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AG News: 7/13/2007

Read Carefully the SoundExchange Offer to Internet Radio

You will start this day seeing headlines about how SoundExchange and internet radio have come to an agreement, of sorts. Two of these headlines read:
"Net Radio Wins Partial Reprieve as Royalties Loom" (Wired)
"Report: Webcasters Shouldn't Fear Deadline" (Radio & Records)

Sounds like the calvary has arrived, doesn't it? But, let's not start popping the champagne corks just yet because there's a little more to this than what's in the headline.

Slip over to RAIN for the most complete read on what happened between SoundExchange and internet radio representatives yesterday in front of a House Commerce committee. RAIN quotes SoundExchange Executive Director John Simson: "For the people who want to comply with the law and are in bona fide negotiations with us [my italics], we don't want those people to be intimidated. And we don't want them to stop streaming." Simson qualified his statement by noting, "That's just so long as they're continuing to pay under the license they had."

That last sentence is important, and I think you'll find most legitimate (business minded) webcasters agreeing that those internet radio stations that are not paying royalties to SoundExchange should be forced to close. The caveat is this: unless they have made agreements with individual artists to play their songs in exchange for exposure.

Artists do need to be paid. Webcasters have always said this. The new royalty rates, though, need to slide from the CRB's exceedingly high level. Webcasters, through their chief negotiator and legal consul, David Oxenford, still need to have rates they can survive with. The problem is that currently any boost from what was being paid in royalties is enough to damage this industry, which has little revenue in general.

Internet radio is not going to shut down. Nobody in the know ever said it was because these people know that a few webcasters have investors with deep enough pockets to weather a loss during these early days. Corporate-backed online radio stations like Clear Channel and CBS aren't going anywhere July 15, either.

What occurred yesterday buys time for all but those internet stations run by hobbyists or amateurs who are not actively paying royalties. These groups are still bound to pay the new fees, retroactive to January 1, 2006. Most will not. Most will close. Those that stay open will remain pirates, until SoundExchange lawyers knock on their door.

The words above uttered by SoundExchange's John Simson have yet to be put into writing, though it's hard to imagine they won't be after having been said in front of a Congressional Committee. So, breathe easy for a little while if you're a webcaster who's been paying your dues.

For station owners that have been using the internet as a means of satisfying their own desire to bring music to the people and have been skirting paying royalties until now, nothing's changed for you. You decide if staying the course is ethically right.

Sunday, July 15, we'll still see internet radio stations close. Those that remain, and pay, will refocus efforts on generating revenue. If yesterday's meeting does result in significantly lower royalty rates, then we've just witnessed the transition to a profitable business model and everybody will win.

That's just one big "if" - so, I'm keeping the champagne on ice for a little while longer.

From: Jose

It's a start but I don't remotely trust SoundExchange or any industry group associated
with efforts to regulate music sales and royalties. It seems to me that the consumers
with the most to lose here are the ones like me with a minimum of 30-40+ gigs of music
in their libraries. Consumers like that should start considering how an Internet-organized
boycott of music purchases, concert attendance, radio listening, etc, might affect
antiquated business models for royalty collections and also album sales.

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Online Since January 1997

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