Senator Wyden Introduces Bill To Bring Some Sanity To Webcasting Royalty Rates

from the a-step-in-the-right-direction dept

We were just talking about how incredibly broken the system is for establishing webcasting rates, in part because the law itself explicitly says that the Copyright Royalty Board (CRB) Judges should look to prevent disruptive innovation and preserve “prevailing industry practices.” In practice this has meant that basic webcasting rates, established by CRB judges, are usually somewhat insane and impossibly out of touch with reality. It’s only gotten worse over time — and the last round ended up being so crazy that everyone basically agreed to ignore those rates and set their own. And while those rates were lower than what the judges wanted to set, they’re still ridiculously high, significantly limiting the amount of webcasting available today. Even the leaders in the field, like Pandora, admit that with current rates, it’s basically impossible for the company to ever make a profit.

Of course, some have looked at the discrepancy in royalty rates between webcasting and other offerings, like satellite and cable radio, and thought that the best way to deal with this is to massively increase royalties on those other services, effectively creating the RIAA bailout bill of 2012. Senator Wyden, thankfully, has other ideas. Today’s he’s introduced a bill in the Senate, the Internet Radio Fairness Act (IRFA), which tries to fix a bunch of issues with royalty rate setting. Like a bill introduced by Rep. Chaffetz in the House, Wyden’s bill would shift internet radio rates to the same process as satellite and cable, rather than the other way around. Those royalties, while still high, are much less onerous.

It also seeks to fix other issues, including the ridiculous rule saying that internet radio broadcasters aren’t allowed to make backups of the music they legally purchased. IRFA makes a slight change to the rule, allowing backups solely for the purpose of webcasting. The bill also looks to fix the somewhat awkward situation under which the CRB was recently found to be unconstitutional due to everyone ignoring the appointments clause (thus, in the future, CRB judges would have to be nominated by the President and confirmed by the Senate, rather than appointed by the Librarian of Congress). This process would at least somewhat increase the level of oversight for who gets on the CRB. More importantly, the bill would require CRB judges have a bare minimum level of experience related to this topic, rather than no experience at all, as often seems to be the case today.

There are two other very interesting aspects to the bill as well. Because, historically, the judges have more or less established rates by staring into space and picking what number “feels” right to them (only a very, very slight exaggeration), rather than what the market would really establish, the bill requires the judges to look at actual agreements in the marketplace, and tries to bring more transparency to those royalty rates. I would imagine this section is going to freak the labels out quite a bit, as they rely on secrecy to try to extract crazy high rates for other services.

Finally, the bill would also seek to establish a global music rights database, somewhat similar to proposals we’ve discussed before, when TopSpin’s Ian Rogers suggested such a thing. There are related efforts underway elsewhere, and the goal here is to:

include all known or copyrighted musical works, the writers of the work, the owners of the rights, the entity on behalf of those owners who can licenses such rights on a territory-by-territory basis, and all known sound recording data.

I have concerns that how such a database is set up can lock in place certain terms or rules, potentially limiting some innovative uses, offerings and services, but it is an interesting idea worth discussing, and would move a highly opaque system that the labels have long abused to one that is much more transparent and open. For pretty much all of these reasons, I expect that the RIAA is going to come out vehemently against this bill, preferring, of course the one that bails them out.

Either way, Wyden’s statement on the introduction of the bill is dead on:

“The Internet has shown itself to be an incredible tool for enabling innovation and competition to make existing industries better,” Wyden said. “However, there are those who seek to stifle that evolution by pushing through onerous and unfair laws to limit competition and protect the status quo. Fourteen years ago, when online radio was in its infancy, the incumbent interests were successful at getting laws passed to discriminate against the Internet. This bill puts Internet Radio on an even plane with its competitors, and allows the music marketplace to evolve and to expand–which will ultimately benefit artists and the internet economy.”

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Comments on “Senator Wyden Introduces Bill To Bring Some Sanity To Webcasting Royalty Rates”

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Anon Again, Naturally says:

I submitted this to Techdirt anonymously yesterday, but since it is related, here it is:

Neil Young Pushes Pono, Says Piracy Is the New Radio

IIRC, 5-10 years ago the very same Neil Young made one of the most angry anti-‘piracy’ statements I have ever read. The difference appears to be time and the lure of potential money.

– Gil

Mike Masnick (profile) says:

Re: Re:

I submitted this to Techdirt anonymously yesterday, but since it is related, here it is:

Neil Young Pushes Pono, Says Piracy Is the New Radio

Heh. That story was actually based on a Techdirt story from January:

Reddit rediscovered it last week, without realizing the date, and then HuffPo rewrote my story after Reddit started sending a ton of traffic to it… also ignoring the date.

So, we had that story… 8 months ago.

Anonymous Coward says:

Why can't they fix the bill posting process

I don’t understand why it takes so long for a bill to get a number and to be posted to Whenever I hear about a bill, one of the first things I want to do is (*gasp*) read it. The second thing I like to do is tell legislators and friends what I think about bill #X. It’s really difficult when it takes forever for a bill to get a number and for it’s official text to get posted. It’s even more frustrating when a committee works on a bill before it’s latest text is posted.

This is not a hard problem to solve.

(Sorry for the slightly off-topic rant.)

Edward Teach says:

Wyden Running for Unelection?

Is Senator Wyden (and his pal Senator Udall) running for Unelection this year?

Jabbing the DoJ and NSA about massive dragnet snooping, and poking the RIAA sleeping giant about internetcast royalties? This seems akin to career suicide by lobbyist.

How can I donate some doubloons to his campaign?

Anonymous Coward says:

I do not think this bill has a snowballs chance in a particularly warm place.

However, if the rates for internet radio is kicked off the bill… The rest is sufficiently debatable to actually spark a good discussion and even the business-people can accept some small concessions on the registration and the rate-setting if they get it watered down.

DanZee (profile) says:

Death of Internet Radio

Well, the greater issue is that these royalties killed off personal Internet Radio Stations and drove them underground (or at least, to Shoutcast, which sort of exists semi- underground). I would have happily paid anywhere from $100-$500 a year for an Internet license to broadcast legally to probably no more than a handful of people at a time. But no little guy could afford the royalties at the established rate. Pandora still hasn’t made a profit, it’s just funneling $50 million or so a year to the record labels, which is the way they like it. It’s easier to run a pirate FM radio station! The FCC only looks for you if someone complains!

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