Like an old-time radio serial, the conflict between Internet radio stations and the recording industry has had an abundance of last-minute plot turns. But if you thought a compromise was in the works, three legendary broadcasting words apply: "Please stand by."
On Wednesday last week, a federal appeals court refused to postpone the July 15 deadline for new royalty rates set in March by the Copyright Royalty Board. The new rates established a per-song, per-user standard, which the SaveNetRadio coalition said would amount to a 300 percent increase for larger stations and a 1,200 percent hike for smaller ones. The coalition said the rates would drive many Net stations out of business.
On Friday, SoundExchange, representing the music industry and some musicians, said it would cap the $500 per channel minimum fee at $50,000 per year for webcasters who agree to provide more detailed reporting of the music that they play and work to stop users from saving music streams to disk, a practice known as "streamripping." However, the organization said it expected larger radio stations, such as Yahoo and AOL, to pay the new royalty rates that were set to begin July 15.
The Digital Media Association (DiMA), representing Internet stations, said it accepted the offer, adding that it would provide more detailed reports and would "research, identify, review, and evaluate" streamripping. But, after the weekend, SoundExchange said that DiMA was misrepresenting its offer. The streamripping issue was apparently the sticking point.
DiMA said that SoundExchange was using the negotiations over fee caps to impose "technology mandates" that are "unreasonable, unworkable, and way off-topic." DiMA also said that, uncapped, the $500-per-channel minimum fee would amount to more than $1 billion annually because some Internet radio stations allow users to create their own channels. "This is far more money than needed to administer a mere $20 million in Internet radio royalties," DiMA said.
Going After the Jugular
Forrester analyst James McQuivey said that, in these negotiations, he hadn't thought that SoundExchange would "go after the jugular." He said SoundExchange is saying "yeah, we'll give that cap to minimum fees but you have to agree" to stop streamripping.
The emphasis on blocking streamripping, he said, is "still firmly entrenched in 2001." In those days, he said, the record industry "inhibited rather than accelerated" the ways that users could listen to and share music over the Internet. Legal departments at many record companies still want to impose restrictions, he said, while other departments in the same companies understand that it's time to move into different Internet models. For those executives stuck in 2001, he said, it is "hard for them to give up their Rolls Royces for Mercedes."
McQuivey said that new media players, where the control of streamripping likely will reside, are coming out that will propel new forms of merchandising and sales while allowing users to more freely share and enjoy media. By way of example, he cited Adobe's upcoming Media Player, which will allow video streams to be downloaded and will use technology to allow the purchase of high-quality versions of those videos. He noted that Adobe's Media Player model, along with advertiser support and other new approaches, is being used by many streamed TV programs on the Internet.
Stay tuned for the next act.