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Reeperbahn Campus: Which bit of the cloud to licence?

By | Published on Friday 24 September 2010

“If you look back at the last five years there is only one solid digital music service from a business point of view, and that is Apple iTunes”. If you’re the sort of person who wishes participants in music business panels would just say what they really think, then ask your convention organiser to book Alexander Wolf from German collecting society GEMA, he doesn’t beat around the bush.

“There are other interesting propositions out there, of course”, he conceded. “But so far only Apple have a model that actually generates revenue, for them and for content owners. And their success, in part, was because they started by asking ‘how can we sell music’ rather than ‘how can we give it away'”.

Wolf was speaking yesterday as part of a panel at the Reeperbahn Campus on so called ‘cloud-based’ music services, in which emerging digital business models – like digital lockers, tethered downloads and Spotify-style streaming services – were being debated. Apple’s iTunes, of course, is not “in the cloud”. But cloudy things are starting to compete with the uber download store, and taking some music fans away from Apple. But do these services have a business that can ultimately pay content owners and deliver a profit?

GEMA, of course, is known for being among the most demanding of all the world’s collecting societies when it comes to licensing new digital services, and has been very vocal in recent years about its frustrations with Google and YouTube, while also leading the way when it comes to shifting the anti-piracy battle away from traditional P2P makers to file-distribution platforms like Rapidshare.

“We must talk to the people behind each new service”, Wolf admitted. “But it’s not true that every digital business model proposed is going to work, and that has to be our starting point. I’m not saying our Apple relationship has been 100% perfect, but our licensing negotiations with them were constructive from the start. Whereas Google and YouTube set up their service and then came to do the deal, starting by offering very little”.

With the only digital music provider on the panel – German-based Simfy – licensed by GEMA, and therefore no one to argue Google’s corner, it was easy to be convinced by Wolf’s argument.

After all, as session moderator Steve Mayall of MusicAlly points out, it’s no secret that many digital entrepreneurs who come looking for a low-cost licensing deal aren’t really interested in creating an innovative platform that helps to sell music, or even a product that is technically innovative; rather they want to build a web business that can be sold for millions to a clueless equity group or media mogul in two years time. Isn’t Wolf and his hardline collecting society just protecting the interests of the songwriting community against web-savvy businessmen looking for a quick buck?

“If I play Devil’s advocate for a minute”, Oke Gottlich of digital distributor finetunes interjected, “there is an argument that because GEMA is so tricky to get on board, some of the more compelling digital services just won’t launch here in Germany. And that’s sad, for music fans, and for rights holders, whether they be artists, labels or GEMA itself”. Basically, hardline GEMA could be shooting itself in the foot; after all, the Googles of this world may not be offering anything like your desired royalty rates, but refuse to do the deal and you earn nothing. Though, as Wolf says, surely that doesn’t mean you should simply licence everything.

However, the only big service not currently operating in Germany, Wolf argued, is Spotify. And they, the GEMA man reckons, don’t currently have a business model worth considering. Ending with another bold statement, Wolf concluded: “To be honest, unless they get a new business model, I can’t see Spotify being licensed here”.

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