The Cost of Granularity in Music Copyright

It might be just my very partial view on some high volume/low unit price markets, but it seems that at some point the cost of the granularity required for a royalty based remuneration system is just too high, and the wholesale market should move to upfront fees for creators, and to catalogue brokering. This assumes that the cost is visible however, and is falling on the parties who can take appropriate measures to contain it, or change their models.

By way of illustration, even semi-efficient developed economy CROs end up taking deeply unfair and desperate measures to keep their rosters small, the goal being not to notice as many performances as they can get away with. The ‘300 highest-grossing live concerts’ method used by ASCAP for instance is clearly going to weight distributions heavily in favour of an elite cadre. But would a random sample of 300 from the top 3000 be any fairer?

This is one of many examples where it seems that collectivisation really does not work in a way that many would consider modern and fair. Chop the market into three on the vertical and you can easily see how ‘fairness’ for each third has its own particular sweet spot, and how different they are. It’s probably a bell curve with the edges migrating into their neighbouring sections where possible. The super-elite are trapped into paying costs to collect for their inferiors; nobody wants to serve the ‘penny a year’ horde.

Chop it in thirds on the horizontal – giving three organisations each roughly a third of the total revenue, and you can imagine how the different platforms might innovate to attract particular communities of musicians. Being great at collecting from arts centres and publicly funded halls perhaps would serve the modern classical and jazz performers and composers. Beer halls and cafes would presumably skew towards Schlager in some places. But that means a kind of ‘genrefication’ as creators seek markets with more efficient collection and stop breaking the rules quite so much (as they do now, but with less explicit data to guide them).

What does this mean for the organisations and businesses that depend upon a skewed distribution of granular royalty flows, or that have built franchises in collecting and skewing those flows? Many of the latter are quasi-governmental, or operate under ‘no competition’ regulatory regimes. Dislodging them and the businesses that depend on them will not be comfortable.

For many creative people however getting paid up front and allowing others to take the risk has great value. On a revenue per minute basis the revenue flows from royalty models still demand a large aggregate producer subsidy; which seems perverse and gives both producers and platforms very odd incentives, growing inventory and competition and depressing the investment per minute that could produce compelling and sustainable content production.

Perhaps we are looking at a world of billions of copyright transactions per hour just because the machines can do it, without sufficient thought for what we should incentive and reward. Correcting and improving the administration of collectives might be entirely the wrong thing to do to help creators in a world of giant and relatively open platforms.

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