Cross-Posted at MyLeftWing
A lot of information has emerged over the last couple days since I posted this diary about the impending death of Web radio. The situation remains dire, but after a couple days of reflection, I felt that providing more specifics and also coming up with some kind of solution beats simply wailing about how dire it all is.
Visit here for more cultural context in which this saga is unfolding.
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Bad it is, to be sure. The U.S. Copyright Royalty Board has unilaterally instituted veritably Draconian fees on Internet digital music Webcasters. These fees are based on both per-listener and per-song accounting. This is unprecedented. Given that the fees are retroactive and scale upwards for several years beyond, many small businesses will go under in short order.
It also represents a terrible further contraction of the independent music scene, which is already going through tremendous strain through the rapid shuttering of music merchandising chains and their independent record store equivalents.
The Los Angeles Times business section comes out with probably the best overview of this topic I have seen. I'll provide substantial quotes here along with my commentary and arguments:
All broadcasters have to pay royalties to composers and publishers, but traditional radio broadcasters — arguing that airtime is free promotion — have long been exempted from paying royalties to artists and record labels whose songs they play on the air. Laws passed in the 1990s governing digital recordings, however, required Internet and satellite radio operators to pay those so-called performance fees.
Faced with increased royalty fees, Internet broadcasters in 2002 persuaded Congress to create an exemption that allowed small online radio operators to negotiate a lower fee based on a set 10% to 12% of their revenue, not on how many songs they broadcast. That guaranteed that Internet broadcasters would not have to pay more in fees than they collected in revenue.
So there's the rub. Why should streaming broadcasters continue to be exempt? Exempt from what? Internet radio royalty fees as now constituted are discriminatory and amount to a taxpayer- and artist-funded subsidy for the monopolistic companies that now dominate AM and FM radio. With all the consolidation represented by companies such as Clear Channel (excluding for present the political leanings of the owners of that company, who are right-wing evangelical Christians - not that there is anything wrong with that, as long as you don't make a nuisance of yourself), those subsidies--er, exemptions--strike me as obsolete at best.
The Coypright Board, however, sees it differently:
In 2004, Congress created the Copyright Royalty Board, a three-judge panel under the auspices of the Library of Congress, to deal with such issues. Because that board established the new higher performance fees, lawmakers may be reluctant to step in this time.
The board's top judge said its guidelines allow it to consider only economic factors — not issues such as educational opportunities at college radio stations and the increased diversity of music that Internet stations may provide.
"Congress apparently made a determination for an interim specified period of time to assist a nascent industry, and that period of time has passed now," Chief Copyright Royalty Judge James S. Sledge said in an interview.
David Oxenford, an attorney who represented independent commercial Internet broadcasters, predicted that a formal appeal to the board or federal courts would be difficult to win.
"This would shut down the entire medium," said Kurt Hanson, who runs AccuRadio.com and publishes the Radio and Internet Newsletter.
The organization's executive director, John Simson, said the new fees simply leveled the playing field for Internet radio and forced websites to adequately compensate the artists and record labels providing the music.
"This is money that they've earned from valuable recordings they've created," Simson said.
The same exact point can be made for the big analog radio companies. The same exact argument. Why do those people get a free pass? (Because their signal is lousy? Oh, yeah. Of course.)
Simson said the hundreds of Internet radio services include corporate giants such as Yahoo and Clear Channel Communications Inc. that can afford the higher fees. Those companies declined to comment Tuesday.
Simson's argument makes only superficial sense. His arguments work for the big analog radio organizations sponsoring Web radio outlets for whom such web royalties are a rounding error. (They would not be a mere rounding error, however, if they were applied to their analog business in the same fashion as they are trying to do to Web radio! Can you imagine the wailing we'd hear in that instance? This would have the salutary effect of breaking up the cozy relationship between Big Radio and the record companies - an event that is so long overdue as to be laughable.)
But as with most bureaucrats, his thoughts reside in a little box resistant to the complications of reality.
The main thrust of my particular argument remains--organizations such as Radio Paradise and KCRW are not comparable to Clear Channel and Yahoo, as their missions and audiences are totally different. The scale of their enterprises is also completely different.
If Congress can accept adjustments in the Sarbanes-Oxley bill that allow smaller corporations (I believe the cutoff is around 200 employees) to avoid incurring the full costs of achieving compliance, why cannot such a scaled approach be applied here, when the resource is so vital to the common culture? Why should digital outlets be forced to pay what the much larger analog entities do not?
It's not as though the independent Web Radio companies are paying nothing. They are paying a fair share of their proceeds at this point. As their audience grows, so do their payments. A 10-12% payment schedule for Web radio seems minimally fair considering all the major analog radio outlets pay absolutely nothing (using the "it's free advertising" argument noted above). To enforce more punitive royalties amounts to collusion between big media companies and the government. I know, this is shocking. Shocking!
Really, as a simple matter of fairness, it can be argued that Web Radio outfits shouldn't be forced to pay anything, using the same "it's free advertising" argument. This is not my argument. But it is wrong to discriminate based on a technically uninformed (to put it mildly) distinction between digital and analog signals. The DMCA included language meant to justify separate copyright enforcement on digital entities based on the laughably stupid assumption that streaming digital audio is of pristine and flawless quality and, due to its portability, represents a clear and present risk to entertainment companies on the level of CD piracy. This is the root of the whole problem.
In fact, it's palpably wrong to discriminate at all.
John Simson and the Copyright Board are wrong. This does not level the playing field. It tilts it further. Yahoo and Clear Channel do not equal Radio Paradise or KCRW.
But my simply saying so is not worth a bucket of warm spit. How can this problem be fixed?
My Idea on How to Fix This
The only way to effectively contradict this wrong-headed thinking is by somehow convincing our lawmakers to amend the relevant clauses of the DMCA, or, even better, draft and legislate fair royalty payment practices in perpetuity for ALL radio entities regardless of signal type. This is an idea whose time has more than come.
This idea has some huge benefits: (a) it removes discrimination against small media businesses and enforces consistency in the law and in the market; the very consistency Mr. Simson claims to care so much about. (b) It adds another substantial revenue stream to the record companies, who frankly can use it right about now. This would buy time for the record companies to modify their business models for the new digital world (assuming they were smart enough to do this - uh huh, yeah, right). (c) It engenders an unalloyed social good by ensuring that indie labels and indie artists of all stripes have at least some access to the market despite the massive contraction now taking place in the music retailing business. (d) It removes a large motivation for collusion and corruption from the music industry, which as we all know is not exactly a paragon of incorruptibility. (e) It destroys obsolete and destructive business dynamics in the music industry, freeing up all entities to encourage innovation and mutual economic growth in all sectors of the industry instead of the current crabbed dynamic of RIAA lawsuits, piracy obsession, pabulum product and crashing revenues.
Will this happen? Not a chance in Hell. This is Bush's Bizarro World, remember. And many Dems are "jump?-how high?" types when it comes to the entertainment industry. Not only that - as I've alluded to before, numerous larger issues are currently being debated, as they should be.
This is the climate we happen to be in when this issue comes to a head.
What does Web Radio do? Why is it worth Congress defending it?
Web Radio breaks new talent. To compensate for what I consider to be a fair "small-business exemption," small Web radio outfits often serve to break musical talent and enable the big entities to avoid the costs of developing that new talent themselves, which they effectively gave up doing a long time ago. Once a band has developed its street cred and a solid audience, the bigger entities often step them up to the next level. The Big 4 labels (Sony, Warner Music, and the rest) have effectively outsourced A&R to Web Radio and the indie labels.
Web radio delivers a valuable audience. It gives the bigs a conduit to a highly desirable cultural demographic that (a) tends to be young or at most middle-aged; (b) tends towards a higher standard of living (given that Web radio listeners own computers and finance broadband connections); (c) tend to be opinion leaders. This audience, though perhaps smaller, is highly desirable and in fact is otherwise almost completely alienated by the Big Four record companies and their Big Media radio conglomerate buddies. Without the Web radio conduit, record companies have no chance of reaching them (and their dollars).
I hope I've shed some light on this complicated subject. I'm in the process of printing and mailing the same letters I e-mailed earlier this week to various Senators. Do the same to your Congresscritters and Senators, and keep on it. Make phone calls. Visit their offices if you can. Keep making noise. Show that you really care about this subject.
Ultimately, it may not help that much, but you never know what kind of effects a sustained effort by a small number of motivated people can have. Conceding defeat and giving up is a recipe for despair and a betrayal of the artists and musicians we all care about and want to help and support. We are all busy (not least myself) but as I've said before, let's spare a thought for those of us who don't have the resources to fight back. Let us keep fighting for cultural and musical diversity. Let us keep fighting for an America that allows room for those that are different.
Let's support them. Keep fighting!