👉 Follow the Deezer Story here. Part 1, Part 2 and Part 3 have already been published!
Licensing any IP is complicated, but licensing music is one to two orders of magnitude more complex, especially when you want to launch a new model. I knew that our most significant moat would be those licenses, and if we could get them, we would be in for a crazy ride!
Thankfully, in hindsight, we were so naive that our complete lack of understanding of the complexity was a strength. Otherwise, we would not have done it. We were oblivious!
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Copyright Corner
Music Licensing is Extremely Complex: for each track you need 6 separate licences
When you listen to a track, it is the result of multiple ingredients, each of them with its copywriting:
Composition Copyright (Musical Work) covers the underlying musical composition, including melody, harmony, rhythm, and lyrics. It is held by songwriters, composers, and lyricists and protects the written music and lyrics, ensuring that the creators are compensated for performances, recordings, and other uses of their work.
For instance: the score and the lyrics are the two main elements covered by this right
Sound Recording Copyright (Phonogram) covers the actual recorded performance of the musical work. It is held by performing artists, producers, and record labels and protects the specific recording of the music, ensuring that performers and producers are compensated for the distribution and use of their recordings.
For instance: “What a wonderful world” has been initialy performed by Louis Armstrong but in 1993 Israel Kamakawiwoʻole performed it and released it’s own version. In that case in the same composition copyright but two different sound recording copyrights
Performance Rights cover the right to perform the musical work publicly. They are held by songwriters, composers, and lyricists, typically through performance rights organizations (PROs) such as ASCAP, BMI, and SESAC in the United States or SACEM, IFPI, and SPPF in France. This ensures that creators are paid when their music is performed live, played on the radio, or streamed online.
Mechanical Rights cover the right to reproduce and distribute the musical work in physical or digital formats, such as CDs, vinyl records, and digital downloads. They are held by songwriters, composers, lyricists, and their publishers, ensuring that creators are paid for the reproduction and distribution of their music.
For instance": prior to “selling” or playing any music track, one needs the support where the music has been recorded. Back in the days we were talking about vinyls, tapes, CDs, MDs, and still today an MP3 or WAV is covered by this copyright even though the term “mechanical” is totally irrelevant.
Master Rights cover the ownership of the master recording of a music track. They are held by record labels or the artists themselves if they own the masters, ensuring that the owner of the master recording controls the reproduction, distribution, and licensing of the specific recording.
For instance: one needs the master rights to actually distribute anything and that’s were the music labels became the gate keeper of the music industry because they were putting the money upfront to record the composition into their studios. Nowadays, the cost to produce a master has drastically decreased, this is why artists are more often than even creating their own masters to get more control of their music.
So, if you want to stream one track, you need six licenses from songwriters, composers, lyricists, publishers, music labels, and performance rights organizations. Generally, those licenses are bound by country, meaning that a publisher or a label may have the right to a catalog in France but not the US.
Music copyright depends on the distribution channel and the country
Thankfully, songwriters, composers, and lyricists have publishers aggregating them, so now we decrease the universe of stakeholders from quasi-infinite to two principal stakeholders: publishers and music labels. While significant players in each category represent between 60% and 80% of the local catalog, and the remaining 20% to 40% represent hundreds of publishers and labels, you decrease the number of stakeholders, but the number is still huge. One could push back and argue that the long tail is not that important... Guess what? Taylor Swift owns her masters and self-publishes, and the same goes for Chance the Rapper, on and on.
To simplify music licensing, Music Publishers and Music Labels use Performence-Right Organizations to streamline the process
The music industry recognized the atomicity of its license ownership and decided to create performance-right organizations (PROs). These organizations aggregate music labels or publishers and offer a blanket license for specific distribution channels: radio, TV, restaurants, retail, etc. For instance, if you want to launch a radio in the USA, you need licenses from BMI, ASCAP, and SESAC. In France, the three leading performance-right organizations are SACEM (publishers), SPPF (independent labels), and SCPP (major labels).
End of copyright corner
Navigating the Licensing Landscape
Amen! To launch Blogmusik, we just needed a license with the 3 main French PROs: SACEM, SPPF, and SCPP.
Well, no! Those three organizations have mandates for a specific category of musical distribution, and unfortunately, on-demand music streaming was not part of their mandate.
PROs are limited by the type of distribution channels they are allowed to license, unfortunately, music on demand was not part of their mandate.
We saw Blogmusik as a freemium model from the get-go, whereby users would use a limited version with subpar quality and ad-supported for free. Then we could upgrade to a premium version with better quality, more features, and no ads. Remember, in 2007, smartphones were not yet a thing. Blackberry was the closest thing one could get to a smartphone. We saw mobile as a distribution channel but needed to learn how to execute a strategy covering dozens of screen sizes and operating systems. We also considered the iPod, but the closed Apple ecosystem made it impossible to break into.
From there, the three of us (Michael our counsel, my co-founder, and I) brainstormed about the licensing framework, starting with the user experience:
Music on demand is the main value proposition to let users pick and choose their tracks, organize them in playlists, and share them with their friends
Interactive radio as a way to discover new tracks and create a holistic experience
From a business model standpoint, we would leverage free ad-supported and subscriptions
Learning from the Pioneers
We drew inspiration from the experiences of other music-streaming pioneers:
Pandora.com opened the door of interactive radio, leading to the creation of the interactive radio blanket license with BMI, ASCAP, and SESAC in the USA
Last.fm opened the door of social networking in music, creating the interactive blanket license with PRS in the UK.
Rhapsody.com open the door to music subscriptions in the USA
SpiralFrog was the first service to offer free music downloads with the backing of all the major labels
Ruckus was a free streaming website dedicated to students in the USA
Imeem was also a pioneer in social music discovery
While these services paved the way in various aspects of music streaming, none had emerged as a clear winner. We believed that Blogmusik's superior user experience and a model funneling users toward paid subscriptions gave us a competitive edge.
Ready to Pitch!
With a deep understanding of the licensing landscape and a vision for the future of music streaming, we were ready to pitch Blogmusik to the French PROs and other critical stakeholders in the industry. Our journey was just beginning, but we were armed with the knowledge and determination needed to navigate the complex world of music licensing and bring our dream of a revolutionary music streaming service to life.
The road ahead would be challenging, but we were confident that our innovative approach and unwavering commitment to creating the best possible user experience would set us apart in the rapidly evolving world of digital music.
👉 Follow the Deezer Story here. Part 1, Part 2 and Part 3 have already been published!
👉 The next Episode of the Deezer Story will be published on July 6th: Dancing with the Sharks!
Thanks for reading Jonathan’s Substack! Subscribe for free to receive new posts and support my work.