Internet Radio: Negotiating a Future

by Rick Rockwell

When the recording industry granted internet radio a reprieve on paying new royalty rates, many who support the fledgling industry sighed with relief.

Little did they realize the offer came with a Trojan horse.

Now, the industry wants something it hasn’t been able to get from over-the-air radio (or terrestrial radio as some call it, you know, the radio most people have used since the 1920s) or television. The music industry wants a way to block computer users from making recordings of music they hear via the internet.

The issue is about recording streaming audio. Never mind that some believe this isn’t a current problem. How many people really take the time to acquire software to record streams of music and then take the time to cut those recorded streams up (which of course means acquiring more software to do that) into audio files? Why would people do that (a technique called stream-ripping) when they can download audio files or use torrent software to find audio on the web? Those methods of getting around the industry’s digital rights management efforts are much more efficient.

This is really an old fight. This is the same argument the music industry made against cassette tapes in the 1970s and 1980s. This is the same argument that Hollywood made against VCRs in the 1970s. The courts have ruled that consumers have a fair use right to record music and other copyrighted material for home use. Some experts would argue that mix tapes, mp3s and other consumer sharing systems actually encourage consumers to buy music from artists they can’t find on traditional radio.

But the music industry isn’t interested in those arguments. Under the guise of collecting every cent they have coming (and some they don’t) for artists, the music industry is really fronting for the big media conglomerates on this issue. Only the really successful artists collect more than pennies on a dollar for the music that is being sold in their name.

So now SoundExchange, the organization set up by the music industry to collect these fees is demanding that internet radio providers use technology that would prevent computer users from recording any audio streaming over the ‘net. Congress has rejected this demand from the music industry, but it is the new sticking point in the negotiations over royalty rates that internet radio must pay. SoundExchange looked benign when it offered internet radio a delay in collecting the new royalties (higher than royalties for other media) but digital rights management is the asking price for that delay, although negotiations continue.

The internet radio industry is hoping that a bill in Congress co-sponsored by Rep. Jay Inslee (D-WA) and Rep. Don Manzullo (R-IL) will set everything right. (Republican Sam Brownback of Kansas – a presidential candidate – and Democrat Ron Wyden of Oregon followed the lead of the House and introduced a similar bill in the Senate.) Although Congressional pressure sent SoundExchange back to the negotiating table, the record of Congress is not to pass these measures and to let industry work it out.

The problem with that is the Goliath that is the music industry looks poised to crush internet radio for good or at least tie it into so many knots its creativity will be lost.

(Photo by KillR-B of Breda in the Netherlands via stock.xchng and Yotophoto.)

For more background on this story, please see these previous entries:

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Jeff Siegel said...

From Paul McCartney, who knows a thing or two about the music business, and undrstrands where this is coming from:

"My record producer [David Kahne] said the major record labels these days are like dinosaurs sitting around discussing the asteroid. They know it's going to hit. They don't know when, they don't know where it's coming from. But it's sort of hit already. With iTunes, and all of that."

Rick Rockwell said...

As you know, the big record companies are no fans of iTunes. Some believe that if the corporate media gets digital rights management (DRM) imposed on webcasters that it will only be a matter of time before they demand even more stringent DRM for iTunes too.

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