Getting Back On Track: Some Tips For The Music Business

Last week, in the wake of Sony (NYSE: SNE) and YouTube reupping their licensing agreement, we wrote about how rare it is to see deals between the labels and digital music companies, and we explained why that is. In short, it’s a function of the way such deals are structured, and of the damaged psyches that each side brings to the negotiations. The record labels have filed a slew of lawsuits against digital music companies in the last few years, and that bad blood was underscored this week with the news that EMI was suing digital music startup Seeqpod, including its investors and partners.

After the jump, some specific steps that both sides can take to make the negotiations more fruitful

So what can be done to break this logjam? Broadly, digital-music companies need to do a better job of extracting value from their audiences to use as a bargaining chip with the labels. They also need to develop business models that aren’t so dependent on the music itself. The labels, for their part, need to seriously consider developing their own wholly-owned, independent digital businesses, and then striking only a few deals with the largest digital companies as a complement to those home-grown ventures.

First, the digital guys. They need to …

Stop distributing record-label content without approval. The digital companies need to get the proper licensing before releasing the music online, not after. Sure, it is frustrating that it takes so long to license content from record labels (years in some cases), and it’s even more frustrating to have to meet their demands, which tend to include large upfront payments and unprofitable revenue splits. But using their content without the owners’ consent (as many digital companies do) and then expecting negotiations to go smoothly isn’t the answer. If digital companies come to the table openly acknowledging the value of the labels


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