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Monday, Oct 13, 2008
Who benefits from the new rules? Point-counterpoint between the Recording Industry Association of America and an Internet radio pioneer.
Apr 3, 2002 | On March 26, Salon published "Web Radio's Last Stand," an interview with Rusty Hodge, the program director of Web radio station SomaFM. Hodge explained how legal fallout from the Digital Millennium Copyright Act (DMCA) was threatening to put independent online radio stations out of business. Specifically, the Copyright Arbitration Royalty Panel (CARP), a body appointed by the U.S. Copyright Office, ruled on Feb. 20 that under the DMCA, radio stations must pay a fraction of a cent per song, per listener, for every song they stream.
The article inspired immediate reader response, including a lengthy letter from Steve Marks, senior vice president of legal affairs at the Recording Industry Association of America. Among his other points, Marks noted that contrary to Hodge's assertion, 50 percent of royalties generated by webcasting would go directly to recording artists.
The dialogue continues. Brian Zisk, a co-founder and former vice president of marketing and business development for the Green Witch Internet Radio, has taken issue with several points made by Marks. Marks has responded in kind. Readers interested in a detailed discussion of the ever-evolving world of Internet music are invited to dive in.
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Hi Steve,
It's been a long time since we've talked, and I hope you're doing well.
I couldn't help but notice the "clarification" you made in regards to the recent Salon article on Web radio. I'll skip over many specific points that I do not agree with to focus on one specific piece of spin that you've put forth. You report that "artists get 50 percent of the royalties by law."
It is interesting how this is phrased. It is clear that the artists will not see 50 percent of the royalty paid by webcasters and other digital broadcasters. First, money is deducted off the top for the expenses of SoundExchange, a division of the RIAA. While in all cases expenses deducted by SoundExchange will drive the royalty paid to artists below 50 percent, in certain cases the RIAA's record company members may be able to recoup up to 100 percent of the royalty before 50 percent of what's remaining (potentially nothing) is redistributed to the featured artists, AFTRA and AFM [the organizations representing artists].
In addition, while you're complaining about the multimillion-dollar CARP costs, isn't it true that the RIAA is attempting to ensure that as much as possible of the RIAA's share of these multimillion-dollar expenses will also be deducted from the pool before the money is split for the artists?
There are a number of other sketchy assertions, including that "most webcasters pay huge sums of money ... for bandwidth, marketing, hardware, software and other things necessary for their business." At this point, the majority of webcasters who have not already been forced out of business are running on a shoestring and not paying huge sums of money for anything. In addition, many webcasters broadcast using free software (such as Icecast and Shoutcast running on Linux and FreeBSD). It is clearly disingenuous to claim that most webcasters pay huge sums of money for marketing, when the majority of webcasters are small-scale micro-broadcasters and hobbyists, operating with essentially no marketing budget at all.
However, let's let a number of erroneous assertions such as these stand uncontested, so we can better focus on the fact that while the money paid to artists and labels is of great benefit to both, that in the case of the assertion that "50 percent of the royalties" will go to the artists, this is only true if everyone ignores the millions of dollars that SoundExchange and potentially the RIAA member labels are hoping/planning to siphon before splitting the remaining pool of royalties. I cannot believe that an RIAA lawyer as intelligent as you, Steve, just happened to ignore the millions of dollars SoundExchange (and potentially the RIAA's member labels) are siphoning from the royalties paid by digital transmitters.
In any case, hope all is well, and it's great that since last week, SoundExchange has finally updated its Web page after causing confusion for a long time. Thus, it no longer states that the royalty would be paid to "the sound recording copyright owner who shall be responsible for allocating to the featured artist." This would have been based on whether or not the artist had recouped, whether the label and the artist were currently involved in a dispute or other standard (or nonstandard) record industry payment practices.
It is telling that while the RIAA claims that the labels are doing all they can to actively move forward into the new digital marketplace, and while SoundExchange has an annual operating budget in the seven figures, that SoundExchange claims to not have anyone on staff who is able to quickly update its Web site, even when it knows that the information it is putting forward is flat-out wrong, causing confusion and hours of extra work for the RIAA's legal team. Are the hours of time wasted by the RIAA's legal team due to SoundExchange's not having someone available with the Web proficiency of an average 6th grader also going to be deducted off the top as CARP expenses before what's left of the royalties are distributed to the labels and the artists?
-- Brian Zisk
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