The Economics of Selling Recorded MusicPage 1
Intellectual Property In Brief
In order to understand and evaluate the opportunity associated with investing in theCompany, some understanding of intellectual property is required, specifically as itrelates to composed songs and sound recordings.Intellectual property (IP) is property in the same way as land, computer hardware, orprecious metals can be property; it can be leased, bought, or sold. The main differencebetween IP and non-IP-based forms of property is that intellectual property originates as the expression of an idea by an individual – and once expressed, that individual (unlesshe chooses to sell, lease (called ‘licence’, or give it away) has a legal monopoly for a setperiod of years on the ways in which his or her expressed idea can be made use of byothers. Examples of ‘Expression of an Idea’ are an author writing a book, the plotline anddialogue for which originate in his brain as ideas, or a songwriter like Heaven 17 writing out sheet music or lyrics to a song.IP surrounds all of us – indeed, it is the key to much of the industrial, and post-industrial,revolution in our lives: without IP protection, and the monopoly that IP gives to thecreator or owner (if the creator has sold or ‘leased’ his rights) of it, much of the modernworld would not exist. Copyright protects not just a song composed by Heaven 17 orSting or anyone else, but also all computer software and books; statuary andphotographs, drugs and computer chips – and sound recordings.
What About Sound Recordings?
As regards sound recordings: like other forms of IP, the owner of the sound recording controls the uses to which the recordings may be put, the commercial terms under whichothers may make use of those recordings. This is the reason why record companies andartists get paid when copies are made – such as CDs sold in stores, or paid downloadsof recordings), or the performances in the recording are performed for the public (forexample, played on the radio or television, though this right of remuneration does notexist in all countries); the exclusive control which copyright gives to the owner of thesound recording allows him or her (or them) to require that payment must be made forall of these (and various other) uses, for as long as copyright protections last – soundrecordings remain “in copyright” (or the exclusive property of their owner) for 50 years –and in some countries, up to 95 years – from the end of the first year in which they arecommercially exploited.The copyright protection of sound recordings, and songs written by composers like Sting,are the foundations of the modern music industry.
Major Sources of Revenue for Sound Recordings
In order to understand how it is that money is made from sound recordings, what followsis a brief description of the main types of revenue which they generate
Sale of Copies – CDs, DVDs, Cassettes, and Other Physical Copies
This is precisely what you think it is – the sale of copies of an album or single which arepurchased by members of the public from record stores, either on the ‘High Street’, oronline via outlets like Amazon.co.uk.
Downloads
This refers to consumer-facing services which allow members of the public to listen to, ordownload, music that they like either for a one-time fee or on some other basis, such asa subscription allowing a certain number of downloads per month or year. Indeed, thelatest innovations in mobile phones mean that consumers are now able to downloadsound recordings onto their mobile phones. According to the trade bodies representing
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