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

Copyright

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.”

Filed Under: copyright, ron wyden, royalties, webcasting