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Monday, March 05, 2007
RIAA Pushes Through Internet Radio Royalty Rates Designed To Kill Webcasts

It's been quite some time since we last heard about arguments between internet webcasters and SoundExchange (a group spun off from the RIAA to handle royalty collection).

Back in the summer of 2003, there was even a lawsuit over the royalties being set, that were pretty clearly designed to put smaller, independent webcasters out of business.

From the RIAA's point of view, this is perfectly typical. They still view the world (especially the internet) as a broadcast medium.

Therefore, they want at small number of "professional" content producers who create the content for everyone else.

Then they can just sign a few ridiculously large licenses with those large players, and "the people" get to consume it.

It's a fundamental misunderstanding of the internet as a communications medium -- a medium where people express themselves back and forth to each other, rather than a place we go sit back and "consume." While the fight had gotten quiet lately, the good old RIAA was hard at work making sure that things were happening in the background.

A bunch of folks submitted stories this weekend noting that late Friday (making it less likely to make news), the Copyright Royalty Board announced that it was adopting the royalty rates SoundExchange put forth, and making them effective retroactively to the beginning of 2006 -- meaning that many small independent webcasters are now facing a tremendous royalty bill they're unlikely to be able to afford (thanks to everyone who sent this in).

That last link goes through the impact of all of this on various players -- and it's not pretty.

The new rates pretty much decimate a large portion of the industry. And, it's only going to get worse, as the royalty rates increase at incredible rates ("2007's rate is a 37.5% increase over 2006; 2008 and 2009's annual increases are about 28% per year; and 2010 adds another 5.5% increase.") Of course, this is utterly backwards and damaging to the industry itself.

A webcaster (especially the smaller, independent ones) is a great means of promotion for artists.

It tends to attract more loyal and well-targeted audiences, who are more likely to want to later go out and buy a CD, a t-shirt or attend a concert.

It lets the industry better promote material from a wider range of artists. However, in the industry's desperate need to charge for every single use, they're effectively killing off yet another wonderful promotional vehicle.

The industry continues to think that it needs to do this because it wants to own all distribution and promotional avenues in order to be able to continue to take its large cut.

However, that's no reason for the Copyright Royalty Board to put in place these artificial barriers that only serve to protect the recording industry's outdated understanding of its own business model.

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