Internet Radio Royalty Update

Internet RadioYesterday we reported that SoundExchange would not be “enforcing” the new royalty rate set to go in effect tomorrow. This was based on a statement made by Jon Simson, executive director of SoundExchange. Simson has since clarified, or qualified depending on your viewpoint, his statement.

For the people who want to comply with the law and are in bona fide negotiations with us, we don’t want those people to be intimidated. And we don’t want them to stop streaming. That’s just so long as they’re continuing to pay under the license they had.

What that means is, those webcasters involved in the negotiations may continue to pay royalties based on their current agreement, with no threat of legal action. Only until such a time as a new agreement is reached. Once that happens, the new rate will be retroactive to July 15, 2007, plus interest.

Also, reports that the $500 per-channel minimum has been capped are true, with a “but.” The per-channel minimum has been capped at $50,000 (meaning they’ll only charge the fee for the first 100 channels), with two stipulations.

First, that they become much more compliant in their reporting obligation…

…And we asked for their help with stream ripping, to work on a technologically-feasible solution.

In other words, they want the stations to report every song played. And they want them to stop listeners from recording the digital stream.

The first sounds reasonable enough, but some commentators have noted that the reporting regulations are quite stringent and difficult to comply with, forcing some internet stations to give up already and just shut down.

Here begins the conspiracy theories. The reasoning is that SoundExchange (heavily influenced by the RIAA) wishes to shut down small independent webcasters altogether.

The larger webcasters will be given no reprieve in the area of per-song-per-listener royalties. Speculation is high that the large webcasters would then go into direct negotiations with the major labels concerning lower rates, and stop playing music from independent labels/artists.

Thus SoundExchange, working for the RIAA), would be able to exert the kind of influence over internet radio that some feel the RIAA) has over traditional terrestrial radio.

Or so the conspiracy theories go.

I tend to think that in this day of digital technology, reporting should not be that difficult.

The second stipulation though, asking the stations to figure out a way to prevent listeners from recording the stream seems a little much. To be fair, they asked for the stations to “help” with this, but in reality stopping this will be all but impossible. Someone will always crack the DRM they use and the people that are inclined to record the stream, thus stealing the songs, will do so. But SoundExchange’s position on this issue seems to reflect the thinking of the major labels, which regards all consumers as thieves.

It does look hopeful for small internet broadcasters that a settlement will be reached allowing them to continue under some sort of revenue percentage based model for royalties. This would be the class of webcaster we are mostly concerned with as most bluegrass webcasters would fall into this category.