Here’s an idea: rather than cripple online music startups with royalties, or burden them with equity arrangements, why not give them a prize for for doing the one thing the major record industry has failed to achieve for itself: make money out of music online?
In Wired Magazine’s Listening Post, Eliot Van Buskirk asked the question ‘Should Music Startups Give Equity to Copyright Holders?’. The question was prompted by a white paper (PDF) by MCPS/PRS chief economist Will Page and PhD student David Touve, which proposes that instead of charging royalty fees to innovative web based startups, they should offer an equity arrangement.
In other words, give the startups the option of letting the record industry own part of your business instead of charging licensing fees.
It’s an interesting idea designed to get past the dilemma that music startups either ignore copyright (and live in fear of lawsuits) in their early stages, or they are entirely crippled by it.
The purpose of copyright is to incentivise creativity
Fear of lawsuits is a disincentive for creative tech companies. Royalties that exceed income - also a disincentive.
But giving away a chunk of a company that you’ve put your body, heart and soul into to someone who has done no work in, on or for that company, but whose work could eventually benefit greatly from its inclusion - also a strong disincentive.
At the very least…
I suggest a slightly different approach. NO royalty payments and NO equity on music startups. At least till they get going properly. Let them use the fruits of the industry to grow the industry.
A 12-month free ride (or, more realistically, 24) is a sound and fair investment in both the future of the music 2.0 businesses and the ongoing income of the copyright holders (by which we probably mean the record labels, rather than the artists) themselves.
In other words - stop trying to stifle growth. Genuinely support entrepreneurial activity, and agree to come back in a year or two to see how things are getting along. Then you can reap the fruits of that investment. If there’s no business, it wasn’t going to make you any money in the first place. If it’s a wild success, then you helped make that happen. NOW you can get involved and start reaping the benefits.
I’m going to take this one step further and suggest something that I’m guessing some people in the music industries might find to be radical. But it’s worth bearing in mind that there are no instances of this idea being applied to an industry where it hasn’t worked to everyone’s massive advantage.
The Record Industry Innovation Prize
- New online music startups can register to innovate competitively.
- All registered startups are exempt from all copyright payments for the first two years of their operation, in order to facilitate and incentivise rapid growth.
- The best and most successful startup gets a ten million dollar cash prize from the record industry.
After the two years, and the award of the prize, the record industry and their representative bodies can have the conversation about royalties or equity… but in a way that has actually resulted from some investment that has focused on growing the industry through technology and innovation.
By actually using copyright to incentivise creativity, new and otherwise unexplored business models, frameworks and systems will be invented, tried and tested, risk-free. While it may be excruciating for some to sit and watch the most successful of these ventures earn massive amounts of money that they won’t be able to skim off the top for music royalties for a couple of years, the simple fact is that this is a necessary cost of survival at this point.
Attracting the smartest minds in technology and creative innovation is an investment in the future of the record industry. And offering an incentive to innovate is the way to attract them.
But it’s not in any way a gamble. And nor is it lost money. It’s the allocation of resources, time and space to build the engines of the future of the recorded popular music industries.
It’s an embryo of an idea - but I think it has promise. What do you think?