Rhapsody recently announced that they had made a deal with Ford that allows for integration of their streaming services within certain Ford model cars.  While this may very well be an important deal for Rhapsody, in this article I’ll look at what this type of integration potentially means for artists.

Understanding “De-Tethering”

First, “de-tethering,” as I like to call it, is crucial. By de-tethering, I essentially mean using your device (smart phone/tablet) as a sort of receiver/remote. That is, increasingly, we’ll use our handheld devices to access music in the cloud—be it on servers of companies like Pandora, Spotify, Rhapsody, et al., or on personal cloud-based storage networks, like Apple’s iCloud or Soundcloud or even Dropbox.

We’re doing this now, of course. Where it becomes more interesting is that with technological advances, such as more robust Bluetooth connectivity, and just generally better wifi streaming, people no longer have to stream the music they access from the cloud over the crappy speakers/earphones on their devices.

Instead, they access the content on their hand-held devices, but are increasingly able to easily and reliably de-tether the music (and video) from their devices, and have it playback through another system—a system that tends to have far better audio quality.

The Evolution of “De-Tethering”

Apple’s AirPlay was the early entrant into this space—allowing you to play your music over speakers, but only if the speakers were connected to one of Apple’s Airport Express devices.  This technology showed the promise of de-tethering, but, for a variety of reasons (no multi-zone plays, for example), is far from perfect.

It was Sonos that really liberated music from the device. Their setup is far easier, and it allows for true multi-zone/multi-song playback. The only prohibitive aspect of Sonos is its cost of entry—around $600 to get started (it’s worth it in my opinion).

Others have entered the market. Bose, for instance has several wireless devices.

Importantly, Jawbone (maker of the ubiquitous Bluetooth earpieces that make you look like you’re on Star Trek Deep Space 9 when you’re wearing one) introduced the beautifully designed Jambox, which, rather than using wifi, uses Bluetooth to connect your device to its speakers. This is a revelation, as it not only de-tethers your music from your device, but also de-tethers you from your wifi network. The result is that you can take your little Jambox speaker with you, and anywhere you have 3G (or better) connectivity, pull music down from cloud-based services, and then—via Bluetooth—beam it right to your Jambox. This means, taking a vast library of music to the beach, park, or hotel room is dead simple. And, because of the continued improvements of Bluetooth, the sound quality is actually very good.

How Cars Fit In

Similar technology, of course, already exists in cars. It’s how we make phone calls, and talk/listen through the car’s audio. Car manufacturers, for the most part, however, have not embraced the technology that would enable people to use Bluetooth to beam their music into the car’s audio player. This is frustrating for the consumer, because, as noted via phone calls, the technology clearly exists to allow this to happen. My sense is that car manufacturers prohibit this because of the margin they make on fancy sound systems in the car that would largely be rendered obsolete if people could forego the CD changers (?!), and proprietary (and expensive…I’m looking at you, Mercedes) connectivity kits that do allow you to play music from your phone through your car’s audio.

This assertion on my part also explains why a deal such as the one that Rhapsody recently struck (and, it should be noted, Pandora struck a similar deal some years ago) is even newsworthy.

That is, if not for restrictions imposed by the auto manufacturers, all of us could easily—via Bluetooth—beam Rhapsody or any other service directly through our car’s speakers with the hardware that already exists both in phones and cars.

What Does This Mean for Artists?

In a nutshell, it’s a good thing. A very good thing. Even with the financially-motivated restrictions auto manufacturers put in place, deals with Pandora, Rhapsody, Sirius/XM or any other music streaming services is great for artists.

Here’s why:  People listen to a ton of music in their cars. Each time a song is played on a car radio it generates a public performance royalty. When a song is broadcast over terrestrial radio, the holder of the copyright of the composition of the song (the writer and/or publisher) gets paid via one of the Performance Rights Organizations. In the U.S. there are three: ASCAP, BMI and SESAC. Each issues licenses on behalf of writers/publishers to broadcasters (radio stations, TV networks, clubs, etc.) that give these broadcasters the right to publicly perform any of the songs in the PROs’ catalogs. The PROs then monitor the play, and divide the amount they collected in license fees (less their overhead costs) among the writers/publishers based on the amount of play these writers/publishers got.  In an era of steadily decreasing revenue for artists, this public performance money is a real bright spot.

It gets better when we move from terrestrial radio play (again, in cars or elsewhere) to digital streams. While only the writers/publishers of the songs get paid when their music is publicly performed via terrestrial radio, when it’s publicly performed via a digital transmission in a non-interactive manner, the performers/labels also get paid.

Interactive v. Non-Interactive Streaming

Let me unpack that last sentence. A digital non-interactive transmission is a stream from a service like Pandora, Sirius/XM, or any of the web radio stations. When these streams occur, not only do the writers get paid—in the same way they do when their songs are publicly performed over terrestrial radio; i.e. via ASCAP, BMI, or SESAC—but so too do the performers and labels. Much in the way ASCAP, etc. represents affiliated writers and collects on their behalf, an organization called SoundExchange does so on behalf of performers and labels.

Now, Rhapsody is not a non-interactive service. It, like Spotify, allows customers to pick whatever song they want, and listen to it whenever they want, however many times they want. As such, the copyright holder for the sound recording (the master) must enter into a direct licensing agreement with these interactive streamers. These deals are negotiated, and vary, but for emerging artists there is typically a Most Favored Nations rate (that is, everyone gets the same deal; take it or leave it).

The good news is that even though these interactive streaming rates are not set by statute (as the non-interactive streams are), the rates tend to be more favorable for the copyright holders (this is because interactive streaming is seen as a substitute for purchase, while non-interactive is seen as promotional in the same way traditional radio has always been seen).

More Streaming = More Money

So, whether your music is streamed interactively or non-interactively, you, as writer, performer, and label (and I hope you’re all three) are owed money. These payments, as you can imagine are teeny. The theory goes, however, that enough micro payments will eventually lead to material payout when there is ubiquitous streaming.

It remains to be seen if this is true or not, but certainly the de-tethering of music so that it can be streamed more easily and in more places can only add to the amount of music being streamed, and thus the amount of revenue an artist can generate.

Let the great de-tethering begin!

George Howard is the Executive Vice President of Wolfgang’s Vault. Wolfgang’s Vault is the parent company of Concert Vault, Paste Magazine, and Daytrotter. Mr. Howard is an Associate Professor of Management at Berklee College of Music. Follow George on Twitter.

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