Some interesting perspectives from Tuhin Roy of MXP4:
Social games and apps on Facebook are the most recent miracle of the Internet, coming from nowhere three years ago to generate a projected $4 billion in revenue this year. Companies such as Zynga, Playfish and Crowdstar have grown with the phenomenon and become experts in producing massively popular and addictive games. Titles like Cityville, Mafiawars, Pet Society and Restaurant City have all become multi-million dollar business.
Music has been totally absent as a category.
Working with the team at Paris-based social music games developer MXP4 last year, we started to research why music-which seems such a perfect fit for the social space-had not taken part in the social games phenomenon. The answer that quickly became clear was that social game developers had looked into what is involved in acquiring music licenses and had run screaming. With lots of fertile territory left unworked, it didn’t make sense for these guys to dive into the thicket of rights issues involved, or to work through the complex license negotiations that would be involved in an entirely new model for the music industry.
With our backgrounds in music, we were less intimidated although we understood that huge complexities would be involved. On top of all the other issues faced by digital music services like iTunes or Spotify, we understood that social music games would be harder to license because they implicate synchronization rights. This meant that in large part we would not benefit from the work the music industry has done over the last ten years to clarify and simplify licensing for straight forward digital download and streaming services. We decided to dive in anyway.
We faced two major challenges. First, we would be negotiating deals that involved payments made in virtual currencies for virtual goods that included the right to access music. Beyond the obvious questions of how fairly to split revenue, the social game setting required us to work with labels and publishers to define entirely new methods of calculating and reporting royalties.
Second, and more problematic, is the fact that unlike digital mechanical reproduction rights or non-interactive streaming, there are no statutory or bulk licensing mechanisms for synchronization rights. For historical reasons, artists and writers almost universally have the right to approve on a case-by-case basis sync licenses that their labels and publishers want to issue.
As a result, once the hard work of agreeing on a deal with a label group or publisher is done, the fun of clearing songs on a track-by-track basis begins.
Just to identify what might be “clearable” and thus which tracks to request, has required us to build a proprietary multi-million line database of publishing rights using multiple sources. Once we have identified a track that we think we may be able to clear through our deals, we work with the clearance teams at labels and publishers to put requests into the relevant artists and writers. Oftentimes, we need to reach out to the artists and writers representatives directly to get them up to speed on what we are doing.
And all of that is multiplied by the number of writers, publishers, artists and labels on a particular track-which these days can be a lot given the popularity of collaborations and sample licenses. One particular David Guetta track, for example, has 14 publishers.
So the challenges are clearly huge, although we are working hard to develop internal systems and procedures with our label and publisher partners to “scale up” the effort. The publishing industry is also starting to look at more comprehensive solutions. The NMPA’s recent call for a one-stop shop for synchronization and other rights is recognition that the music industry is losing out on potentially significant opportunities to make money in the world of gaming and beyond.
Unfortunately, given the historical requirement that artists and writers approve sync licenses individually it’s hard to see how such a one-stop shop can be set up quickly. Essentially, the publishing industry would have to replicate the process that we have been going through with MXP4. They would need to get buy-in from a large group of publishers and then would likely have to get individual writers to opt-in to the mechanism. It’s a huge task, but we would love to see it succeed.
In the meantime, we will continue to work through the process with our partners as we look to put the music business into social gaming.
(Tuhin Roy is Chief Strategy Officer of MXP4, the developer of Bopler Games, a Facebook application that enables users to play multiple music games across a large catalog of music. Tuhin practiced corporate and intellectual property law at Perkins Coie LLP in Menlo Park, California, founded and ran the Digital Rights Agency, co-founded Echo Networks and served on the board of directors of the Digital Media Association. Tuhin also advises a number of digital media start-ups and is on the investment advisory board of Pink, an early stage investment fund.)