iodas arnold on licensing new music

ioda's Arnold on Licensing New Music Models

Last week I put up a post about an e-mail written by the CEO of ioda,

Kevin Arnold, asking its artists and labels not to cut independent

deals with immeem or lala.

I closed the post by saying that Arnold was acting like a big label

executive when he said in the e-mail that recipients should contact

client relations with questions rather than contacting him directly.

In response to the post, Arnold e-mailed me to say that he was "pretty

accessible" and inviting me to get in touch with him if I ever needed

to.

I figured that I would take advantage of that opportunity to ask him a

few questions about his approach to advertising supported music.

Here is what I asked:

I wonder if you would answer some questions for me about this part

of your

letter:

"They are noteworthy because both allow consumers to stream

unlimited amounts of music for free. imeem proposes to pay out a

percentage of advertising revenue from its site, but will not thus

far commit to a base per-stream floor rate, which is common in the

industry for this type of use, and in contrast to the deals many of

the majors received according to many media reports (see WSJ

article dated Dec 10, 2007 for details). Under this structure, the

imeem royalty rate could end up lower than the compulsory DMCA rate

paid by non-interactive internet radio webcasters (just $0.0014 per

performance), far below the standard rates paid for full-song

on-demand streaming in services like Rhapsody and Napster."

Why is what is common in the industry or the DMCA rate relevant?

Why should imeem guarantee a base rate? Why aren't you comfortable

with a percentage of ad revenue and letting the market determine

how much revenue is generated?

Here is Kevin Arnold's response:

It's relevant because it gives us a benchmark by which we and our

labels can evaluate new opportunities. How do you know how much you

are willing to pay for a hotel room or another common good unless

you have some experience with what it should cost you?

The same comment goes for your second question: because it helps us

be comfortable with the licensing terms.

A better question from the perspective of our rightsholders would

be, Why should we we license without a base rate, or outside the

zone of terms already presented to us in the market by other

services?

I don't know if these new models will work, or what the right

formula is for success. We're willing to try some of them out and

share in some risk of experimentation, but why should our

rightsholders take the brunt of the gamble to answer the question

with a particular service, when there are other people out there in

the market willing to take the risk, as there have been for years?

We're fine with revenue models based on a share of ad revenue, and

we've licensed them in the past. But there is a floor below which

we and the bulk of our rightsholders are not comfortable going,

based on various floors established in the marketplace by existing

businesses.

Why should we allow any new business that comes along have an open

slate to define these rates? What if the business just isn't good

at doing what it's model depends on, like selling ads and

monetizing music? The rates a business is willing to offer are a

testament to how confident they are executing on their model. The

first challenge is creating a model that works for everyone

involved in it.

I appreciate that Kevin responded to my questions, but I am

disappointed by his answers. He seems to be focused on grabbing the

biggest slice of a shrinking pie for his rightsholders. I think ioda

would best serve its constituents by focusing on growing the pie.

In regard to ad-supported music services I believe that artists are

entitled to only a share of the advertising revenues their music

generates. By working together to grow the revenues and negotiating

the share, everyone benefits and is fairly compensated.