The "Nuclear Bomb" Business Case

I admit on the first sentence of this blog entry that I do not know all the facts or mitigating circumstances around the Internet Radio Royalty Rates dispute. I do follow the music business as close as I can as well as associated businesses such as Internet radio.

Background: Internet Radio really took off like everything else on the Internet around 1999-2000. When Internet Radio started we realized the cool factor of it all. I hate using that euphemism, but it really fits.

Cool because for the first time we were freed from boring, terrestrial radio that had grown stagnant. For the first time anyone with a computer and decent Internet connection could start broadcasting to the WORLD! For the first time you could find new music through legitimate, independent outlets.

What is the problem?

Radio Utopia didn’t last long though. For you see, the traditional music and radio businesses have this arrangement that’s been around a long, long time. Terrestrial radio stations pay a percentage of their revenues to royalty collection companies such as ASCAP and BMI, which in turn pays money to the copyright holders of the songs played on the radio stations. This arrangement has worked well for the radio stations and artist. It promotes the symbiotic relationship that is needed to keep artist fed so they can create new music and the rates radio stations pay are fair so they can stay in business.

The Internet Radio landscape became more muddy due to the emergence of SoundExchange, an entity created by the RIAA, and the paying of statutory and compulsory licenses. For some reason congress thinks that traditional radio stations should only have to pay royalties to the writer(s) of a song, but digital radio stations (Internet and Satellite) should pay both writing and performance royalties per song and per listener. By the way, the traditional radio stations pay around 3.5% of their gross revenues to the song writers.

And this is the core of the problem. Everyone agrees that song writers and performance artist should get paid for using their works of art to create a business. The issue is that everyone should have to play by the same rules. Internet broadcasters want the same deal as their counterparts in the traditional, terrestrial radio station business. Even terrestrial radio stations that simulcast on the Internet want the same rate to apply to both technologies.

The “Nuclear Bomb” Solution…

I think sometimes to solve a big problem like this that cuts across traditions and new technologies we have to set off a “Nuclear Bomb” and start over.

Let’s clear all the laws governing copyright royalty collections. The days of needing a middle man to collect royalties are OVER! Artists should have the right to choose how they collect their royalties. If they want SoundExchange, ASCAP or BMI to represent them or go it alone they should have that right.

On the flip side if people respected copyright ownership and paid for the usage of those copyrights we would have a better situation today.

Should Internet Radio Stations go out of business? Should digital music go away? If a business “Nuclear Bomb” went off would the world miss all these technologies?

The answer to these problems is not easy. Starting over might be the start of the process, but sanity must prevail if these businesses are to survive.

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Filed under All Posts, Business, Internet, Music

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