As The RIAA Lobbies For More Royalties For Itself, It's Fighting (And Losing) Over Having To Pay Royalties To Songwriters

from the what's-good-for-the-goose... dept

Wed, Jun 23rd 2010 9:26am — Mike Masnick

The RIAA is in the middle of a big fight for new royalties (i.e., a performance rights tax) on songs played on the radio, going on and on about how anyone against those fees are "stealing" from them. Yet, when it comes to the royalties that RIAA members have to pay to others, suddenly those are worth fighting against. As you hopefully know, there are a few different copyrights related to music. There's the copyright on the recording itself, which is usually held by the record label. But there is also the copyright on the song or composition, which can be held by a music publisher or the songwriter.

For whatever reason, while there is a compulsory license setup for anyone doing a cover song, such that if you cover a song, you don't have to first get permission to do so, but you just have to pay an agreed upon rate, which is usually set by the Copyright Royalty Board (a group of judges who more or less pick a number out of a hat). There are all sorts of problems with having a group of judges trying to randomly set prices on royalties, but it is how the system is set up. What's amusing is that after a recent Copyright Royalty Board ruling on cover songs set the rate higher than the RIAA liked, the RIAA went to court to get those rates changed. A district court turned the RIAA down, and now an appeals court has done the same.

Specifically, the RIAA got upset that the CRB said it had to pay late fees, and also that it says composition copyright holders should get a whopping 24 cents for every ringtone sold (way above the rate for songs on CDs). Instead, the RIAA argued that songwriters/publishers should receive a percentage of revenue. This one really makes me laugh. For years, various digital music startups have tried to license music from the RIAA -- and all of them go to the RIAA with a "percentage of revenue" offer. In every single case the RIAA turns them down, demanding huge upfront fees and guarantees on revenue. Funny that when it's their own money on the line, suddenly a percentage of revenue is the preferred option.

In both cases, the court rules against the RIAA, pointing out that, even though the RIAA doesn't like the ruling, the CRB is well within its legal mandate to make both decisions. To be honest, I actually think the RIAA is correct that these rates and the reasoning behind them are ridiculous and not at all sensible. The ringtone rate, in particular, is particularly egregious, and make it difficult for creative business models that embrace things like free ringtones to exist.

However, I find it to be quite hilarious to see the RIAA arguing so vehemently against these rate rulings, when it's demanding similar rulings on its own behalf. Apparently, the RIAA really only supports such rates when it gets to collect them. When it has to pay out, suddenly those royalties are a problem. Funny how that works...

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Filed Under: copyright, copyright royalty board, royalties
Companies: riaa, sga

17 Comments

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Hephaestus (profile), 23 Jun 2010 @ 9:43am

" The ringtone rate, in particular, is particularly egregious, and make it difficult for creative business models that embrace things like free ringtones to exist."

Please explain how free ringtones can be charged for.
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Anonymous Coward, 23 Jun 2010 @ 10:00am

What is the point of buying ringtones separatly when many phones play mp3 files and those can be set as the ring tone?
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Mike Masnick (profile), 23 Jun 2010 @ 10:10am

Re:
Please explain how free ringtones can be charged for.

As a complementary good given out with other goods? Why not? "Attend our concert, get a free ringtone of our hit song."
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Jeremy7600 (profile), 23 Jun 2010 @ 10:15am

Re:
Ask the

A) Millions of people that don't know better

or

B) Companies like Verizon that make it very difficult for people to put their own MP3's onto their phones for ringtones. (but not always impossible)
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Anonymous Coward, 23 Jun 2010 @ 10:16am

Bright lining
Maybe the group of judges have a sense of humor and see since the RIAA can charge it, the RIAA should be able to pay it. Doubtful, but it would be nice if it were so.
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Anonymous Coward, 23 Jun 2010 @ 10:22am

"Funny that when it's their own money on the line, suddenly a percentage of revenue is the preferred option" - not exactly the same thing, is it mike? percentage of food sales (or ad sales) isnt the same as percentage of direct music revenues, is it? It would be a straight percentage of the amount collected for music rights, not for anything else.

we all know you are trying hard to find a slam, but that is incredibly weak.
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Anonymous Coward, 23 Jun 2010 @ 10:25am

Re: Re:
That's not what he means.
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AdamBv1 (profile), 23 Jun 2010 @ 10:39am

Re:
Instead, the RIAA argued that songwriters/publishers should receive a percentage of revenue. This one really makes me laugh. For years, various digital music startups have tried to license music from the RIAA -- and all of them go to the RIAA with a "percentage of revenue" offer. In every single case the RIAA turns them down, demanding huge upfront fees and guarantees on revenue. Funny that when it's their own money on the line, suddenly a percentage of revenue is the preferred option.

Here is the quote in context, read through that whole paragraph again and think on it.

Seems to me its almost exactly the same thing. Every time a startup tried to negotiate rates with the RIAA to a percentage model they say no in order to crush a startup with burdensome fees before they can even get off the ground. Now that the RIAA sees its profits dropping its all in favor of a percentage model that will allow it to pay less when it earns less but thinks this is not OK for anyone else.

So i would say Mike is right on point on this one.
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Matthew, 23 Jun 2010 @ 10:49am

This behaviour is not unique to the RIAA. Many companies do this. Companies want terms and conditions both with their vendors and their customers. Namely, they don't want to be bound by the same terms and conditions that they use to bind others. For example, in industry, a company with a lot of clout will pay its vendors 90 days after receipt of materials but will insist that its customers pay 30 days after receipt of goods.
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Anonymous Coward, 23 Jun 2010 @ 10:50am

Percentage of the revenue?

Every artist knows not to take percentage of revenues because the industry never makes to the black on paper ever!

Everybody knows they are a bunch of fraudsters scamming not only artists, but the government and the public.
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Hephaestus (profile), 23 Jun 2010 @ 11:00am

Re: Re: Re:
Mike I understand what you are saying

" The ringtone rate, in particular, is particularly egregious, and make it difficult for creative business models that embrace things like free ringtones to exist."

But this is a really good thing for us. They charge more for "record label content", sales go down, to maintain the same lifestyles prices are again increased. They price themselves out of the market. In the end they fail because they have to many conflicting interests dictating what they want monetarily.

Again its a good thing.

AC - "That's not what he means."

He is right. How can they charge for Creative Commons or other ringtones along the same license types?
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Anonymous Coward, 23 Jun 2010 @ 12:06pm

Re: Re:
sorry, i cannot agree. the largest companies who offered percentage deals were sites like youtube, who rather than paying fees to use the music, wants to pay a percentage of their advertising income. it would mean that the rates paid to the riaa would have nothing to do with the consumption of music, and everything to do with click out rates on non-related advertising.

the riaa is seeking to take an incoming pie, and split it up by percentage. the money in is licensing rights, and is not dependent on any other sales or marketing campaigns to set.
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shmengie (profile), 23 Jun 2010 @ 12:16pm

i think i'm beginning to understand the riaa's strategy...
i think their plan is to bombard us, daily, with stupid shit until we become apathetic to these stories. then, they can do as they please, unmolested.

i know i am filled with a weird combination of anger and apathy. it's like: "those bastards!" and, at the same time: "oh, more riaa stuff. yawn..."
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known coward, 23 Jun 2010 @ 12:58pm

I do not know why you are suprised.
Al capone did not like folks stealing from him either
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AdamBv1 (profile), 23 Jun 2010 @ 1:01pm

Re: Re: Re:
Mike has reported on this in the past (sorry, cant find an exact link to a story right now) where new music startups have either gone under or never got off the ground due to the RIAA demanding large licensing rates up front that they cant pay but had they of been able to do a percentage of revenue model then they would of at least had a chance to get going and as they grow so does the RIAA. Instead they deny the market the chance and the public is left with fewer options and this benefits nobody.

I would think even minuscule revenue for the RIAA is better than none at all but if they would rather continue running themselves into the ground then so be it.

Also, these contracts do not last until the end of the earth, they can be negotiated to only last a few years.
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Anonymous Coward, 23 Jun 2010 @ 6:39pm

Re: Re: Re:
Seriously, why can't you read? I'll try to make it easier for you.

"For years, various digital music startups have tried to license music from the RIAA -- and all of them go to the RIAA with a "percentage of revenue" offer."

Still too hard?

"For years, various digital music startups have tried to license music from the RIAA"

Oh, I forgot, you're TAM. Your attention span is even shorter. Try this one:

"digital music startups"
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Mitch D (profile), 24 Jun 2010 @ 7:19am

Royalties are fine
sorry, when i hear 24 cents for a ringtone to the music publisher. i think to myself.... whats the problem with the RIAA asking for a royalty for artists who perform on that ringtone which is higher than the songwriters royalty, or at least equilvilent.

sorry, but if an artist performs a song, that ought be equal or higher than the songwriter royalty. which in many cases are different people.

also, artists ought to get performance royalties from radio airplay, for a long time, artists in any other country get radio royalties from airplay on commercial radio, but in the US it is mainly limited to songwriters only, unless it is from digital radio.

sorry, this needs to change. artists get screwed, not only from income in the usa, but around the world, US artists dont get royalties from other countries at all, but artists from say Canada , UK or asia do.
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