MIDEM 2009: KEEPING ON THE RIGHT TRACK.

Thanks to companies such as Audible, DigSound and Counterpoint, the once-labyrinthine process of tracking digital royalties has become more transparent - handy in a year where revenues are set to soar

By Paul Sullivan

BEFORE THE DIGITAL REALM CHANGED the face of the music industry, the tracking of royalties was a reasonably straightforward process. Nowadays, with the rise of digital rights, the process is way more complex, usually necessitating complex web-based software that helps companies process royalty payments and manage the ever-increasing mass of digital content.

Leading companies such as Counterpoint, Audible Magic, DigSound and others provide technologies and services to a wide range of clients including record labels, distributors, publishers and digital music retailers, helping them track royalties and, more often than not, simultaneously reduce costs. While these technologies have been generally successful, new challenges arise as the digital realm continues to expand exponentially.

"The most important issue [with regard to] the expansion of digital revenue remains the increase in volume and the comparative decrease in value, which can result in the cost of processing the transaction exceeding the actual value of that transaction," says Counterpoint VP Ben Clasper. "This, coupled with the more established view that digital revenues are not expected to replace physical revenues in full, and that therefore record labels must be reconciled to earning less for the equivalent products than they would have done previously, means businesses must adapt accordingly elsewhere in their business."

Of course, there are many new markets and revenue streams to explore in the digital realm. Most music companies would agree that, despite the increased complexity of tracking digital rights within the new Web 2.0 realm of P2P, social media and interactive/user-generated content, it is one of the chief areas for potential expansion, both in the short and long-term. The challenge lies in identifying content, licensing its use and collecting and administering royalty payments accurately and cost-effectively.

"The hugely increasing volume of legitimate transactions does not present a problem to us," says Audible Magic general manager Mike Edwards. "Where [our] content recognition technology was once used to prevent unauthorised use of music, it is now increasingly being used to track the use of music and audiovisual creations in the Web 2.0 and P2P environment. In 2007 we carried out 400m identification transactions on user-generated content sites alone. In 2008 this number had increased to more than 1bn. In 2009, this will probably increase by an even bigger multiple as legal P2P services from the likes of iMesh and MSP, both Audible Magic customers, take off."