From The Desk Of... Keith Bernstein
FOUNDER, CRUNCH DIGITAL
THOUGH HE HAD been on the front lines of creating a fairer system for digital music licensing since the CD era, in 2000 Keith Bernstein took a job at Napster. “I was not a fan of what they were doing,” he says. “I thought they should get sued until they were out of business.” But the file-trading service wanted to rework itself as a properly licensed music provider and heard of a program Bernstein had developed to track digital sales. It was software he had created because he understood early on, while working for A&M and then Universal Music Group, the potential of digital to cannibalize the music business. So Bernstein spent two years flying from Los Angeles to Silicon Valley every day, determined to build a new Napster infrastructure that would ensure everyone got paid fairly.
Two decades later, he’s still at it. He has run the Royalty Review Council — which he founded in 1999 and which provides auditing — since 2002, and in 2008, he spun off Crunch Digital, a consulting group that helps an ever-growing list of companies from new apps to gaming, fitness and travel businesses configure the licenses they need to use music legally. The explosion of the at-home fitness industry during the COVID-19 pandemic — as well as recent lawsuits filed by the National Music Publishers’ Association (NMPA) against Roblox, Peloton and the video app Vinkle for improperly using music on their platforms — show how Crunch Digital’s services are needed more than ever in today’s fast-evolving music industry.
Now Bernstein — whose clients include major airlines, app games like SongPop by Fresh Planet and at-home fitness startups like Liteboxer and Hydrow — wants to take Crunch Digital a step further with a search engine called Tempo that will allow companies to input a playlist of songs they want to use and discover instantly the labels and publishers that need to approve the licenses. The idea is to make the process quick and easy, including the ability to crossreference the rights a company currently holds against what’s missing, as well as functionality that will be particularly helpful to the fitness industry: the ability to search by genre or BPM.
Bernstein says he’s driven to keep fighting for solutions by his conviction that “music has value, and music is undervalued,” he says. “I know that music is core to the success of these digital platforms, and if anyone argues that they’re not, then I challenge them to just take out the music and see how well [the company] does.”
You had a peek inside one of the most disruptive technology companies in music history. What was company culture like at Napster?
I was 34 years old and felt like I was a grandpa.
What was the tipping point when you realized you needed to leave Napster?
While building the operating system, I was hunting for publisher information for databases of information that we could utilize and acquire for identification purposes and understanding who uses what and who to pay. But I couldn’t find it. There were companies logging CD booklet information, but nobody had publishing information. When I began to see what was going to happen, I was like, “Forget Napster. When this thing implodes and streaming comes in — which was already being talked about — I don’t know how anybody is going to be able to know who owns what.” There was nothing out there able to help pay publishers at that time.
I wanted to start quietly aggregating publisher data and my own database. I wanted to create the future audit procedures for digital download companies and streaming services, because a CPA generalist wasn’t going to cut it anymore. I relaunched the company in 2002, and by 2005 we were doing audits for all the major labels, all the major publishers, SoundExchange — nearly everybody. We conducted
audits of every digital service where there were audit rights, and because we were finding tons of money that wasn’t being paid, our clients just wanted to audit more.
Why did you create Crunch Digital when you were already thriving with the Royalty Review Council?
It became apparent there were multichannel networks, gaming companies, apps, fitness companies, even the travel industry — all of whom needed the same type of reporting, licensing and clearance help as the traditional labels and publishers did. Probably even more so because they didn’t have a lot of music people. They just had a good idea that was well-funded and used music.
When we first started to talk to these companies about assisting them, I was talking to a lot of people with hoodies on — we found the name “Royalty Review Council” wasn’t very hip or cool. So we spun out Crunch Digital.
Was the difficulty of licensing music shocking to these new companies?
I especially have seen that in the last couple of years. In the early days, more companies seemed to be more like, “Help me. I want to make sure everything is totally available before I use it.” But it shifted when people started racing toward the market and felt the need to be faster than their competitors and to host the most content. You saw people cutting corners and relying on things like the [Digital Millennium Copyright Act] or a compulsory license or saying, “I don’t even need the licensing.”
How does the influx of catalog acquisitions and ownership changes play into the difficulties of licensing music?
If the song a company used a lot is now owned by somebody else that they don’t have a license with, that could be trouble. It’s silly for these companies to think that they’re going to take the data in from the major labels and major publishers and build their own internal database to track this. Our work honestly doesn’t end, because our clients are constantly wanting to know whether they can or cannot use something as rights holders change.
Are there companies that actively try to get around having to pay for music?
There are definitely some lawyers out there that spend a lot of time trying to find the workaround so that their client doesn’t have to go to the labels or publishers or get a license outside of a performance license. Lawyers will tell them it is too costly and takes too long.
The NMPA has made it a mission to go after these infringing digital companies and apps — like Roblox and Twitch — in big lawsuits and settlements. Do you work with the NMPA on these initiatives at all?
We have always had a nice relationship with the NMPA. What they do is critical to the marketplace. We do talk every now and then when we believe there might be something rogue going on and they might look into it, but there are just so many companies out there that are doing the wrong thing. A lot of brands feel like they can fly under the radar. But when you have a new $100 million investment that you’re advertising around, the labels and publishers are going to take notice.
Are we living in the Wild West for music licensing?
Technology moves so fast that there’s always something being developed, or a new use, or another form of distribution that you can’t get your head around fast enough. You have to look at labels and publishers and cut them some slack. They’re getting inundated with license requests, and there’s just so many things they could look at. The tools have not been in place for companies licensing music to be able to assess and monitor what they can and cannot do under their licenses. That’s why we focused on building the part that’s missing in the marketplace. We want to get to a place where there’s no excuse: “Oh, I didn’t know that I couldn’t use that. I didn’t know who to talk to.”
Is that what Tempo is trying to solve?
Yes. We were already doing research requests for clients that would send us lists of 10,000, 50,000, even a million tracks and say, “Can you help me to identify who I need to get licenses from?” Maybe they already had deals in place with a few companies and wanted to make sure that’s all they needed. We would go through these lists and give the clients what we call “the road map.” But when COVID-19 hit it got to be an even bigger issue, especially with the fitness brands. How is it possible for a large company to control all of their fitness instructors? You can’t. You can’t tell a fitness instructor to only use Universal Music Group or Sony Music. That doesn’t mean anything to them, and how are they going to look it up? We thought we needed to build an online platform that would empower these businesses to learn about this more.
How did you aggregate all that data for Tempo?
Painfully. We already had been aggregating it for the purposes of our services for years.
What are some opportunities music-rights owners should be taking advantage of to grow revenue?
They should audit more. I don’t think enough audits take place. And I’m not saying that because I want to do their audits! I’m just saying that the more you keep people on their toes, the more likely they are to get it right.