James Delahunty
1 Nov 2012 19:51
Internet radio firms pay up to 50 percent of revenue in royalties.
At the same time, traditional AM/FM stations pay nothing at all, and satellite radio pays only about 10 percent of revenues to record labels and artists. This huge disparity comes from how the three judge Copyright Royalty Board decides in a trial-like examination every three years.
Internet radio, satellite radio and cable radio firms are on one side, while SoundExchange (an RIAA spin-off) represents music labels and musicians on the other. The judges hear witnesses and evidence about the value of recorded music and the technology for delivering it to people's ears. The three judges then decide what royalties each kind of music service will have to pay for the next five years.
For satellite and cable radio, the judges set prices to give the labels and artists a "fair return" and the music service a "fair income." In practice, the judges tell these services to pay about 10% of their revenues to the artists and labels.
For Internet radio, though, the judges are supposed to set rates based on what a "willing buyer and a willing seller" would do in an open market.
That little detail is the difference between forking out 10 percent of your revenue, and 50 percent of your revenue. Sound fair?
Some members of Congress don't believe it is, and the EFF agrees with them. Congressmen Jason Chaffetz (R-Utah) and Jared Polis (D-Colorado), and Senator Ron Wyden (D-Oregon) introduced a bill called the Internet Radio Fairness Act, which will give Internet radio stations a fairer process for setting the price of their music - and probably much lower prices for that music, as Internet radio would get the same "fair return" standard that cable and satellite get.
At the same time, the MusicFIRST coalition - which represents record labels - is proposing another bill that would also standardize the digital radio rules, only it would apply the "willing buyer/willing seller" standard to everyone. Some proposals even suggest brining traditional AM/FM radio into the mix.