3. Getting Paid For Your Music Online – Digital Music Rights

What This All Means For Independents

Opportunity

Digital music represents a powerful opportunity for the independent community, as a compelling new promotional outlet and increasingly as an alternative source of income. The independent music community's 20% share of the market is underrepresented in most online services today, despite the fact that users consistently cite rich and diverse catalogs as a must have for music services.

The design of most digital music software encourages the discovery of new music, and that represents another promising opportunity for indies. Independents have proven to be the breeding grounds for new musical innovation and trends again and again, and represent an important and vital sector of the music industry for many fans and the business alike.

Likewise, they've repeatedly influenced and innovated the way business is done in the industry, and online music represents another chance to make an impact for the better. Indeed it appears that the majors are primarily concerned with preserving traditional physical CD sales and their high profit margins. Yet at this critical point when these new services are establishing themselves and the values of the rights that they depend on are being defined, the majors are the only ones making the decisions. By engaging in this process in a way that works for the rightsholders and also encourages new methods of online distribution, the independent community has an opportunity to help lead the way to new and solid avenues for earning income online.

For rightsholders, royalties from digital delivery services will become an important source of income with many side benefits: there's little or no additional cost to deliver the music online that you already paid to record, manufacture, and promote; the services offer exposure to new fans and new promotional opportunities; and additional physical sales are generated by service partnerships with online retailers. Digital delivery creates many other interesting possibilities for independents, such as making limited edition or out-of-print catalog material available to fans, releasing live recordings or other special projects that are too costly to manufacture or produce physically, and releasing music online frequently and quickly after it's produced outside of normal release cycles. These are opportunities that major labels either can't or haven't taken advantage of.

The Dilemma for Independents

While there's definitely a promising future for indies in the digital music world, it's a confusing landscape and there are barriers associated with every opportunity.

Prohibitive work and cost — there are over 50 services out there, with new ones appearing daily. Most small labels have their hands full as it is just getting their physical releases promoted and in stores. Licensing deals come with contracts and attorneys and take a lot of time and money, resources that are always in short supply for independents.

The Major-Indie Gap — The services often don't understand the nature of the independent music world. Aside from not really "getting it," they've been overwhelmingly focused on the majors; they simply don't have the time or resources to give the multitudes of indies the attention they deserve.

Preferential License Terms — Thus far independents frequently ended up with less favorable contract terms than the major labels. Unfortunately, the lack of relative bargaining power results in the independents being treated with different standards as the majors receive preferential treatment.

Urgency — The digital music industry is developing at a furious pace, and new systems, rules and technologies (and revenue possibilities) are created all the time.

These challenges seem daunting at the outset, but the services are constantly expanding their catalogs and eventually will be able to include a much larger portion of the independent music market.

Continue: Looking Forward