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RIAA Royalty agreement threatens Internet Radio

RIAA Royalty agreement threatens Internet Radio

The RIAA, publishers and song writers are all after money from music streaming services

Internet radio has had a tough time recently, with artists and song writers continuing to demand more and per song licensing fees, a practise that has already seen popular music service Pandora close its doors to UK users.

Today things have gotten even more serious for the world of music streaming services, with a new agreement between the RIAA, representing music publisher and songwriter associations, and the Digital Media Association (DiMA), which represents industry leaders such as Amazon, Apple and Microsoft which could push internet radio stations and interactive streaming platforms over the edge.

This agreement provides a flexible structure to support innovative business models in the digital music marketplace that will benefit music fans, creators and online services," said Mitch Bainwol, Chairman and CEO, RIAA. "The agreement demonstrates that our industries can work collaboratively to solve complex issues.”

The agreement is indeed pretty complex, but comes down to payment of a 10.5 percent royalty on all revenue based on interactive and restricted streaming - that means that while services like iTunes and AmazonMP3 won't be affected because you're purchasing a physical license to your music, services like Napster's unlimited download Napster To Go service, and interactive music streaming sites like Pandora or LIVE365 will effectively lose more than ten percent of thier advertising based revenue streams.

The worst part of the agreement though is the decision to impose a royalty of 8.5 percent on revenues retroactively, all the way back to December 31, 2001, overwriting the previous agreement made by the RIAA and music publishers which allowed online streaming services to operate without a set royalty rate.

Add this retroactive royalty to the continued clamouring by artists and record labels for further "per play" performance royalty fees, and we have to ask how long interactive or unlimited streaming services will be able to stay afloat before being swamped by artists, song writers and publishers all demanding thier slice of the internet monies they keep hearing so much about.

While we here at bit-tech agree that artists, just like game studios, should be paid for thier work, the vast success of digitally distributed music via stores like iTunes and AmazonMP3 has already secured music's place online, and by further squeezing online radio stations and streaming services, the RIAA and music industry at large are hurting a channel where people can easily discover new music. I for one have lost count of the number of bands I've discovered using such services, which I'd have never found otherwise.

Are song writers and publishers right in chasing such services for more royalties? Will that retroactive royalty drive some business out of business? Or should the the music industry just leave web-radio alone? Let us know in the forums!

22 Comments

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mmorgue 24th September 2008, 13:07 Quote
Quote:
The worst part of the agreement though is the decision to impose a royalty of 8.5 percent on revenues retroactively, all the way back to December 31, 2001, overwriting the previous agreement made by the RIAA and music publishers which allowed online streaming services to operate without a set royalty rate.

Wow. That's just...wow
Cthippo 24th September 2008, 13:12 Quote
The current royalty is acceptable, but the retroactive paryt is pure BS. The RIAA is still trying to figure out how to force people to buy CDs or better yet, buy a new copy of the song for every device. Until they pull their head out of their collective <expletive deleted> and realize that this is digital data and they cannot control it, this kind of BS will continue.

The record industry needs to die.

People will always create music because creation is in our nature. They will create it and they will want to share it and other people are willing to pay for it. The problem is the middle-men like the RIAA who have been rendered obsolete by the march of technology, but who refuse to go gently into that dark night, and are continuing to scream about their right to make a living off other people's creativity.
Krikkit 24th September 2008, 13:34 Quote
Absolutely abhorrent.
Arkanrais 24th September 2008, 13:48 Quote
someone needs to IRL frag the b*st*rds.
suddenly I feel like torrenting some music, just to spite these a$$holes.
Delphium 24th September 2008, 13:58 Quote
YAY great way to kill off the industry and less artists, bah.

If I was running a radio streaming service, one hat wished to continue under the new royalty scheme.. id prob close the existing station, and form a new one, so that the old station does not have to pay a back dated royalty fee and the new station for scheme but with no back dated fees.

Do live FM radio stations have to pay for songs on a track by track basis ?! I was sure to beleive that FM/MW/LW radio stations used a licence that covers all day playing, not a track by track basis.
Track by track licenceing would be a major headache.

So why the need for online stations to have a track by tracks royalty scheme?!!
ChaosDefinesOrder 24th September 2008, 14:07 Quote
Live FM radio stations have a significantly lower royalty rate (less than half that of internet based, but I can't remember my source for this so can't double-check!) and in the case of mainstream stations like BBC Radio 1, for example, actually get paid by the record label to play high profile tracks!
Blademrk 24th September 2008, 14:20 Quote
^^ I'd imagine that a FM/MW/LW station would only be able to play so many songs in a given time frame whereas a streaming internet station would be able to play a hell of a lot more (I've not used internet radio, but I assume that each person streaming a track would have their own individual playlist just like the video streaming sites)
Phil Rhodes 24th September 2008, 14:53 Quote
> actually get paid by the record label to play high profile tracks!

Which is how they become high profile tracks.

You will listen to the music we want you to listen to.
You will play it on the devices we want you to play it on.
Metallica is great.
Obey.
Conform.
Neural subservience implants optional.
SlickGnome 24th September 2008, 15:08 Quote
Let us enjoy the return of the mafia.... Oh wait, its just the RIAA wanting their slice of the pie. Crap NVM. /sarcasm=off
mmorgue 24th September 2008, 16:11 Quote
Well, I suppose it only goes to drive the rich, fullness of the alt.b*.mp3 newgroups :)
DXR_13KE 24th September 2008, 16:38 Quote
retroactive? they can do this?
E.E.L. Ambiense 24th September 2008, 17:22 Quote
Quote:
Originally Posted by Krikkit
Absolutely abhorrent.
cyrilthefish 24th September 2008, 17:23 Quote
They're already trying to enforce utterly ludicrous royalty fees on net radio
Quote:
With the royalty rate set to rise to $0.0019 per song per listener in 2010, large Webcasters would see an increase in royalty expenses of about 40 percent to 70 percent of revenues, according to a congressional estimate. For small Webcasters, the royalty increase could be up to 1,200 percent of revenues.
And on top of this they want to add more royalty charges?

I'm not quite sure why, but it's very much clear they want to completely wipe out net radio for some reason.
It's not simply the usual inept ways to get more money, this is just just a blatant move to completely kill the industry
steveo_mcg 24th September 2008, 17:27 Quote
Its cheaper to put competition out of business than it is to buy them up. Once the original players are out of the scene I wouldn't be surprised if the riaa launch there own stations.
donnie 24th September 2008, 17:41 Quote
Heaven forbid that the MPAA & RIAA will have to give up driving their BMW's or living in their mansions, no we definately wouldn't want that to happen.
reflux 24th September 2008, 18:20 Quote
Oh, I hate the RIAA.
HorseFeathers 24th September 2008, 18:21 Quote
All we hear is RIAADIO ga ga
RIAADIO goo goo
RIAADIO ga ga
All we hear is RIAADIO ga ga
RIAADIO blah blah
RIAADIO what's new?
RIAADIO, someone still loves you!
Hugo 24th September 2008, 18:25 Quote
Quote:
Originally Posted by HorseFeathers
<snip>
:D - made of WIN!
Cupboard 24th September 2008, 18:28 Quote
^^ :D

This is ridiculous though. I really liked Pandora and stopping services like that will both encourage piracy and (imo) reduce CD sales as people won't have heard some new bands that they would otherwise have heard through services like Pandora.

Silly people. I would shoot them along with most animal rights activists (but that is another story)
pendragon 24th September 2008, 19:04 Quote
RIAA Radar ... use this to vote with your wallet.. don't give the RIAA any of your money.. I sure don't plan to.

also, I disagree with the royalty rate that internet radio is required to pay. If I recall correctly, terrestrial radio has a far lower rate.
cyrilthefish 24th September 2008, 19:38 Quote
Quote:
Originally Posted by pendragon
also, I disagree with the royalty rate that internet radio is required to pay. If I recall correctly, terrestrial radio has a far lower rate.
http://blog.wired.com/music/2007/12/webcasters-ask.html
Quote:
The Copyright Act currently has three distinct sound recording performance royalty schemes for music radio services.

• Broadcast radio is exempt from paying royalties, so it pays nothing to recording artists and copyright owners.

• Most satellite and cable radio services (e.g., XM, Sirius, Music Choice) are “pre-existing” as defined by statute. Pursuant to a statutory four-factor balancing test (§17 USC 801(b)), these services have historically paid royalties between 3% and 7.5% of revenues.

• Internet radio and “new” subscription service royalties are set pursuant to the willing-buyer willing-seller standard (§17 USC 114(f)(2)(b)). Internet radio royalties have historically exceeded 30% of revenue, and recently the Copyright Royalty Board relied on this standard to set royalties that effectively average more than 50% of revenue.
In contrast, songwriter performance royalties for all radio services generally total between 3 and 5% of revenue.
Theres orders-of-magnitude difference in rates between them :(
rustyhodge 25th September 2008, 10:21 Quote
There are some factual errors in this article. The agreement that this article references applies to Section 115 of the copyright act. Internet radio services, like Pandora or LIVE365 (or DI.FM or SomaFM) are considered "non-interactive services" and fall under Section 114. Section 114

Internet radio has already been paying Ascap, BMI and SESAC for use of the underlying composition of the songs; and pay at a rate of around 3% of revenues. (Over the air AM/FM broadcasters also pay a comparable royalty to the song composers). While Over-the-air radio pays nothing for the use of the "sound recording" (typically owned by the record labels), internet radio pays a royalty on this. In the past, the royalty for small webcasters was between 10-12% (10% for the first 259k revenues, 12% over that).

However, recently the CRB ruled that going forward, the rate would be calculated per-song, per-listener. This was equivalent to 70% of Pandora's revenues, and in SomaFM's case the royalty rates turned out to be 3-4 TIMES our gross revenue. This CRB ruling has not been changed, and stations like Live365, Pandora and others are still facing financial downfall unless these rates are not revised.

Another error in the article is where it states that " the RIAA, representing music publisher and songwriter associations". This is not the case. The RIAA was OPPOSING the music publisher and songwriter associations. Record labels (and RIAA members) have been trying to reduce the royalties paid to songwriters, a royalty which is set by copyright law. The section 115 royalties concern the fees paid when a digital music file is downloaded to the consumer

Broadcast Law attorney David Oxenford has a detailed write up about this:

http://www.broadcastlawblog.com/archives/internet-radio-settlement-reached-on-certain-aspects-of-section-115-royalty-contrary-to-press-reports-this-has-nothing-to-do-with-internet-radio-royalty-dispute.html

Rusty Hodge
SomaFM
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