Is AI poised to revolutionize the music industry? Listen to conversations about how AI is reshaping both the business and creative sides of music with Matt Henninger from Music AI and Bill Colitre from Music Reports.
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Episode Transcript
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0:00:10 - Dmitri
Welcome back to Music Tectonics, where we go beneath the surface of music and tech. I'm your host, Dmitri Vietze. I'm also the founder and CEO of Rock Paper Scissors, a PR firm that specializes in music tech and innovation. Music Tectonics is about building a community of innovators in music and tech. We create events, and what keeps us going are watching our attendees and podcast listeners connect with each other and move the industry forward together. One of my favorite things is meeting you, our podcast listeners, at conferences and gatherings and learning from you.
This week, we have two fantastic guests that I first met at conferences Matt Henninger from Music AI and Bill Colitre from Music Reports. These two guests allow us to follow the AI theme and try to discover some of what's brewing below the surface of this deep topic. Bill was actually the first person to come up to me at a conference and tell me he listens to this podcast, and I'm always happy to see Matt's smile at industry events. First up in this episode, Matt gives Trisha some background on how businesses are adopting AI and he discusses his view. That happy to see Matt smile at industry events. First up in this episode, Matt gives Tristra some background on how businesses are adopting AI and he discusses his view that artists have always bent and broken things to create new forms and sounds, and that he expects to see amazing artist-centric creativity from the use of AI. Take it away, Tristra.
0:01:19 - Tristra
Hey Matt, Thanks so much for joining the podcast today. So you see AI from a perspective that is quite unique in the industry, in that you are, you know, you're seeing how companies want to use it. You're seeing how artists are using it, because your company works on both the B2B and the B2C side. So I'm curious what can you? What kind of interesting things are you noticing? How are artists using AI? We talk a lot about how they should use AI, how they might use AI. What's actually happening on the ground?
0:01:51 - Matt
Yeah, no, thanks so much for having me and this is great, happy to talk about it. Oh, yeah, yeah, I see it in two very different ways. I think businesses starting there.
they're trying to as the technology matures. I think there's been it's sort of as it's been a young technology and there's sort of been a stigma around AI in general. I think you see businesses taking a unique, slower approach for implementation on it as they start to become, you know, wiser to the questions they should ask, right, I think I've noticed that the questions I'm being asked about how things are trained and you know the process to produce the result in these things are so much more intelligent and well-versed than they were, you know, even six months ago, and so I think that that's maturing slowly and I think now we're going to start to see, probably the second half of this year in the beginning, and next year, I imagine, some larger implementations are going to start to see as these businesses are starting to vet the tech better from the artist perspective. You know, I think that there's the fork in the road that existed a number of months ago is still there, where you sort of have generative on one side, where you're seeing the sunos and UDOs and sort of this prompt-based experience, and then the other side you see more of like what I would call like a tool, like tools, like AI as a tool, and what I've been excited to see there is, you know, the voice synthesis is sort of a great example of this right, where you know there are platforms that are allowing you to mimic the style of well known singers and things, and that's a whole bucket of rights and folks not necessarily doing that the right way.
But then you also have sort of a license side of that, where we're watching companies say I'm going to record incredibly high quality voice models that are fully licensed right from that artist and it's allowing, let's say, a you, you know, um, a singer, a singer, songwriter, who's demoing tracks, to say, oh, you know, like, although I've recorded this and I'm a male singer, maybe this would present better, you know, with a different voice on top right or a different timbre or different and and they're doing, they're using the same things to remix, to sort of bend and shape.
You know, audio, um, which has me honestly kind of excited about it and and to to look at indie musicians and and I, I, you know you, and I've talked about this, you know, in our some of our other meetings is that, like, I still think that independent artists are some of the most remarkable people in the world, their ability to survive, their ability to thrive, their ability to be creative, to watch these AI tools in their hands to what this next generation of art could be. I think it's going to be really, really, really fascinating. So I think you're starting to see it sort of as I drift around. I think you're starting to see it earlier, earlier in the creative process for what we're seeing, and also in the idea of reimagining and reinventing sounds that may already already existed in space today.
0:04:58 - Tristra
Yeah, I can almost imagine with voice synthesis. You know what if you had, what if you could use it, you know, I know there's it's sort of timbre transfer, so you could also use it to, say, create your own synthetic background singers or use it like on top of an overdub, like.
So you have like a second voice that you're dubbing over your original vocal take and you're, or along with it and you're using a bunch of AI to make that voice sound just a little different. I've heard that already with like really intense kind of things like like auto-tune, but having like multiple layers of these like deeply synthesized voices.
0:05:36 - Matt
So there's a lot. Oh yeah, the idea of like a vocal stack, right, a producer that's like oh, I have to do a five pipe vocal harmony underneath somebody and I can just sing every part and you bury it and all of a sudden, I don't know, we're seeing that in the real world. I find it really interesting.
0:05:52 - Tristra
Yeah, yeah. So there's a lot of upbeat stuff you're laying out here, matt, which is really refreshing, because I know some people have felt very concerned, upset about AI and the way it was being implemented at least some of the hardcore generative stuff. Hardcore generative AI Wow, that's a good hashtag, but what out there should inspire optimism when it comes to AI developments right now. What are you seeing out there that makes you feel like, hey, this could really be something amazing and not terrifying?
0:06:23 - Matt
Yeah, you know I was asked that question. I was, um, I was fortunate enough to be in uh in bergen and norway speaking at a panel over the summer and it was uh during during that uh presentation, the question came up sort of how do you? It was from a student, sort of like how do you not see like doom and gloom, how is this not the end of music? Right? And I think that that when you get into that generative sort of like layers of derivatives creating themselves, right, and it's sort of like what, where does that end? Right, and and my answer, you know, was, truthfully, that I just I choose to be, and it was, it was the sort of an interesting, it was a fun moment, it was a very lively discussion about it, because I sort of go back to my faith in musicians, my faith in independent musicians in particular, that their ability to manipulate technology and bend and break things. And we ended up in this great conversation about the edge playing guitar and how the u2 guitar sound was born from using a pedal the wrong way. Potentially right, it's a delay pedal that then started, right, and you go back to synthesizers and you go back to these artists who get, who get this. It's a tool. They get a tool presented to them and they look at it, they plug it in backwards and then they re-solder it and you think about, like, the manipulation of tape machines and I think about, like you know, or the tom morello putting a switch on the front of his guitar for a kill switch, right, so you end up with that like very staccato release of a guitar, like to me, there's just this endless list of use, like of creative ways. I've seen technology applied and I think that I see that with the tool side of AI, I see that with this I also very much respect this concern, right, where it's like okay, if this isn't thought through, and where did this come from and where's the end of this and why even create it and it's just going to be copy.
I also understand that and that room too, like when we got a little bit farther into that discussion, we ended up saying you know that although the music industry seems to be, you know, not the first or the fastest to pick up new technology, right, the music industry in my, in my opinion, also guards itself and guards ip and respects the songwriting process really is at its highest levels.
That you know, we think about sort of what's going on right now, like the folks and I don't know about you, but the folks that I know that have been in this industry the longest are also some of the most protective of its value. And I think that we're starting to see that too. We're starting to see like, and so I I told the room I said, look, I have, I have faith, I have optimism and faith that, look, there are some bad actors in this space that are going to get removed and we're going to see that happen. But we're also going to see this secondary wave of technologies that are thoughtful in their approach, that have kept the receipts, so to speak, and how they got there and how the technologies apply, and I think in there we may end up with some just fascinating music and some fascinating new approaches and a new toolkit to the most creative people I've ever seen. And that's where I get excited about it.
0:09:53 - Tristra
I love it. So, on the business side, though, I think you've made a great observation that the music business is very protective because of just the foundational business model. Because of just the foundational business model, but also from a cultural standpoint. Quite you know, all shady backroom dealings aside, there is a strong spirit of really caring for artists, songwriters, producers, and I think many of us in the industry got into it because we either are artists or we love artists dearly. But you know, as people think about AI, what are you seeing out there? What are you seeing the key business issues that the hurdles or business model snags or whatever that music companies are facing as they consider and implement AI?
0:10:36 - Matt
Yeah, Well, I think there was this wave right. There was sort of this initial wave of I don't know how many thousand companies right that had AI starting last year, right. It was just like boom, right, kind of like NFTs and universe, like there's this wave and then kind of the tide settles back. We kind of find out what's there, and I think we've seen the same thing from a volume standpoint. And now I think it's more about okay, how and where can these? What experiences can these power? Can the technology power? How can I fundamentally change how a user interacts with music? How does my product go to market? What am I doing? Right, like, I think that there was that sort of product fit everyone. It was like, wow, here's a stack of new tech. But, okay, like, what am I really? What value am I adding? Right, and now I think that has started to settle and now it's like okay, I can start to see what I can do here. But now, how in the world do I build a business around it? Right, or like, you know, where can the supply chain support it? Right, and that was sort of where I saw it from the very beginning was like, ok, the technology is great, but like, but it can't, it cannot go into the supply chain like a regular track, right, you like, look at something like stem separation, for example. Like I mean, the industry can barely handle 100 million tracks moving it around. I mean in every territory, daily management and all the rights types and all that stuff Like imagine multiplying that by seven or 10 or 12. All the rights types and all that stuff. Like imagine multiplying that by seven or 10 or 12. Like you know, I doubt I mean people smarter than me can figure it out I, from the very beginning, was like I don't know, yikes, no, thank you. Right, so if that's the case now it's like okay, well then, where does the technology sit? Right, should it sit on the app side? Should it sit at the distributor side? Should it sit at side? She said the label side, right, how do you track it? How do you report it?
And I think we're now to like this idea which is like okay, now you've got this ability to move the technology around relatively cheaply, I think you're like that's starting to settle. The companies that have like made the infrastructure investments are starting to be able to say, oh yeah, like I can, I understand there's not a lot of money here, like I can find my area and I can provide this experience. So I think you're starting to see a maturation of the rates. I think you're starting to see a maturation of the value. I think it's been a very value-based idea for two years. It's like look, I can do this thing, think it's so valuable, but it's like, but I don't know that yet. I mean conceptually, sure it sounds great, I don't know that yet. I mean conceptually, sure it sounds great, but I don't actually know the value or the cost. So I think that that's maturing.
And then I also think you're about to see a movement out of the cloud. I think that you're starting to see this idea of okay, sure, if I have this gigantic infrastructure and I can run incredibly big models, sure, like that's one thing, but like, can I move this offline? Can I put this locally? Can I start to bring these things to? And then, um, this is where I see this sort of next way from from a business perspective is.
I think it's fascinating to think about what could happen if some of these technologies could be attached to a speaker or be put in your car or attached to a electronic drum kit, like all these kids. It's like, oh, like, whoa, okay, and I think so. I think that that's where you're gonna see. Another step of this is like the marrying of these models is saying OK, can you like company, whoever you are like, do you have the ability to manipulate this technology in a way so that I can give you a chipset and say here are my requirements, can that thing go here? And then, if so, oh, like, and then, and then now you're about to find out again who's made those investments in the training, who's made the investments in the model, who's right, and then who's got the technical. So I think that's kind of where you're going to see a push here in the next year, year and a half.
0:14:36 - Tristra
I think that's really interesting because you know some of these prototypes, for you know chat GPT, like large language models. Prototypes for you know chat gpt, like large language models, those prototypes of hardware like rabbit, or that really crazy one friend which had probably the best launch promo video I've ever seen, but apparently I don't know what it, what it actually is and it's the whole premise is a little depressing, um, but what I'm saying is like the hardware, like there's this sort of urge, I don't know the, the creative, the creative soul of, of of humanity is like we really want this in hardware, right?
It's almost like we're all longing to have a drum kit that has a little AI model component or just had a smart speaker or a microphone or you know, imagine a mic that could use some of these models to do interesting things in real time. So there's a lot of cool potential for hardware uses in it, and that would also perhaps have I don't know someone smarter than me would have to do the math, but it could be great for the energy usage of AI and some of the other concerns people have about AI regarding server farms and the cloud and the electricity and resources you need to run this.
0:15:47 - Matt
I hadn't even thought about that.
But yeah, I mean right, like when you start to restrict the capacity of the device and you say, look, this plugs into an outlet, this is what it does, what can go on here? And you kind of go backwards versus like, how big of a thing can I make? Right? Versus, sort of like, can something small go here and can the model be more bespoke and can it serve like a very, very you know like? I mean we're talking, yeah, the idea of, um, there's a you know technology now for, uh, cinematic source separation, so essentially to to take a video right and be able to separate the music from underneath it, along with the sound effects and the dialogue, and which has some really interesting applications, like from music licensing and replacement, all those kinds.
But you know, you could think about that in a home audio scenario where you know you have a sound barium speaker or something and you say I can't hear the dialogue, those scenes where you're just like or someone who's slightly hard of hearing or is lost in hearing, or like me, because I've played 2,000 shows and I'm always asking everyone to repeat themselves.
0:16:58 - Tristra
Music biz ears.
0:17:01 - Matt
Oh man, that drone right, you could feasibly just have a button on the remote that's dialed up.
That's amazing, and the model's living locally, it's just in the speaker and you could do that. Sound effects down, like I don't need the explosions, right, like you could do it. And so that to me is like the idea of like, but in order to do that, I mean the technical work to do it is huge, right, in order to have a model and be malleable enough to port it and get it on the right system and the work pipeline. But it's doable, like, this is doable and it works and it's like okay, this could get really neat. Again, if I actually think about what I'm doing or what it could do for an end user versus like what's hypothetically me, that that's kind of cool to me.
0:17:47 - Tristra
I love it well. Thank you, matt. This has been a really fun short conversation and a whirlwind tour of of.
0:17:54 - Matt
AI.
0:17:55 - Tristra
I love it. Can't wait to see you in uh in Santa Monica absolutely can't wait to be out.
0:18:00 - Matt
Thanks, thank you so much for having me.
0:18:01 - Ad
This was awesome hey music teectonics listeners, I'm excited to be sharing with you some of our official programming taking place at the upcoming Music Tectonics Conference happening October 22nd through 24th in Santa Monica, california. This first panel is, for a lot of you listeners, how to scale your startup. We'll be joined by experts who have succeeded at making their companies profitable pitfalls to avoid and how to succeed in the current climate. We'll be joined by Daryl Ballantyne of LyricFind, sunjen Young of Influence Partners and Tracy Maddox of Artist Management, moderated by Liz Moody. As always, we'll be hosting a music tech investment panel where we'll hear how the investment landscape is right now, what the most investable categories are currently and tips for startups on meeting and pitching investors.
This panel is stacked with experts, including Bruce Hamilton of Everybody Ventures, amy Lemire of WXR Fund and Phil Quist of Connect Ventures. And this is just the tip of the iceberg. The Music Tectonics team has several other insightful, innovative and forward-thinking panels planned for the upcoming edition. If you haven't bought your badge yet, be sure to go to musictectonicscom to purchase it before the price jump October 8th. Now back to the episode.
0:19:31 - Dmitri
And we're back in this next segment. Bill Coulter of Music Reports and Tristra dive into the role of music rights within the world of AI and Tristra asks are music rights on a collision course with generative AI?
0:20:06 - Tristra
Bill's not so sure about specifically. What's your perspective, Bill? Do you see a path forward that might honor both music and its value and the sort of innovative new technology?
0:20:17 - Bill
Yeah, I mean, collision course is, of course, you know, a little bit loaded and you know they have and they haven't been right.
But obviously some AI companies have taken the view that applicable copyright would tend to analyze what they're doing as highly transformative. They are deconstructing, training elements down to the most granular of probabilistic mathematical relationships and then using the resulting mathematical models to enable others to generate works that fall into classes that would otherwise be copyrightable, but for the fact that current copyright law and policy doesn't recognize the copyrightability of materials created without more human originality than is currently understood to be required by those systems and I'm guessing we're still a ways off from even the initial set of US federal court rulings that will interpret the fair use defense that this implies and following that, of course, there will be splits of interpretation among federal circuits and then, of course, the inevitable appeals, before we're all beginning to see a more reliable sense of where the law comes out on the question at the heart of cases like Concord versus Anthropic, which is specifically around musical compositions and AI, and the lyrics.
0:21:29 - Tristra
the realm of lyrics seems to be making progress a little bit more quickly compared to the realm of audio, bit further down the court pipeline than some of these questions about audio and using audio for training, where I think things get a little more, a little harder to pin down, at least from a layperson's perspective. What do you think?
0:21:57 - Bill
Well again, yeah, from a layperson's perspective, all of this stuff just sort of falls into one giant undifferentiated category and people tend to have their gut reactions to it Either they hate it or they love it. And, of course, with some cutting edge creators, you see a real interest in already bringing it into their workflow and trying to figure out how to work best with it, create with it, because I think most of us are going to find 10 years from now that we're all using AI in some way or another to amplify our existing business processes, and so you know there's a lot to that. But, with respect to Lyric specifically, I think anything that you can do to try and strip down all of the amorphous mass of different things that are going on and focus on one specific type of use, use case, type of work, etc. It just becomes easier to clarify what the issues are around that particular type of work and you can start to get a handle on this otherwise very difficult to get a grip of subject. And of course, you know I started with the US federal courts because that's where the majority of AI companies can be found and hailed into court, but on the other hand, there's very different legal frameworks in other jurisdictions, for example, where moral rights of authors or other historical precedents may produce different results, you know and then there's, of course, a cynical, real politic interpretation that you know, courts and jurisdictions that are home to these multi-billion dollar startups that promise a new era of human industrialization may end up providing a greater deference to those companies than companies or courts and jurisdictions that have fewer AI companies or more creative industries.
So I think we're just going to find our way through this forest very, very slowly and painstakingly, but that's, I think, where we start to see the opportunity for things to.
You know, business always moves faster than the law, right? So what we're already seeing is companies that are doing licenses I mean, most of them are pretty behind closed doors at this point. You just hear rumors of licenses that are being done, but pretty significant, widespread blanket licenses with significant fees already attached to them. I think my concern in regard to those kinds of things is making sure that the proceeds of those licenses are shared with the creators themselves and not sort of taken by the rights owners that control masses of repertoire and simply saying you know we'll, we'll figure out how to distribute this, if at all, by looking at our contracts specifically per artist and then decide what they what we have to share as opposed to you know what we should be sharing like. We saw a little bit of that with the breakage era in DSP streaming. If you remember all that right, hundreds of billions of dollars got built up before any of that got distributed.
0:24:55 - Tristra
Eventually, the big rights owners did the right thing, but it took a while right and we're still kind of sorting through some of that era's backlog when it comes to things like, you know, the Fono 3 payouts from you know, in the aftermath of the MMA and with the MLC kind of working through these historically unmatched royalties. I mean it's amazing how quickly things can get pretty complicated when it comes to those kinds of payouts.
0:25:23 - Bill
Yeah, that's true. On the other hand, it can be a lot simpler than some of the other complexities in Music Rights Administration, which we can talk about a little bit more in a second. But I think the good news on AI rights and licensing is that it should be pretty straightforward once the parties determine what the model for licensing is. Determine what the model for licensing is, and again, I think what's really being done now is more like covenants, not to sue big, broad blankets that are not very specific about what they're saying. They're just saying you can do this class of things and pay us this pile of money and we won't ask too many questions about it. But eventually it's going to get sorted into a more specific framework that will, I think, have probably certain elements that are around training, Like this is the framework for training licenses. This is what the market will bear. This is how that should be distributed. And then on the other side of the outputs model, there will be a different framework. This is the structure of the license. There will be a different framework. This is the structure of the license. This is what the economics of that license looked like.
This is how we measure what was driving value right, because on the one hand you could put in the entire canon of western music, uh, as an input and we could tell the reasonable degree of of confidence, like what recordings at what popularity went into that, what musical compositions were embodied in those recordings. But at that point you have no idea about distribution of value, right? The only way you could distribute value fairly was either to just arbitrarily decide every input is worth the same and of course Bruce Springsteen's not going to like that model or you could say that the inputs have a value that is relative to their historical popularity. But that's a backward-looking view that doesn't necessarily tell you how anyone will use that material once it's in the system or how the system will use that material. The system might find some obscure song to be more valuable to the mathematical probabilistic model that it builds than a hit song that we know of. I doubt that's true.
0:27:34 - Tristra
But well, I know what we're seeing with a lot of these newer platforms like tiktok. Stuff is getting surfaced and, um, younger people are enjoying music that no one would have predicted, like, whether it's, you know, harry belafonte or Rick Maestri, just to use some oldies but goodies examples from TikTok. So, yeah, who can tell what AI will, what AI creators will, surface from back catalog?
0:27:57 - Bill
Exactly and then so when people then use those models to create things on the output side, now you can start to map like, ok, well, what's driving the usage of this thing? So you can look at, for example, the search terms that are put in and if someone is searching for Bruce Springsteen, then that's a very high indicator of value. They're looking for something that sounds like Bruce Springsteen. And then you know how do you design the interfaces of these things. So some companies, scared by you know the litigation in the context of this stuff, may say we don't want you to use any famous names as search terms and we'll just reject any famous names as search terms, which I think would be counterproductive to finding a, a reasonable and intuitive model for deciding on the value of what the outputs are. Because I think the prompts are a very you know strong indicator of what is driving consumer engagement with these platforms. You know what I mean.
0:28:56 - Tristra
Yeah, absolutely so. Let's take a step in a slightly different direction, away from this crazy future that is still very much in flux, and talk a bit about what's going on right now. How are royalties and royalty administration? You know what it takes to track and find royalties. How has the how has tech been impacting this in the last year or so since we last spoke? Are you seeing any new interesting developments in this really vital part of the music industry?
0:29:24 - Bill
Yeah, definitely, but I'll just connect those two ideas by saying that you know as and when the parties decide that they want to start doing more specific, more granular, more structured licenses. It should be pretty straightforward to manage from a music rights administration standpoint. We run the Songnex registry, which contains all of the relevant business information for every musical composition that's exploited around the world, and we can tie that to the sound recordings that are used by the different platforms, and all we need is the input of the recordings that are driving value, and we can determine who the musical composition owners are, the fractional share ownership of those musical compositions and the songwriters who contributed to them, and so you know. If you wanted to do a license for one of these things on a granular basis, you could simply hire music reports to do this sort of work. We do this for the DSPs, we do it for music instruction companies, we do it for VR companies. It's all more or less the same model, however you look at it, and those models are proliferating all the time.
Ai is just the most interesting new one of all kinds various kinds of games, applications for people who are challenged with incipient dementia, using music as a therapeutic mechanism, and all of these have different models from DSP streaming right. So they have different types of usage, different types of revenue, different kinds of tiers of offerings and in the abstract, it's all about figuring out what those are, marrying them together to some royalty structure and then allocating the resulting royalties across the owners of the constituent parts. But you know, whereas if're a pro um uh, you can sort of throw everything into a common model according to big structures, or if you're a collective management organization dealing with dsp streaming, there's very cut and dried ways in which mechanical royalties uh flow through um. You know, in the united states, this crazy matrix of 26 steps to calculate a per play royalty on spotify um for these other services you know that we have to invent it each time, right.
Each, each entrepreneur who builds one of these platforms uh, goes out to the market, negotiates with the rights owners, cuts the best deals that they can and brings back to us the resulting royalty structures and license forms that require this custom set of inputs to be processed according to this custom royalty structure. And, of course, they're not consistent, right, because among the majors and major independents there may be three or four different variations in how they want that done, and so our inputs have to represent the sort of most favored nation set or the most complete set of inputs that are required to manage the royalty structure. For any one of them, right, results in a lot of complexity. For any one of them, right, which results in a lot of complexity. Then you run through all those calculations and then you distribute the royalties, each according to the terms of their respective license, which is always fun, requires a lot of Q&A.
0:32:57 - Tristra
I was going to say this definitely sounds like something I would want to hire somebody for, definitely definitely.
0:33:03 - Bill
you know and you know so one of the things that you know, in response to your question, has emerged over the past few years is a pretty consistent set of the professional players who are capable of doing this work. There's probably about five or six platforms globally that can do this work at the level of an ICE or a SOSIM or a Music Reports reports and um. You know we're probably going to see, as the business matures, some consolidation in that market. So there'll there will be a plurality, but, um, but not an infinite number of platforms that can do that work responsibly. That you know. Each one of them, in order to do that work, has to have a relationship with essentially all the music publishers in the world, and there's only so much time in the day for the music publishers to have those relationships and to keep the repertoires properly harmonized at each of them. So it's sort of it naturally doesn't admit of too many players.
0:34:00 - Tristra
So we're kind of hinting at the next question I wanted to ask you, which is that it feels like there's a lot of change going on in the legal and licensing landscape around the world and that music is becoming you know, it was always a global industry and music has always moved around the world, you know, since the beginning of humans going from place to place. But we're in a really interesting moment right now and I'm curious what developments you're excited about. I'm thinking, for example, about the shift in neighboring rights in Europe, you know, vis-a-vis American artists, for example, right, so there's these kind of interesting shifts going on and I'm curious what you're excited about and if there's anything that you think might be challenging that people should be aware of that they're not thinking about.
0:34:45 - Bill
Oh man, we could go three days on this one.
0:34:48 - Tristra
Three-hour conversation.
0:34:52 - Bill
Look, digital wants to be global and that is a fundamental structural shift that's ongoing in our generation, right? So for the 150 years prior to now, copyright grew up in a balkanized, territorial-based structure where each jurisdiction, each country, essentially set its own copyright law and there were things like the Berne Convention and various international treaties that have harmonized a lot of how that works. But a lot of it has not been harmonized. And again going back to, there's themes that go back to the mercantilism of the 1600s around balance of trade issues. Right, if other cultures' music are becoming too popular in my jurisdiction, I want to prop up my own creative industry by placing certain incentives. Or if a collective management organization in my territory is a quasi-monopoly granted by the government on competition management grounds, is highly regulated, then I can use that regulation to ensure that the balance of trade issues don't get too out of hand when it comes to drain on resources from our country to other third countries. But contrary to that, we've heard the term glocalization since, made famous by Will Page, and that seems to be really sincerely taking root, and that's not surprising. As populations grow and as more and more people move into the middle class around the world, we're seeing the flowering of creative industries in various territories, where there's a lot more local music that's becoming super important to the local ecosystem.
But in the backdrop of all these little you know eddies and trends, there's this general move toward digital platforms. And whereas in that territorially balkanized world you know you could make rules about how people press and distribute physical debt, now you've got these digital companies that may have no presence in your territory whatsoever, they're run out of an office in San Francisco or Stockholm. They have reach around the entire planet. They can license all of the music they need to be commercially valuable in your jurisdiction without ever going to anyone in your jurisdiction for permission or, if they want to do that localized thing, they can do those deals with individual participants in your market without going through, necessarily, even a collective management organization in that territory. And that creates a lot more fluidity in the system and a situation where local, territorial CMOs, which were developed to handle the physical business, the broadcast business, the live and local business, are no longer able to deal with what is, as of last year, the very largest segment of the market, which was digital, which last year, I think, hit 37% of SISAC distributions, with a massive bullet right, heading to 80% over the coming years. Basically, broadcast becomes digital, live becomes the remainder, with the largest segment that isn't digital in the future.
In that world, the cmos who you know built these systems for other kinds of revenue generation and collection aren't really set up well to do digital claiming, especially in this highly technological context where the default for dsps is you send a ddex file out of your usage and revenue, the rights owner recipient sends back a claims file after having matched their works in that DDEX file and an invoice for the money that belongs to them. You know, if you're a small CMO in an emerging country, it's almost impossible to put together that kind of technology and to do it timely and accurately and to make it pencil out for the amount that you're actually able to collect for those pools. So specialist organizations again start to become very, very useful in that context and that's that same group of five or six that are out there doing Great.
0:39:17 - Tristra
Well, thank you so much for that sort of whirlwind tour, and we also got to go back in time, which is always my favorite. I love it. So thanks so much, bill. This has been super helpful and I can't wait to talk more with you and your colleagues at Music Tectonics in just a couple weeks.
0:39:34 - Bill
Looking forward and I just wanted to say before we go as well, you know I really love the Music Tectonics podcast. I'm a big podcast listener in general and I only spend time with podcasts that really provide a lot of value for the time invested Right, that really provide a lot of value for the time invested right, and Music Tectonics has always been one of those, with great guests doing interesting things in various parts of the business, and afterwards I generally feel not just more educated but also more energized about the things we're doing at Music Reports after listening to a show. So thank you for what you do.
0:40:02 - Tristra
That's awesome. I'm glad you don't feel like why am I doing this and I've wasted my life. Don't feel like why am I doing this and I've wasted my life. We try to bring in an informed but optimistic approach to everything, so this is great. Well, thanks for the kind words and can't wait to see you in LA.
0:40:21 - Dmitri
Take care. Thanks for listening to Music Tectonics. If you like what you hear, please subscribe on your favorite podcast app. We have new episodes for you every week. Did you know? We do free monthly online events that you, our lovely podcast listeners, can join? Find out more at musictectonics.com and, while you're there, look for the latest about our annual conference and sign up for our newsletter to get updates. Everything we Do explores the seismic shifts that shake up music and technology, the way the Earth's tectonic plates cause quakes and make mountains. Connect with Music Tectonics on Twitter, Instagram and LinkedIn. That's my favorite platform. Connect with me. Dmitri Vietze, if you can spell it, We'll be back again next week, if not sooner not sooner You're listening to Music Tectonics.
Let us know what you think! Tweet @MusicTectonics, find us on LinkedIn, Facebook and Instagram, or connect with podcast host Dmitri Vietze on LinkedIn, Twitter, and Facebook.
The Music Tectonics podcast goes beneath the surface of the music industry to explore how technology is changing the way business gets done. Weekly episodes include interviews with music tech movers & shakers, deep dives into seismic shifts, and more.
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