Critical online radio battle
p2pnet.net news view:- The imposition of the ruinous rates set by the Copyright Royalty Board (CRB) on webcasters has been postponed until July 15 from May 15. This gives everyone a little breathing room, and a chance to sort out where everyone stands.
There are multiple fronts in this critical battle. Judicial appeals from the CRB ruling have already been filed by some webcaster groups, and others expect to join in before the deadline this week. A number of observers believe that the court will immediately stay the effect of the new rates. That restraining order could come as early as June 1, well ahead of the effective date of the CRB decision.
Then there’s the “invisible” front.
Following the introduction of the Internet Radio Equality Act (IREA) in the House of Representatives, SoundExchange spokesman John Simson was quick to announce they were “reaching out” to webcasters, large and small, to find solutions that would permit small webcasters to survive under the new rate structure.
No settlements have been announced in the weeks since Simson’s announcement, and no webcasters have admitted that SoundExchange has contacted them.
SoundExchange is known for announcing it’s doing something, and then not getting around to actually doing it for a while, so it’s impossible to tell whether the silence is because the negotiations are not going well, or if negotiations are going on at all. It wouldn’t surprise many people to have SoundExchange announce an agreement with one or more carefully selected “pet” webcasters (possibly right before the Court decides on that restraining order) which would be intended to show just how reasonable they can be without the courts getting involved.
Finally, there’s the battle over IREA.
Certainly, both sides are going to keep up the pressure on Congress. The webcasters should be encouraged by the number of co-sponsors IREA has attracted. They should also be encouraged by the intensity of the counter-rhetoric being put out by SoundExchange as more representatives sign on.
Unfortunately for SoundExchange, the additional time also gives everyone a chance to examine what they’re actually claiming.
In a piece that ran last week on BusinessWeek.com, John Simson said: “In short, the CRB did what Congress asked it to do, at the behest of Webcasters. But when the CRB set what it judged to be fair and reasonable royalty rates, the Webcasters decided they were too high, cried foul and denounced the very process they had sought.”
The statement is misleading on several levels.
Ostensibly, fair processes sometimes bring about unfair results. Sometimes, what looks on the surface to be a fair process turns out to have some underlying problems that skew the results or have consequences that were unanticipated when the process was set up. That’s why appellate courts exist. That’s why we have the right to petition and recall. That’s also why Congress is given the power to amend previous laws. Government doesn’t always get things right the first time. John Simson’s insistence that the CRB decision was the correct one because the process was fair begs the substantial question of whether or not the criteria they applied were the appropriate ones.
Those peculiar criteria the CRB applied were established by Congress in the DMCA. Despite Simson’s wrongheaded insistence, there’s nothing in the DMCA that requires the CRB to consider whether or not the rates were “fair and reasonable.” Instead, the DMCA says the CRB shall set “rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller.” There’s nothing intrinsically “fair and reasonable” about that market standard.
Given the unequal bargaining power of buyers and sellers in the relevant marketplace, it’s no wonder that, by applying the standard, the CRB came up with rates that will drive most of the “buyers” off the air.
The process may have been “fair,” but the result clearly was not. The CRB did its appointed job. It applied the standards the DMCA required it to, and it didn’t care whether or not the impact of the decision was “fair and reasonable.”
The result is a disaster for Internet radio, its listeners, and many of the artists you hear on webcasts.
Everybody seems to realize this except SoundExchange and the RIAA.
Congress is completely within its rights to review what it did a decade ago and determine if what they did was right, and if they did it the right way. The webcasters, large and small are completely within their rights to seek redress from Congress, even if John Simson thinks it’s unfair of them to challenge the CRB. SoundExchange would have Congress ignore the sheer idiocy of charging license fees greater than the aggregate revenue of the entire industry just because the CRB followed the existing law in setting those fees. Congress is being asked, in essence, not only to pretend that the Emperor is not naked, but also to state that his new clothes are beautiful.
Simson goes on to “expose” what was generally public knowledge about DiMA’s role in SaveNetRadio.org, Yet, in discussing the role of the RIAA in SoundExchange, he can pretend there’s nothing wrong with being a puppet by recently admitting “Again you can’t diminish the fact that the majors own 70% of the content that’s subject to the statutory license. They have very strong feelings about it, they’re my four biggest customers and clients, certainly we’re going to listen to them…”
SoundExchange isn’t alone in practicing this duality. Sadly, for themselves and their artists, the American Association of Independent Music, (A2IM), an organization of independent record labels, clearly doesn’t mind playing the Judas goat for the RIAA. On their own website, they expressly acknowledge that their role is to supply a more sympathetic face to the public than the RIAA can muster on its own. They ask their members:
“No one is sympathetic to the RIAA, the major labels or artists like Mariah Carey asking for money, so we the Indies need to take the lead.”
It really doesn’t get sadder than defining your own role as nothing more than looking nicer than the RIAA. There are communicable diseases that meet that qualification.
The big difference between the alliances on either side of the Internet royalty issue is that the small webcasters have a clearly symbiotic relationship with DiMA. The small webcasters happily accept DiMA as an ally because, on their own they do not have the financial resources to fight an organization that was originally funded by the RIAA and now finances its defense of the CRB by draining money from the accounts of artists they say they can’t find.
Remember, SoundExchange had several extra million to depend on the CRB hearings because it got to keep royalties intended for artists they are unable to locate. They’re still playing with house money here. The RIAA doesn’t have to spend a dime of their members’ own money on this campaign (so they can focus on paying their lawyers chasing those downloading grandmothers) so long as SoundExchange can use money that should have gone to artists.
Low royalty rates for DiMA mean low royalty rates for all webcasters, mostly because SoundExchange considered all webcasters the same in making their argument before the CRB. That monolithic viewpoint wasn’t DiMA’s fault, but as long as SoundExchange insists it is so, DiMA and the small webcasters should be able to stand together, because small webcasters want exactly the same results as DiMA. They want to continue to broadcast, and they want a royalty structure that permits them to do so. It’s a mutually beneficial alliance. DiMA brings the wallet, the small webcasters bring the numbers, and the voices, and the manpower.
On the other side, does anyone really believe the RIAA wants the same thing as the independent labels, and that any label wants the same thing as artists when it comes to getting heard on Internet radio and getting paid for it? Yet that’s the schizophrenic constituency SoundExchange claims is unified behind the CRB rates.
SoundExchange has only itself to blame for the existence of that organized opposition and the legislation that opposition is promoting. If SoundExchange had been pro-active, instead of saying webcasters should just stop whining about the decision, the result probably would not be IREA, but some negotiated middle ground that would have recognized differences in webcaster business models.
Instead, we got to listen to Simson reciting the litany that the CRB process was fair and reasonable. All that business about “reaching out” to webcasters only happened after Congress got involved. Arrogance has its cost, and the bill for SoundExchange appears to be coming due.
Fred Wilhelms – p2pnet
[Wilhelms is an entertainment attorney based in Nashville, Tennessee. You can contact him at fred.wilhelms @ gmail.com.]
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May 16th, 2007 at 4:52 pm
Nice article Fred…keep the presure on these guys!!