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Sound of Silence

As many of you may know, today is an Internet radio Day of Silence to protest proposed increases in Internet radio royalty rates (the link has information on the event and allows one to find the proper representative to voice one’s view). What some may not know is that this battle was fought in 2002. The Washington Post has a decent article on the issues in play. The article is filled with links to commentary on the issues and worth a look for that alone. One of my favorite radio stations, KCRW, is running a loop of a program exploring the issues through interviews. As it is protesting the move, the loop may miss some other view, but it does set forth what public radio and Internet radio stations are saying about the rate moves and the history of the rate debates. I will listen to it in part because I want to and in part because hey it’s the only thing KCRW is broadcasting today.

In the interest of full disclosure I have just started thinking about this topic, so I hope that perhaps Fred and other copyright masters will share their views. Nonetheless, in short, if nothing changes, on July 15, 2007, Internet radio stations will have to pay increased royalty rates such that many of the smaller and even some of the larger Internet radio stations will have to pay more than AM and FM stations. The increase appears to be large enough that many of the Internet radio stations might have to shut down. The whole system seems a mess.

According to the Post, “AM and FM radio stations must pay only one form of royalties–to composers of a given song–while webcasters must pay that royalty and an additional one to the performers of the tune.” The recording industry wants more from Internet broadcasts. But what is unclear is whether the Copyright Royalty Board had a clue about the way that Internet radio works. Apparently under the new system the Web sites that offer completely personal Internet radio broadcasts would have to pay a large fee per listener because each personalized offering is a channel and would need to pay $500 per channel. In addition, there seems to be a new record keeping rule which will increase costs and news webcasters will have to pay more too. Furthermore, although the recording industry is behind SoundExchange which collects the royalties, the current system pays artists 50% of the royalties. Yet according to the head of Yahoo!’s Internet radio group, the new system would change the practice so that big groups would negotiate directly with large music labels and again push Internet radio toward the homogenous terrestrial radio offering of today. As Russell Shaw writes at ZDNet “I find it incomprehensible that a recording industry in the throes of a long sales slump would be behind efforts to quash an avenue of exposure to new artists who might actually find their CDs bought online or at retail. Focus group of one here: I’ve bought lots of music that I first heard via Internet radio.”

At a general level, the Copyright Royalty Board seems to have missed how Internet radio works. In fact, it works at several levels from large companies to run-from-the home offerings so the one-size-fits-all approach fails to address the realities of the market. In addition, if the Internet has any potential power, it seems to be in fostering a huge range of views and enabling smaller, independent creators to share their views and in this case music. Put differently, if one is bored with the oligopoly of terrestial radio, this new ruling seems to push Internet radio to that model as only large Internet radio groups will be able to afford the fees. This battle was fought five years ago. It has to be fought again. It will likely be fought every time no one is looking and a poor ruling is made or foolish bill is passed. That is unfortunate as it seems that once a policy mistake is made, it is quite difficult to fix or reverse it. Again, it is quite possible that the recording industry and the Copyright Royalty Board were correct that some increase in payment is needed. But when the new system appears to benefit only one side and snuff out the other, no one should be surprised that claims for fairness from the recording industry and others are seen as disingenuous if not cynical ploys.