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Legal Eye: What's the score for the music biz?
Is the new content ecosystem viable?

By Duncan Calow

Published: Thursday 22 May 2008

From free downloads to albums you can pay as much as you like for, the internet has put traditional record companies in a spin. But will it all end in tears, asks lawyer Duncan Calow.

Coldplay's decision to offer their latest single, 'Violet Hill', as a free download shows what a state of flux the music industry now finds itself in.

It seems that the collective power of the majors is under threat as artists, using their own sales and marketing techniques, look for alternative distribution methods and tie-ups. So what does this all mean for the music and wider media industry?

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As well as giving away the new single, Coldplay announced free concerts in London and New York. For a band renowned for shunning the limelight, and firmly under contract to EMI, their announcements highlight the uncertainty surrounding the future of media companies.

There's a tangible unease between artists and promoters too. As Coldplay frontman Chris Martin was quoted as saying "being on a major label at the moment is like living in your grandparents' house".

Big names have signed deals outside the mainstream. EMI recently lost Sir Paul McCartney to the nascent Starbucks music label, Hear Music. Drinks brand Bacardi will release Groove Armada's latest songs and the dance duo will headline Bacardi's international music events throughout 2008.

Madonna announced her Live Nation deal with the comment, "the paradigm in the music business has shifted and as an artist and a business woman I have had to move with that shift".

Even without these moves, much else is changing. There is pressure to develop so-called 360-degree deals, where a record company manages all the rights of an artist, from tour to television series, not just their recordings.

There is a huge growth in artist branding opportunities - for example, the campaigns featuring Girls Aloud or the Black Eyed Peas. Above all, in a post-P2P world, there is digital distribution.

High-street retailers and their physical sales structures are being replaced by online music stores. Social networks and user-generated content sites are stimulating a DIY ethos where artists can take control and experiment.

The Arctic Monkeys rose to fame through digital word of mouth and online marketing. Radiohead offer their new album, In Rainbows, on a pay-as-much-as-you-want-for-it basis.

So surely it's becoming harder to find a place for the record labels in all this? In theory confident artists, established or new, should be calling the shots and music executives shaking in their boots at the thought of more defectors. But we should dig a little deeper than the high-profile deals and the headlines.

Musician Billy Bragg, who has already fought a campaign against MySpace on the pages of UK newspapers, recently wrote in The New York Times bemoaning the financial return for artists from user-generated sites.

Music shake-up:
Key issues

1. Business models are changing - 360-degree deals, brand tie-ups and digital delivery are shaking up the music industry.

2. As a result the traditional roles of record companies appear to be under pressure.

3. The content industry must adapt to consumer-driven demand for digital products.

Bragg, and others, were in turn quoted by Thomas Rubin, chief counsel for intellectual property strategy at Microsoft, who this month gave a fascinating speech entitled Can Anyone Survive in the New Media Environment?

In it Rubin questioned whether the new models are proving any more successful than the traditional framework they are supposed to replace.

He pointed to the limited revenue returns from user-generated content sites and quoted Radiohead themselves as saying they wouldn't repeat their experiment of giving an album away.

Rubin argued that a new content ecosystem was being born - but that "its survival to maturity is by no means assured".

Clearly, Microsoft has key competitors in the new web 2.0 landscape and its own commercial agenda. But such a contribution does provide a much needed reality check for the true potential of some of the models, not just in music but the content industry generally.

While it doesn't underestimate the challenges to the traditional media businesses, it does remind us how easy it is to overestimate the alternatives.

The bottom line is that we may not have actually seen the power move from the label to the artist, or even the traditional media company to the new digital distributor.

What we have seen is power in the hands of the consumer. And that power has been felt most keenly in the music industry where ease of digital delivery, whether by lawful or unlawful means, has combined with new hardware to give users more for less.

DLA Piper is the world's largest global legal services organisation with more than 3,700 lawyers across 64 offices and 25 countries. Its award-winning technology, media and commercial practice employs 70 partners specialising in IT, telecomms, media, sport and IP law. Experts in convergence between the technology, communications and media sectors, it advises some of the world's leading multinational entertainment, media, sport and technology companies.