Digital Music Startups: Asking Permission vs. Begging Forgiveness

[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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