every year. In 2006 there were over 75,000 new releases. With so much new music available, the consumer is inundated and confusion reigns.[4]


Unashamedly, Napster2, known as a peer-to-peer (P2P) site, allowed users of their site to download anything that was uploaded to their site. Napster quickly became the most popular place to download copyrighted music. This action put them directly in the sights of the Recording Industry Artists of America (RIAA), the legal arm of the recording industry that represented the major labels.

Caught unprepared to handle the degree of illegal digital downloads, the industry resorted to using extreme legal measures. The RIAA went after anyone and everyone suspected of illegally downloading music. Often called a “witch hunt” the results were mixed but the public relations was a disaster.[5] Tactics changed when court rulings began to go against the RIAA for their practices.[6]

Regardless, Napster was destroyed.

Apple Inc. and iTunes™

In 2000 Apple purchased a little known software program from Casady & Greene called SoundJam. Apple took SoundJam and turned it into iTunes. In 2001 iTunes was created.[7] Later that year the first iPod™ was introduced and soon became the icon of digital music players. It wasn’t until 2003 that the iTunes Music Store was launched, selling songs for 99 cents each.[8] The music industry agreed to Apple’s terms on pricing and distribution of profits. Their concern with loss of revenue overshadowed their understanding of the digital environment. They saw this as a way to stop the bleeding of their profits. In the chart on above it’s evident that the advent of digital sales did not restore profitability. Digital sales became another source of income for the labels, but not their savior.[9]

Reeling from the hemorrhaging of profits, and licking their wounds after negotiating with Apple, the industry leaders regrouped to solidify their position as gatekeepers. As other companies started to sell digital music downloads (Amazon.com soon followed), the industry was unresponsive. Although many believed the Internet, and digital downloading specifically, would be the end of the major music label, this was mostly a myth. Digital downloads did encroach on the profits for the majors but their survival was never seriously in doubt.[10] For several years now, many articles have appeared in academic and trade circles that discuss how the Internet will open music creation and distribution, heralding a utopia for artists. In his paper, Gustavo Azenha (2006) was correct when he states that, “new technologies ultimately tend to reinforce existing social hierarchies and relations.”[11]

The same model used to promote music before the Internet exists today. In an effort to strengthen their position as gatekeepers the majors are clamping down on copyright infringers everywhere; especially on sites such as YouTube. However, this has not stopped piracy or other unauthorized uses. In fact, visiting YouTube is an example of just what they are up against. YouTube’s Terms of Use [12] spells out what can be posted on their site and how the Digital Millennium Copyright Act (DMCA) is used to protect themselves.[13] But there are loopholes. Much of the fan-created music videos on YouTube use copyrighted music. As long as the creator does not use this video for anything commercial, and keeps the video on YouTube only, the music video will likely stay on YouTube. Again, there are exceptions that are discussed in Part 2.

Part 2 — Music and Copyrights


Who owns what?

Music copyrighting is a complicated maze of content creators; those that write the music, song publishers, recording, and distribution. In his book, The Plain and Simple Guide to Music Publishing, Randall Wixen says, “Under United States copyright law, a musical work is protected by law and inures to the benefit of the authors once it has been ‘fixed in a tangible medium from which it may be reproduced.’ This means once a writer records the work into a media from which it can be reproduced in his or her absence, it is copyrighted.”[14]

This all seems simple enough and especially easy for an artist wanting to copyright their work. However, there are other types of royalties that must be considered when trying to acquire the permission to use someone’s music. First, mechanical royalties: This is a fee payable for the use of a performing arts (PA) copyright; a copyright for the underlying composition. Then there is the sound recording (SR) copyright. If you’re trying to get the rights for a particular recording — such as the single from an album — you will need the SR copyright. In the United States, performing arts copyrights are fixed at a statutory rate, whereas sound recording copyrights are negotiated between the artists and the record label.[15] In addition, there are performance royalties whenever a song is performed live on TV, and radio, as well as restaurants, nightclubs, bars, and other venues that can be considered remotely public.

The type of licensing required for using copyrighted music in a film or video is the synchronization right. It is necessary to acquire two sets of rights to put into a film or video. First, clear publishing rights from the publisher — the PA copyright. Next, the master recording, or SR copyright (that song from the album) will be needed to complete your project. Synchronization rights are not something you can acquire by filling out a form (at least, not yet). Many artists are very particular about the types of images that are displayed along with the music and lyrics from their songs. It’s common for an artist to not want to be associated with pornography, politics, or products.[16]

Why Music Videos?

Why is the acquisition of synchronization rights singularly important when producing music videos? There is a simple one-word answer: YouTube. As of this writing, “YouTube is the music video champion holding a 38.4% share of total views across all partner channels and search related content.”[17] YouTube is planning its own music streaming service, rumored to become active in 2014.[18] Although it is not certain what types of videos will be streamed — amateur (fan-produced) or professionally produced — the service may likely evolve to include all types of production. Considering the sheer volume of amateur music videos this seems like a possibility.

Listening habits by age and gender

Listening habits by age and gender

With the birth of the popular music video on MTV in 1981, the music industry has never been the same.[20] Music videos were produced as a way to promote an artist — they were commercials. Videos became elaborate and expensive. A successful music video could make or break any new artist. The power MTV exerted over the selection of successful artists began to irritate many in the music industry.[20] They were criticized for the homogenization of music and many artists began to shun the station.[21] Eventually, MTV, seeing the music video declining as a source of influence, began to change their programming. Musicians no longer needed a successful video. The major labels were more particular about how and where to spend money on videos as the Internet became the new venue for up-and-coming artists to promote their music inexpensively.

In April 2005, YouTube became a reality when the first video was uploaded. In October 2006 Google purchased YouTube. At the same time, YouTube, “presented agreements with media companies in an attempt to escape the threat of copyright-infringements lawsuits.”[22] In 2010, YouTube was the third most visited site behind Google and Facebook and the dominant provider of online video.[23] Today, it is where people in the music purchasing demographic of 14-45 year olds listen to, and watch, music.

Everyone wants to be a star

YouTube has become many things to many people. But there is one thing it is above all else; a place to show off. This is where people come to say, “Look at me!” Done in myriad fashions, one way is to use it as a place to exhibit a video portfolio. The influence of Hollywood, and the desire to have a career producing film and video, has added to the lure of this profession.[24] A certain type of music video — the amateur fan video — has become a path to a career in media production.

Part 3 — The Music Industry and the Internet

The Music industry evolves

One label that has had their share of conflict with YouTube is Warner Music Group (WMG). Pulling their music from YouTube in 2008, because of conflicts over royalties, they renegotiated with Google to move their videos back on YouTube. However, this has not stopped them from using a wide net to stop any and all music videos of contracted artists from being uploaded. All fan videos that use WMG artists have their audio track silenced. Even the artist Neil Young has complained about their tactics.[25]

In 2013, WMG continued their attack on YouTube by targeting Fullscreen for using music videos without paying licenses or paying royalties. “Fullscreen is a multichannel network that operates and aggregates thousands of YouTube channels, with content that is comprised mainly of cover song videos, according to the complaint.”[26] What Fullscreen did was cross the line between fan videos and commercial use. According to YouTube’s Terms of Service, paragraph 4e, the following is applicable: Prohibited commercial uses do not include: uploading an original video to YouTube, or maintaining an original channel on YouTube, to promote your business or artistic enterprise: showing YouTube videos through the Embeddable Player on an ad-enabled blog or website, subject to the advertising restrictions set forth above in Section 4.D; or: any use that YouTube expressly authorizes in writing.[27]

Practices such as this by the industry reflect a reactive approach while not recognizing changes the way people now listen to music.

Speaking to Jesse Locke of AMZ Productions in Bend, Oregon, a video producer with firsthand experience dealing with YouTube, WMG and royalties; he calls the major labels, “a closed club. More like a fraternity with lots of barriers.”

As with many other independent producers looking for a career in video and film production, Locke started making fan videos. When he did one for a song owned by WMG it was automatically removed from public viewing on YouTube. Later he did another song by the Black Keys — the song Next Girl on Nonesuch Records. He was contacted by the label with a cease and desist notice. However, there was a provision that would allow him to continue keeping the video on YouTube: He would have to pay $500, $250 for the publishing rights and $250 for the synchronization rights. Under these circumstances, the video could only be posted on the Black Keys YouTube channel.3 An important concept to understand when acquiring synchronization rights is called MFN, or most favored nation. This means when one party, the publisher, asked Locke for $250, the label will likely ask for the same.[28]

The Internet has leveled the playing field for many industries. Entire retail businesses have disappeared. Blockbuster Video is out of business because of downloading and streaming of movies online.[29] The major record labels are hoping to recoup the type of profits they had in the late 1990s as they invent new ways of managing their products. The product they have is not just the final production of a song, but also the licensing of that song. All too often this product is set aside until the legal team needs to use it as a hammer.

Successful artists are being abandoned because they do not fit into a narrow definition of modern pop music success. Record labels have a wealth of music at their disposal. Because of a short-sighted approach to marketing, a focus on short-term profits, then add the lack of direction, means there will always be a defensive and reactive approach to changes in public listening habits. The major record labels need to consolidate their efforts and take a leading role in changing how people acquire access to producing a film or video.

Part 4 — Conclusion

As negative as the information presented may seem, the music industry will survive. All stories published about their demise is fiction. That said, real leadership is needed to consolidate certain aspects of the industry. The remaining music labels, those controlling the vast majority of all music in the world, can join their libraries for the purpose of licensing through an Internet portal.

A recent article in the L.A. Times details the amount the U.S. copyright industries contributed to the overall gross domestic product (GDP) in 2012. For the first time since tracking began, copyrights contributed over one trillion to the GDP and have increased every year for the last five years. “The study tracks the economic effect and contributions of U.S. industries engaged in the creation and distribution of computer software, video games, books, newspapers, periodicals and journals, as well as motion pictures, music, radio and television programming.”[30]

Copyrights are part of the intellectual property development boom that keeps the U.S. economy moving ahead of the rest of the world. For the nation as a whole, intellectual property-intensive industries support at least 40 million jobs and contribute more than five trillion dollars to, or 34.8 percent of, the U.S. gross domestic product (GDP).[31]

Copyrights are a strength of the music industry; one needed to maximize in order to better adapt to the changing market of popular music consumption. These media giants have vast libraries of copyrighted music at their disposal. By being more flexible and focused on synchronization licensing, the music industry — artists, songwriters, music labels, and distributors — will likely see an increase in the use of their vast library for music video production. More fan-produced music videos are being made daily. By using a central portal for access to an online database, and requiring only a nominal fee for acquiring copyrights, the industry will see an increase in legal acquisition of copyrights. At the same time more artists and songwriters will see their catalogs being used more frequently.

Chris Butler, songwriter and performer in the 1980s band, The Waitresses, spoke of his back catalog of music still controlled by a large music label. Discussing YouTube and the proliferation of fan produced music videos; he was dismayed that his older music catalog is not accessible to new generations accustomed to finding their music online. How can newer listeners discover his music if his record label does not consider how people now consume music?

Understanding the importance of access to copyrights is the key to building upon the continued growth of music sales. The music labels must enter into a coalition with the artists that create the content. Creating a centralized database, where anyone and can purchase the copyright to any song not in the public domain, would be giving the independent producer a tool to bring their music video or film to fruition.

As already mentioned, YouTube is positioning itself to become a major source for music streaming on the Internet — and this includes streaming music videos. As competition increases, many players in the music streaming industry — Pandora, Rhapsody, Spotify, or others — will likely be consolidated with larger companies.[32] This market is getting ready to grow as more people in the 18-34 year old demographic start to create more videos to build their portfolios in the hope of getting recognition.

Although Apple’s iTunes did not stop piracy, it did stem the flow of pirated music and made iTunes the world’s largest music retailer — online or offline. Creating an online site where all music across music labels and history can be researched and the copyright acquired — for a reasonable price — will mean the copyright industry will continue to be a major contributor to the U.S. economy. This also creates an opportunity for musicians and songwriters to have a new source for access their music — and get paid for it in the process.

This database does not mean the creation of an iTunes-like experience or shopping cart that is a one-stop shopping experience for all copyrighted music. There are too many variables for this to happen. When looking for another analogy as to what this online database can look like think of the Apple’s App Store and approval process for apps used for the iPhone™ or iPad™. Apple has had much criticism for this process but it has been very successful in weeding out poorly produced apps and unacceptable content. In the highly competitive world of smart phone apps, Apple’s App Store is still held as an example of doing this right.[33] Artists need to know their music will not be used for something they do not like.

Ultimately, the success of this idea will come down to the producer who considers making films and videos. These are the people that will pay for the soundtrack to their films and music videos. They are the ones using YouTube to build their portfolio of visual projects. They want the recognition a successful music video can bring to them. Facilitating this process, the music labels can build goodwill and profits they have been looking to regain over the last two decades. It’s time for the major record labels embrace the Internet for the powerful tool it is.


1 Of the artists interviewed for this paper most requested anonymity because of their relationship with a major label or the expectation of a contract with one.

2 As of this writing Napster is part of Rhapsody and can be found at http://www.rhapsody.com/napster

3 This video can be viewed at http://www.youtube.com/watch?v=PCYPXWXj8hg&list=PLF44F7244DB0B0F70


[1] DeGusta, Michael (2011, February 18), The real death of the music industry. Business Insider. Retrieved from http://www.businessinsider.com/these-charts-explain-the-real-death-of-the-music-industry-2011-2. November 2013

[2] Long, Tony. (2007, October 10). RIAA hits a sour note with its file-sharing witch hunt. Wired Magazine. Retrieved from http://www.wired.com/culture/lifestyle/commentary/theluddite/2007/10/luddite_1011.

[3] Azenha, Gustavo. 2007, May 17. The Internet and the decentralisation of the popular music industry: critical reflections on technology, concentration and diversification. Radical Musicology 1 (2006): para 122. Retrieved from http://www.radical-musicology.org.uk/2006/Azenha.htm.

[4] Knab, Christopher, (2008). Changes in the Way Music is Sold Over the Last 30 Years. Music Biz Academy. Retrieved from http://www.musicbizacademy.com/knab/articles/changes.htm.

[5] Long, Tony. (2007, October 10). RIAA hits a sour note with its file-sharing witch hunt. Wired Magazine. Retrieved from http://www.wired.com/culture/lifestyle/commentary/theluddite/2007/10/luddite_1011.

[6] Modine, Austin. (2008, May 15). RIAA ordered to shell out $100k for P2P witch hunt. The Register. Retrieved from http://www.theregister.co.uk/2008/05/15/tanya_andersen_attorneys_fees.

[7] Simon, Michael (2009, September 11). The complete iTunes history — SoundJam MP to iTunes 9. MacLife Magazine. Retrieved from http://www.maclife.com/article/feature/complete_itunes_history_soundjam_mp_itunes_9. October 11, 2013.

[8] Cheng, Jacqui, (2012, November 23). iTunes through the ages. ArsTechnica. Retrieved from http://arstechnica.com/apple/2012/11/itunes-through-the-ages. September 2013

[9] Ingraham, Nathan. (2013, April 26). iTunes Store at 10: how Apple built a digital media juggernaut: After a decade of success, can Cupertino ride the next wave? The Verge. Retrieved from http://www.theverge.com/2013/4/26/4265172/itunes-store-at-10-how-apple-built-a-digital-media-juggernaut. September 2013.

[10] Azenha, Gustavo. 2007, May 17. The Internet and the decentralisation of the popular music industry: critical reflections on technology, concentration and diversification. Radical Musicology 1 (2006): para 54-56. Retrieved from http://www.radical-musicology.org.uk/2006/Azenha.htm.

[11] Azenha, Gustavo. 2007, May 17. The Internet and the decentralisation of the popular music industry: critical reflections on technology, concentration and diversification. Radical Musicology 1 (2006): para 5. Retrieved from http://www.radical-musicology.org.uk/2006/Azenha.htm.

[12] YouTube, Terms of Service, Community Guidelines. (2013, November 13). Retrieved from http://www.youtube.com/t/terms.

[13] US Copyright Office (1998, December). Digital Millennium Copyright Act. Retrieved from http://www.copyright.gov/legislation/dmca.pdf. September 2013.

[14] Wixen, Randall D., (2009). The Plain and Simple Guide to Music Publishing, 2nd Edition (Kindle digital version) p 2. Hal Leonard Corporation, 7777 W. Bluemound Road, PO Box 13819, Milwaukee, WI 53213, 2009.

[15] Wixen, Randall D., (2009). The Plain and Simple Guide to Music Publishing, 2nd Edition (Kindle digital version) p 4. Hal Leonard Corporation, 7777 W. Bluemound Road, PO Box 13819, Milwaukee, WI 53213, 2009.

[16] Holmes, David, Andrew Bean, Sharon Shattuck. (2013). The music industry explained. PandoDaily. Retrieved from http://pandodaily.com/2013/08/05/who-killed-the-music-industry-an-interactive-explainer/. November 5, 2013

[17] Research & Markets. (2012, March). Internet Video 2011-2014: View, share, site and user analytics. Retrieved from http://www.researchandmarkets.com/reports/2092499/internet_video_2011_2014_view_share_site_and#summary. November 13, 2013.

[18] Douglass, Gregory (2013, November 7). 5 Ways musicians can prepare for YouTube’s new music streaming service. PledgeMusic. Retrieved from http://www.pledgemusic.com/blog/5-ways-musicians-can-prepare-for-youtubes-new-music-streaming-service. November 14, 2013

[19] Palermo, Ryan A. (2011, November). The MTV Generation. University of Florida, Interactive Media Lab. Retrieved from http://iml.jou.ufl.edu/projects/fall11/palermo_r/sources.html. November 20, 2013.

[20] Carr, Austin. (2010, August 9). I want my MTV, er, Vevo. Fast Company. Retrieved from http://www.fastcompany.com/1679429/i-want-my-mtv-er-vevo. December 1, 2013.

[21] Barrett, Patrick. (2004, March 24). Indie record labels lambast ‘uncool’ MTV. The Guardian. Retrieved from http://www.theguardian.com/media/2004/mar/24/broadcasting2. November 29, 2013.

[22] Dickey, Megan R. (2013, February 15). The 22 key turning points in the history of YouTube. Business Insider. Retrieved from http://www.businessinsider.com/key-turning-points-history-of-youtube-2013-2?op=1. November 18, 2013.

[23] Kumar, Lalit. (2012, March 3). Latest YouTube Facts and Statistics. TechWelkin. Retrieved from http://techwelkin.com/latest-youtube-fact-and-statistics-infographic. November 13, 2013

[24] Lockard, C. Brett, Michael Wolf (2012). Employment outlook: 2010-2020: Occupational employment projections to 2020. Monthly Labor Review, January 2012. Bureau of Labor and Statistics, p 89. Retrieved from http://www.bls.gov/opub/mlr/2012/01/art5full.pdf.

[25] Van Buskirk, Eliot, (2009, September 28). Warner’s Music returns to YouTube following nine month hiatus. Wired Magazine, Business. Retrieved from http://www.wired.com/business/2009/09/warner-music-group-signs-youtube-deal/. November 13, 2013.

[26] Pearson, Sophie & Christie Smythe. (2013, August 6). Warner Music sues Fullscreen over YouTube video use. Bloomberg. Retrieved from http://www.bloomberg.com/news/2013-08-06/warner-chappell-music-sues-fullscreen-over-copyrights.html. November 13, 2013.

[27] YouTube, Terms of Service, Community Guidelines. (2013, November 13). Retrieved from http://www.youtube.com/t/terms.

[28] HubPages (2010, June 25). MFN: What “All In” means for a music supervisor. Retrieved from http://mateof.hubpages.com/hub/MFN-What-All-In-Means-for-a-Music-Supervisor. September 2013.

[29] Walker, Rob. (2013, November 6). Blockbuster is closing all of its video rental stores. Good Riddance. Yahoo News. Retrieved from http://news.yahoo.com/blockbuster-closing-buh-bye-205039449.html. November 21, 2013.

[30] Verrier, Richard. (2013, November 19). U.S. copyright industries add $1 trillion to GDP. The Los Angeles Times. November 19, 2013. Retrieved from http://www.latimes.com/entertainment/envelope/cotown/la-fi-ct-intellectual-property-20131119,0,3616966.story.

[31] United States Patent and Trademark Office. (2012, April 12). Intellectual property and the US economy. Department of Commerce.. Retrieved from http://www.uspto.gov/about/ipm/industries_in_focus.jsp. November 19, 2013.

[32] Resnikoff, Paul. (2013, September 25). The 13 most insidious, pervasive lies of the modern music industry. Digital Music News. Retrieved from http://www.digitalmusicnews.com/permalink/2013/09/25/lies. November 24, 2013.

[33] Hughes, Neil. (2013, November 18). Apple’s iOS App Store still handily trumps Google & Amazon offerings in new analysis. The AppleInsider. Retrieved from http://appleinsider.com/articles/13/11/18/apples-ios-app-store-still-handily-trumps-google-amazon-offerings-in-new-analysis. November 24, 2013.