In one of my recent posts I wrote how everybody in the music industry should re-evaluate his business model and how the business model canvas of Alex Osterwalder can help you to do this exercise. Recently I experienced myself how a publishing company missed an opportunity by not adapting to the new digital environment. There old school thinking actually prevented them from earning some money.

Some time ago I had the luck to work with some very talented flash designers. During their internship at Amai Jan and Dries made a very cool video explaining the concept of Motion Music Manager. I thought we agreed to use copyleft music as background music, but unfortunately there was some misunderstanding there. I was very satisfied with the great video and I liked the song very much. When I asked who made the song, it appeared that it was a track by Apparat, Hailin from the Edge. Not copyleft of course. So, I couldn’t use the movie to promote Motion Music Manager on a large scale without asking permission to use the music, especially because I made some statements about copyright issues on this blog. Infringing copyright would be very stupid.

So, I tried to contact the artist and finally wrote an email to his (German) label to explain the situation. After a while I got an answer from the Belgian department of the publishing company. They asked me for more information: how exactly would the music be used, how long is the fragment, where would it be published, etc. I explained that it was meant as background music for a short (50 seconds) educational video about our service, that we were a very early start-up, that we didn’t have that much reach yet and that we were a service that tries to make life easier for musicians. I also offered to make a win-win agreement: Apparat could make use of our services if we made a beneficiary deal about using the music. After a couple days I got an answer: if I wanted a license for the music, I should pay € 1,500 per year for the licensing rights and € 1,500 per year for the master rights. It was not really possible to make a better deal because we didn’t have enough reach as a starting project and we couldn’t guarantee exposure that would benefit the artist.

As we are a start-up, we think twice about spending every penny. € 3,000 PER YEAR for the background music of a promotion video is absolutely a no-go. Especially because the other aspects of the video (the animation, the voice-over) cost (almost) nothing. It was done by a couple of friends who liked the project and wanted to help me.

So, what did I do? I made a new song MYSELF. It was a nice challenge. Because the animation was completely matched to the tempo and the rhythm of the song, I had to imitate all the elements of the original track, but still produce a new musical creation. I finished all the composing, recording (yes, that’s me singing!), producing and mixing in one day. And it cost me absolutely nothing. You could say I made a financial gain of € 3,000 with one day of work, a never seen accomplishment in my life (and in fact it’s a gain of € 3,000 PER YEAR).

Eventually, I wrote back to the licensing company to explain that their offer was completely out of reach for us and that I decided to make my own song instead. Their answer: ‘Yeah, that’s probably the best idea. But you must understand that we were obliged to propose SOMETHING.’

I was quite flabbergasted. Is that their understanding of customer relationships? Apparently they don’t have a model to answer this type of customer questions. Probably they are only used to making licensing deals with big companies who have a couple of thousand euros in their pockets (as we learned at Unconvention). They prefer that the music of their portfolio is not used and that potential customers like me go elsewhere and they would rather earn nothing than make a small deal. You could argue that negotiating such a deal costs more than they would earn with it at the end of the day. On the other hand, I think that this type of questions will occur more and more in a digital environment: small content publishers who want to license music in a legal way, but who can’t pay the usual heavy up-front cost, because these amounts of money are not in balance with the expected revenues. If I were in the shoes of the publishing company, I would propose a flexible licensing deal. You start with a small up-front cost and if the video goes viral, you pay extra to use the music. If a video of a content publishers gets hundred thousands of views, it is quite obvious that the publisher took commercial advantage of the video and that the owner of the music copyrights should be awarded accordingly. If the reach of such a video was limited, there isn’t any substantial gain for the publisher and the author of the song only gets the limited up-front cost. Not much, but better than nothing. I don’t think it is difficult to make standard contracts for these cases.

Moral of the story: there is no music of Apparat in the Motion Music Manager video, because the publishing company could not make a viable proposal for this type of potential customers. It lost a business opportunity because it could not adapt to a new commercial environment. I really hope that the Motion Music Manager video goes viral, with my own music in it, to prove the point that Apparat and the publishing company might have missed an important opportunity to earn money. So, feel free to pass along this story, the video and the music

Below you find the video. I want to thank Jef from Amai and Jan & Dries for making the video, Hannes for recording the voice-over and Floris for the help with mixing the song. Really great, guys!