MBJ_April_2011-1

Music Business Journal
Volume 6, Issue 5 April 2011
Berklee College of Music
Inside This Issue
Mission Statement
The Music Business Journal, published
at Berklee College of Music, is a student
publication that serves as a forum for intel-
lectual discussion and research into the var-
ious aspects of the music business. The goal
is to inform and educate aspiring music pro-
fessionals, connect them with the industry,
and raise the academic level and interest in-
side and outside the Berklee Community.
(Continued on Page 3)
One of the silver linings of the cur-
rent crisis is the recognition that cooperation
between business, government, academics, and
the creative community is needed to right the
ills of the music industry. That such a gathering
will soon be taking place in the US, however, is
surprising. In the US, music making is largely
independent of government aid and continues to
be a grass-root and street-smart effort. In con-
trast, Europe is more used to government action
in support of the music industry--either to pro-
mote its exports, like in Sweden, or to enforce
broadcast quotas to protect the mother tongue,
as in France. Moreover, European scholars tend
to make more of the connection between music
and culture than their American counterparts.
The “Rethink Music” conference
that will take place in Boston on April 26-27
is an attempt to bring together bedfellows that,
in the US, so far have been largely estranged
from each other. In fact, the conference could
become a catalyst to consider fresh perspec-
tives on common issues. Never, for instance,
have so many distinguished academics shared
the podium with industry practitioners and gov-
ernment policy makers. Harvard, through its
Berkman Center for Internet and Society and
its Business School, will be present; and so
will Berklee’s Music Business/Management
Department, representing one the largest
community of music students and teachers in
the world. Rights’ stakeholders, top record la-
bel executives, public policy makers, and, of
course, some of the talent without which the
business could not exist, will also converge in
Boston. The list of confirmed speakers can be
found at www.rethink-music.com.
The involvement of the French MI-
DEM organization, a true primus inter pares
in international music business building—es-
pecially known for its January flagship show
in Cannes—is also remarkable. MIDEM has
chosen to piggyback on the new Berklee-Har-
vard connection to attempt its first US show
since putting up a Latin Music Conference in
Miami back in 1997.
The MBJ interviewed the Executive
Director of “Rethink Music”, Berklee’s Allen
Bargfrede, who is Assistant Professor of Mu-
Frontier Enterprises
Page 4
Master Recording Rights
Page 6
MOG: An Inside View
Page 8
Apple Subscriptions?
Page 12
This Year’s Grammys
Page 13
A Left-Brain Take on Music:
The Rethink Conference
By Frederic Choquette & Kerry Fee

Table of Contents
Business Articles
Rethink Music.........................................1
Digital Music Forum East.......................4
Corporate Takeovers...............................5
SXSW.....................................................11
The Apple Tax........................................12
Revisiting The Grammys.......................13
Law Section
A Transfer of Rights?..............................6
Online Security......................................14
Interview
Allen Bargfrede and Chis Bavitz............3
Anu Kirk.................................................8
MBJ Editorial
Mission Statement...................................1
Editor’s Note...........................................2
Upcoming Topics...................................16
Sponsorship
Berklee Media....................................... 15
Editor’s Note
Volume 6, Issue 5 Music Business Journal
As we observe the sudden shifts in New England weather over these past few weeks, there seems
to be a distinct sense of renewal in the air. We are surrounded by the much welcome change of the
season, and the Music Business Journal’s latest release is as fresh as ever. Harmonizing the tone set
by this month’s ReThink Music Conference, the MBJ presents a compilation of industry news that
gives insight to the business’s future directions.
Fred Choquette and Kerry Fee open things up with an insightful reflection and detailed interview
with ReThink coordinators Allen Bargfrede and Chris Bavitz. As Boston’s first major music confer-
ence, and the first appearance of MIDEM in the U.S. in a while, the two share their thoughts on the
event’s potential for the industry. Then, Nick Susi provides first hand accounts of this year’s Digital
Music Forum East held in New York City and SXSW, held in Austin, TX.
With the recent Citigroup acquisition of the EMI record label, the instability of the majors is
more apparent than ever. I’ve provided an account of the deal along with other potential mergers and
acquisitions. Also, the Recording Academy has faced a great deal of criticism at this year’s Gram-
mies, and Fred Choquette writes on the controversy. Change in the industry is reflected perhaps in the
discussion over the Grammy nominations.
The world of the music cloud is taking shape quicker than ever. Kayleigh Mill has contributed
an informative piece on the recently enacted “Apple Tax” and its possible implications. In addition,
Ben Scudder provides us with an exclusive look into the inner workings of MOG through a detailed
interview with the company’s mobile marketing director, Anu Kirk.
On the law side of things, Luiz Augusto Buff shares a detailed analysis of Termination Rights
and how that might affect artists. Ben Hong also provides a thought-provoking piece on Information
Security as it pertains to consumer activity on the Internet.
In addition to this month’s latest body of work, it gives me great pleasure to announce that after
six months of rethinking our online presence, the MBJ team will be launching a brand new website
that will feature our entire database of articles along with lots of additional content. Be sure to check
it out soon at www.thembj.org.
Thanks so much for reading,
Evan Kramer, Editor-in-Chief
Contributors
Editor’s Note.....................................................................................................................................................................Evan Kramer
Business Articles............................................................Frederic Choquette, Kerry Fee, Evan Kramer, Kayleigh Mill, Nicholas Susi
Law Section...............................................................................................................................Luiz Buff de Souza e Silva, Ben Hong
Interview..........................................................................................................................Frederic Choquette, Kerry Fee, Ben Scudder
Staff................................................................................................................................................... Frederic Choquette, Ben Scudder
Staff (cont)...................................................................................................................Dahyun Ed Jeong, Kerry Fee, Micah Deterville
2 www.thembj.org April 2011

Management
Editor-in-Chief...................................................................................................................................................................Evan Kramer
Content Editor...................................................................................................................................................................Nicholas Susi
Webmaster..................................................................................................................................................................Itay Shahar Rahat
Faculty Advisor and Finance.....................................................................................................................................Dr. Peter Alhadeff
Layout Editor..................................................................................................................................................................Lau Meng Wai
PR Managers.........................................................................................................................................Ben Scudder, Micah Deterville

April 2011 www.thembj.org 3
Business Articles
It is the only conference that has a business
model competition (with a substantial $50K
reward for the winner), and a competition for
public policy papers organized by Harvard’s
Berkman Center. As you know, this event
also involves MIDEM, which is coming to
the US for the first time in a long time. MI-
DEM is known for putting up the world’s
best-known annual music conference. It is
primarily providing logistical support and
marketing for the event. MIDEM has a built
in marketing database, and a lot of connec-
tions and resources that regular conference
planners do not have.
Beyond that, the quality of the speakers and
the programming is excellent, which is not
always the case in pioneering events like
this, and we’re also offering access to a pret-
ty good lineup of exclusive concerts.
MBJ: Please tell us about it
AB: Berklee and the Berkman Center at Har-
vard are solely responsible for the content of
the programming. We had a pre meeting in
October at Harvard, with some key industry
players to talk about what the issues really
were that had to be discussed (with a view
to find a solution). Rethink will feature about
ten to thirteen different panel discussions a
day, with topics including technology, licens-
ing, new business models, and other profes-
sionals perspectives.
We have the number one or two executives
from every major label coming, a United
States Congressman, top managers, and
heads of other successful startups. There
have been at least two or three instances
where we had a VP of a company saying he
would attend, and the CEO stepped in and
said, “there are so many CEO’s coming to
this, I want to come instead of my VP.”
We also have a variety of artists scheduled to
appear. The combination of Amanda Palmer,
Ben Folds and Damian Kulash (Ok Go) is
going to be really special--the three artists
are going to go into a Berklee studio, do a
collaboration, tape it, release it at Rethink
the next morning, and then perform it live at
night.
MBJ: What about the Public Policy Pa-
pers and the Business Plan Competition?
CB: The Berkman Center ran a Call for
Papers in connection with the conference,
seeking policy proposals that advance the in-
terests of music creators, consumers, and en-
trepreneurs through changes in existing law.
We will select a paper, and Harvard Law
School’s Journal of Sports & Entertainment
Law will publish it this spring. The author is
expected to present at the conference as well.
In addition to the Berkman Center’s Call for
Papers, we have put together a briefing book
collecting research and other resources for
conference participants. The briefing book
will identify key issues that relate to law
and policy concerning music, and these is-
sues will be addressed and expanded upon
throughout the course of the event.
AB: The Business Plan Competition is meant
to give everyone, globally, a voice about so-
lutions for moving forward. It is an oppor-
tunity to speak out and say: “I think this is
the path the music industry should take.” A
generous gift of a Berklee trustee has made
this part of the conference possible.
MBJ: So the intended audience of Rethink
is broad-based?
AB: Yes. This is a question that has come up
over and over, and I think that we don’t have
one specific target audience. We are trying to
cater to the music industry professional, but
the conference is also appealing to academ-
ics. We also want students and musicians
there, which is why we had a special student/
working musician rate. Most other confer-
ences have very wide discussion topics,
i.e. marketing here and management there,
whereas we have a dedicated focus but re-
main open-minded.
We are also incorporating audience partici-
pation and feedback technology. Instead of
passing around an open microphone at the
end of a session, we are going to have SMS
email, Twitter feedback, and displays on
screen. The audience will be polled at the end
of each session, and people can ask questions
about something that was discussed. This
will get the audience’s real feedback in an
anonymous way. A record label employee,
for instance, cannot raise his hand to support
something against the interest of his label.
I think this change is going to make things
really interesting. If you put up a thought-
provoking question, you may get 40% of the
room to publicly agree—but 80% of the au-
dience may agree or disagree anonymously.
Rethink might show us a new and interesting
dynamic here.
sic Business/Management. Bargfrede is also
a copyright and music lawyer and the author,
with Cecily Mak, of Music Law in the Digital
Age (Berklee Press, 2009). Additionally, we
approached Christopher Bavitz, a close col-
laborator of Bargfrede and the Assistant Di-
rector of Harvard’s Cyberlaw Clinic, a law
school program at the Berkman Center for
Internet & Society. Bavitz is a Clinical In-
structor and Lecturer on Law at Harvard Law
School. He currently teaches a seminar on
Music & Digital Media and was an in-house
lawyer at EMI North America for six years.
MBJ: What focus will the conference have?
Allen Bargfrede: Above all, it is a music in-
dustry event. Rethink’s focus is on copyright
and recorded music, and on finding solutions
to the current industry downturn. It will con-
sider ways to save and restore the recording
industry by involving creators, academics,
and industry professionals. On the copy-
right front, for example, it will have a broad
spectrum of views. Examining the parties
in attendance, we have the Berkman Center
at Harvard, which is perceived to be on the
left of the copyright scale, and the Record-
ing Industry Association of America, which is
clearly off to the right. I see Berklee as some-
what of a neutral party (think “Switzerland
of music”), because our interest lies solely in
promoting creativity in music and providing a
market for our graduates.
Christopher Bavitz: Yes, I think that an ideal
outcome for Rethink would be to foster good,
productive discussions at the event itself
around legal rights, business models, chal-
lenges facing creators, and the like, then see
those discussions become starting points for
further conversations going forward. I know
Allen Bargfrede and his team at Berklee have
worked hard to ensure that a wide variety of
stakeholders and viewpoints are represented
at the conference. My hope is that discus-
sions that begin here will continue after the
conference has come to a close. It would be
great to see the event have a real impact on
the way people involved in the legal and busi-
ness aspects of the music industry approach
the challenges facing those who create and
distribute music.
MBJ: Will Rethink work in a saturated
conference market?
AB: It is a challenge, but Rethink has a lot
of parts that will allow it to differentiate it-
self. This is the only conference that involves
creators, academics, and industry executives.
Rethink Music (cont.)

Business Articles
By Nicholas Susi
sic are often times
only buying CDs.
He stated that 55%
of paying music fans
are only purchasing
CDs. There’s always
the argument that an
artist can depend on
their “super fans,”
but is that enough to
recover from the loss
of so many buyers?
“More people
are listening to ser-
vices like YouTube
than they are their
own libraries, and that is a trend that’s hap-
pening fast,” Garland added, “People play
what they don’t buy, and buy what they don’t
play.” So, if consumers don’t listen to the
music they buy or download, and prefer to
stream new content, maybe streaming ser-
vices are still the answer.
Beyond Oblivion seeks to be that
answer. Adam Kidron, the CEO and Co-
Founder of Beyond Oblivion, presented a
new business model. Recognizing the lim-
ited royalty checks from album sales and
streamed plays, Beyond Oblivion strives to
monetize usage.
“With Beyond Oblivion, we be-
lieve that the download and the ownership
should be free, and that what we must pay
for and what people would be interested in
paying for--and where people see the value
is in usage,” Kidron explained. Beyond will
not require subscription fees and intrusive
advertisement interruptions. Instead, users
pay a one-time lifetime-use fee. The size of
this lifetime fee, however, is uncertain.
Beyond Oblivion is setting out
to have the largest infinite music library.
The concept sounds nice, but it seems that
it would lead to massive licensing pains,
similar to Spotify’s constant headaches.
Once Beyond aggregates a respectable mu-
sic library, users would be able to access
the music through a licensed player. Users
could stream, download, and share music
and playlists with their friends who have
licensed players. These licensed players
would be able to track play counts, regard-
less of whether the file was ripped, shared,
or downloaded. This means artists and labels
would be paid micro-royalties per play,
hence Kidron’s coining of the term “usage
model.” Beyond encourages fans to virally
spread music through social media, because
more music consumed means more plays,
which means more money.
The Beyond player will function
not only on computers, but also on smart-
phones and tablets. A beta version of this
usage model will be released in April, and
the official service should launch in June
or later, depending on certain locations of
the world. Beyond Oblivion most recently
received $77 million in venture capital in-
vestment, but time will tell the true success
of this new service.
Following Kidron’s presentation,
the various panel topics began. Spotify con-
tinued to cause quite a buzz in the cloud
technology world, as well as the prospect of
an Apple or Google streaming service be-
ing launched. Surprisingly, representatives
from MOG and Rdio didn’t seem phased by
the potential rivalry. Anu Kirk, Vice Presi-
dent of Mobile Products at MOG, and Cart-
er Adamson, COO of Rdio, said they would
welcome the healthy competition and be
content with riding on the massive market-
ing dollars of Apple and Google to bring
better awareness to subscription services to
general consumers.
Another panel aimed to determine
the right amount of government involve-
ment with illegal downloading and piracy
affairs. This topic was extremely relevant
due to the exhaustive efforts and money that
are constantly pumped into bringing pow-
erhouses like Limewire and RapidShare to
court. What could have been a constructive
civilized conversation turned into heated
bickering.
“The recording industry is falling,
but the music industry is doing fine,” argued
Julie Samuels, Staff Attorney at the Elec-
tronic Frontier Foundation. Rich Bengloff,
President of A2IM, had other thoughts. “I
have looked at the touring numbers over the
last ten years,” Bengloff stated in rebuttal,
“I’ve looked at the merch business, and the
overall pie – whether it be endorsements,
advertising, synchs – this industry has gone
down however you want to measure it.”
On February 24, 2011, the 11th
Annual Digital Music Forum East was held
in New York City. The conference hosted a
series of panels that assembled artist repre-
sentatives, label executives, publishers, and
technology companies to discuss the current
issues regarding all aspects of the music in-
dustry.
The conference commenced with a
research presentation that analyzed the cur-
rent state of digital music, and how consumer
behaviors and attitudes have been an influ-
ence. Eric Garland, CEO and Founder of Big-
Champagne, and Russ Crupnick, President of
NPD Entertainment, shared eye-opening sta-
tistics. Crupnick discussed how the music in-
dustry has catered to the consumer, slowing
the increase of music prices, allowing more
access to digital content, and offering more
choices of services to use. Instead of express-
ing gratitude, “consumers are flipping us the
bird,” Crupnick explained. He continued by
showing that the population of buying music
fans has declined by 20 million.
Garland discussed that although
YouTube is a viable alternative source for an
artist to post content and earn potential in-
come, few songs are able to amass millions
of hits before the ad revenue starts to trickle
in. The disproportionate income is the same
for streaming as well – 1,000 streams equals
about $1 of revenue for an artist. Only 5%
of US consumers are using subscription ser-
vices, and that includes free trial users. Is an
artist’s extreme effort to accrue thousands,
even millions of hits worth the small payoff?
Crupnick pointed out that the re-
maining fans still willing to purchase mu-
Music Companies Meet in New York

Business Articles
It’s certainly not a positive view
of where the industry might be headed, but
Bengloff’s brutal honesty hits hard. Find-
ing who to put the blame upon seems to be a
popular game among industry folk. “We’ve
seen the decimation of the recorded music
industry in terms of the staff, the personnel,
and the creative product,” Mark Eisenberg,
Digital Media Executive and Consultant
for LatticeWorks Media explained, “So we
have seen the worst case scenario when tech-
nology runs its course, without any type of
bounds or restrictions.”
Eisenberg’s statement suggests
the fact that perhaps the government should
place further restrictions on how the Internet
is used within the music industry, especially
in the case of Limewire and RapidShare. Of
course, the converse argument points to the
fact that technology enables an artist to make
leaps and bounds that were inconceivable a
few years ago. “We are living in the golden
age,” stated Michael Petricone, Senior Vice
President of Governmental Affairs at the
Consumer Electronics Association. “There’s
more music being made than ever before,
there are more people listening to music than
ever before, there’s more discovery than ever
before. Meanwhile you’ve got independent
musicians coming up with innovative busi-
ness models that allow them to support them-
selves.”
Petricone is right that technology
allows more music to be made than ever
before, but is all of that music great, quality
music? Have the filters been lowered – fil-
ters that block inexperienced music made by
people who see music as a hobby, which now
has been poured into the same pool as seri-
ous musicians that struggle to create an art
and a living? Ultimately, the same arguments
and the same points were echoed across the
panel, leading the discussion to nothing but a
standstill.
Hopefully the conversation will
continue at the Digital Music Forum West,
which will be held in Los Angeles on Oc-
tober 6, 2011. Despite the muddling of pes-
simism and optimism for the business, it is
conferences like the Digital Music Forum
that encourage forward thinking among in-
dustry officials.
EMI and Citigroup
Ever since private equity firm Terra
Firma purchased the EMI Group in 2007, the
label and publishing giant has been caught in
a proverbial purgatory of sorts; too substantial
and progressive to falter, yet too financially
uncertain to move forward. Having final-
ized the acquisition on the eve of that year’s
economic credit crunch, Terra Firma quickly
found itself pulling rabbit ears out of its pants
pockets in the face of a $3billion loan from
its lender, Citibank. Terra Firma Chairman,
Guy Hands, then filed a lawsuit with Citibank
claiming that his loan officer, David Worms-
ley, had misrepresented the label and effec-
tively duped him into purchasing the com-
pany. November 4th 2010 saw the conclusion
of a four weeklong battle in the New York
Supreme Court that favored Citibank. Guy
Hands’s Terra Firma was made responsible for
the full amount of EMI Group’s debt. Now,
to stay in control of EMI, Guy Hands had to
find the necessary funds to pay the debt—an
improbable occurrence.
Following the New York Supreme
Court’s decision, therefore, the transfer of
EMI ownership had an air of inevitability.
However, at the time of ruling, it was as-
sumed by most that the transition would not
take place until EMI’s March 31st, 2011 fis-
cal year-end, the time when Terra Firma was
expected to default on its final loan payments.
In an effort to expedite the process, and seize
immediately control of the record label and
publisher, Citibank asked for a solvency test
that it expected EMI to fail. It did. As a result,
Guy Hands and Terra Firma were removed
early from the company and lost any stake
they had in it. Research by Private Equity
News would put Guy Hand’s Terra Firma’s
loss at $2.7 billlion—perhaps the largest ever
in the history of private equity.
The acquisition improved the posi-
tion of the label. Time was bought back from
the March 31st, 2011 deadline (Citigroup took
effective control on February 1st). In addi-
tion, the purchase reduced the debt level of
the record label by more than 65%. Through
a debt-for-equity swap, Citigroup was able
to recapitalize EMI, reducing its debts from
$5.5billion to just $1.9billion. “We have gone
from a company that is vastly overleveraged to
having one of the strongest balance sheets in
the music industry,” says Roger Faxon, CEO
of the EMI Group. “This gives us strength to
move forward ... We have plenty of headroom
in our loan covenants and lots of liquidity.”
While restructured balance sheets have a no-
table affect on EMI, they are also equally at-
tractive to Citibank- who will use them as a
selling point for potential investors as they be-
gin the process of selling off the EMI assets,
which include its valuable publishing catalog.
“It’s pretty clear that Citigroup will not sell
CDs… It’s not a comfortable place for a mu-
sic business to sit,” Faxon says; he adds that
“in due course, we of course are going to get
sold; but it will be an orderly and profitable
process.”
A Potential WMG Merger
The prospect of a merger between
EMI and Warner Music Group has been on
the radar since before Terra Firma snatched
the company in 2007. Now that EMI is effec-
tively back on the market, it is up to Warner’s
capital investors –Thomas H. Lee Partners,
The Slings & Arrows of Industry Giants
By Evan Kramer
(From Page 4)

Law Section
A Primer on Termination Rights
By default a person that makes an
original work and fixes it in a tangible form
owns its copyright and consequently the ex-
clusive right that will permit the extraction of
commercial benefits from the creation. The
economic exploitation of copyrights is com-
monly made through the granting of transfers
and licenses to other parties in exchange for
compensation.
Generally speaking, songwriters as-
sign rights of a musical composition to pub-
lishers, while artists transfer their rights over
their sound recordings to the record labels.
Many of these licenses and transfers are usual-
ly granted before the publication of the work,
when it is not possible to predict its success.
For this reason, authors are usually in a worse
bargaining position than the transferees or li-
censees--and end up collecting less than they
could.
In order to protect authors, the 1976
Copyright Act established termination or
“recapture” rights that give authors a second
chance depending on when the grant was ex-
ecuted. The statutory termination of transfers
and licenses allows the renegotiation of these
grants, either by renewing the contract with
the original grantee or by recapturing that right
in order to enter into a new agreement with a
third party.
Termination is considered for any
works other than works made for hire, and
only for U.S rights that are copyright related.
It excludes the possibility of recapturing for-
By Luiz Augusto Buff
eign rights, trademarks, or any
other federal or state rights. The
terminated grantee has the right
to exploit derivative works
that were prepared under their
grant, but not others.
The provisions of the ter-
mination rights can be found in
the 1976 Copyright Act in two
different contexts, depending
on when the grant was execut-
ed. The first, under Section 203,
provides that grant of transfer
or licenses that were executed
by the author in or after 1978
may be terminated. Generally,
the author, as well as his heirs
or a duly authorized agent, has
a period of five years, begin-
ning after thirty-five years of
the mentioned grant, to effect the termination.
Works that were created prior to that date, but
for which the grants were executed on or after
January 1st, 1978, are also included.
For works created prior to 1978 and
for which the grant was also executed before
that date, the provisions of Section 304 (c) and
(d) are applied. The general rule is that the ter-
mination may be effective during a five year
period starting fifty-six years after the copy-
right was first secured, regardless of the date
of the grant. In these cases, for the grant to be
subject to termination, it is not required that it
be executed only by the author, as in Section
203, but also by his heirs or executors.
However, the transfer of rights back
to authors is not automatic. In order for the
termination to become effective under both
Sections, the majority of the authors, heirs or
duly authorized representatives must serve a
notice upon the grantees, expressing the effec-
tive date of termination. In order to be valid,
a copy of this notice must be registered in the
Copyright Office prior to the effective date
of the termination. The service of the notice
should occur no later than two years and no
earlier than ten years of the desired date of ter-
mination.
In the absence of action, the termi-
nation right disappears after the closing of the
five-year window, leaving rights in the work
permanently in the hands of the grantee un-
til statutory expiration of the copyright term.
For instance, for a grant executed on January
1st, 1978 the termination window will begin
thirty-five years after the grant – from 2013
to 2018. If the author decided that they would
want to terminate the transfers at the earliest
possible date a notice should have been sent at
any time between 2003 and January 1st, 2011.
With regards to the application of
the Section 304, a point to be highlighted is
that as sound recordings were not contemplat-
ed by the Copyright Law until 1972, the first
terminations of transfers for sound record-
ings made before 1978 will only be effective
in 2028, fifty-six years after 1972. The first
notices for such terminations will start to be
served in 2018.
There are certain works for which
grants were signed prospectively by authors
before 1978, but the works only came into
existence after January 1st, 1978. These so
called “gap grants” were the subject of recent
analysis by the Copyright Office. At issue
was whether or not the “gap grants” could be
terminated, as the provisions of Section 203
are applicable only for grants executed after
1978 (Section 304 is not applicable because it
requires a subsisting copyright in 1978 to be-
come valid). After receiving comments from
different stakeholders, the study clarifies that
the Copyright Office will accept notices of ter-
mination for these works (it considers that the
execution of the grants only becomes effective
on the date when works come into existence).
However, whether such notices of termina-
tion fall within the scope of section 203 will
ultimately be a matter to be resolved by the
courts.
Many agreements between writers
and publishers anticipate that any termination
right should be renounced, with the publisher
owning the copyright for its entire term. How-
ever, the Law states that the “termination of
the grant may be effected notwithstanding any
agreement to the contrary.” The intention of
the legislation was to secure for the author
the rights of termination independently of any
language that might be set out in an agree-
ment, i.e. forcing them to give up their future
rights without renegotiation.
“Agreements of the contrary” were
the subject of recent court decisions address-
ing the Section 304 termination provision. In
the cases of Milne v. Stephen Slesinger, Inc.

(9th Cir. 2005, Winnie the Pooh Character)
and Penguin Group (USA) Inc. v. Steinbeck
(2nd Cir. 2008, works of John Steinbeck),
the courts decided that the renegotiation of
the agreement during the termination win-
dow revoked the original grants and were
not deemed to be “agreements to the con-
trary”. They denied, therefore, the possibility
of termination. However, in the Classic Me-
dia, Inc. v. Mewborn, (9th Cir. 2008, Lassie
Works) the court preserved the termination
rights considering a post-1978 assignment as
an “agreement to the contrary” and therefore
“attending the congressional intent to give
the benefit of the additional renewal term to
the author and his heirs”. There is yet no case
law related to Section 203, as its provisions
will only become effective on 2013.
Works made for hire are the sig-
nificant exception for termination provisions
and will provide a fertile ground for litiga-
tion in the following years. The exemption
exists because in such cases there is no trans-
fer of copyright and the employer or com-
missioner shall be considered the author of
the work from the moment of its creation.
Record labels would like to consid-
er sound recordings as works made for hire.
Artists, however, argue that this cannot be
applied to sound recordings, as they do not
fall in one of the nine types of works listed
on the definition of a work for hire (Section
101 of the Copyright Law). As sound record-
ings are typically a joint work of different
artists, producers and engineers, the discus-
sion of who can be considered the author
will increase. In effect, the period between
the service of a notice and the effective date
of the termination resembles a period of re-
negotiation for record labels and artists--at
least for those who have maintained com-
mercial value throughout the years.
As we approach 2013, discussions
about the termination provisions are becom-
ing more relevant. The Future of Music Co-
alition recently affirmed “as more copyrights
become eligible to revert back to creators,
we may find that the artists themselves ex-
ploit their works in novel ways that could be
beneficial to the overall health of the music
marketplace.” At the very least, the upcom-
ing termination of transfer provisions will
provide a valuable window for authors to
exploit.
Industry Giants (cont.)
Business Articles
Bain Capital, and Providence Equity Partners- to
decide whether or not to make another bet on the
music industry. Despite the fact that Goldman-
Sachs was recently hired on to seek out potential
buyers for WMG assets, label executives still
maintain vocal interest in placing a bid for EMI
when the opportunity arrives.
One of the constraints that Warner has is
European and US regulators. But given these eco-
nomic times, and the current status of the music
industry, it is possible that government oversight
might be relaxed to stimulate the economy. The
expectation that “regulators need to play the role
of facilitator and help the industry make money
rather than fending off a monopoly” is reasonable,
and is widely held by investors today such as Anil
Narang, a partner at MKM Capital Advisors that
discussed the Warner-EMI merger in Billboard
Magazine.
The consolidation of EMI and WMG
would have a significant impact on the music in-
dustry—and not just the recording industry. EMI
Publishing, for instance, already holds a com-
manding lead in overall market share at 18.1%.
The addition of Warner/Chappell’s 12.7% share
would afford the new company control over more
than a third of the industry’s total publishing as-
sets. Moreover, the consolidation of both com-
pany’s artist rosters, executive staff, and financial
assets would create a very favorable competitive
position in regards to the other two majors.
The role of BMG
Another player interested in EMI and
Warner is the German Bertlessmann Music Group
(BMG). Their interest, however, is focused exclu-
sively on acquiring publishing assets, not record
labels. Because of this, they may be at a disadvan-
tage against a package-deal offer for both.
The saga of BMG is worth telling. Its
recorded music business joined forces with Sony
Music in 2004, creating at the time the larg-
est global record company with a 21.5% market
share. BMG then ran into liquidity problems that
were unrelated to its music operations. It decided
to start selling off assets in 2007, when it sold
back to Sony its 50% stake in Sony BMG for
$1.5billion. BMG’s separate publishing arm, not
part of the Sony-BMG merger, was also auctioned
off to Universal Music Group for $2.6billion.
However, by 2009 Bertelsmann re-
opened shop. It began focusing exclusively on
music publishing, and entered into a joint
venture with private equity firm Kohlberg
Kravis Roberts & Co. (KKR). Under the
leadership of its new CEO Hartwig Ma-
such, BMG is by far the fastest growing
publishing company in the industry. In the
past 18 months, the company has embarked
on an acquisition spree, picking up the likes
of Crosstown Songs America, Stage Three
Music, Cherry Lane Music Publishing, Ev-
ergreen Copyrights and Chrysalis. As of
Q3’10, BMG is the 6th largest music pub-
lisher in America, as measured by the Harry
Fox Agency.
Bertelsmann is currently one of
the front-runners going after the publish-
ing assets of both EMI and WMG. With
a 5.2% market share in Q3’10, acquisition
of the EMI catalogue could vault BMG to
a controlling share of around 23%. BMG’s
CEO is on record for saying that BMG is
“not interested in buying a major label, [and
that] they have a scalable infrastrucure [as
a publisher only]”. He does not rule out,
however, a future interest in controlling
master recording rights to extend the reach
of BMG services—which is where EMI and
Warner’s recorded businesses will come in.
Bibliography:
http://www.guardian.co.uk/business/2010/oct/13/citi-
group-emi
http://www.ft.com/cms/s/0/6a075f9a-ddf8-11df-88cc-
00144feabdc0.html
http://www.emii.com/Articles/2695369/Hedge-Funds/
Other-Articles---Hedge-Funds/Terra-Firma-Seeks-11.1B-
From-Citi.aspx
http://www.billboard.biz/bbbiz/others/take-it-to-the-
bank-citigroup-s-emi-takeover-1005021212.story
http://www.billboard.biz/bbbiz/others/how-citigroup-out-
foxed-guy-hands-in-its-1005020642.story
http://www.billboard.biz/bbbiz/industry/record-la-
bels/emi-and-warner-music-destined-to-be-togeth-
er-1005015022.story
http://www.billboard.biz/bbbiz/others/is-terra-firma-s-
investment-in-emi-the-biggest-1005024732.story
http://www.billboard.biz/bbbiz/others/the-publishers-
quarterly-q3-10-1004126550.story
http://www.billboard.biz/bbbiz/others/bmg-in-a-major-
key-1004126554.story
(From Page 6) (From Page 5)

Interviews
MOG’s Anu Kirk
By Ben Scudder
Services like Rhapsody
charge a monthly subscription
fee to grant users, with brows-
ers or mobile apps, access to an
extensive music catalogue. The
content is stored on a server
somewhere other than the user’s
hard drive (i.e. “the cloud”).
There is no need to safe-keep
a personal music collection or
move it around devices. MOG
is an example of a pioneering
cloud-based service, and we
wanted to know more. Anu Kirk,
is the Lead Product Manager of
Mobile Content.
MBJ: What is MOG doing
to acquire licenses/content?
Where do you feel MOG has
the most potential for growth
in terms of its catalogue?
Anu Kirk: MOG uses a com-
pany called MediaNet as the pro-
vider for our catalogue. We also
have our own in-house licensing
team of people with some legal
background, some label back-
ground, and we proactively reach
out to specific labels that we
want to make sure that we have
on board. This process is based
on feedback from our users, who
request such content, but also
on our knowledge of the indus-
try and our desire to bring in, so
to speak, cool labels. We reach
out and ask these labels if they’d
like to be part of MOG. We have contracts,
or terms that we offer them, we send out an
agreement, and hope that they sign.
MBJ: Do you find that MOG has been
reaching out to smaller indie labels lately,
or is MOG still focused on trying to make
deals with larger independent or major re-
cord labels?
AK: Well, I feel that ‘indie label’ is sort of
a vague term. Fifteen years ago, an indie la-
bel would have been something like Amphet-
amine Reptile, or something like SST [Re-
cords]. But today, an indie label can literally
be a guy that’s made a couple of records on
his computer. I definitely think there’s a dif-
ference between that and a company that has
been around for a couple of years with a size-
able catalogue and sales of physical product.
And sometimes, if it’s a label that people have
heard of in spite of the tiny genre it serves,
we go after it. But many smaller labels that
are genre specific, or even just digital, come
to us directly because they’ve heard about the
service and they want to make sure their music
is placed. Many are happy to go through an
aggregator like IODA, CD Baby, Tunecore,
or a service like that. One of the interesting
things about being a record label today is that
it is not all that different from what running a
label was like back in the days of physical me-
dia. Think about what you’re trying to do at
a label: you’re trying to sell your product. In
the old days, you would be on the phone with
distributors trying to make
sure that your record was at
Tower Records, the Virgin
Megastore, Sam Goody,
and the warehouse. Now
you make sure that you’re
on MOG, iTunes, Rhap-
sody, and Rdio. The label
has some interest in getting
their stuff to us as well.
MBJ: How does MOG
compete with and differ-
entiate itself from other
major streaming destina-
tions such as Rdio, Rhap-
sody, or Grooveshark?
AK: MOG operates a
business, in many ways,
very similar to Rhapsody
and Rdio. All of these ser-
vices are comprehensive
subscription services that
charge the same amount
of money for access to a
similar catalogue of mu-
sic. The way that most of
these services tend to dif-
ferentiate themselves is
through the quality of their
service, the user interface
design, i.e. the “packag-
ing” with which the app
is delivered. We’ve also
differentiated ourselves by
being on different kind of
platforms than other com-
panies. Rdio, for example,
has done a pretty good job of getting on
to mobile phones, but they have not done
a great job with consumer electronics inte-
gration and they don’t have a Chrome App
for the Google Chrome browser. Rhapsody
has done a pretty good job of getting out to
a little more, but they have not been as ag-
gressive about adopting new platforms and
technologies as MOG is. I don’t think that
any of the services really believe that their
catalogue is substantially better or worse
than another.
MBJ: MOG’s “radio slider” feature al-
lows people to customize and control
their radio experience. Does MOG
hold any exclusivity over that technol-

ogy? How do you perfect/develop that
technology so that users get a quality mix
of artists on demand?
AK: One of the things you had asked was
how do we differentiate ourselves. The ra-
dio slider feature that allows you to move
between the original artist and similar artists
is a good example of the type of differentia-
tion that MOG is interested in attaining. The
other services may have similar types of fea-
tures, but they are not presented as elegantly
or stylishly as the slider. This radio feature
is, I think, a key feature of MOG. One of
the problems that other music services have
is that you pick the song or an album, and
it plays that song or album and then stops.
The service plays the one song you like,
then you’re listening to silence until you fig-
ure out what you want to hear next. With
MOG’s radio feature built right into the play
queue, after a song is played we add stuff
that you’re going to like. This makes dis-
covery super easy. The slider uses a par-
ticular algorithm that we developed over a
couple of years for matching similar artists,
and gives the user control over how much
and how wide they want to go. We think it’s
something really unique to MOG.
MBJ: What are your feelings about free
trials? How do they affect MOG’s specific
business and subscription rate?
AK: Well I think that giving people the
ability to try the service is extremely im-
portant. Even though subscription services
have been around for decades, many people
are unfamiliar with them; they don’t really
know what they are all about. People want
a free trial because they want to see if the
service has music that they want to hear,
and they want to check out the interface. I
think the free trial is absolutely essential. In
terms of how long that trial should be, that’s
something that the industry is constantly ex-
perimenting with, as is MOG. When MOG
initially launched its web subscription ser-
vice before they had the mobile phone apps,
the trial was one hour long. That was a very
short period of time, but all you needed to
get out of those trials was an email address.
The concern was that if you made the trial
any longer, people would be creating fake
email addresses just to listen to music for
free. But currently, we’ve been experiment-
ing with free trials that are 7 days or 14 days.
I’m sure you saw the announcement that
Rhapsody is going to try and give people
a 60-day free trial. I think there’s a certain
point where you reach diminishing returns
for free trials. What you really want to do
is give people some idea of how the service
works, but you don’t want to remove the
sense of urgency or excitement about signing
up. It’s really important. The other piece is
that you want to make sure that the user isn’t
just sitting there with a clock ticking, that
they are actively engaged with the product,
and that they understand what it is and how
it works. So it’s critically important, but also
one of those things that we have to keep ex-
perimenting with to find the right balance of
duration and how much you pester the user
during the trial.
MBJ: What are your feelings towards the
actions that Spotify has taken to bring its
service into the U.S? How do you see this
affecting MOG’s business?
AK: Well, the funny thing about Spotify is
that they have been “about to come into the
US” for two and a half years. I don’t want
to sound overly skeptical, but until they
launch here, it’s sort of an academic discus-
sion. Spotify gets a lot of press for a couple
of reasons. They have the totally free option,
and you can’t have it in the U.S. right now-
-so it’s got kind of the thrill of the forbid-
den. They also happen to have a pretty good
product. It’s not substantially different than
MOG, Rhapsody, or any other subscription
services, but they’ve done a pretty nice job
of executing against a very small feature set.
For this, they get a lot of credit. But if they
launch in the US, it is highly unlikely that
they are going to have the same free model
that they have over in Europe. And if they do
have it here, it is highly likely that everybody
else who is in the States will offer exactly the
same thing. The labels can’t just give one
set of deals to one company and not offer the
same to others. It just doesn’t work that way.
That said, obviously everybody is concerned
because they do have a fantastic reputation
based on a few people using it and saying it’s
awesome when free. But mostly, we’re tak-
ing a wait-and-see approach. We’ve done a
lot of talking internally about what we think
our strengths and weaknesses are relative to
Spotify, and how we can counter their next
moves. I think of them as another competitor
that may or may not enter the market in the
summertime. I would be surprised if what
they launch is substantially different than
what’s already on the field.
MBJ: When could we expect to see MOG
available outside of the US?
AK: I can’t comment on that publicly, I
can tell you it’s something that we are very
interested in, and that we are investigating.
We want to make sure that if we do launch
overseas, it’s going to be a quality experience
and something that everyone can be excited
about and give us platform to build on for the
future. We definitely want to do it. Much
like Spotify coming to the States, moving
overseas is a little more complex than it ap-
pears on the surface. It’s not like you can just
copy your software to a computer in a differ-
ent country, turn it on and off you go. You
have all sorts of compliance issues, and have
to do deals with the labels locally. So yeah,
we’re definitely looking at that but we can’t
give a timeframe.
MBJ: The MOG Music Network is a des-
tination within MOG that provides news,
reviews, and blogs on current music events
and trends. Does this platform lead a lot
of people to subscribe to the MOG ser-
vice? What percentage of MOG’s overall
business does this account for?
AK: The MOG Music Network is a network
of blogs that MOG partners with to help de-
liver advertising for those blogs. You have
all these people who are very passionate
about music, writing all these cool entries,
and keeping up with the music scene. These
are people who want to write about music for
a living; they don’t want to worry about mon-
etizing their ads. So we have a partnership
deal where MOG takes care of selling the
ads on the sites in exchange for the revenue.
We have something like 1,800 blogs there,
though I’m not quite sure what the number
is now. It’s a separate business from the sub-
scription service, and we have a loose linkage
Interviews

Interviews
between the two. Obviously, we think there
is some of value in having those blogs out
there with the MOG name present, because
it does encourage people to come check out
the service. It also reminds people that we
are in the business of getting excited about
music--not just billing your subscription on
a credit card. It works out rather well, we
leverage some of the blogs content on the
MOG website, and the blogs help MOG get
more subscriptions.
MBJ: Do you find that people are using
the apps such as the Google Chrome App,
or mobile apps, more often than they are
actually visiting www.MOG.com? If so,
how might MOG’s model change to adapt
to the app trend?
AK: We’re still trying to analyze the data
ourselves. It’s funny, doing that type of anal-
ysis you would think would be very easy and
important, but we’re so busy building the
site and the service that doing detailed track-
ing and trying to draw conclusions from this
data is difficult. When you get any group of
smart people together to look at some num-
bers, you’ll get totally different conclusions.
What I can tell you is that usage across dif-
ferent platforms is really dependent on the
user. One person might only use it on their
iPhone, one person might be using it on ev-
erything, and some people might be going
back and forth between platforms to try and
find which one works best for them. We
definitely see a lot using more than one plat-
form partially because that’s the key value
that MOG brings to the table- the idea that
you can get all your music anywhere that
you want. The chrome app is definitely the
direction that we want to go in for the web-
site. We like the fact that it is very clean and
simple, focused on music listening with few-
er of the distractions that are present on the
website. We want to move the existing site
more in that direction. It’s just that we have
a relatively smaller team for that and it takes
us a little while to get where we want to go.
MBJ: There is a lot of discussion and
speculation on what companies like Apple
and Google will do next. Where do you
see the industry headed if Google orApple
decides to release their own cloud-based
service?
AK: Well, I actually think that with Ap-
ple’s recent announcement about it’s plans
to charge subscription services 30%, it
is much less likely that they’re going to
launch something. Right now, it’s a lot of
rumor and speculation for both Google and
Apple. I would honestly be surprised to see
them not do something in the space, but if you
look at those companies, traditionally Google
has not charged users for things. Most of their
products are free to the consumer. It would be
very difficult for Google to launch something
like MOG or Rhapsody and make it free to the
user without them losing lots of money. What
I heard they might be doing is making a locker
for mp3 files, and something like that may fit
in with what Apple is doing. It’s hard to say,
but I think you can make a strong argument that
Apple is assembling all of the pieces to launch
some kind of integrated digital media service
that includes eBooks and movies. Again it’s
really just speculation, and nobody really ever
knows what Apple is doing and I’m very reluc-
tant to speculate. I will say that I think if Apple
or Google entered into the same business, it
would actually be a great thing for MOG be-
cause one of the things those companies would
do is drive the market, advertise, and explain
these new services. It’s sort of like the iPod-
there were mp3 players before the iPod, but
it was very difficult for people to understand
what they were. One of the great things about
Apple’s Internet marketing is that they spend a
ton of money educating people. If those guys
came in and did the same thing for the subscrip-
tion music business, that would be awesome. I
also think it’s healthy for the industry to have
competition.
MBJ: You had mentioned Apple’s an-
nouncement about the 30% revenue tax it
would collect from all subscription services
through its Apple store. What action has
MOG taken to respond to that announce-
ment, and when will it go into effect?
AK: Apple will not implement this until the
end of June, so it hasn’t affected anyone yet.
Apple has been sort of vague about whether
or not they intend to collect from services like
MOG or Rhapsody. I love developing for the
Apple platform, and it’s a great and wonderful
platform to work with. I also recognize Apple’s
right to monetize its platform. I think what
people like Rhapsody [and us] have taken issue
with is the amount that Apple wants to charge.
Being a music service like Rhapsody or MOG
is somewhat like running a record store, and the
margins are not huge. None of the existing ser-
vices can afford to support a 30% payout. It is
also fair to say that I don’t think any of the ser-
vices today are making anywhere near 30% of
gross revenue themselves, so they would in ef-
fect be giving Apple a bigger cut of their earn-
ings. And it is hard to argue that Apple adds
more value to MOG than MOG adds to MOG.
We’re not making 30%. I think the most likely
outcome in the short term is that, were Apple
to go through with this, MOG we will just
simply remove the ability for people to sign
up and pay for the app from within the app.
They’ll have to go to our own site to sign up.
And Apple seems to say that this is a legiti-
mate way to avoid the levy.
MBJ: MOG’s CEO, David Hyman, is an
active collector of vinyl. This seems to sug-
gest that an interest in physically delivered
music. Given your line of work, how is the
physical experience different in your opin-
ion and how does that transfer into the
MOG service?
AK: Historically, subscription services have
positioned themselves as “never buy a CD or
a record again”. This is not the case of MOG,
and is not a realistic way to look at music. The
way I like to describe it to people is that that,
on balance, these types of services encour-
age more purchasing of music and spending.
Think of it this way: four-fifths of the house-
holds in the US, or more, pay for cable or sat-
ellite television. They still go out to the mov-
ies, or buy a DVD, watch pay-per-view videos
on the web, or use Netflix. They use all of
those things, and in some cases more than they
did before. So I just think it’s a question of
making the pie bigger, and it means that you
have choices. If you wake up one morning
and you have “Sweet Home Alabama” stuck
in your head, you don’t have to go and buy the
song for a buck, and you don’t have to go and
buy the CD for $20. You can go to MOG and
play it. I like to say that choice drives more
informed buying.
MBJ: What advice would you give to aspir-
ing music business professionals entering
the market today?
AK: I think it’s an absolutely great time to be
a musician or a creative person, because the
tools are so powerful and cheap. It’s a chal-
lenging time to be a music businessperson,
because the business model is uncertain right
now. People are experimenting. The down
side is there’s no formula that says, “Okay, if
you do this then you’ll have a successful busi-
ness.” But the upside is that you have this
opportunity to do something new and exiting
that nobody else has thought of--which could
make a big difference. I’d mostly say to peo-
ple getting into the business: don’t limit your-
self. Dream big and go for it, try and think
about something that will be exciting and
make it happen. I’ve been a musician myself
since I was fifteen, and I’ve been working in
the digital business for ten years. Keep dream-
ing, keep trying, and keep coming up with
new things. That’s when the magic happens.
(From Page 9)

Business Articles
Taking Stock of SXSW
South by Southwest (SXSW) is a
music, film, and interactive festival and con-
ference that is held annually in Austin, Texas.
This most recent SXSW Music (March 14-21,
2011) had the highest attendance ever, with
over 14,000 people flocking to the scheduled
events. The music festival offers artists a
chance to reach new ears, and it offers fans a
chance to discover new music. SXSW Music,
however, is not just about concerts and par-
ties; it congregates the industry’s top CEOs
and prospective entrepreneurs together for
prosperous and productive industry discus-
sion– creating an excellent opportunity for
businesses to explore new ideas and expand
their networks.
Allen Bargfrede and Chris Bavitz
(the Berklee and Harvard minds behind the
ReThink Music Conference) led a panel on
how an artist’s experience in the music busi-
ness informs their creative process, and vice
versa. Typically, panel topics are strictly busi-
ness, but this panel provided great insight
to both the business and creative side of the
equation. Holland songwriter, Sondre Lerche,
discussed his career and the importance of
having both a strong business and creative
mind. He began his music career on a major
label, and he admits that the label was a huge
factor in launching his career; despite the bad
reputation labels are given. After releasing a
few records under the label, he parted ways
to establish his own label and record on his
own terms. He continued to use a major label
for distribution, but his latest album will be
self-released. The gradual evolution of his ca-
reer led to increased profits, not only because
he continued to make quality music, but also
because he continued to make smart busi-
ness decisions. Granted, every success story
differs from artist to artist, but the panel did
outline the fact that labels still have a role in
the industry and that independent artists must
have a strong business mind to be successful.
The topic of branding and licensing
was also popular among panels, and one in
particular discussed the possibility of brands
becoming and/or replacing record labels alto-
gether. Brands are beginning to take on the
roles that labels typically fulfill. Once an art-
ist establishes a joint venture with a brand, the
brand becomes a tastemaker, providing inter-
national promotion, distribution, and even
tour funding. Kerri Cockrill, the director of
brand entertainment at Blackberry, explained
that the artist benefits the brand by introduc-
By Nicholas Susi
ing new custom-
ers and giving a
face and sound to
the brand. For in-
stance, Blackberry
released the new
Torch multimedia
phone and they
sought out DJ/Pro-
ducer Diplo of Ma-
jor Lazer to give a
face and sound to
the product. Black-
berry sponsored
Diplo’s latest tour,
and both the art-
ist and the brand
received massive
exposure from their travels. Diplo earned sig-
nificant income through licensing and touring
with Blackberry, none of which was required
to be recouped, which would have been
the case with a label. There are cases where
branding has failed, however. Ron Faris, the
head of brand marketing at Virgin Mobile,
explained that recently, Honda and Tommy
Hilfiger both ran campaigns with the Vampire
Weekend song, “Holiday,” during the same
months. Occasionally, the two commercials
aired back to back and the song played twice,
doing a disservice to both the brand and the
song. All in all, artists and brands have to be
selective when establishing joint ventures, but
the collaboration could lead to a major payoff
on both ends.
Perhaps the most controversial
speech was given by SXSW keynote speaker,
Bob Geldof, who is best known for his help in
organizing Live Aid in 1985. He is extremely
passionate about music and utilizing music to
bring communities together to help those in
need, and his speech did not stray from those
qualities. “People talk about the demise of
the industry, and those within the industry are
worried,” stated Geldof, “But the industry is
only a function of the music, and the music is
only successful when it’s relevant.”
His speech was based around the
“end of relevance” for music. He talked about
how rock and roll changed his life, because
rock and roll demanded that the world adapt
around it, rather than adapt to the world. He
worries that songs are becoming trivial with
no context; that the art is not being used to
its full potential. He worries that music is not
making a loud enough noise against politics
and hunger. It’s not enough for an artist to be
complacent with keeping their day job and
playing the bars at night. He stated that artists
and their songs don’t change the world and
that their lyrics don’t have to literally demand
change, but change must be suggested through
feeling in music to give a push to a commu-
nity.
“The fan club of 6,000 people of a
community of interest is far more powerful
than 6,000 friends. It’s an oxymoron… you
cannot have 6,000 friends.” The attendance
for this year’s SXSW Interactive surpassed
the attendance for SXSW Music, and Geldof
worries that it’s a testament to where people’s
priorities lay. Human language cannot express
the sensations and emotions that music can.
He believes that the Internet and blogging
craze is dumbing down the noise for change.
He admitted blogs could lead to brilliant
conversation, but they instead echo personal
prejudices and make noise with no intent and
no filter against it. Since the eighties, the most
successful music has been made by superstars
about material things. He believes new tech-
nology has potential, but it has instead given
the illusion of talent, where everyone has the
means to say something important and instead
say nothing.
Geldof’s speech was met with a
standing ovation, although not everyone may
have agreed with his views. But such is the
allure of SXSW. It offers an incredibly vast
palette of showcases and panels, morphing
Austin into a churning engine that monetizes
people’s passion for music and encourages re-
flection upon the past and future of this indus-
try.

Business Articles
has made it clear that he wishes one-click
purchases to be the norm. Effectively, Jobs is
asking publishers of content to adjust prices
so that the end user’s experience is simpli-
fied. This is good for Apple, because it helps
sell hardware, but costly for content creators
and aggregators.
The plight of music streaming ser-
vices, for instance, was described by Rhap-
sody’s CEO, John Erwin. Erwin argues that
“[this Apple-imposed arrangement comes] in
addition to [other] content fees that we pay to
the music labels, publishers and artists, [and]
Apple Sets Terms and Prepares for Subscriptions
is economically untenable.” He adds:
“The bottom line is we would not be
able to offer our service through the
iTunes store if subjected to Apple’s
30 percent monthly fee vs. a typical
2.5 percent credit card fee.”
Erwin is apparently not afraid to
pull out Rhapsody from Apple. If so,
Rhapsody would still be offered on
Android smart phones and on mobile
browsers, like Safari on the iPhone
and the iPad. Last.fm co-founder,
Richard Jones, and Rdio’s CEO,
Drew Larner, expressed similar con-
cerns. With the financial difficulties
that these companies face already,
their frustration with Apple grows.
From a consumer point-of-view,
it seems advantageous for Apple to
open yet another market. In-app sub-
scriptions could tap into a previously
untouched segment of the popula-
tion. Apple’s apps are extremely us-
er-friendly and the in-app subscrip-
tion process is no exception. There
is no need to deal with credit cards,
transactions are mostly one-click
away, and users can opt out of shar-
ing their information with the music
services. The simplicity of Apple’s
approach, and the added privacy,
could bring a sizeable influx of new
subscribers.
Is Apple in the wrong? After all,
companies such as Rhapsody and
Rdio are not required to use Apple’s
services. And Apple is entitled to
charge them. This is reminiscent of
the discussions between Apple and
the majors over variable pricing. It
took a while for Apple to accom-
modate variable pricing, and in the
meantime the labels agreed to Apple’s terms
because they feared losing the new online
market—then turned legal by Apple for the
first time.
At this point, streaming services
have several options to weigh. On one hand,
they could stick with Apple, accept the cut
from profits, and hope that the amount of new
subscribers covers the revenue lost to Apple.
A similar but more proactive approach would
be to raise the price of subscribing to ensure
The iPod, iPhone, and iPad
seem to have taken over the music
market. Apple, in effect, rules like an
empire over it all. Yet there are threats.
Music licensing seems to be moving
towards cloud-based subscription ser-
vices, and the challenge to the exist-
ing mp3-based music model is all too
real. Indeed, streaming services such
as Rhapsody, Rdio, and MOG provide
a simpler, and oftentimes more cost-ef-
fective, way of accessing and enjoying
music. Apple’s recent announcement
of a new 30% levy on all subscriptions
via in-apps should be seen in the light
of the competition for subscriptions,
where the computer company is hoping
to prevail.
Subscriptions via in-apps are
accessed though an existing applica-
tion, and are a new and growing source
of revenue. Apple has always taken
a cut of a third from song and album
downloads. Historically, that was the
value added by major label distributors
to music sales in the physical world. In
2003, when iTunes was launched, the
same terms in the physical domain were
applied to the new online world. The
majors had tried and failed with their
own versions of MusicNet and Press-
Play, and finally capitulated to Apple,
licensing in full their product to them.
Unfortunately, they did it on the same
terms that they had traded earlier. Now
it was the record labels that had to pay
Apple, instead of the consumer paying
that value directly to the label distribu-
tors.
This may be the next itera-
tion of the hold of Apple in the music
marketplace, which continues to impact
artists and their labels. Apple’s devices
are popular, so its decisions affect cutting-
edge services like Rhapsody, Rdio, or MOG.
In Apple’s model, announced early in Febru-
ary, publishers set the price and length of the
subscription, i.e. weekly, monthly, bi-month-
ly, quarterly, bi-yearly or yearly. Consum-
ers choose and pay accordingly. Then Apple
processes all payments, from which the 30
per cent levy is deduced. Apple requires that
subscriptions made directly by the publishers
at least match or are an improvement over the
terms offered in the Apple store. Steve Jobs
By Kayleigh Mill

Technology has changed not just
how music is transmitted but also how it is
made, helping independent artists become
national sensations in a matter of months.
The Grammys, however, are designed to
reward talented artists and musical excel-
lence. The challenge is when the “flavor of
the week” overshadows a distinguished act.
On February 20th, the New York
Times published a long and passionate plea
from renowned hip-hop producer Steve
Stout that questioned the selection methods
at the Grammys. Many were quick to label
this as an artist’s publicity stunt, but Stout’s
brief produced reactions globally, and not
just from fans but the creative community
and industry professionals. Had the Gram-
mys lost touch with mainstream culture?
The Recoding Academy maintains
that the Grammy Awards are “awarded to
artists and technical professionals for artistic
or technical achievement, not sales or chart
positions.” Commercial success should have
little bearing, if any, on a Grammy. ‘Artistic
achievement’, of course, is a loaded phrase
encompassing much meaning. Therein
lies the difficulty—and this in spite of the
openness of the voting by members of the
Academy and the strict criteria for selection,
including “no less than creative or technical
credits on six commercially released tracks,
or their equivalent”. The reader can consult
terms at http://www.grammy.org/recording-
academy/awards/voting-process.
As members on the nomination com-
mittee are industry professionals, the yearly
winners can often be at odds with public opin-
ion, for the criteria is not usually congruent with
that of the casual music listener. This begs an
important point. If the Academy’s choice does
not fit into our current cultural and musical mo-
saic, could it lose touch and deny accolades to
the talent in society that is most loved?
Advocates of the advancement of mu-
sic as an art form will say that it is good to pro-
mote artists who, in their own individual way,
are guiding music to new and unexplored plac-
es. However, critics cite occurrences of grand-
fathered artists stealing Grammy awards with
a mediocre album or song. An example that is
often quoted is Eric Clapton’s 1992 win for Lay-
la. At the time, it was believed that Nirvana’s
Smells Like Teen Spirit should have made the
honor.
Still, the Grammys do advance the
cause of album sales for lesser known, but prom-
ising talent. Artists like Lauryn Hill and Alanis
Morissette, although definitely not anonymous
by any means before their respective wins, saw
up to six digit boosts in album sales, and this
propelled their careers to new heights. Another
example is Esperanza Spalding, winner of 2011
Best NewArtist. Spalding has witnessed a nearly
five-fold increase in album sales to date (www.
grammy.org). In fact, one would be hard pressed
to find any past winner of the big awards whose
sales failed to grow after the televised show. The
Recording Academy, in short, has a key role in
promoting new artists in the marketplace.
By Frederic Choquette
Yet the Recording Academy does
not necessarily have just music sales in mind.
Esperanza Spalding’s talent and genius are
unquestionable, but her jazz-based target
audience seems limited for a Best Artist of
the Year award. If the Academy had wanted
to reach a larger audience, they would have
picked Justin Beiber, who’s mellow and bland
pop tunes seem to have the capacity of reach-
ing millions. Interestingly, Bieber did not
seem to need the award as much. Digital al-
bum sales of his Never Say Never increased
by two-thirds after this year’s Award Ceremo-
ny (www.grammy.org).
It is also important to note that
while there will always be some debate as
to the legitimacy of the awardees, the Acad-
emy has clearly made significant efforts to
keep the various performances seen during
the ceremony in line with popular culture.
For instance, this year’s performers included
Lady Gaga, Eminem, Katy Perry, Drake and
Rihanna, all of whom are international pop
icons.
Perhaps the approach to determin-
ing the role of a music artist in our ever-
changing culture has been defined too nar-
rowly. What if the scope of their engagement
to society is not to fulfill one specific goal but
instead to fill many of them simultaneously?
Using this explanation, the general unpredict-
ability of the results becomes much more un-
derstandable as goals may vary from ceremo-
ny to ceremony or even from award to award.
Although the legitimacy of some of the past
winners is debatable, one cannot overestimate
the positive impact the Grammy’s have had
on the promotion of music through media.
Finally, it has to be said that Steve
Stout’s grievances may have some validity.
The Recording Academy did use the most
popular artists of the day to promote a show
full of upsets. But this compromise over TV
ratings should not be viewed as defining the
Academy over time. Choosing the Grammy
Awards is a complex proposition for many of
its voting members. The choices they make
both promote sales and contribute to music’s
general appreciation. The Recording Acad-
emy should be judged on a variety of fronts.
Reference
http://www.huffingtonpost.com/steve-stoute/steve-stoute-
grammys_b_825377.html
A Controversial Grammy Night
Business Articles

Law Section
The Trade-Off Between Connectivity & Privacy
The survival of a business
depends today on the gathering of in-
formation for marketing purposes. A
successful company has to analyze data,
plan, and then execute a strategy. The
Internet and today’s technology have
made the first step quick and efficient.
Google Analytics, for example, gener-
ates detailed numbers about website
visits, summarizes the information into
convenient charts, and helps users strat-
egize and develop marketing plans.
Much like any other business,
the music industry requires information
to target specific fans. After all, music
without people willing to listen to it has
no market value. However, the Inter-
net’s potential raises issues of privacy
and information security. As the Internet
has only been commercially available
for about fifteen years, users are still
not educated enough to understand the
significance of good privacy protection.
We tend not read the terms of service
when signing up for website. Younger
generations are prone to be more vulner-
able because they are not trained to think
much about privacy. Thus, we continue
to find cases of online defamation, un-
solicited emails, and the creation of per-
sonal information databases without the
requisite clearance.
InAugust of 2010, a group represent-
ing minors and parents sued Warner Brothers
Records, as well as Disney and several other
corporations, for placing flash-based cookies
developed by Clearspring Technologies onto
user systems that enabled tracking of visitors
that web-surfed beyond their sites. Plus, these
cookies had an ability to regenerate once de-
leted, without notification or asking for the
consent of the user. Since the federal govern-
ment lets private database owners decide how,
when, and where they can share this informa-
tion, it ends up being sold to third parties such
as ad agencies.
Finding a balance between privacy
and good ethics is complicated, and there is a
trade-off between more security and the ben-
efit of the new technology. In December 2010,
Apple, Pandora, and a number of other top
smartphone manufacturers and software devel-
opers were sued for possible privacy breaches.
According to the lawsuit, iPads and iPhones
containa Unique Device Identifier (UDID) that
acts as a cookie for web browsers, and can track
all activities performed by the user. The cookie
retrieves personal information such as location,
age, and gender that can be collected and sold to
third party ad agencies. Officially, the purpose
of UDID is for Apple to approve the installa-
tion of new software. The user cannot turn off
the UDID, because it protects mobile carriers
from pirated software. With the release of the
iPhone4, congress has questioned the collection
of “a range of user information, including lo-
cation specifics.” Nevertheless, Steve Jobs has
said that users have the ultimate control whether
to purchase the device or not, and they also have
the ability to turn off the real-time geographic
locator. (To view a table that shows personal
data collected from several popular apps in the
iPhone and Android, see: http://blogs.wsj.com/
wtk-mobile/.)
Facebook has also had to deal with
an onslaught of privacy concerns, and recent
breaches have led to an ongoing investigation.
On May 7th 2010, fifteen organizations, includ-
ing the Electronic Privacy Information Center
(EPIC), filed a complaint to the Federal Trade
Commission (FTC). Facebook, they said, “has
engaged in unfair and deceptive trade practic-
By Ben Hong
es.” In their prepared testimony, they
asked lawmakers to update and amend
the federal privacy law “to limit the
ability of Social Network companies
to disclose user information to third
parties without informed and explicit
consent.” They urge the FTC to inves-
tigate Facebook’s business model, as
users cannot keep up with the countless
changes and updates to their privacy
policies. Without easily accessible in-
formation on the updates, users have
no control about where their personal
information goes.
The following are some examples of
controversial features in Facebook, as
listed on EPIC’s official website:
(i) Facebook requires “accurate, current
and complete” information of users as
they activate their account, thus, requir-
ing online identities to match their real
life identities.
(ii) Facebook allows users to invite
their colleagues and friends via a con-
tact importer, which downloads all the
contacts from users’ existing e-mail ac-
counts. The website does not specify
what happens when these e-mail ad-
dresses are given out.
(iii) Users can utilize various applica-
tions via the Facebook Platform, which
was introduced in 2007. For users to
gain access to these applications, Facebook
has to share their data.
(iv) Facebook displays social ads and pages
that target users demographically, using
collected information upon the creation of
a Facebook account.
Facebook, of course, has intro-
duced many useful innovations and is of-
ficially supportive of privacy terms. But
on March 2, 2011, replying to a letter by
Congressmen Ed Markey and Joe Barton,
Facebook could still say that it would “go
forward with a proposal to provide users’
[information] to third-party application de-
velopers.” In the meantime, reports of can-
celled accounts are rising. Facebook scored
just 64 on the American Customer Satisfac-
tion Index’s (ACSI) 100-point scale.
The above suggests that, regard-
less of Facebook’s practices, there has
been a movement in Congress to amend
federal privacy law in accordance to prob-
lems raised by social networking websites.
While “the United States Constitution does

Visit the MBJ online!
www.thembj.org
Please write to us at:
office@thembj.org
Topics in the next issue:
Social Commerce
Live Music Production
Rebecca Black
The Music Business Journal will be
released three times in the Fall, three
times in the Spring, and once in the
Summer.
Upcoming Topics
Volume 6, Issue 5 April 2011www.thembj.org
Music Business Journal
Berklee College of Music
Apple (cont.)
that the cost of Apple’s levy is covered. For
after tax earnings to break even, however, it
appears that these services would have to raise
their prices by more than the levy. The higher
prices may discourage potential subscribers and
cause current subscribers to cancel their sub-
scriptions.
Conversely, music streaming servic-
es could withdraw from the Apple ecosystem
completely. If all music-streaming services
boycott Apple, the company would be forced
to reconsider its stance. The loss of every avail-
able streaming service would harm its image of
providing a cutting edge music and entertain-
ment experience. Also, Apple isn’t the only
company that produces mobile devices that sup-
port streaming; Android would gladly pick up
the slack.
Many analysts have speculated that
Apple may be intentionally putting streaming
services at a disadvantage in preparation for
launching their own subscription cloud ser-
vice, MobileMe. Mobile Me is expected early
in June, and would corner all the revenue from
its service and collect very well from compet-
itors—a smart business plan. Judging by how
popular most of Apple’s endeavors are, they
may well end up leading the music-streaming
market. They recently bought rival Lala, which
they will shutter on May 31st. They also invest-
ed in a $1 billion data center in Maiden, N.C.,
which they hope to leverage later in the spring.
Apple is still dealing with licensing issues but
as the record labels rely mostly iTunes sales, an
accommodation is likely.
Sources
- “Apple Data Center Opens In Spring To Support Cloud.”
Hypebot. Web. 22 Mar. 2011. <http://www.hypebot.com/
hypebot/2011/02/apple-data-center-goes-live-this-spring-
to-support-cloud.html#more>.
- “Apple Launches Subscriptions on the App Store.”
Apple. Web. 22 Mar. 2011. <http://www.apple.com/pr/
library/2011/02/15appstore.html>.
- “Apple To Shut Down Lala On May 31, ITunes.com
Launch Impending?” TechCrunch. Web. 22 Mar. 2011.
<http://techcrunch.com/2010/04/29/apple-to-shut-down-
lala-on-may-31/>.
- “Apple’s Big Subscription Bet: Brilliant, Brazen,
Or Batsh*t Crazy?” TechCrunch. Web. 22 Mar. 2011.
<http://techcrunch.com/2011/02/15/apple-in-app-sub-
scriptions/>.
- Bruno, Antony. “Apple’s New Subscription Rules Could
Kill Streaming Music Services | Billboard.biz.” Mu-
sic Business | Music Industry | Record Sales | Billboard
Charts | Billboard Hot 100. Web. 22 Mar. 2011. <http://
www.billboard.biz/bbbiz/industry/digital-and-mobile/
apple-s-new-subscription-rules-could-kill-1005036412.
story>.
- “Rdio CEO Says New Apple Tax Makes It “Untenable”
For Them to Exist On IOS Devices.” Hypebot. Web. 22
Mar. 2011.<http://www.hypebot.com/hypebot/2011/02/
rdio-ceo-says-new-apple-tax-makes-it-untenable-for-
them-to-exist-on-ios-devices.html>.
- “Rhapsody CEO Blasts Apple: New App Store Terms
- “Economically Untenable”” Hypebot. Web. 22 Mar.
2011. <http://www.hypebot.com/hypebot/2011/02/rhap-
sody-ceo-blasts-apple-new-app-store-terms-economical-
ly-untenable.html>.
- “Will Apple Back Down From 30% Charge?” Hy-
pebot. Web. 22 Mar. 2011. <http://www.hypebot.com/
hypebot/2011/02/will-apple-back-down-from-30-charge-
likely-not.html>.
not contain the word privacy,” the concept of it
prevails throughout its amendments, and it is rec-
ognized as a penumbral right; i.e. a right by im-
plication. At stake here, and from an individual
perspective, is the balance between a great user
experience and the safeguarding of private infor-
mation.
If user behavior is the measure of our
concern for privacy, it may appear that this is not
such a priority for most of us. Acording to statis-
tics posted on Facebook, its user base has more
than 500 million active users, who spend over 700
billion minutes on the site a month. Artists and
bands will certainly continue to utilize the ben-
efits of having access to a large user base, from
which they may plan their marketing strategy. In
fact, if Congress pushes its agenda too much and
forbids all the features within social networking
platforms that touch on privacy concerns, the ad-
vantage of utilizing Facebook and other websites
may disappear. Connectivity and sharing are two
key concepts of social networking, and as long as
this is valued more highly than privacy, control
of an individual’s profile over the Internet might
become more and more elusive.
Sources
http://www.dmwmedia.com/news/2010/08/16/disney-warner-
records-sued-over-clearspring-tracking-cookies
http://www.hypedsound.com/news//details/LAWSUIT-ACCUS-
ES-PANDORA-OF-PRIVACY-INVASION
http://digitalmusicnews.com/stories/122710pandoraprivacy
http://digitalmusicnews.com/stories/062410apple
http://epic.org/privacy/facebook/in_re_facebook_
ii.html#summary
http://www.foreseeresults.com/news-events/press-releases/face-
book-flops-in-acsi-ebusiness-report.shtml
http://www.facebook.com/press/info.php?statistics
Privacy (cont.)
(From Page 14)(From Page 12)

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