Toward Global Rights

Originially published in the Dec-2011 issue of The Music Business Journal – Berklee College of Music

by Peter Alhadeff, Zosia Boczanowski, Luiz Augusto Buff, and Aaron Gottlieb

Music is a complex commodity bundled with many rights. As intellectual property, it requires licenses to transact legally. But in today’s marketplace, clearances from owners or intermediaries can be difficult to track both nationally and internationally. Often, many parties are involved before permission can be granted for a single trade. In effect, it may be more practical to license a collection of songs rather than a single song, biasing usage against the non-commercial and cultural repertoire of lesser known artists and works. As a result, the diffusion of musical production and the livelihood of music creators, two tenets of international copyright law, are coming under threat.

The problem for buyers and sellers of music has been compounded since the new millennium. Music is bought and sold in TVs, computers, smart phones, and satellite radio. There are more playback devices and distribution channels, so the number of transactions is growing exponentially. More trade, however, does not mean a higher returned value because the typical tradable item before the millennium was the album, and it returned ten times the worth that a single song does presently.  Musical purchases today, in short, are dominated by myriad low- priced transactions.

The perception is that the rights’ shell of music is now hindering business more than ever, not just by adding friction in the music exchange but also by preventing trade. As the fortunes of the global recorded music market have declined catastrophically since the new millennium, with the business only grossing half the value that it did back then, a new sense of urgency is being felt both by music stakeholders and governments.

Regarding stakeholders: When music users are not getting access to creative content because of the logistical difficulties that music intermediaries, including online music distributors, have clearing music rights, the market takes a hit.  As for governments: The State tends to become involved where copyright industries are deemed significant and/or music is thought of as a cultural good worth protecting. Another issue here is the migration of music into the ‘public domain’. The transition can never be seamless unless there is clarity and tractability about ownership rights. The end of the commercial exploitation of a musical piece, of course, is never really accepted gladly by the interested party.

A New Series

The Music Business Journal will start its first ever article series on a multinational effort to build a better infrastructure to trade music.  The object is to draw attention regularly in future issues to a new momentum behind international song registries and one-stop initiatives for global rights’ clearances. As we write, a new architecture for the music trade is being attempted under existing intellectual property laws. (Because of this, the Journal will concentrate its efforts on the creation of such registries and continue to cover general legal developments elsewhere in the publication.)

We will look at all the parties involved, the agreements and compromises that will be necessary to carry these novel ideas to fruition, and the implications of these registries for the future of music. It took many years to get nation states to agree to submit their economic data to the League of Nations, and for the latter to begin compiling national income statistics. Similarly, sellers and owners of music copyrights, as well as public libraries and other publicly owned music repositories, have to come to the negotiating table willingly. The drama is likely to last.

Yet the development of mechanisms for better rights’ documentation, data-collection, and rights’ clearances is arguably as urgent today as when the onslaught of online music challenged the recorded industry after 2001.  Inaction, of course, has a steep price in an economy in crisis, and global efforts to build song registries have derived impetus from the Great Recession. Naturally, the music market has a better chance to discover new trades and reduce transaction costs if it centralizes and lays bare its arcane permit strictures.

IMR, GDR, and CISAC

The Journal has picked up increased coverage on the subject, and done its part1.

The United Nations’ World Intellectual Property Organization (WIPO) is presently focusing on developing an international intellectual property system and has made the case for an International Music Registry (IMR) in the past year. Specialists, academics, and stakeholders have been convened for special forums, for instance at the World Copyright Summit in Brussels in June, throughout October and November in Geneva, and at a Harvard-Berklee Rethink Music workshop in Boston in November.

Earlier, in 2008, the European Competition Commissioner of the EU established a working group which included representatives from Amazon, Universal Music, EMI, iTunes, Nokia, and three collection societies: PRS (United Kingdom), SACEM (France), and STIM (Sweden). The aim was to develop a Global Repertoire Database (GRD) that would stand as the reliable central database for multi-territorial licensing2.

Both groups are of course weary of competing with each other. WIPO has made it clear that IMR and GRD should cooperate to make the most efficient international licensing database possible, while, early in 2011, at a joint IMR-GRD meeting, the GRD Chair noted that the GRD could connect to the system that IMR developed3.

At the same time, the International Confederation of Societies of Authors and Composers (CISAC), an umbrella organization for mostly, but not exclusively, performing rights’ societies, joined the GRD in March 2011. CISAC developed the International Standard Musical Work Code (‘ISWC’), which identifies musical works from information procured by the rights-holders4.  Its expertise in copyright data management is thus political as well as technical.

Our Coverage

Clearly, the trade of music is recognizing that it can benefit from a new and more federated approach. For more in-depth coverage, the MBJ intends to publish, in the months ahead, individual pieces on (i) the potential for a synergy between IMR and GRD, (ii) the technological solutions being discussed, (iii) possible funding mechanisms for a global register or registries, (iv) the politics of stakeholders and the role of government, (v) the management and control of global song databases, and (vi) the unavoidable legal challenges of antitrust concerns, formalities, orphan works, and conflicting claims.

In our next issue, we will be reporting from MIDEM, at Cannes, France.  There, late in January, IMR and GRD representatives will engage in a debate with participants from around the globe. The expectation is that they will release their own independent study shortly after.

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See Luiz Augusto Buff, “WIPO Tallies Song Credits Worldwide”, The Music Business Journal, Oct. 2011, 10; and, same author, “The G8 and Copyright”, MBJ, Aug. 2011, 4 (also at http://www.thembj.org).

Berkman Center for Internet & Society, Rethinking Music: The Challenges of Creating and Maintaining a Music Rights Registry, Working Draft, Nov. 2011, 3.

Ibid., 4.

Ibid., 5.

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by Peter Alhadeff, Zosia Boczanowski, Luiz Augusto Buff, and Aaron Gottlieb

The Shackles of Copyright Law: Brazil’s Tecnobrega

Originally published in the Dec-2011 issue of The Music Business Journal – Berklee College of Music

The crisis in the recording music industry has diminished the breadth and diversity of record label catalogs at a time when there are more artists and musical works than ever. Around the world, moreover, local and regional music may be in danger of becoming marginalized as the traditional distribution structures focus just on pasteurized product. And yet there is hope.

New ‘open business models’ are being considered overseas and involve the creation and dissemination of artistic and intellectual works under a more flexible and autonomous copyright regime. If successful, it is argued that such a regime would generate more revenue for the music stakeholders and cut prices for consumers.

A book by two Brazilian writers illuminates the approach and may well shape thought in years to come.

Its title, Tecnobrega–O Pará Reinventando o Negócio da Música (’Tecnobrega-The State of Pará Reinvents the Music Business’) at first may seem pretentious.  But the authors are Ronaldo Lemos, Director of the Center for Technology and Internet Society at the famous Getulio Vargas Foundation (FGV) in Rio de Janeiro, and Oona Castro, FGV ‘s Project Leader.  Lemos, in particular, is active in academic discussions of intellectual property law around the globe, has been an articulate spokesman on copyright legislation for emerging economies, and serves as the director of Creative Commons in Brazil.

The work of Castro and Lemos is scholarly and relies on in-depth mining of qualitative and quantitative data in situ. It has become a part of the Open Business Project, a global initiative between Brazil, the UK, Nigeria, Chile, Mexico, and South Africa that is partly funded by Canada’s International Development Research Center (IDRC). Brazilian think tanks FIPE, an economics research foundation, and the Instituto Overmundo were also involved. Lemos and Castro also advise Brazil’s Ministry of Culture, lately an international advocate of a new legal architecture for music.

Tecnobrega, the music from which the name of the book is derived, is a genre from the state of Pará.  Pará is far removed economically, geographically, and culturally from the main centers of the country, Rio and Sao Paulo.  Brega, a kitsch regional style, became mixed with European Tecno, but the major labels or mass communication media never picked it up. (even though the old Brega was widely popular across Brazil during the 1980s, the genre faded as the industry declined). Yet it has now returned morphed into a new and complex ecosystem that provides revenues in the millions and employment for thousands. The key appears to have been both a loose copyright enforcement policy and an informal commercial structure that enabled the growth and promotion of the genre.

The traditional paradigm illustrates, among other things, the exchange between composers, producers, record labels, and publishers. This is not how the tecnobrega model works, for the interaction there is between the aparelhagens, i.e the sound system companies, the artists, the live and studio DJs , the promoters,  the venue managers, the mass reproducers, and the street vendors.

According to Castro and Lemos, the sequence of tecnobrega is as follows:

(i) artists, either  solo acts or  bands, record songs in self owned or other studios; (ii) the best productions are sent out by the studio DJs  to mass copiers; (iii)  street vendors  sell CDs locally at an affordable price, typically $2.50; (iv) DJs play their choice of songs at aparelhagem parties; (v) artists that have popular songs assemble bands to make performances; (vi) new CDs and DVDs are recorded and sold at concerts; (viii) the cycle is repeated while success lasts.

Artists are compensated primarily through live performances at an average of $1,200 per show.  Since royalties are not a feature of that business model, musicians are driven to perform their own songs, and 84% of the artists are also composers. In fact, what usually happens is that composers only form bands after their songs have become popular by either being part of compilation CDs or because they were performed at aparelhagem parties. Artists that are solely composers are rare, but such artists tend to write for jingles used in broadcasts and political campaigns as well as for songs that are exclusively commissioned to pay homage to the aparelhagens.

The aparelhagens, in fact, are a crucial element of the tecnobrega business. These sound system companies are hired to provide large setups that combine computers, sound, video, and lighting technologies for large parties in which tecnobrega music is played by DJ’s. There are four major companies running aparelhagens throughout the state, and several hundred of smaller ones. Aparelhagens are mostly family businesses. Local promoters are then responsible for organizing the parties and subsidizing the acquisition of new equipment for the aparelhagens—a major selling point in the eyes of the attendees. Ticket prices typically range from $5 to $10, with an attendance range between 3,000-5,000 people on average.  When aparelhagens debut their new equipment at special parties as many as 8,000 people have been known to attend.

The gatekeepers of the tecnobrega are the studio and aparelhagem DJs. They determine which songs will be a hit by either distributing them on compilation albums for mass reproducers, or by playing them at live events and through the electronic media channels. Not all the deals are based on the exchange of monetary values, and sometimes the network of contacts and the capacity of access to certain people is sufficient consideration.

It is important to note the informality of this business model. The absence of written contracts and the sale of mass reproduced copies by street vendors (approved by artists but in fact illegal) prove that the tecnobrega is a model based upon norms rather than law. The lack of a strong copyright culture, combined with the fact that the parties themselves foment this structure of distribution, breeds an environment conducive to growth.

Tecnobrega artists don’t expect any revenues from copyright exploitation, believing that giving up control allows for the free circulation of their songs thereby reaching a broader audience. Piracy is not seen as a threat. In fact, artists support the practice because it can significantly increase the size of the audience for their concerts. Considering unauthorized distribution as a marketing tool, artists sell their albums and DVDs at concerts with a price sufficient to cover their costs of production, and the show’s revenue comes mainly from ticket sales. In a country where legal albums are sold at a price well above what most of the population can afford, the tecnobrega model guarantees broader access for the lower-income layers of society.

The book suggests that in some cases the application of copyright protection mechanisms might not be necessary to stimulate creation and sustainability within the creative industries. As well, copyright mechanisms may have a negative impact on the access to music, which for the authors is a ‘cultural’ good.  The tecnobrega model navigates a grey area within the margin of the established legal canon, but the case of Pará shows that when creators do not make an issue of their private intellectual property, a music economy may evolve just as well.

Lemos and Castro urge the public to consider that there are new effective ways of generating income for the stakeholders of ‘cultural’ industries. They make the case for easier copyright policies in Pará. In addition, the tecnobrega economy emphasizes the sale of ancillary services and strategies that leverage publicity to sell other goods. Similar examples of these so-called ‘open business models’ are found in the technology sector with open-source software, in the Nigerian Nollywood film industry, in Wikipedia–and, as well, in the much scrutinized initiative of Radiohead offering their album at whatever price a consumer might be willing to pay.

For the stakeholders in tecnobrega, the formality of the copyright system stands in the way of their trade in music.  Although Lemos and Castro warn that the replication of the model is unlikely on a bigger scale and in a different context, it remains an exemplar of a vibrant musical exchange in an emerging economy. It makes everyone interested in the future of music pause for thought, for where intellectual property law cannot be seen as the chaperone of trade, but its shackle, musicians and the public at large are victimized.

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The English translation of the book is pending; the Portuguese version can be downloaded free at: http://portalliteral.terra.com.br/lancamentos/download/715_tecnobregamiolo.pdf.

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by Luiz Augusto Buff

The Rock in Rio Festival

Originally published in the Nov-11 issue of The Music Business Journal – Berklee College of Music

Nearly two months ago, and after a ten-year hiatus, Brazil witnessed the return of the Rock In Rio Festival. The event, considered the biggest of its kind in the world, has developed its own international profile, with Madrid and Lisbon editions in Europe. Roberto Medina, one of the most successful advertising entrepreneurs in Brazil, has built an empire around it.
The first edition of the festival, a landmark event in Brazil, was held in January 1985. The country was recovering from military dictatorship and the new democracy welcomed international acts at last. 1.4 million people went to a specially-built location called “Rock City” (Cidade do Rock) to see Queen, Iron Maiden, Ozzy Osbourne, and AC/DC. The festival also featured Al Jarreau, James Taylor, and George Benson. Large audiences drove Rock in Rio to success. Queen’s performance was anthological, with Freddie Mercury conducting a choir of more than 325,000 voices singing Love of My Life. The performance was recorded and broadcasted in over sixty countries and reached two hundred million people, giving sponsors an unprecedented amount of visibility. Rock in Rio became a reliable brand, which then cemented the reputation of young local groups such as Paralamas do Sucesso, Titãs, and Barão Vermelho. These bands are now recognized as pioneers of a new musical landscape in Brazil.
The second edition of the festival, in 1991, took place at the famous Maracana Stadium. The economy was not doing well, the event could not be run from the desired Rock City venue, and, for budgetary reasons, there were many more national artists performing. Part of the reason for that was that the organizers themselves wished to diversify into genres other than rock in order to attract newer audiences. Artists from more traditional Brazilian styles like Gilberto Gil and Elba Ramalho shared the same stage as Sepultura, George Michael, A-Ha, and Judas Priest. The highlight of the festival, however, was Guns and Roses, who played two memorable concerts.
Rock in Rio III took place in 2001, and welcomed 1.2 million people in a rebuilt City of Rock. Good causes dominated the event, which pushed the motto and project “For a Better World”, education for the young, and untold UNESCO initiatives. Celebrities attended in droves, and convinced 3,2000 radio stations and 400 TV broadcasters to air three minutes of silence for reflection.
This social mantle was instrumental in establishing Rock in Rio as an international brand, promoting festivals in Europe, with Rock In Rio Lisbon in 2004, 2006, 2008 and 2010, and also in Madrid in 2008 and 2010. The European versions were not as well attended as in Brazil but, on average, audiences hovered around a respectable 350,000.
More regularity helped too. After six European editions, the way was paved for a stellar return to Brazil. A partnership with the Rio de Janeiro City Hall allowed the construction of an entirely new City of Rock on the site of the future Olympic Village in 2016 . Rock in Rio 2011 has had an enormous impact on the city’s economy because it generated about half a billion dollars in revenue and indirectly created 10,000 new jobs. It was not the largest festival of the series, but attendees numbered 700,000 throughout the week. More than 160 musical acts were featured across three different stages. The price of admission was around $110 and tickets sold out in less than four days.
This year, one of the criticisms levied at the festival is that not enough space was set aside to feature Rock music—the genre from whence the event was born. Roberto Medina explained that the festival is an open space where different people can come together and share experiences. In fact, the majority of the 600-plus acts featured in every edition of Rock in Rio have been rock acts like AC/DC, Metallica, and the Red Hot Chilli Peppers. However, the strategy always was to diversify in order to attract a wide array of customers. Roberto Medina emphasizes that the choice of artists who perform at the festival is the result of dense marketing research and a thorough analysis of trends in social media. Katy Perry and Rihanna were both at Rio this year, and their success seems to confirm Medina’s approach.
This year, for instance, the organization decided to invest heavily in communication through non-traditional outlets. They estimated that 180 million people from more than 200 countries followed the festival via the Internet and social media. Rock in Rio had an exclusive channel on Youtube that streamed all the concerts live worldwide. During the weeks of the festival, Rock in Rio was the top “trending topic” on twitter in more than ten countries, and its exclusive iPhone app was the most downloaded in Brazil.
Taking advantage of the success of this latest edition, the organizers announced that the festival will now happen on a regular basis. Even with no bands announced yet for 2013, 15,000 tickets have already been sold during a pre-sale promotion at the festival this year. Before it happens again, Rock in Rio will go back again to Lisbon or Madrid in 2012, and possibly to Latin America in 2013. Mexico and Colombia are the most likely candidates.
The brand is growing organically. But, Rock in Rio demonstrates too the growing power of Brazil in the international music market. With a thriving economy plus important events in the upcoming decade–the World Cup in 2014 and the Olympic Games in 2016—the country is attracting new business. Indeed, Lollapalooza, America’s best-attended festival, has announced a Brazilian edition next year.

By Luiz Augusto Buff

WIPO Tallies Song Credits Worldwide

Originally published in the Oct-11 issue of The Music Business Journal – Berklee College of Music

Considering the vast array of music services that were launched this year, including Amazon Cloud Drive, Spotify, and Google Music, it seems a new order for the consumption of music is taking shape. Indeed, legislation is being reformulated to facilitate new forms of music consumption, with consumers substituting piracy practices and moving to legal services. However, the existing music rights management architecture is being challenged. The difficulty is to know exactly who all the copyright owners of a song really are–and where they can be located. Transactions for the appropriate licenses cannot happen without this knowledge.
For each song recorded there are two copyrights involved: one for the composition itself (©) and one for the sound recording (℗). The first one is owned and controlled by different songwriters and publishers, while the other is usually owned by record labels and performing artists. When each of those rights are owned by a significant large group of people, someone needs to locate all of them in order to obtain licenses that need to be negotiated on a case-by-case basis. Additionally, many popular artists are now emerging outside traditional corporate structures, and not having them in the current databases of copyright ownership impedes the legal consumption of music. Two recent examples are Choruss and SoundExchange. Choruss, an experiment meant to allow college students across the country to download an unlimited amount of music in exchange for a small fee built into the their tuition, was not able to gain traction because of the difficulty in finding out exactly who it had to compensate. SoundExchange, a Performance Rights Organization created to collect royalties from digital music services, has had millions of dollars stuck in its accounts for some time now because it simply cannot find the appropriate right owner.
Jim Griffin, founder of Choruss, is a former label executive that now is channeling his efforts to tackle this situation. As he recently pointed to Billboard, “[the] big problem we ended up facing…is that we couldn’t find at least half the rights holders.” He advised that an extensive global registry of copyright owners be created to facilitate the licensing process across borders.
Such an ambitious plan started to be brainstormed at the end of 2010 and took form as the International Music Registry (IMR), currently functioning under the auspices of World Intellectual Property Organization (WIPO), an agency of the UN. In order to be viable, the organization needed representation of all the stakeholders involved in the process of licensing. Indeed, its first Consultative Committee included Jim Griffin and brought together a wide variety of players in the music industry. In its initial planning stage, the IMR will be an internationally transparent global registry of all rights and right holders sharing all the necessary information needed to ease the process of multi-territorial licenses. “This”, it said “will preserve the public good [character of music] both [for] culture and commerce.”
The system is designed to be an inclusive platform, creating a single point of access for multiple databases already in existence around the globe, tying the information together and diminishing overlapping efforts and conflicting information. In fact, critics of IMR argue that there are a number of similar initiatives trying to achieve the same goal, such as the Global Repertoire Database being developed in Europe.
However, WIPO has advantages over other entities in creating and maintaining a successful global registry. Being an agency of the United Nations ensure worldwide involvement in the project. Furthermore, the agency already developed and runs established global registries in other intellectual property fields such as patents and trademarks. WIPO generates most of their income through the operation of these systems, but also counts on contributions from member states. Due to its public character, the agency is free of antitrust regulations and can focus on developing such a system without being concerned on an immediate return on investment – which would usually hinder the major music companies.
The IMR wishes for a comprehensive geographical representation in order to facilitate a truly global dialogue. The idea is to not only focus on the most powerful countries, but to enforce the inclusion of the BRICS (Brazil, Russia, Indonesia, China, South Africa) and other fast developing regions. Brazil for instance was one of the few music markets that showed growth last year, despite the fact that it lacks download stores such as iTunes and streaming services. The structure and organization that IMR will provide will be essential to the development of new services in these countries, shifting the audience to legal services and therefore reenergizing the music market globally. (Still, how fees will be collected, be it by individual entry or by subscription, is yet unclear.)
Overall, the development of this comprehensive database is a long process that depends significantly on compromise. Skeptics will be afraid of losing control over their information, fearing that data that was private may go public. A good balance has to be found between what data will remain confidential, and thus not hurt licensors and licensees, and what data can be made readily available to promote what really is an ailing music trade. It is not an entirely new problem for the business. Record industry organizations, like the RIAA in the US, have long tallied rival company recorded music sales promising confidentiality to the individual labels. Back in the day, trust was good for business. The hope is that the same will happen with the International Music Registry.
By Luiz Augusto Buff