Business - Written by Denis Hancock on Wednesday, June 27, 2007 10:03 - 0 Comments
The Sound of Silence
Hello music industry, my old friend, I’ve come to talk to you again. It seems that just when I thought things couldn’t get more ridiculous in your business, you’ve found a way to out do yourself.
So for those that may be wondering why their favorite online radio station didn’t work yesterday, they were all in a day of silence to protest the royalty rate increases that the Librarian of Congress and Copyright royalty board have decided on (starting July 15th, retroactive to January 1 2006).
Oh right – the size of the rate increase. That would be about 300% apparently, which might just cause many of the stations to shut down since, oh I don’t know, estimates on total royalty payments would exceed the combined revenue of all the stations.
And the biggest absurdity in this? Well that would be the differences in the deals given to web broadcasters in comparison to AM and FM (i.e. broadcast) radio stations. You see, the latter group only pays royalties to the composers of the songs, while web broadcasters must pay these and an additional one to the performers. This latter group also brings in about $20 Billion in revenue a year, which is a wee bit more than the web broadcasters to say the least.
Seems fair, non? But at least AM and FM radio now seem to be playing on the same team… which wasn’t quite the case when FM radio emerged onto the scene. But actually I lied – that’s not the most absurd thing, as the record industry also requested that web channels offer up a minimum $500 “administration fee” for every channel they set-up, and it got passed into the law in question.
So you know how those innovative Internet radio companies like Pandora have custom channels (using an algorithm to determine similar songs that people might like) – that $500 per might be a little prohibitive for such a model. Of note, last year Rhapsody had a cool 400,000 channels on offer. If you do the math, that would clearly pay for a lot of administration.
Of course, you’d only be using Pandora right now if you are in the U.S., because they’ve had to cut off listeners everywhere else in the world due to licensing constraints. It almost seems like the music industry is doing pretty much everything it can to fight the evils of a service that helps you find music you’d like, instead of what the powers that be try to cram down your, um, ear.
The webcasters currently have an emergency stay on this big mess, as they try to get support behind a bill that would – and it sounds totally crazy – have them pay the same royalties as satellite radio (7% of revenue)! Can you imagine the chaos that would ensue of both Internet and satellite radio paid the same royalties?
Sarcasm aside, what congress and the U.S. Court of Appeals will end up on is unknown, but the pressure is mounting – apparently mail in relation to this issue ranks #2 (after the Iraq War). Ideally common sense will win out, but since it rarely has before I’m not holding my breath.
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