Labels Strangle Playlist
The long saga of free music streaming service Project Playlist looks like it will end in a classic case of “out of the frying pan and into the fire.”
Any hope that the company’s worries were over when it settled with Universal Music Group and Warner Music Group dropped its suit in May could be dashed if UMG succeeds in stopping Project Playlist from paying off millions of dollars-worth of debt with a $15.7 million loan from the label. The label filed papers to that effect on Monday as part of Playlist.com’s ongoing Chapter 11 bankruptcy, in which the company said it only had $2.2 million in total assets, little of it in cash.
Now called simply Playlist, the site allows users to create and share playlists using either song files that are hosted by the company itself or on third-party servers. When it plays the files that live on playlist.com, the service racks up millions of dollars in royalty costs. When the files play from external servers, the site functions, in a sense, as a playable search engine.
As the screenshot from its Chapter 11 bankruptcy filing shows (right), Project Playlist now owes millions of dollars in royalty costs to each of the major labels for playback of the music it hosted, having finally reached licensing agreements with all four major labels by May of this year. Those hard-won licensing agreements may well spell doom for Playlist.com, as they have for so many other start-ups.
These days, the privately-owned Playlist claims only to play songs that live on outside servers. Indeed, the song “Acid Food” by Mogwai was pulled from a blog at chezlubacov.org when we clicked on it Wednesday morning, rather than from playlist.com. The company argues that it shouldn’t have to pay sound recording royalties on that music, and must only remove links to offending music when notified, as required by law.
But we saw how well that argument worked for the now-defunct SeeqPod when it employed the same strategy, all the way down to the bitter end. Predictably, UMG isn’t buying the argument that Playlist.com isn’t responsible for royalties when it plays music from outside servers.
“UMG, as the debtor’s largest creditor and secured creditor, and the owner of countless copyrights which are being infringed even now, cannot in good conscience consent to use of cash collateral for the conduct of a business based upon the illegal use of copyrighted material owned by UMG and other entities,” wrote the label in court filings on Monday.
Another free music service bites the dust? It’s looking that way.
One way or another, these long and winding roads always seem to end up at the same place: bankruptcy. Even the most promising start-ups that offer free on-demand music, including those that increase user engagement by harnessing people’s urge to curate music into lists following the death of the album, and then to share those lists with friends, still can’t seem to keep up with the labels’ royalty rates without charging users up-front.