From payola to royalties?
The RIAA has taken a full ration of abuse for suggesting that local radio stations pay royalties to record labels, too, instead of just to songwriters' performance royalty organizations (e.g., ASCAP). It's probably just an academic debate; I doubt Congress would ever enact something so fiercely opposed by the National Association of Broadcasters (who call it a "performance tax" -- ooooh, a tax -- despite the fact that it would be collected by copyright holders, not government). Nevertheless, I can't help but wonder what the fuss is all about.
In my mind, over-the-air stations, satellite radio, podcasts and webcasters are all in the same business: broadcasting music (or talk) programming. The platforms are a bit different today, but those differences are fading as all broadcasting goes digital. Going forward, the main distinction among music services will be between programmed and on-demand services, not between an Internet stream and an HD Radio transmission. So while I understand why the royalties for a Rhapsody or a Napster should be higher than those for a webcast, I don't see why webcasters should be paying something to the labels and over-the-air broadcasters nothing.
Think of it this way. In 1998, Congress required webcasters to pay royalties because their transmissions were considered potentially harmful to music sales, while local radio broadcasts have long been viewed as potentially helpful. With no limits on bandwidth, online radio stations could offer niche programming that so closely matched a listener's tastes that it would sate his or her appetite for music -- or so the argument goes. That's really hard to accept, given a) the incredible amount of music that's been recorded, and b) the number of new CDs released every week. So even a sub-genre station can't satisfy the core fans who account for most music spending. Besides, people buy tracks and albums because programmed music services don't fulfill all their cravings. How else could you explain the fact that the songs played most often on over-the-air radio are also the ones downloaded most often through peer-to-peer networks and purchased most often at Wal-Mart?
Such statistics suggest that local stations remain the most powerful promotional force in the music industry. Lobbyists for the radio industry routinely point to that promotional effect as the main reason they shouldn't have to pay royalties to the labels. Here are three counter arguments: the statistics suggest that local stations spur illegal downloads, too; they haven't shown that their promotional power is unique (in other words, online radio may be just as effective at promoting sales); and if stations use music to generate revenue, it's only fair that all the copyright holders get compensated, not just some of them.
The labels' case is undermined by the industry's history of paying to get airplay. And requiring local broadcasters to pay royalties could lead to a new round of scandals involving label reps who kick back royalties in exchange for more frequent spins. A bigger risk for the labels is that stations would play less music, worsening the current sales slide. The labels have a track record of overreaching on performance royalties, after all. Still, as the saying goes, what's sauce for the goose is sauce for the gander. If webcasters have to pay, why not broadcasters?
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Copyright is a tax on the audience. As with taxes generally, it is a necessary evil, to be supported only so long as it can be justified as serving the public good. So the question that should be asked here, and in all copyright contexts, is whether a new exclusive right is necessary. Are we suffering from too little creativity, such that we need to increase the incentives to creators?
Plainly, the problem is not that we have too little music being created. As a result, it makes no sense to have the government grant more exclusive rights to copyright owners at the expense of the public (because that's who ultimately pays for these royalties, one way or another).
If anything, the "digital performance right" that was created by Congress in 1995 should be repealed, not extended to terrestrial radio. After all, so far the track record for the digital performance right has been pretty dismal, impeding new digital music services without generating meaningful new revenues for artists.
Posted by: Fred von Lohmann | May 26, 2007 at 10:53 AM
I agree that the "digital performance right" should be repealed rather than extended to terrestrial radio. The government officials who originally passed that showed their ignorance of technology by believing the lobbyists of the RIAA who made it seem like it was easier and more effective to record an internet stream than an FM station.
This is purely ridiculous. For decades people have been able to make virtually perfect copies of music played on FM stations on DAT tapes and later CD-Rs. Meanwhile, all they have to do is hit RECORD on their stereo. I'd love to see these same people figure out how to record a stream as easily.
This law was simply intended to provide as much regulation for a market as possible in a situation hard to regulate. The fact is, online radio shouldn't have such regulations. Unlike with terrestrial radio, online stations do not interfere with other stations - they don't share bandwith or space on the radio dial. Therefore there can be as many online radio stations as possible and stations can have listeners from their backyard to around the world. That's what scares the RIAA. They no longer can work with the corporate radio structure that they've helped build up; a structure that benefits only a few of their artists and leaves the majority without any airplay at all. And that's where the market for online radio and satellite radio came into play. From the original law to the new royalty rates proposed, the RIAA has constantly tried to destroy the future of online radio. It's sad that more artists don't recognize the irony in this.
Posted by: Gary Wien | May 27, 2007 at 02:53 PM