The Future of Digital Music Delivery: Event Recap as part of the Innovation in the Digital Age Series

The UCLA Luskin Center for Innovation hosted a panel discussion on October 15, exploring the policy challenges involved in ensuring a sustainable and vibrant music industry. This first event of the Public Policy for Innovation in the Digital Age series featured representatives from Pandora, REN Management, Audiam, Wilkinson Barker Knauer, LLP and a moderator from Billboard Magazine. Over 100 music industry experts, technologists, attorneys, students, and professors convened to learn from some of the world’s experts on music law and policy.

John Villasenor, Director of the Digital Technologies Initiative at the Luskin Center, kicked off the event by explaining that music distribution is undergoing a fundamental shift with many societal and policy implications. In the pre-Internet era, consumers accessed music primarily through the radio and purchases of physical media such as records. Today, an increasing amount of music is delivered digitally. Public policy, however, has not kept pace with the changes.

Panelist David Oxenford, a partner at the law firm Wilkinson Barker Knauer, LLP underscored how this shift from traditional AM/FM radio to digital distribution services like Spotify and Pandora, which allow a greater variety of artists to reach a larger audience, has brought up new challenges surrounding the ownership of content, copyright laws, and compensation for artists.

The broadcasting industry is at a crossroads: the multi-tiered system of American copyright law has created different compulsory sound recording performance royalty rates, depending on the technology used to deliver the music. Internet radio services face high royalty rates, while satellite radio pays lower royalty rates. The issue of royalty rates is complicated—artists need to get a fair compensation, but if rates are too high then the public will have fewer options for receiving music.

Two panelists, Jeff Price, CEO of Audiam, and Chris Harrison, Assistant General Counsel of Pandora, engaged in a debate about the viability of compulsory music licensing. Compulsory licensing allows certain digital broadcasters to use copyrighted sound recordings without the need to obtain a direct license from the copyright holder. Instead, the royalty rates are set by the government. From the artists’ perspective the issue is contentious because, as Jeff Price observed, “Why can’t artists have the right to say no?” Chris Harrison replied that if a music service like Pandora had to spend time licensing each artist individually, the licensing might not happen, limiting music delivery.

Moderator Alex Pham, a contributing editor at Billboard Magazine, discussed the evolution in the use of BitTorrent, a file transfer protocol like HTML, most known for pirating.  BitTorrent, Inc. is a San Francisco-based company that helps people take advantage of the BitTorrent protocol; Pham noted that the company is successful and lawsuit-free. BitTorrent, Inc. recently came out with the BitTorrent Bundle, a new file format that disseminates mixed content to BitTorrent’s millions of users. Artists including Madonna and Arcade Fire are distributing their media via the Bundles, which offer a small amount of downloadable content for free, and set up a pay gate to access the rest. Perhaps the most unique feature is that payment is not always requested in cash—it can be made in the form of publicity, or private data sharing. The user can ‘like’ the artist on Facebook, re-share the content with other BitTorrent users, or as in the case of Madonna’s latest Bundle, submit an email for complete access.

Panelist Steve Rennie, President of REN Management and manager of the band Incubus, agreed that the Bundles are an innovative way to promote music. However, artists aren’t always selling their material, so Rennie says that “It almost concedes the point 100%…if we give [consumers] music or a book, then they [no longer] have to buy it.”

Jeff Price outlined the difficulty of envisioning BitTorrent’s industry growth; “BitTorrent doesn’t have a hardware device… companies [go] vertical, from the bottom up, [from] operating systems to hardware to software, that’s the food chain…they’re not going to be in the cards.”

Other digital innovations, challenges and opportunities for the music and broader entertainment industry will be explored during the next event in the Luskin Center’s series: The Demise of Ownership: Digital Content in the Age of Licensing, on November 5. Click Here for more information and to register. 

To view photos of the event – Click Here