The Business of Music: A Conversation with Rightsflow President/CEO Patrick Sullivan – HuffPost 8.12.11

Mike Ragogna: Patrick, let’s start from the beginning. Who is Rightsflow and who do you serve or represent?

Patrick Sullivan: Rightsflow is a rights management company which helps users–artists, record companies, record distributors, and online music services–license, account, and pay songwriters and publishers globally. Clients that we represent are clients such as YouTube, Clear Channel, Muzak, The Orchard, Universal INgrooves, and thousands and thousands and thousands of independent record companies and independent artists, including Spin Magazine and ad agencies. They use our services to license, account, and pay songwriters and publishers for the use of music and downloads on iTunes or on streaming services such as Rhapsody, which is also a client of Rightsflow.

MR: Before we go further, would you give the definition of a mechanical license for those who don’t know?

PS: A mechanical license is a license that’s necessary when someone reproduces and distributes a musical composition such as “Summertime” or “Yesterday”–a song that someone else wrote and some other artist is using in order to sell and distribute on iTunes or on a physical product in a retail store or at a concert or at a show. They need a license in order to pay that songwriter for that use in the download or the CD sale at a show.

MR: People seem to be doing more covers than ever before, especially with shows like Gleeand American Idol being so popular.

PS: Correct. I think with the advent of American Idol and Glee and now The Voice, all of this TV programming has popularized cover songs that may or may not have been used in the past with popular artists or artists that are on American Idol. You really see a huge concentration of interest from the viewers to the people that are buying music on iTunes. Our services help enable that song or that cover song to get licensed, accounted, and paid for to the songwriter who originally wrote that song. It’s a pretty exciting time, and, more importantly, it shows a recognition to the original creation, that version that may have been penned by Paul McCartney or John Lennon or their versions of songs. It really gets the newer artist today the ability to commercialize and help drive a revenue as well as interest to those songs that may have been created twenty or thirty years ago.

MR: Very interesting. How is this different from what’s traditionally existed in the licensing world?

PS: In the past, it was a very cumbersome process where you had to identify who the songwriter was, and then more importantly, who their publisher or administrator was. Then you’d have to contact them directly and hopefully get a license from them. Traditionally, with the cover song licensing, the publisher or the songwriter could refuse if they didn’t want that version of their song being used. It became a very complex process for many people and a lot of songs weren’t accessed. And then there were requirements by law on an annual basis for accounting and auditing that you had to abide by to continuously use that song. Then there was the subdivision of songwriters–in many instances, a song may have multiple songwriters and so you’d have to contact four songwriters in order to get permission. What we’ve done, through our systems and data of information, is allow transparency to license, account, and pay the songwriters with the click of a mouse with the do-it-yourself platform through Limelight.

We’ve really simplified it. For a nominal fee of fifteen dollars, you can eliminate that cost of doing it directly, which is time consuming. In many instances, you’d have to hire an attorney in the past or you’d have to hire some sort of consultant or someone to help you identify the songwriters and then reach out and paper a contract in order to license it. And, many times they would just not even return your calls because the use may not have been relevant in the sense of the old business model, where you were selling millions of CDs, as opposed to this, which is a small-use business and is more disruptive. Through Limelight, we’ve simplified the process and more importantly, we help songwriters and publishers get paid from a good source such as Limelight.

MR: Forgive me for further simplifying the concept, but this sounds like LegalZoom for mechanical licensing.

PS: Correct, where you can choose to do your own will or your own type of business registration or trademarking. To do that simply and create an efficiency in the market that’s needed, there’s Limelight. Through Limelight, we feel we’ve created a sensible offering so that people can easily license any song and more importantly, sell their songs to their consumers.

MR: Let’s focus on Limelight–that’s the functional arm of this company, right?

PS: Correct. That’s the front end, where we allow the independent artists and independent labels to have the ability to fill out the information on a web form and really process the license accounting all from the click of a mouse.

MR: So, that’s the basic process?

PS: Yeah, it’s roughly a two-minute process. So, if you think about identifying a songwriter or publisher and trying to get that license historically, it could take you months and sometimes years to get it. From our online platform, you can–basically within two minutes–check out a license on a song, and you feel comforted that you now have the rights to then distribute that song on iTunes or any other online service or in physical retail.

MR: What are a couple of things someone sees when they go to the platform?

PS: Basically, they’ll have a checkout box, and they decide how many units they would like to license. Then there’s a very simple payment method that’s done through PayPal or eCheck. They’ll see the song, they’ll see the information that they’ve populated and then they basically walk away with a license that they can now have to prove that they legally have licensed the song, like LegalZoom does with their service. It’s a pretty simple interface–we’ve created a very simple web form and really eliminated any clutter or confusion to the consumer who uses Limelight, so they don’t have any misconception of what they’re doing.

MR: Who’s using Limelight?

PS: Everyone from Spin Magazine to independent artists. CD Baby is a big client of ours, along with INgrooves, America’s Got Talent, and American Idol–specifically Lee DeWyze, who won American Idol. Beyond that, there are universities, musical groups, churches, choirs, a capella groups–if you think about it, fundamentally, there are thirty-five million people in choruses in America, and they put their choruses on CDs or offer downloads on their websites. They have the ability to use Limelight and do use it as a platform to license.

MR: What’s happening in the market of licensing? One would use Limelight, obviously, to save time, but are there other functions or reasons why one would want to use Limelight?

PS: I think what’s happening in the marketplace is that there’s a lot of disruption. More and more artists and labels are doing it themselves directly–whether it’s TuneCore or CD Baby. And through Limelight and its systems–which are very transparent–that user or that artist is allowed the ability to pay the songwriter properly. The information is transparent to the user and transparent to the songwriter via Limelight’s online platform. Everyone benefits, where as with the old model, you’d pay into organizations or you’d pay an agent, and that money would just go into a black box and you’d never know where it would go. I think what we’ve done with our Limelight product and our business overall is help enable paying tens of millions of dollars out in songwriter and publishing royalties that may not have flown as easily in the non-transparent world that existed before. I think overall, we enable market transparency, where songwriters can see the tracking and income coming from the use. Limelight, through Rightsflow, really benefits and creates value in the market and grows the market without cannibalizing it.

MR: How big does this get, as American Idol and other reality shows are using your services? Does your clientele include movie and television companies as well?

PS: With the Limelight product, no, in that the record company or whoever releases the product would probably use that, so it wouldn’t be necessary for the TV shows and film studios. They would be dealing with synchronization rights–synchronization rights are when you put music in film or in advertisement and those rights are necessary but different. We do service clients such as Viacom and TV Land with their properties for the use of music in their television programming. They are similar to clients like YouTube who use our product for powering and paying out songwriters for the YouTube online platforms, but that’s on the Rightsflow side. Limelight is really geared towards the artist or the record company that is doing the distributing. In the example of American Idol, most likely the record company that’s putting out the product is using the Limelight service, which is the easiest way for them to get the license that they need.

MR: Let’s say I’m somebody from Grey’s Anatomy, and I have an unknown who doesn’t have a label deal recording “Don’t Stop Believing,” in a mischievous faux Glee dream sequence. (laughs) Am I able to go to you, because you’re not licensing a master at that point?

PS: Correct. Anyone whose putting product out on a CD or on iTunes, even if it’s a television show, can use Limelight. It’s built basically for the small-use artist, where as Rightsflow is really for the enterprise clients. But, yes, anyone can use Limelight, and we facilitate that licensing transaction to all and any type of artist or record company or television programming.

MR: So, the potential is there, it’s just word still has to get out to those parties.

PS: Well, they may be using it and I may not know. (laughs) There are tens of thousands of users today, all coming in from multiple sources. So, there’s a probability they could be already using it. For example, we just worked with Spin Magazine on a Facebook download program for a Nirvana cover album and they had hundreds of thousands of downloads from that. It’s a very simple tool for them to get a license, and they probably paid a nominal fee to get it. What you’re seeing through Limelight is that a lot of the jazz standards and the popular songs such as “Don’t Stop Believing” are being covered more by small, independent artists that are starting out in addition to the big name artists as well. What we’re doing through Limelight is really trying to enable everyone with the opportunity to license in an affordable way.

MR: What’s the future look like for music licensing?

PS: I think it’s a world that’s going to be driven by data access–that’s information on the song–and transparency. People want to know where they’re getting licenses from and who’s getting paid and how they’re getting paid. Direct licensing with businesses like us and what we’re doing on songclearance.com, which is our Limelight service address, is going to be very important. I think people want to have that ability to license directly, and if you can enable an independent artist whose playing in their bedroom or in their garage with their band the ability to license–just like major label artists like Jay-Z and Beyoncé, who need licensing services as well–it benefits everyone. The ecosystem will grow when there’s data transparency and direct licensing

MR: What advice do you have for new artists?

PS: The most important thing for artists is blueprinting out their business. What that means is identifying where your rights are today and where your rights are going, and how you fit within the ecosystem of collecting that money. It’s very important because it’s data driven and digital assets are now being put forth on iTunes, which really globalizes your business. I think mapping it out and blueprinting it and always walking away with a very clear picture, as an artist–to innovate fast with your business but focus on what you’re doing and I think you’ll be successful at it.

MR: Patrick, is there anything else we should know about Rightsflow and Limelight?

PS: We did launch a business recently called MySpark Copyright and it’s like a LegalZoom–it can compete with LegalZoom in helping creators register their copyrights, not only for music, but for photography, for books, and for theses in college. It really helps protect those rights, which we think are necessary for protection, and we built that with the copyright office in mind and worked very closely with them. I think that independent artists and creators now have that simple way to register copyrights.

MR: Thanks Patrick for informing us on everything mechanical licensing, I really appreciate your time. Let’s do this again in a few months to re-examine the marketplace and see what progress there’s been.

PS: Great, I would love to Mike. I really appreciate the time and I enjoyed the conversation. Thanks to your readers for taking the time as well.

Transcribed by Claire Wellin