Preemptive retort to Weird Harold:
Yes, the artists should be fairly compensated for their creation, but new and innovative techniques are no impediment to that.
If the streaming radio station is making a profit, a fair portion of that can go to paying the artists, and some money is better than no money. It's also a way for the artists to get heard, which can then lead to other avenues of income (e.g. album sales).
People need to stop thinking of copyright as an income-generating tool for artists. It is, but only in a limited sense. It is supposed to encourage creative expression by fairly compensating an artist for their work. It is a limited-time monopoly on the reproduction of that work for this reason only. It is not a form of income in perpetuity.
@Weird Harold (March 5th @ 3:52pm)
Let's have a look at the maths again, this time without wonky assumptions.
For the concert situation, let's assume that the band's net profit from ticket sales is $5 per seat per show. For an 80 show tour, averaging 20,000 seats per venue, that's $8 million in net profit.
Now we'll look at song sales. Let's assume that the song sells for $1, and the artist (who's also the composer) gets a generous 25% for their cut. That's $0.25 per song.
At that rate, the artist needs to sell 32 million copies of their songs to make as much money as a the concert tour. This number doesn't take into account the profits from merchandising that can be sold during the tour.
I'm not forgetting any royalties that would be made from radio play. If someone's music is being used to generate profit for a 3rd party, that party should be required to pay a reasonable licensing fee. That money will be made whether or not songs are sold or given away for free, so doesn't count in any equations.
@Weird Harold
If you properly read what Mike is saying, it's not that the record labels need to go away completely. It's that they need to stop trying to control the market and start moving with it.
At the moment, they're trying to control EVERY possible way that music can be distributed. They want their cut of every play of every song in their catalogs. Never mind that your average artist will only see pennies out of every dollar collected in this way.
The only way forward is if the labels embrace the internet and digital distribution as a tool. Make it cheaper, easier and more convenient for people to buy songs online. Give people reasons to buy physical media, such as bonus print or video content. Get bands out on the road, selling merchandise and signing autographs.
Unless the music companies start to see the bigger picture, they will crumble and fall and be replaced by smaller companies who actually "get it".
I find it hard to take Sarkozy seriously when he (and his political party) have blatantly infringed a band's copyright and refuse to pay the necessary royalties.
The UMP has used the song Kids by MGMT at its national congress and in two online videos, but when they were hit up for royalties, only wanted to pay a token 1 Euro. They're now being taken to court (see http://news.bbc.co.uk/2/hi/entertainment/7912423.stm)
@David
If your business is allowing uploads and downloads of content, no attorney would advise to pay millions that you legally don't have to do. Google isn't stupid. It might make business sense to pay for something that is minor to your business model but never for your core product. If there wasn't a legal reason to pay they would get a summary judgment and be done with it.
My guess is that Google/YouTube had a choice: pay money and host the content on their site (and therefore be able to get advertising revenue), or get DMCA notices and take the content down. They looked at the bigger picture and decided that some money was better than none at all, and chose to strike contracts with the big content publishers.
If you can't see that, then perhaps you shouldn't be questioning Mike's MBA...
It isn't the music industry's fault that internet radio isn't economically viable, why should they be forced to swallow lower fees to make someone else money?
Your thinking on this matter seems completely backward to me. Isn't some revenue better than no revenue?
Assume that we have an internet radio station that's making $5000 profit per month. If they pay 40% of that in fees, that's $2000 per month that goes to SoundExchange. If the fees are set at a price that the station can't afford, that's $2000 that isn't going to artists.
Let's not forget the promotional aspect of these radio stations. How will new artists get heard if their songs aren't being played? Sure, higher fees make for more profit in the short term, but it's not something that will help the music industry in the long term.
Re: Re:
My reasoning for radio stations paying royalties is that they are making money off someone else's work. Nobody would listen to a radio station that played ads 24/7. For the vast majority of radio stations, music is the reason that people tune in. If a station is generating enough revenue to cover all of their own costs, why shouldn't they pay the musicians that helped them make that profit?
The Pirate Bay is probably not the best analogy to use here. Yes, they get some advertising revenue form their site, but they're not directly using third party content to get people in. They act as a general repository of links to third-party content, which may or may not be available.
Roading isn't a suitable analogy either. Roads exist as a public utility in order to assist transport, and are paid for by taxpayers. Automobile manufacturers can certainly exist without roads - just take 4x4 vehicles as an example. Roads simply make the use of automobiles more convenient.