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“We’re seeing a generational, cultural shift in the consumption of all media.”
LIFE IS BUT A STREAM
Fred Davis Talks Sub Services
Veteran entertainment attorney Fred Davis has represented such digital subscription services as Last.FM, Rhapsody, MOG and Rdio. Shockingly, Davis agreed to get on the phone with Roy Trakin to discuss some of the issues surrounding the introduction and evolution of subscription services.

Why is there such complexity in licensing subscription services?
The problem is, over the last few years, the labels have established a market rate for what content will cost for on demand, portable subscription services. And the margins are about the same as for downloads. But, where a download service has scale, the subscription services haven’t offered the same kind of base yet. We hope that we’re at the beginning of the on-demand streaming generation, and we expect revenues will start scaling exponentially from here. I’m bullish on subscription services breaking through in America.

How does the possibility of a cloud-based iTunes or Google Music impact any future subscription services?
Not at all. Cloud-based is just a form of distribution. One of the differences between subscription and download services is where the content comes from, cloud-based vs. application-based. But the real battle is for time spent listening to music on Rhapsody, iPhones, satellite radio… They’re all competitors.

Can subscription services make up the difference in loss of physical sales?
We’re seeing a generational, cultural shift in the consumption of all media. Books, movies, games and music are all shifting from an ownership/download to a streaming/access model. We used to live in an era when we’d be thrilled when an album sold 1 million copies. But that means 299 million people didn’t own a copy. The ubiquity of the cable model—and the number of people who pay on a monthly basis for their video—if you think of the potential of that for music, just in America, these revenues could be exponentially greater [than physical sales].

How will streaming services affect recording contracts and publishing royalties?
Publishing is actually way ahead of recording in this area. There’s a statutory rate that anybody can get to launch a subscription service. Recording contracts have not really anticipated in any meaningful way subscription services. They are far out of date, need to be thrown away—and we need to start again.

How does the role of the traditional record label evolve in a streaming universe?
Much of the make-up of the traditional record label—A&R, marketing, publicity, promotion, etc.—can and will continue to exist. The area that has changed is distribution, and they’re trying to adjust on the fly. Subscription services are a $10-a-month, all-you-can-eat service, like cable, with the possibility of other premium tiers. That’s where the creativity of the content owners and the distribution companies will come into play. The goal for subscription services is music everywhere. There are plenty of areas, like mobile devices, we haven’t touched yet.

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