New Royalty Rates Could Kill Internet Radio

FlatCatInASlatVat writes "Kurt Hanson's Radio Internet Newsletter has an analysis of the new royalty rates for Internet Radio announced by the US Copyright Office. The decision is likely to put most internet radio stations out of business by making the cost of broadcasting much higher than revenues. From the article: 'The Copyright Royalty Board is rejecting all of the arguments made by Webcasters and instead adopting the "per play" rate proposal put forth by SoundExchange (a digital music fee collection body created by the RIAA)...[The] math suggests that the royalty rate decision — for the performance alone, not even including composers' royalties! — is in the in the ballpark of 100% or more of total revenues.'"

surprised??? never...

[advocate_one]

they want to kill the little guys off and just have the field to themselves.

Fine by me

[JackMeyhoff]

Why? It is like all issues of abuse, Patents abuse, music / video media abuse, software patents etc Let them do it, then what happens? Nobody uses their product. Then what? They start to backtrack. Let the system just eat and destroy itself from withing then come the meltdown a new dawn of change comes. Let them get their way and see how long it lasts, all it takes is people to stand up and say enough. Do you really need the shit they produce? No you dont NEED it.

Shouldn't the title be....

[Anonymous Coward]

"New Royalty Rates Could Kill (Legal) Internet Radio"?

Re:surprised??? never...

[Goldberg's Pants]

The problem is that most people aren't going to know about this. What I'd propose is that ALL internet radio stations that will suffer by this stage a day or two of action, synchronized. The busiest hours are probably 9am-5pm EST, so go black for one day, with a message explaining why.

The only reason the RIAA keeps getting away with this shit is because nobody is willing to stand up to them. If the radio stations banded together for one day of action to draw attention to the issue, maybe something will change, but it's gotta be done very soon, as I believe they only have two weeks to appeal.

The only stations I listen to are independent and have no RIAA music, but I really don't want to see the option go away. If it does, what are we left with? Your local Clear Channel owned station, and other "genre of the week" stations that satisfy nobody.

When will they learn....?

[Anonymous Coward]

There has grown up in the minds of certain groups in this country the notion that because a man or corporation has made a profit out of the public for a number of years, the government and the courts are charged with the duty of guaranteeing such profit in the future, even in the face of changing circumstances and contrary public interest. This strange doctrine is not supported by statute nor common law. Neither individuals nor corporations have any right to come into court and ask that the clock of history be stopped or turned back, for their private benefit.
-Robert Heinlein "Lifeline"

Haven't we heard this before?

[Anonymous Coward]

Didn't everyone say it would kill Internet radio the last time they raised the rates? Did it kill them?

Let me see... that's right... "Internet Radio Day of Silence". here's the story:

http://slashdot.org/article.pl?sid=02/05/01/052325 1 [slashdot.org]

Back in 2002! Did it kill them?

Nope.

Go away and quit crying wolf.

Only here to help the... artists

[280Z28]

The RIAA has a responsibility to bring more money for the music artists. Unfortunately they misread "going above and beyond to help the people you represent" as "going above and beyond anything... hey Bob who is it we say we're representing again? <Music artists!> Yes, we are only here to help 'music artists'."

"Hey Bob, you hear my youngest started playing the recorder in Kindergarten today? I filled out another WTF1337 form today and we should start seeing the revenues next month. :woot:"

OK...That's solved by not playing RIAA music.

[the_REAL_sam]

Right?

Streaming audio isn't a crime.

Re:surprised??? never...

[Dred_furst]

theres another solution, switch servers to one that isn't based in an RIAA controlled country.

What's really wrong with this

[dbcad7]

Unlike conventional radio stations, more listeners costs the station more money. Imagine what would happen if local radio and TV stations were charged extra based upon the numbers of viewers and listners.. I doubt that would fly.

Re:Well,

[Garrett Fox]

Note that at this rate of repeated extensions (>1 year/yr), there will never be any new out-of-copyright music except for works released to the public domain by their creators' consent.

The simple solution

[mattus]

'US Copyright Office' -> Move your servers to a place that is outside of US jurisdictional where the copyright laws are not controlled by large media companies. Last time I checked US law does not effect the rest of the world.

My email to the RIAA

[EPDowd]

RIAA, I am very puzzled. I used to find out about new recordings that I might want to buy, by hearing them on the radio. For quite some time now it seems that Radio stations, AM and FM, all seem to play the same tiny group of music, over and over. I never hear the music I buy, and play at home, played on the radio. When people started using the Internet to make small "Internet only" stations there were enough of them so that I once again had a way to find out about new stuff. How would I ever buy it if I did not know that it existed? This morning I read: "Kurt Hanson's Radio Internet Newsletter has an analysis of the new royalty rates for Internet Radio announced by the US Copyright Office. The decision is likely to put most Internet radio stations out of business by making the cost of broadcasting much higher than revenues. From the article: 'The Copyright Royalty Board is rejecting all of the arguments made by Webcasters and instead adopting the "per play" rate proposal put forth by SoundExchange (a digital music fee collection body created by the RIAA)...[The] math suggests that the royalty rate decision -- for the performance alone, not even including composers' royalties! -- is in the in the ballpark of 100% or more of total revenues." I am puzzled. It seems to me that you are killing the best, largest, and only way for me, and others, to find out about new music from the artists that you say you are representing. For the life of me I cannot figure out why you are doing this. I can't buy it if I don't know it exists. I like Bluegrass, Swing Band, 1950's oldies, Traditional Country, Traditional Western, Western Swing, some Jazz, and several other types of music. I hear a very small portion of this, once in a great while on the radio. But so rarely that it is not worth sitting through the usual tiny, bland, group of stuff that is normally played. Most of it is just not played anywhere except on the Internet. Please let me know how you think I am going to find out about the music you want me to buy.

Re:Well,

[eclectro]

If it were your music, and you made a living from it, you'd want your share, wouldn't you?

With copyrights lasting 50 years after an author's death (in the US) it makes no difference to those who are in the grave. And for those who are still alive, they have no incentive to create new works, which was the original intent of copyright law.

Let's be fair

[Anonymous Coward]

and apply these fees to terrestrial radio also. This would then effectively kill ALL radio. A radio station that claims 10,000 listeners at any given time would owe 1.5 million per year. And retroactively collected should put about 80% of stations out of business. Terrestrial radio would be in big trouble because they have to claim more listeners to get the advertising dollar, but being popular would work against them. So, people, let's be fair and give them what they want and tell them to be careful what you wish for, wishes sometimes do come true!!

Re:surprised??? never...

[digitig]

The first problem with the current setup is that it's put under industry administration (whose interests are vastly divergent with both most musicians and the public, witness the current example), when in fact it's a tax and should be under government administration. That way it'd be subject to the same constraints as other taxation forms; is it reasonably equitably collected, do we get our money's worth from the spending (ie, does it finance as many artists and creators as possible for the money we're willing to spend?), is this a reasonable level of expenditure? What's more, we could actually measure the number of new works and how they change depending on the level of spending so we could finally get real data rather than imaginary numbers made up to support organized con men.

So we would only have access to music that the government approves of? Bad luck all the acts who are critical of the government, from Pete Seeger through Steve Earle to The Dixie Chicks, and bad luck any genres that are percieved as "evil", from blues and rock 'n' roll ("the Devil's music") to Gangsta Rap ("promotes violence"). Do you really want your senator choosing what you can listen to? Then you must have more trust in your government in the USA than I have in mine here in the UK. Having these choices in the hands of industry may be bad, but passing it to government looks to me to be even worse.

Re:Why not donate instead?

[Oligonicella]

The answer to that should be self-evident. People are cheapskates. They will sit and whine about the expense of things, but then will refuse to donate money to individuals who actually try to make a living by the cheapskates' suggestions. Just shows the "I want it all free" crowd are hypocrites and don't really want anything more than "free".

You get what you pay for.

By the way "Utopian Socialist", I have an outdoor structure I need built. Come on over and build it and I will give you some writing in exchange.

Re:surprised??? never...

[PopeRatzo]

theres another solution, switch servers to one that isn't based in an RIAA controlled country.

Dred,
you have hit on the ultimate solution to all idiotic intellectual property laws. In some years, it will have been a good thing that the Internet caused the end of IP as we know it. Stories like this one, showing how little the "gatekeepers" of recorded music really understand about how people use their product, are starting to pop up at such an alarming rate that the crash must be near.

Re:surprised??? never...

[KKlaus]

No offense, but this is a terrible idea. Who has the authority to decide what is "valuable"? Britney spears was very popular. Does that make her more valuable? Andy Mckee is a fabulous musician, but relatively obscure. Is he then less valuable, or more because what he does is more difficult and complex?

Whatever you think is the answer is irrelevant, because the point is that a huge number of people will disagree with you. Whatever answer is legislated, a lot of people are going to be upset when, in their opinion, they're spending money incentivising the wrong thing. And what if I don't listen to music? Am I exempt, or is funding the pleasures of others a reasonable thing to be required of me?

I don't know why having some sort of committee deciding what artists should be paid seems appealing, and that is what it would ultimately come down to. The free market _can_ work here, it just doesn't because we have stupid copyright laws, and a cartel that no one seems willing to take on. That doesn't make a nonsensical socialist program the answer.

Lobby for laws to get "equal time" in the end

[gd23ka]

This might well force internet radio to take up more and more independent artists
that would otherwise get turned down by the dispensing recording industry,
never see the light of day - and be a great way for indies to get on the air
to a large audience without having to compete with the established artists for
time.

As soon as they see their "mind-share" eroded by people outside their
http://en.wikipedia.org/wiki/Payola [wikipedia.org] payola system the recoding industry will turn around
and offer payola or even demand to be put on and lobby for laws to get "equal time".

Re:surprised??? never...

[dcollins]

"Hardly any of the stations (even the popular ones) play RIAA music."

Does that make a difference? I'm an indie musician, and to my understanding any time a song gets played, a royalty should be paid to a collection agency like BMI or ASCAP. (Possibly based on a reasonable survey technique.) And that money comes back to the writer, publishing rights holder, etc., regardless of whether it's RIAA or not.

Can someone please correct this information if I'm wrong? (A small number of internet stations that have played my band required signed wavers foregoing any royalties.)

Re:Well,

[cpt kangarooski]

No, there are incentives aside from making money. For example, look at /. -- all of us here are posting creative works, in the form of our posts and responses in these threads, but none of us are making money from it. The incentive of socializing is enough for us. Other natural incentives include fame, art for art's sake, non-copyright-based economic incentives (e.g. commissions, the fine arts market, being first-to-market, etc.), scholarship, etc.

And in any event, the purpose of copyright law is to serve the public interest, where the public interest is tripartite, and consists of 1) wanting more original works created and published; 2) wanting more derivative works created and published, and; 3) wanting no or minimal (in scope and length) copyright laws.

Which brings us to the life+70 term (which is what it actually is in the US, at least for some works). For the vast, vast majority of creative works, they'll never make money at all. For the tiny minority of works that will ever make money at all, the vast, vast majority of them will make virtually all of the money they'll ever make within a year or two of release in a given medium. For example, let's take movies: When a movie comes out the opening weekend is absolutely critical. It'll make a lot of money that weekend, less the following week, even less the week after that. After a few weeks, it'll be gone from first-run theaters. After a couple of months, it'll be gone from pretty much all theaters. Whatever money it made from the box office during that period is basically all it will ever get in the theatrical medium. Then it comes out on pay-per-view. I have no idea who actually uses ppv, but apparently someone does, and again, when it first comes out, that's when it makes most of the money it will make from ppv. As the weeks drag on, it pulls in less and less. Eventually it drops off of ppv. Then come the sales to movie rental shops and the public, in the form of DVDs. The first week that the DVD is out is when most of the people who have been wanting to buy a copy of the movie will get it; people who have wanted to rent it (rather than use ppv) will get it then too, resulting in most of the rental store orders to have been placed early. But again, as the weeks drag on, sales drop off. A little bit more money can be squeezed from licensing the movie to the cable movie channels, and after that, to regular tv channels. And you can go through the same cycle in the foreign markets. But then, that's basically it. You have gotten 99.44% of all the money you will ever make from this movie. Most of that (box office, ppv, dvd sales) took place in the first three months or so. (Newspapers and some tv shows have the shortest periods, while books probably have the longest, but even for books, it's a couple of years)

So the issue is, if all that the remaining years are worth is the paltry 0.56% remaining money to be wrung out of it, which is true for the vast, vast majority of movies that ever make any money at all, since so very few ever have the lasting popularity to keep making a significant amount of money over the long run, is it important that the copyright lasts so much longer?

If Alice will paint Bob's house when Bob offers to pay her a million dollars, then that certainly has an incentivizing effect, but it is rather costly. If Alice will paint Bob's house when Bob offers to pay a thousand dollars, then that has incentivized her just as much, but in a much more cost-effective manner!

Well, for creative works, we need to provide the least amount of incentive we can in order to get the most works we can -- basically we're looking for how to get the most bang for our buck. If a five year copyright would get nearly as many movies made as a 95 year copyright (the term length most commonly applicable in the US for movies), then surely the five year term is a better bargain. Adding more incentives -- by lengthening the term -- might get a handful of extra films made, but are they worth the cost to the public of having to endure such long copyrights? Probably not. So don't just look at the incentivizing effect, look also at whether or not it is worth it, and just how much of an effect there actually is.

Re:When will they learn....?

[Restil]

Many corporations and industries are hesitant to change their entire revenue model. This is especially the case in such industries such as the music and movie industries which work today much the same as they have since they were originally formed. Whenever a new technology becomes available that they have no control over they are presented with two opportunities. Spend a small amount, which is probably already an allocated expense, to use the government, courts, and other industries to stifle or outlaw the new technology, or spend a much larger amount of money to adapt the revenue model to the new technology. Even if in the long run the new technology will pay off for them, the inability to control the outcome will be an unacceptable risk to endure.

Oppose that to companies that create CPUs, Intel, AMD, etc. Sure, they have their share of patents, copyrights, and lawsuits to go around, but in the end those issues are insignificant. No manufacturer of CPUs would dare to decide to try to slow the growth or change in their industry, since any effort to do so would instantly give their competitors a significant, perhaps crippling advantage. And as far as lawsuits go, by the time any lawsuit has had its final day in court, the technology in question has long since been retired.

The music industry is still all caught up in the concept of CDs. They sign a contract with the artist for the copyright on a recording, market the recording, print the CDs, the coverart and inserts, and feed all the distribution and retail stages of the process. The industry is much more than the artist and the customer. But now it doesn't need to be. Sure, we might have less manufactuered boy bands, but there will still as many tabloid enhanced rock/pop/rapstars as ever even if the industry wasn't around to "help" them along. We don't NEED CDs anymore, but that's all the industry knows, that's all they have, and they risk losing it all if they're forced to dive right into a different method of distribution. Of course, in the long run they'll have very little choice, but they're going to go kicking and screaming about it.

I'm sure the horse and buggy makers didn't get along well with the automobile industry either, but you'd like to hope that the smart ones saw which way the wind was blowing and switched sides before it was too late.

-Restil

Re:That's kinda the point

[MobiB]

EXACTLY! You hit the nail on the head. Non major label acts (ie. local and indie label acts) are a threat to the big 5 and the RIAA. The largest 2 reasons that CD sales have declined in the last decade is because a. quality and variety have diminished and b. paying $12-$19 for crap is a further deterrent. Wider and alternative channels to get music they don't control (and artists they are not actively screwing out of royalties) has great potential to become a massive competitor were it ever to gain traction. So the obvious plan of course is 'don't let it gain traction'. When the RIAA gives their gripes against digital distribution it usually comes down to two things about the format. 1. Users can just listen to what they want, when they want. Which is akin to playing from a CD. 2. "Perfect" digital copies can be made which obviates the need to purchase CDs or official distributions. Do either of these apply readily to Net Radio? (Pandora maybe 'slightly' to the first point since you have some control over which artist, but still not completely a replacement for owning the CDs). The answer is NO. So why are they against this just as they are against MP3s? Make no mistake about it. When it comes to the net radio stations, this is less about protecting the playing of their big acts than it is keeping uncontrolled competition out. They've had a sweet (corrupt really) deal going on for a long time. The artists largely get screwed BY THE LABELS (that fact doesn't get enough press) and they have a cartel lock over what actually makes it to the consumer. They will actively hunt and kill anything that is a threat to this. This is just the latest hunting trip.

Actually it should be:

[novus ordo]

"New Royalty Rates Could Kill (Legal) Internet Radio (in the USA)"

Re:surprised??? never...

[Anonymous Coward]

Well, I work in standard broadcasting (i.e., radio -- FM, AM) -- and this is nothing new.

First, yep, the way the industry looks at it, you have to license against POTENTIAL audience. If you play copyrighted material in an auditorium that holds 1,000 people, you pay the same fixed rate, even if only 20-30 show up. Likewise in broadcasting: we pay the same price whether we're top rated or in the Arbitron basement. They go by market size, not by what you play or how many people might actually be listening. So, yes, from their point of view, it DOESN'T matter whether you're playing Britney Spears and Fergie, or a couple of jazz guys that only a handful of people have heard of.

Welcome to the wonderful world of royalties, where you pay a fee against the POSSIBILITY that someone might listen to a song without paying for it. (Likewise, you pay a small fee for each blank audio CD that you buy, and for the same reason. After all, you MIGHT use it to record audio.)

We stopped our online streams several years ago when the licensing organizations (ASCAP, BMI, SESAC) told us that we'd have to pay tons of money, even though (I watch the counters) we might have 50 listeners at that time(contrasted with, say, 50,000 on regular radios at the same moment). We finally worked a deal with them for rational fees, and we're streaming again. Who knows how long it will last?

The latest trick, though, is that they want us to pay AGAIN for the second channel with HD radio. That's not a surprise, not knowing them, but what's annoying is that they want us to pay the SAME fees as we do for the main channel. Let's be honest: at present, there are very few HD-R receivers out there capable of receiving the additional HD channel, but we have to pay the same.

Oh ... and we have to pay the same EVEN IF the second channel is just rebroadcasting another station that we've already paid for -- in other words, if I have WAAA doing WBBB on the second channel and vice-versa, both of which are licensed and paying fees in good stead, we still pay FULL price. Again. (And in a large market, those fees can easily top SIX FIGURES in a year. Most people don't know that, either.)

Having said that, I don't think they're consciously trying to stop streams. Most people don't realize that they've been doing this to standard broadcasters, nightclubs, et. al., for many decades. They're just greedy, and use a revenue model that is hopelessly out of date.

(Think about it: ignoring privacy issues, we have the technology now to KNOW what song you're listening to, and when. But the record industry doesn't propose that, do they? Because they WOULDN'T MAKE AS MUCH MONEY. It's just that simple.)

Re:surprised??? never...

[schon]

Hardly any of the stations (even the popular ones) play RIAA music.

Yes, and this is exactly why the RIAA wants them to die - they're competition for the existing cartel.

Re:Opportunity

[Anonymous Coward]

Big opportunity here for independent artists

Good thing the RIAA convinced the government to make their "partner" company SoundExchange the collector for mandatory and automatic royalties on all internet music.

Your independent artists will have to be sure to cut their SoundExchange check if they stream their own music online. Theoretically, they'll get the money back, less handling fees, shipping fees, processing fees, breakage fees, promotional fees, break-even fees, interest fees, interesting fees, and so on. Actually, they'll just get a bill for more.

Re:OK...That's solved by not playing RIAA music.

[Anonymous Coward]

This is actually a fantastic bit of news. Essentially this will force artists that want to have their music heard on internet radio to license with an open license. And small artists that aren't signed (which is where a fair chunk of the actual talent is) will have an open field that won't have to compete with the over promoted music the RIAA pushes radio stations to play.

Re:surprised??? never...

[rustman]

Novus ordo said ``You can go to each band whose music you want to play and make a deal with them directly.`` That's only true if the band owns their own copyrights. If the band has been released on CD / (or through online distribution like iTunes), most likely the band has licensed the rights to their track to a label or distributor. That is who you need permission from, not from the artist.

So unless you're talking about bands that are unsigned, or bands that own their own labels, the band/artist is not in a position to license their music for internet radio broadcast!