DiMA: SoundExchange is leveraging absurd fees to push DRM on web radio


By Ken Fisher | Published: July 18, 2007 – 09:17PM CT

Everyone breathed a sigh of relief when the July 15 deadline for webcasters to start paying new royalty rates and per-station fees was temporarily put on hold for all but the largest webcasters. The eleventh-hour deal from SoundExchange at first appeared to be the breakthrough that was needed to keep Internet radio alive and kicking, but as we reported, the deal was a bit of a Trojan horse: SoundExchange wants webcasters to adopt Digital Rights Management (DRM) in exchange for better rates.

While the sources I talked to about the deal clearly saw the writing on the wall, the Digital Media Association (DiMA) understood SoundExchange to be asking for something far less: cooperation in investigating the impact of streamripping, but no requirement to commit to any particular solution. Now that they’ve come to realize that SoundExchange is only interested in pushing DRM, DiMA says that SoundExchange is fronting a bad deal. That signals rough waters ahead, as DiMA represents some big hitters in webcasting, including Live365, Napster, Pandora Media, and Yahoo. DiMA says that the DRM requirement was not discussed at the roundtable last week. 

Jonathan Potter, executive director of DiMA, said in a statement that SoundExchange is leveraging high royalty rates to push DRM. “DiMA and our members are happy to cooperate on issues of common interest even if outside the scope of the CRB decision, but SoundExchange has demanded enforceable technology mandates that are unreasonable, unworkable, and way off-topic,” he said.

“They seek to leverage this absurd fee to impose mandates that they have unsuccessfully sought elsewhere,” he added. Potter characterized the developments as a “disappointing turn after what we thought had been a very productive roundtable.”

Potter’s reference to mandates unsuccessfully sought elsewhere can only be a reference to the PERFORM Act, ill-fated legislation aimed at both implementing a broadcast flag for radio and forcing the use of DRM for all streaming media services, whether online, on cable, or through satellite radio and TV.

The original bill died in committee last year, but it was one of the first pieces of legislation resurrected at the beginning of the 110th Congress this year. The new legislation was billed by its backers as being more palatable since it would permit the recording of content by station or time, while making the disaggregation of music illegal. In other words, you can record “X103” from 3:00-4:00pm, but the use of technical means to disaggregate that recording into individual songs for playback later would be illegal. The bill has languished and doesn’t look likely to go anywhere.

Under the Audio Home Recording Act of 1992, consumers have the right to make noncommercial analog and digital copies of broadcasts. It’s hard not to agree with Potter’s take: having failed to push any of this legislation through, the next best thing for the music industry would be to force the issue via contractual deals.

DiMA says that it is prepared to convene working groups to talk about such technical measures but that it believes that such “off-topic” matters should be divorced from the issue of royalties and fees.

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