Tuesday, April 15, 2014

Soundcloud: Time to face the copyrighted music

With the recent rumors of Soundcloud negotiating with the labels, there has been a flood of complaints from DJs and producers who believe it's their right to be able to give away their remixes. They are outraged when their remixes are taken down even though it rarely happens. What they don't realize is that Soundcloud must take down these remixes or become a target for a lawsuit.

Sites like Soundcloud operate under the DMCA (Digital Millenium Copyright Act).  The DMCA provides a "safe harbor" so companies can host user generated content (video, songs, etc...) without fearing a lawsuit if a user posts something infringing.  To be eligible for safe harbor protection, sites must respond to takedown requests and actively remove infringing content they become "aware" of.  There are several pending lawsuits to clarify how actively a company must police for infringement. The fear of losing their safe harbor protection spured YouTube to develop their "content-id" system that gives copyright holders a choice of taking down an infringing video or sharing in the ad revenue.

A couple years ago, Soundcloud introduced audio fingerprinting technology to detect infringing "sounds" but the system hasn't been very effective. More importantly, Soundcloud doesn't currently have a significant revenue stream to share with copyright holders.  With the label starting to apply pressure, how will Soundcloud respond?  Here are some possible scenarios:

1. Stick to original content.  Soundcloud is a place major artists promote their new music, broadcasters host their pod-casts and brands communicate their message. Why put the entire platform at risk for a minority of infringing content producers? Soundcloud could strengthen their detection systems and immediately terminate infringing users (no more three strikes you're out). They would lose some paying customers and traffic but would greatly reduce their legal exposure.

2. Adopt the YouTube model. By sharing the ad revenue generated by infringing videos, YouTube gave copyright holders an alternative to takedowns. Soundcloud could also introduce ads and give copyright holders the choice to share the revenue. Ads would dramatically change the Soundcloud user experience (in-stream audio ads, no downloads, etc...) but could generate the profits their shareholders expect.

3. Compete against Spotify.  An interesting option would be to compete against Spotify and sell subscriptions that give users streams of the originals songs and infringing user-generated content (remixes, mashups, DJ sets, etc...).  Soundcloud would have the monumental task of negotating directly with artists and song writers for the right to stream the derivatives but it would give them a competitive advantage against Spotify (or Beats, Deezer, Rdio, etc....).

It's obvious that Soundcloud will eventually monetize their content and this will require addressing their copyright issues.  Whatever path they pick, the site will be radically different three years from now.

1 comment:

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