New Webcast Royalty Rules Will Line SoundExchange's Pockets With Billions In 'Administrative Fees'

from the there's-greed-then-there's-greed dept

Thu, Jun 7th 2007 11:37am — Carlo Longino

There's been plenty of backlash against the new royalty rates for webcasters, set by the Copyright Royalty Board at the suggestion of SoundExchange, a group spun out from the RIAA to handle royalty collection. The royalty rates themselves were ridiculously high, and would make it untenable for many small webcasters to continue, while taking a huge bite out of bigger players' revenues. Now, four of those bigger companies -- Yahoo, RealNetworks, Pandora and Live365 -- have sent a letter to lawmakers pointing out that not only do they have to pay the inflated royalties, they have to pay SoundExchange more than $1 billion a year in "administrative fees" for collecting them as well. The new royalty deal levies a charge of at least $500 per "channel" on webcasters, which SoundExchange says is to cover administrative costs. For somebody like Real, that adds up quickly, since it says it served 400,000 unique channels to its subscribers last year. Furthermore, since they're not royalties, there's a good chance they'll just line SoundExchange's pockets rather than be distributed to artists. This isn't particularly surprising, given SoundExchange's track record (nor its affiliation to the RIAA), but further illustrates how one-sided this royalty deal is. It was crafted only to benefit SoundExchange, and not the artists it purports to represent -- and it certainly doesn't do much for webcasters, other than decimate their industry. Hopefully the webcasters' letter will give a boost to the bill that's been introduced to overturn the CRB decision and set much more reasonable royalty levels.

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21 Comments

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discojohnson, 7 Jun 2007 @ 11:51am

it won't happen
it won't happen because soundexchange is a shit-eater and sleeps with the riaa, who in turn gives the reach-around to congress. btw, i have a lot of hate for the folks there that are making a killing for screwing off all day.
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War-N, 7 Jun 2007 @ 12:36pm

My understanding is that the $500 collected also go into the royalty pot and that SoundExchange is a non-profit organization.

Now, please don't misunderstand my take on all this. As an indie artist the new royalty rates sicken me. The new rates threaten to do away with the great webcasters that grant us indies the exposure we need. The community support and word of mouth is worth far more to me than a bump in royalities.

If you want some insight into how SoundExchange works, take a look at an email thread between myself and John Simson, head of SoundExchange (links to my blog).

I also have an email into John asked specifically about the $500 "base line" fees and where that money goes.
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glitch, 7 Jun 2007 @ 12:42pm

when will I be outlawed ???
i dont own a radio any longer, nor do i have a cd player
other than in my comp

i am not boycotting or proposing a boycott, that is a useless waste

i only buy used cd's

the comp comes with a dvd player [software] so again, i only buy used dvd's

i only have basic cable TV, no movie channels

actually, i haven't been to a theater to see a movie since Ghost...1990....17 years !!!

i had been going to about 5 or more concerts a year, but CLearChannel and LiveNation shut down the venue i went to..now i wont go to any more
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Reality Check, 7 Jun 2007 @ 1:09pm

Re:
Um...

The royalty is for stations that play licensed music.

NOT for stations that do not play licensed music...such as those that play *only* indie music.

It'd be "Real Nice"™ if you understood what the hell you were talking about before posting.

The only affect this will have on the indie artists is that *they* will get *more* airtime.
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Anonymous Coward, 7 Jun 2007 @ 1:28pm

Re:
"The new rates threaten to do away with the great webcasters that grant us indies the exposure we need."

The RIAA is not really concerned with collecting royalties. They are concerned about control of the music. The RIAA has the traditional channels like radio stations and even satellite radio under control. There isn't much chance of an artist outside the RIAA syndicate becoming popular or cutting into the cash cows they have assembled.

Webcasters are another story. Their great sin is giving indies exposure. If rates are low it is fairly easy to set yourself up as a webcaster, so the hope of ever controlling them is pretty low. The only solution is to make it prohibitively expensive to set up a new operation. This keeps the number of webcasters down to a number the RIAA can control. If the RIAA gets its way it will soon be as hard to hear an indie track on a webcast as it is to hear one on a commercial radio station.
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The Truth, 7 Jun 2007 @ 1:36pm

Guess Again
Actually, that's not true. The RIAA claims ownership of all recordings, and that SoundExchange has the right to collect all royalties for ALL artists, regardless of whether they are signed to an RIAA label or not. Maybe you should read up on this subject before you start casting stones at others:

http://slashdot.org/articles/07/04/29/0335224.shtml
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Ajax 4Hire, 7 Jun 2007 @ 1:45pm

This sounds like a violation of the 14th Amendment
to the US Constitution; "equal protection under the law" clause (Section 1).

You cannot deprive of life, liberty or property un-equally.
The clause does seem to only applies to State Governments. Still this sounds and smells like UN-equal treatment of the law.

It burns me raw to see loosers trying to win back success thru legislation; if I cannot compete, then I will get the legal/legislation system to grant me an advantage.

Protectionism is the last gasp of a loosing side.
Now cornered, the feral animal will fight with the most fervor.
The RIAA will go down swinging so watch out for the wild punches.
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DavidBZ, 7 Jun 2007 @ 2:41pm

Re: This sounds like a violation of the 14th Amend
What about when tighters try?
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mike allen, 7 Jun 2007 @ 3:03pm

Re: Re:
reality get real you are wrong i quote from webcastersunite.net royalty's are due weather you just play indi music or not also due if you play no music by sound exchange artists. what is more news and speech stations have to pay the 500 doller registration and a reduced rate foe royalty's yes a station that plays no music has to pay for music it dont play.
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Chris, 7 Jun 2007 @ 3:13pm

Re: Re:
It is my understanding that SoundExchange has gotten it set up so that ALL web stations must pay them for all music they play, RIAA label or not. Then the labels must request specifically from SoundExchange their royalties, even if the artists and their small label do not want royalties collected. Maybe you should understand more about this before you start posting.
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Fred, 7 Jun 2007 @ 7:45pm

Re: Simson's email to you
Simson lied to you. I posted why at your blog.
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Avatar28, 7 Jun 2007 @ 10:46pm

even crazier
Let's say that I am an indie musician or part of an indie band. We decide to set up a streaming radio station that plays ONLY our music and nobody else's. Technically we STILL have to pay the $500/stream administrative fee and royalties to SoundExchange. We would then have file a claim with them to get our royalties back, less their cut, of course. We could, I suppose, license them to ourselves and notify them of it but that poses another question. CAN you enter into a licensing contract with yourself?
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Anonymous Coward, 8 Jun 2007 @ 7:12am

It'd be interesting if a band actually did stream only their own music and then got sued. Better yet, have a label do it, so it'd be bigger and probably more noticeable. I'd like to see the headlines for that.

"Record label sued for playing music it *owns* the rights to."

It'd definitely bring attention to the idiocy of the law.
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luvyablue1, 9 Jun 2007 @ 4:23am

SoundExchange
SoundExchange is a nonprofit organazation (unlike the RIAA), which means that any money that comes to the organization from Webcasters goes directly to artists and labels, not to the Porsche down payments of SoundExchange employees.
To assert that the new rates are a boon to SoundExchange is just patently inaccurate--the beneficiaries are the very artists whose music drives internet radio to begin with.
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Mike Strong, 9 Jun 2007 @ 11:36pm

Beneficiaries
"...is a non-profit ... which means that any money ... goes directly to artists and labels ..."

Yeah, Right. There must be a Kool-Aide prize for this one.

The RIAA wants to control the artists this way so that only a small number of them get played - which is what the recording industry de-volved into. The indies want to break out of that and RIAA doesn't like it.

Therefore the birth of SoundExchange - the RIAA's evil spawn. They are like a damn horror movie. They've never really been in there for the artists, just the industry, which means a very different agenda.

Did you read the docs on their site? Man, it reads like evil propaganda complete with ultra-cynical talking points about how they are doing this for the good of those deserving, starving artists. They don't really support the claims but the lies have a really sick feel, like maybe I should just go and hurl.
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DJ Trik, 3 Jul 2007 @ 2:00pm

Death of College/NPO/Independent Radio
I am a producer/on-air DJ for 90.7 FM KFSR in Fresno, CA... like most 90.7 stations around here, it is a "College" radio station that supports and brings exposure to not only local artists (irrespective of genre) but brings a variety, in terms of airplay, that you simply *will never* get out of a commercial radio station because our "bottom line" is the community and listenership, not a product sponsor. I specifically have been producing a program for the past 6 years that plays Japanese Hip-Hop--- one of the few FM radio broadcasts in the *world* that does so (this includes Japan)... and have had the privilege of supporting this progressive scene as well as introduce people Stateside who normally would never have had the chance to listen to this type of music. We pull tens of thousands of listeners each week from Japan alone who are tuning in to one of the only places that they, ironically, can listen to "their" music... This is a great example of "everybody wins": artists/labels getting exposure to base as well as new audience, program listeners getting exposed to music outside the normal channels typically available to them... this is also typical of college/independent radio to offer this kind of diverse programming.

If Congress doesn't act, then on July 15th all of this will dry up... probably indefinitely until someone reigns in the greed machine.

"beneficiaries are the very artists whose music drives internet radio to begin with" ... my ass.

In order to get their supposed royalty fees from SoundExchange (who will collect with or without said artist's permission), the often-times non-English speaking Japanese artist must jump through considerable bureaucratic hoops for the IRS in order to even qualify to receive their royalty, and because they are a foreign national, are subject to a 30% tax rate on income received... So when it's all said and done, some of the "starving artists" will at least be able to buy themselves a hamburger from their tax-raped miniscule royalty percentages, if they filled out all the proper forms of course, at the expense of losing the very vehicle that gave them exposure to begin with. Yeah, sounds like progress to me.

..hope to still be steaming in 2 weeks time.
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J, 13 Jul 2007 @ 7:33am

Re: Re:
This is incorrect. Sound Exchange collects for all music played. The artist that are not members of sound exchange must then register to them to get their money. The webcaster must get a direct license (legal royalty waiver) from every artist they play and provide this information to Sound Exchange or be found in violation of the ruling. No waiver then you have to pay up to sound exchange. Regardless of whether or not the artist is a Sound Exchange member.
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Brett Hayes, 13 Jul 2007 @ 5:35pm

SoundExchange is about as non-profit as the Mafia!! I buy more music and attend concerts because of my online service I pay for.. Without it, I won't buy or even know about musicans from around the country.. Sounds like SoundExchange is being backed by the corporate Record Companies who screw over artists on a regular basis.. There isn't one artist who lives off of CD sales unless you are the top .05% of Musicians.. LEAVE INTERNET MUSIC ALONE
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newmanae, 19 Jul 2007 @ 6:51pm

luvyablue1 said
"SoundExchange is a nonprofit organazation (unlike the RIAA), which means that any money that comes to the organization from Webcasters goes directly to artists and labels, not to the Porsche down payments of SoundExchange employees."
Finally a charitable organization where all the employees work for free! Even the Red Cross and the United Way have to pay their employees! I mean no seven figure salaries, no wives and brothers-in-laws padding the payrolls. These people at SoundExchange are truly dedicated and selfless individuals and are to be greatly admired and exalted!
I'm just breathless(from rotflmfao)
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johnvacek (profile), 31 Jul 2009 @ 10:50am

Sound Exchange
Converstion with Sound Exchange as recalled (recording of phone conversation was requested but permission not granted by Sound Exchange). I have an excellent and accurate memory, and do not forget things.

The conversation was very close to the following:

JV - I understand that Sound Exchange is mandating a payment schedule for internet radio broadcasters.

SE - That's right.

JV - I will be programming and streaming a station that will carry music that is composed and performed by myself. Will I be subject to royalty payments.

SE - You should be.

JV - Then, lets say that I make the mandated payment to you. When will I expect a full refund or payment back from Sound Exchange?

SE - There would be probably be no payment due to you.

JV - Why not?

SE - Since you're a small station and have limited listeners, you probably wouldn't qualify.

JV - So, I would pay you for the privilige of letting people listen to my own music. Why should I bother?

SE - By registering and paying, you exhibit your support for the music royalty system.

JV - That brings me to my second question. I also want to have a talk only station. You don't have any regulations for that, do you?

SE - Listen, you can use every trick you can think of; but if you even hum a bit of music, you're liable for all payments, and you will be shut down.

JV - Then it's the "music police" who will be listening, right.

SE - That's not funny. You people think you can get away with anything. We will use all methods available to enforce our regulations.

JV - Can I have a list of all the people involved in Sound Exchange.

SE - It's on the website. (hang up)

I plan to have streaming stations that will do what is talked about in the above conversation, and would prefer that I pay any performers, or artists directly. I'm appalled that the attitude of the 'broadcast attorney' who talked with me assumed that everyone was trying to scam the world; and I'm also appalled that they are attempting to force artists to pay them when they guarantee that the money will never be coming back to them.

Thanks
John Vacek
vacek_john@yahoo.com
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johnvacek (profile), 31 Jul 2009 @ 11:03am

Re: SoundExchange
You've got to be kidding me! Many non-profits pay employees very substantial salaries. I would advise luvyablue1 to wait for a while, and then ask for an audit of the finances of Sound Exchange. Jim and Tammy Bakker were non profit, and look how much they took the public for.

Wake up and smell the roses (or something else that smells)
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