Today’s CRB rate news from RAIN

From a DiMA press release: “
Today SoundExchange issued a press release stating that the organization has proposed a voluntary cap on the minimum fees charged against royalties for sound recordings played on Internet Radio. Accordingsoundexchange  to the press release, SoundExchange proposed capping such advance payments at $2,500 per service [previous RAIN coverage here]…

“Jonathan Potter, Executive Directorof the Digital Media Association, issued the following statement:

“DiMA would agree to a $2,500 per-service cap for the entire term of the CRB ruling (through 2010), but not the partial-offer presented to us in writing, which would terminate in 2008.

“Any offer that doesn’t cover the full term is simply a stay of execution for Internet radio. The looming 2009 billion-dollar threat is destabilizing and inhibits investment and growth. DiMA, like thousands of artists and millions of consumers, wants a solution that promotes long-term industry growth. A billion-dollar dima‘minimum fee’ is equally absurd in 2006, 2007, 2008, 2009 or 2010. It should beeliminated – period.

“DiMA is disappointed to have to issue this statement; we would prefer to resume negotiating important issues directly with our counterparts rather than through press releases.”

Read the entire press release here.

On Friday, we excerpted from the SoundExchange press release announcing the offer of the $2,500 annual cap on the minimum fee required by the CRB determination (RAIN coverage here; text of the SoundExchange press release is here).

A vital detail that the SoundExchange press release (and thus, our coverage) omitted was the fact that (according to Potter’s statement above) the minimum fee cap “would terminate in 2008.”

But didn’t Simson say, in his organization’s press release, “There was a lot of misunderstanding out there about how the minimum fee would apply, and frankly some people were wrongly stating SoundExchange’s policy on this matter… We certainly don’t want anybody to get unduly hurt by the minimum fee…”?

To my ears, this means, “All the worry about nine-figure mimimum fee payments for webcasters like Pandora and Live365 was much ado about nothing — we never intended to levy such enormous and crippling fees.” The words “misunderstanding” and “wrongly stating SoundExchange policy” were used — as if webcasters misinterpreted SoundExchange’s and the CRB’s intent. Perhaps this “formalization” of a limit on minimum fees was a good faith efffort on SoundExchange’s part to quell the concerns of webcasters (and the press, and listeners, and Congress).

But if the possibility of minimum fees snowbaling into obligations of hundreds of millions of dollars was simply a “misunderstanding” on the part of webcasters, why does the settlement offer expire? And why wasn’t that point mentioned in SoundExchange’s press release?

If I’m correct here, I can only conclude that this offer, like the settlement offer made to small commercial webcasters in May (see RAIN here), is not so much a compromise offer as it is a PR move to portray SoundExchange as actively trying to negotiate a resolution to this affair. PM

From The Economist: Stereo Hits, a radio station in Cobán, Guatemala, decided to go global last year… Raúl Najera Ponce, head of the station’s online unit, estimates that this ‘webcasting’ costs Stereo Hits just $100 a month, since it needs neither a frequency licence nor a transmission tower.

Mr Najera Ponce also keeps costs down by neglecting to pay royalties on copyrighted music… Mr Najera Ponce chose a simpler way to remunerate musicians and labels. ‘If we need music from a band in London, we buy their disc—that’s how we collaborate,’ he says.

“Collection agencies and the record labels they represent have long struggled to extract royalties from radio stations… Internet radio stations are even harder to corral, because they are smaller, more numerous and tend to be run by hobbyists who find it too complicated and expensive to pay their dues…

“Almost all of America’s 14,000 or so webcast stations, which have 34 million regular listeners and income from advertising, do pay royalties. Nonetheless, for several reasons America is where the big record labels and SoundExchange, the collection agency representing them, are fighting hardest to bring in more money.

“For one thing, America’s traditional radio stations pay relatively little in royalties, thanks to a 1909 law that mandates fees for composers but not for performers. (Low royalties, radio stations have argued, are justified because playing songs provides performers with free publicity.) The frustrated record labels are anxious to establish a less generous system for webcasters…

“In March the record labels persuaded America’s Copyright Royalty Board (CRB) to triple royalties for webcasters, to roughly a fifth of a cent per-song per-listener, with retroactive effect from the beginning of 2006.

“This will almost certainly put most webcasters out of business.

“They will also have to pay SoundExchange $500 for each channel they stream when the ruling takes effect on July 15th. This fee is likely to eliminate one of the most cherished features of online radio: the customised channels that listeners can concoct using software that produces playlists based on the names of favourite bands or songs. One popular webcaster, Pandora, creates customised channels for some 7 million users. It cannot possibly afford to pay $500 for each one

“The quest for higher royalties may actually be doing record labels more harm than good. People generally do not buy music unless they have already heard it. Internet radio makes it easy to zero in on a preferred genre, so listeners are more likely to discover music they would want to buy. Many online stations even provide links to online music stores—free of charge.”

Read this entire Economist article here.

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