It might have been a conflict of interest and probably to their financial detriment if they had angered the label by participating in a protest.

http://blog.last.fm/2007/06/25/make-some-noise

“In the U.S. neither internet nor terrestrial stations pay royalties for using the performance (i.e., royalties to the singers/musicians).”

This is not true. Webcasters have been paying performance royalties since the SWSA of 2002.

This discussion is about the CRB rates set for performance royalties for the period of 2006 - 2010…rates which in their second, third, and fourth year (2007, 2008, and 2009) increase 37.5%, 27.2% and 28.5% respectively. How many businesses do YOU know (besides Google) that can increase their total revenues 37.5% year over year?

Of course, any number of positions can be taken, and arguments made on either side of this debate. Here’s a few points I’d like to add (possibly reiterate):

1.) The music industry is hardly in a position to lecture webcasters on the efficiency of their business models. One of the primary reasons the US music indusrty is in this situation to begin with is their failure to adapt to market demands. They chose to litigate rather than innovate, and thereby missed out on their opportunity to shape the future of music distribution in the digital era. These royalty rates are a reflection of that missed opportunity.

2.) If the performance royalty rates for webcasting are so fair, why did a separate CARP (Copyright Arbitration Royalty Panel) determined that 7.5% of revenues was a “fair and balanced” rate for Satellite and Cable Radio?

3.) Many small webcasters showed up for the CRB panel discussion, asking that they keep a percentage of revenue model. The CRB rejected ANY percentage of revenue model for internet radio, even though a previously established rate existed in the SWSA (which, btw was set at 12% of revenue for digital performances, a rate that was higher than most of the EU and Canada for performance royalties. ASCAP and BMI royalties were / are paid above and beyond the 12% figure.

4.) The “willing buyer / willing seller” clause of the DMCA is flawed language, inserted at the behest of lobbyists for the music industry, and is overly vague. Obviously, you cannot establish a rate that would have been negotiated between a “willing buyer / willing seller” in a situation where there exists no willing seller, only willing buyers. This clause puts all the power in the hands of rights holders without balancing the public interest, or allowing for economies of scale. Here’s a take on John Simson’s milk analogy.

In a willing buyer / willing seller relationship, a seller has milk for sale. He’s willing to sell it for $X. A willing buyer says he can’t sell the milk at $X because consumers won’t pay $X for it, when a competitor sells it for $Y. So, the willing buyer trys to negotiate a lower price in an effort to make up in volume what he cannot in price. If the willing seller says no…the willing buyer has the option to find another willing seller who WILL sell at $Y, and maybe even offer volume pricing discounts, while the seller that said no gets nothing (ie, loses the sale). It’s how the market works.

The problem with the willing buyer / willing seller language in this instance is that if a webcaster cannot negotiate a rate with SoundExchange, where else can they go? Who are the other “willing sellers”? The only option available is to go to the labels directly to negotiate rates…which is what deals the killer blow to SoundExchange’s argument. Unlike SoundExchange, the labels are under NO OBLIGATION to split the negotiated rate 50 / 50 with the artists. So, by forcing direct deals, artists could actually LOSE MORE MONEY than they would have otherwise received under a more fair royalty scheme.

5.) A percentage of revenue model (like that set for Satellite / Cable radio) is a win-win. Webcasters benefit by getting a rate that allows them to grow their business, receive further investment, and still compensate artists and music composers for their works. The music industry benefits because Internet radio provides access to a much wider array of music and demographics that are currently underserved or not served at all in terrestrial “broadcast” radio, which means the potential for future growth in revenue for the music industry is tied to the growth of internet radio (which the RIAA and SoundExchange contend will be exponential in the coming years). So, really, it’s only common sense. 7.5% of $500,000,000 is $37,500,000 (the $500m figure was used in the CRB proceedings as an estimate of the current value of the entire webcasting industry). 37.5% of nothing is…well, NOTHING. So, while one could argue that “businesses that don’t have an effective business model go belly up”, it would be naive to ignore the facts that, a.) These rates are established by a GOVERNMENT REGULATORY BODY, and are set arbitrarily rather than negotiated, b.) that these rates are established ex post facto, and in absence of any “real” market forces, and c.) it is in the best interest of both artists and the music industry to work with webcasters in good faith. I have yet to see where any major webcasters are asking for a “free-ride”.

“Somehow I get the feeling that most of the commenters (and Duncan) don’t really have a grasp on this issue.”

“In the U.S. neither internet nor terrestrial stations pay royalties for using the performance (i.e., royalties to the singers/musicians).”

Of *course* internet radio stations pay performance royalties today. That’s what SoundExchange is for. What’s at issue is the obscene increases in royalty payments being called for.

“The new royalties would simply bring internet radio in line with what is done for radio in the EU and other countries, and compensate performers for their recordings. Isn’t that fair? I don’t see how anyone can have a problem with this.”

The problem isn’t not wanting to compensate performers. Internet broadcasters WANT to compensate performers (even though, due to the way SoundExchange operates, the “long tail” artists that many internet stations play get next to nothing). The problem is that the rates go beyond most stations’ total revenue. And that’s just (retroactively) for 2006. The rates go up 37.5% from there in 2007, 2008 and 2009 will be about 28% more each year and 2010 goes up 5.5% from there.

The UK has rates based upon a percentage of revenue. The US used to too… that’s what the CRB ruling does away with. I wish that internet radio *could* be brought back in line with what is done for radio in the EU and other countries that have a rate of 3% to 4% of revenues.

thanks for the 4 updates on all your comments ; no one cares how you spell you name.

-RB

Somewhere I read an actual dollar amount per song per user that it will cost internet radio stations in royalties. I’m curious to how that compares to the average amount per song per user for the average city radio station.

The DiMA trade organization represents large companies like Yahoo and the large venture capitalists who support companies like Pandora, Last FM, etc.. These venture capitalists do not care about music and are just looking to make profits from music. DiMA is using small webcasters and public radio as a shield for their cause, which is to increase the value of their member companies and their profits by paying low rates to artists and labels. The SaveNetRadio.org news release of May 23rd “rejecting” (by the way SaveNetRadio.org is not representing the small webcasters in negotiations) the extension of SWSA rates for small webcasters discusses how “under this proposal, Internet radio would become a lousy business, unable to compete effectively against big broadcast…..”. Huh, what happened to their argument of a month ago that they wanted to protect the kid who loves to play and listen to music? Those real music lovers will be covered by the small webcaster rates. Do people who want to “invest” in Internet radio have a greater claim to having a worthy investment than artists who create music and deserve to be paid for their creativity and record label owners who’ve invested in producing the music?

I don’t think so.

That is the most idiotic thing I’ve heard.

The amount Last.fm spends on royalties isn’t jack squat to CBS.

The reason Last.fm will operate that day (if they do) is because Last/CBS doesn’t give two shits about making more payments–in fact they probably prefer higher royalties because it means lots of other stations and websites (read: competitors) will have to shut down leaving them as one of the few still standing.

The rate increases were proposed by Soundexchange, which is an organization spun off from the RIAA specifically for the purpose of collecting royalties off of digital music. Except they don’t collect those royalties for just RIAA artists, they collect them for ALL artists. Whether those artists want them to or not. Whether those artist give them permission and consent to or not. (and they get to collect “administrative fees” for this “service” on top of it).

This, of course, is an example of REAL copyright infringement - someone profiting off someone else’s work without permission or consent - and part of the original intent (not the sort of twisted abominations it’s been warped into) of copyright laws to prevent.

Of course artists are free to collect these royalties from Soundexchange, IF they join and pay a fee to do so. (Kinda sounds like an extortion racket to me). If they opt not to join (and pay a fee) to collect their money, Soundexchange is LEGALLY ALLOWED KEEP ARTIST’S MONEY (again, an example of real copyright infringement and a clear violation of the real intent of copyright, despite how “legal” the whole process is).

Of course most major label artists will see next to nothing of these fees, since most of them have been forced to sign over their rights in an effort to get greater exposure (and draw people to their live shows, where most bands make their real money) and the efforts of the RIAA to “shortchange” their artists (see their petitions to the courts to reduce artists royalties as well as lawsuits by artists against the labels for improper payment - specifically the Cheap Trick/Allman Brother lawsuit against Sony).

Smaller labels and artist won’t benefit much since they generally rely on the smaller broadcasters (the ones most affected by this increase and likely to be driven out of business) for airplay and exposure given the fact that most of the large outlets play mainly major label artists (thanks largely to tactics like the major labels long and very well documented history of payola). Most of whatever fees (after the “cut” - in the form of membership fees - they have to pay Soundexchange) most of them get will likely be offset by the decreased exposure of people hearing them and buying their CDs/digital music or going to shows.

So I’m left trying to figure out how this really benefits, in real practical terms, anyone but the RIAA and the major labels, who stand to benefit directly from the rate increase, indirectly from Soundexchange, and all the while squeezing competition out thereby putting even more pressure on artists to sign with major labels (and thereby forfeit their rights) in an effort to make a decent living.

1. Why should there be legislation regarding record label contract negotiations? The government’s job is not to protect people from willingly signing what others might consider a “bad deal.” There are so many options for talented recording artists today. If you get an offer from a major label and feel like their terms are not acceptable, go somewhere else. We don’t need legislators involved in this; if a contract signed is legally questionable the court system is very capable of dealing with the issue.

2. If the royalties are too high, it’s the fault of the Internet radio providers who knowingly or unknowingly didn’t show up for the debate. Congress should not listen to any party that decided not to participate in the proceedings. You snooze you lose. It always amazes me that people will be given a forum to participate in major decisions, fail to do so, but then have no problem wasting taxpayer dollars by trying to get the courts and Congress involved. Why not just show up in the first place? At the very least, if you don’t like the decision, you’ll probably have a valid basis for claiming that your arguments were ignored.

3. I think there’s a valid argument to be made that the “publicity” received from radio play does not do as much for music sales as one might think. In fact, the concept that terrestrial radio boosts sales significantly and therefore shouldn’t be subject to performance royalties was an after-the-fact argument created by broadcasters to justify why they shouldn’t have to pay performance royalties during past debates on the issue. My personal suspicion is that there are consumers who make purchases after hearing a song on the radio (whether it be terrestrial, Internet, satellite, etc.), however the majority do not. More may have in the past, but with so much piracy today and disrespect for the parties involved with the creation of music, it’s probably more likely that somebody will hear a song and download it for free on a P2P service.

how is turning the raido off over leaving it on, better for the community??

“and are instead about the money and the business (CBS).”

this is about paying A LOT of money to the recording owners. Last.fm is getting no money for this! They are losing money by not turning off.

what all the others are doing is save one day of royalty payments

how is your argument making sense?

What Last.fm is doing is sticking it out, like they always did, so the community can listen to music. wake up please.

If the RIAA in the US get away with this other countries will follow and the only music on the eb will be top 40 that is what the record companies want to control what you hear and to get rid of the independents. That is both Radio and labels.

One of the things I enjoyed about Last is their community and the way they treat their members. If they don’t observe the day of silence, it means they no longer feel their community is important and are instead about the money and the business (CBS).

Here goes.

Internet (and terrestrial) radio stations pay songwriter royalties now, today (these go to the publishing company of the songs). These are about 3 percent in the U.S. (5 percent in the U.K., similar levels in the rest of the EC).

In the U.S. neither internet nor terrestrial stations pay royalties for using the performance (i.e., royalties to the singers/musicians).

So two issues, the song and the performance. Right now only one get compensated in the U.S.

In most developed non-U.S. countries, however, radio stations do pay royalties to performers, in addition to the royalties to songwriters. All E.U. countries do this. In the U.K. it’s 5 percent to the performer (and 5 percent to the songwriter).

As mentioned above, in the U.S. there are no performance royalties now. This is because the U.S. copyright law preceded (1909) those of other countries and preceded the existence of a strong lobby for performers or the recording industry. There’s been a back-and-forth for decades on this between broadcasters, who don’t want to pay, and performers and record companies, who feel they should be compensated.

(Side note: most U.S. performers never get their royalties from the EU because of reciprocity issues, which would be partially solved by performance royalties for U.S. radio.)

The new royalties would simply bring internet radio in line with what is done for radio in the EU and other countries, and compensate performers for their recordings. Isn’t that fair? I don’t see how anyone can have a problem with this.

There _are_ some side issues:

– Are performers getting a fair cut from their record companies? They signed arm’s-length contracts not under duress, but perhaps reasonable people can feel that their is some imbalance of power here (even in the internet age?). If so, that is fine, but it’s a separate issue that should be addressed in legislation regulating recording negotiations, not by denying everybody involved in the performance royalties.

– Isn’t there a lack of fairness between internet and U.S. terrestrial? Yes there is, due to the historical anomaly mentioned above, and that should be resolved by instituting royalties for U.S. terrestrial radio stations. U.S. terrestrial stations are the ones out of whack with the rest of the world.

– Are the royalty levels fair? Maybe, maybe not. That was dealt with in excruciating detail by the arbitrators. Unfortunately, many internet broadcasters boycotted the proceedings, so important data was not available to them. (By boycotting, what I probably mean is that small internet broadcasters were so legally unsophisticated they probably didn’t even have law firms and didn’t know how important this was to them.) If the royalties are too high, that is a legitimate issue, and there are ways to rectify that using economic arguments based on actual business data to U.S. legislators.

– Wouldn’t it be better for artists not to get royalties, because the viral publicity of internet radio benefits them more? Maybe so. But their performances are their property, under copyright law. If they want to be self destructive and insist on immediate royalties in place of long-term viral publicity, that’s their right.

Remember this about copyright law: Music is governed by the unique concept of “compulsory licensing.” If you write a novel and I decide I’d like to publish it or make a movie based on it, I cannot do it without your permission, even if I say I’ll pay you royalties. Only in the realm of music can people just up and use the material without any permission. Their compensation comes in the form of royalties set by arbitrators. To be absolutely in line with the rest of copyright law, compulsory licensing would be abolished, and you’d have to get written permission directly from the rightsholder for every broadcast.

It always amazes me how idealistic and irrational people are. Does anybody really believe that these services are founded by individuals and then backed by professional investors solely for the purpose of remaining independent and thumbing their noses at The Man? A little hint: a good portion of the startups that provide services we love to use are hoping to get bought out by somebody like CBS. If they get bought out and the acquirer implements radical changes that ruin the service, displeasure is warranted, but simply deciding to leave a service because they get acquired by a “big evil corporation” is just plain childish. If your black and white view of the world sees things this way, you might as well not use any service that has raised money from institutional investors. After all, aren’t they “evil” too?