Getty Images thinks it’s time to reinvent the commercial music licensing business. The company is well known for its vast catalog of pre-cleared digital stock photos, which is sells at a flat rate. Its Web site allows customers to browse, preview and buy these images without ever even making a phone call.
It plans to apply that same model to music licensing for ads, TV shows and movies. The first step was its $42 million acquisition of Pump Audio in late June. Pump Audio operates an online music licensing business similar to Getty’s photo service. Users can browse through Pump Audio’s catalog of about 700,000 tracks — mostly from independent and unsigned artists — and purchase licenses for as low as $25 for a podcast to $50,000 or more for a nationwide TV spot.
But Getty isn’t stopping there. CEO Jonathan Klein said he plans to expand the licensing business to include content from major labels and mainstream acts, and continues to negotiate with several labels and publishers toward that end.
The idea is to streamline the music licensing process so more potential customers can get involved.
“Everyone always focuses on the grand slam, but that’s not a sustainable way to build an industry,” Klein said. “There’s a focus on licensing a tiny percentage of the catalog in a very complex way with prices in the stratosphere that have no basis in reality to a small number of people … We want to simplify the process.”
LUCRATIVE MODEL
But the notion of a flat-rate, fully automated music licensing system flies in the face of the traditional licensing process. Acquiring the “synch” rights (which permit the user to synchronize music with video or film images) to major-name acts generally requires several phone calls to the larger labels and publishers to acquire all the licenses required. The negotiation process is designed to maximize the amount of money each song can bring in.
And that’s a lucrative model. The market for commercial music licensing and performance rights combined — for publishers alone — is an estimated $3 billion business, according to research from Enders Analysis. It’s only expected to grow as TV shows and video games become prime vehicles for exposing new artists, and while advertising budgets continue to increase. Research group eMarketer projects that synch revenue alone will increase to $2.5 billion in 2011.
Before the acquisition, Pump Audio’s revenue was estimated at less than $10 million per year. Klein said Getty could build that into a $100 million annual business during the next five years by integrating the company’s licensing platform across all Getty Images sites so customers can handle their audio and visual needs at the same time.
In theory at least, publishers and labels agree — so long as making it easier to license a song doesn’t mean making it cheaper.
“The structure of rights does make licensing more complicated, (and) any mechanism that allows one to bring those rights together is positive,” EMI Music Publishing CEO Roger
Faxon said. But, he added, “one has to recognize that music is not a commodity. Each individual license has a unique character, and that has to be recognized in the pricing.”
How “higher value” music will be used is a point of discussion as well: Background music will cost less than something featured more prominently, for instance. Automating that element of the licensing process is possible, but will take some time to achieve.