Fighting Over Internet Radio and Music Royalties Goes to Washington

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We’ve all heard about the fight over copyright and digital theft.  Piracy is a big news item as various groups go after individuals and other companies looking for payback for stolen music, movies, and so on.  One of the quiet battles in this copyright war, however, has been waged on the legal streaming front.

The way copyright law is set up in the U.S., terrestrial (broadcast) radio pays almost no royalty at all on the music it uses.  This is a holdover from the distant past when radio spearheaded the music industry and artists and labels were dependent on the marketing radio provided for their music in order to sell records and concert tickets.  Today, new media has entered the fray and all of them are paying royalties to play music, rather than getting it handed to them as terrestrial radio does.

Satellite radio and internet broadcasters pay fees every time they put a song on their streams and airwaves.  For satellite and cable companies, the fees are set by the 801(b) section of the Copyright Act, somewhere in the 7-16% of revenue range.  Internet radio, however, pays up to 55% as it is under a different section of the act.  That disparity has lead, some industry experts argue, to a destruction of innovation as the costs are too high for most who’d want to get into the online music broadcast business from doing so.

New legislation proposed in both the U.S. House and Senate, and supported by Pandora – the Internet’s leading music streamer – would move Internet radio into the realm of satellite and cable, lowering the rates paid.

The music industry, which sees the obvious – Internet radio will eventually largely replace terrestrial and cable – is opposed to this.  They stand to lose a lot of money in the long term.  Instead, they’ve proposed legislation that would do the opposite: move satellite and cable music into the same bracket as Internet radio, which would dramatically raise rates for those other music delivery forms.

The fight here isn’t about who should make more money.  It’s about who should be in charge of deciding the amounts in the first place.  Doesn’t it seem odd that ultimately it’s government that decides how much those royalties are?  You’d think that artists, labels, publishers and groups representing them should negotiate directly with broadcasters in all media to come to terms.  This would create competition and allow more innovation and less lobbying.  If a producer, for example, decided to hold out for unrealistic dollar figures, their clients (artists) would soon find their music fade into obscurity as it never gets broadcast because no one can legally do so.  Meanwhile, those who create equitable deals will see their sales flourish as they get more exposure.

Seems pretty obvious.


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