The Reality Of Music Licensing
The unfortunate truth is that SpiralFrog's success or failure may not ultimetely be determined by either their business strategy or even the level of public interest they're able to attract. In the end it will be a question of revenue vs. royalties. If labels see value in SpiralFrog's service it's incumbent on them to try to find a licensing model which enables the company to keep operating. The problem, as I see it, is the unwillingness of the music industry to absorb their fair share of the cost for re-tooling their own business model.
Earlier this year at the request of music label representatives at SoundExchange royalty rates for Internet radio services were increased to levels that shocked most industry observer. Universal Music Group is also reportedly working on a music service of their own that would require mobile media player vendors like Apple and Microsoft, to pay a royalty of $5 per month over the lifetime of each device in exchange for a subscription to a catalog of songs from most or all the major labels. In both cases the burden for developing the labels' own business model is shifted completely to someone else, webcasters or media player manufacturers, instead of being shared by the companies that benefit the most - the labels themselves.
Rather than simply calculating what they might be losing in CD revenue and passing that on to online consumers or media player makers it might be in the labels' best interest to enable manufacturers to buy a lifetime music license for each device. Music could be distributed through an ad-supported service (like SpiralFrog perhaps) to subsidize making the license fee reasonable. And there's no reason to require all devices to be licensed. The wonderful thing about all this technology is that it supports a variety of business models.
Regardless of SpiralFrog's chances at financial success I intend to keep using their service until a better alternative shows up. It would be better for music consumers, artists, labels, and technology companies alike if we were led into the future by innovative thinking out of the music industry itself. Barring that I'll have to hope that services like SpiralFrog to fill the void from the lack of such leadership. Companies like EMI and Universal Music Group have made progress by allowing sales of DRM free downloads from online music stores and even striking deals to make their music available from a service like SpiralFrog. Now it's time to take the put their own money on the table and work out a licensing system that's consumer friendly enough to make some money without alienating their customer base any further than they already have.
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By Rich Fiscus 2007.12.1
