May 16, 2023
Not many artists can say that 27 million people watched their gig, but Travis Scott can claim that total for his 2020 gig in Fortnite. In the same year, Lil Nas X beat that count by another 6 million for his gig on Roblox. Bloomberg Intelligence has predicted that the metaverse could be an $800 billion market by 2024. These numbers have helped to send the music industry into a frenzy of speculation about the future of music in the metaverse.
The potential revenue seems vast – but how can that potential be realised?
The answer must lie in adapting the existing music licensing systems to be as flexible and efficient as possible. That’s no simple task, since the use of any music track requires a licence from at least two separate copyright owners, and often three or four (and that doesn’t include performers’ rights). The copyright in the recording will be owned by either a record label or (increasingly these days) by the artist themselves. The copyright in the underlying musical composition will be owned or controlled by one, two and sometimes up to four or five different music publishers, depending on the number of individuals involved in writing the song, and those music publishers will license their rights via a series of collective rights management organisations. The licensing structures are there, but they will need to adapt intelligently to harvest the potential value the metaverse offers.
Of course, there is no one ‘metaverse’, at least not yet. There are many platforms offering different types of interactive worlds, all of which could be described as ‘a’ metaverse. The dream is that interoperability will one day enable your avatar (and your credit) to move seamlessly from one world to another, however incongruous your Minecraft avatar may look on your PS5. But from the music industry’s perspective the current individual platform market makes the licensing conundrum that much easier, since the burning question for the music industry, and indeed for all copyright owners whose IP is used in the metaverse, is: Who to license? In a virtual world where players, uploaders, platforms, content owners, sponsors and advertisers will come together to create a complex minestrone of experience, who should bear the burden of the required music licences? If all elements appear on one platform operated by a single company, such as Meta or Roblox, the answer is relatively easy: that company is the licensee. That view is endorsed by Article 17 of the DSM Copyright Directive. But as the metaverse develops as some hope it will, the answer becomes less clear.
In terms of copyright law, adaptation may also be required
There will inevitably be communication to the public in the metaverse, and unless the activity is live (and not recorded) there will also be reproduction. Both are the subject of established music licensing regimes in all major jurisdictions. The issue, as noted above, is who is doing the communicating (and for that matter, the reproduction)? Article 17 now requires that under EU law the platform is liable for the communication to the public of user-uploaded content, but not for content uploaded on a commercial basis, or where the activity generates significant revenues. So in the case of an online gig, is the artist responsible for the music copyright licences rather than the platform?
Difficulties may also arise on the subject of synchronisation, a term which does not appear in any copyright statute but which describes a key source of revenue for the music industry
Synchronisation, roughly speaking, is the act of synchronising audio with video, and many musical experiences in the metaverse will involve synchronisation. The question is how that synchronisation will be effectively and efficiently licensed since the present system mostly involves case-by-case negotiation.
The music industry is already getting into the game in a corporate sense
Warner Music Group has acquired a digital property on the Sandbox platform that serves as both a music theme park and concert venue. Roblox has partnered with Sony Music. Universal has entered a collaboration with Genies, a company that creates virtual avatars for artists. The newest recording agreements under which labels sign their artists now give the labels the exclusive metaverse rights, hence their metaverse moves.
For older artists whose recording contracts may not include such rights, and for artists out of contract, the possibilities are tantalising. Having appeared at Decentraland’s Metaverse Music Festival in 2021, the artist deadmau5 said “Web3 will revolutionise the way that artists and fans connect. It’s the future where they will have complete control over their creations and their vision. We can connect directly with fans without any middle men.” Quite how that revenue will flow to artists is a question yet to be determined, and we suspect that many different models will emerge. Tickets and experiences can be sold as NFTs, artist can sell virtual merchandise, and of course sponsorship is often an option for the bigger names. The terms of all of these will be the subject of much negotiation.
In the meantime, platforms and DSPs providing gateways into virtual worlds should be ready to welcome music in all its forms through their portals, and the terms of doing so can be worked out with willingness on both sides.