Bebo Sale Spotlights Online Music Licensing Controversy

Two years ago, as Billy Bragg tells it, the founder of British social networking site Bebo came to him for advice about avoiding the same music licensing pitfalls that Bragg had railed about during the evolution of MySpace. As I wrote previously, Bragg's lobbying resulted in MySpace clarifying its terms of service so artists could retain copyright of works they posted online. Since then, other online services have followed suit, assuring musicians at all stages of their careers that they would not accidentally close off revenue streams by uploading songs to social networking sites.

Bebo grew so big that AOL purchased the service for "a staggering $850 million," as Bragg writes in a New York Times Op-Ed piece. Billy makes the case that a social networking service that builds audiences around original music should pay a dividend to those musicians

There's some precedent for this in the online world, too. When Yahoo! purchased Flickr, Pro account members got their accounts extended. When Yahoo! purchased Upcoming, musicians and other contributors got free t-shirts. (I still wear mine.) If Bebo's founders walk away with about $600 million in their pockets, why not at least extend some gesture of thanks to the folks who helped bring users to the service in the first place?

Over at TechCrunch, Michael Arrington calls musicians "crazy" for thinking they deserve a penny from services like Bebo. Social networking sites allow artists to gain exposure for their work. However, as I wrote about in all four of my books, simply gaining exposure does not guarantee an income. For decades, courts have upheld the rights of artists to collect royalties for work that is used beyond purely promotional purposes. This is the same principle that film and television writers spent months on strike defending.

Unfortunately, songwriters do not hold the same kind of bargaining power that screenwriters do.

As we observed in the ongoing struggle to find a workable royalty scheme for webcasters, a small group of already-established songwriters hold enough sway with Washington to produce license structures that are simply unaffordable for tech startups. At the same time, amateur songwriters are so desperate for exposure and attention that they willingly give up their existing rights in order to live the dream -- forty or fifty listeners at a time.

This is where I think Arrington is not understanding Bragg's argument. If 10,000 musicians each decide to bring their 40-50 existing fans into a service like Bebo, the service gains half a million users. The aggregation here is around musicians and their fans, not the other way around. Musicians add more value to a social networking platform, than vice versa. Bebo didn't make anyone famous. Musicians brought subscribers to Bebo, and Bebo cashed in. That's why Billy's pissed.

How can tech startups compensate artists fairly? A "per-play" royalty, like the agreement under which webcasters currently suffer, helps nobody. However, a revenue sharing agreement through existing performance rights organizations that mirrors the agreements signed by the WGA can eliminate this argument while clearing a path for musicians to collaborate more openly and aggresively with tech companies. I can assure you that any startup social networking site that compensates musicians for the number of times their song is played and/or the number of new users they refer to a site should do pretty well.

And, at the same time, it's up to artists to develop the skills and the support teams to leverage any exposure that does come from pages on MySpace, Bebo, Facebook, and any other services that bubble up over the next few years. At the end of the day, even the royalties artists earn from traditional radio airplay aren't a whole lot -- they're just fair compensation for musician-assisted commerce.