Last year, I raised a fuss by arguing against webcasters in the internet royalty rate debate. For those that don’t remember it, the government raised the royalty rates that webcasters pay to play music on the internet. Practically everybody was against it, some talked of the end of internet radio, and some tried to petition the Congress to step in and stop the new rates. Something didn’t smell right to me, though, so I looked a little deeper. And what I found was the exact opposite of what I was being told. The government wasn’t forcing anything on webcasters. Rather, the government was actually forcing music artists into a system that favored webcasters. Webcasters were angry because the government was making it harder for them to use their government-backed advantage over musicians!

That’s when I became the first blogger (that I know of) to openly and completely condemn the “free internet radio” movement. Or, at least, the blogger who has written the most against it. My stance is that musicians should have the right to control their creative works, including who plays their works over the internet. Period. Therefore, I totally disagree with the government-backed SoundExchange arrangement that forces all music artists into an deal with webcasters — whether they like it or not. I like the new, higher rates only because they make it harder for webcasters to use their advantage over music artists. But most of all, I want a free market where individual rights are respected.

I’m only one out of a handful of people that I know that hold this position, though. Many thousands of people agree with the webcasters (or think they agree, I don’t think they were told the whole story), and they all clicked the “Contact your Congressman” links in their emails. But alas, Congress did nothing, and the higher rates stayed.

Fast-forward to today. Is internet radio dead? No. In fact, I read an interesting story today that shows how some are reacting to the higher rates. From the “Who Needs Music Labels? Last.fm Starts Paying Royalties To Unsigned Artists” by Erick Schonfeld in the Washington Post (emphasis mine):

Music-streaming service Last.fm is now paying unsigned artists royalties for every song played on its service. Since the company announced the program last January, 170,000 artists and small music labels have signed up for it and uploaded 450,000 tracks.

What Last.fm is doing here is creating an alternative to the official royalty-collecting organization for musicians (i.e., SoundExchange). [...] And for any song owned by a label or artist who participates in SoundExchange, Last.fm continues to pay the going Internet radio royalty rate. But it is beginning to bypass Sound Exchange by giving new, unsigned artists an alternative.

Since Last.fm’s offering is only for artists and labels that don’t participate in SoundExchange, it’s obviously not a complete alternative to the government-backed SoundExchange option webcasters currently enjoy. It is a step in the right direction, though. This is an example as to the types of arrangements that are possible when webcasters and musicians are able to negotiate voluntarily. They both have something that each other want, so if they’re just left alone they’ll work it out.

And if there’s any doubt as to whether the internet radio royalty rate issue is one of those messy “mixed economy” cases where it might be ok to support lowering the government rate, I have one question: What will happen to offers like this if the government mandated a low royalty rate?