The blogs are awash in outrage over the Copyright Royalty Board's (CRB) decision about the royalty rates that Internet radio broadcasters must pay for the use of songs protected by copyright.
The reactions in general are that, under pressure from Evil Owners of Property in the form of the RIAA, the CRB has set an exorbitant rate that will drive most web radio broadcasters out of business and further subject media to the homogenization and control of Corporate America.
But this paranoid view doesn’t stand up to scrutiny.
Of course, there is no “correct” royalty rate. Rather, royalty rates are set through a process of negotiations, economic analysis, and trial-and-error. The process that resulted in the recent web radio royalty decision involved a three judge panel, expanded discovery, and 18 months of work that included dozens of witnesses, weeks of live hearings, and tens of thousands of pages of evidence. It’s entirely possible that further action may adjust the proposed rates.
But lost in the controversy is the point that, while a particular webcaster may select and arrange content in a way that provides additional value to the listener (and thus is itself deserving of compensation) web radio is simply a new and different way of distributing desirable content.
What webcasters seem to want is a rate structure that that give preferential treatment to new distribution methods at the expense of adequately compensating content. But this puts the cart before the horse. Content is still the “draw” of web radio.
Because of the new royalty rates, there may be some webcasters that are no longer viable, but there is such a thing as a business model that doesn't work, and business models that assume use of others’ property without adequate compensation may be particularly vulnerable.
If the image of a cottage industry webcaster with a small audience gives you a warm, fuzzy feeling, there is a special carve out in the proposed rates for such low-volume, non-commercial broadcasters.
But somebody is making a lot of money in web radio. According to JP Morgan, webcasting revenues have grown from $50 million to $500 million – a 1000% increase – in just the last three years. So is it so unreasonable to ask webcasters to begin paying their fair share of royalties to artists and music labels?