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[qi:084] Despite all of the issues plaguing the music industry these days, there is plenty of innovation in digital music to be found from a range of startups out there. Many of these startups require content from the labels, yet choose to plow ahead with their […]

[qi:084] Despite all of the issues plaguing the music industry these days, there is plenty of innovation in digital music to be found from a range of startups out there. Many of these startups require content from the labels, yet choose to plow ahead with their product marketing without getting licenses. This irks the labels, of course, but it’s of their own doing — it is generally much easier to beg forgiveness than ask permission.

Given all the hoops that need to be jumped through — technical, financial and legal, to name a few — negotiating content licensing deals with labels can take months. And that’s if they’ll do a deal with you at a price you’re willing to pay. Of course, the labels have sound business reasons for making companies jump through such hoops.

But from a practical perspective, a cash-strapped startup typically won’t have the patience, expertise or resources to ‘ask permission’ as such. Instead, they calculate that it’s better to move forward with bringing their product to market and deal with the consequences if and when they gain traction (because if they don’t gain traction, no one will come after them and it will all be moot anyway).

The founder of one innovative service (with good traction) whom I recently spoke to said his backers encouraged him to follow the ‘beg forgiveness’ route rather than negotiate directly with the labels. On the other hand, I know of another startup that has tried to negotiate direct deals with the labels over the past couple of years, holding up its full launch in the process. Traction for them? Not so much.

While the original Napster is one example where begging forgiveness didn’t pay off, more recent examples abound of successful startups that begged forgiveness once they had traction: iMeem, YouTube and MySpace immediately come to mind. I also know that some labels look askance at Last.fm and its $275 million acquisition price and, given the license fees it paid, are determined not to let that happen again.

It’s understandable that the labels want to capture more of the value that they feel their content creates. But in order to do so, they’ll need to not only increase the cost of begging forgiveness, but make it quicker and cheaper for sites to license their content. Finally, I think the labels recognize this and want to do something about it (full disclosure: my company, Brightcove, is working with some of them in this area)…but the quicker they do so, the better off they’ll be.

[Raghav “Rags” Gupta is VP of Consumer Services & Partnerships at Brightcove, where he has worked since ‘05, prior to which he was a senior executive at Live365. His blog can be found at www.ragsgupta.com . The views expressed here are personal and do not necessarily reflect those of any Company with which he is or has been affiliated.]

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  1. Today’s Cool News Monday, November 19, 2007

    Digital Music: Begging Forgiveness

    Back in those halcyon days before Lars Ulrich became the Spokesmodel for Corporate Greed, I really believed Napster offered the opportunity to blow up the label system which has always been bad for artists and create a new model in

  2. Andrew A. Peterson Tuesday, November 20, 2007

    I think that disruptive technologies are necessary right now. The product they can deliver is so superior to what is available legally (see oink’s pink palace).
    When all the video-sharing sites were sprouting like crazy back in 2005 and 2006, it was YouTube that was so obviously set up to “obliviously” allow illegal uploads, while the other sites seemed much more guarded in their EULAs against copyright violations. And it’s those very violations that made YouTube stick.

    There are so many kinks to work out in the area of digital media and intellectual property… If you listen to the teachings of Lawrence Lessig like I do, you’ll agree that some major changes in perception about the ownership of ideas are in order. If you disagree with that side of the debate, you’ll at least agree that digital makes it suddenly very hard if not impossible to satisfy the consumer using the traditional models.

    If nothing else, it makes this an interesting time to be alive.

  3. I recently blogged about how big media companies use IP litigation as a negotiation tactic with internet startups – quite relevant to this topic. More at http://lsvp.wordpress.com/2007/11/07/litigation-as-a-negotation-strategy/

  4. It’s a great idea really. While you are getting traction as a startup under the radar, and building up a fan base, the music industry can be seen as a bad guy, and you get free publicity in one of those David -vs- Goliath news stories.

  5. How Can the Music Labels Save Themselves? – GigaOM Monday, February 25, 2008

    [...] I’m not sure that this will fully replace the foregone revenues from a decline in physical CD sales, but it does make a lot of sense. I’ve been privately telling my friends at the labels that their licensing pricing strategy has been flawed, notably that it’s skewed towards short-term financial rewards. I’ve also been telling them that they’ve priced out a large part of the market, which is one reason that so far it’s made more business sense for even well-meaning startups to beg forgiveness instead of asking permission. [...]

  6. GIGAOM | How Can the Music Labels Save Themselves? – MEDIA & ENTERTAINMENT NEWS Tuesday, February 26, 2008

    [...] I’m not sure that this will fully replace the foregone revenues from a decline in physical CD sales, but it does make a lot of sense. I’ve been privately telling my friends at the labels that their licensing pricing strategy has been flawed, notably that it’s skewed towards short-term financial rewards. I’ve also been telling them that they’ve priced out a large part of the market, which is one reason that so far it’s made more business sense for even well-meaning startups to beg forgiveness instead of asking permission. [...]

  7. Grooveshark Has a New Look, But It’s Still Streaming Unlicensed Content Monday, October 26, 2009

    [...] Android phones due within 2-4 weeks. Historically, the infringe-litigate-settle-license model has worked for sites such as YouTube, while others, such as Project Playlist, never recovered from their legal troubles. Grooveshark [...]

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