When Good Ideas Collide …
p2pnet news view | Radio:- Satellite radio sounded like a good idea. High quality, ad free programming, free of the restrictions of terrestrial radio, and at a reasonable cost. Sure, it took special receivers, but they weren’t all that expensive to buy. It seemed like such a good idea, two companies sunk hundreds of millions into making it a reality.
A radio performance royalty for recording artists and copyright holders also sounded like a good idea. Songwriters and music publishers had been getting those royalties for decades and it hadn’t slowed down the growth of radio in the US into a business generating billions of dollars of profit. Why not extend the idea to the copyright holders on the recordings, and, since nobody would really believe Edgar Bronfman needed the money, they brought the recording artists along as poster children for the campaign.
Getting a performance royalty on satellite and webcasting broadcasts is one of the very few things the dinosaurs of the record business have gotten right in the past 15 years, but they were virtually unopposed. The web and satellite broadcasters weren’t organized, and the record labels’ traditional enemies, the terrestrial broadcasters, were as afraid of the Internet as the labels were.
So the labels saw a chance to get their friends in Congress to grant them a performance royalty from the new platform, and they threw in satellite broadcasting because, well, because it was there.
The labels couldn’t lose. If the new media thrived, they’d make money. If it died, well, they’d opened the door to performance royalties on other platforms. A good idea, either way.
Almost as if self-destructive behavior was built into the industry’s DNA, the labels then proceeded to try to kill off the new revenue sources. And, try as they might, the labels just haven’t been able to kill webcasting. The royalty rates imposed by the CRB in 2007 are still hanging fire while “negotiations” between SoundExchange and webcasters seem to be going nowhere fast. Congress, with other matters on its mind, have pretty much left the parties to figure things out for themselves. All those glowing revenue projections that SoundExchange relied on in supporting the killer rates have drifted away balances in Bernie Madoff’s bankbook, but still the fight goes on.
But in the meantime, the labels, through their puppet front SoundExchange, has just about completed the job on satellite radio, which now appears to be the first DAT tape story of the 21st century; a really fine piece of technology that saw its time come and go as it was overtaken by progress before it even got started.
Just as the mp3 and burnable CDs made DAT tape recorders and players irrelevant, the rise of reliable webcasting capabilities spelled doom for its satellite-based cousin. Webcasting was cheaper, you didn’t need specialized equipment, and the programming choices were even greater. With the expansion of Wi-Fi access, the advantage of portability that satellite radio had has greatly diminished.
Like two drowning souls, Sirius and XM, each swimming tied to a giant anvil of debt, reached for each other in the hope that together they could achieve what they couldn’t do on their own; survive. Like most mergers born of desperation, things only got worse. Costs mounted, revenue didn’t keep pace, and the interest payments on that debt kept coming due. When they merged, Sirius XM promised the FCC that they wouldn’t raise rates, but they left a loophole that allowed them to adjust the subscription fees for “royalty costs.”
Starting next month, the satellite broadcaster will tack on an additional $1.98 per month as a “royalty fee.” That’s just about $24 a year. There are now about 18.5 million subscribers, according to a cNet report in may. Even if they lose 10% of their subscribers over the increase (which comes on the heels of a basic rate increase, a separate fee to stream the previously free broadcasts over the Internet AND a separate $3 a month iPhone app) the “royalty fee” will still generate $400 MILLION a year.
You know the labels are licking their chops at getting to carve up at least $200 million among themselves. And, given SoundExchange’s proven inability to find and pay artists, (they still haven’t paid out one-third of the webcaster money collected for 2006) even more of that money will end up in the label coffers before its all gone.
There is little question that the higher royalty rate passed for the CRB for satellite radio (6% of revenue rising to 8% by 2012) was going to spell financial trouble. Passing the bill (and apparently then some) on to the subscribers sounds like washing down a cyanide pill with a chaser of battery acid.
Subscribers are quitting over the increased fees, and perceived decreases in both quality and programming selection, not to mention the ads being played where there were no ads before. What had been a relative trickle (400,000 quitters in the months immediately after the merger) could turn into a stampede. It isn’t going to take much erosion to put Sirius XM back at the door of the bankruptcy courthouse.
And that will mean no money for the labels. And, of course, no money for the artists.
So, we have satellite radio, a good idea whose time has come, and most likely gone.
And we have performance royalties, a good idea until they are used as a blunt instrument to influence programming and exact maximum immediate payout without any consideration for the future.
Two good ideas don’t always combine into a really good idea.
Put these two good ideas together, and you have a promising medium that walks around not understanding that it is already dead, with self-inflicted wounds a great contributing factor.
Instead of one more platform to hear music, we have equipment we can put in the attic next to the DAT players. And instead of a source of what could have been reasonable royalty revenue for labels and artists, we have no revenue for labels and artists.
New game, same losers.
Fred Wilhelms – p2pnet
[If the corporate music industry had any ethics, Wilhelms would be its 'ethicist-in-chief,' wrote CounterPunch's Dave Marsh. Wilhelms is an entertainment attorney based in Nashville, Tennessee. You can contact him at fred.wilhelms @ gmail dot com. ]
First they ignore you, then they laugh at you, then they fight you, then you win ~ Mahatma Gandhi
June, 2009
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June 29th, 2009 at 8:57 am
Well written Fred!
I wonder when the artists will wake up and see this for themselves. Only with them quitting and going on their own, taking their fans and revenue with them, will things like this stop.
I guess we could equate the labels and royalty collectors as a common group, not shills, but the CBG; the Charlie Brown Group. “I’ve killed it. Oh! Everything I touch gets ruined.”
July 1st, 2009 at 2:07 pm
Fred always posts good stuff, probably one of the best anti RIAA guys out there.
July 1st, 2009 at 3:28 pm
read Isaac Asimov’s ‘Foundation’ series.
apply psychohistory to the planet Earth and you can easily compute the MAFIAA’s future.