Today, June 26, 2007 Radio Dismuke joins thousands of Internet radio stations in observing a Day of Silence to call attention to the impending shutdown of the vast majority of Internet streams if the new sound recording royalty rates are allowed to go into effect on July 15. For today only, listeners who tune in will be directed to a non-music informational stream explaining the crisis facing Internet radio and featuring testimonials from a variety of broadcasters. Normal Radio Dismuke programing will resume on Wednesday.
The Internet Radio Equality Act has been introduced in both the US House and Senate which would establish Internet radio royalties at a rate that is equal to the more reasonable percentage of revenue model that satellite broadcasters pay for airing the exact same music. By contrast, the rates which are scheduled to go into effect on July 15, are based on a per-song per-listener basis and would amount to well over 100 percent of most existing webcasters' annual revenues - and they would be applied RETROACTIVELY back to January 2006. The Act would also do away with a $500 per channel minimum so-called "administration fee" that is part of the new rate structure. Radio Dismuke's service providers, Live 365 and LoudCity host THOUSANDS of Internet radio stations. This administration fee alone is likely to send them into bankruptcy. Indeed, based on the number of unique channels they offer, four of the top Internet radio networks, Live 365, Rhapsody, Yahoo and Pandora alone would owe SoundExchange, the RIAA's royalty collection arm, approximately $1 BILLION per year for these administration fees alone IN ADDITION to the very expensive royalties. To illustrate how absurd this is, that $1 billion in "admin fees" from those four webcasters alone would vastly exceed the $20 million in total royalties that SoundExchange collected last year from all Internet radio stations combined.
The new rates are nothing more than a thinly disguised attempt on the part of the RIAA to kill off a rapidly emerging medium which, by bringing the public's attention to an unprecedented range of independent artists and niche genres, threatens the market share the RIAA labels have held for decades. According to Live 365's Director of Engineering, last month the several thousand stations across the Live 365 network featured recordings by over 250,000 artists. That's probably around 249,000 more artists than you would likely be able to hear on your local FM radio stations - artists who would have almost no opportunity for broadcast air time to expose their works to new audiences were it not for Internet radio. That's 249,000 artists whose existence and music the RIAA would prefer that you not know about.
The major RIAA labels make their money by selling mass market recordings aimed at the widest and lowest common denominator - i.e., the sort of music you will hear on FM radio and find in the limited assortment of CDs available at your local discount retailer. The degree to which audiences discover and become enthusiastic about the wide variety of wonderful artists and music that fall outside of the RIAA labels' lowest common denominator offerings is the degree to which their market falls apart on them. Every time I receive an enthusiastic email from a high school student telling me how, as a result of discovering Radio Dismuke, 1920s and 1930s popular music is now his or her favorite type of music, that is one less person who is likely to act like a good little sheep and buy the latest hit recording that has been played over and over again on half the FM stations in town. And the same is true for the people who, through Internet radio, discover stations which play Ukrainian folk music, or ragtime, or polka, or blues, or jazz or even features some group of young rock musicians who perform at local clubs and are not famous enough to get FM airplay.
Internet radio is at the forefront of a wonderful revolution in both how enthusiasts listen to music and how aspiring artists promote themselves. It is bringing about a world where audiences will have endless options to access an unprecedented variety of quality music and where artists - especially those who previously had little hope of getting past the focus groups and "gatekeepers" at the RIAA labels and FM radio stations - will have new opportunities to make themselves known to new fans and to promote their recordings and live performances. The RIAA does not have any special advantage in such a world and will face new competition from a wide variety of sources, including artists who in an earlier day would have signed with an RIAA label but now realize it is increasingly advantageous to remain independent and thereby retain ownership and control of their music and keep all of the financial rewards for themselves. Therefore, the RIAA has used its political pull in an attempt to kill off the new and increasingly popular industry which is making such a world possible: Internet radio.
If you value the music that I and countless other Internet broadcasters present, please do not allow that to happen. Please telephone your Congressperson and both of your Senators TODAY and ask them to support the Internet Radio Equality Act. In the House, the specific bill is H.R. 2060. In the Senate the bill is S.1353.
For those who have responded to my previous requests to contact your representatives, I and all other Internet broadcasters thank you. Your letters, phone calls and emails were what has made it possible for bills to exist today in both houses of Congress. But there is still a lot of distance that needs to be covered before the future of Internet radio is secure. Now that there are very specific bills on the table, please consider contacting your representatives AGAIN and encourage them to support the Internet Radio Equality Act.
Those who have followed my postings here on this blog now know that I am not a fan of statutory royalties in any form. As I pointed out in a previous posting, under such a compulsory and crude "one size fits all" approach, it is impossible to be fair with or adequately protect the rights of all players. There are certain aspects of the Internet Radio Equality Act that I do not like and take exception to. But these shortcomings pale in comparison to the profoundly unjust and, in my judgement, downright evil attempt to kill off an absolutely wonderful new medium with endless potential and possibilities for the purpose of artificially propping up a de-facto cartel of dying and technologically obsolete companies which through their legacy revenue streams are, unfortunately, still able to purchase and wield a substantial amount of political pull. Short of a radical reexamination and reform of certain aspects of our copyright laws, the Internet Radio Equality Act is our best hope of stopping this injustice before it does a great deal of damage to both webcasters, artists and enthusiasts of the many musical genres that, prior to the Internet, were simply shut out from radio airplay.
Hearings on the Internet Radio Equality Act begin soon so it is important to take action NOW. By contacting your representatives, you will be doing your part to ensure that the Day of Silence is only a DAY of silence and not a permanent reality after July 15.
Tuesday, June 26, 2007
Thursday, June 21, 2007
A Free Market Answer To Statutory Royalties - How It Would Kill The RIAA
Note: Some individual whom I refuse to dignify by linking back to has grotesquely distorted one of my previous postings and has used it to insinuate that webcasters seek an unearned license to steal copyrighted music and falsely asserted that I somehow am an advocate of statutory royalties and the CRB process.
For the record, I am not and never have supported statutory - i.e., government mandated - royalties. I very clearly stated the context of my remarks in the conclusion of my posting when I said: "So long as the government is setting the rates..." I made it very clear in my posting that I was not in favor of the government setting royalty rates. However, as any person who has any grounding in reality ought to know, regardless of what the rates end up being when the CRB ruling is scheduled to go into effect on July 15, the rates are going to be ones that have been set by the government. To argue whether they should or should not be set by a governmental board in the first place is certainly a very valid topic for discussion - but for webcasters who are fighting for their survival the question is academic. To eliminate statutory royalties would require a major overhaul of the copyright laws and the abolition or, at the very least, a major reworking of the Digital Millennium Copyright Act. None of this is going to be on the agenda in Washington DC anytime soon - certainly not before webcasters are forced into retroactive bankruptcy by the new rates.
To set the record straight and to defend myself against this individual's disgraceful misrepresentation of my position, I am publishing a posting I put up a couple of months ago to a private broadcasters-only forum. (One of the readers on that forum, however, asked for and received my permission to republish my remarks here. ) This posting will very clearly establish that I am NOT an advocate of statutory licensing. In it, I propose a free market alternative which would recognize and protect the rights and interests of both copyright holders and webcasters. I also explain why the modern day Luddites at the RIAA would NEVER go along with such a proposal.
For the record, I am not and never have supported statutory - i.e., government mandated - royalties. I very clearly stated the context of my remarks in the conclusion of my posting when I said: "So long as the government is setting the rates..." I made it very clear in my posting that I was not in favor of the government setting royalty rates. However, as any person who has any grounding in reality ought to know, regardless of what the rates end up being when the CRB ruling is scheduled to go into effect on July 15, the rates are going to be ones that have been set by the government. To argue whether they should or should not be set by a governmental board in the first place is certainly a very valid topic for discussion - but for webcasters who are fighting for their survival the question is academic. To eliminate statutory royalties would require a major overhaul of the copyright laws and the abolition or, at the very least, a major reworking of the Digital Millennium Copyright Act. None of this is going to be on the agenda in Washington DC anytime soon - certainly not before webcasters are forced into retroactive bankruptcy by the new rates.
To set the record straight and to defend myself against this individual's disgraceful misrepresentation of my position, I am publishing a posting I put up a couple of months ago to a private broadcasters-only forum. (One of the readers on that forum, however, asked for and received my permission to republish my remarks here. ) This posting will very clearly establish that I am NOT an advocate of statutory licensing. In it, I propose a free market alternative which would recognize and protect the rights and interests of both copyright holders and webcasters. I also explain why the modern day Luddites at the RIAA would NEVER go along with such a proposal.
A Free Market Answer To Statutory Royalties - And How It Would Kill The RIAA
My problem with the compulsory license is that it is a rather pathetic and grotesquely unfair way of protecting intellectual property rights. The fact of the matter is that not all owners of intellectual property have similar interests in the marketplace. Indeed, as we have seen, the marketplace interests of the vast majority of intellectual property owners - i.e. the independents - are very much at odds with the interests of the RIAA labels. In a free marketplace, everyone is able to battle it out and everything is ultimately decided by what the customers have to say. Under a compulsory license, everything is pretty much determined in advance by a governmental body and the one who wins is usually the one with the largest amount of political pull.
This is exactly what we have seen with the CRB which has set rates at a level that favors the interests of the lowest common denominator recordings of the RIAA labels by making it too expensive for broadcasters to stream less famous artists and niche genres and thus depriving them of the valuable Internet radio exposure they have come to depend on. In other words, the CRB basically has set itself up as the agency that exists to protect the interests of the RIAA by keeping emerging competitors from gaining access to the marketplace.
One of the cardinal rights of ownership is the ability to charge whatever price one wishes and is able to voluntarily get. If you make pencils and want to sell them for $100 each and someone is dumb enough to buy them - go for it. Likewise, if a copyright owner wishes to charge $100 per song per listener or to not license his recordings at all - well, that is a major part of ownership and he should have every right to do so. And likewise, we have every right to treat them the same way we would someone who offered to sell us a ten cent pencil for $100.
In reality, however, people do not charge $100 for ordinary pencils. And, unless there happens to be a temporary shortage of certain raw materials, nobody goes around complaining that pencil prices are outrageous and pencil manufacturers are not at each others throats over what price pencils should sell for. The marketplace takes care of that. It ought to do the same thing with regard to what price, if any, broadcasters pay for royalties.
Here is what I propose in place of compulsory licensing:
When a sound recording is copyrighted, the automatic default will be that NO license is required for public performance. Copyright holders who are eager for exposure and publicity might consider this to be their very best option - and it certainly will give broadcasters a HUGE incentive to play their material.
Copyright owners who do not wish to allow free public performance of their material have the option of specifying which Performance Rights Organization (PRO) they wish to license their material through - or they have the option of requiring that any license must be granted by the copyright holder exclusively.
Note that I say "which PRO." The notion that SoundExchange should be a monopoly is absurd. If the RIAA wishes to license all of its material through SoundExchange for outrageous rates - then it should be able to do so. But it does NOT have the right to demand that all other copyright holders be forced to either do the same or else give the material away for free. Copyright holders who wish to charge rates that are more reasonable have every right in the world to form their own PRO for such a purpose.
What I also propose is that every sound recording sold carry a notice of the licensing requirements. For example: "Public performance license granted" "Public performance license through SoundExchange" or Public performance through SoundExchange Competitor X or "Must contact copyright holder for public performance license." The Library of Congress would also maintain a database of all recordings under Federal copyright where broadcasters could quickly and easily check the status and licensing requirements of any recording.
Under my proposed system, if the RIAA wished to charge outrageous rates for its material, it would be very easy for broadcasters to identify such recordings and refuse to buy them or include them in their playlists. And it would be very easy for broadcasters to identify those copyright owners who DO want airplay and are willing to either give it away for free or else charge reasonable rates.
Such a system would protect the rights and interests of ALL copyright holders. It also would enable the RIAA to get what it claims to want - the high prices it claims its recordings are worth.
But the fact of the matter is, if such a proposal was put forth, the RIAA would fight it tooth and nail. A free marketplace is the LAST thing they want - because they know they cannot survive in one.
SoundExchange and the RIAA is lying through its teeth when it says that Internet radio airplay does not have value. Who gets airplay and who doesn't is the only thing this royalty battle is about. The RIAA wants to make sure that only the mass market products of the Big Four get Internet airplay - which is why it has tried to use the SoundExchange monopoly to price everyone else out.
If a free market were to come about and the RIAA charged the sort of rates that they have pushed through the CRB - well, Internet stations would have little choice but to pull RIAA recordings and play only those which are more affordable or, at the very least, severely restrict the number of RIAA recordings which are played. What that would do, of course, is give greater airplay and more exposure to those recordings that are not so overpriced. This, of course, would only hasten the RIAA's demise as the extra exposure would enable audiences to discover artists that they most likely would not have otherwise and the RIAA's market share will decline even faster. Their only hope of being competitive in the market for Internet radio airplay would be to lower their prices to rates that make it attractive for stations to play them. The only reason they could get away with charging high prices would be if a recording is a huge hit - but if they don't get airplay on Internet radio, which will very soon replace FM as the medium where musical trends are set, they will not have any huge hits that anyone would be willing to pay high prices for. They will have priced themselves and not their competitors out of the market.
If the RIAA wants to price recordings out of the market for airplay, it should be free to do so - but only with its OWN recordings and not everybody else's. If the RIAA does not wish to participate in Internet radio - well it shouldn't have to. It can stand on the sidelines and become even more obsolete as Internet radio becomes more and more important in people's daily lives and in our culture. But it does NOT have a right to determine the conditions and terms that its emerging competitors must operate under in order for them to participate in the many wonderful things that Internet radio has to offer. Quite frankly, we need a system where the RIAA has to play by the same rules that everybody else does and where it has absolutely no more status or privilege in the eyes of the law and the government than does any other copyright owner.
The notion of a "willing buyer and a willing seller" being determined by a GOVERNMENT PANEL is absurd. Despite the pseudo-free market verbiage, such is NOT a free market approach. A system where the GOVERNMENT determines what prices ought and ought not to be is the premise of communism/socialism and not a free market. I am actually all for prices being set by "willing buyers and willing sellers" - provided that all parties are actually willing. Perhaps certain broadcasters would be willing to pay .0019 cents to stream some recordings - but no broadcaster in his right mind would be willing to play such a price for all recordings as the vast majority simply are not worth that much in terms of attracting audiences. And perhaps the RIAA labels are willing to sell performance rights to their mega hit recordings for .0019 - but no independent artists or niche genre artist in his right mind would be willing to charge that much for airplay for the exact same reason that pencil makers do not charge $100 for an ordinary pencil. If we are going to have a "willing buyer/willing seller" strandard then it actually needs to be decided by willing buyers and willing sellers - i.e. by a free market and NOT by the RIAA on grounds that it has political pull. And webcasters and independent copyright owners should not have to be forced to spend the time, money and energy to go out and acquire their own political pull in order defend themselves from the RIAA's predatory political schemes.
The problem with the compulsory license is that it is a "one size fits all" proposition for both copyright holders and broadcasters. As a consequence, the results will never be to everyone's satisfaction: either one side or the other or both will always feel that they are being screwed. In a free market, each player makes his own decision as to what he wants to charge and to pay - and if it does not work out, then only he is to blame. Under a free market, the only party that loses is the RIAA because it is no longer able to use its political pull in order to keep a flood of emerging competitors in check. It will be forced to compete in a marketplace where it has no special advantage over anybody else and is no longer needed or even particularly wanted anymore by either artists, customers or broadcasters. Establish a genuinely free market and the RIAA is toast because, quite frankly, it no longer has anything to offer that other players in the marketplace cannot do better and much more efficiently.
My problem with the compulsory license is that it is a rather pathetic and grotesquely unfair way of protecting intellectual property rights. The fact of the matter is that not all owners of intellectual property have similar interests in the marketplace. Indeed, as we have seen, the marketplace interests of the vast majority of intellectual property owners - i.e. the independents - are very much at odds with the interests of the RIAA labels. In a free marketplace, everyone is able to battle it out and everything is ultimately decided by what the customers have to say. Under a compulsory license, everything is pretty much determined in advance by a governmental body and the one who wins is usually the one with the largest amount of political pull.
This is exactly what we have seen with the CRB which has set rates at a level that favors the interests of the lowest common denominator recordings of the RIAA labels by making it too expensive for broadcasters to stream less famous artists and niche genres and thus depriving them of the valuable Internet radio exposure they have come to depend on. In other words, the CRB basically has set itself up as the agency that exists to protect the interests of the RIAA by keeping emerging competitors from gaining access to the marketplace.
One of the cardinal rights of ownership is the ability to charge whatever price one wishes and is able to voluntarily get. If you make pencils and want to sell them for $100 each and someone is dumb enough to buy them - go for it. Likewise, if a copyright owner wishes to charge $100 per song per listener or to not license his recordings at all - well, that is a major part of ownership and he should have every right to do so. And likewise, we have every right to treat them the same way we would someone who offered to sell us a ten cent pencil for $100.
In reality, however, people do not charge $100 for ordinary pencils. And, unless there happens to be a temporary shortage of certain raw materials, nobody goes around complaining that pencil prices are outrageous and pencil manufacturers are not at each others throats over what price pencils should sell for. The marketplace takes care of that. It ought to do the same thing with regard to what price, if any, broadcasters pay for royalties.
Here is what I propose in place of compulsory licensing:
When a sound recording is copyrighted, the automatic default will be that NO license is required for public performance. Copyright holders who are eager for exposure and publicity might consider this to be their very best option - and it certainly will give broadcasters a HUGE incentive to play their material.
Copyright owners who do not wish to allow free public performance of their material have the option of specifying which Performance Rights Organization (PRO) they wish to license their material through - or they have the option of requiring that any license must be granted by the copyright holder exclusively.
Note that I say "which PRO." The notion that SoundExchange should be a monopoly is absurd. If the RIAA wishes to license all of its material through SoundExchange for outrageous rates - then it should be able to do so. But it does NOT have the right to demand that all other copyright holders be forced to either do the same or else give the material away for free. Copyright holders who wish to charge rates that are more reasonable have every right in the world to form their own PRO for such a purpose.
What I also propose is that every sound recording sold carry a notice of the licensing requirements. For example: "Public performance license granted" "Public performance license through SoundExchange" or Public performance through SoundExchange Competitor X or "Must contact copyright holder for public performance license." The Library of Congress would also maintain a database of all recordings under Federal copyright where broadcasters could quickly and easily check the status and licensing requirements of any recording.
Under my proposed system, if the RIAA wished to charge outrageous rates for its material, it would be very easy for broadcasters to identify such recordings and refuse to buy them or include them in their playlists. And it would be very easy for broadcasters to identify those copyright owners who DO want airplay and are willing to either give it away for free or else charge reasonable rates.
Such a system would protect the rights and interests of ALL copyright holders. It also would enable the RIAA to get what it claims to want - the high prices it claims its recordings are worth.
But the fact of the matter is, if such a proposal was put forth, the RIAA would fight it tooth and nail. A free marketplace is the LAST thing they want - because they know they cannot survive in one.
SoundExchange and the RIAA is lying through its teeth when it says that Internet radio airplay does not have value. Who gets airplay and who doesn't is the only thing this royalty battle is about. The RIAA wants to make sure that only the mass market products of the Big Four get Internet airplay - which is why it has tried to use the SoundExchange monopoly to price everyone else out.
If a free market were to come about and the RIAA charged the sort of rates that they have pushed through the CRB - well, Internet stations would have little choice but to pull RIAA recordings and play only those which are more affordable or, at the very least, severely restrict the number of RIAA recordings which are played. What that would do, of course, is give greater airplay and more exposure to those recordings that are not so overpriced. This, of course, would only hasten the RIAA's demise as the extra exposure would enable audiences to discover artists that they most likely would not have otherwise and the RIAA's market share will decline even faster. Their only hope of being competitive in the market for Internet radio airplay would be to lower their prices to rates that make it attractive for stations to play them. The only reason they could get away with charging high prices would be if a recording is a huge hit - but if they don't get airplay on Internet radio, which will very soon replace FM as the medium where musical trends are set, they will not have any huge hits that anyone would be willing to pay high prices for. They will have priced themselves and not their competitors out of the market.
If the RIAA wants to price recordings out of the market for airplay, it should be free to do so - but only with its OWN recordings and not everybody else's. If the RIAA does not wish to participate in Internet radio - well it shouldn't have to. It can stand on the sidelines and become even more obsolete as Internet radio becomes more and more important in people's daily lives and in our culture. But it does NOT have a right to determine the conditions and terms that its emerging competitors must operate under in order for them to participate in the many wonderful things that Internet radio has to offer. Quite frankly, we need a system where the RIAA has to play by the same rules that everybody else does and where it has absolutely no more status or privilege in the eyes of the law and the government than does any other copyright owner.
The notion of a "willing buyer and a willing seller" being determined by a GOVERNMENT PANEL is absurd. Despite the pseudo-free market verbiage, such is NOT a free market approach. A system where the GOVERNMENT determines what prices ought and ought not to be is the premise of communism/socialism and not a free market. I am actually all for prices being set by "willing buyers and willing sellers" - provided that all parties are actually willing. Perhaps certain broadcasters would be willing to pay .0019 cents to stream some recordings - but no broadcaster in his right mind would be willing to play such a price for all recordings as the vast majority simply are not worth that much in terms of attracting audiences. And perhaps the RIAA labels are willing to sell performance rights to their mega hit recordings for .0019 - but no independent artists or niche genre artist in his right mind would be willing to charge that much for airplay for the exact same reason that pencil makers do not charge $100 for an ordinary pencil. If we are going to have a "willing buyer/willing seller" strandard then it actually needs to be decided by willing buyers and willing sellers - i.e. by a free market and NOT by the RIAA on grounds that it has political pull. And webcasters and independent copyright owners should not have to be forced to spend the time, money and energy to go out and acquire their own political pull in order defend themselves from the RIAA's predatory political schemes.
The problem with the compulsory license is that it is a "one size fits all" proposition for both copyright holders and broadcasters. As a consequence, the results will never be to everyone's satisfaction: either one side or the other or both will always feel that they are being screwed. In a free market, each player makes his own decision as to what he wants to charge and to pay - and if it does not work out, then only he is to blame. Under a free market, the only party that loses is the RIAA because it is no longer able to use its political pull in order to keep a flood of emerging competitors in check. It will be forced to compete in a marketplace where it has no special advantage over anybody else and is no longer needed or even particularly wanted anymore by either artists, customers or broadcasters. Establish a genuinely free market and the RIAA is toast because, quite frankly, it no longer has anything to offer that other players in the marketplace cannot do better and much more efficiently.
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