The internet is a publishing machine.

Q3/08
Q3/08
Banking on UGC ’s jackpot
T
he explosion of web 2.0 sites offering consumers a new experience through
user-generated content (UGC) has raised hopes that they could become a
significant new source of revenues for rights owners. Juliana Koranteng
assesses the potential of UGC and the challenges ahead.
T
here’s a question racking the
region,” said Jack Flanagan,
enhancing their own musical
by wireless operators’ subscribers
minds of every music creator
comScore executive vice president.
experience. Monetisation of this
could become the key model.
and right owner: Is it possible to
“However, the phenomenon is
sociability…represents a
extract significant revenues from
still growing rapidly in other
significant business channel.”
user-generated content (UGC)
regions around the world –
posted on the fast-growing social
especially as the established
media platforms?
American brands turn their focus
From the mass-targeted
YouTube, MySpace and Facebook
to developing markets.”
But what does that mean for
a still unpredictable media
Where’s the money?
format. UK-based Juniper expects
all social-networking UGC,
The use of UGC platforms may be
including the use of legitimate
on the rise, but assessing the
music, will generate $11.2billion
(€7.7b) in 2013 from mobile
to the niche social-networking
the content industry? How can
financial potential of these
services, such as the soon-to-
rights owners harness their
platforms still remains difficult.
internet alone, compared with
launch Mxtab.next, communities
individual and collective forces to
That is because there is currently
$1.8b (€1.2b) in 2008.
of similar-thinking music and
monetise this impressive use of
no one business model that fits
entertainment users are sharing
content and services by music
all. The various UGC services
big in Asia, where mobile
files featuring self-created or
users worldwide? In a May 2008
covered for this article are
penetration is as high as 70%-plus
copyrighted songs. Any of these
report called ‘Meet the
adopting a combination of
in Thailand and Vietnam. Ovum
can be ‘broadcast’ on a website, a
Millennials: Fans, Brands and
different models, although from
predicts a 64% penetration for
personal profile page, a podcast
Cultural Communities’, Terry
the content-owners perspective,
China and 55% for India by 2012,
These services have been
growing at a staggering pace. A
Mobile UGC is certainly getting
both countries with a population
or a widget.
“The internet is a publishing machine.”
Gerd Leonhard
recent report by comScore
of more than one billion. To
explore this new area, the Mobile
Entertainment Forum association
has formed local-market
estimated the number of global
users of social networking sites in
McBride, CEO/co-founder of
the licensing of legitimate content
initiatives in significant music
June 2008 at about 580 million, up
Canadian-based talent-
from labels and publishers is
markets like the US, France, India,
25% from a year before. The
management company Nettwerk
always a prerequisite.
and the UK to examine “revenue
study shows that many of the
Group, accepts that UGC poses
world’s leading social networking
significant challenges. This is
offer free music, paid for by
sites have grown rapidly in their
especially true among young music
advertising. And by allowing their
global reach over the past 12
users who live to upload,
users to transfer their personalised
months. For example, Facebook’s
download, stream and share music.
widgets to other social networks,
Some, like US-based imeem,
generation, business models and
consumer protection”.
Extracting revenues
the ads’ reach is even more
However, while driving traffic to
than doubled between June 2007
a generation that expects free
effective on the internet’s open
these services is one aspect of the
and June 2008, from 52 million to
content is the challenge for
global platform. Others, like the
equation, deriving revenues from
132 million.
today’s nascent digital
soon-to-launch MySpace Music,
traffic is another, and so far there
marketplace. Embracing the
will be financed by advertising
has rarely been a correlation
report is of Asia as the leading
whole spectrum of ‘free versus
and paid-for downloads. And,
between traffic and revenues.
region for the use of social
paid’ will doubtless be key to
although not a social network, the
Even sites like YouTube and
networking sites, followed by
success,” wrote McBride. He
community spirit of Amie Street
MySpace – linked to such
Europe and then North America,
continued: “Tagging, sharing,
could allow for a model where
powerful media groups as,
(see box). “While the social
recommending and blogging are
UGC users determine the price
respectively, Google and News
networking trend first took off in
just a few of the activities
paid for tracks. In Asia, where
Corp – have had difficulties
North America, it’s beginning to
Millennials (those born in the
mobile UGC is a fast-growing
harnessing their massive
reach a point of maturity in the
1980s) frequently engage in,
business, revenues via the bills paid
consumer base and turning it
number of unique visitors more
The main revelation of the
12
Some research analysts try to
forecast the future revenues from
“Monetising the behaviour of
13
Q3/08
Q3/08
Paul Sanders
Peter Leathem
Jason Langley
of Google’s business strategy.
into significant streams of revenues.
owners in the USA, is blunt about
made content as UGC – it just
eMarketer forecasts that brands
the consequences of uncontrolled
muddies the waters,” Sanders
will spend $1.4b (€950m) in
music usage in UGC. “There is
states, referring to sites such as
advertising on social network sites
obviously a lot about UGC hitting
YouTube in which users can
in 2008, a mere 1.62% of total
the national and international
upload content directly lifted from
online ad spend.
Patrick Ross
human edit or moderate the UGC
on our site. If we’re seen to be
Filtering solutions
Steve Porter
services and it’s still changing.”
Indeed, rights owners continue
Mark Kirstein
Jo Oliver
“There is the person who
good example of this approach,"
uploads, and the person who
says the UK MPA's chief executive
Stephen Navin.
moderating UGC, we shall lose our
to look out for profitable UGC.
downloads. In the middle is the
credibility as a host and become a
These include UK rights body PPL,
website. If you license the body
In May, Google filed its response
publisher, making us directly liable
in charge of collecting
that gives access to the music files,
is to adopt the publisher’s mantra
He adds: “Our position on UGC
media. But we don’t want to
existing programmes from TV
in the US courts. It insisted that it
for copyright infringement,” says
performance rights on behalf of
you can legitimise the whole
of license, license, license. Sites
So, income generated from
encourage creativity that amounts
channels, films or DVDs. “Building
had fulfilled the provisions of the
Kate Burns, Dailymotion UK’s
record labels, which saw its online
model and even monetise it.”
like YouTube provide another way
these activities is barely reaching
to stealing other people’s works,”
an audience using content in that
Digital Millennium Copyright Act,
managing director.
and mobile revenues reach 2.5%
the pockets of music creators,
he says.
way should be considered
removing illegal content as soon
infringement. With re-mixing,
as it was flagged. Google claims to
whose works draw millions to
“You have to think about
of total broadcast revenues of
Creating value
£56.8m (€71.5m) in 2007. “We are
social-networking services. In
where the burden lies,” adds Ross.
however, in its various forms, skill
use anti-piracy systems like
March, an incensed Billy Bragg,
“Should it lie with the original
and effort have been expended to
Audible Magic to filter out
The recorded music sector, which
what kind of service to offer our
the British singer-songwriter,
creators to refuse to license their
make something new.”
unauthorised content.
has seen CD sales plummet as free
members when their works are
expressed his concerns in
works, or should it lie with the
music proliferates, has been
used on UGC services,” says
The New York Times.
person who wants to use [the
particularly sensitive to the UGC
Peter Leathem, director of
issue. “While there’s no common
legal and business affairs and
position on how to solve it, web
rights negotiations.
Following AOL’s $850m
works]? We believe it should be
(€580m) acquisition of social
with the latter, but they need to
network Bebo, he wrote: “Social-
seek permission or respect the
networking sites like Bebo argue
rubric of Fair Use, where US law
that they have no money to
allows for the use of short bits of
distribute – their value is their
copyrighted works for commentary
membership (of more than 40
or satire that’s related to the
million). The huge social-
[original] work itself.”
networking sites that seek to use
music as free content are as much
Legal issues
to blame for the malaise affecting
Then he adds: “There’s another
“In the US, the courts have
generally taken the position that
class too which involves putting
“We don’t want to encourage
creativity that amounts to stealing
other people’s works.”
Patrick Ross, Copyright Alliance
formulating our licensing plans on
“If you license the body that gives
access to the music files, you can
legitimise the whole model and
even monetise it.”
Florian Koempel, British Music Rights
Such is the view of UK rights
for people to enjoy the music
According to research firm
society MCPS-PRS Alliance, which
they love. In addition, fans
necessarily convert into sales,
Compete, the US’ premier music
signed an agreement in 2007 to
making their own videos of
which is why we collectively need
site is UGC-centred imeem, which
license more than 10 million pieces
popular songs can boost the
to work together where we can
has signed deals with the four
of music to YouTube. The benefits
number of online performances.
to extract greater value,” offers
major labels for North America
of the deal to the Alliance’s
UGC represents a potentially
Matt Phillips, communications
and is now negotiating for global
members should start in 2008 with
significant revenue stream for
2.0’s popularity does not
content that you might not have
you need to have made a
director for British labels’ trade
licensing. Its business model is to
the distribution of the first
writers and publishers, as long as
made into an interesting context,
reasonable amount of effort to
body the BPI.
rely on advertising revenues on
royalties from the use of works on
this increased consumption of
and that might be as simple as
prevent infringement using
both its site and on its users’
YouTube. “We are making inroads
music takes place within a
licensed environment.”
In recent times there has been
the industry as the music lover
Of course not all parts of the
linking an MP3 file to a blog, or it
filtering and watermark tools, and
a great deal of thinking and
personalised widgets to pay
into the online market with our
who downloads songs for free.
world are governed by the same
might involve putting together DJ
Take Down notices,” offers analyst
arguing between the music
legitimate content owners a
groundbreaking licensing deals
The claim that sites such as
legal framework as the USA but,
sets and mixtapes. Again, where
Mark Kirstein at Multimedia
industry and content users about
reported $0.01 for every song
with iTunes, YouTube and Bebo,
the Alliance with Bebo, another
MySpace and Bebo are doing us a
for many experts, the real issue is
there is no licence, this is strictly
Intelligence. “This court case
the most appropriate way to
streamed. Imeem decline to
with further gains anticipated in
content-sharing service. Executives
favour by promoting our work is
about setting the limits of what
infringement even though skill
proves the legal issues are still up
“legalise” UGC and allow
confirm the report. Meanwhile,
the year,” said MCPS-PRS Alliance
at Bebo say their business models
disingenuous. Radio stations also
would come under the Fair Use
and effort are being expended.”
in the air.”
unrestricted – but fully licensed –
MySpace’s planned ad-funded
CEO Steve Porter.
should remunerate rights holders.
promote our work, but they pay
provision and what constitutes
Such a situation has not been
use of repertoire. London-based
service had deals in place with
us a royalty that recognises our
infringement. Paul Sanders, UK-
lost on some major media groups
cancelled a UGC-based channel
Jo Oliver, general counsel for
Warner Music, Universal Music
contribution to their business.”
based director of strategy at
– and content producers and
called MTV Flux in January, after
international labels’ trade body
Group and Sony BMG by August.
music service provider Playlouder,
distributors – like Viacom, the US-
only 15 months on the air. No
IFPI, concurs: “Unlike MCPS-PRS,
points out the complexities that
based international media
official copyright-related reason
we don’t manage the rights on
UGC can trigger.
conglomerate. The group, which
was given, but MTV Flux is now a
behalf of our members. But if
owns the international music and
web-only service.
there is a website monetising
One solution appears to be
content without our licence, it will
licensing through CROs (Collective
be of great concern to us.”
Rights Organisations) that can
In the same vein, Patrick Ross,
executive director of the
Washington, DC-based Copyright
Alliance, which regroups
representatives from most content
“I don’t think it helps to see
users uploading professionally
“If there is a website monetising
content without our licence, it will
be of great concern to us.”
Jo Oliver, IFPI
14
Kate Burns
Ironically, MTVN’s UK division
Blanket licences
A similar deal has been cut by
“Monetising the behaviour of a
generation that expects free
content is the challenge for today’s
nascent digital marketplace.”
Terry McBride, Nettwerk Group
entertainment TV operation MTV
But, whether online or on
Networks (MTVN), is in the middle
mobile, the global UGC market is
of a bitter $1b (€686m) lawsuit
still evolving in dramatic ways.
against Google, YouTube’s owner.
While the Viacom-Google
UGC as a business, Oliver agrees
use of repertoire. Florian
supportive of a blanket approach
enables record labels, for example,
The suit alleges that YouTube
litigation continues, French-
that there is still no definitive
Koempel, legal counsel for
to licensing with safeguards built
to set up channels targeted at
features unlicensed content, such
originated Dailymotion sums up
model. “It’s still early days,” she
London-based British Music Rights,
in for usage and reporting, and
Bebo’s members and keep all the
as MTVN’s MTV Unplugged
the dilemma facing social
says. “But many record companies
argues that blanket licensing
the YouTube deal, in which we
advertising income generated
programmes, and that that is part
networks. “We’re not allowed to
are doing deals with these sorts of
could play a significant role.
were closely involved, is a very
around their content.
Regarding the legitimacy of
provide blanket licences for the
“We have been very
Bebo’s free Open Media platform
15
Q3/08
Q3/08
A who’s who of social-networking sites
(AN), the UK-based music licensor with more
Musicnotes.com’s CEO. “Fans have always
Juliana Koranteng takes a look
‘User-Generated Content
imeem is negotiating for territorial
exclusive, fully paid royalty-free,
build their own fan base, and have control
than 5,000 tracks on its catalogue. “We’re
jotted down and exchanged notations, and the
at the world’s leading social
Principles’, a treaty established n
rights outside the US. Imeem has
worldwide licence to use, copy,
over the entire process,” explains Sarah Gavin,
looking at where we shall be in five years’ time
creator never saw a dime. Now it’s a matter of
networking site and their
October 2007 by the major leading
acquired Snocap, the online music-
modify…and distribute such
global director of communications of Bebo and
and what is frustrating is to see UGC creators
accepting the existence of that activity,
music-related UGC offerings...
Internet and media groups such as
sales company founded by
content”. British singer-songwriter
AOL People Networks. “We don’t take any of
with professional aspirations but not access to
monetising it and sharing the revenues.”
Napster’s original inventor Shawn
Billy Bragg protested and the user
the revenue from that, and it’s about
professional-quality music,” says Jason Langley,
Bebo
CBS Corp, Fox Entertainment
Group, Microsoft Corp, Viacom,
Fanning. It signed a deal with MTV
agreement was changed so that
encouraging the presence of the right content
AN’s commercial director. For 79pence (€0.99)
Owner: AOL
and MySpace. It has a deal in place
Networks to make videos available
MySpace had no rights to content
for our users.”
per full track, UK students can synch, edit or
Number of subscribers worldwide:
in France with rights organisation
to imeem users to watch and share.
posted on the service. But the
42m members
Sacem, but has faced legal
In January, it acquired
service is very popular among
“It means they can own the advertising,
During the first half of 2008, the Alliance
Active publishers
mash up AN music with their video. The
collected over £286m (€362m) on behalf of its
licensing deal, which is for global usage, was
Marsh believes more publishers will be willing
Music and UGC provisions:
challenges from individuals and TV
Anywhere.FM, an online radio
artists who can upload up to six
members, and while only £7m (€8.8m) was
struck with the UK government’s National Grid
to follow Sony/ATV, EMI and Alfred as about
Recently acquired by AOL for
production firms.
network and music player that can
songs in the unencrypted MP3
online royalties, it’s a figure growing at over
for Learning organisation.
80% of most copyrighted songs are not
$850m, Bebo is now part of Time
format, enabling both established
available in the guitar tablature format. “The
Warner, one of the world’s leading
Facebook
be used for uploading personal
music collections. In March, it
and unsigned acts to reach a
40% annually. To more accurately distribute
Next, AN is to launch a new UGC
these royalties to its members, in 2007, MCPS-
application in partnership with the BFI (British
guitar makes different sounds; it bends, slides,
media group and therefore one of
Owner: Privately funded;
introduced imeem Media Platform,
potential 100 million-plus users.
PRS Alliance’s managing director for broadcast
Film Institute) “that allows visitors to the BFI
distorts. The transcription involves an
the biggest copyright holders. It
shareholders include Microsoft
which allows content creators to
Said to have contributed to the
and online Andrew Shaw says that over 60
site to create their own movie trailers using
enormous amount of work and is very
uses Audible Magic to filter out
Number of subscribers worldwide:
integrate the imeem music service,
discovery of hit acts like EMI
million downloads and music streams on
BFI’s movie archive. Users will be able to send
expensive,” she states. Consequently, publishers
unauthorized content. In June, it
80m active users
and its discovery and
Music’s Lilly Allen, MySpace equally
licensed websites such as YouTube, iTunes and
or share their trailers with friends and through
usually transcribe only the top-selling songs.
signed a deal with Universal Music
Music and UGC provisions: The
recommendation system into their
enables unsigned acts to sell
Bebo were analysed. Leona Lewis’ ‘Bleeding
other social-media sites,” according to Langley.
“Second or third-tier music never gets formally
UK to produce ‘The Secret World
profile of the privately owned
profile page using widgets.
recordings via Snocap’s MyStores
transcribed by publishers, and therefore the
of Sam King’, an online drama
social-networking service rose
Love’ was the most performed online song,
Another service, Musicnotes.com, a leading
US online sheet-music retailer, has chosen to
only way to get that done is for the rabid fan
series set in the music industry.
after Microsoft, itself an ambitious
Last.fm
widget. It is launching its own
accounting for 6% of the analysed files. “The
trend for posting self-made videos is driving
play it by the book and has signed agreements
to take the time to do it. We’ve found a gap in
Bebo users will be able to interact
online-music service operator,
Owner: CBS
MySpace Karaoke where users can
the number of performances on the websites
with Sony/ATV Music Publishing, EMI Christian
the business,” she added.
with the drama, contribute to the
became a shareholder. The site
Number of subscribers worldwide:
upload renditions of copyrighted
we license,” says Shaw.
Music Group and Alfred Publishing in time for
plot and developments at the
features MyMusic application that
21m registered users
songs licensed to MySpace, and an
ad-funded service in September.
Investing in UGC
Some rights owners are also investing directly
in UGC services. An example is Audio Network
the July launch of Mxtabs.net. The ad-financed
executive VP business and legal affairs, says
fictional label operated by the
enables users to synchronise their
Music and UGC provisions:
social-networking site is dedicated to user-
Musicnotes.com has the right approach.
protagonist Sam. Bebo features
iTunes or other music collection to
This site is designed for creating
generated guitar and drum tablature.
“We’ve seen hundreds of thousands of hits on
QLoud, a music application partly
their profile pages. Live Nation,
personalized radio stations and
YouTube
videos using our songs,” he says. “But used
funded by former AOL CEO Steve
the global live-music promotion
features a music-recommendation
Owner: Google
legitimately, and taken together with other
Case; it allows users to stream
company, launched a Facebook
system. It is ad-funded, but for a
Number of subscribers worldwide:
new-media usage, [UGC] could be a significant
music and offers a click-to-buy
application in May to allow users
small fee users can have extra
200m unique users/month
revenue source.”
system. Bebo’s Open Media
to search for tour details and buy
features such as ad-free content. It
Music and UGC provisions: The
“Tab and lyrics sites have been around for
about 15 years,” explains Kathleen Marsh,
European Social-Networking Sites
UK Social-Networking Sites
Total Unique Visitors (millions)
April 2008 versus April 2007
Total Unique Visitors (millions)
April 2008 versus April 2007
Site
April 2008
April 2007
107.4
28.3
28.2
16.2
15.0
12.9
11.1
3.8
1.7
60.6
5.3
24.3
12.0
9.4
10.3
6.8
n/a
0.89
YouTube
Facebook
MySpace
Skyrock Network
Bebo
Hi5.com
Flickr.com
Imeem
Orkut
Peter Brodsky, Sony/ATV’s New York-based
Site
April 2008
YouTube
18
Facebook
14.4
Bebo
12
MySpace
8.5
Flickr.com
2.8
Hi5.com
1.2
Imeem
0.83
Orkut
0.23
Skyrock Network
0.2
April 2007
12.7
3.7
8.3
9.9
1.7
1.8
n/a
0.21
0.18
Source: comScore Media Metrix
Source: comScore Media Metrix
Notes: The number of visitors per social-networking site in the
Notes: The number of visitors per social-networking site in the
ranking is rounded to the nearest decimal point.
ranking is rounded to the nearest decimal point.
platform allows music companies
tickets. Facebook has partnered
operates a library of more than 3.5
mother of all user-generated video
also views UGC sites as potential streams of
to set up their own channels and
with Ziddio.com, the user-
million songs, but consumers are
sites, YouTube became difficult to
income. “We have deals in place with sites that
keep 100% of the ads sold around
generated video site owned by US
not allowed to upload copyrighted
ignore when it was acquired by
have UGC, including YouTube, and we and our
them. The Bebo-produced BAFTA-
cable giant Comcast. Music On
music. Last.fm has deals with several
Google for a staggering $1.65
songwriters will be compensated for UGC,”
nominated ‘KateModern’ featured
Facebook is a facility that allows
labels, including the four majors.
billion in October 2006. Although
says chairman and CEO David Renzer.
real-life signed bands in the
acts to promote their recordings,
But Warner Music Group recently
the subject of some serious
storylines. ‘Sofia’s Diary’, the first
tours and other information. The
pulled out of the agreement,
lawsuits centered on UGC (see
a good place to collect the proceeds from the
online drama to be picked up by a
service is also the biggest platform
allegedly because it was unhappy
main article), YouTube has signed
usage of their repertoire. “There is no
major TV broadcaster (Channel
for iLike, the application partly
with the remuneration Last.fm paid
deals with the four major labels,
question that we’re in a very challenging
Five) illustrates how the value of
owned by Ticketmaster and allows
for its on-demand music service.
agreements which enable users to
environment,” he explains, “but I believe that
social-networking content can
users to play music clips on
However, Warner’s repertoire can
include licensed recordings in their
it all starts with a song. There wouldn’t be a
evolve unpredictably. Bebo has
Facebook and syndicate those clips
still be found on the artists’
uploads. More recently, parent
music industry without a song, there wouldn’t
recently signed an agreement with
to their personal pages on other
streamed radio stations.
company Google agreed to pay
be an iTunes without songs, artists,
MCPS-PRS Alliance in the UK.
social-media sites. Other features
Dailymotion
MySpace
royalties for one year to Japan
include one called Social Ads,
which enable advertisers to
Owner: News Corp
perform karaoke to some 5,000
Owner: Privately owned; CEO/
interact with the Facebook users.
Number of subscribers worldwide:
licensed songs. The Rolling Stones
120m active users
became the first YouTube Living
Market leader Universal Music Publishing
Renzer believes that music publishers are in
songwriters and composers. So to be in a
position where the industry would not exist
without the content that our songwriters and
composers create is a very good feeling, even
Social networking growth by worldwide region
Total Unique Visitors (millions) June 2008 vs. June 2007
Worldwide
Asia Pacific
Europe
North America
Latin America
Middle East – Africa
June 07
464.4
162.7
122.5
120.8
40.1
18.2
June 08
580.5
200.5
165.2
131.2
53.2
30.1
Percent Change
25%
23%
35%
9%
33%
66%
Source: comScore World Metrix
Note: Total Worldwide Audience, Age 15+ - Home and Work Locations?
16
online music services, starting with
as we are challenged to find new licensing
models for ad-generated services or usergenerated content. We’ll figure it out as
we’ve been figuring it out over time.”
But maybe it is Nettwerk Group’s Terry McBride
who sums up what might have to be the next
possible step towards monetisation: “Millennials
are constantly experimenting with, and
evaluating, their experience as consumers: we
suggest the music business does the same.”
co-founder Benjamin Bejbaum
Rights Clearance so that fans can
Number of subscribers worldwide:
imeem
Music and UGC provisions:
Legends to talk directly to
37m unique visitors/month
Owner: imeem Inc
Its acquisition by News Corp for
YouTube users to promote the
Music and UGC provisions:
Number of subscribers worldwide:
$580m in 2005 signalled the
movie ‘Shine A Light’ by Martin
Considered the most effective rival
reaches 100m users a month
growing importance of social-
Scorsese. In March, Sigur Ros
to YouTube, Dailymotion also uses
Music and UGC provisions: This
networking services to the global
streamed a feature-length
Audible Magic technology to filter
social-networking service has
media sector. It became
documentary ‘Heima’ on YouTube
out copyright-infringing content.
agreements with the four major
controversial when it added to the
and fans were invited to create
Last year, it signed a deal with
labels, but for North America only.
terms and conditions that content
their own videos using audio and
Warner Music to give users
And Warner Music Group is an
owners featured on the site had
video clips supplied.
legitimate access to the label’s
investor. But because users outside
effectively granted MySpace (and
content. It is a signatory to the
the region can access the site,
therefore News Corp) a “non-
17