How to start a legal digital music service

If you like to start a digital music service you just can't start sell music on your website that you bought on another digital music service like iTunes, or even worse, ripped from a cd or from a peer2peer service. Why not? Because it is not your music. The creators of the music, authors and artists, own the music. If you like to sell their music you need their permission. Creators have various rights. Rights to exploit the music. If you like to sell the music of the creators you have to pay a (small) amount of money to them.

Clearing copyright and neigboring rights

Within the Netherlands you have to pay the author based on the copyright act of 1912. The artist (performer) has to be paid based on the neighboring rights. But, how can I find these artists and authors? And, how much do I have to pay them?

Most of the time artists and authors are supported by organizations to market, finance, distribute and sell their music. Music Publishing companies are supporting authors, Record companies are supporting artists. The relationships between artists and record companies and authors and music publishers are based on record deals and publishing deals. The creators are (partly) transferring their rights to these parties. It means that record companies and music publishers are becoming rights holders as well.

The role of the copyright society

Another party is involved. The copyright society. Music Publishers and authors can transfer the exploitation of their copyrights to a copyright society. The copyright society charges music users for the use of music based on the copyrights of the rights holders they represent. So, when you like to start a digital music service, you have to start to get a license from a copyright society. This was the easy part of the story.

Get licenses from the 4 major recordcompanies to cover 80% of total market

To get a license from a record company (because of the neighboring rights) you have to make deals with several record companies to clear the rights. It is not possible to clear your rights with one organization. You have to start negotiations with various record companies. The four major record labels (Sony, Warner, Universal and EMI) have an accumulated market share of 80%. To have a successful (mainstream) music service, you need the content of the four majors in order to survive this highly competitive market.

Conclusions

So, if you like to start a digital music service: clear copyrights and neighboring rights. Copyrights can be cleared via copyright organizations, neigboring rights need to be cleared via record companies. Start with the major labels. Clearing rights can be a time consuming and an expensive process.