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Ray of Light For Internet Radio
Things are heating up again in the battle over the future of internet radio. The Copy Right Royalty Board, part of the Library of Congress, handed down new rates on March 5th of this year that were set to take effect on July 15th. The ruling came after 18 months of hearings that pitted one well-organized side against a fragmented industry (if you could call it an industry). The new rates have threatened to put almost every last webcaster out of business. The months since the latest ruling have seen webcasters of all shapes and colors come together to fight back, and have also seen the designated collector, SoundExchange, play politics in true Washington style.
Some encouraging developments last week, however, seem to indicate that SoundExchange’s politicking has begun to genuinely piss off the powers that be. As Congress neared its summer recess, Senators Ron Wyden (D-OR) and Sam Brownback (R-KS) have threatened to take a piece of legislation, entitled the “Internet Radio Equity Act,” that would legislate a return of lower per-revenue rates to the senate floor after the break. The legislation has over 140 sponsors in the House, though it’s currently seen as languishing in recent days as Congress would prefer a solution aside from one requiring their intervention. Even more encouraging is some inside news that former Senate Judiciary Committee chairman Arlen Specter’s (R-PA) office is considering re-writing section 114 of the Digital Millennium Copyright Act (DMCA).
This is a long and complicated story. A lot has been written about it, unfortunately almost all of it as half informed regurgitation that fails to get the story straight and take into account all of the complex developments. It seems that no one wants to go back to the beginning of things—to 1995, when Congress enacted the first bit of legislation dealing with the topic, or to 1998, when it weighed in again with the DMCA and read and reevaluated the laws as written—much less the rulings of the body empowered by the laws to create the new rules of the game.
I’ve thought for a while now that a well executed dissection of the topic, going back to the origins of the mess and detailing all its twist and turns, is long overdue. Having followed the developments over the last few years, I only wish I had the time and resource to talk to everyone involved and lay out all of its sides in the light of truth and illuminate the best way to resolve it. The trouble is that even with such an enlightened understanding, the chances of creating the most sensible and just state of affairs for all parties is essentially nil.
The original laws were crafted in a time when technology was seen as having a limitless possibility to change everything about our lives, and much of the very things that the DMCA creates rules for were in states of infancy. Given the way the saga has unfolded over the last 12 years, the only way that harmony is going to be reached is either tossing out or amending the DMCA and, in doing so, re-evaluate exactly how the changes in technology have played out in the forms of digital media. There is little chance of fixing the tangle of existing legislation and Copy Right Board rulings, especially given the fact that webcasters have evolved into quite divergent forms with distinct business models, organizations and revenue/profit streams. Treating them the same would make little sense, and would open the door to fighting amongst themselves over a single rule that applies to them all as they have different interests. That is exactly what SoundExchange is hoping for.
In the last few months SoundExchange has offered so-called “small webcasters” a stay of execution, postponing the rate hikes until 2010—a reprieve they will need if they are to stay alive until a possible re-evaluation of the DMCA. According to Specter’s office, this will take until early 2009. If the “Internet Radio Equity Act” fails to make it through the House or Senate, the small webcasters could be in big trouble. Rusty Hodge of Soma FM has led the small webcasters in turning down the reprieve. It’s a dangerous move, but one that has the force of reason behind it. This could create a precedent. The current rates are based on precedent, that of one deal struck mostly under the leadership of Dallas Mavericks owner Mark Cuban between Yahoo! and the RIAA after he took over their webcasting unit when they bought his Broadcast.com for $4.9 billion during the irrational tech days of 1999. Bear in mind that this blowing transaction (YouTube.com sold for $1.6 billion last year) occurred just a year after the DMCA was passed into law and Cuban (who claims to have fought against the DMCA) has gone on record saying that he structured the deal so Yahoo! would be left as the sole player, thus actually benefitting from higher rates.
SoundExchange has also been aggressively working to use their current victory and playing politics to cement its position while making new inroads. It has helped form a lobbying group called the musicFIRST coalition to use the logic of the new rates for internet radio and extend them to satellite radio and other digital methods of distribution like cable, where there are standing agreements on rates struck by more organized industries some time ago. It’s also going after terrestrial radio, again using the internet radio rulings as precedent for collecting performance royalties from an industry that has never been subject to paying them. The problem is that the DMCA explicitly prohibits SoundExchange from lobbying, as it would be an unauthorized abuse of its revenue, which comes solely from the collection of artist royalties.
SoundExchange is also offering to cap the $500 per stream fee for webcasters (which only affects bigger players like Yahoo! and Pandora) in exchange for requiring them to turn over more data and implement DRM technology that prevents listeners from “ripping” webcast streams. This REALLY makes little sense as, again, it’s beyond the bounds the DMCA sets for a performance royalty collection agent and is what has led Senators Brownback and Wyden to threaten to take the IREA to the Senate floor after recess.
“As Congress heads into its August recess, we are troubled by the lack of negotiating progress being reported,” the pair said in a statement. “Now we are hearing that the recording industry is attempting to use [the per-channel minimum fee] of the CRB decision to force webcasters to adopt recording restrictions far in excess of the controls that have governed broadcast content for decades. While we strongly support a negotiated solution, we will not allow the minimum fee issue to be used to force an agreement that mandates DRM technology and fails to respect the established principles of fair use and consumer rights.”
This is a subject for the RIAA, as is the lobbying for extension of the royalty collection to other industries and really brings into question their independence and their legitimacy as an agency that is mandated solely as the collector of royalties for the benefit of performers.
Almost all of these recent actions on the part of SoundExchange are very tactfully aimed at creating separate circumstances in the dealings of the various groups of webcasters with it. They know that not only are the webcasters standing together for the first time, but that recent actions on their part have brought other groups such as terrestrial broadcasters into the fold. The latter has been a miscalculation on SoundExchange’s part and a result of what appears to be either greed or direction from a third party (read the RIAA). They know if either the small webcasters or the larger ones (Digital Media Association) alone stick a deal with them that saves either par
ty temporarily, the result will be facing the same set of circumstances down the road. Congress will not have a reason to intervene, and they will no longer be a unified front.
It’s time Congress cleans up this mess. They’ll avoid it if they can, and it’s up to us to force them to deal with it. The only thing that makes sense is to re-evaluate the situation with 12 years of change as evidence and a better understanding of what the industries will look like in the future. We’ve got a long way to go before we really know what the music industry, and the outside media it relies upon for distribution and promotion, will settle into before the next great wave of change comes, if it ever stops. The events over the last few months have forced the issue, perhaps too early to create the best laws. But what is a fact of modern life is that the law lags technology. The DMCA, however, is a rare case of law PRECEEDING technology being implemented. It’s clear the laws don’t achieve what any good intellectual property right law should, which is to allow for the encouragement of innovation while protecting rights holders. The DMCA has, instead, become an obstacle to those very ends. It’s time we re-evaluate it.
I implore you to visit a site that provides you with your Representative’s email or phone number and call or write them. Simply tell them one thing: given the developments over the internet radio issue this year, you would like them to sponsor legislation that rewrites the DMCA, or at a minimum its section 114, that any other action towards resolution or the debate is inadequate and that your vote for them in their next election hinges upon rewriting that law. How you want to see it change is up to you. Read about it for yourselves, read the laws themselves. But let’s force a debate now that more of the facts are in, and while that chance is ripe. Unless you like hearing the same 10 songs every hour, hour after hour!
» Previously: Blog It Out Your Ass
14 Comments
Shouldn’t intellectual property rights protect the ability of an individual to control what he creates? It seems that the only action the DMCA takes is to take away an artist’s right to control what is done with his own music. It sets a rate that the artist must sell the music at, regardless of his wishes. I don’t think webcasters should have the right to play someone’s music without obtaining their permission.
You have to be kidding me. Where did you learn to read.
1) None of this had ANYTHING to do with the artist intellectual property rights. That’s a song writers royalty and is covered by a whole separate set of laws and groups, and no one is debating that. This is about paying for the performance, which is an unprecedented request in any medium or art. The performers get paid for the act of performing a song someone else wrote, for the psychical act of playing someone else’s intellectual property. The labels own the right to the recording and are paid through sales, which are declining, whether they should be compensated so aggressively or at all for internet radio pay (regular radio does not pay for performance royalties) is the debate and one that i’m asking you to make up your own mind about.
2) The current law FORCES artist to allow Soundxchange to collect for them whether they want them to or not. Even if they wished to NOT have their new-found royalties be collected (not that they’d see a penny of it) so that there music was free to be played by all and opening new ears to them, they CAN’T NOT have them collected. Sounexchange will just collect and use their money to lobby (which it’s prohibited from doing) unless they sign up and claim it. And the CRB will not allow anyone else to comete and become a collector, letting say, the indie’s creat thir own collect that fits with their interest. This takes away all control from the artist.
3) Legitimate webcasters only play what has been sent to them by bands and labels.
The DMCA is in the wrong, it needs to be thrown out, but I think your missing the point or just not reading well.
This is a great article but it missed one fact. Somebody / some bodies need to be arrested for breaking the law. If we were talking about any other non-profit incitements would have already been handed down and at the very least records would be seized for an investigation of activities. Who knows these guys might be funding terrorism.
Darren,
Intellectual property rights do not protect people who actually create things. They protect people who own the rights to the things that are created, and then use the mumbo-jumbo of legal language to designate the owners ‘creators.’ This makes about as much sense as designating calves cows because they’re full of milk, but then, we are dealing with lawyers and lawmakers and capitalists, this kind of confusion IS their mother’s milk.
Jason, you said:
“And the CRB will not allow anyone else to comete and become a collector, letting say, the indie’s creat thir own collect that fits with their interest. This takes away all control from the artist.”
Can you provide a reference for this? I’ve heard this said before, but I haven’t seen any law or rule that prevents an artist from: 1.) Setting his own royalty rates independent of the CRB, and 2.) joining other artists to create their own collection agency. Their agency won’t have the same powers as the government’s agency, but as far as I can tell webcasters and artists are still free to negotiate their own rates independent of the CRB. The problem is that the CRB allows the webcaster a way to get around the artist’s wishes.
Darren,
1) Yes, the CRB’s ruling is not int he interest of artist….or the various players. The process IS the problem. That’s why I think we should toss out section 114 and start over with more up-to-date information on the effect of this industry.
2) No, Soundechange has been unwilling to negotiate rates. It has a few examples of of how its tried, but so fare they have all been rigged offers, and that is one reason the two senators are pissed. Further the NAB has put to together a very fair and comprehensive proposal that affects all involved. Soundexchange has not responded.
3) The last CRB ruling and a CRP ruling before it denied allowing another collector. It’s logic is ridiculous especially given that (unlike what is usually written) Soundexchange was a part of the RIAA that was spun off, it WAS NOT created by the gov. The RIAA created it to do just what its doing now. and spun it off before the 1st CRP ruling. Make no mistake, it was created to find a way to collect for the big labels, not the artist. But when a third independent party tried twice to seek permission to sign and collect for artist (many expressed a preference for them) the CRB denied them saying they did not make a good argument that suggest they would be more efficient and thus benefit artist. There is not a WORD reguarding CHOICE for artist, it was not even a consideration.
I implore you to read it. If your interested, you’ll find much better information here than from google news.
HAHA,
“This is a great article but it missed one fact. Somebody / some bodies need to be arrested for breaking the law.”
That’s actually an opinion. But true. What would happen if an environmental non-profit got caught doing something it is prohibited from by law? They’d be splayed on national television.
This is ridiculous. Why doesnt the same rule apply to internet radio, as normal radio. Surely if royalty rates arn’t paid on either that will be fair. Otherwise it will just kill off community radio type services. Ads are fine, but don’t treat each differently when they arn’t. I can’t believe how much that your congress does that affects us here.
I don’t have any doubt that other companies aren’t being allowed to collect the royalties charged to webcasters who use the CRB license to play music. But what’s I’m looking for is a law or rule that prevents a music artist from:
1.) Negotiating with a webcaster to play his music for free or for a rate higher or lower than the CRB rate, and
2.) Artists forming their own organization to allow for collective bargaining with webcasters, independent of the CRB. I’m not talking about taking over SoundExchange’s role, I’m talking about artists acting on their own like they would in a free-market.
If they have the ability to set their own rates, then it seems that the high CRB rates don’t necessarily have to affect them. If SoundExchange demands incredibly high rates, any artist can say “Forget SoundExchange, you can play my music for X amount per play or for X percent of your revenue.”
Daren,
I agree that is the ideal. Perhaps if they re-write the DMCA that may be a possibility. Unfortunately the early CRP (pre CRB) ruling based on the DMCA prohibit artist from doing so. Make no mistake the CRP process under the CRB is the problem. I denies a real market in favor of an artificial one derived by a panel of arbitrators using a rigged standard.
Want it to change. Write your congressmen and ask the to pass the IREA and take action towards re-writing section 114 of the DMCA. Tell them you WILL follow their actions on the matter and that your vote depends on it.
Thanks, I will check out the CRP and see how it affects the artist’s right to negotiate their own rates. If artists really don’t have the right to set up their own collection agencies my opinion of the current situation would change. I might have questions for you later about this. :)
Ok, I’ve spent more time than I should looking through the DMCA and other related documents, and I can’t find anything that backs up what you are claiming: That artists are not able to form their own organizations to set their own royalty rates, independent of the CRB.
Can you provide a reference that shows what you are claiming?
The recording industry is laying the groundwork for it’s own destruction. Once they are out of the way for good then the issue of internet radio royalties will be settled . I do not understand why playing a song on a public medium, which should should be analagous to advertising and therefore popularizing the song, shoul cost the broadcaster any money. In fact a case could be made to charge the recording industry a fee for playing their music. The recording industry by trying to intimidate their public and thoroughly PISSING THEM OFF have finally dug their own grave. It is a very fitting end for an industry that has raped the public over the years.
Sound Exchange Jest I am sure. The organization given the responsibility of collecting royalties for internet broadcasting would have a functional site, right. NO, not no but NO. One of the worst sites on the internet apparently written with so much flash junk that fully 90% of it does not work. This appears to be a self made block by some entity that does not really want internet advertising at all. Sure we will tell them they can do it if they will pay us, but we will make it so difficult that nobody can apply, read how to do it right or pay us. Gotcha suckers. Of course “Congress” does not care or they would do something about it. Got us again didn’t you.