By Hannah Karp
The music industry is gearing up to spin revenue from a new
source: the billions of hours of DJ mixes and mashups that
dance-music fans listen to online each year.
Spotify AB, Apple Inc.'s Beats Music and most subscription music
services don't include DJ creations or user-made mixes in their
song libraries because they don't have a way to pay for them.
Record labels, meanwhile, have been slow to agree on a
revenue-sharing plan.
One startup is trying to solve the problem. Dubset Media Inc.
has developed technology to track how much of each song is used in
any given DJ-made track or mix. It can then calculate royalties
owed to artists like Lady Gaga or Jay Z whose music was
sampled.
The New York-based startup is in discussions with the major
record labels-- Vivendi SA's Universal Music Group, Sony Corp.'s
Sony Music Entertainment and Access Industries' Warner Music
Group--to license music that DJs have mixed. Such deals could pave
the way for Dubset to distribute such mixes to streaming services
such as Spotify.
The labels are in need of new revenue streams. Global recorded
music sales peaked in 1999 at $40 billion and have shriveled as
fans started sharing files online and shifted to sites like YouTube
for free music. The industry brought in $15 billion in revenue in
2013--with more than $1 billion from streaming services, according
to the International Federation of the Phonographic Industry.
Dubset Chief Executive Bob Barbiere estimated that online music
mixes could eventually generate $1.2 billion a year in additional
revenue for the industry. Currently all the big subscription music
services "deal with same library, but now you're dealing with a
whole new world of content that could help drive new subscription,"
he said.
Dubset spent the past several years creating its "MixScan"
technology to analyze DJ mixes, which it hosts on a small
music-streaming service it operates called Thefuture.fm.
Before posting music on the site, Dubset analyzes it, measuring
how many seconds each individual song is heard and logging the data
into its library. It then pays royalties based on the number of
times users listen to a given mix, along with the length of time
each song was featured in the mix.
Its total payouts have been negligible to date, due to the
site's tiny user base and revenue. Dubset has ingested more than
50,000 mixes into its database and there are 250,000 more waiting
to be scanned into the system, Mr. Barbiere said.
Extrapolating from the streaming habits of 100,000 consumers who
used TheFuture.fm over the past two years, Madonna and her record
label have likely been missing out on the most money in the absence
of mix-content licensing agreements, Dubset said. Fans around the
world have likely streamed her songs in DJ mixes about 204 million
times over the past two years without paying, while Lady Gaga's
music has been streamed 154 million times in mixes, according to
the company.
Radiohead came in third place, likely missing payment on 52
million mix streams, while U2, Blondie and Phil Collins also ranked
among the top 10 biggest losers.
David Guetta, a popular DJ and dance-music producer, recently
started releasing regular mixes onto TheFuture.fm to endorse
Dubset's technology. He said he hopes SoundCloud and other big
online services will adopt the technology.
Until big music services start paying the creators of the
individual tracks he puts in his mixes, he said, he can't release
them to very wide audiences, since he doesn't have time to get
clearance for every song himself. If he did put them up without
permission, the rights holders would likely notice, given his
celebrity, and might have the mixes taken down.
"I feel like I'm too big to use SoundCloud, but I want to use
it," Mr. Guetta said.
SoundCloud, which specializes in streaming such mix content to
175 million monthly users, doesn't pay royalties on such
tracks.
The company would like to, according to people familiar, but
doing so has been impossible without a label-approved system to
determine what fragments of songs are worth.
SoundCloud started advertising last year and shares the revenue
with several dozen partners, including Warner Music. The company
also plans to launch a paid subscription service this year.
But Warner's much larger rivals, Universal Music and Sony Music,
haven't signed deals with SoundCloud, and some executives at those
labels remain dubious of the audio-sharing site's business model,
according to people familiar with the matter.
Warner Music, meantime, isn't yet being paid for the music it
owns that has been incorporated without permission into mixes on
SoundCloud, according to people familiar with the matter.
Write to Hannah Karp at hannah.karp@wsj.com
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