The New Licensing Opportunity for Movies and Music

Memo

To: Studio Chiefs, Network Heads, Record Label Presidents, Filmmakers, and Musicians
Subject: Your New Revenue Stream
Date: 9/18/06

When your first impulse is to sue because people are using your product in ways you don't like, it's always a good idea to examine the situation to see whether you're overlooking a new revenue stream.

When people started recording movies from TV onto videocassettes, Universal and Disney decided to sue Sony, which made the first widely-available VCR -- rather than diving head-first into home video, which now generates more money for the studios than ticket sales.

Right now, Internet users seem to enjoy making videos, often using copyrighted music and video. That's illegal, right? Sure, but it also hints at a new revenue stream for record labels, movie studios, TV networks, filmmakers and musicians.

There's no way for an individual to legally license a song for use in their home movie, or for a basement filmmaker to easily license a clip of video to use in a movie she's making. Established musicians and filmmakers, when they want to use a clip or a sample, can hire lawyers to "clear" the sample they want to use, and usually pay lots of money for the right to incorporate it in their work. But wouldn't you guess a much larger number of aspiring musicians and filmmakers might pay a smaller amount to license music and video -- providing they didn't have to hire laywers?

(And if you answer no, consider this... Auction houses probably would have told you a dozen years ago that the only people who wanted to sell things at auction were Vanderbilts and Cabots who owned priceless works of art, and that the only people who wanted to buy things at auction were similarly wealthy. The costs and hassles of selling something at auction were simply too much for the average schmo to bear. Then along came eBay, which is now bigger than every auction house in the world combined.)

There are three ways to approach this market.

- One is to have a set of license fees for using your stuff, probably based on the length of the sample, and the breadth of the release. (IE, the fee would cheaper if it's just being posted to YouTube or MySpace, and more expensive if you want to release it on a self-produced CD or show it in a neighborhood movie theater.) Would people pay for the right to legally use music and videos? I think many would. If I bought a song for 99 cents, I'd certainly pay another buck or two to be able to incorporate it in a video I made and not worry about being sued.

- The second way is for the music or movie companies to get a piece of the advertising revenue. Warner Music plans to try this with YouTube. But it works best for videos, since most people don't listen to or see advertising when they listen to MP3s. And what happens if a song or video uses many clips from many publishers? That starts to dilute the revenue for any one publisher.

- The third way is for record labels and movie studios to work more closely with technology companies, so that music and video incorporated in what the lawyers call a "derivative work" could better promote the original works. Imagine listening to a mash-up in your iTunes music player, and having the original songs available for purchase in a window on the bottom of the screen, under a heading that says, "This song samples from..." Similarly, imagine watching a video on YouTube featuring five minutes of the best car chases ever filmed. At the end, you'd see a list of the movies they came from (`Bullitt,' `The Fast and the Furious,' etc.), and be able to link over to a marketplace site to buy the DVDs or a digital download.

The creator of a musical mash-up or video might even earn a referral fee, based on the number of DVDs, CDs, or downloads his work helped sell.

Any of these three approaches, I believe, would help record labels, movie studios, TV networks, filmmakers, and musicians earn more money from works they'd already created. You'd still have to sue people who didn't play by the rules, but you'd also have a brand new revenue stream (or promotional engine) for your business.

Your thoughts?