| After two years of hesitancy, the music
industry is finally taking its first steps toward embracing
pod-casting.
When podcasts attained prominence in 2004, amateurs
and advertisers alike heralded the down-loadable audio
programs as the next step in the evolution of broadcasting.
But they have failed to make headway in one key area:
music programming.
For a variety of reasons -- including fear of piracy
and the need to be paid -- the major record labels and
music publishers that control the rights to about 75%
of the commercially released music in the U.S. have
refused to make deals that would allow songs to be used
in podcasts. Consequently, podcasts have been blocked
from using this music, at least legitimately. That has
stopped music-oriented radio programming from being
available as podcasts.
 That
is starting to change. San Francisco-based Rock River
Communications Inc. has struck some of the first deals
to license major-label content for pod-casts. Rock River,
which specializes in making the mix CDs sold at the
check-out counters of retailers like Gap Inc. and Williams-Sonoma
Inc.’s Pottery Barn, is creating a series of promotional
podcasts on behalf of corporate clients including DaimlerChrysler
AG and Ford Motor Co.
Chrysler and Ford pay Sony BMG Music Entertainment
-- the joint venture of Sony Corp. and Germany’s
Bertelsmann AG -- a fiat fee, which the companies decline
to disclose, for the right to distribute the podcasts
for a year, regardless of how many or how few copies
are downloaded. Users can keep the programs on their
personal computers or MP3 players indefinitely.
“What we’re doing with podcasts is taking
the King Biscuit Flower Hour notion of sponsored content,”
says Rock River President and Chief Executive Jeff Daniel.
He is referring to a popular radio program in the 1970s
and ‘80s that was sponsored by a regional baking-products
company called King Biscuit Flour. “It’s
a patronage model.”
Thanks to a tangle of legal and financial problems,
record labels have been slow to license their music
for podcasts. For starters, podcasts are almost all
delivered in the MP3 format, which includes none of
the special software that other digital-music formats
use to prevent wholesale copying. That has contributed
to podcasts’ popularity by making it simple to
disseminate them and load them onto any digital music
player, not just iPods. But it has also made music companies
uneasy, since they have in nearly all cases insisted
that online music sellers wrap their files in copy-protection
soft-ware.
The other major hurdle facing podcasts has been the
difficulty of figuring out how labels and artists should
be paid. Many podcasts are free, like broadcast or Internet
radio; but because of key differences between those
media and podcasting, the performance rights royalties
that are collected from broadcasters don’t apply
to podcasts. Plus, given that many podcasters are do-it-yourselfers
who give their content away, it isn’t even clear
where those royalties might come from.
For now, Rock River has struck licensing deals only
with Sony BMG, to include four to eight songs in podcasts
created on behalf of its clients. The “Chrysler
Music Legends” series focuses on a specific artist
in each program, and includes 30-second ads from the
car maker at a few points in the pro-gram. Subjects
of the biographical programs have included Miles Davis,
Johnny Cash and Journey.
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The programs are available from Chrysler’s
home page and from the podcasting section of Apple
Computer Inc.’s iTunes Music Store. The
Ford series isn’t due to launch until later
this month, but Rock River executives say they
are in discussions to license content from multiple
major labels.
Licensing music for podcasting has long been
a source of internal debate at music labels. Many
executives argue that it is worth handing over
some content to spur consumer interest, while
others maintain that the companies erode the value
of their product by knowingly allowing it to be
freely downloaded and copied.
Ted Cohen, a digital-media strategist who for
many years was an executive at EMI Group PLC,
says that keeping up-and-coming artists “protected”
from use in podcasts has often backfired. “We’ve
protected them so well nobody knows they exist,”
he quips.
Adam Block, senior vice president and general
manager of Sony BMG’s Legacy Recordings,
says the podcasts are “essentially a movie
trailer for our projects.” He says the possibility
of the shows’ being copied wasn’t
much of a concern because the songs are embedded
within a long program that would be difficult
to redistribute.
Write to Ethan Smith at ethan.smith@wsj.com
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