London-CallingThe digital music market has been taking a battering on two fronts: Where record labels have hammered digital content companies for upfront advances in order to use ‘their’ content, for example video, those same companies have been hammered at the back end by the licensing societies for the use of that content.

So, in summary, as a content aggregator or provider you pay up front to access the content and then again once the public has consumed that content. Somewhere in the middle, you as the content provider are meant to monetise that content to pay off both ends and maybe make a slice for yourself. Tough challenge when advertising is thin on the ground and those same music labels don’t even use online advertising much.

The only content provider of note to score off of music was MTV (many years ago) and the labels are damned sure that mistake (i.e. music videos for free) will never be repeated!

That has meant providers have needed big pockets and big balls in order to take a punt in the music space. Many, including big names like Yahoo! and AOL in the UK have retreated licking their wounds and deciding to focus on Money, Cars, Property, other Entertainment instead. Leaving an increasingly sickly UK music scene.

Now, the game may be changing and getting a little easier as the Performing Rights Society (PRS) has announced it’s dropping its rates in the UK from an extraordinary 0.22p per track to a more manageable 0.085. The likes of Pandora and YouTube (though that was more a spat directly with the labels) were also part of that retreat and so, hopefully not too late, the PRS is opening the door just a crack to allow a little light into the squeeky tight business models for online music providers.

The content companies *may* come back but given the continuing squeeze on their budgets as advertising drops off the cliff, it might be quite some time before they come back to thinking about music. Once burned, twice shy indeed.

UPDATE: The EU is also nudging the music industry to get its house in order when it comes to pan-EU licensing, which has also been a huge blocker to digital music businesses reaching an economy of scale to match US rivals.

Advertisements