Rep. Nadler Proposes The RIAA Bailout Act Of 2012

from the riaa-bailout dept

Ah, the whole fight over licensing and royalty rates for internet radio had been quiet for a little while, but has sprung back up thanks to Rep. Jerry Nadler proposing a music royalty bill that would effectively bump up the rates that cable and satellite radio stations have to pay to make them more aligned with the insanely high rates that internet streamers are supposed to pay (rates so high, and set by a group of judges who don't appear to know what the internet is half the time, that no real business can be built off of them). This is in contrast to a different, but similar, attempt by Rep. Jason Chaffetz to basically bring the internet rates back down to the same rates as those other providers.

Of course, this is all somewhat related to the RIAA's ongoing push for a Performance Rights Act, which would force radio stations to pay extra royalties for when they play music. Under existing law, radio stations only pay the composers/songwriters for songs played on the air, due to the recognition that radio airplay is basically a massive advertisement for the musicians and it's silly to have stations pay the copyright holders for advertising their works. In fact, it's doubly crazy when you realize that the history of radio is filled with pretty indisputable evidence that the major music labels find tremendous value in radio play: payola. Payola is all about the labels increasing the airplay, knowing that it leads to all sorts of revenue elsewhere. But the RIAA is so insanely greedy these days that it's been begging for this form of a "bailout" for quite some time -- seeking to get radio stations to pay them for playing the same music that the labels are paying the stations (indirectly, of course, thanks to all the payola settlements) to play!

These proposals don't directly address that issue, but are clearly based on this idea. In fact, Nadler is incredibly upfront that he views taxing internet radio is his way of making up the money that isn't being collected from terrestrial radio:

“The lack of a performance royalty for terrestrial radio airplay is a significant inequity and grossly unfair. We can’t start a race to the bottom when it comes to royalty rates and compensation for artists," Nadler said in a statement. "The Interim FIRST Act would provide artists with fair compensation for the valuable creations they share with all of us."

In other words, because we can't fund an RIAA bailout off the backs of terrestrial radios (thanks in part to the powerful lobbying of the NAB), we'll instead increase the existing (and already crippling) tax on the useful and innovative services that are trying to help drag the RIAA (kicking and screaming) into the future.

Pandora is, quite reasonably, worried about this turn of events, noting that this new tax would be "astonishingly unfair."

Nadler seems to think that Chaffetz's plan is unfair because it would mean lower royalties from the internet streamers, but that's a gross distortion for a few reasons. First off, it assumes a perfectly static market, which is wrong. Second, it seems to assume that the identical number of services and the identical number of listens will occur. That's not true. As it stands now, the rates are so damaging that Pandora -- the top player in the space -- has made it clear it may never be profitable. Yes, never. Nadler's bill would effectively make sure that no one else in that market would be profitable either. The end result? Many of these services don't exist or never get started. That would actually mean fewer services, fewer listeners and lower royalties.

It's almost as if he has no concept of price elasticity. Lower prices can create higher total income. Also, the idea that any particular Congressional Rep. should be (effectively) determining what the "fair" price is for anything is, well, horrifying.

If these royalties are going to exist, is it really so crazy to think that perhaps (just perhaps) keeping the rates low, to encourage these useful new services to come along and grow, might be a good thing? But, instead, the RIAA and its members are so greedy for the largest payout per music listen, that they're clearly willing to kill off useful legal streaming services like Pandora. In the long run, that's not good (at all) for the record labels and the RIAA, but they've never been particularly good at seeing beyond the price per listen.

Either way, can anyone explain just why the government is bailing out the RIAA in the first place?

Filed Under: bailout, internet streaming, jerry nadler, licensing, royalties
Companies: riaa

Angry Spaniards Crowdfund Money To Try To Bring Former Banking Boss To Court For Bank Collapse

from the crowdfunding-justice dept

Francisco sent over an interesting story of how a bunch of people in Spain were able to crowdfund a bunch of money in an attempt to bring Rodrigo Rato, the former chair of one of Spain's largest banks, Bankia, to justice for driving the bank into the ground until it had to be bailed out. In just one day, they were able to blast past the €15,000 they were seeking.

I have to admit that I'm interested in this as an outlet for populist outrage, but I do wonder how effective it really is. An English version of the site claims they plan "criminal and civil actions against members of Bankia's Board of Directors," and they "demand prison and seizure of assets." While they can file civil claims, criminal charges have to come from the government. So the goal is to use the money not just for filing a civil suit, but also to hire independent investigators and auditors to work towards building enough details and evidence that it forces the government to file criminal charges as well. This seems like a project that has a ridiculously high likelihood of failure.

Separately, while I tend to agree that the banks were run by some insanely greedy people who did many questionable things, I think it's going a little mob-like "burn him!" crazy to try to pin the problems on a single person. The global economy is still a mess, and the European economy is in turmoil, with Spain being a big part of that. In other words, there are larger economic issues at play here that go beyond just one banker, even if it turns out that he was a really bad banker.

Either way, though, I am fascinated to see how crowdfunding evolves over time, and the unique ways people use it -- and this is certainly a unique plan.

Filed Under: bailout, banking, crowdfunding, europe, rodrigo rato, spain
Companies: bankia

Senate Judiciary Committee Approves RIAA Bailout Radio Tax

from the and-so-it-goes dept

Because the federal government apparently hasn't helped the RIAA enough in the past century -- despite repeatedly changing copyright laws to favor the industry again and again and again (and again) -- the Senate Judiciary Committee has approved the Performance Rights Act, which effectively serves to tax radio stations for promoting music. It's quite obvious to anyone who actually understands radio economics that this makes no sense. After all, the history of radio has always been about payola -- having the labels pay the radio stations to play certain works. That's because the record labels know quite well that airtime leads to more money in terms of promoting an artist and building a business model around music, concert and merchandise sales. To the labels, airplay has always been the equivalent of advertising. That's why they pay for it.

But now they want the radio stations to pay them to advertise the labels' music? Isn't that getting the equation backwards?

This is nothing more than a federal bailout of the RIAA, who still refuses to embrace new business models. Instead, they have to squeeze others and get the government to force them to hand over money. A real business model doesn't involve changing the law. It involves giving others a reason to buy. Apparently, that's too difficult for the RIAA.

As for the claims that a performance license will somehow help musicians, that's bogus as well. First, ask the RIAA's SoundExchange about all the money it keeps for itself and about all the musicians it "can't find." Besides, all this will do is harm up-and-coming musicians. Because radio stations will now need to pay more for playing music, they'll play less music, and if they're playing less music, they'll focus just on the big name acts. Smaller up-and-coming artists should be furious with the RIAA for giving radio stations less incentive to play their works. Remember, this is the opposite of payola. While payola got new records on the air, this will make sure fewer get on the air. But it will sure put a bunch more money in the pockets of the major record labels. So there's that.

Filed Under: bailout, performance rights act, radio, webcasters
Companies: riaa, soundexchange

Pandora Continues To Push Users To Vote For Shameful Radio Performance Tax

from the can't-compete? dept

We mentioned back in July how Pandora was urging its users to support the Performance Rights Act, which is effectively a government bailout for the RIAA by taxing already struggling radio stations for the right to help promote the RIAA's music. It's a travesty. The only reason Pandora supports it is because Pandora was pressured into its own ridiculous webcasting rates and wants to help bring down radio too. While I like Pandora as a service, I think it's shameful that it's now using the political process to burden competitors with a government created tax, that goes straight to the RIAA.

Apparently, Pandora has once again ramped up this effort to have the government tax its competitors. A whole bunch of you have been forwarding these ridiculous emails from Pandora that urge people to contact their elected officials in support of the RIAA Bailout bill. Most of those submitting those emails to us have said that you'll be doing the exact opposite, and are offended that Pandora is pushing you to support such a thing.

Yes, Pandora, it sucks that you got stuck with ridiculous webcasting rates that will make it difficult to remain profitable, but that's no excuse for trying to get the government to dump an unfair tax on your competitors.

Filed Under: bailout, performance rights act, radio, webcasters
Companies: pandora, riaa, soundexchange

Why Is The FCC Even Giving The Time Of Day To RIAA's Bogus Radio Witchhunt?

from the waste-of-resources dept

Earlier this year, MusicFirst, a lobbying group that is run by the RIAA and pushing for a special tax on radio stations for daring to promote songs, came out with its latest in a long list of bizarre claims, demanding that the FCC investigate the fact that radio stations were supposedly boycotting musicians who supported the Performance Royalty tax. There were numerous problems with this claim. First, we thought it was rather hypocritical of MusicFirst to demand that radio stations play these artists, when it was the very same MusicFirst that was also claiming that radio was "a kind of piracy" for playing the music of these very same artists without paying a performance tax.

So, apparently if a radio station does play these artists, it's piracy. If it doesn't play these artists, it requires an FCC investigation.

Beyond that, MusicFirst failed to note that many of the artists topping the charts (including the Black Eyed Peas, who topped the charts at the time) were some of the most outspoken artists in favor of this tax. If there was some big conspiracy to not play these artists on the radio, someone forgot to tell... well... pretty much every radio station around.

That highlighted the third problem: MusicFirst didn't happen to point to any radio station that actually did this. The only one that could be dug up was a small high school radio station that had publicly boycotted artists supporting such a tax (which would have shut down the radio station), but only did so for one month and that month happened two years ago, and was a clearly supported expression of free speech.

And that brings up the final point. The recording industry has no right to demand that radio stations play certain artists. A radio station is free to play whatever artists they wish and run whatever commercial they wish. This is a pure free speech issue, and it's quite troubling that the recording industry is targeting radio stations when they have no right over this.

Based on all of this, you would hope that the FCC would simply laugh off the petition... but tragically, it's opened up a consultation on the matter and is asking for public input (found via Michael Scott). The article linked here goes through all of the First Amendment questions raised by this, and notes (thankfully) that the FCC seems to recognize those issues as well. But, if that's the case, why even bother holding this investigation in the first place?

Filed Under: bailout, high school radio, performance rights act, piracy, radio
Companies: fcc, musicfirst, riaa, soundexchange

Pandora: If We're Getting Taxed So Heavily By SoundExchange, Radio Should Be Too

from the strange-bedfellows dept

Well, this is rather disappointing. Just days after caving in and agreeing to new webcaster rates that will harm pretty much everyone, Pandora has gotten right into bed with the RIAA/SoundExchange in supporting the Performance Right Act (the RIAA Bailout Act) to extend a similar unnecessary tax on radio. Pandora's reasoning is no surprise: basically it's saying that if it has to pay such a silly tax to help promote musicians, it's unfair that radio stations get away without paying something similar. But, still, it's disappointing. Rather than looking at adding value to the overall market, Pandora has basically decided that it's "enemy's enemy is a friend" and is supporting such a law simply because it will harm radio stations. This makes me think significantly less of Pandora.

Filed Under: bailout, performance rights act, radio, webcasters
Companies: pandora, soundexchange

Recording Industry: Radio Is Piracy, But Not Playing Our Music Is A Federal Offense

from the logic-much? dept

It appears that the big record labels and their lobbyists aren't content with just suing and shaking down students across the country -- now they want to threaten them for taking a political stand as well. Earlier this week, musicFIRST, the big time lobbying group put together by the RIAA to push for the highly questionable Performance Rights tax on radio stations, did a neat little publicity stunt where it asked the FCC to investigate radio stations that apparently were "boycotting" musicians who supported the Performance Rights tax, claiming that it was an abuse of the airwaves. Remember, this is the same group that just recently called radio "a kind of piracy."

So, wait, which is it? If it's a kind of piracy to play songs on the radio, shouldn't musicFIRST and the RIAA be thrilled that radio stations aren't playing their music? Or do they recognize the free promotional benefits radio provides for artists? They can't have it both ways, can they? First they're upset that the music is being "pirated" and now they're upset that it's not being "pirated"? Please explain!

Now, as for those nasty nasty radio stations "boycotting" certain artists, well who are they? Turns out one of the main culprits is a tiny 100-watt high school radio station who has explained, in great detail the reasons behind their political stance. They are making a political choice by purposely boycotting musicians who support the view that playing their songs on the radio is "a kind of piracy." You would think that would make musicFIRST, the RIAA and those musicians happy. But, more to the point, that music "boycott" was a temporary thing, and lasted for one month, from mid-June 2007 until mid-July of that same year. Yes. It lasted for one month, to make a political statement, and it happened two years ago. And suddenly the RIAA/musicFIRST wants an FCC investigation? Of a bunch of high schoolers making a political statement against a tax that would harm their educational radio station by not "pirating" materials that the lobbyists claim are pirated?

Filed Under: bailout, high school radio, performance rights act, piracy, radio

Bailing Out The RIAA?

from the there-we-go... dept

At the Tech Policy Summit yesterday, David Carson, the General Counsel of the US Copyright Office spent a bit of time at the beginning of his talk explaining why the Performance Rights Act made sense. This is the bill that would make radio stations pay musicians (rather than just songwriters as it is now) for every song they play on the radio. The recording industry insists that it's somehow unfair that radio stations have been promoting their music for free, and Carson seems to believe their explanation 100% (which is, unfortunately, quite typical of the Copyright Office). He argued, unconvincingly, that while radio used to promote artists (the reason that stations don't need to pay musicians), it no longer does so. That makes no sense. While there are alternatives out there for promoting artists, and radio may not have the impact it once had, that hardly means that the stations aren't promoting the music.

And, of course, the most damning argument against the recording industry's demand for money here is the fact that, for decades, the industry has (illegally) had the money go in the other direction. The system of payola has shown, quite clearly, how much the recording industry values airtime, in that it's willing to pay radio stations to play its music.

So, can anyone explain why it's illegal for record labels to pay radio stations to play music, but it's okay for Congress to force radio stations to pay the record labels for playing their music? It defies common sense.

Yet, with a nice push from the Copyright Office, the bill is moving forward, and will face a full House vote. During the Committee debate over the bill, Rep. Daniel Lungren made a perfectly reasonable suggestion: why not wait until the GAO had a chance to do an economic analysis of how the bill would impact radio stations. Considering that the bill is effectively a tax on those radio stations, this seems like a perfectly reasonable idea... but it resulted in Rep. Howard Berman (who represents Hollywood, always) accusing Lungren of trying to kill the bill. Isn't it great when simply waiting to find out what kind of impact the bill might have gets you accused of trying to kill it. Apparently in Congress, it's all about shooting first and asking questions later.

That said, Peter Kafka, over at AllThingsD, has made the best point: most people don't care about this bill because they don't realize that it's really a bill to bail out the RIAA by creating a radio station tax that goes straight into the recording industry's bank accounts. So, rather than call it the Performance Rights Act, it should more accurately be called the Britney Bailout Bill.

Filed Under: bailout, performance rights act, radio

Making The Tough Choices To Save The Economy?

from the stop-giving-the-banks-everything-they-want dept

With the latest plan laid out last week on how to "save Wall Street" ("the Geithner plan"), there's a lot of back and forth over whether or not this is a good plan or not -- and while Planet Money had a decent "is it good or bad?" show, the folks there didn't get too deep into it (and even claimed that no one really thought the plan was all that dangerous (just that it could slow down the recovery). However, the more I read up on it, the worse and worse it seems. Simon Johnson has a long, but worthwhile writeup at The Atlantic, where he delves into how Wall Street has effectively taken over Washington DC, such that it helped both create the mess, and then set things up so that the "recovery plan" only benefits those who caused the problems in the first place. This echoes a piece by Andy Kessler last week, where he pointed out that we're effectively handing money to those who brought the collapse upon us -- and suggests that the better response is to simply stymie the plans of the hedge funds -- flooding the markets where they're looking to buy, rather than subsidizing them.

Then, there's Umair Haque, who basically makes the same points, but suggests that this is an outright looting of taxpayer money by putting most of the risk on taxpayers, and encouraging the hedge funds to make increasingly risky loans (you know, like the ones that got us into this mess in the first place). The root of all of these stories is that the government seems to think that the only way to fix the problem is to reinflate the bubble, rather than letting the bubble deflate and moving forward from there. The problem with reinflating the bubble isn't just that it puts off the inevitable (though, it does), but that the inevitable is that much worse when it comes.

It's what we've done for the past couple decades -- effectively building an even shakier house of cards, and every time the cards start to fall... we just reinforce it with another layer of shaky cards to prop it up. At some point, the cards do have to fall, and propping it up with more leverage isn't going to help that.

Even if, as Richard Posner suggests, the current plan is about the most politically feasible, it's still problematic. The politics of the situation is troubling. On one side, you have populist anger, making it difficult to do certain necessary things. On the other, you do still have the influence of the bankers, who view the world as being one where we need to keep propping up that house of cards.

Why is it that no one is talking about carefully taking down the house of cards while building a sturdy house next door?

Filed Under: bailout, financial crisis, politics, timothy geithner, wall street

Why Aren't We Trying To Solve The Too Big To Fail Problem?

from the getting-it-wrong dept

Last year, with all the talk of companies being "too big to fail" and governments bailing out such companies left and right, we had what seemed like a simple suggestion. Recognizing that it is possible for a company to be "too big to fail," in an intertwined economy, because the fallout would create even more problems, we suggested that a requirement for taking government money would be to become small enough to fail. That could mean spinning off parts, selling off parts, shutting down parts, exiting businesses, shrinking businesses -- whatever. There just needed to be some sort of guarantee that within a certain time frame, the company wouldn't be so tied up that if it failed it would bring down the rest of the economy. And, if a company didn't want to deal with those restrictions, then fine, it didn't need to take gov't bailout money.

The idea didn't get much traction (not surprisingly), and now some are pointing out that the opposite seems to be happening. Our solution to dealing with companies that are too big to fail has been to make them bigger and bigger, and pass off the question of "too big to fail" to other politicians in the future -- at which point the problems will likely be even bigger and harder to deal with. Propping up companies that are too big to fail, without a clear path towards making them small enough to fail, is a recipe for a future disaster.

Filed Under: bailout, too big to fail