New music royalty rates for webcasters went into effect last Monday, but the charges continue to be fiercely contested.
The good news is that net radio stations are still on the air and negotiations are ongoing. The bad news is that there's no guarantee of a lasting agreement that will ensure artists and labels get paid without bankrupting thousands of broadcasters.
At stake is the future of net radio -- a market that may seem like a niche sideline today but one that could explode with the emergence of ubiquitous broadband over Wi-Fi and next-generation wireless networks. Decisions made now could have an enormous impact on how we consume music in the coming years and decades. Suffice to say it's in no one's interest to kill net radio.
Label representative SoundExchange appears to hold all of the cards. The Copyright Royalty Board approved its proposed rates wholesale, and a federal appeals court refused to stay the fees pending a resolution of the case -- a possible sign the court is leaning toward upholding the scheme, given the havoc involved in applying fees and then revoking them later.
But SoundExchange can't press its advantage too hard or Congress could intervene under pressure from the estimated 50 million to 70 million Americans who listen to internet radio each month (numbers source: Arbitron/Bridge Ratings).
To advance the debate, here's a proposal for webcasting royalty rates that attempts to synthesize the interests of labels, webcasters and listeners.
All commercial webcasters should pay a percentage of revenueUnder the current Copyright Royalty Board, or CRB, scheme, webcasters are the only radio broadcasters required to pay a per-song-per-listener royalty rate. Satellite and cable radio stations and jukeboxes pay 7.5 percent of their revenue in performance royalties (a bill has been introduced in Congress that would charge the same rate for webcasters). In the United States, terrestrial radio stations pay no performance royalties at all.
Radio has traditionally dodged hefty royalty rates because it has been treated as a marketing arm of the industry. Terrestrial radio is a highly programmed medium, so it can easily be co-opted into the labels' hit-making strategies. It's so powerful that labels would happily pay to have their songs played, rather than the other way around, if it weren't illegal to do so.
Not so for net radio, which in principle could offer as many stations as there are listeners. It is highly customizable, and fans can exert so much control over playlists that it is not deemed effective as a marketing shovel. In addition, net radio listeners can make exact digital copies off the web, which is not possible with traditional radio, although in practice there are far easier ways to obtain the songs.
So it is proposed to punish net radio with unique and exorbitantly high royalties.
In fact, net radio does offer labels a powerful marketing vehicle. It's a fantastic try-before-you-buy platform that could dramatically increase listener satisfaction and music sales. The data alone from these services is invaluable. Yet none of that is recognized in the current scheme.
posted on wired.com