If Licensing Is ‘Cancer’ for Startups, Deezer CEO Axel Dauchez Has a Cure…

Deezer’s CEO, Axel Dauchez, has told the World Creators Summit audience that the fragmentation of music rights is the “cancer” threatening to destroy innovation in digital music services.  And he’s come up with the cure.


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Not too long ago, all a music startup had to do to license the publishing (songwriter) rights for all the music in the world was to go to the local collections society (in the US, that would be ASCAP, BMI or SESAC) and strike a deal. With pureplay radio, it wouldn’t even have to do that, as that is covered by a compulsory license.  The aim has been to prevent societies from acting monopolistically.

And if the startup doesn’t like the rate the society offers, it can go to the rate court, which will decide what is an appropriate rate – almost always a lousy deal for publishers and songwriters.  A perfect example of this is the Pandora royalty rate, where the labels enjoy a 14-1 ratio to the publishers.

As David Israelite, of the National Music Publishers’ Association, put it at the WCS: “The government is pushing down the scale on one side.  The labels have one set of rules [a free market where they can set their own rates and are able to say no] and the publishers another [one where they are forced to accept a rate set by a judge].”

The major publishers got fed up with this, and have now pulled their digital rights from the societies. This means they can now say no to offers they don’t like, just like the labels.

All of which also means that startups now have to negotiate with more entities than ever.

Dauchez believes that this, and the respective holdouts for better rates, will kill innovation.  It’s especially crippling for small startups that don’t have the funds for drawn-out negotiations and large advance payments.

During a panel called “Copyright + Innovation = Growth,” Dauchez declared – after telling the audience not to physically attack him before hearing him out – that publishers should make a deal with labels instead of the music services, so that services would only have to negotiate with the labels for all rights.

He believes this will increase the publisher share of the “royalty pie” across the board.

Labels have voiced their frustration over not being able to monetize YouTube in countries such as Sweden and Germany, despite having licensed the service there, as publishers have yet to strike a deal.  Dauchez’s proposal would put the onus on labels themselves to make sure the publishers came on board.

He says he is even willing to report to and pay the publishers separately from the labels, in order to increase transparency.

The major publishers are likely to resist the proposal, the songwriters less so – but digital music startups would be ecstatic at the chance of cutting down on the amount of negotiations.

What do you think? Is Dauchez right, or simply looking after his own best interests at the cost of creators and publishers?

26 Responses

  1. Yves Villeneuve

    Seems to want less costs and hassles in the negotiations. Maybe easier if the split between the labels and publishers is determined by judges. Might need a government solution to a long-established inequity. In my opinion, labels and publishers should split profits down the middle, taking into account all related revenues and expenses from both sides.

    • Visitor

      A Axel Dauchez is doing is playing “pass the buck.” He’s not offering a solution, only an excuse.
      How about we have a true free market where everyone get’s the right to CONSENT and COMPENSATION… you know, kinda how the rest of the world and free markets work…

      But then again, you’d also need regulatory enforcment to prevent market failure from illegally operationg businesses and we don’t have that either…
      Finally, it’s always interesting how many people are so passionate about music to want to create start-ups, but not so passionate about musicians as to actually figure our business models that are actually good for musicians… go figure.

  2. Visitor

    Music licensing is by far the esoteric type of licensing out there. You shouldn’t have to getting seperate licenses with a million entities involved in making the music if all you want is the end product.

    • Visitor

      Either it’s a free market or it’s not. Perhaps the greatest opportunity for innovation is to actually develop a business that BOTH consolidates licensing AND compensates musicians fairly.

      Funny how so many people say music has been so devalued until they actually have to pay for it – then, it’s just a PITA… Ha!

      • lifer

        How silly. There is no such thing as a purely free market. The state, which can giveth and taketh away, is always an actor to some degree.

  3. can't stand the truth?

    What this mafia boy doesn’t tell to his audience is that most musicians today control 100% of their rights. So they are both the publisher and the writer.
    Don’t believe me? Ask BMI, ASCAP and SESAC to tell you how many of their members have both a publisher’s and a writer’s account.
    There is no such thing as “fragmentation of music rights”.

    • oh, yes

      and they find the time to write songs, register copyrights, license, account, plug songs, and administer it. With no staff at no cost. Certainly.

      Ever heard of administration deals with Major Publishers?

  4. simple

    Deezer = France Telecom /Next.com /Orange Group


      …and Warner owner Blavatnik. He wants to make sure that he is on the boat if hopeless Napsters like Spotify and Deezer become the Jesus Christs of the Music Industry. Actually they might become the prophets of dwarfed industry.

  5. my life, cancer?

    My music rights is cancer, Mr. Dauchez?
    You do realize that you can say things like that only in front of stupid people who are too pathetic to even talk back to you?
    You do realize that if you say something like this to a working musician, he/she will kick your pathetic ass so hard that NSA will be able to install a mainframe in it?

    • Pete

      From a retailers point of view (which Deezer is) he is quite correct. Licensing is the biggest issue in the music industry – the more complicated and fragmented it is, the longer the payment chains are to each stakeholder.
      A simple logical solution would be to enforce publishing to be obtained (hopefully globally) for each track BEFORE distribution to a retailer. The retailer sells it locally/globally and makes a single payment back to the distributor covering sales, publishing et al
      The distributor/artist relationship would ensure the correct parties were known and the distributor then makes payments to each party.
      This shift from retailer obligation to distributor would increase sales and ensure all partie are paid quicker as there is no ‘finding’ who to pay.

      • Mechanical Licensing

        You mean like how physical and digital “sales” work in the U.S. and Canada? I specify the territory because most other territories rely on the Performing Rights Societies for payments.
        I think that things are starting to go this way a little bit. The problem is, how much is a stream worth to the label and the publishers. There are statutory rates for publisher on permanent audio ($0.91 under 5 minutes). Streaming is still new and solid rates have not yet been determined. Part of the problem is that a lot of streaming is free, or subscription. How can retailers determine a fair price if they cannot accurately assess the cost/revenue per stream per artist?
        You also have to factor in that, without standard rates in place, there would have to be an agreement made between publishers, labels and retailers as to how much each entity would take.
        I can see this happening in the future, but it’s goint to take more time and a better understanding of the format. That’s probably why the labels didn’t want to be responsible for the money like they have in all other mediums.

  6. Megalomutt

    This article is easily beaten by the comments. We have a solution to this. http://www.megalomutt.com DIY music licensing. It removes a lot of people with their hands out. The Artist receives 80% of all sales from downloads and licenses and retains 100% music rights.

    • hippydog

      Maybe you should actually try and read the article before spamming “you have the solution”.. 🙁
      because you not only DONT HAVE the solution, your not even on the radar.. Which just makes you look stupid.. what we dont need is more ‘tech industries’ trying to make money off of the messed up music industry..

      • Megalomutt

        Maybe you should realise what it is we do. We are pro the musician and therefore a rarity; so rare in fact that you don’t recognise it for what it is. This is no spam. MM is a platform designed specifically for musicians to see a decent and fair return for their hard work. I’m sorry you can’t get an argument at home.

  7. Fred Schmoker

    The “cancer” I dare say, are the scumbags like Mr Deezer, and Daniel Ek at Spotify, and Pandora, and all of the similar business modeled streaming services that want their method of consumption to be the future of how we listen to music but somehow do not want to share a fair portion of the revenue. The splits are laughable and the hundreth of a penny royalty paid is unacceptable.
    As a label owner and musician I would rather see my catalog torrented than enable these cancers to all become multimillionaires off of ad revenue and subscriptions off of the back of music.


    Guy has a vission I like it! It should go above labels! Will tell you more in few weeks

  9. hippydog

    I dont know, I’m waiting to hear from someone on EXACTLY why its a bad idea.
    Quote “all a music startup had to do to license the publishing (songwriter) rights for all the music in the world was to go to the local collections society”
    ‘All a music startup had to do’ roflmao.. not that easy actually,
    Still, it worked.. Albit with an overhead worse then the govts 😉
    Biggest problem is some of these organizations or over are close to 100 years old.. thats a pretty cemented in status thats not easily changed..
    A counter arguement could be charged..
    Wouldnt it make equal sense to remove the “rate court” and turn the PRO’s into true ‘copywrite collectives’ handling both performance and mechanical?
    and then setup 1 or 2 global PRO’s that helps global business’s deal with across the border rights?..
    Aurgh.. my head hurts just thinking about it..
    Maybe Dauchez’s idea aint that horrible..

  10. Clouseau

    I saw his remarks live and here are some thoughts:
    1. Agree that composition rights licensing is the most complex part of the value chain; however, just because something is difficult, is the answer to pass the buck?

  11. Dreyfus

    There is nothing prevtening labels from doing pass-through licenses at the moment. Why doesn’t Deezer propose this and see if the labels wish to do this, giving Deezer full indemnity? My suspicion is that Deezer wouldn’t get too far with this approach.

    • Pete

      In my experience this is rejected by the labels – never actually heard a good reason – probabaly the norm. It would be great if they did!
      Why do you need different licences for Interactive streaming (Spotify model), Non-Interactive streaming (Pandora, radio style), whether online or offline? The rights should be granted for streaming whatever model used – it’s the reporting calculations that are key to differentiate – although why they differ beats me!

    • Cato

      What is your point? How is this double dipping? Are you suggesting that an artist that also writes should be penalized? Using that logic, an author should not get paid when his/her book is made into a film. Get your head out!

  12. Cato

    Kind of tired of hearing about the 14:1 ratio. The labels’ compensation is based on a greater of % of revenue or a per play rate (of which the per play is currently taking precedence in Pandora’s case), whereas the music publishers compensation is based solely on % of revenue. If Pandora were making enough revenue such that the % of revenue was taking precedence, on the master side, they would be paying labels 25% of revenues. All of a sudden the 14:1 ratio is 5:1 (roughly), i.e., 25% v. 4-5%. If publishers were on a similar compensation formula, then this would be a more valid comparison as opposed to a headline grabber.
    As David Israelite aptly pointed out, the ratio of master:composition rights compensation varies trememdously: 1:1 for synchs; 0:1 for terrestrial broadcast (labels get 0); ~4.5:1 for interactive streaming/limited d’loads. That’s just in the US. It’s similarly varied in different parts of the world.
    Can the industry decide on a constant ratio for all types of uses? I think that it is unrealistic to expect that any time soon. And who is to say what the correct ratio is?

    • Visitor

      It’s worth noting that the vast majority of mainstream performance artists are co-writers on their albums, that is, there is very few examples of performance artists/labels that aren’t double dipping on songwriter royalites anyway.

  13. Brooke Wentz

    Great idea, but the labels don’t want to do the accounting to publishers and deal with these sorts of negotiations.
    At The Rights Workshop we do a lot of this licensing for clients and he’s right, digital streaming rights need to done separately and the fees are all over the map. It’s frustrating for the clients, but keeps us in business. The crazier the business gets, the more fun we have. Bring it on!