5 reasons internet radio royalties suck
Ok, I’m pretty annoyed now. And so I feel the need to outline — in 5 forthcoming posts — why I think the new royalties for internet radio are terrible for all concerned: listeners, webcasters, artists and even labels.
I posted last weekend re the new royalty rates, handed down by the Copyright Royalty Board (CRB) on Friday, for the “digital public performance of sound recordings” under the DMCA’s compulsory license for webcasting (that’s a mouthful, I know). Basically, this is the royalty that is paid by internet radio services to a record label and performing (as opposed to composing) artist(s) in return for the ability to play a song on an internet radio station.
To be clear, the concept of a “compulsory license” for webcasting is a compelling one. It allows a webcaster to add any music it/he/she wishes to an internet radio playlist, subject to a set of rules, the spirit of which are to ensure that listeners access the music in a radio-style manner — NOT on-demand — and thus promote the discovery and sale of music. In return, the webcaster submits (1) payment for the songs played (with royalty rate set through a proceeding of the US Copyright Office every 5 years), and (2) a log of the songs played (to enable this payment to be allocated back to the appropriate labels and artists).
For Live365 — my employer for 6 years, up until last summer — the compulsory license was essential because it provided a way for music fans to create a sort of “online mix tape” by uploading MP3s for others to tune into in a radio-style manner, with links next to each song so a listener could, if desired, purchase a CD (from Amazon) or download (from iTunes). If L365 had to directly license music for its service, it would have had to pre-screen each track a user uploaded and then go try to get a license from the appropriate label or artist. Not an easy process for a truly DIY programming model.
But, unfortunately, the rate-setting process has gone awry. I had firsthand experience in the process this time ’round (the first proceedings were in 2001-02) as was one of 24 witnesses called to testify in the proceeding last year. There’s too much to write about in one setting, but here’s a preview of the 5 reasons internet radio royalties suck, IMO:
- Rates were established under inadvertent, but still false, pretense from the outset
- Rates are completely out of line with meaningful comparables
- Rates have proven onerous and, with a proposed increase, could destroy a nascent sector
- Rates will eliminate all small webcasters
- A $500 per-channel minimum will eliminate all innovative webcasters
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