Recently I was on a panel at Northwestern Law School with another lawyer, a musician (who happens to ba lawyer too) and an ASCAP representative.  Our topic was the effect that cloud or subscription based music services will have on performers and songwriters.  While I definitely had my own opinions on the topic, it was ear/eye opening to hear from my fellow panelists. 

Most music lovers seem to have their own private way to listen and enjoy their music.  While there is a lot of overlap amongst listeners (iPods, satellite radio, pandora, car radios, home stereos) everyone has their own unique method to purchase, stream, listen and (now most importantly )travel with their collection.  In the past we would break out our record collection and play records in the family room.  Then came the cassette and the walkman.  Our record collections became somewhat mobile and we could grab our favorite tapes and walk around or drive while listening to our collection of music.  Technology allowed for better sounding recordings to travel along with us with the invention of the CD.  However, like one of my panel compatriots aptly pointed out, a music fan was a prisoner to his cd collection; still rather bulky and highly scratchable, you would have to lug a box/book of cds with you on each road trip and hope that they did not fall between the seats or get scratched on the dashboard. 

Enter the MP3. A computer file that is quickly dowloaded and containes cd quality sound.  The digital album revolutionized the way we consume music.  As with most revolutions, the infrastructure that existed prior to the revolution (the big music label system) fell.  Brilliant entrepreneurs and crafty opportunists from Apple to Napster entered the fray and came out making billions of dollars from the shift.  For the everyday consumer of music, it became easier to listen to music wherever you wanted to do so.  Your entire record collection can now fit into the palm of your hand, be programmed to your car’s stereo or be shared with people in your office with a click of a button. 

Now that the digital age of music is over a decade old, there is yet another shift occurring.  Technology again is making it easier for people to listen to their music collection regardless of where they are.  The clouds have come rolling in. 

Pandora has already helped put the cloud on the map with approximately 80 million users (1 new user every second per the www.digitalmusicnews.com).  But services such as Spotify, Sony’s Qriocity and Google’s delayed cloud service will take it one step further.  While Pandora allows you to listen to music based on bands or songs you tell it you like, the cloud subscription services allow you to pick all of your music.  Essentially, you will no longer have to actually purchase a song, let alone an album.  Rather, you will pay a monthly fee that will allow you to pick your favorite songs, categorize them, rank them, etc. and, most importantly, take them with you.  Whether you are listening on your hand-held device (smart phone or iPod type device), on your computer, in your car or listening to your home stereo system, your music will be there waiting for you.  As long as you keep paying the monthly fee, that music will be with you. 

As a consumer, I think cloud based systems are the bees knees.  Technology should make things easier and better.  Allowing me to go from my office to my car without missing a beat of the song I was just listening to (I’m very fast) and without plugging anything in, is amazing.  As a lawyer who represents musicians and songwriters, I’m worried.  For interactive internet based music providers (where the user gets to select the songs he/she wants to listen to) the royalty rates are negotiated between the labels/publishers and the cloud provider.  This means that the labels and big publishers negotiate pre-determined revenue shares for each stream of a song; typically a teeny tiny fraction of a dollar (in England the rate is thought to be around 0.00085 pound).  A famous example of how potentially horrible these rates can be is the report that Lady Gaga who had over one million streams of Poker Face on Spotify in the UK earned $167.00 (click here for more on that). 

The labels and publishers in the US are fighting for more per stream.  But don’t go rooting for them quite yet.  They are negotiating deals so that they actually get an equity or ownership stake in the cloud based service.  So while it appears as though they are fighting for the artists (which some of them might actually be doing), they are also positioning themselves to make as much money as they can in the process.  If the clouds make it unnecessary to ever download and actually own a song, how are the songwriters and artists going to recapture that lost income?  As of now, the songwriter lobbyists are doing a good job of asking that question and fighting to establish fair payments for musicians. 

The laws in place that cover interactive internet radio and subscription services did not imagine the day when streaming would eclipse downloads.  That day has clearly arrived: “Streams of music are eclipsing everything,” Universal Music Group UK chief David Joseph recently told the Guardian.  “It’s a different digital currency to downloading. You’re dealing with 175 million single tracks bought a year compared to 7 billion streams of music.” (from The Digital Music News).  Just as technology has adjusted, the laws dealing with fair payments to the providers of content need to be modified. 

The bottom line is that just as the cassette replaced the record, the cd replaced the tape and the mp3 replaced the cd, the cloud is going to replace the downloaded mp3.  The clouds are rolling in and the artists may be left in the impending dark.