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Thursday, 07 July, 2011 - Music Ally Report - Stems Sell

Originally written for MusicAlly, 7th July 2011

At a time when technology is changing how we create, consume and discover music, some labels appear to be missing a trick when thinking about how their digital assets could be monetised in a new way and also preserved for future digital generations.

There is an emerging trend for labels, managers and artists to wise up to complimentary digital revenue streams with a simple reuse of existing digital assets – track stems – separated out recordings of the key elements of the track. By capturing and making these multi-part recordings available commercially, labels are able to respond to an ever-expanding range of licensing requests.

Whilst there is no official definition of exactly how stems should be captured and stored, the general consensus among labels is that stems are stored as a series of uncompressed audio files representing the various instrumental and vocal tracks, such that if they were layered on top of each other, it would recreate the whole track. Stems should be provided at the same audio quality as the original recording so as to ensure no loss of fidelity.

As technology continues to lower the barriers to music creation, enabling consumers to interact with music in new ways, the use of stems is becoming an increasingly popular way of unlocking new opportunities and complimentary revenue streams for rights owners. Traditionally stems had been used to respond to sync license requests where only specific parts of a track were required for TV/advertising use. Now however, the rapid pace of change in the smartphone and gaming markets is opening up new revenue channels and generating requests for licensed stems to be used in video games and the increasingly popular genre of online/mobile social music games.

Additionally, mobile technology is lowering the barriers to user creativity and thus opening up the possibility of mass-market consumer-facing music creation and remixing applications that had previously been the preserve of professionals and semi-professionals with more sophisticated technology and knowledge.

Majors leading the pack, indies behind the curve

Increasingly major labels are taking multi-format deliveries into their digital vaults as part of their standard digital delivery process from artists, and have amended and re-structured their contracts with recording artists accordingly. The incremental cost of creating and delivering a set of track stems at the same time as the rest of the digital delivery is negligible, but significant cost can be incurred if there is a requirement to dig out the original multi-part master recordings at a later date for a sync, game, remix etc. Often those costs will be prohibitive for the potential licensor, and hence lead to a missed revenue opportunity for the label.

Despite this, many labels still do not take delivery of stems as part of their normal digital delivery from artists. It seems to be the independents that are behind the curve. All too often they focus just on the final version of the track and ignore the opportunity to archive the track in stem format.

I have had recent first hand experiences of just how fragmented labels are in their approach to this as Bounce has been preparing to launch a series of white label remixing applications with commercial radio partners in the UK, which rely on the sourcing of track stems as the raw form of content. Experience to date is that some labels have really thought this through and are able to deliver track stems directly from a digital vault, generally within an hour of the request being made.

With others, there is no coherent strategy in place to archive or deliver stems which generally leads requests going back to producers to create stems from the original recording sessions, which invariably involves upfront cost and project management time in order to deliver. At worst, the parts have not been preserved and have been lost forever due to hard disk failures or original recordings not being passed across when catalogues have changed hands, even when the recordings have been made in the last couple of years.

An interesting development recently has been the number of artists going back into the studio to re-record their classic tracks to preserve them for future generations. Increasingly forward thinking music publishers are recognising the value of owning the master rights to re-recorded tracks, particularly when 100% of the publishing rights are also owned. Publishers will also typically hold the rights to the re-recorded stems as well as final mixes, allowing them to respond to a wider variety of licensing requests. This gives them the ability to license both recordings and publishing rights as a one-stop shop that can simplify rights clearance issues for sync licensing, game licensing etc.

The market opportunity to monetise stems will only increase over time as technology makes it easier for a wider audience to interact with the music they love. Making a few simple changes now could open up an alternative digital revenue channel for the future in a growing market.

Stems Sell

Martin Macmillan, CEO – Bounce Mobile