Airborne dodges licensing 'poison pill'

A new online music site has launched in SA, despite the challenges involved in offering a regional service due to complicated licensing agreements, and a lack of bandwidth, which limits the business viability of the service.

Island of Jersey-based Airborne launched locally last late month and has signed up more than 650 artists already, and its carrier numbers are growing, says founder Justin Melville. “Even though the Airborne Network went live in December, we're still letting the dust settle before aggressively pushing forward.”

Melville says leading music services like iTunes, Pandora and Spotify are not available in SA because of the need to have regional licences. In addition, SA is considered too small a market, because only a small percentage of the population has access to such services, he adds.

Airborne has overcome the licensing “poison pill” by using the Creative Commons licence regime, which allows artists to upload their music, says Melville. “That means that all music available on Airborne is licensed by the artist to allow carriers to share, provided it's not for commercial purposes and it's properly attributed.”

Almost half of Airborne's artists are South African, with the bulk from the rest of the globe, notes Melville. He says the company is active in more 50 countries.

“The South African music scene is vibrant; just look at the explosion of festivals and live music venues, and let's not forget break-out artists like 'Die Antwoord',who demonstrated that you can come from anywhere and make it in the digital age. There's plenty of untapped potential.”

However, Melville points out that SA has a small online market, especially when it comes to music sales. “Once smartphones make their way into the mass market, armed with mobile payment technology, then I think you will see a sharp climb in spending on digital music.”

Sales of digital tracks set a new record with 1.27 billion units sold, an 8.4% increase or 100 million sales year-on-year, said Nielsen. Digital album sales passed the 100 million mark for the first time with a new all-time high of 103.1 million sales, a gain of almost 20%, it noted.

However, despite the surge in online music internationally, SA lags in the dark ages, as digital music share of total industry revenue is a measly 9%.

The International Federation of the Phonographic Industry digital music report for 2011 shows that SA's digital music services are limited to 11 platforms, while the UK has 66 portals, Germany 45 and 22 in the US.

According to a recent PricewaterhouseCoppers' report - South African entertainment and media outlook: 2011-2015 - the digital music market is becoming more significant and is set to grow, while physical sales will drop.

The auditing and accounting firm says increased broadband access and penetration of smartphones and tablets are driving growth in the digital music market.

The digital music market was worth R195 million last year and is expected to grow at a compound annual growth rate of 25.4%, to reach R480 million by 2015. Physical music sales, however, will decline from R1.5 billion last year to R804 million by 2015, says PricewaterhouseCoopers.

Despite the projected growth rates, international sites such as Rdio, Spotify and Pandora are not available in SA, and do not have any firm plans to enter the country.

Rdio, which is available in the US, Canada, Germany and Brazil, is focusing on an Australian launch this year. It is not available in SA and did not indicate when it might launch locally.

A spokesperson for Spotify says its long-term aim is to be available in every country. “We know just how passionate South African music fans are but we don't have any immediate plans to launch there.”

Even Facebook's friend sharing music application, through Spotify, cannot be accessed locally.

Pandora recently cut off access to listeners outside of the US. In a note posted on its Web site, it says: “We are deeply, deeply sorry to say that due to licensing constraints, we can no longer allow access to Pandora for listeners located outside of the US.”

None of the music industry spokespeople ITWeb contacted would comment on the reasons behind the lack of local access to international streaming or downloading sites.

Mark Walker, director of insights and vertical industries for IDC's Middle East, Africa and Turkey region, says international sites probably do not see the commercial potential of launching locally, because of the difficulty of opening up a local portal.

SA has a small online consumer base and international companies are more likely to look at licensing the technology through some sort of franchise agreement with local players than to try to do it themselves, Walker adds.

Walker says there are about two million active music consumers that have access to the Internet, disposable income and are tech-savvy. He says cutting off access to international sites is likely to lead to them turning to virtual private network-based alternatives that allow them to buy from other locations.

CDs are the biggest selling segment of the music industry, and, until Internet access becomes the norm in SA, this will remain the reality, says Walker. He adds that SA is also missing out on other services such as video-on-demand and triple play to the home, because of a lack of pervasive bandwidth.

Arthur Goldstuck, MD of World Wide Worx, argues that the music and movie industries, and books to a lesser extent, “still operate in an archaic, pre-20th Century mode in which the world is divided up according to geographies that have become irrelevant in the age of the Internet”.

Goldstuck argues the online environment does not respect physical borders. “It is long overdue that the old system be scrapped or substantially refined.”

Limiting services such as iTunes to the US and other First World markets is an “invitation to the entire developing world to go looking for content from illegal sources”, says Goldstuck.

Goldstuck argues that there is great demand for these services in SA and the billion-rand local music business could have “been a lot larger if it had not spent so much effort trying to enforce and reinforce ancient ways of buying and selling”.

New media lawyer Paul Jacobson notes the lack of local access is the result of licencing as sites like Pandora need to sign regional agreements, and not the lack of bandwidth.

Jacobson says the industry operates in a protectionist environment and is “living in the dinosaur age”, because of the strict licensing restrictions and rights management. He says “it's only a matter of time” before the current model become obsolete.

South African users are prepared to pay for access, but if the service is not available, music lovers with Internet access will find alternative ways of accessing songs, such as through torrents, says Jacobson. “There will always be people who pirate content.”