As anyone tangentially involved (and by tangentially, we mean you own an iPod) in the music business knows, the recording industry is brutal when it comes to start-ups they perceive are poaching their goods. We all remember the Napster dust-up circa 2001. And just this past week Muxtape, a site where users can upload playlists of MP3, was such down by the Recording Industry Association of America (RIAA). The scuttlebutt is that they’re after a similar site, 8Tracks, next.
The question, as always, is the issue of licensing and whether these start-ups are allowed to use the material without paying royalties. But even beyond that, it actually seems like the music industry doesn’t want these start-ups to exist. Period. Tech blog GigaOm recounts an interesting anecdote today:
“I was talking to an executive at a major label the other day. We were talking about startups and he noted that they either sue these companies out of business or legitimize them out of business. That is not far from the truth. How many legitimate, standalone digital businesses can you name that rely on licenses from the labels for their primary business and are profitable?”
GigaOm makes a good point. There are only a few legit businesses that actually operate successfully with licensed music, and they’re not start-ups. Apple’s iTunes, the new permutation of Napster, and Rhapsody are the few that come to mind. That’s because the RIAA keeps a tight leash on things.
But does the strategy make sense? To a certain extent, the RIAA’s grip on its licenses seems counterintuitive. The more music is disseminated and heard, the more popular it will become, and there were always be a certain percentage of the population who will actually purchase songs they like. Wouldn’t partnering with some of these start-ups that use licensed music—by charging them a reasonable fee they can afford—make more sense than shutting them down?
There are always going to be new businesses like Muxtape cropping up, and what that means is more legal fees and millions spent battling these start-ups. It’s an exercise in futility. Surely someone over the RIAA has to recognize that.
Regardless, the entrepreneur who comes up with a way around licensing laws (and good luck on that count) or who is able to actually negotiate a low-cost licensing fee with the record labels will have a cash cow on their hands.
Lars Ulrich of Metallica was so outraged that his music was being traded for free on Napster back in 2001 that he helped shut it down. Frankly we think he should just be flattered that anyone listens to them anymore…