The majors’ defence of intellectual property rights is a key barrier to music/tech startups (guest column)


This is a guest post from Dr Allan Watson, Senior Lecturer in Human Geography at Loughborough University and Professor Andrew Leyshon, Emeritus Professor of Economic Geography at the University of Nottingham. They have recently published a study that explores the tricky relationship between the music industry and disruptive startups.

They see the music industry as a “pioneer platform industry” – but one that is also entering a new wave of platform reintermediation, which means challenges for both incumbents and startups. Strong tensions, they say, still exist between music and tech – due to the music industry’s business model of intellectual property capitalism, and the legacy effects of preceding waves of music tech platforms.

Allan Watson and Andrew Leyshon

The rise of digital platforms has been one of the most significant social developments of the past decade.  The music industry is widely recognised as a frontier sector for the process of by which platforms now help to create markets linking sellers and buyers.

In retrospect, the rise of peer-to-peer networks in the late 1990s represented the emergence of the first ‘platforms’, although these were largely illegal, connecting users to copyrighted recordings without permission. However, these ‘proto-platforms’ paved the wave for legal downloads through iTunes and similar services, which were then followed by a second wave of platformisation as streaming platforms came to dominate the distribution of music.

Now, we see a third wave of platform reintermediation underway, as a constellation of music/tech startups experiment with digital technologies allowing users to consume or create music in novel ways. The music industry has, of course, always had something of a complicated relationship with technology, a relationship that reached a low during the MP3 crisis.

With the rise of the major music streaming platforms, a new accommodation between tech disruptors and industry incumbents was achieved during the second wave of platform intermediation.

Yet, despite such an accommodation, emerging links between the incumbent corporations of the music industry and music/tech startups in the third wave are being overshadowed by a chronic tension that is constituent of intellectual property capitalism and amplified by the legacy effects of preceding waves of platform reintermediation.

The study

Between 2018 and 2019, we undertook the first detailed qualitative academic examination of the complexity of the relationships between the large number of innovative startups and the small number of major corporations that are the oligopolistic incumbents of the music industry. This consisted of in-depth interviews with individuals working within music/tech startups, major record labels, independent record labels and publishers, incubators and other organisations engaging with startups, in both London and Stockholm.

Our research finds that the progress of the latest wave of platform reintermediation is being determined in part by the legacy of earlier waves, which serves both to make large record companies cautious of the implications of platformisation, and of the demands that innovation around platforms make on their resources.

While narratives around the implementation of music/tech appear positive in the music industry press, the relationship between the music industry and emerging platforms is often complex and difficult. Incumbent corporations are scarred by a strong institutional memory of the devastating impacts of internet file sharing, which is reflected in their stout defence of key historical assets, namely extensive catalogues of music.

These assets endow music corporations with an oligopoly over intellectual property rights and provide a key advantage through which incumbent music industry corporations retain their dominant position in relation to major streaming platforms and emergent music/tech platforms.

Protecting assets

There are two key strategies through which incumbent firms protect these assets in the face of the incursion of music/tech startups into the music industry.

First, major corporations defend their interests through recourse to law, as seen in the need for startups to employ expensive legal teams to engage with the legal departments of the corporations, with majors pursuing legal action against startups where it is judged that copyright has been infringed.

There were issues not only with the willingness to issue licences however, but also with the availability of appropriate frameworks for licensing in a digital age.

Major corporations are seemingly unwilling to bend or adapt legal frameworks to the needs of many startups, such as the wide-scale adoption of a ‘rights sandbox’ a protocol which enables startups to test innovations in the market with actual customers under strict conditions and monitoring (such as those seen in FinTech, for instance).

While music industry sandboxes have been trialled, major corporations appear to be reluctant to enter into a wide-ranging sandbox agreement for music/tech firms.

It is this hard-line defence of copyrighted assets by the major corporations that presents perhaps the biggest single challenge in launching and subsequently growing a viable music/tech startup, especially where initial funding is limited.

Yet there are other related barriers too. First, lines of communication into the large incumbent corporations are very complex and difficult to navigate for startups, especially those where founders or investors do not have prior experience in the industry.

Often, we were told that initial enthusiasm from label staff gives way to the cynicism of publishing and legal departments. Engaging with these departments to discuss licensing can be both complex and expensive. Second, even where licensing agreements are reached, the costs of licences for music rights owned by the incumbents incur a significant cost for startups – in the order of tens or even hundreds of thousands of pounds – and therefore is only feasible for those startups with significant initial capital investment.

Resistant to innovation?

A narrative circulated within and between many of the startups interviewed that major corporations are ‘innovation resistant’. Startups, and the entrepreneurs that found them, are part of a growing group of organisations and individuals that are seeking to develop a counter-narrative to that which argues for strict copyright protection, depicting industry incumbents as part of a problem rather than the solution to any copyright reform efforts.

Yet, the premise that the majors are innovation-resistant was strongly rebutted by representatives of the major corporations, who are focusing their limited internal resources on those innovations which meet immediate strategic needs.

A 2019 report by Music Ally suggested that “rather than scrabbling around for the next big thing, the labels are quietly seeking unsexy, powerful, niche pieces of technology to augment their existing businesses”.

We would argue that the often complicated and uneasy interactions between major corporations and startups are demonstrative of the ways in which the powers vested in intellectual property are being strengthened, and enforcement is augmenting intellectual property’s resilience in the face of potential threats to the oligopolistic power of the music corporations.

Having reasserted their control of music rights following the MP3 crisis, large corporations are reluctant to engage in technological and business model experiments that might weaken their position as the dominant controllers of the key music industry assets, namely music rights.

The full detailed findings of the research are available online here.

Written by: Music Ally