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Can't tell your royalty dispute players without a scorecard? Here's a scorecard

Posted on: 01/09/2009

UPDATE: Under the terms of last fall’s Webcaster Settlement Act as passed by Congress, SoundExchange and the various groups of webcasters described in the article below have until February 15th to negotiate modifications in royalty rates. Those negotiations are currently underway.

One reason for the Internet radio royalty mess is that, in the Digital Millennium Copyright Act of 1998, Congress set up a spiderweb of groups with multiple conflicting priorities that are supposed to somehow come up with reasonable rates.

Here’s a chart I recently put together that attempts to describe the players:

(To see a larger version of the chart, click the headline at the top of this article (or the link at the bottom).)

The Webcaster Settlement Act is written to allow private negotiations between Sound Exchange (representing copyright owners and musicians who have chosen to become members) and various subsets of webcasters to have the force of law. (The DMCA itself doesn’t permit SoundExchange to negotiate on behalf of non-members; that’s why this law is a necessary procedural step.)

Conflicts on the SoundExchange side

One problem that has been getting in the way of successful negotiations is that the members of SoundExchange are competitors with conflicting priorities. Its board is supposed to be comprised of 50% record label reps and 50% musician reps, but because the board members were, essentially, selected by the RIAA, many observers perceive that large RIAA labels have a disproportionate influence.

At any rate, here are some of the conflicts going on within the left-hand side of the chart:

Indie labels, for example, are competing with large record labels for radio airplay and consumer dollars. They may be more inclined to support Internet radio than large labels, who might enjoy and want to protect their dominance on terrestrial (e.g., Top 40) radio.

Musicians, too, have conflicting priorities. Multimillionaire recording artists (think Mariah Carey) probably are more desirous of “Cash now!” than the hundreds of thousands of working musicians who are trying to build fan bases and are primarily desirous of radio airplay. Of course, multimillionaire musicians who are still active (e.g., Paul McCartney) are probably more desirous of airplay than retired musicians, who would prefer cash to airplay (e.g., Mary Wilson of The Supremes).

(And, of course, retired musicians who are not millionaires — e.g., Mary Wilson — perhaps are poor largely as a result of their past dealings with major labels, so there’s historical conflict there, too.)

Give the stated purposes of copyright law, it would seem that it’s supposed to primarily support those hundreds of thousands of active musicians. But they certainly don’t have the upper hand in the way SoundExchange is set up.

Conflicts on the webcasters’ side

On the copyright users side, we saw last Friday that the NAB sees itself as competing with DiMA members (e.g., Pandora and AOL Radio) and perhaps with NPR member stations, and thus briefly tried to scotch the settlement in Congress because they perceived themselves at a potential disadvantage.

Meanwhile, the Small Commercial Webcasters (SCW) (e.g., AccuRadio) are working hand-in-hand with DiMA members and others on efforts to bring the royalty rates down to reasonable levels… but in fact DiMA members might prefer in some sense not to have competition from dozens of smaller, entrepreneurial webcasters. So will DiMA members actively support the existence of a “Small Webcaster” rate? We’ll see.

There’s a collective on only one side

Finally, note an extremely unfair situation in terms of arguing before the Copyright Royalty Board (CRB): All of the copyright owners speak with one voice (via SoundExchange and its lawyers), whereas the copyright users speak with a half-dozen or more different voices, creating a conflicting cacaphony of arguments.

Add to this the fact that the CRB works for the U.S. Copyright Office, which has essentially over recent years transformed itself into the U.S. Copyright Owners’ Office, and you have a recipe for disaster. And the proof has been in the pudding.

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  1. you have omitted hobby stations and religious stations in your description of the chart. I would be interested in hearing your thoughts on this important part of web radio 20,000 stations on shoutcast alone +yhose on other platforms. otherwise i agree with you on this so far.

    mike allen · Oct 3, 07:13 AM · #

  2. Monetary issues aside, Internet radio station operators should be alarmed at Sound Exchange/RIAA rules restricting programming practices such as pre-announcing songs and limits on numbers of songs from same albums within certain time frames. These provisions relinquish content control to record companies who would love to decide who plays what, when, and how often.

    Rick · Oct 4, 09:01 AM · #

  3. The aggregate tuning hour metric is one that is more readily obtain from content delivery or
    other bandwidgth provider,and a metric that has been used since the first royalties were
    established in 2002(from
    December 26,2007 posted by
    David Oxenford)Internet
    Radio Reminder-No more
    aggregate tuning hour after january 1,2007 Presently the portable people meter(PPM) has burgeon an interest correlating with the webcasters settlement act of 2008.
    an interest

    Johnnie Davis · Oct 14, 12:13 PM · #

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