MANAGING CREATIVE INTELLECTUAL PROPERTY IN DISRUPTED
INDUSTRIES: A BUSINESS PLAN FOR ATHENA PUBLISHING LLC.
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A Thesis
Presented to
The Honors Tutorial College
Ohio University
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In Partial Fulfillment of the Requirements for Graduation from the Honors Tutorial College with the degree of
Bachelor of Business Administration
______by
Nathan Finley
April 2021
This thesis has been approved by
The Honors Tutorial College and the Department of Entrepreneurship
Nathan Finley
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Paul Mass Professor, Entrepreneurship Thesis Advisor
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Dr. Raymond Frost Director of Studies, Business Administration
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Dr. Donal Skinner Dean, Honors Tutorial College
1 Table of Contents
Introduction………………………………………………………………………………..4 Literature Review………………………………………………………………………….5 Identifying the Need for Review…………………………………………………………..5 Planning and Review Protocols…………………………………………………...... 5 Synthesis and Review……………………………………………………………………..8 Digital Infringement……………………………………………………………...10 Blind Infringement……………………………………………………….10 DRM Systems……………………………………………………………11 Better Methods…………………………………………………………...13 IP Strategies……………………………………………………………………...14 Entrepreneurial…………………………………………………………..15 Accounting………………………………………………………………16 Legal……………………………………………………………………..17 Communitarian…………………………………………………………..18 Managing Talent…………………………………………………………………20 Accreditation……………………………………………………………..20 Internal Goals…………………………………………………………….22 Creative Process………………………………………………………….24 Literature Summary……………………………………………………………………...26 Methodology……………………………………………………………………………..27 The Traditional Business Plan…………………………………………………...28 The Business Model Canvas……………………………………………………..31 The Lean Start-up………………………………………………………………..32 Comparison and Chosen Method………………………………………………..34 Business Plan…………………………………………………………………………….36 Executive Summary……………………………………………………………………..36 Industry Overview……………………………………………………………………….40 Music Publishing Defined……………………………………………………….40 Key Terms………………………………………………………………………..41 Trends……………………………………………………………………………………45 External Analysis………………………………………………………………..46 Internal Analysis…………………………………………………………………49 Business Services………………………………………………………………………...50 Target Artists…………………………………………………………………….50 Target Partners…………………………………………………………………...51 Client Services…………………………………………………………………...52 Future Services…………………………………………………………………...54 Revenue Streams…………………………………………………………………55 Current Expenses………………………………………………………………...58 Future Expenses………………………………………………………………….58 Competition………………………………………………………………………………58 Success Stories…………………………………………………………………...59 Competitors………………………………………………………………………59 Management and Operations…………………………………………………………….62
2 Nate Finley………………………………………………………………………62 Operations………………………………………………………………………..63 Milestones and Financial Projections……………………………………………………65 Concluding Remarks…………………………………………………………………….68 References………………………………………………………………………………..69 Appendices……………………………………………………………………………….72 Discussion………………………………………………………………………………..79 Creating the Business Plan……………………………………………………….79 Managing Creative Talent………………………………………………………..80 Maintaining Consumer Interest…………………………………………………..81 Entrepreneurial Perspective……………………………………………………...82 Summary…………………………………………………………………………………82 Contributions…………………………………………………………………………….83 Implications………………………………………………………………………………84 Limitations……………………………………………………………………………….86 Acknowledgements………………………………………………………………………87 References……………………………………………………………………………...... 88
3 Introduction
For a long time, music has been at the core of my goals. My passion for music has led me to pursue many different interests and opportunities. One of those opportunities was a study abroad to London organized by the College of Fine Arts.
There, my mentor Professor André Gribou challenged me to research in depth the music industry and to grasp how the economies surrounding music function. After years of being a music fan and a business student, it was not until this instance that I discovered music publishing even existed.
What a music publisher does is explained later in this paper, but what is important is the field grabbed my attention. The music publishing industry is convoluted, legally ambiguous, and constantly changing. In a field known for creativity, the publishing side is a frustratingly complex web of analytics and administration. I enjoyed it.
Athena Publishing (AP) started when I was working under Professor Josh
Antonuccio in the College of Media Arts and Sciences. I presented the idea for starting my own music publishing company, and he guided me on how it could be done. The end result of my study was a much better understanding of specific functions and organizations in the industry, the beginning of a business plan, and the ambition to carry it forward.
I was directed to my thesis advisor, Paul Mass of the Center for Entrepreneurship.
Under his mentorship, I was able to bring AP to life. I secured a $1,000 grant from the
Bobcat Seed Fund to set the foundation for AP. This paper is the product of all my work under these mentors. Moreover, it is a guide for directing AP’s future growth.
4 Literature Review
Identifying the Need for Review
There is a need to understand the role intellectual property plays in the digital era in order to identify best practices for adapting to a disrupted creative industry. The digital revolution has disrupted the way songwriter’s intellectual property is managed, monitored, and accessed by licensees and music consumers. It remains uncertain how copyright owners can best ensure their intellectual property (IP) is being fully monitored and protected on digital platforms. Additionally, it is disputed what types of systems best serve IP owners.? How can IP owners take advantage of new technology to better monitor and market their controlled works? How can IP owners best manage their controlled works to prepare for future disruption? Insights to answer these questions can be gathered from analyzing literature on IP markets at large, because the new wave of technology has forced creative IP industries to restructure so significantly.The questions to be elaborated on for this review is as follows:
i. What are the current themes in relevant literature pertaining to commercialization of creative intellectual property?
ii. Reiteration: What are the key success factors for commercializing creative intellectual property?
Planning and Review Protocols
The resource used in gathering documents for this review was the primary available database from Ohio University’s Alden Library for business research, Business
Source Complete. This was ideal for aggregating academic works which will be limited to peer reviewed research from academic journals. The documents were also limited to
5 those written in English, so that the information is relevant to where AP is to be based and could be best reviewed given my own known language. An abundance of information was from these documents, so there was enough evidence to support the themes identified across all citations.
The level of searches was set to only search for the words included in the search string and only search within the title and subject line of the document. By being strict in this way the results were narrowed to the most relevant articles.
Documents were limited to those published after 2010. This narrowed the search to information released into the maturity of the digital era. In technology terms, this places applicable research several years after the releases of such products like iTunes, smartphones, and music streaming to ensure the documents uncovered accounted for those innovations in their themes and predictions. For this industry, looking too far back means not being able to see the future. However, it was advantageous to make exceptions to this limit, especially and exclusively for documents pertaining to a firm or professional reacting to a disruption in the intellectual property market. In other words, any work that shed light on the methodology of how intellectual property owners prepare for or react to dramatic change.
A variety of keywords were tested to develop search strings for aggregating documents. The four roots the keywords were based from were pulled from the review outline: Intellectual Property, Creative, Commercialize, Disruption. These four keywords were then expanded by 40 alternatives, ten per root. With the keywords, a list of 10 optimal search strings targeting no more than 50 results each was established. They are outlined in the following table:
6
From these 225 results, 17 articles were removed after manually applying exclusion criteria in a review of each article’s abstract. Then, a relevancy grade of 0-9, with 0 being the least relevant and 9 being the most relevant, was applied to each of the remaining 208 results, deeming articles with scores 7-9 applicable to review. The final pool of applicable articles to review totaled 64. A table reiterating the inclusion/exclusion criteria is below, followed by a table outlining the relevancy grading criteria:
7
Synthesis and Review
In synthesizing the notes from the relevant literature explained previously, I have identified conversations within creative intellectual property (IP) industries worth considering for the development of any creative IP firm. Most notable was infringement in the digital era and new strategies for managing IP. By putting into discussion the perspectives of recent literature on these subjects, I seek to in this review answer how creative IP can be best commercialized in the disruptive digital era.
8 First, there is much debate as to how IP protections should be enforced when the internet makes piracy easier than ever before. This has been the longest debate within this industry and has proven the most difficult. A variety of potential solutions have been tested. By exploring the successes and failures of each, I seek to reveal what role private firms and individuals may be able to take in protecting their own copyrights. Piracy remains a persistent issue in copyright markets, so understanding how some have effectively limited its impact may offer overarching lessons to thriving in disrupted marketplaces.
My second focus is on the role of IP firms in a world driven by digital technology. Copyright industries were significantly disrupted by the digital revolution and have been slow to adapt. While new legal structures have been set to appeal to the changes, the market itself must transform to fit the new ecosystem. This means the services offered by firms in IP industries must change to better represent what creates value for clients. Also, new strategies are needed for marketing IP to the expanded opportunities now available in media. There is value in narrowing down what functions
IP industries should be serving today and what channels produce the best outcomes.
As the last pillar of this review, I want to shift away from the management of strictly IP itself. Rather, a firm’s innovation is dependent on its talent pool and the systems by which these individuals and their works are managed. The exploration here focuses on those systems, and how they can be crafted to motivate the greatest potential innovation out of a firm’s talent. In other words, I look to uncover how managers can foster creativity. These determinants can benefit most organizations, but are especially important for IP industries whose primary assets are either copyrights or patents. There
9 are varying theories to how managers can best create an environment for innovation. In addition, there are numerous theories on how the way firms manage their intellectual property impacts that environment.
Next, I analyze and review the literature in their relation to the above topics in detail. In assessing the consistencies, contradictions, and unique perspectives of academic journals on best practices in commercializing creative IP, insights reveal themselves.
Digital Infringement
Rapid innovation in technology has brought new mediums and new opportunities to IP firms, helping to expand global markets and drive success. However, the speed at which these innovations diffuse cause disruptions that can be difficult to correct after the technology is adopted. One such disruption IP markets have incurred with current technology is a rise in infringement. Digital platforms provide easy access to use protected IP without the necessary licensing or purchase. Widespread infringement has put a burden on IP industries and those who control IP.
Blind Infringement
Research into IP infringement has revealed many cases of infringement occur without any malicious intent. In fact, research by Luo and Mortimer (2016) states,
“evidence on infringement of digital images suggests that uninformed infringement is an important feature of this and similar markets” (Luo & Mortimer, 2016). The term
“uninformed infringement” refers to cases where protected IP is used without proper licensing because the user is ignorant a license is required. This occurs often with media such as photographs and music. A large portion of revenue lost to infringement comes
10 from uninformed consumers whose point of access to IP lacks the channels to license properly for protected uses.
One problem is the proper channels are not in the eye of many consumers. While protections are legally in place, enforcing infringement after the fact is a daunting challenge. Berkley Center for Law and Technology’s Dr. Menell (2016) published,
“such a system must come to grips with the reality that a growing segment of the population does not view copyright markets as the only means to access creative works”
(Menell, 2016). To better ensure IP licenses are purchased for protected uses, IP controllers need systems in place where their IP is accessed by such consumers. Digital technology has moved the attention of those who must license IP to new mediums, so IP markets must move with them.
DRM Systems
When IP piracy first began to rise on digital platforms, many firms implemented digital rights management (DRM) systems. These systems forced consumers to input product codes or account information to access protected content they had purchased. Unfortunately, the complexity and inconvenience of DRM is unattractive to most consumers.
In the journal Management Science, Dr. Zhang (2016) explains, “DRM technologies allow publishers and copyright holders to exert control over how consumers use digital content by making it difficult, if not impossible, to reproduce and distribute copies” (Zhang, 2016). Protected content accessed through DRM is safe from redistribution. The problem lies in the consumer experience of DRM systems. The
George Washington Law Review (2014) writes, “One DRM method, installation limits,
11 can cause great inconvenience to users. This type of DRM seeks to prevent copying by limiting the number of times that any particular copy can be installed on a computer”
(Shroeder, 2014). This method, while preventing redistribution, causes undue burden on any single consumer attempting to access their purchased content on multiple devices. In an age of technology where owning multiple devices is the norm, one can see how this would be a frustrating experience.
Due tothe burdens placed on consumers by DRM, many firms chose to dump their security tools. “In 2012, the publishing company Tor Books removed digital rights management protection from all of its eBooks in response to frustration from customers and concern by authors” (Shroeder, 2014). Frustration with the outcomes of implementing DRM was shared across industries and firms of varying scale. Another example includes, “EMI’s decision to remove DRM” (Zhang, 2016). EMI’s removal of
DRM did come with the consequence, “...that any music purchased online that is owned by EMI can be copied and shared among friends and is playable across different devices”
(Zhang, 2016). The removal of DRM placed many firms’ content back in a vulnerable position, but returning to square one actually benefited most companies.
“I find that the removal of DRM increases digital sales. More importantly, the effect is most pronounced for albums at the long tail of the music sales distribution, providing support for the long-tail hypothesis that lowering search costs can facilitate product discovery of non- mainstream fare” (Zhang, 2016). The systems used to protect these firms' content hurt their overall sales, because the burden on consumers to access purchases became greater than that of piracy methods. In the case of music DRM, the
12 burden on consumers was so great that less popular products found a competitive advantage when protections were not in place.
It was found that putting such blockades over digital content caused more harm than good and, if firms wanted to protect their IP, they would need to administer a solution that better fit consumer behavior. A study by Dr. Sinha (2010) found, “The results indicate that DRM is not a control mechanism that is independent of consumer preferences but rather an important product attribute that consumers include in their evaluation of online music products” (Sinha, 2010). Digital rights management systems were designed to protect IP from unauthorized access and redistribution. While it succeeded in that goal, DRM created such an unattractive consumer experience in copyright markets that firms were better off leaving their content vulnerable to recover lost sales.
Better Methods
Copyright industries have already been successful in creating market solutions that are more effective than DRM and reduce infringement. One example of these successes is the cover license for musical recordings. When musical artists wish to record a performance of a song written by someone else for commercial distribution, all they require is a cover license. “The cover license has succeeded because of its standardized features and low barrier to entry. It provides those interested in covering a previously released musical composition with a preset pricing mechanism that does not require any initial outlay” (Menell, 2016). As stated by The Berkeley Center for Law and
Technology, the advantages of the cover license platform, known as Songfile, is that the platform has an easy to access database and predetermined licensing rates. Users simply
13 create an account, search for the song they wish to cover, and purchase the license. By developing a system with ease of access and quick turnover Songfile has helped normalize licensing for cover music.
Another proven method is a form of blanket license for allowing limited use of the owner’s wide catalogue of IP assets to subscribing members. This model is popular for publishers of research, and it is often referred to as a database license. The
International Journal of Business & Society published an article by Dr. Manap (2012) stating, “A database license agreement grants licensees a limited license to access the information contained in the database” (Manap, 2012). Blanket licensing models are used in a variety of other IP industries to allow access to materials like photographs, music, and schematics. They are attractive for their transparent and predictable pricing model and efficient search tools. A service that can save users time and money has a great opportunity to generate abounding customers and deter infringement.
The infringement problem in creative IP markets will likely never go away; however, it can be addressed by shifting towards consumer-based strategies. Markets of consumers that unknowingly infringe upon IP, and those who do so intentionally, can both be recaptured when the proper points of access offer more value than the improper. Consumers are not willing to pay for burdensome systems like DRM. To better commercialize creative IP online, firms must prioritize the consumer experience.
IP Strategies
To determine any firm’s optimal strategy for reducing cases of infringement and managing IP for the future, it must first be determined what model best represents the role of IP to the firm. Intellectual property means different things to different types of
14 firms, even within the creative sector. How to best commercialize a firm’s IP depends on that perspective.
Todd and Erickson (2014) define, “four models of IP: legal, entrepreneurial, accounting, and communitarian. These four models were developed through interviews with key television executives at five UK television production companies, as well as two major broadcasters between 2012 and 2013” (Todd & Erickson, 2014). The first model, entrepreneurial, is concerned with how IP is used, what leverage it offers the company, and how it impacts demand for the end product or service. The accounting model views
IP as an asset. This asset creates added value through the data obtained through consumer interaction. The legal model is concerned with the protection of the firm’s IP, and how the monopoly it creates can be monetized through non-exclusive licensing. Finally, the communitarian model sees IP as a public good that should be accessible to all, encouraging adaptation and improvement on public platforms. Understanding the IP model that fits a firm’s mission helps guide how a firm can best exploit the IP they control. For example, a firm controlling a machine design patent is likely to benefit most from a legal approach to prioritize monitoring their patent for infringement and to identify the best manufacturers in which to grant licenses. On the other hand, a software startup might benefit greater from a community model that lets their audience tinker with the software so it can improve and be adopted more quickly.
Entrepreneurial
As the behavior of consumers evolves in IP markets, firms, especially new or small companies, must take on new strategies for development that fit the new means by which IP is discovered and licensed or purchased. The journal Research Policy (2015)
15 suggests new IP companies may need to, “initially pursue a non-ideal strategy – but only on a temporary basis – in order to eventually enable their ideal strategy” (Marx & Hsu,
2015). This reflects managing IP under the entrepreneurial model. One successful strategy that represents this idea is windowing. Research by Schroff (2019) explains, “In
[windowing], a creative work reaches the market in different versions aimed at distinct sectors of the customer base” (Schroff, 2019). Windowing is well suited for IP that is adaptable to multiple mediums like characters. In the Japanese manga industry, publishers distribute a wide variety of written works; the most successful written works are produced into television series, and the most successful series into movies and merchandise. A publisher controls the IP of many authors and profits from the adaptations of its most successful content. Windowing often requires publishers begin by distributing works for a loss, but the potential for works that create an audience offers an ideal business model.
Accounting
Another long-term strategy under the accounting model IP firms should consider is corporate social responsibility (CSR). Even IP firms must consider their impact on the communities they serve, and studies have shown such activities do not go unnoticed by consumers. Taking advantage of CSR opportunities can influence how consumers evaluate the value of a firm’s IP assets. Annals of Operations Research (2017) published,
“Empirical results of CSR and non-CSR companies’ efficiency performance show that companies with CSR activities outperform companies with no CSR activities. CSR investment in the creative industry allows firms to yield higher financial performance”
(Hou, 2017). Community engagement and charitable actions help draw people to
16 consumer markets of IP. Upstream IP firms can benefit from encouraging or collaborating with their downstream partners to engage in CSR, especially if royalty heavy license agreements are in place. It is important to understand the limits of CSR’s impacts. Research by Fosfuri (2014) suggests, “that products introduced in a month in which the company also sponsored social events, remained in its product portfolio for longer. However, this positive association between Kiehl’s sponsorship of social causes and product longevity fades as the price of new products increases” (Fosfuri, 2014). Data like this can help guide IP firms to CSR actions that offer predictable mutual benefit to the firm and the community.
Legal
New strategies and technologies in IP are also changing the way many companies look at their agreements with talented personnel. These strategies hold the legal model. As mentioned previously, accreditation is shown to have a positive impact on the satisfaction personnel receive from working creatively towards a firm benefit. This new view has shed light on the negative long-term effects work for hire (WFH) agreements can have on a company’s success. Research by Erickson (2018) supports, “WFH arrangements may be attractive to small firms because they represent a more stable source of revenue and can establish a firm’s reputation. While this may bring in revenue in the short term, it may fail to provide creative incentives for workers and can inhibit long-term sustainability” (Erickson, 2018). To reiterate Business Horizon’s analysis, while work for hire agreements provide more control of IP and predictable costs in the hands of the firm, they fail to encourage creative solutions for long-term success. When
17 the backbone of a firm is the value of their IP, it should remain a priority to encourage more innovative work and thus higher value IP.
As for technology's impact on agreement practices, IP managers must account for the fact that digitization has led to globalization and that some IP can expand geographical markets at unpredictable times. Creative Industries Journal (2013) published work by Cantatore stating, “It is evident that most publishers have already come to the realization that they need to acquire worldwide digital rights” (Cantatore,
2013). Preparing agreements for worldwide licensing may be a given, but tracking and monitoring IP across the globe is complex and will require new systems to execute effectively. Research by Savelyeu (2017) argues, “that blockchain can introduce long- awaited transparency in matters of copyright ownership chain; substantially mitigate risks of online piracy by enabling control over digital copy and creating a civilized market for
‘used’ digital content” (Savelyeu, 2017). Blockchain technology has the potential for creating the most accurate record of IP usage to date. This “travel log” of metadata files could be used to track every use and reuse of a copyrighted work. While no successful system of such nature has been implemented yet, the hope is that in the near future blockchain can be used to combat global infringement and more accurately monitor the compulsory use of copyright.
Communitarian
Those who take a communitarian approach to IP argue for more industries to distribute open-source content, or IP that belongs to the public. There are several advantages to exploiting open-source markets, the first of which is input and word-of- mouth marketing from a community. Firms who take their projects to open source, “are
18 uniquely able to generate and capture value from openness by investing in relationships with communities that improve and circulate their products” (Erickson, 2018). For small software companies getting user feedback and distribution from the most niche educated audiences can be a real difference maker in product development. The other advantage to consider in an open-source strategy is, t “Instead of going to battle against gangs of pirates, they are taking advantage of new consumer habits by developing an innovative approach that allows them to profit from the non-rivalry of digital music. By making free content a core component of their business models” (Gateau, 2014). This experience recorded in the International Journal of Arts Management (2014) is about an independent music group that releases their music free online as a loss leader. Putting their music out for free helped them more quickly attract an audience. They then made a profit by selling merchandise and performing at venues. Open-source strategies tend to perform best in niche markets. The risk involved in relinquishing control of IP or distributing at no cost is apparent, but it is advantageous when attempting to execute speedy diffusion into select audiences.
Considering a firm’s IP model is a great tool for determining its optimal strategies towards better commercialization. Each perspective, entrepreneurial, accounting, legal, and communitarian, all suit particular IP industries and business models. For creative IP, any one of these models, or a combination of them, may suit a firm's goals. Although, no
IP firm can isolate their strategy to the management of their IP alone. The talent pool they manage to create IP is equally as important to their end commercialization.
19 Managing Talent
It is the task of those who manage such creatives and innovators as artists, writers, chemists, engineers, etc., to enable their talent pools to reach their full potential. To accomplish this goal, IP managers in both copyright and patent industries implement strategies for motivating their talent pools to produce great works. Taking lessons from research conducted on both types of IP firms provides enlightenment for how creative IP managers can improve their commercialization upstream.
Accreditation
Research by Yanisky-Ravid (2013) suggests, “Lacking substantial incentives, employees will not innovate, create, or develop IP products beyond the minimum required to safeguard their salaries” (Yanisky-Ravid, 2013). It should be a priority for managers to encourage their innovators’ creative process, because those innovations are the assets that provide these firms value. In terms of motivating and incentivizing innovators, much of the recent literature provides input regarding how to improve the work of designers, engineers, and other professions who create patentable works. The input provides ways all intellectual property managers can direct their innovators’ incentives and their own priorities.
A study by the Cornell HR Review investigated the truths behind what makes creatively driven patent firms competitive. What they found contradicts common practices amongst intellectual property managers and creative companies. At the core of every creative firm is their human capital, and those who have properly managed their creative personnel have seen their companies find tremendous success. “...creative employees need incentive to innovate in a manner that adds value to the organization.
20 The usual employee waiver of all rights without significant consideration seems to undermine the most important factor of the creative process” (Yanisky-Ravid,
2013). This quote from the review first highlights the previously mentioned point that a form of incentives must be provided by the managing body for competitive innovation to manifest. It also acknowledges the conflict of interest between intellectual property firms’ tendency to claim the intellectual property rights of their employees’ work and a desire to innovate competitively. Rather than implement greater financial incentives to innovators, the literature suggests that personal accreditation and accolades offer creative personnel greater motivation.
While firms often consider claiming intellectual property rights as vital to financial returns, that motion is seldom true. “Conferring all IP rights to employers does not necessarily incentivize firms to further intellectual property innovation. In fact, studies reveal that alternate commercial practices, such as being the first to introduce a unique product into the market, play a greater role than the patent system in influencing corporate decisions on investments in research and development within the IP field”
(Yanisky-Ravid, 2013). Claiming intellectual property rights is less significant to success than other priorities, like the quality and diffusion of the innovation. The Cornell HR
Review comes to the conclusion, “The employer’s attribution of inventions and patents to their actual inventors is important with relatively low cost to employers, as the employer must neither waive IP rights nor invest funding to maintain the right. Therefore, I recommend ensuring attribution rights to employed inventors” (Yanisky-Ravid,
2013). By attributing all or greater intellectual property rights to the innovator, managers can better incentivize their personnel while simultaneously helping themselves be
21 competitive. Offering this token of accreditation and ownership acts as the firm investing back into itself.
Additionally, managers can supplement innovator accreditation by seeking and recording awards in their field. Research by Brooks and Meredith (2010) supports,
“Awards of any type, including the awards sponsor and title and whether the asset ‘won’ or was nominated. This is useful not just for programming and marketing purposes, but also in the cases where the winning of awards triggers bonus payments for contributors”
(Brooks & Meredith, 2010). Awards are a data field recommended for licensing enterprise systems by the Journal of Digital Asset Management. It also suggests offering financial bonuses for innovation awards if possible to a given firm. Regardless, awards can further improve the satisfaction and motivation for innovators’ work and, as stated, any investment into incentivizing an innovator’s creative process benefits the entity they innovate for. Those who study patent industries consider the innovators at such firms to be creatively minded, which is why these ideas can be applicable outside of patent industries to those in copyright. The literature on copyright industries, often referred to as cultural industries or creative industries, also brings insight to how management structures can be better implemented to foster creativity.
Internal Goals
Literature reviewing the incentives of creative personnel in creative industries delivers a consistent theme of the prevalence of internal motivations for creation. It is first described here within research by Castaldi (2018) as, “...’art for art’s sake’: this relates to the idea that creators tend to have strong intrinsic motivations. Not only are creators often willing to be remunerated less than the efficiency level, their artistic goals
22 also often clash with the commercial attitudes of distributors and funders” (Castaldi,
2018). This analysis also includes the idea that internal motivations subsidize compensation, ascreatives value the opportunity to create more than the financial compensation for their work. Moreover, the internal motivation for an expressive product can conflict with the goals of an employer firm. So, while a managing entity may benefit from a discounted expense, they may lose in the misalignment between the creator’s process and their project expectations. These points are repeated in The
European Journal of Social Sciences (2012) as, “[creators] have shifted to the different ground of underlining the trade-offs made between making money through commercial activities and making little or none through the pursuit of creative and esthetic goals”
(Schlesinger & Waelde, 2012). If internal motivators guide creators more than financial gains, those managing creators may benefit from aligning commercial goals with the process of their creators to capture the full potential of their creative output.
The literature offers more insight into creators’ motivations to help guide such an alignment. “We certainly do not have to exclude self-interest from the mix of motivations that sustains such exchanges, but friendship and the identification with a project and people are likely to be much more important” (Schlesinger & Waelde,
2012). This supports evidence from patent industry literature that creatives value accreditation and ownership of the product they create. It also suggests managers can improve the satisfaction of their creative personnel by encouraging collaboration. While the types of incentives that best suit creatives stem from expressive internal goals, managers can improve the outputs of commercial projects by understanding those goals and implementing project plans and processes that consider them.
23 Aligning creative and commercial goals can be a difficult task, making communication a key factor. A recent study into how copyright structures affect creative communities provides a lesson into what to consider for those talks. Research by Menell
(2016) suggests, “Legal uncertainty has important ramifications for the development of the music mashup genre as well as for the larger creative and copyright ecosystems”
(Menell, 2016). “Legal uncertainty” refers to how creatives seldom understand the nuances of copyright law and copyright industries. By communicating those conditions to creatives, managers can open discussions for resolving conflicts between their commercial goals, intellectual property regulation and administration, and the creative processes of those they are working with.
Creative Process
Both patent and copyright industry literature present sound lessons for best practices in cultivating innovation and creativity. Both sectors indicate creative personnel are motivated more by the accreditation and ownership of a project than past management philosophies accounted for. While ample compensation remains important, managers can influence their teams by implementing systems that support their intrinsic goals. Patent and copyright literature differ in whether such systems should be implemented in terms of the output creation or the creative process. By digging deeper into the psychology behind intellectual property, I interpret where managers’ priorities should lie.
The Northwestern University Law Review released an article that analyses the dilemma described above. It introduces the perspective of utilitarianism, an idea that considers outcomes as the sole determinant for success. Research by Fromer (2010)
24 states, “Utilitarianism is concerned with giving people incentives to make creative products and thus rewarding people for navigating and completing the creative process”
(Fromer, 2010). The utilitarian perspective aligns with the patent industry literature in that incentives should apply to the outcomes of creative work. Incentives such as accreditation and exploitable rights for the production of valuable works. The article states this ideology can be applied both to patents and copyrights, but offers another perspective more attune to copyright: “By contrast, for artistic creativity, the focus is on the discovery of the problem rather than its solution. This emphasis fits with copyright's concept of originality, which requires only that the author has personally found a problem, which was then fixed as a work of art” (Fromer, 2010). This perspective argues patents are based on solving problems while copyrights are based on identifying and expressing problems. This explains the discrepancy in priorities for each sector. Taking this into account, it can be determined the differences between the ideas in patent and copyright industry literature come with sound reasons.
A utilitarian approach, to incentivize innovation based on outcomes and rewarding solutions, better suits the patent industry. Likewise, supporting the creative process and the identification of problems better suits the copyright industry. For copyright managers looking to take advantage of this idea, the same article presents insights for understanding the creative process. The article explains, “Psychological scholarship indicates that there are four stages to the creative process: preparation, incubation, illumination, and verification” (Fromer, 2010). Preparation has to do with aggregating obstacles and information. This is the discovery phase where problems are first identified, and relevant knowledge is collected. Second, Incubation consists of
25 processing information and making associations. It is performed while the creator is idle, in that the information must sit and develop internally until the next stage occurs. That stage, illumination, is the eureka moment where a solution breaks through or a critical idea is formed. Finally, verification tests and refines the illumination and is most benefited by field expertise. In creating a supportive environment for creative personnel, managers can help drive this process by providing access to knowledge sources to assist in the preparation stage. They can also allow time for incubation, letting creatives sit on problems and information before returning to actively working so they can achieve illumination. In some way or another, supporting the first two stages of the creative process is an ideal method for copyright managers to get the greatest potential out of their creative personnel. Efforts can also be taken to ensure accreditation to creators for the outcomes of their labor.
These methods outline how IP firms can better motivate their talent pool, leading to higher quality creative work or improved innovation. The value of an IP firm is dependent on the value of its IP, so investing in that quality can help better commercialize the firm’s product or service downstream.
Literature Summary
Through reviewing and synthesizing the relevant literature on IP management, multiple lessons for moving forward can be determined. Encouraging a talent pool to create valuable works takes an understanding of individuals’ intrinsic goals, often correlated with the sector in which they innovate for. Dealing with complex disruption, like digital piracy, requires consideration of what the solutions will look like to the consumer. A potential solution can end up creating a new problem downstream, if
26 consumer expectations are not accounted for. Additionally, building a successful long- term strategy for IP means identifying the role IP plays to the firm. From there, it becomes clearer what type of market a firm should enter and what to expect from their consumers. The creative IP market has become disrupted due to infringement and changing strategies brought by the digital revolution. These factors cannot be ignored when developing a new business strategy or repositioning an existing one. Best commercial practices at either end of the creative IP supply change have greatly changed in the last decade, and those who change with them will be better positioned to succeed.
Methodology
Based on the insights provided by the literature review, it becomes feasible to plan and execute an IP focused business. The knowledge gained from this exercise provides an advantage in understanding how to be successful managing IP. That understanding can be applied to a business strategy to chart a successful company. In creating a document to outline an IP business strategy, there are several methods that can be utilized. The three most accredited approaches to planning a business are the traditional business plan, the business model canvas, and the lean start-up. The method chosen should reflect how its advantages align with the necessities of entrepreneurship in the IP industries. Specifically, it matters how well the method will propel the company
Athena Publishing (AP), a music publishing firm. Music publishing is concerned with creative copyrights, so the planning method that best suits creative copyrights will be the best choice for documenting AP’s strategy. The method must also fit the current development stage of AP. As of now, AP is launched with a few clients, minimal
27 infrastructure, and a single operating member. The best planning method for AP will be the one that can best guide its future growth.
In order to compare and contrast the aforementioned business planning methods, each method will be summarized and have its advantages and disadvantages analyzed, individually. Afterwards, those advantages and disadvantages will be put into discussion together in how they align with the goals of AP and the industry for creative copyrights. The methods will be analyzed in the same order they were listed prior, the traditional business plan first, then the business model canvas, and finally the lean start- up.
The Traditional Business Plan
Traditional business plans are labeled as such because they are the oldest method of the three. Harvard Business School Press (2007) describes a traditional business plan as, “A roadmap for meeting the expected and unexpected opportunities and obstacles the future holds and to navigate successfully through the business’ unique competitive environment” (HBSP, 2007). Business plans are created with a defined purpose more specific than simply documenting a business idea. The purpose can be raising capital for a start-up, creating a new strategy for an existing business, or proposing a spinoff subsidiary of a large corporation. In AP’s case, besides detailing its overall strategy and goals, the business will need a document to help raise capital for growth. Business plans vary extensively based on their purpose. Some plans, known as executive summary plans, are as short as two to three pages, whereas more detailed plans can exceed 100 pages. Length can often depend on complexity. Creative copyrights exist in a market more complex than most, so explaining these nuances to potential investors will likely
28 take more than what is provided in a brief plan. Purpose and industry also influence the types of sections present in a traditional business plan. Such sections may include an executive summary, business description, industry analysis, competitive analysis, marketing plan, operations plan, management summary, financial projections, or many other variations of these ideas. A business plan for raising capital focuses on how the business will be competitive and the business’ financial potential.
Advantages
There are two main advantages to using a traditional business plan. First, a detailed plan improves new businesses’ chances of success. A study conducted by Maali
Ashmalla in the Journal of Small Business and Entrepreneurship found, “...that 80% of the successful [clothing] stores had written a business plan whereas 65% of the failed stores had not” (Ashmalla, 2008). While clothing retail is very different from music publishing, the significant gap in success rates between stores with a business plan and stores without a business plan proves the value of having a detailed roadmap. Second, business plans are influential to investors. In a survey of investors, “70% perceived a written business plan to be very important and over 28% perceived it to be somewhat important. Only less than 2% said a business plan is not important” (Ashmalla,
2008). Raising capital means making an impression on investors, so the fact so many value this form of document is an important factor in deciding on a method. Below is a graph made to visualize proportionally how significant business plans are to investors based on this research.
29 Importance of Business Plans
How Important Investors Consider Business Plans 2%
28%
70%
Very Important Somewhat Important Not Important
(Ashmalla, 2008)
Ashmalla’s study also explains, “It gives [investors] the opportunity to understand and appreciate the mindset of the management team and the way they perceive their venture. Therefore, it is the process of strategic planning, not the plan itself, that probably matters. (Ashmalla, 2008). Traditional business plans can prove the management team is adept in the knowledge and skills needed to carry out their goals. This is something that may be difficult to do with other methods.
Disadvantages
Traditional business plans do have several disadvantages. There are limitations to the data in the above paragraph as it is relatively dated. As information on the proceeding methods will show, lengthy business plans may not be as attractive to investors as they were over a decade ago. Traditional business plans take time to analyze, time some investors may not be as keen on spending on small start- ups. Traditional Business plans also take time to construct. They require thorough research and time to write that may not be necessary for a business’ goals.
30 The Business Model Canvas
The business model canvas is an entrepreneurial tool created by Alexander
Osterwalder. It was first put into mass distribution in his book Business Model
Generation (2010). The business model canvas is designed to make uniform the way people look at business models by breaking down a business into nine components: customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, and cost structure. These nine components are most often visualized on a single page. Business model canvases are prescribed when managers are engaged in ideation, summarization, or the comparison of businesses.
Advantages
The business model canvas is most advantageous for the previously listed functions. In creating an idea, it allows for teams to organize their core business elements and make everything visible at once. This enables entrepreneurs’ ability to swap and edit ideas until their business model is synergized, simplifying the act of developing a strategy into core competencies and business activities. Research into the business model canvas by Luisa Carvalho (2020) explains, “The plasticity, flexibility, and intelligibility of [the business model canvas], even for entrepreneurs without academic knowledge in management, justify its popularity compared with [traditional business plans]” (Carvalho, 2020). The simplicity of the business model canvas also makes it ideal for summarizing an existing business. Laying out the nine components of a business this way can help to identify its overall strategy and possible areas for change. This method is visually focused, putting as much vital information as possible
31 on one page. This focused approach is why the business model canvas makes it so easy to evaluate a business model or multiple business models. The method is designed to be a universal approach to portraying a business. This means one canvas can be placed up against another for easy comparison. The utility has been proven as Osterwalder writes in his book, “This concept has been applied and tested around the world and is already used in organizations such as IBM, Ericsson, Deloitte, the Public Works and Government
Services of Canada, and many more” (Osterwalder, 2010).
Disadvantages
There are limitations to planning a business using the business model canvas. As previously explained, this tool is exceptional for forming a business model idea, summarizing, and evaluating a business model, or comparing two or more business models. However, it excludes business details and complexities and only acts as a snapshot of the business strategy. The business model canvas is exclusive to showing the business model which limits its application. Business model canvases are also unlikely to include quantitative information, like trend statistics or financials. Information which is critical to attracting investors.
The Lean Start-up
The last method for planning a business is the lean start-up. The lean start-up approach to entrepreneurship is documented in The Lean Startup (2011) by Eric
Ries. Ries outlines the five principles of a lean start-up. The first, “entrepreneurs are everywhere,” explains how the method is applicable to any entrepreneur or firm regardless of business knowledge, business scale, or type of institution. “Entrepreneurship is management” defines an entrepreneur as a type of
32 manager that deals with extreme uncertainty as it pertains to a product or service. Next,
“validated learning” refers to the way entrepreneurship is a learning experience that requires every element of a vision to be tested. Fourth, “build-measure-learn” is at the core of the lean start-up approach. Ries describes it as, “The fundamental activity of a start-up is to turn ideas into products, measure how customers respond, and then learn whether to pivot or persevere” (Ries, 2011). Finally, “innovative accounting” is to place measurable checks on progress, innovation, and priorities. These five elements are meant to help entrepreneurs create processes for testing, adjusting, and executing a vision until it is successful.
Advantages
There are a couple key advantages to the lean start-up method. Research by
Michael Leatherbee and Riitta Katila (2020) states, “early-stage teams, especially under high levels of environmental uncertainty and in technology-based industries, are unlikely to decide on an optimal business idea from the very beginning of their ventures”
(Leatherbee & Katila, 2020). In technology industries especially, first prototypes are seldom perfect products. The lean start-up offers an approach to refining a product or service that is systematic and proven effective. Without a system like this, entrepreneurs can quickly become disorganized and can lose sight of their vision entirely, instead of steadily improving it. For established firms, the lean start-up method can be used to transition strategic goals or enter new markets. In a study by Seonho Hwang and
Juneseuk Shin (2019) it was found, “Samsung’s experience shows that Lean Startup can provide an effective foundation from which large firms can tackle the challenge of transformation” (Hwang & Shin, 2019). The study demonstrated the lean start-up
33 method’s success in expanding Samsung, a large international corporation. This proved t the approach is applicable to businesses of any scale.
Disadvantages
The lean start-up does have disadvantages. Entrepreneurs must consider what might happen if their continued product refinement leads nowhere. Leatherbee and
Katila (2020) write, “that endless formulation of new hypotheses may tire out entrepreneurs and prevent scaling… highlighting the dangers of hypothesis proliferation as an end in itself” (Leatherbee & Katila, 2020). Whether or not a start-up will ever see success is another uncertainty entrepreneurs must manage. The lean-start-up also provides better applicability to product industries than service industries. AP provides a service, which makes a lean start-up approach less effective for steering it towards success.
Comparison and Chosen Method
Each of these three methods show strengths, but for AP, there is one with advantages best suited for its industry and position. In the case of the business model canvas, this method is attractive for ideation, summarization, and comparison. That as it may, the lack of detail would hinder AP’s ability to communicate industry complexities to investors. Also, at its current stage, AP needs a set of milestones to grow, which the business model canvas does not offer. For the lean start-up, it is unfit for AP’s industry. As a service industry, there is no tangible product or technology from which to receive consumer feedback. AP will likely learn from its experience with clients, but its refinement does not require as comprehensive a system as the lean start-up provides.
34 To compare the advantages of each method quantitatively, below is a table attributing a score each method, The scores are based on sub scores , including investor attractiveness, creative guidance, flexibility, efficiency, and level of detail. The scores range from 0-9, 0 indicating the poorest score and 9 indicating the best.
Methodology Scoring Table
Level Investor Creative of Total Attractiveness Guidance Flexibility Efficiency Detail Score Traditional Business Plan 9 5 5 2 9 30 Business Model Canvas 5 7 7 7 1 27 Lean Start-up 5 3 8 4 5 25
As shown by the comparison table, it can be determined the traditional business plan is the best planning method for AP’s development. While rigorous and time consuming to produce, it has the greatest quantifiable advantage. t also fits best to AP’s current needs. AP needs a future roadmap for growing and evolving its business. A traditional business plan is ideal for explaining the social complexities of the music publishing industry to investors, who may be unfamiliar with its structure. Lastly, working through the detailed nature of a business plan will help AP prove its feasibility. The act of strategic planning in such detail will verify AP’s potential for success to all stakeholders.
Proceeding this section is the final result of the applied research. A traditional business plan was created using the themes derived from the synthesis and review.
35 Business Plan
The following is the result of this study, a detailed business plan for Athena
Publishing LLC.
Executive Summary
Athena Publishing (AP) is a small independent music publisher dedicated to helping establish careers for new and undiscovered musical talent, connecting their work to opportunities in creative licensing. AP was founded by, and owned and managed exclusively by, Nate Finley (See “Management” below).
Vision
AP’s vision is to become a successful music publishing company, serving undiscovered musical talent who lack the time and expertise to monetize their intellectual property. At the same time, AP intends to become a trusted and reliable source of music for any audio-visual production. To date, AP has registered with BMI, HFA, and the
MLC. AP currently serves three musical acts, and it is actively networking with more writers, composers, music supervisors, and other potential clients and partners.
Opportunity
Music publishing in the United States is a $6.6 billion revenue industry with an
11.7% profit margin (IBISWorld, 2020). AP looks to enter the market by taking advantage of the large pool of underserved talent. There are many talented writers and composers capable of generating revenue that are not represented by any publishing service, because they have yet to be discovered and/or lack the resources to self-
36 publish. Advantages to entering this market now are the decreased barriers for entry caused by new developments in technology and increased licensing opportunities from an increase in media output and consumption. The market for creative licensing is expanding as the video streaming service industry grows 23.2% annually (IBISWorld,
2020). AP has the plan, expertise, industry contacts, and passion to find and to help underserved songwriters and composers monetize their work.
Target Market
AP seeks to represent artists early in their careers. These individuals are capable of producing high quality works independently, but lack the knowledge and/or resources to administer or market their work properly. Their creative style fits common trends in creative licensing like indie pop/rock, acoustic folk, orchestral, or ambient. They produce high volumes of work, and they can create music in a variety of emotional contexts. Targeting artists that fit this description allows for AP to best position its brand for growth and success. Further, AP looks to form creative licensing partnerships with key professionals, like music supervisors. These partnerships can also include TV producers, film makers, advertising agencies, and tech companies.
Services
The services AP provides are comparable to most music publishers in that it connects artists with income opportunities. AP will provide administrative and creative support for its artist clients. Administrative services include song registrations, royalty allocation, and performance logs. Creative services include selling creative licenses and facilitating collaborations. A more unique service AP provides to its creative licensing
37 partners is music to brief, or custom songwriting. Due to the target market of AP’s talent pool, AP will have the tools to fulfill song briefs for brands or producers that desire new original work for their project.
Growth Strategy
The most important areas of focus to ensure AP’s growth is to build its artist client roster and its network of creative licensing partners. In three years, AP intends to represent ten or more talented songwriters and composers and to form strong relationships with six or more creative licensing partners. To accomplish this, AP must be well informed within the music industry and communicate its value to potential clients to attract them to AP. In addition, AP must be present at music and entertainment industry conferences to best network with music supervisors and other creative licensees.
Revenue Model
AP generates revenue from the use of the works it controls or from the music its clients create. Whenever a client’s song is played on the radio, streamed on a mobile device, etc., it generates a royalty that is split between AP and the writer. These recurring revenues can be increasingly valuable as a work becomes more popular and finds its way into more forms of content and more platforms. Creative licenses, like a song placed in a film, generate a flat rate for the use of the work. This rate, once again, is split between AP and the writer. This revenue is short term revenue driven by AP’s ability to network and to sell the works it controls to licensees.
Management
38 AP is a sole member limited liability company organized in the State of Ohio and founded by Nate Finley. He is currently the only member of AP, and he manages all its operations. Nate is a Spring 2021 graduate of Ohio University’s Honors Tutorial College
Business Administration program, a select honors program that admits no more than ten students per year. Nate remains heavily involved in the music industry and niche music communities, through his involvement with the All Campus Radio Network (ACRN).
ACRN is a radio station and media organization completely run by Ohio University students. Nate served as promotions director during his junior year, and he was elected president and general manager of the station in April of 2020. He has participated in booking and organizing live concerts, in-studio performances, and digital music productions, as well as overseeing radio programming. He founded Athena Publishing
LLC in 2020, after being awarded a $1000 grant from the Ohio University Bobcat Seed
Fund. Nate is a member of the Guild of Music Supervisors, and he has participated in conferences such as the virtual 2020 and 2021 South by Southwest (SXSW) events. These credentials place Nate in an advantageous position to make the connections needed to succeed in this industry.
Financial Projections
The Financial Projections portion of AP’s business plan include a 36-month summary of estimated revenues and operating and capital expenses. These projections are based on the performances of like firms, federal set royalty rates, and the three-year goals of AP. It also includes other detailed financial documents that speak to AP’s status and potential. Below is an abbreviated version of the financial projections found later in this document.
39 Abbreviated Financial Projections
Year 1 Year 2 Year 3
Total Revenue $ 12,840 $ 65,040 $ 436,320
Total Operating Expenses $ 55,152 $ 156,252 $ 396,892
Operating Income $ (42,312) $ (91,212) $ 39,428
Total Capital Expenses $ 1,200 $ 2,400 $ 1,200
Net Income $ (43,512) $ (93,612) $ 38,228
Industry Overview
Music Publishing Defined
The music publishing industry is a service industry accompanied by various organizations that collect and allocate royalties generated by the use of musical compositions. Most people are not familiar with music publishing, or its role in the music industry. To understand the role music publishers play, it is important to first understand that every published song has two copyrights: one for the sound recording, and one for the musical composition. A music industry firm that most are familiar with is a record label. In recording performers and distributing their music, record labels manage the sound recording copyrights of the music they control. Publishers on the other hand, manage the musical composition copyrights for the music they control. This means collecting royalties for performances and reproductions, in addition to seeking out more licensing opportunities. Both types of firms represent artists, but where record labels
40 represent performing musicians, publishers represent songwriters and composers. Some artists are exclusively a performing musician or a songwriter, while others are both. Below is a table outlining the key differences between a music publisher and a record label.
In placing music into audio-visual productions, licensees require permission for the use of both the sound recording copyright, known as a master license, and the musical composition copyright, which is a synchronization license. More detail on the types of services AP provides and the revenues generated by the different types of royalties it collects can be found in the “Business Services” section.
Comparison Table: Music Publisher vs. Record Label
Music Publisher Record Label
Type of Copyright Musical Composition Sound Recording
Type of Artist Songwriter/Composer Performing/Recording Artist
Audio-visual License Synchronization License Master License
Key Terms
Copyright
Copyright grants exclusive legal rights to the originator or assignee of a creative work. The originator is the creator of the work, and an assignee is any person or entity
41 that the originator has legally designated a sole owner, partial owner, or controller of that work. There are six exclusive rights include:
1. The right to reproduction
2. The right to derivative creation
3. The right to distribution
4. The right to publicly perform
5. The right to publicly display
6. The right to digitally transmit
Musical compositions are protected under copyright. Copyright is established at the point of creation. For musical compositions, this is when the music is written down, digitally produced, or put into any tangible form where the melodies and/or lyrics are discernible. However, it is difficult to prove copyright ownership in court without formal registration with the U.S. Copyright Office (copyright.gov, 2021).
Performance Royalties
A musical composition generates a performance royalty whenever it is publicly performed. A public performance includes any broadcast of the music on TV, radio, the internet or satellite or a live performance. Performance royalties are collected from anywhere music is played in a public space like concert venues, restaurants, or gyms, and all public media platforms like YouTube or Tik Tok. Performance royalties are collected and allocated by Performance Rights Organizations (PROs). There are four PROs in the
United States: American Society of Composers Authors and Publishers (ASCAP),
42 Broadcast Music Inc. (BMI), SESAC (originally the Society of European Stage Authors and Composers), and Global Music Rights (GMR). AP is affiliated withBMI.
Mechanical Royalties
Mechanical royalties are generated whenever a musical composition is reproduced. Reproductions include physical recordings, digital downloads, digital streams, music videos, ringtones, and music used in new recorded items. Currently, most mechanical royalties in the U.S. are administered by the Mechanical Licensing Collective
(MLC), with several mechanical licensing services being administered by the Harry Fox
Agency (HFA). AP is registered with both organizations.
Synchronization Royalties
Synchronization Royalties are the result of the most common creative license known as a synchronization license. Synchronization royalty payments occur whenever a musical composition is used in conjunction with a visual production. This includes films, TV, commercials, video games, and more. Synchronization royalties are paid directly by the licensee to the copyright owner.
43 Music Licensing Flowchart
Consider the diagram above for the different ways in which publishing royalties are generated. There are countless scenarios and dependents that affect the way money changes hands and how much the amount may be. These are a couple examples, demonstrating how and when money moves to pay for the rights to use a song.
44 When someone plays a song written by Artist A on their on-demand streaming service,
Spotify for example, the service tracks that stream and the data is sent to the MLC and
Artist A’s PRO. This is because an on-demand stream is considered both a public performance and a reproduction. Both organizations allocate a royalty payment from
Spotify’s licensing fees to Artist A for the use of the song. The royalty shares allocated by the PRO are paid to Artist A and Artist A’s publisher, directly. All of the royalties allocated by the MLC are paid to Artist A’s publisher, who then pays Artist A his or hershare.
When Artist A’s song is played in an episode of a television series broadcast on a cable network, there are two publishing royalties involved. As the episode is being produced, the show’s music supervisor works out a synchronization licensing deal with
Artist A’s publisher in order to get permission for the use of the song in the visual production. This is most often a flat fee paid to the publisher, who then pays a share to
Artist A. Then, every time that episode with Artist A’s song airs, the performance of the song is recorded in a cue sheet. The data is sent to Artist A’s PRO, who allocates royalties to Artist A and Artist A’s publisher from the cable network’s licensing fees.
Trends
Music publishing in the U.S. is a $6.6 billion industry, with new opportunities developing. The industry saw a 7.5% increase in demand from major label music production between 2015 and 2020, with steady growth in the market to continue. Demand from individual artists is expected to surge considerably, an estimated
170%, when a post pandemic environment relieves limitations on musicians (IBISWorld,
2021).
45 External Analysis
The greatest outside influence on music publishing is technology. This includes both digital media platforms and music production equipment. Digital streaming has become the largest market for music. Streaming accounts for 79% of all music revenue, and streaming revenue is projected to grow 9.9% annually over the next five years
(Statista, 2019). Additionally, there are growing opportunities in synchronization licensing, as video streaming services and podcast creators grow and produce more content. The video streaming services industry is growing at an annualized rate of 23.2%
(IBISWorld, 2020), and it has sustained success by continuing to offer new and original content. More video content also means more advertising slots. Global video advertising revenue is expected to increase by $2.5 billion annually, through the next five years
(Statista, 2019). For podcasts, revenue for listening application Stitcher grew 233% between 2017 and 2019 (Statista, 2019). Podcasts are the fastest growing market for synchronization licensing today. The below bar graph was made to visualize Stitcher’s growth so it can be seen just how fast the industry is scaling upwards.
46 Stitcher Annual Revenue
Revenue of Stitcher worldwide from 2017 to 2019 (in million U.S. dollars)
80 72.55 70 60 51.06 50 40 31.2 30 20
Revenue Revenue in million USD 10 0 2017 2018 2019
(Statista, 2019)
A great impact on musicians’ ability to release music is the increased availability of music production equipment and online music distribution services. The cost of creating a viable recording studio has gone from around $50,000 forty years ago to as low as $1,000 today. This makes it much easier for individuals to start musical careers. Furthermore, where artists used to rely on record labels to distribute their music, distribution to all major platforms is now available to independent artists through low- cost online services. These developments in technology have produced an abundant number of artists without publishing representation, and new opportunities for creative licensing.
Legal structures play an important role in the music publishing industry. Publishing royalties are set by the U.S. Copyright Royalty Board, and those monies pass through federally sanctioned organizations to get to publishers and
47 artists. The Music Modernization Act of 2018 created the Mechanical Licensing
Collective (MLC), a new organization for collecting and allocating mechanical royalties in place of the Harry Fox Agency. As MLC is still in its infancy, it will be important for
AP to monitor the news and information it releasest to keep up to date with any potential changes in mechanical royalty administration. There is also an important case where “in
March [of 2019], Spotify, Amazon, Pandora and Google appealed a ruling by the
Copyright Royalty Board, which voted to increase the amounts that songwriters make from interactive streaming by more than 40 percent over five years” (Leight, 2019). How theappeal is resolved will have significant implications on future music publishing revenues.
Lastly, new cultural trends have impacted popular genres and styles in music, creating some additional challenges for music licensees. In particular, the production technique of sampling complicates musical credits and can make it difficult to license asong for synchronization. Sampling is when a part of a released composition or sound recording is used within a new creative work. When a song is produced with a sample, the sample is often only cleared specifically for use within the song; therefore, if the song were to be requested for a film placement, the licensee would have to ensure they also clear the sample or samples, as well, which can create a tedious process. Some songs have been released with over 30 registered songwriters, because they use a sample from a song that used a sample from another song and so on, creating a convoluted web of credits troublesome to clear. It may be in AP’s best interest to avoid music that contains samples, and artists that are prone to sampling, to steer clear of this complexity. The
48 ability to clear songs quickly for placements is a core competency AP will need to succeed in synchronization licensing.
Internal Analysis
Under the current conditions of the music publishing industry, there is space to enter and to develop new opportunities in technology and media. This industry has long been known for high switching costs for clients, and firms benefiting from the cumulative knowledge, experience, and networks gained from their legacy in the business. Now, the industry is evolving to meet new client needs and licensing opportunities created by new innovations. Artists need administration for royalties on platforms that did not exist 15 years ago. Media formats that did not exist 10 years ago need music to license. The demand for value adding publishing services exceeds the supply, creating an advantageous environment for AP.
The competitive structure of this industry most resembles “monopolistic competition”. This is a competitive environment with low concentration, some barriers for entry, and ample pricing power. The top three firms in music publishing account for less than a 20% share of the total market. Differentiation comes mostly in the types of artists firms represent, either offering services to artists with certain musical styles, degree of popularity, or even geographical location. While there are barriers for entering this industry, like knowledge, network, and capital, those barriers are decreasing as technology makes all three more accessible. The strategic group AP intends to penetrate is synchronization licensing specialists. This area of music licensing offers the greatest potential for short term revenue, and it is the fastest growing. In this field specifically,
49 connections in media play a large role. The explosion of new video content and platforms makes now the ideal time to enter the market and secure a position.
Business Services
AP’s mission is to provide breaking artists with needed professional services for monetizing their artistic creations by handling their publishing administration and arranging creative licensing opportunities. Clients receive a high quality of service by being part of a select roster, instead of a giant pool of artists aggregated indiscriminately by less personal online services. AP’s artists receive fair compensation based on industry regulations and standards. AP connects underserved talent to the newest and fastest growing markets in music monetization.
Target Artists
As mentioned, the types of artists that best fit AP’s model client are early career songwriters and composers. These artists often lack the expertise to self-publish, or they desire freedom from the labor of publishing as it takes time away from their creative work. Stylistically, they lean towards one of the following genres of music: indie, pop, rock, folk, orchestral, ambient, or purely production music. These styles are common in synchronization placements. Yet, more important than style, these artist have the ability to produce an extensive catalogue with a wide range of emotional contexts. The greater
AP’s catalogue volume, the greater its potential revenue. This is because controlling more works generates more performance and mechanical royalties. Also, both a high volume and a range of musical contexts will increase AP’s ability to secure synchronization placements.
50 Target Partners
There are several types of people or firms across the music industry that AP seeks to form partnerships with to grow its business. To expedite the client recruitment process, AP can partner with record label managers, artists managers, entertainment attorneys, and other professionals providing services to artists. By sharing artist networks with these types of partners, AP’s roster and catalogue can grow faster, and it can be more selective about its client pool.
In addition, placing works for creative licensing opportunities, especially synchronization, requires having and maintaining a network of music supervisors and other video production or music licensing professionals. Music supervisors are responsible for curating and licensing music for an audio-visual production based on the vision of the director or other licensee. Partnerships with music supervisors (for television series, broadcast networks, or digital streaming services) are extremelyvaluable to AP, as those individuals control the most opportunities for synchronization placements. The below flow chart shows a simplified version of the steps involved in placing a piece of music for a synchronization usage.
Synchronization Licensing Process Diagram
Artist Publisher Music Supervisor Makes an Makes an Places the agreement agreement agreed with a with a upon music Publisher music in a motion supervisor picture
51 Differentiation
The first major point of difference AP offers to its synchronization partners is pricing. By licensing good quality, but less well-known copyrights, AP can offer discount options to music supervisors seeking to fill placement spots with tight budgets. As AP’s catalogue grows, and it secures its first placements, it will be easier to determine where to carve its creative niche in synchronization licensing markets. The above goals offer the best opportunity for entering the market, but sustainability will come from AP establishing itself with synchronization partners as the “go to” contact for a specific type of placement. That niche can range from broad categories (i.e.., a whole genre of music like “country”) to narrow niches (i.e.., driving on the highway at night or a romantic moment at a café).
Client Services
Clients of AP receive the following services. These services are catered to artists just starting their careers and provide structure and value that works towards their goals.
Publishing Consultation
The first step is to provide artists an overview of the terms of a publishing agreement, the benefits of publishing works, and the services that AP provides in that regard. This step is meant to establish transparency and trust between AP and an artist, as well as to determine if the two are a good match.
52 Copyright Registration
AP registers copyrights with the U.S. copyright office for its clients’ music as “a work of the performing arts”, if the work has generated 10,000 total plays with on- demand streaming platforms, been placed in an audio-visual production, or achieved some other benchmark that deems it appropriate to certify legal protections. Copyright protections are legally in place at tangible conception of the creative work; however, copyright registration ensures copyright ownership can be proven in litigation.
PRO Registration
All of AP’s client’s works are registered with Broadcast Music Inc. (BMI) for performance royalty collection. AP uses BMI over ASCAP, the only other non-invite- only PRO in the U.S., because of BMI’s competitive administrative fee rate (10% compared to ASCAP’s 12%) and because BMI does not charge songwriters or composers to register with them (bmi.com, 2021). ASCAP charges $50 to register as a songwriter or composer. AP’s PRO services also include registering all client’s live performances with
BMI Live. This ensures clients are allocated royalties for the songs they perform live at concert venues.
Mechanical Licensing Registration
All of AP’s client’s works are registered with the Mechanical Licensing
Collective (MLC) and the Harry Fox Agency (HFA) for mechanical royalty collection. The MLC collects and allocates mechanical royalties from on-demand streaming services and digital sales, and HFA collects and allocates mechanical royalties for physical reproductions and cover licenses.
53 Synchronization Services
AP utilizes a network of music supervisors, synchronization agents, and other strategic partners to place its client’s works in audio-visual projects including films, TV series, commercials, and video games. Pitching music for picture requires a certain understanding of the job music supervisors perform. To best facilitate placements for its clients, AP seeks to form relationships with music supervisors using admirations, transparency, and responsiveness. One of the ways AP ensures responsiveness is by using
“all-in” clauses in agreements with artists not represented by a record label. This allows
AP to clear the composition and the sound recording of a track and to decrease time costs for licensees.
Future Services
There is much potential for AP to expand the breadth of its services, after it establishes its core competencies and finds initial success. This includes expanding its artist services to fill additional roles. AP can grow to form sister entities, like a record label or artist management firm. The more AP’s network and capital access grows, the more it can provide for its clients. Companies that grow this way are commonly known as “music groups”, and artists belonging to these organizations benefit from the synergy provided by having many services provided under one roof.
In specializing in synchronization opportunities, AP in the future can choose to vertically integrate into a music supervisor role. Firms offering both music publishing and music supervision services exist today, and they are the result of experts in music licensing expanding to new revenue streams. AP will have this opportunity.
54 Revenue Streams
Athena Publishing administers three types of royalties for songwriters, performance royalties, mechanical royalties, and creative licensing royalties. Asrights exploitations require considerable time, influence, and knowledge, it is uncommon for songwriters to be capable of administering all their publishing rights on their own. In return for the services AP provides, AP currently collects a 25% share of all publishing royalties generated by its clients’ works. This is below the standard industry rate of
50%. AP plans to sign artists at the standard 50% split once it establishes an ample roster and reputation amongst its stakeholders.
Performance and mechanical licenses are considered compulsory. This means they can be obtained without explicit permission from rights holders, so long as the licensee pays the appropriate fees. Performance royalties, as previously stated, are monitored, collected, and distributed by PROs. In AP’s case, these royalties are handled by BMI who takes a 10% administrative fee before paying both publishers and artists on a quarterly basis. Performance royalties are paid for live performances and all forms of public broadcasts, such as radio, television, and streaming. Live performance royalties are largely based on location, and they can come out to $100 for a full performance. Radio royalties are determined by the radio format, as well as other factors like time of day. Terrestrial pays around $5 a play, while satellite is $35, government is as high as $79, independent is $1.35, and college is $0.06. All forms of performance royalties are calculated based on complex formulas set by PROs that take into account where the song is being played, when, by whom, and how popular the song is.
55 Second, songwriters generate revenue through mechanical royalties. Mechanical royalties come from physical sales, digital downloads, and on-demand streams. Physical sales include CDs, vinyl records, and DVDs, and digital downloads include music purchased from online stores like iTunes, Amazon, or Rhapsody. For both of these types of sales, the amount paid in mechanical royalties to publishers per song is $0.091. For
AP, these licenses are sold and collected through the MLC who pays publishers the full amount of allocated royalties monthly. The MLC does not take any fee for the service it provides, but is rather funded by the U.S. Copyright Royalty Board. It is then AP’s responsibility to pay its clients their share of royalties.
Publishing royalties for on-demand streaming plays are calculated differently. These are generated every time a song is played on services like Spotify,
Apple Music, or Amazon Prime Music, and it is the most popular means of music access today, accounting for 80% of all music industry revenue (Alexander, 2019). The rate digital streaming services (DSPs) pay in publishing royalties is usually around 12% of their revenue but differs between services. DSPs also pay varying rates, depending on the tier of service the song was streamed on and the country. All this translates to approximately $0.0012 per stream, and it is split equally between performance and mechanical royalties. To put that in perspective, a song with 250,000 streams has generated $300 in publishing royalties (Manatt, 2016). The below pie graph best shows how major DSP Spotify’s total revenue is distributed.
56 Spotify Revenue Distribution
How Spotify Distributes its total Revenue
6% 6%
Sound Recording Owners Spotify 29% Mechanical Royalties 59% Performance Royalties
(Manatt, 2016)
The best opportunity for AP to generate short term revenue is in synchronization royalties. Synchronization royalties come from licensing songs to be played in films, television shows, advertisements, video games, etc. Synchronizations licenses are most often paid in flat fees. For AP starting out, rates could vary anywhere between $50 to
$5,000 per license. The factors that influence the fee for a synchronization license are demand for the composition, demand of the recording artist, manner of use (i.e.., background music, theme song, on-screen performance, etc.), track duration, term of use
(how long the license lasts), scope of use (how many media formats are used), and territory of use. As AP grows, so will the frequency and prices of its synchronization licenses. The demand for synchronization licenses is continuously growing as more original video content is being produced than ever before.
57 Current Expenses
AP’s current operating expenses, excluding client royalties, include a salary for
Nate Finley and professional fees for legal and accounting services. There are also expenses associated for traveling to networking events and for paying subscription and dues for enterprise applications, industry publications, and professional groups.
Future Expenses
As AP develops, it may choose to make greater investments into artists to support the future value of their copyrights. These investments can include purchases like studio time to record demos or masters, or public relations services like press releases.
Depending on the terms of the publishing agreement with any particular client,
AP investments may be recoupable from future royalties, meaning a portion or all of the writer’s initial share of royalties goes to paying off costs incurred for such investments. However, the implementation of this kind of deal is dependent on the particular artist and the negotiating power of the artist or artist manager.
Finally, AP has plans to take on additional personnel during its first three years.
Newemployees will require salaries and work devices. Other expenses not mentioned include office supplies and potential future legal expenses.
Competition
The opportunity for small players to succeed in the music publishing arena are evident from the present market concentration, the success of other independent music publishers, and the availability of unique talent. In the U.S., there are 8,100 operating
58 music publishers. The top three major companies, Sony/ATV, UMPG, and Warner
Chappell, only control a combined 21.4% of the market (IBISWorld, 2021). Like the many minor players in this industry, AP only seeks to capture a small portion of the market.
Success Stories
There are many examples of successful small independent publishers. In a
Forbes article published in December of 2020, “Primary Wave has also found its niche in offering marketing and branding digital strategy services that maximize artist brands while most competitors focus on administration and copyright or registration and royalty collection” (Zarczynski, 2020). Primary Wave was founded in 2006, and it represents the copyrights of artists like Kurt Cobain, Steven Tyler. Recently, Primary Wave acquired the catalogue of Bob Marley. Independent publishers do not always need big name songwriters. Pen Music Group is an independent music publisher based in Los Angeles,
CA, that was awarded Indie Music Publisher of the Year in 2019 by the Association of
Independent Music Publishers (penmusic.com, 2021). Pen Music Group represents small artists like Shyboy, Raining Jane, and Lizz Wright.
Competitors
AP’s competition can be broken down into three types of firms. Independent distributors, major publishing companies, and other independent publishing companies.
Independent Distributors
Independent distributors are companies that allocatemusic to major platforms, like iTunes and Spotify, for artists lacking the support of a record label. They offer
59 publishing services as a premium service on top of distribution to interested members.
Independent distributors have customer service representatives, but otherwise the primary point of access their members have with them is with their online platform. There is little personal service or relationship where the individual needs of each artist can be assessed and met. Examples of these firms are CD Baby, TuneCore, and Songtrust. Services like these have the advantage of reaching a plentiful user base, but lack the attention provided by a traditional publisher. Artists are left to perform many administrative tasks on their own, and they must self-educate to understand the process. Whereas independent distributors offer the bare minimum publishing services to any artist who signs up, AP offers focused services that take the burden of publishing off of the artist’s shoulders.
Majors
Major publishing companies are less a concern for the market AP occcupies. As majors primarily target well established artists, it is unlikely AP will compete for an artist with a major publisher. AP is also in a separate market for creative licensing. Major publishers control high value copyrights, and therefore, they have high negotiating power, meaning their fees for creative licensing such as synchronization placements are expensive. AP represents lower value copyrights to support music licensees’ need to fill placements constrained by tight budgets. Consequently, it is improbable AP would compete with a major publisher for a song placement in its early years.
Independents
The type of competitor closest to AP’s model is other independent publishers.
Independent publishers represent all types of artists, but it is common for music industry
60 firms to compete for talent exclusively within their geographical regions. Most music publishers are headquartered in New York, Los Angeles, or Nashville. These hubs attract the most talent, because most artists and music industry businesses are based in these cities. However, not every talented artist has the resources or desire to relocate to one of these cities. There is an abundance of talent in other regions of the U.S. and abroad. AP is presently based in Midwest Ohio, where creative industries in cities like Columbus,
Cleveland, Cincinnati, Chicago, and Detroit are growing. Scouting music communities in the Midwest is less competitive than major music hubs. The Midwest is home to many adept songwriters and composers in need of publishing services, if you know where to look. Competing within AP’s market for synchronization placements is dependent on forming that aforementioned “go-to” expertise. The table below outlines the key differences between AP and its varying competitors.
Comparison Table: Competition
Competitor Example Athena's Differentiation
Independent Personalized Service and CD Baby Distributors Attention
Major Publishers Warner Music Group Discount Licensing Rates
Curated Catalogue for Unique Independent Publishers Banner Music Positioning
AP has the opportunity to be competitive in this industry. The market concentration shows viability, and there has been meaningful success for similar, independent publishers in the past. AP offers a better option than independent
61 distributors and seldom competes with major publishers. Most important, for all competitors, the pool of talent in the Midwest, and elsewhere, is growing substantially – the pie is getting bigger. AP’s ability to find and represent that talent has never been better.
Management and Operations
Nate Finley
AP is managed by its founder and CEO Nate Finley. Nate started AP as a student at Ohio University (OU), using his passion for the industry and his knowledge and experience gained from his studies and student organization involvement. Nate draws from his experience as General Manager of ACRN Media, OU’s student managed radio station. During his tenure at ACRN, Nate became involved in numerous music communities through activities such as booking live concerts, curating radio content, and overseeing the organization’s other media outlets. The esperiece provided him with the knowledge and resources needed to discover up-and-coming musical artists. As the founder of AP, Nate has successfully achieved certain important benchmarks. Nate successfully procured funding from OU’s Center for Entrepreneurship Bobcat Seed Fund to register AP with the proper parties and to begin taking on clients. When first pursuing his education at OU, Nate showed his aptitude and ambition by gaining acceptance to
OU’s Honors Tutorial College for business administration, an undergraduate business program that accepts no more than 10 applicants per year. From there, Nate became an expert on the music industry and music publishing by reading the relevant literature, enrolling in OU’s recording industry program courses, and attending music industry events such as the AVA Conference, SXSW, and the OU Music Industry Summit. Nate
62 is motivated by a passion for music and a drive to support musical artists and music communities.
Operations
There are three key operations for AP: royalty administration, artists and repertoire (A&R), and synchronization licensing. Each is essential to AP’s success and each offers the opportunity to create AP’s unique advantages.
Royalty Administration
Royalty administration encompasses AP’s role in collecting and allocating its clients performance and mechanical royalties. It is the most essential service AP provides, and it involves registering all of AP’s controlled copyrights with the correct organizations. It also means monitoring statements to ensure the correct payments are collected and allocated in an appropriate and timely manner. Royalty administration takes time and an understanding of music licensing, two things most musical artists do not have. When new artists begin releasing music, it is a time-consuming process to work with an online service that forces them to input a great deal of tedious information on their own. For artists, that time should be spent working on their art. This is why
AP’s service model is advantageous for attracting small artists. To ensure proper care is taken during royalty administration, AP plans to hire a Royalty Manager in its second year of operation. This will ensure that there is someone committed to royalty administration full time, allowing CEO Nate Finley to focus on AP’s other activities, particularly business development.
63 Artist and Repertoire
The second of those activities is artist and repertoire (A&R). A&R is the act of scouting for new musical talent and overseeing the creative development of signed talent.
This operation is important as it supplies AP with the creative assets it needs to generate revenue. AP needs to acquire a significant number of copyrights to produce adequate performance and mechanical licensing revenues and to be attractive to creative licensees.
Copyrights can be aggregated in three ways. First, signing new clients means taking on their available catalogue and any works they create during the term of their agreement.
Second, partnerships can be formed with record labels or music groups to acquire more extensive catalogues more quickly. Finally, catalogues can be purchased from rights holders. AP’s focus is on singing clients and forming partnerships in territories outside of popular markets. This strategy allows for AP to scout an abundance of underserved musicians and composers. AsAP’s catalogue will need to grow quickly, it plans on hiring an A&R Manager in year two to lead these activities and to expedite the aggregation process.
Synchronization
Synchronization licensing, as stated, is the placement of works in visual-audio production. It is AP’s greatest opportunity for short term revenue, and it accounts for an industry average of 25% of revenues generated by music publishers (IBISWorld, 2021).
Synchronization licensing is dependent on a strong network of licensees and fast turnover time. Music supervisors very often need music quick and cheap, and so that is what AP offers. By licensing mostly unknown tracks from small artists, AP can sell at a discount rate to satisfy licensees’ tight budgets. AP plans to hire a Sync Manager in its third year
64 of operation to lead this effort. Hiring department managers for each of AP’s key operations will allow CEO Nate Finley to focus on guiding the development of AP’s overall strategy and to respond better to individual issues.
AP plans to operate remotely for the first three years, using virtual tools to communicate between team members and clients, only traveling to clients as needed. In terms of globalization, when appropriate, AP can form a deal with international sub publishers for collecting foreign royalties. Sub publishers are music publishing firms that perform services for publishers in foreign territories. They typically collect a fee of 10-
15% of collected royalties for this service.
Milestones and Financial Projections
3-Year Pro-Forma Income Statement
Year 1 Year 2 Year 3
Revenue
Performance Royalties $ 3,240 $ 19,440 $ 155,520
Mechanical Royalties $ 3,600 $ 21,600 $ 172,800
Synchronization Royalties $ 6,000 $ 24,000 $ 108,000
Total Revenue $ 12,840 $ 65,040 $ 436,320
65 Operating Expenses
Salaries $ 40,000 $ 115,000 $ 170,000
Client Royalties $ 6,420 $ 32,520 $ 218,160
Professional Fees $ 3,540 $ 3,540 $ 3,540
Travel & Events $ 4,000 $ 4,000 $ 4,000
Subscriptions and Dues $ 1,192 $ 1,192 $ 1,192
Total Operating Expenses $ 55,152 $ 156,252 $ 396,892
Operating Income $ (42,312) $ (91,212) $ 39,428
Capital Expenses
Computers $ 1,200 $ 2,400 $ 1,200
Total Capital Expenses $ 1,200 $ 2,400 $ 1,200
Net Income $ (43,512) $ (93,612) $ 38,228
AP will require an investment of $150,000 to cover initial losses and to allow for a reasonable “cushion” to cover unforeseen expenses. A “summary” pro-forma income
66 statement for the first three years of operation after funding is shown above. Based on the projected income and expenses, AP is expected to reach profitability in year three of operation. These projections are based on the expected revenues from on-demand streaming royalties and synchronization royalties at the rates explained previously. The bulk of AP expenses are for compensating management and new hires.
AP’s projected operating income and capital expenses are based on the catalogues of like businesses and on the present music publishing royalty rates of music streaming.
AP will need to aggregate a catalogue of at least 4,000 copyrights. It is at this point the economies of scale work in favor of AP, and the revenues generated overcome operating costs. AP expects to grow its catalogue at an increasing rate over the first three years, as it establishes a foothold in the industry and builds its team. The jump in revenue from year two to three can be explained by a plan to add 2,500 copyrights to AP’s catalogue for this year. Thereupon, AP will have the experience, network, and team to achieve this goal.
The following chart shows the primary activities and individual milestones AP needs to achieve to be successful. This three-year plan will build AP in size and reputation, so it can not only be a force in the market, but also a driving force in its clients’ careers and in music at large.
67 3-Year Activity Timeline
Concluding Remarks
With an enormous pool of unrepresented talent and an expanding market for synchronization licensing, AP is entering a market with terrific opportunities. Artists outside of music hubs have become accessible through virtual communication tools and online platforms, for the distribution and discussion of music has globalized the industry and leveled the playing field for A&R efforts to discover new talent. New platforms like podcasts and video streaming services are in need of discount licensing options for their myriad of content. Licensing revenues are growing. ASCAP reported a $53 million increase in collected revenues from 2019 to 2020, meaning even with COVID-19 limitations on performance, the industry is booming. It is the ideal time to invest in musical copyright.
Nate Finley and Athena Publishing will succeed in this business and marketplace, because of his expertise and the relentless effort he has applied to building his knowledge
68 and to discovering and serving new clients. Nate developed AP out of research with
Ohio University mentors in music, the recording industry, and entrepreneurship, over the course of two and a half years. He procured an initial grant to build AP’sfoundation from the Bobcat Seed Fund, and it is already serving three clients while Nate is finishing school and working part-time. Nate is passionate about music and supporting music communities. AP is Nate’s push to serve musical artists with the type of technical assistance he knows they need and he can provide.
References
Alexander, J. (2019, September 06). Streaming makes up 80 percent of the music
industry's revenue. Retrieved April 08, 2021, from
https://www.theverge.com/2019/9/6/20852568/streaming-revenue-growth-spotify-
apple-music-industry-ariana-grande-drake-taylor-swift
BMI. (2021). Creators FAQ. Retrieved April 08, 2021, from
https://www.bmi.com/creators/#faqs
Duncan, L. (2020, December 29). How much Do Songwriters make per song, per stream
& in other situations? Retrieved April 08, 2021, from
https://www.musicindustryhowto.com/how-much-do-songwriters-make-per-song-
per-stream-in-other-
situations/#:~:text=In%20the%20U.S.%20%28and%20globally%20for%20the%20
most,cent%21%20Of%20course%2C%20this%20can%20still%20add%20up.
69 IBISWorld. (2020). Video Streaming Services in the US. Retrieved April 08, 2021, from
https://my-ibisworld-com.proxy.library.ohio.edu/us/en/industry-
specialized/od6197/about
IBISWorld. (2021). Music Publishing in the US. Retrieved April 08, 2021, from
https://my-ibisworld-com.proxy.library.ohio.edu/us/en/industry/51223/about
Manatt. (2016). U.S. Music Streaming Royalties Explained. Retrieved April 08, 2021,
from https://www.manatt.com/
PEN music Group. (2021). PEN music Group, Inc. Retrieved April 08, 2021, from
https://www.penmusic.com/
Statista. (2019). Digital music in the U.S. Retrieved April 08, 2021, from https://www-
statista-com.proxy.library.ohio.edu/study/14059/digital-music-in-the-us-statista-
dossier/
Statista. (2019). Podcasting in the U.S. Retrieved April 08, 2021, from https://www-
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70 U.S. Copyright Office. (2021). What is copyright? Retrieved April 08, 2021, from
https://www.copyright.gov/what-is-copyright/
Zarczynski, A. (2021, January 04). Why independent Music publishing will thrive in the
New Year. Retrieved April 08, 2021, from
https://www.forbes.com/sites/andreazarczynski/2021/12/31/why-independent-
music-publishing-will-thrive-in-the-new-year/?sh=5a67f7f8aaf2
71 Appendices
Appendix A
List of Subpublishers
This list is made up of potential partner sub publishers for Athena Publishing.
The first columns show basic information like the name, website, and location of the firm, as well as type of firm. The rightmost three list the advantages and disadvantages of each firm, and then provide a color-based evaluation on their attractiveness, with green being best, yellow having potential, and red meaning a relationship is unlikely or disadvantageous.
72 Appendix B
List of Synchronization Agents
This list is made up of potential partner Sync Agents for Athena Publishing. The first columns show basic information like the name, website, and location of the firm, as well as type of firm. The rightmost three list the advantages and disadvantages of each firm, and then provide a color-based evaluation on their attractiveness, with green being best, yellow having potential, and red meaning a relationship is unlikely or disadvantageous.
73 Appendix C
Company Logo
The Athena Publishing logo portrays the Greek god Apollo holding an electric bass guitar in a black and white sketch style. Apollo is the Greek god of music and poetry, appropriate for a company working in songwriting. Apollo also led the nine goddesses of the arts, representing Athena Publishing’s mission to guide songwriters to successful careers and to make an influence on music and media. The design is simple, yet eye catching, The contrasting time periods of the two subjects help communicate both modernization and longevity, as AP works to drive innovation and sustainability for all its stakeholders.
74 Appendix D
Bobcat Seed Fund Grant Agreement
75
76 Appendix E
Website https://natejfinley.wixsite.com/athenapublishing
77 Appendix F
Revenue Model Exercise
These worksheets were used in estimating annual revenue and expenses for AP’s pro-forma income statement. Industry standards and applicable rates were used in estimating many calculation figures, but several assumptions were made. Estimates for streaming numbers, sync sales, and copyright acquisitions were based on qualitative information from speaking to industry professionals and researching similar businesses.
78 Discussion
This exercise was highly influential in both experimenting with lessons derived from the literature review and in understanding the general success factors of managing creative intellectual property in today’s market. The execution of the business plan, as an exercise, allows for significant insight to be taken into what makes businesses like music publishing firms operate successfully. The use of a traditional business plan along with the industry and financial experiments lead to conclusions worth discussing in greater detail. This is also true for how each lesson from the literature review applied to the creation of the business plan. These lessons included motivation factors for creatives, protecting intellectual property without alienating consumers, and the intellectual property perspectives that guide industry innovation. It is also important to note creating this business plan was not a solitary effort. Many ideas and insights worth sharing were offered by industry professionals. These individuals are on the front lines of AP’s industry, and there is extensive value to the perspectives they provided.
Creating the Business Plan
As AP’s business plan was formulated as a traditional business plan, the document is rich in detail and touches on more success factors than the other methodologies explained previously. It was important that the plan was scribed this way, because it allowed for the more nuanced elements of AP’s business to be identified and thought out. For example, in vague terms, AP provides music publishing services. Yet, as described in AP’s business plan, such services include a breadth of activities. Documenting AP’s plan as a traditional business plan allowed for the details of these activities, including how they apply to artist clients, to be fully considered.
79 The most significant implication of using a traditional business plan was conducting the projected financials of AP’s first three years of operation. It was from this exercise operational benchmarks could be set to guide AP towards a profitable outcome. In analyzing the revenue model and expected cash flow for all significant inputs, it could be determined the scale AP would need to reach to achieve profitability. Specifically, it was found how controlling approximately 4,000 low value composition copyrights provide enough potential revenue generation for a small business to succeed in the music publishing industry. This was found by applying asset numbers from like firms to a formula that could estimate revenue and expenses. Through trial and error, this optimal scale was uncovered and used to plan AP’s growth strategy for the first three years.
Managing Creative Talent
AP’s business model, and the business model of creative intellectual property firms like AP, are dependent on the creative work of musical artists. Firms that fail to satisfy the needs and desires of such creators are destined to lose influential clients and industry reputation. As online platforms continue to diffuse knowledge around music publishing to artists, and artists better understand what role publishers play in the industry and artists’ careers, it is likely there will be less tolerance by artists for firms that provided limited artist support. Limited artist support can mean a non-personal approach to client services, or a list of services that do not fulfill all an artist’s publishing needs. For independent artists, this is the experience they receive from independent distributors who offer publishing services. Basic administration services do not provide focused support to guide artists to accreditation and recognition for their work.
80 Those who make creative copyrights value recognition and support, as was discussed in the literature review. Therefore, AP is to be more client focused than independent distribution networks. Moreover, AP will offer services that allow artists to focus more time on their creative works and less time on research and administration. By administering copyrights, pitching to placement opportunities, and providing artistic support for artists, AP can better align its priorities with the priorities of talented artists.
Maintaining Consumer Interest
As illustrated by the failure of DRM systems, consumers are likely to become frustrated if creative work is trapped behind complex channels for access. While this was demonstrated in music with consumer markets, it is equally true for creative licensing markets like synchronization. When licensing creative works for business-to-business usages, the time cost is as important as it is in business to consumer usages. In order to improve the attractiveness of their creative copyright licenses, firms need to make them more easily accessible.
This theme is what outlines AP’s synchronization policy. For AP to increase its potential success in this market, it needs to be able to deliver licenses quickly and without hassle. To accomplish this, AP dictates “all-in” clauses in its agreements with independent artists. This means if AP finds an opportunity to license the controlled composition of an independent artist’s song, then it also has the right to license the associated sound recording. AP also seeks to implement similar contractual language when working with artists signed to a record label or in partnerships with record labels.
81 Entrepreneurial Perspective
Intellectual Property can be analyzed using any of the four aforementioned perspectives - legal, accounting, entrepreneurial, or communal. Succeeding in music publishing means having a greater focus on the entrepreneurial perspective. Looking at intellectual property like an entrepreneur means finding the best way to leverage its value to generate a profit. In the evolving music industry, this is more important than ever. New technology and media have serious implications on how much revenue is generated by traditional channels in music publishing, as well as where new channels are opening up. Music publishers have to be futurists to remain sustainable in this competitive marketplace.
For AP, the future is new media. AP seeks to form strategic partnerships in expanding industries that are new to music licensing. These industries are growing quickly and require music licensing to produce content, but the landscape is so fresh that common practices and rates have yet to be established. Examples of these fields include podcasting and virtual reality. As they are so new, independent firms like AP have the advantage of an equal playing field with major players. Knowledge and access are mostly even across firms of all scales, so there is plenty of room to establish a position in these forms of media. Taking advantage of entrepreneurial opportunities like these are essential for forming a sustainable competitive advantage in creative intellectual property industries.
Summary
In summary, this paper explored developments in creative intellectual property management, and then put into a plan a way to leverage such changes into an applicable
82 business model. The recent literature on creative industries, intellectual property, and related industry disruption was reviewed to paint an accurate picture of the state and future of creative intellectual property industries. The topics discussed in those articles were then synthesized into overarching lessons, including motivators for creative talent, consumer reactions to intellectual property protections, and guidelines for innovation in related industries. These lessons were then put into practice to formulate a business plan for a music publishing company.
The business plan for Athena Publishing was based on insights derived from the literature review. It is broken into multiple sections: executive summary, industry overview, trends, business services, competition, management and operations, and operation milestones and financial projections. These were the most essential aspects of
AP, and they encompass the business’ overall strategy. AP was designed to use the knowledge acquired by the review to assist musical artists in their careers. The exercise of creating AP’s plan was as valuable to reaching that goal as the initial literature review.
Contributions
This work provided several contributions to industry and academia. The literature review synthesized topics discussed widely in recent literature pertaining to creative intellectual property management. Strategic leaders in these fields can take advantage of the wider lessons discussed in directing their firms to future success. The landscape for these industries is in constant rapid motion, so utilizing the review can help strategic leaders pinpoint priorities and areas nearing disruptive change. Having this wealth of knowledge condensed is significant for those seeking similar answers.
83 The music publishing company AP is not simply a theoretical idea, it is a business in operation. The business plan created for this paper will guide AP’s next three years and onward. The analysis of industry conditions and trends helped AP identify a point of differentiation and target markets. In doing so, it provided parameters for AP to set specific and actionable goals for the next three years. These goals were tested and compared to similar firms in AP’s industry to ensure their resilience. From all this, AP has a real chance for not just financial success, but to make an impact on artist careers and music at large.
Of less grandiose, but of vital importance, this work advanced my own academic and experiential knowledge of the subject matter. This project proved immense value to me as a student and a young professional. I learned specific issues and controversies facing intellectual property industries, and the proposed theories on how those issues will resolve. I also learned what questions must be answered when planning a business and attracting investment opportunities. Finally, I learned important knowledge and skills specific to the music publishing industry that provide me a leg up in career opportunities.
Implications
There are various implications of this work from the conclusions drawn in the literature review, the aspects of the business plan, and the methodology conducted in creating this paper, as a whole. Firstly, guiding a business under the principles outlined in the review has significant advantages for strategic leaders. Stronger consideration for the methodology and goals of creative personnel leads to greater work satisfaction, and thus, more innovative work. The need for an engaged workforce is a common theme in management literature, but this paper curates themes specific to engaging creatives. A
84 creator's work is part of their identity. Managers who apply accreditation to their personnel’s reward structure will see improvement in quality of work.
The implications of this work are significant to consumer experience, as well. Time cost and convenience are high priorities for consumers of creative intellectual property. This was proven many times. Studies showing the failure of DRM systems; therefore, it is vital to make creative works as accessible as possible, even if it means compromising security. Finding balance will mean taking advantage of newer platforms and limiting the number of channels consumers will have to navigate. The implications of the research here will be most useful to start-ups in creative IP industries. Those entrepreneurs can use these collected insights to better understand how to structure relationships with creatives and consumers. It is these relationships that sustain creative
IP firms, so being vigilant to what incentivizes individuals to create and consume creative content is key.
Where to innovate will depend on industry and company mission. The perspective by which managers view their intellectual property determines their strategic priorities. For creative industries, it is best to view intellectual property from the perspective of an entrepreneur, seeking new ways to leverage value.
The implications for AP are the greatest, as the bulk of this paper plans the business’ execution. The plan for AP as an individual document is AP’s roadmap for success. It outlines its strategic niche and specific goals needed to grow. While the information placed in the plan is valuable, it remains a fluid document because internal and external factors are likely to change. Even so, it is a framework for identifying those needs for change and recording adjustments accordingly. AP’s business plan also serves
85 as a tool for soliciting investors. The plan provides everything an investor may want to know about AP.
The structure of this paper is not completely unique, but it can be presented as an example for similar academic projects in the future. The blend of academic research and experiential learning associated with this type of work is ideal for students seeking to gain expertise in a field autonomously. By applying the structure and procedures of this project, others can advance their knowledge and skills in a field of interest the same way
I have.
Limitations
There were multiple limitations on this work that could be addressed or expanded on in future papers. These limitations apply to the literature review and the business plan. In aggregating academic works, it was difficult to find an abundance of research applying directly to the research question. If one were to repeat that process, it may prove beneficial to expand the search to additional databases or apply additional search strings. Limitations to the business plan come from the status of AP at the point of creating the plan. As AP is in its infancy, it is difficult to predict in what niches it will find opportunity and what its financial outcomes will look like. A business owner with more experience and past success in the field would likely be able to craft a document that better describes key success indicators for music publishers.
There were also specific limitations involved in the chosen methodology. By deciding not to use a lean start-up plan or a business model canvas, AP’s greatest weakness becomes inflexibility. In a highly disruptive industry like music publishing, it can be expected AP will need to adjust its strategy down the road. Traditional business
86 plans are not completely static. They can change, but the forgone methodologies offer greater ease and a defined procedure for such adjustments. A traditional business plan was chosen for its focus on detailed planning, but supplementing this plan with a more flexible version in the future may be to AP’s benefit.
Acknowledgements
Many individuals and resources were influential on my creation of this project. First, I want to acknowledge Paul Mass, director of the Center of
Entrepreneurship at Ohio University, for acting as my thesis advisor. Professor Mass is an experienced entrepreneur and provided invaluable guidance for the development of my business plan. Ohio University’s professors Andre Gribou, Luke Pittaway, and Josh
Antonuccio were also incredible resources for musical experience, research protocols, and industry knowledge, respectively. I give a big thanks to my mom for holding my writing to a higher standard. None of this would have been possible without a generous grant provided by the Bobcat Seed Fund. Ohio University and the Honors Tutorial
College have believed in me my entire academic career, and so have my friends and family that encouraged me every step of the way.
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