Opinion

How the YouTube era damaged brands' relationship with the music industry

The music rights landscape is fragmented and complex. Add in the content boom and the stumbling blocks for marketers get worse, writes Richard Kirstein, founding partner of music buying specialist Resilient Music.

At this year’s SXSW music conference, no less a figure than Paul Krugman, the Nobel Prize winning economist, was discussing a $64,000 question shared by brand marketing and procurement execs the world over:

"How much is music worth?"

It’s a pertinent question.Especially in the YouTube era where, to all intents and purposes, music has become a ‘free’ commodity to an entire generation – some of whom are joining the marketing profession.

Those who ignore the finer points of intellectual property do so at their peril

As envisaged by David Bowie more than a decade ago, music now flows openly like water. Fans no longer need to plumb the murky waters of Pirate Bay since the entire history of music, licensed or otherwise, is now available at a click. However, against this consumer backdrop of diminishing value, for brands and their agencies, negotiating the price of music licences for marketing communications remains a minefield.

The music rights landscape is fragmented and complex – controlled by record labels and music publishers - and those who ignore the finer points of intellectual property do so at their peril. (On this point, Bowie's future-gazing went somewhat awry - in 2002 he also predicted that "copyright…will no longer exist in 10 years".)

Fight for your right

The unlicensed use of a Beastie Boys’ track by Monster Energy drink is a high profile and salutary lesson for those who bypass the rules - resulting in an award against the brand of US$1.7m for copyright violation and a further US$668,000 for legal costs.

Ironically, for marketers the challenges are particularly accentuated when it comes to the use of music in online video. This presents an obvious challenge, as that’s precisely where eyeballs and ears are increasingly focused – so brand campaigns follow that audience.

The Beastie Boys: the group said they would have turned down Monster if it had asked for permission

In July this year, I co-presented a workshop to ISBA members called 'What’s Next For Content Production?'. This examined the relentless growth in online video, predicted by Cisco to be 84% of all web traffic by 2018 – much of which will contain music. Whether intended for owned, earned or bought online media, brands expect their video content delivered by production partners with greater speed, agility and cost efficiency.

While this is a laudable goal, it fails to recognise the increased risks arising from a continual 'just-in-time' content production line in which dropped balls can lead to legal claims and unexpected costs.

While consumers’ perceived value of online music falls, it’s the polar opposite in licence fee negotiations for online branded videos in which music rights owners have sought to strengthen their hand.

Three strikes

Brands are often surprised by increasingly tough commercial terms demanded by music rights owners for online video

They have a suite of automated tools to monitor the use of their music; many brands don’t realise that record labels and music publishers can take down video content at will if they believe their music hasn’t been properly licensed. This counts as a 'strike' against the offending party’s YouTube channel.

Worse still, YouTube’s three strikes rule results in complete channel suspension for multiple offences – arguably a catastrophic outcome from both marketing investment and brand reputation perspectives.

In addition to the legal risks, brands are often surprised by increasingly tough commercial terms demanded by music rights owners for online video.

YouTube and 'Catch-up TV' channels are now priced by many record labels and music publishers at close to parity with broadcast TV media. Furthermore, music rights owners increasingly mandate geo-locking to restrict online visibility or charge punitive fees for global online licences. The result?

Friction, misunderstandings and a poor commercial outcome for marketers.

Vicious circle

Brands blame their agencies, who blame the music industry, who blame the brands. In short, it’s a vicious circle. Like the end scene in Reservoir Dogs.

The solution, perhaps predictably, is education and improved planning. The digital age demands that marketers’ understanding of music goes beyond its strategic and creative power.

Without a better grasp of the commercial rights elements, brand teams will forever be stumbling into unfamiliar territory littered with impenetrable jargon and multiple rights owners – they will fail to understand the cost drivers and how to balance the scales during fee negotiations.

So, the answer to Paul Krugman’s question is increasingly: "More than you budgeted for" - unless, that is, you have sufficient knowledge to buy music with optimal efficiency. Without the proper skill sets or experienced advisers at their side, brands will forever be caught in a standoff in which Mr White has a gun to their head.

Richard Kirstein's book 'Music Rights Without Fights' will be published by Rethink Press in early 2016