House analogy
I haven’t been writing on the subject recently, but I have still been keeping up on the internet radio issue. There have been some developments that I want to address at some point, such as last month’s day of silence protest and SoundExchange’s recent demand for webcasters to implement DRM with their radio streams to receive SoundExchange’s recent concessions. Before then, though, I’d like to respond to one article I read last week, and perhaps try to explain my position in a new way.
The article I bookmarked was titled “Recording industry threat looms over Net radio,” written by Sherwin Siu, and posted on CNET. There are plenty of articles that gives the same perspective on this issue, but in just a few sentences Siu was able to sum up the biggest misconception people have about this internet radio royalty issue. He wrote (emphasis mine):
Webcasters, who provide the public with Internet radio by streaming music over the Web, are required by law to pay royalties to SoundExchange, a collecting society that distributes those fees to record labels and artists. Those royalty rates are set by the U.S. Copyright Office.
If this were true, I would be against the high CRB royalty rate. However, it is not true that webcasters are required by law to pay royalties to SoundExchange. Paying SoundExchange for the right to play music is only one of many options webcasters have. They can ask for permission from the music artists or label themselves, they can play music in the public domain, or they can play their own music. If the SoundExchange option is taken away, either by a prohibitive rate (such as the CRB’s incredible rate increase this year) or by the government exiting the music business (which we should all want eventually), music artists, labels, and webcasters will still be free to do business with one another. Just like they would in a free market.
But I’ve said this already before, haven’t I? Well, I thought of an analogy that might make this issue more understandable. My wife and I are in the process of buying our first home, and I think there’s a way to relate the internet royalty rate to buying a home.
In a free market, home buyers and sellers would be able to negotiate between each other to establish a mutual agreement about what the house will sell as. A potential buyer can make an offer, a seller can accept or reject it, and the house will only change hands when both parties agree to make the transaction. That’s the fair, easiest way to do it.
Now, imagine if Congress passed a law that required a government agent to sit in on every negotiation between home buyers and sellers. If the two parties cannot agree on a deal, the government agent would allow the potential buyer to buy the seller’s home for a low, government-set rate. That would be great for home buyers, because they’d have great leverage over the home seller. Either the seller accepts the rate or the buyer uses the government to take the house for a low cost. But what does that mean for the seller and his right to sell his property for what he wants?
Now pretend that the government changed the house-purchase rate one day and set it to a high amount that no buyer would want to pay. There would still be government intrusion in the market, but no buyer would want to take the government’s offer. It would not be as good as a total free market, but people would still be free to make their own deals. I know there are a lot of differences between houses and intellectual property like music, but if you replace “house” with “music” and you essentially have the same issue.
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