Let music lead the way

It’s been a roller-coaster month for Project Playlist, a popular local start-up that lets users create playlists of songs scattered around the Internet. Last week, the company’s service was booted from MySpace, cutting it off from much of its clientele. On Monday, it announced its first deal with a major record company, Sony BMG. And on Tuesday, its playlist-building application was expelled from Facebook. This one-step-forward, two-steps-back routine shows how hard it continues to be for the music industry and entrepreneurs to adapt to a world in which recordings proliferate online, beyond the copyright owners’ control.

Project Playlist is one of a growing number of online services that enable people to find, arrange and play the songs available (legally or otherwise) on the Net. Because they don’t store songs themselves, several of these services have argued that they don’t need to obtain licenses from or pay royalties to the labels. Naturally, the major record companies disagree. Two popular playlisting sites with no visible means of support -- Muxtape and Mixwit -- folded rather than fight or strike deals. Project Playlist, which sells advertising and has raised more than $20 million from venture capital firms, was sued by Universal Music Group, Warner Music Group and EMI Music in April. Sony BMG held its fire, and eventually agreed to grant a license.

Playlist services could be an enormous boon to the labels. The vast quantity of music online creates a need for aggregators that can introduce new songs and artists, assemble individual tracks into hours of programming, and organize the chaotic mass of music into something coherent. That’s the niche that companies such as Project Playlist fill. The problem for labels and artists, though, is that their business has long relied on selling music rather than generating money from what people do while they’re listening to it. And services like Project Playlist are designed to sell advertisements, not songs -- which would be a fool’s errand, given how easy it is for consumers to find free music online.

Record companies are trying harder than before to profit from music that’s free; witness efforts such as iMeem, MySpace Music and Nokia’s Comes With Music. But they’re not making nearly enough money from such ventures to compensate for the steep slide in CD sales. More to the point, they haven’t yet made it easy for innovators such as Project Playlist to build new businesses that automatically generate income for copyright holders. That’s what the major television networks have achieved in the past year by making their programs available online with built-in advertising. Entrepreneurs who want to construct businesses based on TV shows from CBS, NBC and Fox can do so easily online, and the viewers they attract generate more dollars for the networks. The record companies too need to join entrepreneurs in the marketplace, not the courtroom.