Music Royalty Negotiations

The House and Senate sent the authorization bill to President Bush that allows SoundExchange to negotiate royalty agreements with webcasters on behalf of copyright owners and performers.

A lot is on the line for webcasters because the interested parties now have until February 15th to come up with a negotiated agreement that could reduce the high rates imposed by the Copyright Royalty Board.

These draconian rates have put a damper on Internet streamers causing many to close shop and others like Pandora to be concerned about whether they can operate in the future with a disproportionate amount of their total revenue going to royalty fees.

What's worse -- the Internet is the new frontier. It is the least developed and most under monetized entertainment segment and yet the rates that they are paying -- with an eye on the increases that are soon coming -- make the segment disproportionately taxed.

Here are five excellent reasons to pray for the parties that they show fairness and restraint where the CRB failed to:

1. A better deal will help the record industry.

The major labels somehow think that the Internet is the enemy. In reality, they are their own worst enemy. Streamers are not and never have tried to avoid paying fair royalty payments, but cut them a break. They are a startup business. The artists and performers stand to make more money by doing more volume. That is, when small webcasters can fire up their streams once again and perhaps even predict their expenses going forward as any other viable business would, they will provide more opportunities for listeners to hear a wide variety of music. In that way the music industry stands to make more.

2. More streaming means more money.

Eventually rates will have to be increased so the more audience webcasters can attract the more revenue artists and performers can earn. It is flawed thinking to assume that levying an unusually high rate to what is tantamount to the larger companies is the way to go. Where's your long tail?

3. Radio eventually will benefit from a settlement.

To borrow a phrase from the brilliant radio programmer Jack McCoy, "as incredible as it may seem" a fair rate to webcasters will not hurt radio stations any more than stations are hurting themselves by cutting back on essential elements of programming, management and sales. What's even more important is that unless radio companies get into the Internet other than simply posting their terrestrial streams, they will have nowhere to turn to attract young audiences. Terrestrial radio has already lost Gen Y and the only way they can add younger demos to their available older listeners is to create new streams on the Internet. The fair royalty rates would benefit them as well.

4. Indie labels have a new place to turn for airplay and revenue.

Indies have to fight for airplay in radio and radio is less of a factor in music sales every day. Performers and owners will get a better deal if the Internet is available for exposure to their music. The majors have to understand that life has changed. The more music that is played, the better for everyone. The Internet is a big place with an endless potential stream of money to artists, performers and labels if the price is right.

5. Radio and records cannot be a growth industry without fair play.

The record labels are on an eight year decline. The radio industry has been declining since 2003. Satellite radio stepped up and agreed to an unfair royalty rate and satellite radio is as deep in the red as any business. Pandora is a new form of Internet radio and its predicted demise without fair royalties is not in the interest of a boom industry. You want a boom? Stimulate channels of music exposure in the air, online or via satellite.

RAIN publisher and AccuRadio owner Kurt Hanson has been and is the voice of reason on this issue. He points out the advantages that SoundExchange has over its opponents -- namely, SoundEx represents the music industry and speaks with one voice. The streamers, NAB, small commercial webcasters, colleges and religious organizations step up to the negotiating table separately.

I'm not sure reason will prevail and a fair settlement will be reached by this unique workaround for a botched CRB, but if it isn't -- the big loser will be the musicians, owners, performers and labels.

Young people will simply continue to steal the music they want from bit torrent sites -- with no payment to anyone involved in making the recording.

Cut off your nose to spite your face ...

Or ...

Swallow your pride and start making money when you need it the most -- in a business that could grow exponentially between now and the next royalty negotiation.

Your history shows that you usually fail to answer the call.

My advice: Don't miss this opportunity to help webcasters help you.

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