The music industry is excited about the potential offered by games and virtual worlds, but are its licensing models flexible enough to realise that potential?
At our Sandbox Summit Web3 Special conference this week, CrossBorderWorks CEO Vickie Nauman addressed the topic, using her experience licensing music for VR game Beat Saber, helping David Guetta clear tracks for a Roblox DJ set, and sundry other projects.
Nauman is bullish on music in the metaverse, but also under no illusions about the challenges that remain to be solved when it comes to licensing.
“I feel like it’s opening a door into new experiences that can really be higher value, that can be deeply immersive and experiential between artists and fans, and I think there’s an enormous amount of potential,” said Nauman. “But we’re seeing the early stages of some big tangles around rights and licensing.”
In her role as a consultant, Nauman is working with the full gamut of web3 startups and projects, from NFTs and fractionalising rights through to games, virtual worlds and artists as avatars.
“It’s early. It’s really, really early! The experiences we’re starting to see now are kinda clunky. If you want to set up a Metamask account or transfer crypto from wallet to wallet, it’s not easy,” she said.
“The platforms and technologies are rapidly evolving. Every single NFT is different, all the metaverses that are out there now – a lot of hem being built, a handful of them that are live – they’re all changing quickly: what their models are and who they’re trying to appeal to.”
“The moral of this story is that it’s time to experiment and to gain first-hand knowledge… You can try some fairly low-barrier-to-entry projects, and it’s okay to fail.”
Nauman added that the current state of web3 reminds her of the internet in 1999-2002, when a lot of startups failed.
“Companies that raised tens of millions of dollars, and they crashed and burned. There were things that were not necessarily business models. They were proof of concepts. And that’s really where we are with web3 and the metaverse.”
Nauman also broke down music licensing, noting that it’s always been a mixture of “norms and laws”. Norms around how music licensing is done, and then copyright laws in different countries dictating how music is used, and the rules around it.
“For web3, the licensing norms don’t really yet exist. We’re still figuring all those things out… We’re trying to take what we know in web2 and previous eras, and see how they apply to web3. But importantly, for all the startups that may be in the room, the copyright laws do still apply!” said Nauman.
“I’ve talked to quite a few startups who seem to think that copyright laws don’t apply to them, and their technology use case falls outside copyright laws. That they don’t need to think about these things… I have to say it: yes! You are still subject to copyright laws!”
Nauman also stressed that the direction of travel for web3 is towards products and experiences that are “very artist-centric… nobody’s buying an NFT because it’s just part of a label catalogue: it’s because of the artist”.
She added that the same is true in the metaverse, suggesting that this is a key difference between web2 services (“Things like Spotify and Apple Music… where you’re not necessarily going there for one artist, you’re going because you can get a collection of every song ever created”) and web3 services.
“In web3, we don’t necessarily need to license every catalogue from every rightsholder, but we do need a constellation of rights to light up web3 experiences, surrounding an artist,” said Nauman.
“It goes beyond sync licensing where you’re just licensing a handful of songs. Oftentimes, platforms are going to want to pull in an ongoing feed of artists, and a lot of them are also building creator tools directly into their platforms, and they’re not really separating out artists from other kinds of creators.”
“As a visual artist, you can do whatever you want in web3, same as if you’re a young [music] artist who owns all you rights. But if you’re signed to a label and publisher, you can’t just use a tool to bring every single rightsholder with you.”
Nauman also raised one of the running themes of the Sandbox Summit: that web3 business models are “orienting around niches and communities” rather than what she sees as a “volume-based” focus for the big, established music services.
“You can make money if you are getting streamed millions and millions and millions of times. And if you’re not – if you have a small fanbase around the world, if you don’t get on playlists – those models maybe won’t work for you,” she said.
“Web3 may work better for those artists with devoted fans but who are not streamed millions and millions and millions of times [on the existing streaming services].”
Nauman closed by talking about the rights needed for music metaverse partnerships and projects: any combination of sound recording, publishing and performance, along with artist name, image and likeness.
“The burning question is how do we divide up all of these web3 pies? And there are a lot of battles going on around this right now. We have a window to sort this out, and I think that it’s critical for us as an industry to really start discussing all of these things,” she said.
Nauman referred back to her work on David Guetta’s Roblox performance: clearing the rights for 20 songs that had 143 different writer’s shares that needed to be cleared.
“It was extraordinarily challenging. It almost killed me! But I did it… This is what we need to do to clear these rights. The industry is not particularly set up for it, it’s not really scaleable to do it as a sync. But those were the rights that needed to be cleared.”
Nauman also believes that web3 is not a disintermediation trend: it’s something where labels, publishers and other existing music entities can play a positive role, rather than being cut out.
She also thinks web3 could provide a new layer of “really high-value” experiences at the top of the digital music pyramid, co-existing with free and paid streaming services rather than replacing them.
But she came back to the licensing challenges that still need to be solved. Among them: if metaverse music licensing is akin to traditional syncs, will that mean labels and publishers (i.e. recordings and songs) split the royalties 50/50 – and will labels accept that?
Performance rights in the metaverse, too, loomed large in Nauman’s final thoughts. “Is there a better path to secure performance rights? This is a huge, huge issue,” she said.
“There will be millions and millions of metaverses. I would like to have all of them fully licensed and fully legal, but the path to securing performance rights – especially if you have only one or two per cent of your business being in music, is really a big lift, and very challenging to secure those rights.”
Nauman finished on an optimistic note though, suggesting that the innovation around web3 technologies and services can and will be matched by innovation around music licensing models.
“While we’re experimenting with web3, we should really be experimenting with what these [licensing] norms are, and making sure we have a way to properly compensate the artist and the traditional stakeholders: labels, publishers and PROs,” she said.
“And that we have some clarity so that the platforms that are trying to light up experiences with music have a chance of surviving and figuring out proper business models.”
Music Ally’s Sandbox Summit Web3 Special was held in association with Cirkay, Fanaply and Global Rockstar, and supported by Tuned Global. You can read all our coverage of the sessions here.
Tools: platforms to help you reach new audiences
Tools :: Wyng
Through Music Ally’s internal marketing campaign tracking, we’ve recently discovered an interesting website by the…