The recent Copyright Royalty Board ruling about streaming rates has sure stirred things up among those who are streaming music online, both traditional radio stations and Internet-only radio operations. I've posted about it here, here and here. In what one of my colleagues called an "obdurate" (that's for sure) ruling, the CRB has now reaffirmed its ruling (see Copyright Royalty Board Upholds "Disasterous" Royalty Rates). But also see Stephen Hill's post on this. Even if you don't want to heed Stephen's call to "get over it," he provides some important information about how we got here, including this:
... If you want to understand the rights holder's side of the issue I recommend the interview BRIAN ZISK of the Future of Music Coalition did with JOHN SIMSON of SoundExchange in Royalty Week. (.pdf) Simson is a very clear, very practical guy as you will see from what he says. One thing he mentions that is sure to be even more controversial is that SoundExchange and the RIAA intend to fight to change the law as it applies to legacy broadcasters so that ultimately...the rates are uniform. ¶ This means that terrestrial broadcasters would no longer have the 'carve-out' they've enjoyed since the 1920's, where they pay only the music publishers, songwriters and composers for use of recorded music. With the radio industry already under pressure from changing advertising models, you can bet the screams about this will be much louder, and the lobbying from the NAB should be nothing short of tactical nukes. ...
Which prompts the first thing about which I'd like to comment, that the exchange of values in the music business isn't always obvious.
As we navigate these waters, it will be useful to analyze the historical exchanges of value in the music and broadcasting business. This was brought to mind by the FCC's recent $12.5M in fines against four large radio broadcasters for accepting pay for play payments -- payola, something most of us thought was part of radio's adolescence, not its adulthood. Yes, broadcasters have a "carve-out" from the rates, yet they're considered to add so much value to record sales that rights holders are willing to pay us to promote their products. So powerful is that "reverse value" that we have to make rules against it. Ironic, huh. Likewise, many -- perhaps most -- artists don't make much money on record company sales, they make it on performance tours and merchandising. Reform of this complex set of payments needs to recognize where true value is extended and where it is received.
The second thing is a point about this ruling's impact on innovation.
It's tempting to argue that the recording industry's true target is innovation. Pandora, to name one, and its fellow innovators are the future of music online, not streams that mirror our broadcast services. For our own survival, broadcasters need innovation that the CRB's ruling manifestly discourages. I agree with Stephen that we ultimately must focus on business models that work, but innovation by legacy players is already handicapped by the need to continue to treat good legacy customers well and by the broadcasting culture. The CRB ruling adds even more reasons not to make the innovative investments and related changes in our m.o. Seems to me that's exactly what its proponents want. --Dennis