Traditional Radio Stations Agree To Webcasting Rates; Internet Only Webcasters... Not So Much

from the battle-still-brewing dept

While the big radio stations, represented by the NAB seem to have worked out a deadline deal on webcasting rates, it appears that internet-only webcasters have had their talks break down. This is bad news, of course. The whole situation is something of a farce. Rather than letting the market work the issue out directly, the Copyright Royalty Board (basically some internet-illiterate judges) basically gave the recording industry everything it wanted when it declared what the rates should be -- and made them quite high. Many online radio stations noted that the rates were so high that they would shut down. And, of course, the whole process would make RIAA-spinoff SoundExchange tons of money in administrative fees while separately benefiting the major labels that make up the RIAA by driving the smaller indie webcasters (who play less RIAA music) out of business. A win-win! And, of course, protesting by playing non-RIAA music wouldn't help. SoundExchange gets to collect for that music as well.

About the only reasonable thing was (despite the CRB's refusal to stay the ruling) that SoundExchange agreed to hold off new royalties while the parties negotiated. Time to work out a deal was supposed to end last fall, and despite SoundExchange and many webcasters asking for more time, the NAB lobbied hard to deny that extra time. Luckily they got it anyway, but even the extended period of time has ended. NAB and its big radio stations are fine with their deal, but internet-only webcasters still don't see anything reasonable. On top of that, SoundExchange made a separate offer to "small" webcasters, but most have found that to be way too onerous as well -- especially the part where if they ever get acquired by a larger player, they'll have to go back later and pay the higher rates even for the time when they were small and independent.

And, no one has yet explained why webcasters should need to pay so much money for helping to promote new acts in the first place. Radio, streaming online or over the air, is a great way for people to learn about new acts, giving them reasons to go out and buy products and merchandise or see those acts live. By forcing the very people who want to promote the music to pay ridiculous fees, all the industry is doing is shooting itself in the foot. Again.

Filed Under: copyright royalty board, radio, royalties, webcasting
Companies: nab, soundexchange

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  1. identicon
    Peter Rojas, 18 Feb 2009 @ 7:02am

    I think it's pretty obvious why the RIAA is taking this approach. Major labels generally don't participate in revenue streams from an artist's live performances, merchandise sales, etc. Historically they've pretty much only made money from sales of recorded music. Now that CD sales are collapsing and digital sales aren't growing fast enough to close the gap, the major labels are looking to streaming services (whether on-demand services like imeem or online radio services like Pandora and other webcasters) as a major new source of revenue. Which is why they're obsessed with increasing the amount of revenue they can derive from those sources, regardless of whether or not those businesses can become sustainable (yes, it's short-sighted). The reason we have this fight between the labels and webcasters is that there is a fundamental gap between what the labels want to get paid for their content and what the market (in the form of advertising) says that it's worth. From the label's perspective the amount of revenue they would make if they licensed streaming services at a reasonable rate (the kind that let people actually build sustainable businesses) is tiny compared with the golden years of the CD and they don't want to adjust.

    So since they're relying on an increase in revenue from these sources (which they see as being in some respects subsitutional for music purchases, which isn't unreasonable since music sales are in fact falling) they need to make as much as they can from them, they can't view them as being primarily promotional.

    Ultimately the problem is that the interests of the labels and the interest of their artists have diverged. Artists signed to major labels benefit from all the promotion and marketing their label does for them, and can make money from touring and merch even if they don't sell many CDs (and again, the labels don't participate in those revenue streams unless they have a 360 deal with the artist). So while it's in the artist's best interest to have as many people as possible hear their music, even if they don't actually make any money from it (since it results in greater attendance at shows and more sales of t-shirts, licensing deals, etc), this isn't the case for a major label. This is why the majors have been pushing 360 deals, but from an artist's perspective there's no real incentive to cut them in on those revenue streams -- and less and less reason for an artist to sign their life away to a label in the first place since they're no longer needed for distribution and marketing.

    I don't think things are going to get better until we have a whole generation of artists that have grown up outside the label system, and don't expect sales of recorded music to be their primary source of revenue. We're slowly getting there, but it's going to take a while.

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