Interview with Panos Panay
For podcast release August 1, 2016
KENNEALLY: In Boston, a single mile and 17 years separate two technology initiatives with the power to reshape the music industry. The first led the business to the brink of collapse, and the more recent could prove to be its deliverer.
Welcome to Copyright Clearance Center’s podcast series. I’m Christopher Kenneally for Beyond the Book.
In June 1999 on the Northeastern University campus along Huntington Avenue, Shawn Fanning released Napster, a peer-to-peer file sharing service that mushroomed around the world and gave the music business a digital body blow from which it has never fully recovered. And in June 2016, a short walk away at Berklee College of Music, the Open Music Initiative announced its goal to solve the challenges facing today’s post-Napster music industry. OMI aims to establish a global open-source platform providing technology for a shared ledger of music creators and rights owners. Panos Panay, an OMI cofounder joins me now to explain why and how a more efficient marketplace for music can reward creators. And welcome to Beyond the Book Panos Panay.
PANAY: Thank you, Chris, glad to be on the show.
KENNEALLY: Looking forward to chatting with you. I think we need to give people here a little bit of background. We’ll tell them about you, first. Panos Panay is the founding managing director of Berklee’s Institute for Creative Entrepreneurship as well as a passionate entrepreneur and active start-up mentor in the creative media space. Berklee ICE prepares students to be professionals at the intersection of creativity, technology, and business. As the founder of Sonicbids, Panos Panay created the leading platform for bands to book gigs and market themselves online, building a subscriber network of 550,000 bands and 35,000 promotors from more than 100 countries. He led the company as CEO for 13 years, from its inception until its successful acquisition. Panos Panay writes about startups and entrepreneurship for such publications as the Huffington Post, Forbes, The Wall Street Journal, and Fast Company. He has spoken at South by Southwest, and his TEDx talk, “How My Guitar Taught Me Entrepreneurship” is available online.
Panos Panay, you’re clearly very much involved here, and I like particularly the way that the Berklee ICE positions itself – the intersection of creative, technology, and business. That seems to me to be very much what the Open Music Initiative is trying to do, as well. So give us an idea of where you are hoping to get to, and who’s involved?
PANAY: Sure, well, thank you for that introduction. The Open Music Initiative, in many ways, sits at the epicenter of what we aspire to do with the Institute for Creative Entrepreneurship. At its core, we aim to foster the entrepreneurial mindset for our students. We don’t really approach entrepreneurship as must the mere act of starting a business, but it’s a mindset, it’s a way of seeing the world, it’s a way of relating to the environment around you. Let’s face it, the modern marketplace, not just the creative industries, but I think the marketplace at large demands that people think entrepreneurially.
In terms of the initiative itself, it’s really something that after having a lot of discussions internally we felt that as a college that educates about a thousand new creators every year to go into this business – a business that’s changed tremendously, certainly since I finished college 20-odd years ago, and even since – well, you mentioned that Napster came about has changed so much. We felt that we have, in some ways, a moral obligation to our graduates to use our convening power, to use our network and our influence in the market to help advance the conversation of how we can make this industry equitable for all participants.
So that in many ways is what informed the birth of Open Music, which is almost exactly six months old right now.
KENNEALLY: And the kinds of participants in the initiative – you’ve got a variety of players from across the spectrum. You’ve got music industry providers – Sony, for example. You’ve got other colleges and universities involved where research is going on on all kinds of aspects of media and entrepreneurship. I guess that’s the critical point here is that it’s not just about musicians alone – Berklee produces, as you say, quite a few of them, many of them very famous and very successful – but it’s about everyone who works with musicians.
PANAY: Looking at this issue of rights, and especially looking at this issue of music-related rights in a digital age at a time when, let’s face it, the way that both music is consumed as well as created is vastly different than even five years ago. We felt that to get the different players to coalesce around tackling a solution for a shared future, we thought this was less of a technology issue, but in some ways more of a political will issue. So that’s why, from the beginning, we set down the path of getting all the different players involved in this ecosystem to come together, and whereas they’re not going to agree on everything, at least agree on this one thing, that addressing this issue of being able to identify ownership – creating a uniform way that the industry uses to identify who owns what and who’s owed what was critical. So we have over a hundred companies that have signed on to participate in Open Music. This involves all the big major record labels like Universal Music, Sony Music, Warner Music; major publishers like BMG, Sony, ATV; major streaming services like YouTube, Spotify, Pandora, SoundCloud, Netflix; and of course a number of entrepreneurial companies.
As you mentioned, academic institutions such as the MIT media lab, NYU, Northeastern, and you may say, well, gee, what does academia have to do with this? Well, we felt that when you look at innovation that happens in any market, you really need both industry and academic participants, as well as government and policy participants to come together to really advance a particular cause. This has happened time and again in a number of situations. For any number of reasons, the music industry, even though it’s been dramatically disrupted, hasn’t really looked at academic institutions as a way to access a pooled R&D – a way to tap into academic minds who tend to see things from a fresh and different perspective to work collaboratively with them to create new solutions.
So that’s where we felt, let’s tap into some of the unique strengths that Berklee has. One, it’s curriculum while fostering creativity and building entrepreneurial capacity, and people who go out there in the music space, but also very importantly, build on the fact that we’re in Boston and that within a very short five or six square mile radius we have some of the world’s foremost minds in both business, in technology, in all sorts of other areas. So we thought that tapping into this ability to convene people will be one of the things that we would bring to the table. So far, it’s proven to be very, very effective.
KENNEALLY: We’re not telling people any news here, that obviously digital has changed so much about the music business – it’s changed the way that it’s created, it’s changed the way that we consume it. Yet I understand that, from your perspective, from the musician’s perspective, it hasn’t really hasn’t really changed – the compensation structures and contracts haven’t really changed in a similar fashion. Why is that, and is it because it’s really the toughest part to change?
PANAY: Well, you’re looking at an infrastructure of the business that’s been put in place ad hoc over 100 years. Many of the institutions that exist today, and even many of the structures and the way that rights issues are architected today down to actual legislation, they weren’t really designed with the mindset of the way the music is created and consumed today. In some situations you’re looking at institutions that, as I mentioned, were put in place not even last century, but the century before that.
When you look at the music business, again, we tend to talk a lot about the new ways that the music is being consumed, and all the new platforms and formats, as well as things like user-generated content and so forth, we tend to forget that also the way that music is created is extremely different. It’s a much more collaborative process. It’s a much more remote process. It’s a much more multi-stakeholder process which creates multiple owners for even one particular song, so this has created a complexity, if you will, that has been exacerbated by the fact that change is happening at an extremely rapid pace.
So our approach is saying, OK, let’s take a step back, let’s look at the macro trends that are happening and come together as an industry and envision a shared digital architecture that enables the entire ecosystem to grow and to capitalize on these changes rather than creating an industry of haves and have-nots.
KENNEALLY: The objective, Panos, by the way, is to create this open-sourced platform. Tell us why that principle of open-source is so fundamental to what you’re trying to do.
PANAY: Well, if you look at the way that – and again, there is some inherent complexity in music copyright law because there’s multiple rights associated with any song that you hear on the radio. There’s both the recording side that somebody owns – the underlying recording or the sound recording, and then there is the rights associated with the actual composition in itself, which is usually the songwriters as well as the publisher.
In terms of the open source component of it, right now the industry is using all kinds of databases that every one of these organizations or stakeholders in this value chain that goes from the person that creates a piece of music, all the way to the consumer, which travels through any number of different intermediaries. In some situations as many as 40 different intermediaries exist between somebody consuming music and the person who made it. All these different intermediaries use both different systems, different platforms, different databases to often identify the same asset. Multiply that by the factor of 10 or more in terms of complexity because that asset is no longer owned by one songwriter, for example, but there’s been five, six, seven, 10 people that came together to create this. So this has created almost a hodgepodge of systems that don’t really talk to one another so it’s not very easy to identify who owns what. There is no uniform standard that the industry is using.
So creating an open protocol that enables the industry to say, OK, let’s agree to a minimum amount of shareable information that we can all agree exists within this protocol, but then enabling all kinds of proprietary applications and systems and platforms and databases to be built on top of it is critical with respect to fostering innovation and is also critical to bringing efficiencies into the market.
People talk about protocols – they’re often very amorphous, very abstract things. The simplest way for me to describe it is think of a protocol like TCP/IP that governs e-mail communication. You can send me an e-mail using the browser in your smart phone and I can get that e-mail on my proprietary e-mail client that’s sitting in my desktop computer. Well, there is an open protocol that people can build applications on top of it that enables this communication between us to happen irrespective of platform, irrespective of form, and I trust that my e-mail and my message will arrive to you intact.
It’s a similar thing, so when we talk about an open protocol, we don’t mean well, gee, everybody in the industry will have access to everyone’s information. That is not the case. But similar to the fact that an open protocol like the one that is described for e-mail communication has enabled all kinds of proprietary programs and applications to be built on top of it, that’s a similar aspiration that we have with Open Music and the protocol that we’re getting all these people to come together to agree to.
KENNEALLY: So success then, is interoperability. It would also, I think, require transparency.
PANAY: That’s correct. Interoperability is key – getting all these systems to talk to one another and always identify an asset the same way, or at least have a metaphorical translator to say, OK, this asset that you’re identifying as asset A over here is actually identified as asset B over here. So this is what communication protocols do.
But then transparency, that’s correct. Right now, if you’re a musician or you’re a songwriter, you get statements and checks all the time through the mail that are often indecipherable and you don’t always necessarily know that what you’re getting paid is ultimately what you’re owed.
Now, we’re not necessarily suggesting that this is always or even most of the times done because somebody’s deliberately trying to mislead your, or at any time, for that matter. But because of, again, an infrastructure of an industry that hasn’t evolved with the digital age, sometimes you get a bewildering amount of information as a creator, then you have no idea, and there’s certainly no accuracy involved in what you’re getting. We believe that an open protocol will bring transparency, cost efficiencies to the industry across the board. It can enable existing players in the industry to be far more innovative, focus on building far better services for the people that are their customers, and ultimately can usher the industry not just into the 21st century, but more importantly, put it back on a growth trajectory and on an innovation trajectory, both of which we believe are absolutely possible. There’s more music arguably being consumed today than ever before across more platforms. Music is probably even more relevant today than it’s ever been. There’s more amazing music being created everywhere around the world that we can access no matter where we are. Often we feel that the current infrastructure of the business is getting in the way of the industry realizing the economic benefits of this heightened consumption.
KENNEALLY: Right. We are speaking today on Beyond the Book with Panos Panay, he’s a cofounder of the Open Music Initiative and speaking to us from his office at the Berklee Institute for Creative Entrepreneurship. Finally, Panos, tell us about how we’ll know you’re on the road to success. I believe this summer you are running an innovation lab in Boston to explore cases and innovation models. Is there a first milestone that you’re hoping to get to, and when might we see it?
PANAY: We’re kicking off the Open Source Initiative in September. We’re aiming to create a space where all these different companies involved can create their own prototypes. We’re looking at technology that’s been in the news quite a bit called distributed ledgers or block chain. Most people know it because that’s the technology on top of which a lot of digital currencies like bitcoin are being built. But we’re looking at it for its underlying properties and what it has the ability to do.
So we’re really aiming for early next year to have some working prototype applications. But our feeling is that sometimes these things tend to move pretty rapidly. I like to say that we are cautiously optimistic, we’re pragmatists. As I mentioned at the beginning of this interview, we believe that a lot of this thing will rely on political will. But also we want to bring our strength to the table which is the fact that we have about five thousand students who are here every year creating all kinds of amazing music, so we believe that we can prototype a lot of what we’re doing, even within the confines of our own university. So again, we have high ambitions but controlled expectations.
KENNEALLY: Panos Panay, cofounder of the Open Music Initiative, thanks so much for joining us today on Beyond the Book.
PANAY: Thank you very much.
KENNEALLY: Beyond the Book is produced by Copyright Clearance Center, with its subsidiaries RightsDirect in the Netherlands and Ixxus in the United Kingdom. CCC is a global leader in content workflow, document delivery, text, and data mining, and rights licensing technology. You can follow Beyond the Book on Twitter, like us on Facebook, and subscribe to the free podcast series on iTunes or at our website, beyondthebook.com. Our engineer and coproducer is Jeremy Brieske of Burst Marketing, I’m Christopher Kenneally. Join us again soon on Beyond the Book.