Radio royalty rates jumped? In comes the free market!
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?
Tags: [internet radio, royalty rates, soundexchange]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
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
Confusion about SoundExchange’s role in web royalties…
Yesterday a post titled “RIAA Claims Ownership of All Artist Royalties For Internet Radio” made its way on the front page of Slashdot. In that post, the author links to a Daily Kos article that states that SoundExchange has the right to collect royalties for any music streamed over the internet, which is true. Where both articles go wrong, however, is when they jump from that fact to the false assumption that webcasters cannot play anybody’s music without paying royalties to SoundExchange. Here are the exact quotes:
With the furor over the impending rate hike for Internet radio stations, wouldn’t a good solution be for streaming internet stations to simply not play RIAA-affiliated labels’ music and focus on independent artists? Sounds good, except that the RIAA’s affiliate organization SoundExchange claims it has the right to collect royalties for any artist, no matter if they have signed with an RIAA label or not. […]
[…] One solution proposed by Webcasters is to just not play RIAA-member songs under the assumption that then they don’t have to pay the royalty to the RIAA’s collection body, SoundExchange; Webcasters would then just pay the independent artist the royalty.
This sounds fair and just because it is. However, the RIAA is not about being fair and just. […]
Sorry, but they have it wrong. I think I’ve written about this before, but I’ll explain the issue again as simply as I can.
People who create music have the rights to decide what they do with that music. That includes the right to negotiate with webcasters to stream their music over the internet. Our government still recognizes this right today.
The Digital Millennium Copyright Act (DMCA) gave webcasters another way to secure “permission” to play an artists music. Rather than negotiate with the owners of the music they wish to play, webcasters could pay SoundExchange, an organization associated with the RIAA, royalty rates that were established by the United States Copyright Board. SoundExchange’s job was to distribute the royalties to the artists. Essentially, the DMCA gave webcasters a way around securing permission from music artists to play their music. I think that’s horrible, but webcasters loved it. They could play practically anybody’s music for a low rate and not have to be sued for copyright infringement. Good for them, but bad for the owners of the music. What about what they want to do with their property?
This SoundExchange option for webcasters was just that: an option. Webcasters are free to ignore SoundExchange and make their own deals with any artist or music label they wish, and at any royalty rate. Or for free, for that matter. Artists are also still free to stream their own music without having to deal with SoundExchange. As far as distributing music over the internet, the DMCA only increased the number of options available to webcasters.
SoundExchange is not an option for artists, however. No matter who an artist wishes to grant publishing rights to his music to, anybody can play his music by going through SoundExchange. No matter what an artist wishes to charge for his music, anybody can play his music according to SoundExchange’s rates. All of the webcasters’ new “rights” to create their internet radio stations came at the expense of the artist. And accordingly, it also came at the expense of those who purchase the rights to artists music. Yes, it was the big labels, including those that are associated with the RIAA, that lost their rights. All because some people think it is their right to play other people’s music on their own radio stations.
That’s what SoundExchange means when they say that they can claim royalties from webcasters that use compulsory license to stream music. It’s compulsory for the artist to allow his music to be streamed over the internet by any webcaster that meets SoundExchange’s rates. That doesn’t mean that it is compulsory for the artist to only go through SoundExchange to stream his music, or to make other arrangements with other webcasters for higher or lower rates.
The authors of the Daily Kos and Slashdot post are mistaken when they suggest that SoundExchange has taken away the artists ability to play his own music without paying SoundExchange’s rates. And when the Daily Kos author states that “Artists can offer to download their music for free, but they cannot offer their songs to Internet radio for free,” he is incorrect. An artist can still offer his songs on internet radio for free. What he can’t do is stop SoundExchange from accepting royalty rates on his behalf by those webcasters that play his music and take the SoundExchange option.
So who is to blame for this? They believe that it’s the RIAA, but who gave the SoundExchange its power? If it wasn’t for the government’s intrusion into the music business, the artist would still have sole rights to his own music. I can accept that the RIAA has some blame for this mess, depending on how much “input” they gave the government when they established the SoundExchange option. However, the only solution for this problem is eliminate the law that gives SoundExchange any power at all. Setting music royalty rates is not a proper role for government.
Tags: [daily kos, digital millennium copyright act, internet radio, riaa, royalty rates, slashdot, soundexchange]Comments
Internet Radio Equality Act
Internet webcasters have been crying for somebody in the government to step in and stop the US Copyright Royalty Board’s ruling, and now it looks like they’re going to get some help. From an article at internetnews.com:
“The illogical and unrealistic royalty rates set by the CRB have placed the future of an entire industry in jeopardy,” Ward said in a statement praising the Inslee-Manzullo bill. “The Internet Radio Equality Act is the last best hope webcasters, artists and listeners have to keep the music playing.”
Of course they’d have to call it the “Internet Radio Equality Act.” When one person thinks of “equality,” he or she would think of things being equal. And that’s what this bill does, right? It tries to equal out the interests of webcasters with the interests of the music owners? Well, it’s precisely this attempt that makes this bill inequitable. It takes away the rights of the artists (and the record companies they sell their music to) in order to please the desire of a few people who want the artists’ property. To say that it’s “fair” for webcasters to set the royalty rates of an someone else’s music is to say that the person never had the rights to the music at all. It says that the creator of any intellectual property has a say in what is done with that property only up to a certain point, at which point someone else can take it. That point, in this case, is the webcaster’s desire to play music at a rate that can be supported with internet advertisement, but I think that once you take away someone’s right to their property it’s almost arbitrary as to how you do it and to what amount you do it. No matter how far you go, you’re still against it on principle. Today webcasters may be willing to pay $.0008 cents per broadcast, but who knows what it will be tomorrow? One thing is for sure: The one individual who won’t be setting the rate is the artist.
The only way we can achieve “equality” is for everybody to be treated the same under the law and for people to respect one another’s rights The artist who creates music has the right to control what is done with that music. Rather than respect that right, webcasters are trying to get Congress to pass laws that take what they want. If Congress will do such a thing, then what other rights may be up for grabs?
One of the things I hate about this debate is how it’s framed as a quest to “Save Internet Radio” when broadcasting music online is not at stake. People will still be able to listen to streaming radio on the internet after this ruling, even if all of the webcasters that can’t afford the new rates go out of business. There are plenty of stations that do have the permissions from artists, and there are many online music services that give you almost unlimited access to millions of songs. What’s really at stake for some webcasters is their own ability to play music that they can’t afford.
Tags: [internet radio, internet radio equality act, royalty rates, webcaster]Comments
Net Radio discussion at S&R
This past weekend, I did more writing in response to a post about the recent internet radio ruling at a site called Scholars and Rogues. I don’t know the site that well, I just happened to come across it while I was checking out blog posts on the subject of internet radio at Technorati. I don’t think enough is being said for the “other side” of the internet radio royalty ruling, and I mean those that don’t believe that internet broadcasters should be able to use the government to set royalty rates on music. Below you can read are the comments I wrote that best explain my position on this issue.
5. Darren - April 21, 2007
I don’t see how this ruling will stop internet radio.
What’s at question is who gets to play whose music and under what terms. Normally, a webcaster would have to obtain permission from the owners of any music they play. Whether you agree with it or not, this board is a way for webcasters to get around seeking permission and to play the music for a rate that the board sets. Even though the board may have changed their rates to a level that most webcasters can’t afford, webcasters still have the option of playing music if they obtain permission.
It may seem that is is unfair that the rates were hiked so high, but shouldn’t the people who own the music decide what the fair price is? It’s no different than if, for example, you set up a garage sale and tried to sell your computer for $1,000,000. People may laugh at you and nobody will buy the chair, but it’s *your* chair and you get to decide what it is worth *to you.* The same applies to the RIAA and all music they own. Whether one likes it or not, when a musician signs a contract with a big label to sell the rights to their music, the big label owns the music. And the big label gets to decide what they will charge for it.
No matter what the RIAA does, people are still free not to buy their music, musicians are free to give away their music instead of sell it to the RIAA, and webcasters are still free to play music of those that have given them permission.
8. Darren - April 21, 2007
Webcasters may believe the royalty rate was fair, but the owners of the music the webcasters were streaming did not. I believe that only those who own the content should get to decide the royalty rates that are charged for that content.
I don’t see a major difference between webcasters who think they should be able to publish music for free and those who are willing to pay last year’s royalty rates. One will pay the artist *something,* but both accept the premise that they should get to stream music without obtaining permission of the artist. If one really wants to stand for the rights of artists (or for all individuals, for that matter), they should reject that premise.
I think that the RIAA has made it pretty clear that they think webcasters should have to pay more to play the RIAA’s music. Therefore, they are raising their rates. Webcasters can take it or leave it.
11. Darren - April 21, 2007
The RIAA owns the rights to all music it purchases from the artist. Once the artist signs a contract that transfers the ownership rights from the artist to one of the music labels, the RIAA has the same rights to that music as if they created it themselves.
This actually is an extension of the artist’s right to own whatever he or she creates. Artists have the right to trade their product to anybody they want for any amount of money. If the government’s copyright board were to step in and take away the RIAA’s right to sell their product, it would be the same as if they took those same rights from the artists. The government would be telling the artist (or RIAA, or whomever else owns the music), “You may not sell your music for that rate, it’s too high. Internet broadcasters only want to give you 0.0001 cents per play, and what they want is more important than what you own.” Who really loses in this deal?
The RIAA is always made to be the bad guy, but the RIAA has one thing over webcasters that are pushing this “Save Internet Radio” campaign: The RIAA won’t take an artist’s property if he or she don’t want to sell it to the RIAA. The RIAA respects the rights of the artist, because it’s those same rights that allow the RIAA to function as a business at all. Webcasters, on the other hand, will try to compel the government to *force* content owners to sell their products at a lower rate. Webcasters are right in one respect: Only one side in this debate is really looking out for the rights of the artist.
20. Darren - April 22, 2007
[…]
That’s what the free market is really all about. It’s more than people buying and selling things for money; it’s also about respecting individuals and their rights to their lives and their property. We might not like or agree with what people do with their stuff, but we have to respect their rights. That’s the principle I’m talking about. If you think that streaming music over the internet is important enough to violate those rights, then we don’t agree in principle at all.
[…]
Tags: [intellectual property, internet radio, riaa, royalty rates]Comments
Kings of Content
I think Corey Deitz is missing the mark overall in this article, but he does have some valid advice for webcasters who can’t afford the new royalty rates.
From “Becoming King of Their Content“, Dietz wrote:
What Webcasters Can Do
The answer is simple: find content that is not tied to any royalty structure.
Any webcaster can survive who originates his/her own content like talk shows, instruction, news, original music, etc. If the only thing you can do is stream someone else’s music, then quite honestly you haven’t been offering anything that can’t be obtained somewhere else.
I would change one thing here, though. The problem is not that a webcaster doesn’t offer something that can’t be obtained somewhere else, it’s that it is owned by someone else.
Tags: [internet radio, royalty rates]Comments
Copyright Royalty Board Ruling (2)
I received a reply to my previous comment on the recent copyright royalty ruling, and I responded with this:
I don’t have a problem with the RIAA lobbying this government board because they are lobbying for their own property.
The little secret that the anti-RIAA side won’t tell is that webcasters depend on government intervention to keep royalty rates low enough to allow them to broadcast their stations. If this issue was left to the free market where the content owners were allowed to set their own rates, the RIAA would probably set high rates similar to what we saw the government board set. That’s why webcasters are urging their listeners to contact legislators to try to make the government set a low rate rather than try to get the government out of the business all-together.
I know that some artists have come out against the rate increase, and they’re paraded as examples of how webcasters are siding with interests of content owners. However, so long as those artists have signed with labels that are members of organizations such as the RIAA, they’ve voluntarily give up their say in what happens with their music. It’s part of what goes with the paychecks they receive. They traded their music for money from someone that wants to sell their works. Once the property rights over that music have been transferred to another party, that second party has the same rights over that music that the content creator had. So, I really disagree with this idea that the RIAA is somehow taking artists’ music or getting in the way.
I don’t want to take Gus’ comment list, but there is one more thing I’d like to address while I’m writing about this: Webcasters bemoan the fact that the internet rates are so much higher than AM/FM radio rates, and claim that they are unfair. I have two responses to that statement. First, and most importantly, content owners decide what is “fair” when it comes to their property. It would be more fair if the RIAA charged $100 per song per listener than if the government set the rate to a level webcasters could afford. Second, broadcasting music over the internet brings has problems that don’t exist when broadcasts over the airwaves. The first problem that comes to my mind is the fact that internet broadcasts can be ripped easily, turning some stations into a real-time music file-sharing system. I believe that the majority of webcasters are honest and that the bitrates the music is streamed on probably stops most people from trying to steal music in this manner. However, there is an increased risk for the RIAA here, and I can understand why they would want to try to better secure their property. It’s the same reason much of the music purchased online has DRM built-in. I think it’s perfectly fine to debate whether the RIAA is following a good business model when it comes to online distribution (personally, I won’t buy any more of their DRM’d music, it’s too much of a hassle), but what should not be up for debate is the RIAA’s right to their property.
Sid said:
“The alternative method — negotiate with content owners — is, quite frankly, impractical.”
It’s statements like this that make it easier to understand what the RIAA is up against. This is not an issue of how much should be charged for internet broadcasting, it’s for who actually controls the content to be broadcast. I believe that all personal property, whether material or intellectual, should be respected.
Tags: [copyright, government regulation, intellectual property, internet radio, royalty rates]Comments
Copyright Royalty Board ruling on webcasting rates
Gus Van Horn wrote a post discussing the recent U.S. Copyright Royalty Board’s ruling to increase the rates webcasters owe for broadcasting music over the internet. His previous posts on this issue are what alerted me to the problem, so I wrote my feelings about the ruling as a comment on the post:
Tags: [copyright, government regulation, intellectual property, internet radio, royalty rates]Hi Gus. I saw the news about the internet royalty ruling today, too, and since I’ve been thinking and reading about this issue since your last post on it I thought I’d post another comment.
The problem with the rates that the government set is not that the rates are too high or low, but the fact that the government has any say in the rates at all. Those who hold the rights of the music should set the rates, and nobody else. It’s their music, so you need their permission. But so long as the government is playing a role in this issue, the government should side with the content owners. Like I said in my previous comment, the government should not be trying to balance the rights of the content owners with the wants of the broadcasters. Since SoundExchange seems to be very happy with the ruling, I’m more apt to believe that the correct ruling was made.
I disagree with how this issue is framed as a question whether “internet radio” will be allowed to continue. Internet radio will continue. This ruling doesn’t take away any broadcaster’s right to play music to which he or she has permission. What this ruling affects is what it will cost for some broadcasters to get permission to play some music, and it’s setting the cost to a rate that the content owners want. That’s all. Nobody’s individual rights are being violated (except the property owners for having negotiate with anyone about their own rates).
Imagine what would happen if the government gave the internet broadcasters the low rates they wanted. The government would essentially be telling the RIAA, “We don’t care what you want to do with your property, because internet radio must be preserved.” What is “internet radio?” Playing music over the internet? Whose music? Playing it to whom? These aren’t questions you’ll find answered on sites like saveinternetradio.org. There, you’ll just find easy ways to get in touch with your legislators and pressure them to take from the RIAA what you want.
I’d like to finish by pointing out that despite this ruling, it’s never been easier to listen to the music you want legally. Many websites allow online streaming and will continue to do so. Some even allow you to play a low monthly fee to have unlimited access to millions of songs, and even download them all to your mp3 player. For $12 a month, you can have a music library that beats the biggest internet music pirate. I think online music is going to be ok.