With the weakened world economy, content in general faces plenty of gloom and doom. Advertising models are severely weakened. But, oddly, in the world of music, there are some positive signs that the shift to decentralized, online distribution might actually be going well — and maybe economic pressures are simply ensuring the parties involved find some way to make the adjustment.

And music distribution is becoming wonderfully weird and diverse – maybe far more so than in recording’s so-called golden age, an era in the past dominated by racial division, predatory labels, and a few dominant big businesses. (Money is tough as always, but it does make you wonder why we complain so.)

One sign of the shifting landscape: online streaming site Pandora is now actually calling for more performance fees — for terrestrial (AM/FM) radio, anyway. Ars Technica has been doing a great job of following the issue:

Pandora now pushing radio to pay for music, too

It seems Pandora – along with other webcasters – was able to cut a deal on webcasting rates, in a battle that put music listeners and makers at the center of a legislative struggle. Legislators had been the ones to intervene and save webcasting, under pressure from listener constituents and even musicians. Pandora founder Tim Westergren told CDM how dire a failure on these rates could be.

What the deal means is that we can return to the rosier vision of how online streaming could help promote indie musicians, something Westergren put eloquently in a 2007 interview with CDM. But looking back at Tim’s arguments from two years ago, a central tenant was fairness — meaning big, corporate radio broadcasters really ought to face a level playing field and start paying musical rights owners. (Public radio in the US, by contrast, is likely to benefit from the online deal, as public stations increasingly rely upon wider online distribution and even pledges from loyal online listeners. Moved from Omaha to Montreal? You can still listen to your favorite station.)

There are signs that not only have online music pirates moved to download stores like iTunes, eMusic, and Amazon, but to streaming solutions, as well. In one of a number of recent studies, for instance, the UK is showing online file sharing down markedly as legal streaming grows. To me, the most interesting thing about this is that it disproves a long-held industry assumption that habits, once set, wouldn’t change. For better or worse, the online world doesn’t seem to work that way.

Meanwhile, the lines between “indie” and “major” are blurring quickly. Again, Ars Technica:

Universal/TuneCore deal opens major doors for indie artists

The surprise there is that it’s not so much about distributing Universal artists exclusively – online artist services firm TuneCore is now opening its membership base to Universal and visa versa, so that Universal can discover new artists and artists get licensing and mastering services from UMG without the need for exclusive contracts with the major label. In fact, if there’s one word that sums up the future of music deals, “non-exclusivity” seems to be it.

(clarification) As kj notes in comments, I think saying this opens “major doors” is a bit of a stretch. It opens a small door at a major. But on the other hand, the idea of a label becoming an open service shop for artists – for offering, say, mastering for a fee as part of their revenue – is new and, provided it actually works, interesting. And it’s clearly part of a larger trend.

But I think the best news is the spread of unusual means of musical distribution. Eliot Van Buskirk writes a round-up of favorites for Wired Magazine. (And yes, while top ten lists are overused, they’re brilliantly appropriate when you actually have ten really awesome things.)

10 Weird Ways to Distribute Music

From soup cans to music boxes to iPhone apps, there are a few underlying trends in there. One is experimentation in the delivery mechanism itself (including 8-tracks and cassettes, really). The other is in what you can do with the media, as with the interactive remixable iTunes album, or even art books that extend what an album actually is.

As these spread, though, I have to optimistically think that this is more than desperation or brief novelty. Distribution media haven’t just shifted from one popular form to another; they’ve imploded. We’re rapidly approaching a “minority majority” situation in which no one format dominates the others. We haven’t gone from the compact cassette to the CD to the MP3. We’ve gone from the CD to MP3s, MP4s, lossless files for aficionados and lossy streams for kids who love on-demand, vintage formats, physical media and art books and software. Instead of being strange anomalies, these other formats may actually be the new normal. I think in a way the business model doesn’t matter, because, let’s face it, a lot of art making is about losing money. What drives artists is loving sharing the thing they’re making, and finding someone who wants to love it, too. Some people will make a great business model around that, while others won’t.

But if you’re a music lover, we could be facing a new golden age. And if you missed compact cassettes, good news – they’re back.

What if you could record directly online from a Web browser – no additional software needed? It’s not a new idea, but online music community Indaba has an interesting new Java-based tool that gets one step closer. We took a first look at the tool last month, but it’s now publicly available at indabamusic.com today. Indaba shared with CDM some video walking us through the feature set, and the company founders also answered some of my questions. For the musicians in the audience, we’ll have some more hands-on time with this tool to see if it’s something you can use. (My guess is, it’s something you might use alongside your existing tool of choice.) For the developers and Java fans (or skeptics), I also want to dig a little deeper in the Java and JavaFX platforms behind the scenes.

What can you do when making music in a browser?

• Work online or offline.
• Record directly online and share immediately.
• Work across platforms, directly in the browser.
• Add real-time effects, mixing, and even multitrack automation for adjusting levels.

Indaba isn’t alone in some of these features, but the ability to have high-performance, non-destructive audio effects and to record directly into the program without the typical browser restraints is definitely a step forward from other solutions.

Pricing will include a relatively full-featured free plan, plus $5/mo and $25/mo tiers adding additional clips, online storage workspace, and real-time non-destructive effects. (Video sharing service Vimeo recently adjusted their free/Pro distinction, a subject Jaymis covered for Create Digital Motion yesterday.)

Here’s our own Q&A to get things rolling:

CDM: Obviously, we have readers who are very comfortable with some existing, non-browser-based tools. But I can see them having a place for a browser tool as a supplement. How might some of those kinds of people use Indaba, as you envision it?

Indaba: The Indaba console is fully integrated with our global community of musicians, so it’s much easier to share work and collaborate on mixes. Even if your readers currently use non-browser-based tools, the Indaba console enables them to work together seamlessly from any computer without having to transfer files from machine to machine. What’s more, because the Indaba console is web-based, it can capture inspiration that strikes when artists are on the road or otherwise away from their studios. For musicians who don’t currently use complex DAWs, the Indaba console can be even more – a turnkey solution for recording, editing, and mixing.

Why JavaFX? What specifically was possible with JavaFX versus, say, Flash – given that at least some basic DSP functions we have seen in Flash?

The real decision was to build a Java application. A signed Java app gives us the freedom we need to tap into client-side hardware (sound-card, hard drive etc) and the power we need to handle multiple non-destructive effects. Other client-side technologies simply can’t offer this level of access. JavaFX gave us the ability to develop a sexy interface that wouldn’t look/feel like the stereotypical java apps of yesteryear. Going forward, this will enable us to do some pretty amazing things.

Ed. – note, that generally answer leads to some follow-up, specific development questions I have regarding implementation on Mac, Windows, and Linux, so we can talk more about those details – feel free to pass along your own thoughts and I’ll see what I can learn.

CDM: It’s nice to see the Creative Commons license on the sample materials. Will there be ways for artists using Creative Commons to release their own clips / share their own loops?

Not in this release but shortly thereafter. For now there are hundreds of clips available to our members.

Will there be an API for other sites to hook into what Indaba users are doing / what they’re doing on the Java-FX-based editing platform?

It’s definitely something we’re planning on releasing at some point. At the moment, we have private APIs for corporate partners.

What are some likely workflows with the new tool? How does that differ from previous versions?

It cuts a tremendous amount of overhead out of the process and is a simple and quick way to capture your ideas in high quality. Previously you had to download tracks, record locally, bounce them out of your DAW and upload them to the site… Now you can pop open the Console, record in high quality and mix your song all within Indaba.

Stay tuned for more details. And, of course, Indaba does have some competition on the Web; it’ll be interesting to see how it all stacks up.

As an addendum to the Last.fm story today, what are the actual royalty rates we’re talking here? They’re not much – precisely the reason musicians will have to get broadcast-style play counts to ever see anything worth counting. For instance, Last.fm makes the comparison with the BBC in the Wired story. The BBC has more hegemony than even a giant US ClearChannel radio station, and I suspect it’d be virtually impossible for an unsigned artist to see that number of plays.

How little? Try $0.0005 per play, as Steve of sighup writes in comments. (I think that’s just radio plays; assuming you get both radio and on-demand plays, you should do a little better – but, still, you might be better off with your CD sales out of your guitar case.) Keep in mind, that’s on top of other revenue, like performance royalties from ASCAP, BMI, and such, but it’s still not much.

Low as that may sound, it’s in the same ballpark as traditional webcasting rates. Prior to the big shake-up over Copyright Royalty Board rates here in the US, its rate was US$0.0008. And that’s only in the US, whereas Last.fm is international – and some of that goes to SoundExchange, and some goes to your label, and … you get the picture.

The CRB and record industry did successfully pass higher rates, up to $0.001 (okay, still not putting your kids through college). Those rates caused an uproar from webcasters, but they were also initially associated with punishing minimum fees, which depending on the definition of what a “channel” is could have driven millions of dollars in fees for some webcasters. Those requirements, not the relatively tiny per-song rate, were what concerned artists and writers, because the new rules threatened to take away important channels for getting their music out there and driving sales to more lucrative enterprises like CD and concert sales.

As it happens, that debate continues as we speak. In the June 5 RAINcast (Radio and Internet Newsletter), Paul Maloney points to reports that Pandora’s chief executive is personally lobbying against these rules, because they’d suck up 70% of that services revenue, for a total US$18 million in royalties. You can do the math: that’s enough to bury Pandora, but not enough so that you’d ever see any of the change. Everyone loses. RAIN also notes that SoundExchange hasn’t actually been enforcing its new rates, so we haven’t yet seen what happens to Internet broadcasting with the new rules – even though they were ratified last summer.

So, Last.fm’s rates, while small, go straight to the artist, they’re transparent, and they’re in the ballpark of webcasting fees in the past. Since they’re set by Last.fm, we can assume CBS isn’t destroying its own business, either. And keeping things in perspective, this is really about Last.fm, not the entire universe of music. That’s the good news. The bad news is, they’re so impossibly small that for most people, it won’t really matter. And, yes, if Last.fm’s main business model is advertising, you have to wonder if artists won’t be more successful directly selling ads. Even Google AdSense could wind up being better for the artist, partly because it’s unclear how much ad exposure Last.fm can cram into its service. In the long run, my guess is you’ll see all of these – given the amount of ad inventory out there, and the rising consumption of music, and new ways of consuming music, I don’t think this is a zero sum game.

But the bottom line: cool as the Last.fm announcement is, even I’ll quickly admit that royalty rates in general are unlikely to make or break most artists’ lives. The real business is elsewhere, at least for now. If Last.fm can massively expand the number of listens, though, the whole game could change – and that means even that fraction of a penny could wind up being an important precedent. Stay tuned.

As music listening takes new forms, that builds new business models. But who calls the shots? Who gets to play, and who reaps the benefits? One immediate danger is that major label deals will dominate as outlets vie for position. Online outlets like MySpace have started to look a bit like the same-old, same-old world of major labels and big deals. “Indie” music sometimes makes an appearance, but nearly always in the form of signed artists and often in the shadow of the majors. Unsigned artists can get onboard, but the playing field often isn’t level – and while majors negotiate lucrative deals for their music, unsigned artists and indies have to give theirs away for free. At the other end of the spectrum, unsigned artists often don’t get paid by services that benefit from their work (like MySpace).

That’s why Last.fm’s announcement yesterday was a potential bombshell. Now fully available after months of development, the Artist Royalty Program will pay artists royalties on plays directly – no label required. Unsigned and independent artists can sign up to earn royalties from on-demand plays and Last.fm’s streaming radio.

Last.fm Artist Royalty Program (last.fm/uploadmusic)

Royalties 101

To fully understand what that means, let’s back up and talk about where royalties come from in on-demand online music. This is entirely separate from downloadable music – that’s pretty straightforward. If you, for instance, sell a track on your band’s website for 50 cents, people pay 50 cents, own the track, and you get 50 cents. If you sell it through another vendor, then you get a slice of the sales pie.

But on-demand, streaming music, via radio stations or elsewhere, works differently. Since the days of radio, broadcasters have wanted broader access to music. Obviously, if they had to negotiate rights individually for each track, they couldn’t exist. So the solution has always been a system of blanket royalties. In the online space, there are two kinds of royalties, coming from two different licenses. Here’s the simplified version (lawyers, feel free to clarify):

1. A license for the recording – the “statutory license.” These fees are set by the Copyright Royalty Board and collected by SoundExchange. It’s called “statutory” because webcasters don’t need your explicit permission to broadcast music. They’re paid to the owner of the recording. If you’re a signed artist, that’s your label.

2. A license for the “performance rights” of the copyrighted work itself. These fees are negotiated with performing rights organizations like ASCAP, BMI, and SESAC.

That sounds odd (Last.fm isn’t “performing”), but it makes more sense if you think about the actual music. There’s the recording of the music, and the “work” itself. So, for instance, you might record a cover of a song. There’s the songwriter, and the artist recording the work; they may not be the same person.

If you’ve written and recorded your own song, you own both of these rights. You might sign with a label and give them the recording rights, but either way, the basis remains the ownership of the recording and the musical work.

So where does ARP fit in?

First, regardless of whether you’re part of ARP or not, you’ll always receive the performing rights if you’re the writer of your musical material. That’s why it makes sense to join an organization like ASCAP if you’ve ever produced anything; unless you do nothing but cover other people’s music, they’re there for you. They’re not the RIAA – they represent writers and publishers. In fact, even if you release your music under a Creative Commons non-commercial license, you are eligible to receive royalty payments collected by these bodies. (That’s the topic of an upcoming article.) If you join ARP, you’ll continue to receive income for this music.

What ARP does is to provide additional income for unsigned artists. A spokesperson for CBS Interactive (parent of Last.fm) tells CDM:

If you participate in the ARP, you should not be signed up with a recording rights society. In effect, Last.fm is cutting out the middle man here by paying the artist directly without going via the collection society. Writers benefit from the publishing rights royalties that Last.fm pays to the publishing rights societies. ARP is for recording rights only.

Who Benefits from ARP?

Here’s where ARP makes a difference. Previously, the system for the artist was to go get a label, and then get that label to collect royalties on the recording. The label, in turn, had to go to SoundExchange, formerly part of the RIAA but now an independent organization, to get the money. Result: fees get set by a board of judges chosen by the Copyright Office (the Copyright Royalty Board), and you’ve got multiple middle … men, actually.

Under the ARP, you go to Last.fm, and Last.fm pays you. You upload the music where you want it to go. And, via Last.fm’s community pages, you actually have some tools for your music:

Last.fm for labels and artists

In addition to royalties, that includes stats, event management, and the ability to connect with fans. And the other thing that’s interesting about this whole system is that both parties essentially have to be happy. Artists have to be getting value from Last.fm’s service, and royalties that make sense for them. Last.fm can then, in turn, build an ad-based revenue model that works for them as a business. That’s a far cry from a giant battle between the recording industry and large performers’ organizations in front of a group of judges. It’s new, so we’ll have to see how it works, but it’s nothing if not appealing.

(See also a similar announcement from imeem, though that one required working through SNOCAP for distribution, and comes from, arguably, a less popular service. I also think some of Last.fm’s unique tools for data collection and fan management make it more interesting than imeem. But this is all the more significant if other sites do the same thing in the future.)

ARP for Labels, Getting Paid

The ARP system isn’t limited to artists, either. New labels could embrace the system. Again, a Last.fm spokesperson clarified for CDM:

A label can participate in the ARP Program IF they own the WORLDWIDE rights to the content and have NOT signed up with any collection societies.  (Basically only startup labels that aren’t collecting any royalties would be interested in participating in the program since they’d only receive revenue from Last.fm in that case)

One other simple upshot of all of this is that people actually get paid. That’s not the case with MySpace. As Eliot Van Buskirk writes for Wired’s Listening Post:

We’ve had a bone to pick with MySpace about this for a while, because it plans to compensate major labels with a share of ad revenue without similarly compensating indie labels, unsigned artists, or possibly even the artists signed to them.

The headline says it all:

Last.fm Compensates Artists, Unlike Some People We Know [Wired.com Listening Post]

It’s well worth the full read. Eliot notes that even Last.fm doesn’t maintain the amount of money will be huge, partly because online streaming is still growing gradually (though I think listening habits will continue to grow). The money is coming from ads that appear with the streams. But Wired notes over 450,000 tracks are available on Last.fm as part of the Artist Royalty Program. And they also observe that, unlike MySpace, indie artists aren’t left in the dark, and unlike almost everyone, payouts are transparent – you can actually monitor what you’re earning.

Ultimately, I think that’s the bottom line: Last.fm is actually paying people. And I don’t mean to make an argument against labels. On the contrary, ARP is a tool many artists will likely use while looking for a label – alongside other useful tools (some arguably more valuable than direct revenue) provided by the service. The one question I do have, though, is whether new upstart labels might forgo the complex recording collection process entirely and start to use services like this directly. That would allow them to continue to fill the business and promotion roles labels have always provided, which artists and writers often can’t handle on their own. But it could be the first glimpse of a new set of models in which music creators, publishers, and labels deal with online business directly, rather than dealing with a middle man.

Update: Labels not so happy

I missed this: Merlin, one of the aforementioned rights bodies representing the labels (12,000 independent labels total, controlling more music than EMI) has protested the ARP license:

Merlin Opposes Last.fm’s Artist Royalty Program [Wired.com Listening Post]

The grounds: no retroactive license fees, a breakdown in negotiations with Merlin, and vague licensing terms. Now, I’m not sure on any of those points – in particular, Merlin’s negotiations should theoretically be independent of ARP to begin with; it explicitly excluded people who have signed with labels who are part of separate negotiations. If you’re an independent artist, it doesn’t really matter what Merlin thinks or even what they deem “illegal” – particularly if you’re uploading and licensing your own music, which is presumed by the ARP deal.

But the main thrust of this argument is that past Last.fm plays were illegal and unlicensed.

Last.fm’s response is, basically, ARP is about indie artists, not Merlin. Merlin’s banner says “representing the rights of independent record labels worldwide,” by which they mean, of course, their members, not necessarily anyone else.

But Does it Add Up to Anything?

The big problem is, streaming rates in general are a tiny fraction of a cent per play. If Last.fm achieves greater volume, that could be good news for artists. Until, then, though, this is largely symbolic. Further discussion:

Fine Print: What Do Royalty Rates Actually Pay?

On second though, as many artists start their own labels or self-publish, we may not be far from a world in which the artists really do run the record industry. Imagine an industry that’s actually smart and has a sense of humor. Fascinating.

AudioLemon, author of one of the best music tech blogs around (a newer arrival), says quotes the following from the fury over DAT recording (some things never change):

A coalition consisting of PEN, the Writers Guild of America, and other organizations representing writers filed a class-action suit today against major pencil manufacturers for copyright infringement. Defendents in the suit include Eberhard Faber, Riviera, Skilcraft, Cascade, Empire Pencil Co., and Dixon Ticonderoga.

The writers claim that with modern pencil technology, purchasers of books magazines, newspapers and other printed matter will be able to make exact reproductions of copyrighted material. The suit charges that royalties will be lost when people write out copies of books for friends.

Check comments for the full item and lots more:
Comments: Record Industry Now Completely Bonkers, Wants DRM on All Radio