Interview with Beatpick – FairPlay Music Label

The music industry has been infamously slow to address developments in customer habits and the web’s architecture. Although both the indies and the majors have now made some half-hearted attempts to accommodate digital developments, their trad business models depend on exclusive and rabidly enforced control of a musician’s works. Beatpick are a new record label who take a different approach. They use Creative Commons licenses in conjunction with a player designed to help sharing, and reject DRM. In addition, all music can be streamed for free. These moves deserve the highest praise, read on for more detail on their plans in our interview.

Can you explain what you see as particularly unfair in the ‘major’ / historical approach to doing business in the music industry?

The music industry, embodied by the music majors, has been accused of keeping prices artificially high and underpaying musicians. The industry has furthermore been accused of refusing to accept technological innovation, declining to look into the possibility of relaxing copyright rigidities to answer the problem of file sharing and, more recently, using copy protection technologies such as DRM, and directly participating in suing file sharers.

The fact that the music majors have kept prices artificially high is a serious problem that directly affects consumer welfare. The majors have been able to charge top prices for their hits as they have been allowed to price-fix through a lack of regulation and control from antitrust authorities which have not, until recently, paid enough attention to the music business (There was a $63.7m fine for price fixing in 2002).

In this respect we have welcomed the advent of the Internet, digital downloads, online music stores and file sharing. All these phenomena have contributed to create competition for prices in the music industry and are contributing to making the music industry a fairer place.
It is even possible to take a very radical view and actually welcome non-authorized peer-to-peer file sharing as justifiable from an economic perspective. Let’s accept for a moment that peer-to-peer file sharing bears hidden costs such as the possibility of catching virus, low quality music format, wasting time downloading fake files, slower internet connection as p2p uses bandwidth, the impossibility in some cases to find entire albums and art cover as well as the possibility of being prosecuted. These costs are stronger or weaker depending on the personal characteristics of the downloader but they may mean that prices for music released into the traditional market actually decrease as affected by the free sharing only until a certain level at which the consumer prefers to buy rather than download. As a consequence prices will not get to zero shortly after commercialization which is a negative effect that would collapse the music industry and create no economic returns for the artists’ works. If this is true, there is no evidence that with peer-to-peer file sharing, profit for the record industry decreases more than total welfare increases.

Peer-to-peer file sharing may be considered a new competitor entering the market that can help decreasing the substantial mark-up of price over marginal costs that the music industry has been enjoying for decades. In this case there is no evidence that the music industry cannot survive by pricing nearer to marginal costs (lower prices for their products) and that the music industry cannot reshape to continue to be successful in the face of such a phenomena.
We are not supporting non-authorised peer-to-peer file sharing, but we strongly believe that the music industry is in dire need of a shake up, in order to re-establish the right balance between music majors’ profits, customers’ welfare and artists’ compensation. The Creative Commons framework can actually help by allowing and regulating file sharing to contribute to making the music industry more economically and socially efficient.

The answer of the music industry to the problem of illegal music sharing has been introducing DRM and suing people.

Since the advent of the Betamax video-recorder, “time shifting”, the activity of recording copyrighted TV shows for later viewing, has been considered a non-commercial activity that must be allowed under the doctrine of fair use. Impeding consumers to make the use they want of the product they purchase, it is a sort of “intellectual monopoly” that leads to a “socially inefficient monopoly”. Impeding a consumer who has legally purchased a CD to make a copy to listen to in her/his car stereo or to transfer the music to a portable device is against her/his consumer rights. It also restricts the artist’s potential for being heard. What this implies is that DRM also prevents the music industry from harnessing the much needed network externalities.
Furthermore the fact that DRM is not always perfectly designed causes CDs not to work in certain players. DRMs have also been known to install malware in computers and in some cases have become vehicles for viruses, effectively further lowering consumer welfare and lowering the perceived value of DRMed products.

BeatPick.com condemns the legal actions taken against peer to peer file sharers, as absolutely negative for the image of the music industry – there is not much to gain out of suing the hand that feeds you. It also considers this kind of action as non-efficient from an economic point of view and morally wrong as it persecutes people who are not criminal and makes them scapegoats for a much bigger issue.

Artists being underpaid is a problem that we see rests in the hands of the artists provided that there is enough competition to give them a choice of what to do. We are often told that a musician only gets 20 cents to a dollar after the record label turns a profit or, in the case of digital downloads on iTunes, as little as 4.5 cents on a 99 cent tune. We think that for the time being things are getting better with respect to the past, thanks to the hundreds of possibilities an artist has today. An artist, whether a developing artist, an established artist or a big name can find hundreds of possibilities for producing, marketing and selling her/his music.

BeatPick.com adds to this variety of choices by trying to promote a deal which is particularly fair for artists. We are doing our best to help musicians making savvy decisions and boycott the deal offered by the music majors by selling their music directly, not giving away their copyright ownership and using services that offer profit split schema like BeatPick.com. We split earnings with artists 50/50 rather than giving them a small fraction of the profits, we leave them as the sole owners of their music and we let them go whenever they like.

Can you explain why the Creative Commons licensing framework in combination with your business model will give a fairer deal to artists and the wider public?

Our business model gives a fairer deal to the public by allowing the free streaming of entire albums. This enables potential customers to preview all the music they like and to make their purchases according to their real taste. The fact that we let people stream entire albums for free, while splitting the earnings with artists, enables us to take riskier choices such as signing artists producing less popular music. The public is empowered to decide what music they prefer and as a result can make more informed decisions. By having entire albums free for streaming, transaction costs associated with uncertainties are lowered. The market for second hand cars has high transactions costs as the buyer does not always have the possibility to test and be sure of what they are buying; the buyer therefore takes high levels of risks and this affects prices and the quality of second hand cars. At BeatPick we are able to drastically lower these transaction costs by simply having the customers fully test the product for a period of time effectively making the economy more efficient. This leads to a better music deal in terms of quality and variety. As a matter of fact, by lowering the transaction costs involved in buying music with no full preview, we effectively eliminate asymmetry in the market and therefore we help the customers to distinguish from low, average and quality products.

We also use no-DRM on our albums. We think that people are entitled to a just use of the music they buy. We like to think that you can burn and take our music anywhere, listening to it on any computer, ipod, portable device and car stereo; after all we do it ourselves so why shouldn’t others? Also, as people take our music around they introduce their friends to BeatPick.com… In addition we also help people to share the music they buy up to four times. After the customers buy music, an mp3 sender gives them the possibility to choose a song and input four email addresses. Their friends will get an email with a link to download the song they choose for free. This helps people to introduce their friends to new music and develop network externalities much needed in the music industry (see Arctic Monkeys). The Creative Commons license we use – Attribution-NonCommercial-ShareAlike 2.5 – allows customers to copy music as many times as they wish; we do not restrict this possibility by using DRM. However we hope that our customers appreciate the fact that we need to be profitable to survive and that our artists deserve to be paid for their music. We think that it is possible to trust people and give them the opportunity to make morally driven choices. As a result we believe that it is fair to allow people to share an album given that the most likely scenario here is that some people will not share at all and others will make ten copies!

One thing we are really quite proud of in our business model is that, through Creative Commons, artists engaged in non-commercial projects are encouraged to use our music for free. We thought there must be a zillion musicians out there that would be very intrigued to see their music being used in projects within other art fields. We decided to create an easy system where students or even professionals could get the music, use it for free in their non-commercial projects, and then, if they decided to go commercial, pay a standard licensing fee. Customers can license all music on roaster by accessing an automatic control panel which helps them choose the song they need, pick the type of license they wish, get a quote, pay, download a WAV file and a legal agreement in just a few minutes. The same principle applies to commercial licensing. We let businesses and professionals test our music for their projects for free and then they can come back and pay a licensing fee if they like the result. Sometimes we get work on commission for our artists too.

Basically we think that anything that can get our music in the hands of developing professionals or into developing projects can lead to increased sales in the future.

Do you intend to make use of the traditional channels for promotion and marketing (i.e. print-media, radio) or will you be keeping things entirely digital?

We think BeatPick.com should grow organically. We are spending the money that we are earning trying to be as cost-effective as possible and we are developing and promoting the business digitally but with an eye to the traditional channels too. We are hiring a PR who is going to take care of sending our info and news to the UK music specialist dance and general music press, with a view to following up with features where possible. We will be targeting the specialist music press, various websites and so forth with a view to building towards more website profile as well as more mainstream press and the internet sections of the broadsheet press.

We have created a series of podcast shows on itunes, radio stations on shoutcast and we are very active on myspace (www.myspace.com/beatpick) where we daily keep contacts with filmmakers, musicians, audiovisual artists and music lovers. We are also pressing sample CDs and keep sending the artists’ material to online reviewers, online radio stations and podcast shows. What we will not do is pay to have our music played on radio. We take a firm stance against traditional radio stations, which do not play music according to their tastes but according to what the majors say (and pay…). This is the mentality we are fighting and we will not submit to it.

We will also prepare a series of BeatPick.com music compilation to sell in selected music stores and we are translating the website into Chinese, French and Spanish.

Would you help other labels who hold a comparable philosophy to get started by sharing any code to your site, for example your player with built-in sharing capacities?

There can be only a very short answer for this: absolutely yes! We are pro-open source and at the end of the day it’s all about the music and the artists you have. We must thank magnatune.com having inspired us to design our music licensing section. The more business models like ours, the better the music industry will be. Obviously people that will want to be helped will need to work within the Creative Commons framework.

What examples of ‘value’ will you attach to your premium-rate services in order to encourage a user to part with hard cash?

To some extent we are operating a system similar to that of a firm offering software for free and then selling the gold or platinum version. We guarantee a basic service for everyone, as we are interested in promoting art and getting our music out there, but then we charge a fee for a superior service.

Our basic services are: 1. Free streaming from our website in lo-fi (mp3 80kbps) and hi-fi (mp3 128kbps) of all albums we stock. Streaming is simple and it does not require account/login. Just click next to any album name and a player opens with the entire album loaded. 2. Free use of our music for non-commercial projects. 3. Commission work from our artists for non-commercial projects (provided that the contacted musician is interested in the project).

Our “premium services” and the additional value that is attached are: 1. Purchase albums and download in 3 high quality different formats: WAV, mp3 192kbps, OGG. 2. Own purchased music with no DRM, allowing customers to play on any portable devices, computers as well as burning on CDs and making copies. 3. Purchased music can be sent to 4 friends with the help of an mp3 sender. 4. All music can be licensed for commercial purposes instantly and online using an automatic control panel that helps to search for a song, pick the type of license needed by selecting a few options, getting a real time quote, pay with paypal or credit card, download a WAV file and a legal agreement to use the music in just a few minutes. 5. Commission work from our artists for commercial purposes.

BeatPick.com acts as an intermediary: artists will be asked for specific requirements, timing, number of test versions to provide and a price for the project. The artist will then consider the proposal and decide whether to agree or not. The artist can refuse the proposal and specify a reason for it. The producer can submit a new one. If both parties agree, they enter into a legal agreement provided by BeatPick. BeatPick acts as escrows keeping part of the money until both parties are satisfied.

Your future plans to make available ‘sample packs’ are particularly exciting, because providing the raw materials improves a creator’s ability to remix and produce derivative works. Yet it is entirely incongruous with the secrecy and exclusivity which dominates beat-digging, at least amongst the hip hop fraternity … do you see this open approach becoming part of the mainstream?

While musicians in the hip hop world may seem reluctant to give away the provenance of their samples, in truth, their music is all derived from the hard work of session musicians and famous compositions. For example, the ‘Jungle beat’ has been based almost exclusively on one funk sample called “amen”.

From the early blues to the ragga dancehalls of Jamaica today, borrowing and sampling has formed the core dynamic of music production. Just as Internet record distribution has been pushing more and more vinyl diggers online rather than into dusty stores, sample diggers are increasingly sourcing their sounds digitally from readily available online mp3s. Therefore we’re not so much promoting a trend but trying to make an emerging reality work in favour of the artist.

In order to encourage musicians to have their sample packs available on BeatPick, we want to leave the decision of whether to sell or give their sounds away for free to them. We will also give them the opportunity to specify which Creative Commons license users can apply for.

David d’Atri and Katy Fentress answer for BeatPick.com; Michael Holloway asked the questions for OpenBusiness.

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