Investing in internet radio (or not)
I’m sure many readers will have heard the news yesterday, but here’s Paul Resnikoff’s round-up of the CRB denial:
Copyright Royalty Board Denies Webcaster Rehearing Request
The US Copyright Royalty Board (CRB) has now denied motions for a rehearing by internet radio broadcasters, according to documents issued Monday. The broadcasters are protesting a more expensive royalty schedule related to the use of master recordings. “The parties filed various responses per our request,” the three judge panel explained. “Having reviewed all motions, responses to those motions, and written arguments, the Judges now deny all such motions.” The five-page document noted that internet broadcasters largely rehashed earlier arguments in their rehearing requests, or raised issues that could have been offered during earlier proceedings. “We find, however, that none of the moving parties have made a sufficient showing of new evidence or a clear error or manifest injustice that would warrant a rehearing.” The denial follows an original ruling in early March of this year, and a subsequent order allowing motions for a rehearing on March 20th. Motions were filed by the Digital Media Association (DiMA), Intercollegiate Broadcasting System, Inc., Small Commercial Webcasters, National Public Radio (NPR), and various others.
The denial was greeted enthusiastically by SoundExchange, which represents the interests of major recording labels and artists. “We are gratified that the CRB has upheld its decision,” said Michael Huppe, general counsel at SoundExchange. Others promised a fight and rallied behind the banner of SaveNetRadio, a group committed to pushing back against the escalated rates. “The CRB’s ill-informed decision to increase royalty fees to this unjustifiable level will quite simply bankrupt most webcasters and destroy internet radio,” said SaveNetRadio spokesperson Jake Ward. Meanwhile, the royalty board also refused to grant a stay on the payment of retroactive royalties until all legal appeals are exhausted, a decision that will generate a lump payment for a number of internet-based radio providers. “In just about one month from today … the Copyright Royalty Board expects internet radio stations to pay millions of dollars in retroactive royalties – and this will drive most stations out of business,” said Jonathan Potter, executive director of DiMA.
I’ve been planning a new venture over the last year or so that was to take advantage of the compulsory license. Now, I question whether it’s worth pursuing from a purely business perspective. One thing is certain: the only way forward for internet radio is to seek direct licensing arrangements, which means that music from Major labels (which would seem unlikely to license at a rate cheaper than that handed down by the CRB) will receive increasingly less airplay.
Or at least less airplay through sites and services that pay royalties vis-a-vis a number of free offerings that are now hosting (or pointing to) music available on demand — a “better version” of access to music than radio-style consumption, which would normally require a payment of $.01 per stream, a la Rhapsody or Napster — but for which no royalty is currently paid.
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