Sound Exchange & The Copyright Royalty Board Are
Full of Shit Extremely Complicated
posted by March 21 at 15:00 PMon
I just got this press release in my inbox:
SOUNDEXCHANGE CALLS ON WEBCASTERS TO RECOGNIZE VALUE OF MUSIC PERFORMERS TO WEB-BUSINESS
SUGGESTS WEBCASTERS NOT TELLING WHOLE STORY ABOUT ROYALTY PROCESS
WASHINGTON, DC—-SoundExchange today called on internet radio and broadcast radio simulcasters to publicly acknowledge the value of musical performers to the success of their businesses, and to acknowledge the recent royalty setting process for such work was fair to all involved.
“The music created by artists is the main reason why people listen to internet radio, and those artists should be fairly compensated for the value they bring to each webcaster’s business,” said John Simson, Executive Director of SoundExchange. “Yet, the webcasters refuse to acknowledge this common sense fact. Webcasters have a number of opportunities to maximize revenue with a captive audience attracted by music created by artists through banner ads, pop-ups, video pre-rolls, audio commercials and other avenues of revenue generation. While we want internet radio to succeed, it is only fair that artists be compensated for the value of their work, which forms the basis of their business.”
The decision by the Copyright Royalty Board (CRB) on March 2, 2007 established performance royalty rates webcasters will pay artists and record labels based upon the fair market value of their work. This decision was a balanced, well-reasoned opinion that considered all sides of this issue. (A summary of the decision is attached.) Unfortunately, some in the webcasting industry have been engaged in a campaign of misinformation about the process, the decision itself and the impact of the decision on the participants.
“Recent claims by a few webcasters that the process was unfair simply reveal that their complaints are not really about process, but rather about results,” said John Simson, Executive Director of SoundExchange. “Webcasters like AOL, Clear Channel, and others want to impose low rates on artists, rather than accept fair market rates as the law requires. They may disagree with the ruling, but they should be forthcoming about the integrity of the process.”
The CRB reviewed written and oral testimony from almost 50 witnesses during 48 days of hearings that totaled over 13,000 pages of transcripts. The webcasters cross-examined all of SoundExchange’s witnesses and had access to hundreds of thousands of pages of documents. The webcasters and SoundExchange also submitted over a thousand pages of written findings, which the CRB reviewed before issuing its 115-page decision.
What this statement fails to address is that the new internet royalty rates are so high as to price streaming stations out of existence. Indeed, if these rates were applied to satellite and broadcast stations, they might be bankrupted. Idolator has done a great job covering this. The FAQ @ savethestreams explains the basic math. This blog post from Pandora has some interesting discussion in the comments, including some proposed letters of protest. The Wall Street Journal gets to the root of the problem:
(Performance royalties and composer royalties are separate — the former are paid to artists and record labels, while the latter are paid to songwriters and music publishers.)
A brief recap: The Digital Millennium Copyright Act of 1998, building on 1995’s Digital Performance Rights in Sounds Recordings Act, said Net-radio firms had to pay performance royalties on songs played in addition to composer royalties on those songs. Terrestrial radio stations pay composer royalties, but they don’t pay performance royalties, under the long-established rationale that record labels benefit from the promotional value of songs played on the radio.
So if a Clear Channel radio station plays that new Fergie song over the air, it doesn’t pay a performance royalty — but if it streams Fergie over the Net (or satellite radio), it does. Make sense to you?
The bottom line here isn’t that Sound Exchange, a spin-off organization of the RIAA, and the Copyright Royalty Board are looking to get artists paid, but that they’re seeking to eliminate the laissez-faire entrepreneurial wonderland of the internet and replace it with the kind of consolidation and regulation that they (or their clients) are comfortable with/profiting from. If getting artist paid was all they cared about, they would institute royalty rates commensurate with those of regular broadcast or satellite radio and let fair competition ensue. The Big Four record companies need a strangled flow of media to ensure that you purchase their rapidly devaluating product, and internet radio stations threaten their grip.
Update: Meinert points out in his post, that the real bad guy here is, perhaps unsurprisingly, Clear Channel and their ilk:
National Association of Broadcasters, one of the most powerful lobbying groups in DC. Congress needs to create the royalty rates, not Soundexchange. In fact, Soundexchange, RIAA, NARAS, the musicians unions and artist advocacy groups are all working together to fight the NAB and get broadcast radio to pay more royalties. The US is the only Western country where artists and labels don’t get paid these royalties. Because the NAB has blocked artists and labels from collecting these royalties in the US, it means US artists also do not get paid these royalties in other countries. The artists are truly getting screwed here where companies who use their music are enriched (see Clear Channel’s profits and salaries).
So then the better idea would be to increase rates for both terrestrial and other radio? Wouldn’t that, coupled with existing deregulation, just encourage more media consolidation?