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Warning: Very long article :P
I posted on ZeroMe about some research I was going to do concerning my personal curiosity about why people still pirate music and why even when using legal methods there are still heavy restrictions in place that weren't really an issue back when CDs were the format of choice back in the day...
To understand what music licensing is for, you really need to look at the whole chain from the music artist and people behind making the music all the way to the consumer. Note that my analysis is for the UK market and it is slightly different in how it works in different continents and countries, although I've found that it's mostly the same procedure - just different names for the intermediaries mainly and slightly different copyright laws.
I've made a chart that explains all the usual intermediaries and people involved in creating, recording, promoting, licensing and selling music. Please excuse it being flipped, you need to read it from the bottom upwards as I didn't realise my mistake until it was all finished.
I've asked but they were unable to provide me with an answer as there are too many variables involved. The amount of the licensing fee that actually goes to the artist depends on stuff like:
The last point is the most variable, as internally the amount they will charge will depend on how well their label is doing, how much profit they want to make, how much it actually cost them to produce the ads, and much, much more.
This is what I found the most interesting... you see, each intermediary has their own job that they carry out for the music artist behind the scenes. Obviously, they all want a profit as very few people will do or even be able to volunteer to work for free - especially considering that most of the time the exact people behind a song aren't fully listed in credits like a film does.
While online music streaming is likely to be used for personal leisure purposes, it is still a public commercial service, hence licensing costs still apply regardless of the use behind the service.
The restrictions on modern music streaming services are because of either technical or licensing constraints
The licensing fees are fixed costs paid annually, but depending on your usage and revenue/income, the charge is different.
What's interesting here is that economies of scale don't apply, instead diseconomies of scale do. The better or more popular your online music service becomes, the higher the licensing fees and the more restrictions are involved, which explains why services require you to subscribe to a premium variant in order to do certain things like listen to music offline - it's not the business' choice, it's the licensing restriction.
Can the restrictions be worked around by using a decentralised method? Yes, as long as you still accurately report how many songs have been streamed, how many streams are a song from a specific artist, etc...
Both me and @technoshaman777 have collectively come up with some ideas that could potentially skip all of the intermediaries between the artist and consumer, by using advanced cutting-edge decentralised technologies and concepts that would remove the technical limitations and can theoretically make the service work as a hybrid streaming service and label/publisher.
What does this mean? It means no technical costs, at all. All while being fully legal! It would mean there would be no hosting costs, no licensing costs, no required reliance on third-party online advertising... The only costs would be the general management of the business and R&D.
Exciting stuff indeed, I could actually see this as a viable business that offers complete freedom of music and therefore eliminates the need for music piracy! :)
After some internal anonymous research, I found that a significant amount of people who pirate music is because they either do not want to pay for it or they dislike the restrictions that free legal alternatives provide. I'll officially say it now: NinjaBeats' mission is to combine the benefits of pirated and legal offerings into a single, decentralised, free and legal music service. Think of it as like a legal form of piracy with the added benefits of good metadata and audio quality :P