Stream ripping is a piracy problem
Last December I wrote a post about “stream ripping” and its relation to the internet radio royalty issue. To quickly recap, I said that one possible effect of low, government-mandated internet royalty rates is the theft of that music through “stream ripping.” I said that as our internet connections became faster and the quality of internet radio broadcasts increased, an unsecure internet radio station could be a good source for music pirates. And to make it worse, music artists and record companies can’t do anything about it.
Well, I was corrected by a stream-ripper today. I said that it would be a bigger problem in the future, but he informed me that high-quality rips are available now:
BTW, quality is not a factor for stream ripping. There are plenty of excellent stations with 192, 256, or 320 kbps streams offering clean gaps and no talking or crossfading over songs. These can produce higher-quality rips than what you can buy on iTunes or Amazon.
And he continued:
Personally I only stream-rip songs I cannot buy in non-DRM’ed form from iTunes, Amazon, etc. So it seems to me that artists who don’t want me to stream rip their music have a simple alternative: let me BUY a non-DRM’ed copy of a song!
The internet radio royalty debate is not just about protecting internet radio, or even making the best of a bad situation. I think comments like the one above show why it’s essential for artists to be able to control what is done with their property.
Tags: [internet radio, stream ripping]Comments
Stream ripping and royalty rates
I’ve addressed many problems with the webcaster’s side in the internet radio royalty rate (I’d start reading here if you you’re interested in a different perspective on the webcaster’s plight), but there is one problem I haven’t touched: Stream-ripping. Stream-ripping is what it sounds like: the ripping (i.e. downloading) of music streams. Well, I came across an article today in my news reader that reminded me that stream-ripping belongs in the conversation. In “RaimaRadio - Internet Radio DVR,” Davis Freeberg explains how users can use a RaimaRadio, a freeware application, to download internet radio streams into .mp3 files. Freeberg calls this download a “time shift” of radio content, but it’s essentially the same as downloading music through a p2p application. Instead of someone offering the song through Kazaa, they can just broadcast the music they want to “share” with others. And with a wink and nod, the listeners can build a mp3 library of songs they downloaded from the stream.
Don’t just take my word for it. Here’s what Freeberg wrote (emphasis mine):
Even more powerful then the scheduling capabilities, is the ability for Raima to monitor and record specific songs or artists that you are interested in. Instead of illegally downloading songs from the P2P networks, Raima allows you to create wishlists and will scan for those songs on any station that you tune into. The number of streams that you can simultaneously record is only limited by your bandwidth. This allows you to set up filters, record 10 different stations overnight, and in the morning you’ll have a hefty MP3 collection.
How is stream-ripping related to the internet radio royalty rate debate? Webcasters want the right to play an artist’s music without his or her permission, and at a rate lower than many artists want for the publication of their music. If the government grants the webcasters that right, music artists will have no ability to control how their music is played. If a webcaster wants to play an artist’s music across an unsecure mp3 stream but the artist will only accept a DRM’d wma format, the webcaster wins. If the artist wants to establish rules about how many times his or her songs can be played, it doesn’t matter. The artist just has to accept the rates and rules the webcasters “negotiated” with the government.
I’ve said it before, and I’ll say it again. Webcasters say that one of the reasons they are fighting for lower rates is to protect the artist and the music, but what they’re really doing is using the government to rip away the artists’ intellectual property rights.
Now, I don’t think stream-ripping is a huge concern today, due to one big problem that Freeberg points out in his article: Quality. The quality of sound you’ll hear on many internet streams does not match the quality of sound you’ll hear from a cd or from an online music store. It’s a noticeable difference, and I bet it’s enough to make most people look for some other source for their music. However, this is a problem that will be overcome. As computers gets faster and internet connections get better, the size and quality of internet streams will quickly grow. Just look at what has happened with video and Youtube. Online video used to be slow and a waste of time years ago, but now we’ve reached the point where anybody can put up a video that can be easily watched by anyone else. Just think of the improvements we’ll see in the coming years. CD-quality streams will be the standard someday, and that will make downloading music off of an internet stream worth the trouble.
If artists were allowed to control what happens with their music, they could prevent webcasters who offer unprotected, high-quality mp3 streams from playing their music. If the Internet Radio Equity Act or anything similar passes, artists will have no recourse. Webcasters will get to play their music no matter what the artist says, and they’ll be able to play the music for an incredibly low rate.
Stream-ripping is an example of the problems that can arise when the government meddles in the music industry. The ideal solution is to keep the government out and let individuals negotiate and work out their differences.
Tags: [internet radio, stream ripping]Comments
Moving towards Option B
Yesterday, I wrote a post commenting on the free-market, negotiate-with-the-copyright-owner option that’s hardly mentioned in news articles and editorials on the internet royalty rate battle. Well, I happened to come across a new story that shows one of these webcasters using that option.
I wrote a post yesterday commenting on an option that webcasters have to deal with the government’s increased royalty rates: Negotiate with record companies and artists directly. In my example, I called this “Option B.” I also commented that this option is hardly ever mentioned in the debate. Well, a few days ago I came across an article that not only mentions the option, but shows an example of a webcaster using it. As reported in “SoundEx touts digital royalty deal” at the Hollywood Reporter:
Some stations are taking matters into their own hands.
Smoothjazz.com, a station in Monterey, Calif., is asking artists to waive their rights to the royalty in exchange for airplay.
and…
Shore [founder of Smoothjazz] contends that stations the size of Smoothjazz that allow artists to sell CDs right off the site help the artist as much as the webcaster.
“Not one artist has said: ‘You’re trying to rip us off,’ ” she said.
It’s up to the artist to decide whether the promotional value of her station is worth forgoing the payment they’d receive through SoundExchange, she explained.
“If they want to waive so we can play them, then they do; if they don’t, they don’t,” she said. “It’s totally up to the artist.”
Here is a webcaster that is going about securing the rights to play her music the right way: by asking for permission. The exposure webcasters give to musicians they play should be used as a negotiating tool, not an excuse or a rationalization for using government power to take away the property rights of music artists.
Tags: [internet radio, webcasters]Comments
The essence of the webcaster’s argument
There was some activity in the internet radio royalty rate issue last week. SoundExchange announced that they had made deals with 24 small webcasters. In response, a dozen webcasters released their own statement on the situation. That response contained some of the usual context-dropping statements, but I found one sentence that I think really illustrated what this debate is about.
We have asked for a reasonable, long term solution, not one that is subject to increase at the whim of the record industry every five years.
What they refer to as “whim” is the record industry’s right to control the price of their product: the music. One of the 24 artists that reluctantly signed the SoundExchange agreement added (emphasis mine):
Safroncikas added that he continues to strongly support passage of The Internet Radio Equality Act, HR 2060 in the House, S 1353 in the Senate. “A willing-buyer, willing-seller thoeretical standard cannot work when one entity holds all of the music cards. The rate-setting standard must be ammended,” he added.
What he refers to as the “music cards” is the record company’s property. What both are saying that so long as the record industry is allowed to control its own property and set its own rates, webcasters won’t have any choice but to accept the rates the industry sets. That would be bad, so the government should step in and give the webcasters some help.
I’ve written a lot on this issue, probably more than I should, and I’ve been trying to think of a way to explain why I’m against the Save-Net-Radioers cause and why I believe that most news and editorial coverage on this issue has not been complete and honest. And I got an idea. Ever since my first year of college, I’ve found that pictures and graphs can be very helpful in explaining programming concepts and methods. It allows people to see abstract ideas in a concrete form, which is very helpful when trying to communicate between two people. So, I’m going to try it here. As bad as this makes my writing sound, these two pictures probably present my argument better than I have in all my posts.
Here you can see the webcaster and the artist. The webcaster wants to play the artist’s music and the artist wants his music played by the webcaster. But unfortunately, there is a big obstacle in the way: SoundExchange! Note the “$” symbols next to SoundExchange. Greedy SoundExchange wants to take the webcaster’s money, but not give it to artists. Practically every news article I’ve read this year portrays the issue like this. Under these circumstances, if SoundExchange forces higher royalty rates, the wall between the webcaster and the artist will be insurmountable. But are these the real circumstances?
Here are the real circumstances. The webcaster wants to play music, and he currently has two options. He can use Option A and get the “right” to play the artist’s music by paying the government-set rate. Or, the webcaster can take Option B and get permission to play music directly from the artist.
Obviously, the webcaster is going to go with the option that costs the least amount of time and effort. Option A has been the cheapest and easiest for years, thanks to a low royalty rate that covered all music - regardless of the wishes of the individual who created the music. However, earlier this year the CRB announced that the cost for Option A was going to increase dramatically. That takes away Option A for most webcasters. That sounds bad, but look again. The government action has, in effect, priced themselves out of the market and made negotiation with record companies and artists the only remaining option. I think that negotiation should be the only option anyway, so I’m happy with the decision.
I’m not happy that some webcasters may have to shut down their radio stations. I’ve read a lot of their stories, and I hope many of them can continue. But then again, I’d also like everybody to have easy access to health care, education, clothing, job opportunities, good food, big houses, dating opportunities, fast cars, high-speed internet, and all of the things that help to make life fun and enjoyable. The question is, how do we do that? I think the answer is to allow people to live their lives as they choose without interference from other people or the government. The only role government should play is to protect someone from interference, and then let the chips fall where they may. If internet radio can survive and by dealing directly with music owners, then it will survive. If it doesn’t, then it doesn’t (it’s going to be fine, of course). I think we get in big trouble when we try to use the government to make the “right” outcome occur, whether it’s the promotion of internet radio or any of the other issues listed above.
Tags: [CRB, internet radio, soundexchange]Comments
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.
Tags: [internet radio]Comments
Same old thing…
I’m starting to get my free time back, and I had some time the last couple nights to use my computer for fun. But what did I do? I debated the internet radio royalty rate issue over at talkobjectivism.com. I’m getting to the point where I can write a long statement on this subject in very little time. Since this conversation constitutes what little I’ve written this week and since my first comment is a basic overview of the reasons I don’t agree with the SaveNetRadio’ers, I’m going to repost it here.
The rest of the conversation can be read here.
Hi Mosley. I’m also a big supporter of the fair market, but in this debate I fall on the other side. I’m probably the only person outside of SoundExchange that you’ll find that agrees with the CRB ruling. I know this isn’t a fun issue for most to discuss, but if it’s ok I’d like to explain why I believe the royalty rates should be raised.
First, I believe that music artists should have full ownership and control of everything they create. Like all intellectual property, this means that anybody who wants to take or use the music the artist created should have to obtain permission from the artist. Most artists will offer you that permission in a number of ways. If you want a recording of their music, you can usually buy a cd they made. If you want to listen to their music, you can go to one of their concerts. If you want to play their music for other people to hear, like on a online radio station, you can negotiate a rate with the artist. (Who knows, the artist might pay you to play their music on your station.) An artist might even make their music available for no cost by everyone. Basically, it is up to the artist to determine who or what is done with his own music.
Second, the proper function of the government is to protect individual rights, including the right to own property. In this case, the government should protect the music artist’s right to control who can use his property. If someone takes or uses that artist’s property without permission, the owner’s rights have been violated and the government should step in.
Unfortunately, the government is not doing its job for music artists. Rather than protect a music artists right to control his intellectual property, the government created a “Copyright Royalty Board” that allows webcasters to broadcast music without obtaining permission from the music artist. If a webcaster can’t or doesn’t want to go through the trouble of negotiating with music artists, he can just use the government license and play anything he wants. And if a music artist wants to charge more than the government royalty rate for his music, he’s out of luck.
It’s important to note here that webcasters are the beneficiaries of the CRB, not the victims. Most people that protest the CRB’s decision to increase their royalty rates do not have a problem with the government’s violation of the rights of music artists. Their complaint is that thegovernment’s individual-rights-busting license will cost too much. Currently, the rates established by the government are cheap enough to allow practically anybody to broadcast other people’s music, and that’s one of the reasons we’ve seen online radio flourish. The CRB’s rate increase will make it much harder for people to use the government’s license, but I believe that they never should have had that license in the first place.
The ultimate solution to this government intrusion is to abolish the CRB and get the government out of the royalty-rate-setting business, but that’s not an option today. The debate is whether the government rates should be very high or very low. I think the rate should be very high to make the government’s license as unappealing andinaccessible as possible, because nobody has the right to use that license anyway. If the government’s rates are out of reach of webcasters, their remaining option is the only option they should have had in the first place: To negotiate with the people who own the music they want to play.
Will enforcement of the CRB’s ruling cause some online radio stations to stop? Probably. I still think that’s a better option than allowing webcasters to use the government to step on the rights of the music artists. I really believe that internet radio is going to be fine, though. I believe that if there is a demand for something, like streaming radio, the market will try to fill that need. Webcasters are always quick to tell you all of the benefits music artists receive when they play their music. If a music artist wants to receive those benefits, it would make sense for him or her to give the webcaster permission to play his music. Music artists still have the ability to establish their own royalty rates, independent of the government’s rate, so they can still get their music played on online radio stations if they wish.
Tags: [internet radio]Comments
Increased royalty rates for whom?
July 15th, the day that the new royalty rates will hit the internet radio, is coming this weekend. I’ve already talked a lot about this issue, but with the upcoming “deadline” (the Internet Radio Equity Act can still be passed after then) I’m going to get the rest of my thoughts out.
The save-net-radio crowd has had no trouble getting their arguments out, and after reading most news stories you’d think that the situation was dire. They refer to July 15th as “the day the music dies.” They want you to believe that all webcasters are going to go offline in a week, but there is a small fact that seems to get dropped from the discussion. A few months after announcing the increased SoundExchange announced the increased radio rates, SoundExchange made a concession that you might not have heard about.
That concession is: Small webcasters do not have to pay the increased royalty rates.
SoundExchange made an offer in May to allow small webcasters (those with below $1.2 million in revenues, if I remember correctly) to continue to pay the lower royalty rates they have been paying through 2010. This means that small webcasters can still play music just as they have been for years. This ruling is affect businesses who use this government license to play music without having to be bothered to ask copyright owners for permission.
Most importantly to me, this concession also means that small webcasters won’t be hit with a huge retroactive bill that will put them into personal bankruptcy. While I don’t believe that webcasters should be able to play people’s music without explicit permission, people who run small internet radio stations as a hobby should not have their personal and financial lives ruined by this government ruling. Whether or not the webcasters knew that they were playing music for rates that wouldn’t be decided for months, the government shouldn’t hang them out to dry.
What was the response from the save-net-radio advocates? Not good enough!
I don’t think this concession changes the fundamental issue in this debate, which is the role government should play in the music business. Still, I think this concession is important . If anyone wants to suggest that the music industry has been so damaged by government interference so badly that further government regulation is a necessary step to keep everything from collapsing, then we should discuss just how bad the situation is. Is music really going to die in less than a week? Is internet radio even going to die next week? Is your favorite webcaster even going to go off the air next week?
I don’t think the rhetoric matches the facts. More tomorrow…
Tags: [internet radio, royalty rates]Comments
Bye Bye Allofmp3!
Allofmp3.com, one of the internet’s biggest sources of illegal music, has finally been shut down. Another site that operates in the same way by the same company in Russia has sprung up to replace it, but the fact that something finally happened to Allofmp3.com is still good news.
For anybody who doesn’t know what this site is about, Allofmp3.com was a Russian website that sold songs for pennies compared to the prices offered by services like iTunes or Napster. Despite protests from music labels and artists that Allofmp3.com was taking their property, Allofmp3.com claimed that it was selling music legitimately under Russian law. Russia does not respect intellectual property rights, so I don’t necessarily doubt that Allofmp3.com’s claims were true. Still, they were selling other people’s music without permission. If Russia is ever going to be taken seriously as a country worth trading with, sites like Allofmp3.com can’t be permitted.
I see similarities between the allofmp3.com issue and the internet radio royalty rate issue we have in the US. I read allofmp3.com’s legal argument (since the site is now down I can’t reference it), and if I remember correctly they claimed that Russian law allows other organizations to set and collect rates for music, with or without the permission of the individual who owns the music. The owner of the music can contact the organization and get the money from the sale, but the owner does not have the ability to make the organization stop selling his or her music.
Sound familiar? It’s a compulsory license, like the one in the US that allows webcasters to broadcast other people’s music without their permission for rates that the owner never set. Now, there are differences between these two cases. The save-net-radio advocates want to broadcast music, while allofmp3.com sells music. And unlike the save-net-radio advocates, allofmp3.com sells music at rates that practically constitute giving it away. If one were to measure the extent at which both sides want to violate someone’s intellectual property rights, allofmp3.com would blow the save-net-radio people out of the water. However, the fundamental idea behind the two are the same. Both want to use someone’s intellectual property without obtaining permission, and both want to use the government to do it.
Tags: [allofmp3, internet radio]Comments
More on royalty rates
So, I received a few responses (here, here, and here) from my post last week in response to Dismuke’s post about the free market. I’ve explained my position on the issue and I don’t want to fan any flames, so instead of repeating myself or going point-by-point through the responses, I’m just going to write a few general comments and leave it at that.
First, to the claim that I misrespresented his position, I just want to say that on the post I replied to, the “So long as the government is setting the rates…” clause was the only inkling I could have that he was against statutory rates, especially since he was asking for more government regulation. After I wrote my post, he released an essay criticizing statutory rates. It would have been nice to read that essay along with the others on his blog, so I have to admit that I was wrong to throw Dismuke in with the rest of the webcasters who are pushing the Internet Radio Equity Act. I still disagree with his position and many points in that essay, but so far as he is against statutory rates and government interference in the music industry I’m with him.
Second, I believe I’ve been misrepresented when he tied my position to his “MilkExchange” example in one of his rebuttals. It seems that a big point of contention between the two of us is the the idea that SoundExchange constitutes a monopoly. I don’t believe it is a monopoly because copyright holders and webcasters are still able to negotiate rates independent of SoundExchange. I think one can deduce logically from that fact that copyright holders can form their own licensing organizations to offer broadcasters the ability to negotiate rates for music in bulk (if one person can do it, why can’t a group of people?). Dismuke asked me if I knew that for a fact, and I admit that I don’t. If it is true that the law forbids such organizations, the situation is even more messed up than I knew and I might even agree with call to lower royalty rates as an intermediate step to fixing the situation.
I’m not the one that is advocating for more government regulation, though. If I should ask my representatives to vote for the Internet Radio Equity Act because there are government barriers that prevent private licensing organizations, where are they?
(Note: I asked if the law forbids such organizations, not the RIAA. How the RIAA would feel about such organizations or whether they would fight them legally is not relevent to the question of whether a monopoly really exists.)
For the record, my position on “MilkExchange” is not what Dismuke claims it is. I think there are essential differences between his example and this royalty situation, but I don’t want to get into it right now.
Third, I’ve stated repeatedly that the basis for my position on this issue is my belief in the concept of intellectual property rights. The existence of SoundExchange and the CRB are violations of those rights, and the final solution to this issue is to get the government out of the music business. I’ve side with the CRB ruling only because I feel it is the least-restrictive option for copyright holders. I’ve been dismissive of points not related to the rights of copyright holders because I don’t think they are relevent. Yes, I think the rate jump was excessive. Yes, I would like to have more access to music I like. Yes, I don’t want small webcasters to lose their shirts to pay retroactive royalties. Yes, I think copyright holders will make more money if they let internet radio stay online. Do I think that copyright holders - even if they’re the RIAA - should have to lose control of their property for the sake of others? Absolutely not, and I think that’s what this debate is all about.
If the government passed a law that eliminated SoundExchange and the CRB and brought a real free market to the music business, I bet we’d see the same “Save Net Radio” movement that we see today. Dismuke might not be a member, but everything else would stay the same.
Fourth, I have to stop staying up past midnight writing on this subject. It’s time for bed.
Tags: [dismuke, internet radio, royalty rates, soundexchange]Comments
Dismuke on “free markets”
A couple months ago, someone on the webcaster-side of the net radio royalty rate debate suggested that I read a post titled “An Unfree Market” written by Dismuke. I read it then, along with many other posts and articles on the issue, but I always remembered Dismuke’s response because of the way he tried to defend the idea of a “free market” while also trying to argue that the government should force low music royalty rates on music labels.
The two positions contradict one another, so in order to do so he twisted the idea of a “free market” into one that better suited his pro-government-regulation position. There are some arguments Dismuke made that I would like to address.
What is a free market?
A free market is a market where transactions occur only when the seller and buyer voluntarily agree to make the sale. The price for any product is ultimately up to the seller to set, and the amount that any buyer is willing to pay for that product is ultimately up to the buyer to set. The only way for a sale to occur is when the two sides can agree to terms. The only role the government plays in this type of market is to protect the freedom of all parties involved.
I’ve written this before, but that’s where the “free” in “free market” comes from. All parties are free to exercise their own judgment without being coerced into any deal.
This is where webcasters break with the ideas behind a free market. In a free market, the owner of a copyrighted song would be able to set his own publishing rate for any webcaster to play the song, and the webcaster would be free to accept the rate, walk away and never play the song, or negotiate a lower rate. Unfortunately, current U.S. law does not operate this way. Currently, if a webcaster does not like the rate the song-owner asks for, the webcaster can ask for “permission” from the government to play the song without the song-owner’s permission. The government has arbitrarily established a royalty rate that all webcasters can pay music labels, regardless of whether the music labels agree to the rate or not.
This special deal webcasters can make with the government violates the principles behind a free market. It takes away the freedom music owners have to set their own rates.
Webcasters love this arrangment, though, because the rates established by the goverment were much lower than major music labels wanted. That is, they were lower until the CRB’s recent decision to dramatically raise the royalty rates. So, when webcasters ask you to “save net radio” they’re not trying to bring back the free market. They’re really asking is that you pressure your government representatives to continue government intrusion into the free market.
So, how did Dismuke explain a free market? He doesn’t, except to throw out three facts about free markets:
1.) Free markets don’t allow prices to be set by judges on a government board,
2.) Free markets do not allow special privilege for certain industries to be set by the government, and
3.) In a free market, prices fluctuate according to supply and demand.
These are all true facts, but these facts by themselves do not define what a free market is. He never explains what he means by “free market,” leaving it to the reader to assume it is what he says it is. But if the the term “free market” is explained simply as a system where people are allowed to make their own agreements with one another without government influence, it’s easy to see how Dismuke’s call for government coercion in the music royalty rate business is in direct conflict with the free market.
Now, I can see how the first fact he gave could be considered an acknowledgement that the government should not be setting royalty rates. He wrote:
For the judges to attempt to cloak their rationalizations using free market verbiage is absurd and drops context in a massive sort of way because the entire process they are part of and the results of their decision is the exact opposite of a free market.
The results of the CRB decision are the exact opposite of a free market precisely because the process is the exact opposite of a free market. No matter what decision the CRB makes, it will be a result of a process that takes away the freedom of the owners to establish their own rates. Dismuke does not elaborate on this nor argue for the abolishment of the CRB and the special privilege they give webcasters.
Special privilege for certain industries?
Dismuke, like many webcasters, believe that is is unfair that the CRB’s royalty rates are much higher for internet streaming than the rates established for AM/FM radio. They claim that this is an example of the government giving the over-air radio industry advantages over the online radio industry. Dismuke wrote:
On what twisted logic can one say that the value of a given recording being streamed is somehow different depending on whether the stream originates from an FM broadcaster or whether it originates from a station such as mine?
The value is different because the owners of the music being streams want a higher rate for internet transmissions.
If they were able to set the royalty rate for broadcasting their music (as they would be able to in a free market) they would set a higher rate. In setting the higher rate for internet broadcasting the government is not giving over-air radio a special privelege. It is refusing to grant internet radio a special privelege over the music owners: The ability to set their own royalty rate for somebody else’s music.
It can be argued that the music owners should want to lower royalty rates for music broadcast over the internet, but the final decision to allow the broadcast should be theirs to make.
Fluctuating Prices
Dismuke explains how prices fluctate in a free market, and correctly points out that it is not a guarantee that rates would increase every year (like the CRB ruling has declared) in a free market. He wrote:
For a person to know what the market price for a given good or service in the year 2010 ought to be would require nothing short of psychic powers or omniscience.
What’s missing here is the fact that the violation of the free market is not in the CRB’s rate increases, but the fact that the CRB exists at all. Would Dismuke maintain his objection to the CRB’s psychic powers if they set the 2010 royalty rate to what he wished instead of what the music owners wished?
If so - then the next question is this: which copyrighted sound recording?
Do the judges on the CRB actually mean to suggest that the market value of all copyright sound recordings is identical?
Again, what’s missing here is the fact that the violation of the free market is the CRB’s blanket royalty rate for all music, but the fact that the CRB exists at all. Yes, in a free market the rates for unpopular music would probably be lower than rates for popular music, but in such a market the government would be setting royalty rates at all. But he wants the CRB’s lower rates, not a free market.
Pricing smaller labels out of the market?
For the CRB to price such copyright holders out of the market for Internet radio airplay does them a profound injustice - especially since the purpose of the CRB is to look out for the property rights and best interests of all copyright holders, not just copyright holders who happen to be the major mass market labels which control the RIAA.
The government pricing someone out of the market sounds bad, and definitely anti-free-market. But there is one little fact that Dismuke is not telling you:
Copyright holders are still able to negotiate their own royalty rates with whomever they wish.
In other words, music owners are still free to negotiate their own deals with broadcasters. If a band wanted to play their music on Radio Dismuke for a rate that is much lower than the CRB’s rates, they are free to do so (assuming they haven’t already sold their music to another party). If a deal can’t be worked out, though, the webcaster can go around the music owner and broadcast under the government’s rate.
So, nobody has been “priced out of the market” by the CRB’s higher rates. Music labels can still charge lower rates if they wish.
Freeloaders?
Aside from the implication that small webcasters such as myself are a bunch of mooching freeloaders, on the surface, this almost sounds reasonable.
I think this is a case where the term “freeloader” deserves to be defined. The dictionary.com definition of freeloader is “someone who takes advantage of the generosity of others.” Freeloaders do not steal from people, they just take everything that is offered. When I think of a freeloader, I think of the irresponsible cousin or uncle on television whose asks to stay for a few days to “get back on his feet,” but stays for weeks because the family doesn’t know a polite way to ask him to leave.
I definitely agree that the term “freeloader” does not fit webcasters who are trying to “save net radio.” In fact, freeloader is too good of a term to describe them. These webcasters are not taking advantage of the music owner’s generosity, they are trying to steal the music out from under the music owner. The tool they are using for this heist is not a lockpick, a crowbar, or a club. Their tools are the government, which they want to use to invalidate the music owner’s right to control their intellectual property, and you, who they plan to use to pressure the government to do what they want.
Webcasters will be quick to point out that they pay royalty rates, and their payment is money the industry would not have received had they not started their internet broadcast. What they’re not telling you is that the record companies don’t want them to sell their music at them at the rate they’re paying, and the issue at hand is whether the record companies should have the right to tell them no.
Here’s a quick example: Imagine two guys, Dan and Mike. Mike buys a brand new car for $20,000. Dan steals the car one day, sells it for $500, walks home, and gives the money to Mike while saying “I helped you out, this is money you didn’t have before I sold it.” The problem between Dan and Mike would not be the amount of money Dan sold the car for, but the fact that Dan sold Mike’s car without permission.
I don’t know enough about how the creation of the compulsory license for internet broadcasting has affected that industry to know if it is wrong for webcasters to take advantage of the license to play music without first getting permission from the owner. So long as the webcaster pays the royalty rates dutifully, I’m inclined to believe that they’re just mixed up in this mess of a system our government has created. However, if a webcaster - or anybody else - takes another step forward and becomes an advocate for this system that steals the private property from music owners, he has become part of the problem.
“Beyond Disgusting”
Dismuke wrote (emphasis mine):
The task of the Library of Congress and the Copyright Royalty Board is to protect the property rights and interests of all copyright holders. The fact that the judges on the CRB chose to use their authority to create an arbitrary rate scheme which will price a great many copyright holders out of the market for valuable Internet radio airplay so that some copyright holders with political pull can be protected from emerging forms of competition - well, that is disgraceful. And the fact that they attempt to use the honorable term “free market” as a rationalization for their decrees is beyond disgusting.
If it is “beyond disgusting” that someone would misuse the term “free market” when issuing their ruling, then how should one describe the way that webcasters argue for a completely anti-free-market system? The paragraph above is just like his entire post. His first sentence states that the task of the Library of Congress and the CRB should be to protect the property rights of all copyright owners (which should mean that property owners should be able to set their own rate for their own property), and then in the next sentence he complains that the arbitrary rate the judges picked is not low enough for webcasters (nevermind what the property owners want). He complains about the political pull of some record companies, all the while trying to build up political pull of his own. And all of this is surrounding a statement that is completely false (the idea that anybody will be priced out of internet radio).
If Dismuke was really concerned about the property rights of music owners and if he really believed that the free market was “honorable,” he would advocate for the elimination of the CRB and the compulsory license for internet broadcasts.
Why I Wrote This
I know I’ve written a lot about the internet radio, even before writing this huge post. One of the things that motivates me to keep doing it is the frustration I feel in when essential points in issues like these are ignored in favor of emotion-based arguments or outright lies. Instead of arguing whether intellectual property owners should have the right to control their own property, we get “Save Net Radio!” What is “net radio?” Who are we saving it from? How will it be saved with this government action? The questions raised by a context-dropping call like “Save Net Radio” lines up the issue perfectly for those who want to fill in their own answers without really addressing the issue at all.
Edit 6/21/2007: Very stupid spelling errors fixed.
Edit 6/22/2007: I should have probably made this clear above, but the link to Gus Van Horn’s site is not meant to imply that I’m replying to something he wrote. I’m linking to a comment someone else wrote.