The Copyright Act Explicitly Says Disruptive Innovation Should Be Blocked

from the isn't-that-a-problem? dept

A few weeks back, we wrote about a proposal by Rep. Jerry Nadler, which we referred to as the RIAA Bailout Act of 2012 because it sought to change the nature of satellite radio royalties to put them on par with the absolutely ridiculous and unsustainable royalty levels for internet radio. In case you don’t know, there are basically three very different tiers for the royalties that need to be paid to musicians (separate from songwriters) for broadcasting the tracks on which those musicians played. If it’s played on the radio, the stations have to pay nothing to the musicians, as Congress long ago decided that radio play was the equivalent of advertising (a viewpoint that is pretty accurate, given the decades of payola that have shown that radio play is so valuable that labels will pay stations and djs to get their songs played). Then there are the satellite radio guys (basically Sirius XM at this point). They pay a rate that they already think is too high and pass those rates directly on to consumers. In preparation for a new rate-making process, they’re already seeking out legal ways to get away from having to pay statutory rates.

But what the satellite guys have to pay completely pales in comparison to what internet streaming companies like Pandora have to pay. There, the rates are so crazy that it’s become clear that Pandora has little likelihood of ever being profitable unless something drastically changes. Matt Schruers, over at Project DisCo, has an absolutely fascinating look back at why these rates are so bad, and it comes down to this simple, but positively scary point:

When the Copyright Act of 1976 was passed, it was so taken over by regulatory capture by a few key industries, that they explicitly put into the Copyright Act that it should be used to stop disruptive innovation from challenging legacy businesses. I’ve read the Copyright Act many times, but have to admit that I’d never quite noticed this line from 17 USC 801(b)(1)(D), which explicitly states that the role of the Copyright Royalty Judges on the Copyright Royalty Board that sets the rates for internet radio are there:

To minimize any disruptive impact on the structure of the industries involved and on generally prevailing industry practices.

Yeah. Their job is to set rates that basically kill off disruptive innovation in favor of “prevailing industry practices.” As Schruers notes, this goes against absolutely everything we understand about the importance of disruptive innovation in driving forward the economy:

That’s right: employees of the U.S. Government who dictate price inputs for entire industries are statutorily charged to resist change. While the CRT / CARP / CRB has always had other statutory guidance as well, for example, maximizing availability of works, affording copyright owners a “fair return” and users a “fair income under existing economic conditions”, Congress enshrined this explicit rule that no one be permitted to upset the existing players’ apple cart. There is no pretext here, no cynical appeal to some higher objective that justifies minimizing disruption of the prevailing industry — change is inherently bad. The statute gives no consideration of whether a better business model might come along, and in fact affirmatively discourages any — not only because the statute aims to minimize any “disruptive impact”, but also because this license was limited solely to “pre-existing” services by the Digital Millennium Copyright Act in 1998. New arrivals were out of luck.

How the hell did something so explicitly corrupt and so clearly a form of crony capitalism get directly into the Copyright Act? Take a wild guess:

So how did this “minimize disruption” language wind up in the Copyright Act of 1976, given that it so clearly violated the First Rule of Defending the Status Quo? The “minimize disruption” requirement is a vestige of a copyright legislative process that stretched over many years, starting in the 1960s, at a time when fewer people appreciated copyright and fewer still understood the contours of the legal system that created those rights. Much of the initial drafting of the ‘76 Act was by the Copyright Office, which chaired a series of meetings with prominent industry copyright lawyers throughout the 1960s.

Counsel for publishers, the recording industry, broadcasters, were well represented in these discussions. The future, as the saying goes, had no lobbyist. It is not surprising, therefore, that the multi-factor test that determines the rates paid by services like satellite radio under the Copyright Act’s statutory licenses would reflect the perspectives of the existing parties to the arrangement. The standard from the ‘76 Act remains today (although at the time, the statute was focused on regulating “coin-operated phonorecord players”.)

And… believe it or not, that’s not even the end of the story! That part of the Copyright Act is the part that impacts the satellite guys. But the streaming internet folks? For them it’s even worse, as the statute takes things even further to create even more incentives to further kill off these new innovations — by basically saying that a “proper” license is one with which a “willing seller” is happy. In other words, it sets the statutory rates almost entirely based on the interests of… the existing, entrenched players.

And that’s why Pandora may never be profitable if nothing changes. Because we’ve actually built into copyright law that disruptive innovation is bad and should be minimized at the interests of the legacy players.

Filed Under: , , , , , , ,

Rate this comment as insightful
Rate this comment as funny
You have rated this comment as insightful
You have rated this comment as funny
Flag this comment as abusive/trolling/spam
You have flagged this comment
The first word has already been claimed
The last word has already been claimed
Insightful Lightbulb icon Funny Laughing icon Abusive/trolling/spam Flag icon Insightful badge Lightbulb icon Funny badge Laughing icon Comments icon

Comments on “The Copyright Act Explicitly Says Disruptive Innovation Should Be Blocked”

Subscribe: RSS Leave a comment
pizza says:

Re: Copyright intent

Look at the final determinations and SX filings. See how often they justify their rate demands on the basis that the companies can afford to pay what they propose.

That begs the question, at what point should the service be allowed to make a net profit and what percentage of net profit should they be allowed to make, if any.

droozilla (profile) says:

How to solve this.

Step 1: Stop paying royalties for broadcasts. Satellite, internet, whatever.

Step 2: Make argument playing the song is same as advertising, just like radio.

Step 3: Make argument widely public. Show data. Use whatever media available to spread argument.

Step 4: Watch lawyers freak out, old media lobbyists come out of woodwork, and politicians take bribes.

Step 5: Expose morons from step 4 to the public. Explain how technology works. Demand changes to the system, because it’s 20fucking12 and any argument against moving onto different platforms is simply retarded.

Step 6: Point and go ‘U MAD’ at legacy media as they lose and crumble into dust.

Anonymous Coward says:

Ahh Mike, you get all riled up, but you miss the point:

“by basically saying that a “proper” license is one with which a “willing seller” is happy. In other words, it sets the statutory rates almost entirely based on the interests of… the existing, entrenched players.”

If there were other, new sellers, the rates would change. The real issue here is that as soon as anyone makes it in the music world, they are suddenly very happy to get the higher rates. Nobody wants to sell cheap.

If this system is entirely defective, if there is so much of a gap in there that millions of dollars are lost, don’t you think someone wouldn’t have shown up by now to scoop it up?

There is no downward pressure because, unlike how you try to portray it, there is no real alternate music source. People generally want to hear hits and well known material, they don’t want to hear nothing but bands they don’t know all day. The new business models have failed to take advantage of all the apparent sloth and abuse you see in the system because they aren’t turning out the material the masses want.

Maybe if you concentrated on how to make the NEW models better, and stopped trying to drag the old ones down, you might have something. So far, I don’t see any new models that are beating the old guys down.

MahaliaShere (profile) says:

Re: Re:

All it took was one damn online search in order to find a source for the vast majority of my music. Of course, not everything is as easy to find. A person has to get out there and dig for indie gems, but many people just don’t want to. That’s part of the problem. People have to be told what they’re going to like, and they have to be told in such a way that is the most appealing to them. They don’t want to have to actively work to find entertainment that isn’t from one of the majors. Everything from movie trailers to best seller lists, it’s all right there in the consumers’ face.

GreenPirate (profile) says:

Re: Your opinion doesn't matter tho

To sum up AC’s statement, “New models need to improve while remaining bound to the old model.” Though he may not realize it, AC is ultimately agreeing with this article.

RIAA is not as healthy as AC seems to be convinced. If only that proud ol’ business model ran on belief! riaa-revenue-dwindles-as-labels-cut-back-120817

There is a new model that is better. It’s called file-sharing. It has smashed the old model and this article is a stellar example of why the old model prevents business new business models from competing with the undefeated champion that is internet piracy.

Anonymous Coward says:

I’m still waiting for the feds to step in to remove that pesky disruptive innovation called the refrigerator & freezer that ruined my ice business! Everyone used to have to buy big blocks of ice from me, to be delivered every single day to their house to keep their food and drinks cold enough to last for the entire day!

Now I’m out of business! Those pesky inventors killed my ice making business!

And while we’re at it, my horse breeding business also wants the feds to step in and throw Mr. Ford in jail for piracy, for his ‘cars’ that ruined the horse breeding business. Look at all the evil Mr. Ford’s cars have been used to commit, like running people over, & transferring stolen goods!

Chronno S. Trigger (profile) says:


There is an alternative music source, but it’s not being used because the second Pandora and the like switch exclusively to independent music, nothing will change. They will still be forced to pay out the nose, but now they’re forced to pay because they might play music covered by the collection agencies.

They could fight it and probably win, but it’s not like the RIAA would pay back the millions lost in court and lawyer costs. And god help them if they ever make a mistake (like play a song that kinda, sorta sounds like one covered).

There’s more to being a monopoly then just not having other options.

Anonymous Coward says:

Let's cut the crap once and for all.

This might (currently) be an mostly international web site, but the US is where the lion’s share of the trouble originates.

The US so-called government couldn’t give a rat’s butt about individual citizens and cares solely about how much money is lining their personal pockets. All the legends about the “founding fathers” and the “constitution” (or as the former US dimwit-in-chief GW Bush called it “just a piece of paper” ) will never change that, so let it go. The country is ruled by the corrupting influence of money, period.

The MAFIAA may be full of some of the slimiest creeps ever to crawl this planet but they’re not stupid and they know exactly whom to bribe in the corrupt US government (it does not matter at all what party wins anything – your government is corrupt) to get things the way they want them.

And that’s what they do. And it works. And they laugh at you because they can’t believe how gullible you are.

Democracy my backside.

Anonymous Coward says:


“but now they’re forced to pay because they might play music covered by the collection agencies.”

Not true. If they prove that everything they play will be ONLY through other collection agencies or mechanisms, they can get exempted.

They will have a hard time to prove it, considering that many of today’s breaking artists seem content on lifting other people’s work to create their own, thus thrusting things back to the old system.

Oh, oops. You did it to yourself, you did, you and no one else… thanks Thom!

btr1701 (profile) says:

Re: Re:

> If they prove that everything they play will
> be ONLY through other collection agencies
> or mechanisms, they can get exempted.

Why in the blue hell should that burden be on the business? Why should I have to prove what I won’t do in the future? *How* can I even realistically do that?

No, any sane, non-corrupt system would place the burden on the collection agency to prove that the service or venue is playing music covered by its clients.

Crosbie Fitch (profile) says:

Missing the forest for the trees

How the hell did something so explicitly corrupt and so clearly a form of crony capitalism get directly into the Copyright Act?

Mike, the copyright act was already “explicitly corrupt and clearly a form of crony capitalism”. It’s just your indoctrination that persuades you that Queen Anne and her cronies were ‘the white witch of the east and her beauties’ who could do us no ill, and moreover, that kind old James Madison who repeated her good spell, also had mankind’s well being at heart.

Read and deprogram yourself, or continue your quest in search of the holy grail – the mythical goodness within copyright.

Do people think the 18th century was some kind of utopian period in which the powers were pure, benevolent & corruption free? That legislators always put the interests of the people before the state?

You should have noticed the stench the moment a law found it necessary to state up front that it was for the benefit of the people. Ever noticed such pretexts behind laws against murder, burglary, fraud, kidnapping, etc.?

Peter Nelson says:

Mike - that's why disruption will destroy them

Mike, disruption doesn’t always destroy an industry. Here, they’ve set the bar to a place where, when someone does cross it, by definition, it’ll be in a way that doesn’t disrupt them… It’ll route around them completely.

So they’ll hold on to their little fiefdoms for a while longer, but in the end, instead of being pulled ‘kicking and screaming’ into the future… they’ll just be left behind.

Just like the buggy whip makers you like to talk about.

They’ve set up a system where, for progress to happen, it needs to be progress they don’t approve of, that they don’t have control of, that they aren’t attached to. Progress will happen….

arcan (profile) says:


the only way a gambit like this would work if all the companies attempting to run a business in those fields pool their resources and go for broke. The RIAA won’t stand a challenge like that, and will drag this out as long as possible, and in general attempt to stack the odds as far in their favor as physically possible, aka get this moved to a favorable judge, a jury like the one in apple vs samsung who is willing to ignore their orders because copyright is a moral imperative, etc. if pandora et al. lost, and there became a court record saying that they are not advertising, the RIAA will just jack up rates even more as punishment, leading to them all going bankrupt. it will be heralded as an incredible victory against piracy through the internet, followed 10 minutes later by them whining that piracy killed their streaming revenues, which they just killed themselves. but if they lose the court case, there will be a bill proposed within a week that classifies them as not advertising, leading to another court case unless the supreme court declares that they are exactly the same as normal radio.

Chronno S. Trigger (profile) says:


What did I do and who is Thom?

As for the first part of what you said:

“They could fight it and probably win, but it’s not like the RIAA would pay back the millions lost in court and lawyer costs. And god help them if they ever make a mistake (like play a song that kinda, sorta sounds like one covered).”

Plus the “breaking artists seem content on lifting other people’s work to create their own” is universal, not just indie (Big Secret: That’s how art is made).

Chronno S. Trigger (profile) says:

Mike - that's why disruption will destroy them

That’s not how progress works. We don’t jump independently from one thing to another in a vacuum, we build upon the things that came before. “Standing on the shoulders of giants” so to speak.

Look at music, it’s been around for thousands, possibly millions of years. The notes have been around even longer. The instruments used have been around for hundreds of years. It’s all just evolved over time, slight changes here and there to become what it is today. This wasn’t done in a vacuum, Mozart didn’t compose without knowing the music that came before.

Legally forcing people to recreate the wheel ever single time they want to do something will slow progression to a crawl and more then likely force people to do it illegally.

That One Guy (profile) says:

Re: Re:

Nice idea, but sadly the powers that be have corrupted the system to such an extent that it would be a moot point.

Now, they don’t have to prove you’ve played one of ‘their’ songs before they send you a bill, they send the bill beforehand and you have to prove that you haven’t. Even then they’ll still charge you, just in case you happen to play one of ‘their’ songs.

average_joe (profile) says:


What makes me laugh is that you’ve changed your avatar after someone called you out on using a copyrighted image even though you claimed “fair use” at the time.

People have been questioning me about it for years. I haven’t changed my opinion about whether it’s infringing. I changed my avatar so people would stop derailing conversations by changing the subject to my avatar. I want to focus on the issues. It’s really that simple. People here are so desperate to take me down a notch. That’s understandable since I obviously don’t drink the same Kool-Aid. So now I’ve taken away one common thing people pull out to distract attention away from my points. Simple as that. I’ve explained why I don’t think it was infringing several times at length. It still cracks me up that the same people who see noninfringement everywhere they look suddenly have a different point of view. But I digress…

RD says:


“What makes me laugh is that you’ve changed your avatar after someone called you out on using a copyrighted image even though you claimed “fair use” at the time.”


The Law is the Law. There are no shades of gray, right? All copyright violations are theft after all.

He should be sued for $150,000 PER INSTANCE (per post) that used the ILLEGALLY STOLEN images, right AJ?

Live by the sword, die by the sword my friend.

So which is it? Its not actually theft, or are you a giant hypocrite?

Anonymous Coward says:


“I changed my avatar so people would stop derailing conversations by changing the subject to my avatar.”

That’s right, only you are allowed to derail conversations.

“I want to focus on the issues.”

No, you don’t. As anyone who has read any of the Funniest/Most Insightful articles of the past month or two can see. Should we link to them and show how off topic you drag them? Or should we count how many comments you make along the lines of “No, Mike WHAT ARE YOUR MORALS? RAWR! ANSWER ME!” or “No, MIKE THAT ISN’T THE ANSWER I WANT, WHY WON’T YOU ANSWER ME?! RAWR!”

“It’s really that simple.”

No, aj, it’s not really that simple. Because if it was you’d quit harping like you do. You asked about morals, people gave you their responses and you dismissed them outright or went with “but but but the law”.

If things were really simple, we wouldn’t have the problems or issues regarding copyright and copyright infringement like we do. But we do. Why? Because despite what you wish to think, things aren’t cut and dry/simple.

“People here are so desperate to take me down a notch.”

Yeah, again, I guess it’s only okay when you’re the one doing that. But heaven forbid anyone use your tactics against you. Oh no. Can’t have that. AJ will be the first to cry foul or say let’s all behave.

Oh yeah, and insulting Mike and Leigh and telling people to fuck off and die… that takes yourself down a notch. People don’t need to do anything besides point to your comments and say, “I rest my case.”

“That’s understandable since I obviously don’t drink the same Kool-Aid.”

Mhm. Don’t like what people are saying so claim they’re brainwashed. Mature attitude you have there. Not.

I’d rebut the rest of your comment on a sentence by sentence basis, but you know what? I don’t want to and you’re not worth it. You’re a joke. And not even an entertaining one like bob. Which is pretty sad.

Rikuo (profile) says:

Re: Re:

Amen. bob is just awful whenever he posts. His sentence structure, lines of thinking, grammar are just all over the place that it can actually be entertaining to read. There are times I’ve broken into laughter over what he posts.
Average_Joe? No. He’s the complete opposite. He has sentence structure, proper grammar and does present his arguments in a nice to follow manner. The problem here is that a guy that can actually write that well and clearly should not be making the kinds of arguments he makes. bob at least has an excuse: he’s a complete idiot. Joe though doesn’t. He’s got a JD (or says he has one) so he’s got at least some education in him.

chanciusmaximus (user link) says:

Response to: Anonymous Coward on Sep 17th, 2012 @ 10:56am

What is so hard to understand about how bad the phrasing in this Act is for the current or future of recorded music?

We have a law in place that keeps those with the power (in 1976) shielded from new forms of business innovation. So even though there are plenty of new and different types of reliable sources to get and listen to music, the only reason they can’t continue to flourish is due to the fact that a law requires them to not be as competitive as other companies? Um, that really sound wrong and broken to me!

Considering how fast technology advances in this day and age, its pretty obvious that any laws pertaining to it should be heavily looked over and adjusted for the current times.

That One Guy (profile) says:

Re: Re:



It handles ad hom arguments, it handles pointless swearing, it handles obvious lies and strawmen arguments, it even makes julienne fries*!

Act now and you too can get all this and more for the low low price of just visiting the site!

*Feature to be included in the soon-to-be-released* ‘THE REPORT BUTTON(tm) v2: Now with even more pink!’

*Geologically speaking

Anonymous Coward says:

Re: Re: Re:


All reported messages are guaranteed to come in a shade of pink that only the non-morally/legally/whatever-the-fuck-is-troll-buzzword-of-the-day outraged can see! Want trolls with reported comments to complain that no one can see their handiwork and throw tantrums over misguided definitions of what censorship really means?


DH's Love Child (profile) says:


Wait. so you’re saying we can only complain about laws that have been passed in our edumicated lifetimes? So are YOU old enough to be able to reprimand Mike for finding fault in a law that’s only 36 years old?

Which, of course, means there is no reason to bitch about laws passed in the early years of our country that have to practical purpose, right. I mean, I wasn’t around when they passed the laws against sodomy and homosexuality. Most people alive now weren’t, so we have no right to try to fix them?

This means the perfect way to have an incredibly bad law passed is to hide it within another less bad law that can hang around until the people who it is most likely to affect can’t have ‘standing’ because they weren’t old enough to oppose the law originally?

If that’s what you truly believe, you should be living in a country with Sharia laws (or maybe you already do, but sure as shit not in one where the populace is actually supposed to have voice about the legislative process.. especially the right to REPEAL laws..

Josh in CharlotteNC (profile) says:


There is no downward pressure because, unlike how you try to portray it, there is no real alternate music source. People generally want to hear hits and well known material, they don’t want to hear nothing but bands they don’t know all day.

Yay for circular logic.

1) Major labels own or influence the distribution channel and advertising that most people only hear what the majors want them to hear.
2) Claim people only want to hear what they know about.
3) Claim there are no legitimate alternatives because of #1 and #2.
4) Use #3 to get potential competition shut down before it can threaten #1.

:places marker on his logical fallacy bingo sheet:

Ed C, says:


That doesn’t really matter. As it is now, they milk royalties boards around the world that collect statutory fees on music that they don’t own, even when board doesn’t have the legal right to collect the fees in the first place! Even if not a single label produced song is not purchased, pirated, or played ever again, they will still have a steady cash flow to continue lobbying for higher royalty rates. They are so intrenched that this cannot end until they are dead and buried. Even then, I’d suggest staking the corpses, just to be safe. Corporations have a nasty habit of raising from the dead.

gorehound (profile) says:

How about having Radio Stations no matter what form they are just refuse to play any material coming from the Labels who are trying to milk them out of a buck.Guess these labels do not like the publicity they get.
If you do not ever play any of the Copyright Maximalist Material then there should be no issues.
I have always really appreciated when a Radio Station has played Material from the Bands I have played in.I never asked em for money and never will.I love the exposure.

The Rufmeister-General says:

Practical tip for consumers

If, as an end-user, you just want to listen to music on the radio, preferably through the internet (because usable wifi reception is usually easier to achieve than proper FM reception), then here’s a simple tip.

Once the last American internet-based radio stations/streams are finally killed by unreasonable financial burdens: go international.

There are very good radio stations from all over the world that you can listen to over the interwebs. I daresay that one of the advantages of these here interwebs is that by definition, stuff is available globally by default, unless blocked.

So, if you want good radio, go here: (Fresh FM here is my personal favourite)

I’m not sure about the other countries, but in the Dutch version ( I believe the license structure is like this: radio is radio. It’s already licensed for radio. The website is only making an existing radio stream available through the interwebs. Done.

I might be naive, but then again, I don’t really care. I just know that as an end-user I have plenty of choice of radio stations that just work. 🙂

wec says:

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.

If this is an exact quote from the constitution, I seem to be confused. It says only the creators get exclusuve rights. If this is true do the creators sell these rights to gatekeepers. If they do can they still do what ever they want with their creations? If not then the creators no longer have exclusive rights. According to the constitution, by law only the creators can be given exclusive rights to their work.

Add Your Comment

Your email address will not be published. Required fields are marked *

Have a Techdirt Account? Sign in now. Want one? Register here

Comment Options:

Make this the or (get credits or sign in to see balance) what's this?

What's this?

Techdirt community members with Techdirt Credits can spotlight a comment as either the "First Word" or "Last Word" on a particular comment thread. Credits can be purchased at the Techdirt Insider Shop »

Follow Techdirt

Techdirt Daily Newsletter

Techdirt Deals
Techdirt Insider Discord
The latest chatter on the Techdirt Insider Discord channel...
Older Stuff
09:00 Awesome Stuff: Monitor Everything (5)
09:00 Awesome Stuff: Cool Components (1)
12:42 Tech Companies Ask European Commission Not To Wreck The Internet -- And You Can Too (4)
09:00 Awesome Stuff: Play & Listen (1)
09:00 Awesome Stuff: Beyond Chiptunes (12)
09:00 Awesome Stuff: Updated Classics (3)
09:00 Awesome Stuff: Celebrating Cities (1)
09:00 Awesome Stuff: Crafts Of All Kinds (5)
09:00 Awesome Stuff: One Great Knob (13)
09:00 Awesome Stuff: Simple Geeky Toys (2)
09:00 Awesome Stuff: Gadgets For The New Year (18)
09:00 Awesome Stuff: A Post-Holiday Grab Bag (0)
13:34 How Private-Sector Innovation Can Help Those Most In Need (21)
09:00 Awesome Stuff: Towards The Future Of Drones (17)
09:00 Awesome Stuff: Artisanal Handheld Games (5)
09:00 Awesome Stuff: A New Approach To Smartphone VR (5)
09:00 Awesome Stuff: Let's Bore The Censors (37)
09:00 Awesome Stuff: Open Source For Your Brain (2)
09:00 Awesome Stuff: The Final Piece Of The VR Puzzle? (6)
09:00 Awesome Stuff: The Internet... Who Needs It? (15)
09:00 Awesome Stuff: The Light Non-Switch (18)
09:00 Awesome Stuff: 3D Printing And Way, Way More (7)
13:00 Techdirt Reading List: Learning By Doing (5)
12:43 The Stagnation Of eBooks Due To Closed Platforms And DRM (89)
09:00 Awesome Stuff: A Modular Phone For Makers (5)
09:00 Awesome Stuff: Everything On One Display (4)
09:00 Awesome Stuff: Everything Is Still A Remix (13)
09:00 Awesome Stuff: Great Desk Toy, Or Greatest Desk Toy? (6)
09:00 Awesome Stuff: Sleep Hacking (12)
09:00 Awesome Stuff: A Voice-Operated Household Assistant (19)
More arrow