DiCola and Touve (2014)
|DiCola and Touve (2014)|
|Title:||Licensing in the Shadow of Copyright|
|Author(s):||DiCola, P. C., Touve, D.|
|Citation:||DiCola, P. C., & Touve, D. (2014). Licensing in the Shadow of Copyright.|
|Link(s):||Definitive , Open Access|
|Key Related Studies:|
|About the Data|
|Data Description:||The authors collected relevant data for more than twenty music services in total, resulting in a representative sample whose lifecycles spanned more than a decade of licensing efforts. The research comprised both qualitative and quantitative components. They used a combination of publicly available and privately obtained data. The authors conducted private, semi-structured interviews with greater than thirty individuals who had been directly involved in the licensing activities for new music services launched or attempted to be launched in the United States. The interviewees participated in licensing negotiations as technology-firm executives, legal counsel, advisors, or rights holders. These public and private inquiries produced a set of general licensing stories and a set of service-specific case studies, consisting of licensing timelines, process maps, and business logics. The authors collected the data through a combination of public information about the features of interactive services with findings from their interviews about how the licensing process works.|
|Data Type:||Primary and Secondary data|
|Secondary Data Sources:|
|Data Collection Methods:|
|Data Analysis Methods:|
|Cross Country Study?:||No|
|Government or policy study?:||No|
|Time Period(s) of Collection:||
Copyright offers protection to creative works, but new technologies put pressure on that protection. Copyright owners and technology firms negotiate over new ways of distributing and transmitting creative works. Understanding the shadow that copyright casts on private negotiations will allow policy makers to better design the statute in a way that encourages more competition, diversity, and transactional efficiency in markets for digital goods. Prime examples of copyright licensing negotiations are the attempts to license digital music services over the past decade. In this Article we present the first qualitative and quantitative data about the licensing process for on-demand music streaming services, gleaned from confidential interviews with executives and attorneys. We report our findings about the time it takes to license a nascent service, if negotiations succeed; the number of record labels and publishers with which new music services typically deal; the general processes through which these licenses evolve; and how changes in the law over the period may have affected the dynamics of these negotiations. We find that copyright law, alongside business practices and professional attitudes, sets complex background rules for these private licensing negotiations. Copyright shapes, constrains, and also presents opportunities for innovation.
Main Results of the Study
- For those interactive music services that have obtained direct licenses from music owners it has taken as little as nine months and in excess of twenty-four months to obtain those licenses. At the median, licensing activities have required about eighteen months of effort. The majority of this time period, roughly five-‐sixths, is spent in discussions with major rights holders, those “major labels” that are also major publishers. The remaining proportion, about one-‐sixth of the period, is spent negotiating with major rights collectives and other aggregators
- There was a slight decrease of approximately three months over the last decade in terms of the time it has taken to obtain licenses from the set of sound recording owners considered crucial for launch.
- The number of sound recordings with which services launch has increased dramatically over the last decade. Pressplay and MusicNet, both of which first offered their services in December 2001, each launched with approximately 100,000 tracks—just a portion of the recordings contained in the catalogs of the then five major labels. In contrast, Rdio launched its service in 2010 claiming greater than seven million tracks available. The most significant factor that increased the number of tracks available was the emergence of large aggregators of independent rights.
- It is possible to see a significant decrease over the last decade in the amount of time it has taken to obtain a sufficient collection of licenses covering the use of musical works for interactive services—as long as that use fits a discrete set of qualifications. What once was a prolonged operation requiring not months but years of ongoing negotiations can now, at least in large part, be accomplished in as short a timeframe as under ninety days.
- At least in the past, certain service offerings that were not licensed by the quorum of major labels and publishers were voluntarily licensed by other sets of rights owners.
Policy Implications as Stated By Author
- Because the copyright statute so heavily influences industries like the music industry, evaluating the state of private licensing negotiations amounts to evaluating the state of the copyright statute. To consider the merits of copyright reform in one direction or another, policy makers should be gathering all the empirical evidence they can. This Article has aimed to contribute to deliberations over copyright reform by describing the nature of the licensing negotiations for digital music services. Secrecy and private information render it infeasible to construct a large, quantitative data set consisting of both successful and failed attempts at licensing. Studies like ours, however, based on interviews with individuals directly involved in licensing negotiations, shed important light on the realities of the marketplace.
- The direct licensing process can require a surprisingly similar amount of time (at the median) to the time it takes a rate-setting proceeding to reach its resolution. In both cases there are the extremes—when the rate-setting process drags for years, or the direct licensing process never succeeds. But we do need to understand whether and why these two very different paths to market—each determining service features, royalty rates, and consumer pricing in different ways—may actually require quite similar periods of time.
- In future designs of the copyright statute, the goal should be efficient resolution of conflicts between copyright owners and firms with new distribution technologies. Congress must understand that unless they choose to make certain arrangements mandatory (i.e., unless Congress forbids contracting around the copyright statute in various ways) their statutory scheme is merely one constraint in a complex private negotiation. Copyright law, along with business practices and perceptions, determines each side’s bargaining position in private licensing negotiations. Congress, along with the other government institutions that make copyright policy, should aim to give both sides some leverage.
Coverage of Study
|Level of aggregation:||Music services|
|Period of material under study:||2014|
|Level of aggregation:||Individual|
|Period of material under study:||2014|