The Internet-Radio Royalty Crackdown: Is There Any Way To Sex This Story Up A Bit?

Mar 12th, 2007 // 6 Comments

Today’s Wall Street Journal takes a look at the Copyright Royalty Board’s recent proposal to increase the amount of royalty rates for online radio stations. If the hikes are put into effect, they could force sites such as Pandora.com and Accuradio to shell out thousands of dollars in royalty payments–or worse, put them out of business altogether. So who’s to blame here?

Net-radio fans are angry, but they shouldn’t be too hasty in blasting the Copyright Royalty Board. The real problem is a pair of misguided decisions made by Congress in the 1990s…

A brief recap: The Digital Millennium Copyright Act of 1998, building on 1995′s Digital Performance Rights in Sounds Recordings Act, said Net-radio firms had to pay performance royalties on songs played in addition to composer royalties on those songs. Terrestrial radio stations pay composer royalties, but they don’t pay performance royalties, under the long-established rationale that record labels benefit from the promotional value of songs played on the radio.

So if a Clear Channel radio station plays that new Fergie song over the air, it doesn’t pay a performance royalty — but if it streams Fergie over the Net (or satellite radio), it does. Make sense to you?

To be honest, playing a Fergie song in any format–whether it be net radio, terrestrial radio or Cuba Gooding Jr. from Radio–never makes much sense to us. But the DMCA decision seems especially unfair: It’s been nearly a decade since the act went through Congress, and internet broadcasters have since grown to benefit record labels in ways greater than anyone could have imagined. Hopefully, someone will step in and help the Webcasters with their appeals–does anyone know what John Hall‘s up to this week?

Anxious Times for Net Radio [WSJ.com]

idolator

  1. Chris Molanphy

    I’ve come to decide that the DMCA was the single worst piece of legislation signed by Bill Clinton. Yes, worse than “Don’t ask, don’t tell” (farcical but at least an improvement over what came before) or welfare reform (inevitable).

  2. binaryan

    What bothers me is that even if the appeals win through, streaming services already owe under the new rates retroactively to Jan 1, 2006. The appeals process could take up to a year or more; time that webcasters simply can’t afford.

  3. DavidWatts

    @dennisobell: What about telecommunications deregulation? Without that, you’d still have local radio (although you couldn’t get internet service from you cable company- quelle horreur!)

  4. dhuman

    As with many “sexy” stories, this one doesn’t quite tell the whole story…

    Look further down the page in the full WSJ article quoted above, and you see:

    “To me, that virtuous circle sure sounds like the old “radio is free promotion” bargain underlying traditional radio — for which performance royalties have never been paid in the U.S…”

    Key words…”in the U.S.”…in most of the rest of the world, performance royalties *are* paid to labels on terrestrial radio music broadcasts. The NAB (National Association of Broadcasters), a very powerful lobbying group with a lot of money, spends their pennies on a regular basis making sure that this situation does not change here in the States. Were this situation to change, it would help not only the fading majors, but many independent labels who struggle to put out music, and survive, based on diminishing record sales.

    A major point of the WSJ article seems to be that, because there’s no label royalty payable in the States on terrestrial radio, there also shouldn’t be a ‘net or satellite radio royalty. If you were a rights owner, you might flip that coin and say that the situation regarding terrestrial radio payment to labels needs to change in the States to reflect the rest of the world, at which point the idea of a ‘net or satellite radio royalty all of a sudden doesn’t seem so out of step.

    The “promotional” music argument, while also sexy, can be extended a loooong way. Where would you stop it if you were a rights owner? Why not make the use of all music, in any forum except purchased music, promotional? Labels are businesses (although independent businesses are usually more a labor of love) – they need income to survive, and generally, they own or have licensed intellectual property – music – for which they have the right to be paid when that music is used. “Promotional” music use generally means “unpaid” music use. Yes, it may generate future record sales, key word being “may”. How broadly should anyone be able to use music under the promotional argument?

    This is a complex issue with many complex sides. It’s unfair to bash the DMCA based on the argument of inequity between terrestrial and internet/satellite radio payments.

  5. Chris Molanphy

    @DavidWatts: You’re right, that’s even worse. Frankly, I bundle everything IP-related Bill Clinton signed into law during his eight years – from DMCA to telecom dereg to the Sonny Bono copyright-extension of ’98 – into one big category of Bill’s most misguided category of legislation. For a president I generally liked and whose Veep was net-savvy (I will avoid falsehoods re:the “invented the Internet” joke), Clinton did nothing but set back the progress of digital access and content rights in his time in office.

  6. dhuman

    As with many “sexy” stories, this one doesn’t quite tell the whole story…

    Look further down the page in the full WSJ article quoted above, and you see:

    “To me, that virtuous circle sure sounds like the old “radio is free promotion” bargain underlying traditional radio — for which performance royalties have never been paid in the U.S…”

    Key words…”in the U.S.”…in most of the rest of the world, performance royalties *are* paid to labels on terrestrial radio music broadcasts. The NAB (National Association of Broadcasters), a very powerful lobbying group with a lot of money, spends their pennies on a regular basis making sure that this situation does not change here in the States. Were this situation to change, it would help not only the fading majors, but many independent labels who struggle to put out music, and survive, based on diminishing record sales.

    A major point of the WSJ article seems to be that, because there’s no label royalty payable in the States on terrestrial radio, there also shouldn’t be a ‘net or satellite radio royalty. If you were a rights owner, you might flip that coin and say that the situation regarding terrestrial radio payment to labels needs to change in the States to reflect the rest of the world, at which point the idea of a ‘net or satellite radio royalty all of a sudden doesn’t seem so out of step.

    The “promotional” music argument, while also sexy, can be extended a loooong way. Where would you stop it if you were a rights owner? Why not make the use of all music, in any forum except purchased music, promotional? Labels are businesses (although independent businesses are usually more a labor of love) – they need income to survive, and generally, they own or have licensed intellectual property – music – for which they need to be paid when that music is used. Yes, promotional music may result in new record sales, key word being “may”. Most independent labels go to great lengths to make their music available promotionally in a lot of different ways to interest people in purchasing it. Where should promotion end, and income generation begin? This isn’t the clearest of lines…

    This is a complex issue with many complex sides. It’s unfair to bash the DMCA based on the argument of inequity between terrestrial and internet/satellite radio payments.

Leave A Comment