Alternative to the iPod, Cloud Technology and Music Sales

Aaron Kleinman is a first year JD candidate at Osgoode Hall Law School and currently enrolled in the course Law & Social Change: Law & Music, in Winter 2011. As part of the course requirements, students are asked to write a blog on a topic of their choice.

Utilizing online services, like Grooveshark, Pandora, Spotify, MobileMe and Digital Music Locker to allow consumers to listen to and store music can be a great opportunity for the Canadian music industry to bridge the needs of the industry with the wants of the consumer.

Clouds are an easy way to share your data instantly between several computers and are quickly becoming a useful tool. The range of devices that an individual may have with internet connectivity lends itself nicely to the idea of one centralized source for music.

Networks are becoming faster; it is easy, and legal, to stream high quality video from YouTube and Netflix to your TV instantly. But why should this be limited to video? Grooveshark is one website that gives users around the world access to an enormous collection of music for free while complying with the DMCA copyright laws. Users upload music onto the site and copyright owners get paid for use or can have their material removed. Streaming services are an excellent opportunity to enhance exposure of a label’s collection and gain revenues in the process. Record labels are signing up for the service, including EMI, and making their collection available. This represents a great opportunity for the Canadian music industry.

Pandora is another online music streaming database that pays for music. It streams its collection to the user continuously based on your song choices, creating ‘Pandora radio.’ Over the first nine months of 2010 Pandora paid $45 million in copyright fees in the USA, where there is a licensing scheme available. However, Pandora is still unavailable in Canada.  In Canada, royalties from such a service to record labels, artists, and authors comes from tariffs certified by the Copyright Board of Canada.  While SOCAN’s Tariff 22 has been certified, the corresponding Tariff for performers and record labels has not. Uncertainty in the quantum of performance royalties has prevented copyright holders from collecting revenues and services from launching in Canada.

Spotify is another service available in several European countries, and recently signed a deal with Sony in the USA. Most devices with an Internet connection (a computer or smartphone for instance) are able to stream music from Spotify’s huge catalogue legally. Performance rights are paid, which are becoming a growing source of revenue for an industry which continues to face mounting losses from piracy.

However, listeners still want to own the music that they pay for. Last year alone, $4.3 billion was spent on digital music in the USA. The availability of digital media to save your collection and ease of sale has allowed this market to thrive despite the decline in physical sales. However, users are still required to copy music from one device to another to listen to their purchased tracks and additional royalties are not paid for the transfer.

One way that this uncertainty can be avoided is through the cloud. Apple’s cloud service, MobileMe, syncs your address book, calendar, photos and files in real time over all your Apple devices from storage on its server. Rumor has it that MobileMe is about to be expanded, and made free. The revamped service may include a ‘digital locker’ for all your media, including videos and music, and allows you to stream and download your purchased music from your locker, similar to the shut down Lala. Allowing users to buy and store their music online, once verified as licensed, could be a significant niche for the music industry and a viable new digital business model in its fight against piracy.

The ease of use will arguably be unmatched by its illegal counterparts. The availability of high quality music on-demand throughout all your WiFi (or 3G) enabled devices is something consumers may prove willing to pay for. Additionally, the record labels will be able to collect data based on its users’ libraries and better respond to their tastes.

Online storage services can be a boon for Canadian Record Labels, bridging the wants of the consumers and needs of the creators. Apple’s revamped MobileMe service and Google’s Digital Music Locker, in addition to online streaming services, represent a tremendous opportunity for the music industry. However, if the necessary licensing deals are not put into place quickly the future of these types of service may end up in the hands of pirates. By responding to consumer interests over the digital market and adding new functionality copyright holders can give consumer what they want, generate additional revenues and combat piracy.