MAGAZINE

Virtual Roundtable 1: Control and the Creative Industries - who really owns content? [Part I]
Oct 20, 2010

(This is Part I of a two-part article. Stay posted for the next part of this Virtual Roundtable.)

Participants:
Charles Caldas (CEO, Merlin, UK)
Martin J. Thörnkvist (Founder of Songs I Wish I Had Written, Media Market Analyst of Media Evolution, Sweden)
Vickie Nauman (VP North America, 7digital, USA)

In the days when physical data carriers were the only ways to deliver entertainment to the consumer, it was easy to control the flow of the content. Rights owners could decide at what point to release their product and run the distribution; even though unlicensed releases were available, they were not always easy to get.

Digitization and networked computers suddenly made entertainment and media content easy to share, and technologies such as p2p file-sharing not only became vastly popular but also surprised the industries that manage and monetize information.

It is now well documented that all content industries have since struggled to see the free flow of content as a business opportunity but always focused on the threat that came with new technologies.

Some might argue that the real change for all digital creative industries over the last 15 years is a sudden loss of control which neither fits into their existing business models nor the current legislation.

This panel does not discuss the effect of p2p on existing businesses but wants to understand what a sudden loss of control does to businesses and how this can be seen as an opportunity.

* * *

What kind of new opportunities have opened up to content owners through the free flow of information?

Martin J. Thörnkvist: First of all it's important to remember that many wouldn't be around without it. This is certainly true for labels like mine and the artists I'm working with. As a label with no money and no contacts to start with the ability to distribute music for free was a great opportunity. It meant that with "only" some really good songs in our hands we could establish a relationship with fans, the media and other music business functions such as booking agents and publishers that enabled us to get a business going.

It was a good way to start, but I'm also certain it's a good way to sustain and grow the business. I've always said that I rather have 100 000 listeners and 100 buyers, than 100 listeners and 100 buyers.

Charles Caldas: The clearest opportunity is the creation of a market in which the barriers (that often prevented content owners reaching their audience) have been dismantled. A market with no tightly controlled “shop window” - where presence in that window depends on financial power and influence - and where the ability to globalise your reach is far easier is clearly an opportunity for the distribution and consumption of a more diverse and broad set of content than was possible under a physically restricted market.  In theory, a market such as this offers consumers a broader, deeper and more diverse choice than they have ever been able to access, and potentially gives content owners a much broader audience for their art. The challenge is, of course, how to harness that possibility into a financially sustainable ecosystem that rewards creation, fosters an environment that encourages investment and creates new business models for the benefit of both creators and consumers.

Vickie Nauman: Certainly the broadest change and opportunity [in the free flow of information] is access to more varied content from every corner of the world. Consumers have more choice and more options than ever before -- and the distribution of music to people's phones, homes, and mobile lives opens up vast new ways to find and enjoy music.

* * *

Why have content owners always struggled to work together with disruptive technologies and organizations over the last 15 years?

Vickie Nauman: There is an inherent loss of control over distribution and the traditional revenue that was tied to that controlled distribution system.

Martin J. Thörnkvist: I think it's - to a large extent - about fear. Fear of losing a monopoly-like position. The big content owners used to own and control the whole chain from recording to packaging to distribution. Of course they want to sustain it.

Charles Caldas: The simple answer is fear.... of disruption, of loss of control, of the potential for the status quo to be severely disrupted.

Vickie Nauman: For the last twenty years of the 20th Century, music became a highly lucrative "product" -- content owners were able to drive physical format changes and packaged music (songs vs albums) and had great influence at all points along the supply and distribution chain.  Now consumers are empowered, distribution is dispersed, and the core function of labels and studios needs to be redefined; with lower margins, the overall structure and licensing complexity need to be reduced.  The past strategy for music licensing has been to create scarcity in the marketplace so that a higher price can be charged. This no longer works as there is NO SCARCITY.  

Martin J. Thörnkvist: But I also think we need to be fair and acknowledge that it wasn't that easy to understand the magnitude of the digital shift in the first five of those years. Sometimes I think we are a little bit too hard in our judgement. The duo, She & Him, says it well: "Change is hard."  Content owners that are still suing their customers are just ridiculous and have disqualified themselves from this discussion many years ago.

Charles Caldas: From the point of view of an independent, ironically, independent music companies have been at the forefront of innovation and creation throughout the past 15 years, yet have been damaged by the behaviour of the most powerful organisations who have dealt the worst with change as much as they have by illegal consumption of their repertoire.

The possibility that all of the players in the industry could operate in a market where creators and investors are rewarded and incentivised to create value-added, consumer friendly and sustainable music and entertainment services seems achievable. Yet for many independent companies, it is often the industry itself that throws as many obstacles in the way of the quest for success of any illegal service.

(See Part II of this Virtual Roundtable here.)

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