Look deeper into this issue. It's not so simple. First, know that the head of Soundexchange is John Simson, former manager of several indie and major label artists. I know him well. He is a true lefty, true artist advocate, very good man.

You mention that 'they' should institute similar royalty rates for broadcast radio. I agree those rates should exist, however Congress has for decades bowed to the pressure of the 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).

Sadly, most of internet radio is owned by major corps like AOL, Clear Channel, Yahoo, Microsoft, etc. And the small stations have tied themselves and their arguments to the large stations. What the smaller stations should be doing is asking for blanket licenses straight from Soundexchange at a low rate. Or something of the sort.

This really is about getting artists paid, and yes, labels too. Indie labels included. I see no reason why Clear Channel should get music for free just because they are on the internet. The web is not some mysterious magic ether. It's just another space business happens. Companies are making a ton of money on the web off the backs of content producers, especially musicians. I support non-profit and indie radio, but I also support artists getting paid.

Anyhow, If you want I can hook you up with John Simson who can explain this to you better, and I think you'd see that there are ways to make this work well for both the small non-profit broadcasters and the artists and labels. But the small stations need to separate themselves from the Clear Channels of the world.

Even your Wall Street Journal quote really shows how ignorant the people writing about this are.

Also, Pandora will probably be treated completely separately from radio, they are a special case.

No. But Artists and labels would get paid for another business using their product. Seems fair to me. Tv and film has to pay to use music, why shouldn't radio? Because they're Republican owned with large lobbying groups?

http://www.royaltyweek.com/issues/Royalty_Week_031907.pdf

So, when Simson

a) ... asks "Does having so many Web stations disperse the market so much that it hurts the artist?" (first article)

b) Says things like "These little stations develop a popular URL and then flip it and sell it for big money and the artists get nothing."
(first article)

c) Complains that webcasters made the arbitration proceedings "more costly for us" and "I think there was a lot of greed on their (webcasters) part" - and then admits in the same f!@#$5ing article, that SE more or less gets free legal guns direct from the RIAA (second article)

.. you're still saying it's about 'artists getting paid'?

to 'b' - as I said, these negotiations are about getting recording artists and the owners of the masters (usually record labels) paid. And yes, I still say that. I personally know Simson and have spent hours talking to him about this subject. You can read about him hear - http://www.soundexchange.com/about/whos_who.html

The reason the RIAA helps pay for attornies is that the RIAA helped establish Soundexchange. The RIAA has a bad rep and much of it is well deserved. Though in this case they helped form Soundexchange in order to get them and artists paid. Sometimes groups like the RIAA do something good even though it's definitely motivated by their own interests. Of course, they also make sure artists like Modest Mouse, Death Cab, and now The Gossip (all signed to majors) get paid too. And a lot of small labels and indie artists.

Under the 1909 copyright act, there was no federal copyright protection for sound recordings. So in the context of recorded music, the only federally protected component of a record was the underlying musical composition.

Copyright holders received a bundle of rights. One of these rights is the so called "performance right," the right to control public performance of the work. This right applies not only to live performances but also to uses of recorded music in public as well as via broadcast, etc.

ASCAP and later BMI are non-profit groups that came into existence to enforce the performance rights of composers. For the most part, they have done a reasonably good job at this. By aggregating content and requiring users to agree to blanket licenses, they have pretty good leverage to negotiate with even big media companies.

So that's one part of the puzzle. The song.

The part at issue here is the sound recording (the master tapes). Before February 15, 1972, sound recordings were generally protected by common law (judge made law) or in some cases by statutes enacted in certain states. They were not, however, protected by federal copyright law.

In 1971 Congress amended the copyright code to provide copyright protection for sound recordings fixed and first published with the statutory copyright notice on or after February 15, 1972. In part, this was in response to a waive of bootlegging of commercial recordings.

When the entire copyright act was revised in 1976, a sound recording copyright was explicitly included for any work, whether unpublished or published, that had been fixed in a tangible medium of expression (which is a term of art under the copyright act).

This is where things start to get sticky. From a conceptual symmetry standpoint, it would make sense to include a performance right for sound recordings just the like the already existing performance right for the underlying composition. But various interests (including broadcasters) succeeded in blocking such a right. And as Eric explained above, one rationale was that record labels got the promotion of having records played on the radio, and that was enough compensation.

So what that meant was that the owners of sound recording copyrights (typically record labels or the people who played on the recording) weren't in a position to get any income from performances of the sound recording, even as the composer of the work was getting performance income through ASCAP or BMI.

The rise of the internet provided an opportunity for labels and other interested parties to try and get another bite at the apple. And as Eric explain in his post above, these parties successfully lobbied for a digital performance right that only applies to internet streaming.

When Congress passed the Digital Milleneum Copyright Act, in 1998, this right was incorporated. And while labels get the vast majority of any money that comes in from this source, the statute does provide that a portion of the digital performance monies go directly to the the musicians who played on the record (with the so called "featured performer" getting a bigger cut).

Much as ASCAP and BMI have administered performance rights, Soundexchange was designated to play this role with regard to digital performance rights. So while Soundexchange certainly benefits RIAA member labels, I don't think it's fair to equate this group with the RIAA.

Unfortunately, I think Soundexchange got some bad publicity when it released that list of people who hadn't claimed their performance royalties and stated that if you didn't make your claim before x date, you were ass out. But ideally, Soundexchange isn't purely some tool of big labels. It exists to protect anyone who has a valid interest in receiving performance royalties from a sound recording.

So now we've got this new right. And we've got this group set up to collect digital performance right monies on behalf of labels and artists.

But exactly how much do the users have to pay?

That's what the current argument is about.

And while extending the performance right on sound recordings to terrestrial broadcasts is a nice idea, I wouldn't hold my breath on that one.

So from my perspective, it's kind of a tough quandary. Soundexchange is definitely doing its job in trying to get the highest royalty rate possible on behalf of the copyright owners.

But internet streaming radio, especially small players, provide a pretty valuable service, especially to smaller labels and artists, by helping to expose the music.

It'll be interesting to see how it all plays out. Ultimately, the argument revolves around how best to structure incentives to that the market can do its thing without someone getting egregiously screwed over. In addition, as others have argued, if the parties involved can't find an effective way to balance everyone's interests, people will just go black market and then nobody will get paid.

To a certain extent, we're seeing that with digital downloads. I guess it's still an open question as to whether the big labels will eliminate DRM. But the market does seem to be pushing things in that direction.

Personally, I hope the end result doesn't kill diversity, but I also hope we can increase opportunities for artists in particular to get paid, not just for playing live and for a t-shirt, but also for their recorded music.

That's great you know Simson, he might be a great guy with a heart in the right place who wants artists to get paid. Good for him.
But as a webcaster forgive me if all I see is yet another in a long line of attacks from organizations whose business practices border on criminal, and yet have the audacity to make statements like "gee, they made the aribtration process really expensive for us, those greedy, greedy webcasters" - all while wrapped in the ideology of "we're just acting in the artists
best interests."

ITS ALL BS AND All A RIPOFF!

"you can pry my station from my cold dead fingers"

time to fire up some good old pirate radio!