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Music in the metaverse: What are the licensing laws?

Gregor Pryor from legal firm Reed Smith outlines some of the challenges that the metaverse could bring to the live music business

22 Dec 2021

Gregor Pryor

Parts of the music industry have been running into the arms of the global metaverse phenomenon, seeking opportunities for growth, collaboration, revenues, and creativity. Fortnite’s Ariana Grande concert, HYBE’s diversification beyond music, and UMG’s launch of a new “NFT supergroup” offer a taste of what music can do in this alternative, fully digital world.

Opportunities or threats?
If the Rolling Stones were already livestreaming in 1995, what makes this new form of music consumption in the metaverse different from the traditional “vanilla” livestreaming?

Performing in a virtual venue has proved to be a commercial success, with record-breaking attendance in Lil Nas X’s Roblox concert and Fortnite’s Travis Scott performance. The diversification into the gaming industry is just one medium.

NFTs prove that digital goods can be marketed as part of a wider package of rights and can offer new monetisation methods for the music sector. Aside from virtual events and NFTs, another metaverse sensation affecting the music sector has been the emergence of virtual “artists” and the traction around AI avatars.

The global audience that even the biggest tours are unable to accommodate has made music and metaverse inseparable

Early adopters cite reach, immediacy, and interactivity through collaborations between talent performing from different virtual locations as key differentiators for artists. The opportunity of direct interactions with fans will provide acts with exposure to wider audiences and high user engagement.

Do these innovations, however, come at a price? Artists who rely on traditional production channels to reach audiences risk getting left behind.

Looking ahead, could some of the more one-dimensional approaches to the digital music industry – such as purely owning rights and monetising through subscription streaming channels – quickly become commoditised and mechanised to the extent they no longer yield the profit margin we have come to expect?

From a scale perspective, the global audience that even the biggest tours are unable to accommodate, patched together with migration to online entertainment during the pandemic, has made music and metaverse arguably now inseparable.

The proliferation of music within closed and open online environments adds another potential layer of complexity

Legal issues
Mostly, the traditional legal and licensing rules to online exploitation apply equally in the metaverse. However, the proliferation of music within closed and open online environments adds another potential layer of complexity to a chain of rights in the music licensing process.

For instance:

    • Walled gardens. The opportunity for music businesses to create their own place in the metaverse raises the question of how each environment is to be regulated legally. It is widely accepted that online environments are subject to offline laws, specifically contractual terms in which users are permitted to use the platform. The terms under which a licence is obtained would need to be aligned with the terms of the walled garden for the exploitation of someone else’s music in the metaverse. An underlying difficulty with having different rules regulated by different legal jurisdictions is maintaining consistency and good relations between the individual platforms.
    • Rights clearance. Any users nowadays can manipulate, edit, and deliver an entirely new musical creation by simply creating a meme. Does the responsibility of music licensing then lie with the uploaders or consumers? While the platform will be responsible for making efforts to obtain licenses for content uploaded by users, it will not be held responsible for licensing copyrights in content that is brought to a platform by commercial operators.
    • Fence hopping. The moving of the user’s avatar between environments begs more questions. Could a Spotify user listen to their music playlist whilst playing multiple games? Could a user listen to music in a virtual coffee shop?

One thing is certain
The exploitation of music and rights in the metaverse creates massive opportunities to build new models and ways of exploiting copyrights that help drive incremental revenues and value to the industry, artists, creators, and the platforms that invest in the metaverse itself. Read our metaverse guide for further unique legal issues here.


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