Kohn on Jobs

Interview What's Bob Kohn doing now? The storied lawyer, who with his father Al wrote the "bible" on music business law has long been active in the IT world too. Kohn was Ashton Tate's attorney during the boom years of the 1980s, and later Borland's general counsel during the attrition years of the 1990s, when the software company was targeted for destruction by Microsoft. He also served on the board of Pretty Good Privacy Inc.

Now the eMusic founder - he sold the company to Universal in 2001 - is back with a technology company that straddles his areas of expertise. RoyaltyShare is a software application for record labels designed to simplify the nightmare of distributing payments, and provides graphical reports on the downloads.

Launched a year ago, RoyaltyShare is now heading for Europe, with an office slated to open in London in April.

There's no need for labels large or small to do the penny accounting, its CEO argues, any more than there is for companies to employ large payroll departments.

And the technology explosion makes counting royalties more complicated all the time. On-demand streams, for example, pose one set of new problems, he says. And synchronisation licenses, where a recording is licensed for use in a movie, pose another - now that anyone can make a movie.

"The owner of an audio-visual work who wants to show this on line has to go back and get everything re-licensed," says Kohn.

A record label that tries to keep count of downloads also has to contend with duplicate or missing ISRC codes. The International Standard Recording Code is the industry's way of creating a GUID for sound recordings.

The quotable Kohn also had a few things to say about Steve Jobs' recent DRM essay - but we wanted to know a little about the experience of running eMusic, the company he founded in 1998.

For a while eMusic ran an unlimited MP3 download service, DRM-free as it is today. When eMusic was relaunched with private equity in 2003, it was obliged to put a cap on the monthly downloads.

Kohn describes the first incarnation of eMusic as "a great experiment" but one that given the cost structures of the day, was doomed to fail.

"The problem is we were paying a penny rate to the Harry Fox Agency," he told us. "At one stage we were paying more to the publishers than were were to to the labels."

(The royalty split is currently 8:1 or 9:1 in the labels favour for song downloads).

"It probably would have worked in the UK," he thinks, where the revenue share was clearer.

Kohn is adamant that DRM is a disaster - "we knew it would never work for consumers or the record labels," he says, "Steve Jobs is beginning to realize that's it's not working for him, either."

Kohn described Jobs' essay as a "brilliant PR move" made against the background of regulatory pressure in Europe.

"iTunes music can only play on iPod - and you can't buy iTunes hi-fis or music players from anyone except Apple. He says it's not his IP, and his excuse is that if he licensed it then, 'it wouldn't be secure.'"

Says Bob -

"That's ridiculous. Microsoft licenses its DRM to everyone."

But Jobs wins both ways, thinks Kohn.

"If the majors drop DRM, then he becomes the consumer's hero. If they don't, the majors, not Apple, get the heat for the incompatibility problem that Jobs has caused himself. Steve can immediately eliminate the incompatibility problem by allowing others to make iPod-compatible devices or sell tracks in Apples proprietary iTunes format. The incompatability problem is the biggest impediment to legitimate music download sales, and if Jobs sublicensed his intellectual property, then the download business would triple in size overnight."

"He had nothing to lose".

He told us -

"I'm not here to tell the record labels how to run their businesses. But DRM is not consumer friendly." ®