Collection Societies: The Scent of Descent and Decay

[This article has been published first on ContentSphere.]

The news of Deadmau5 joining Kobalt once more has shown the attractivity and strength of Kobalt. Trent Reznor, Dave Grohl, Paul McCartney, Skrillex, Lionel Richie. All of them are with Kobalt now.

But actually, there’s much more to it. Kobalt is the first player to change the music licensing business in a groundbreaking way. In a bold move, a commercial company founded a collection society.

Within the past 5–10 years, collection societies have been hurt seriously already. But the damage hasn’t been that visible. Their death has been predicted often. Nowadays the signs are clear. Within another 5 years, collection societies will have suffered a huge loss in influence and significance.

Lobbying & Warfare are Killing Best Intentions

Collection societies always made sure their efforts were in strict support of the artist. Of course, „the artist“ should be replaced with „our members“. You may question even this interpretation.

They lobbied hard. That’s good, sometimes. Only few of them fought as hard and brave as German GEMA who are still in court against YouTube. It is a fight that users and the music economy are suffering from: The reaction of YouTube to mute most music videos in Germany hurts music marketing. That’s not GEMA’s fault, it is mean marketing by YouTube. We are enjoying it for more than 5 years now.

Collection societies lobbied in Brussels, Washington, Berlin and elsewhere. But the likes of Google, YouTube and Facebook have a stronger lobby at least in the US. Wars were set on fire against technology corporations, manufacturers’ organisations, internet activists (aka the sharing economy), piracy, fans and sometimes even artists were hit by collateral damage (you may remember Radiohead’s „In Rainbows“).

Anybody left to fight?

Team Conservatives vs. Team Reformers

The most loyal supporters still standing are publishers and settled composers, and politicians who tend to be rather unfamiliar with the business.

On the other side of the fence, there’s technology corporations, DIY artists (including established independent artists and non-established ones), and legions of startups. Also, don’t underestimate one other huge stakeholder group: Anyone who is generating content. User Generated Content. The Common People. All of them have expectations and requirements that often collide with collection societies.

Both sides have their points, and both are right in some… and wrong in others.

I am a co-founder and former Executive Director of Cultural Commons Collecting Society (C3S) which was (and still is) an approach to a modern collection society. For several reasons, it didn’t happen (yet), but that’s another story. Believe me — I’ve seen them all. Fanatics of the Sharing Economy and grim enemies of anyone with a notebook. Actually, the latter is almost a quote from a very prominent member of a collection society.

The collection societies did a good job in defending the palisades. But the GEMA vs. YouTube lawsuit is a perfect symptom of last resistance. In other countries, contracts have been made. The lawsuit represents a Status Quo ready to fall. It may end in a Pyrrhic victory for GEMA at best. Most probably, thanks to Kobalt and others, the court’s decision will immerse in insignificance.

UGC, or the need for Big Data collection societies

According to the collection societies’ umbrella association CISAC they represent 4 million authors. Hold on, and think again: There are up to 200 times more people making music — with an instrument or in a choir. This is an estimation based on the numbers for Germany by the German Music Council. Add to that professional and non-professional DJs and music generating app users, and you might end up with 0.5 billion people or more. Finally, YouTube on its own brings a playground of creativity (to whatever extent) to more than 1 billion potentially active users. This is what’s called User Generated Content (UGC).

Fact is, we have far more than 1 billion people generating content on the net and beyond. What’s there can be distributed and commercially utilised. These users are not mere copyright infringing pirates. They also are deserving payment for any commercial use of their work (if they want to).

Any content can be licensed, no matter how high its intellectual value is. Old collection societies can’t cope with the challenge of UGC.

Everyone considered to launch a collection society… for about 5 minutes at maximum.

Flashback to C3S: When we started with C3S one thing stuck with me. Almost every company dealing in licensing, distribution, streaming or downloads started at the same point. They considered to launch a collection society… for about 5 minutes at maximum, that is. Fully understanding the political backdrop (and backlash), the legal requirements and most importantly of course the perspective of zero commercial benefit made them change the business model before it started.

Enter: Kobalt.

Kobalt has changed the game radically.

A new innovative and digital collection society was and still is in demand. It is in demand by the majority of the music industry. A collection society that truly understands and supports all artists, and that takes full advantage of technology and does not alienate users.

Kobalt has realised and implemented the technical and economic vision which C3S envisioned five years earlier. The difference is, they dropped the strict democratic part.

This is no plea in favour of C3S as an alternative in collection societies, I’m afraid. I quit C3S in April this year — which again is another story. [If you plan to start some new sort of a more pragmatically acting C3S… call me. Chances are I will immediately join.]

Now, with Kobalt launching its very own collection society, the game has changed radically. A point has been reached in music business where corporations are actually willing to undertake this effort. They have the financial means, the reputation and the experience to do it.

It is today that this leads to fluctuation in the Conservatives’ team and the Reformers’ team. Currently, Kobalt is the best of both worlds.

What will be left for the old collection societies?

Publishers more and more will flock from traditional collection societies to the new generation of collection societies. It’s more efficient. The profit increases. It’s less hassle with political debates between collection societies that rather resemble government institutions and their critics.

TV and radio broadcasters in Europe traditionally are providing the highest revenue for collection societies. Now, they are under heavy pressure. With streaming and Apple Music’s Radio kicking in, and TV suffering from YouTube and Netflix and other video on demand services the segment is to shrink extraordinarily. If broadcasting networks want to survive they have to focus on online business and UGC. Here, collection societies can’t deliver.

If the significance in function fades — what about the representation and support of artists? As long as you are a valued customer, Kobalt and upcoming copycats will take care of you, sure.

For artists who might be less successful the threats of some modern time issues brought up another category of interest groups: artist associations. FAC, Younison, GAM, Domus, CoArtis, Gramart, DRMV, Future of Music Coalition and now, founded in 2015, the umbrella association hosting some of them: the International Artist Organisation (IAO).

So what is left? Close to nothing.

Technology is here to fill the gap.

There still are the independent artists and non-established artists. Will they stay? Depends on the conditions they are getting from Kobalt compared to their respective collection societies. Unfortunately, it’s these artists who often have been rather unsatisfied with their collection society’s service.

Enter new technology big buzz blockchain business models — see Imogen Heap’s most recent release of „Tiny Humans“… via blockchain.

Finally, collection societies missed the turn towards embracing the user. This could be the last opportunity for rescue. This only works out if traditional collection societies would be willing to instantly turn their technological infrastructure upside down. They would be well advised to do so. Integrating with Alan Graham’s and Rupert Hine’s OCL can be the rocket drive propelling the lifeboat.

Though, it’s easy to predict: Those composers who tend to stay with the old collection society, well, these are the conservative ones. They won’t agree to undertake really significant changes. Sadly.

I remember a posting from Tim Renner (then Managing Director at Motor Entertainment) a few years ago on Facebook:

„GEMA won’t change. They will implode.“

That’s quite exactly what we are witnessing to start now.