Recently we reported Channel 4 pulling ads from simulcasts over model rights clearance concerns. Now another ‘triple play’ victim emerges as ad soundtrack downloads onto mobiles cause advertisers royalty headaches.
Topic: Ad music downloads royalty bonanza
Who: Pepsi
When: September 2006
What happened:
Following hot on the heels of the recent decision by Channel 4 to pull advertising from its recently launched simulcast service over fears that it could expose advertisers and agencies to the risk of legal action from third-party rights holders for uncleared rights, it has been reported that Pepsi has removed the audio from the free mobile download of its latest TV commercial due to clearance issues.
It appears that Pepsi removed the audio – of Christine Aguilera performing her new song 'Here to stay' – from the mobile download version of the commercial because of the prohibitively expensive royalties being charged by record companies, particularly in comparison to the licence costs charged advertisers to include music in other non-download streamed services.
In response the record companies have pointed out that giving away copies of tracks for free could potentially cannibalise music sales and chart positions, hence the higher royalties for download.
Why this matters:
Record companies are becoming increasingly aware of this issue, and so any advertiser planning to distribute copies of its commercials via any new media format needs to take great care to ensure that it licences all necessary rights from record companies (and other third party rights holders) to be able to do so legally.
In particular there can be some confusion over whether a particular format involves (non-downloadable) streaming, or whether it involves downloading copies to the consumer. The potential costs of getting this wrong could be substantial.
For now, unless record companies agree to reduce or waive their royalties in return for the exposure given to their artists (or advertisers charge for downloaded content), then advertisers wishing to offer downloadable versions of their commercials to consumers will either have to budget for the significant costs of doing so or to consider alternatives such as removing the audio like Pepsi.
