The increase in royalty rates for Internet radio stations scheduled to go into effect May 15 makes me very nervous. I don't think I fully understand all the issues, but I know I definitely don't trust major record labels to protect artists' interests. Here's what I'm reading:
BoingBoing calls it an Internet radio crisis. Reader comments urge people to contact their representatives through Savenetradio.org. And they provide talking points, so you just have to dial a number and read the script. Sweet!
Here's an excerpt from an interview on Truthdig with the guy who founded Pandora, which I listen to pretty much nonstop every day at work:
Sinnreich: The RIAA and SoundExchange argue that higher rates are necessary in order to adequately compensate recording artists as CD sales and other traditional music channels continue to lose customers to the Internet. What’s your take on this?
Westergren: I’m a musician myself, and I’m a huge fan of paying artists for their work. Our position is that we’re happy to pay it, but it has to make sense for the business. You’re right—CD sales are really dropping dramatically, and there’s a fair bit of panic going on. But that’s coupled with a serious misperception about the economics of online radio. SoundExchange and the RIAA say that since Internet radio’s getting bigger, a bigger piece of the webcasting pie needs to go to artists. In reality, revenue might grow, but that doesn’t mean it’s going to become much more profitable. You can’t squeeze blood from a turnip.
Sinnreich: So you don’t think they’re malicious so much as misinformed.
Westergren: They’re definitely misinformed. But there’s another piece of the story. Half of the money we pay to SoundExchange each month goes to the labels, and half goes directly to the artists. If these new rates do stick, then the only way webcasters will stay alive is to start striking direct licensing deals, at lower rates, with the major record labels. If those deals are struck, then all of that money goes directly to the label, and goes under the umbrella of traditional record deals, where only a very small percent ends up going to artists [emphasis mine].
Sinnreich: So you believe that one of the strategic reasons the RIAA has for supporting these higher rates is so labels can offer a competitive lower rate directly to webcasters, which would mean more income overall for labels and less income for artists?
Westergren: That’s exactly right.
And an excerpt from Newsweek.com:
As you read these words on your monitor, there is a decent chance that you’re also streaming a little online radio. After all, with an estimated listenership of approximately 50 million Americans per month, Internet radio has become a go-to destination for a fuller spectrum of music, an alternative to FM’s mind-numbing monotony. And if you are one of those listeners, mark May 15 on your calendar: it might well be the day that the music dies.
Last month the trio of Library of Congress judges that oversees copyright law’s statutory licenses decided that May 15 will be the date royalty fees owed by Web radio operators will be recalibrated. The Copyright Royalty Board changed rates from a percentage of revenue to a per-song, per-listener fee—effectively hiking the rates between 300 and 1,200 percent, according to a lawyer representing a group of Webcasters. "If this rate does not change, it will wipe out the vast majority of Web radio," Tim Westergren, founder of the music discovery service Pandora, tells NEWSWEEK. "If this stays, we’re done. Back to the stone age again." (Royalty Board Chief Justice James Sledge declined to comment on the case, which lawyers say they intend to appeal.)