CC Version of Radio's Future

[DavidEduardo]

The music industry says otherwise.  The music industry will show you historically how on air radio cut into music sales from the 1930s on.  That’s why they took radio stations to court back then to prevent them from playing music on air.  The only reason recorded music gets played today is because the music industry lost those cases in court. 

You refuted your own point. The music industry lost those cases in court. In other words, they didn't prove their contention. History has shown that the music industry grew exponentially and new artists were created because of exposure on the radio. The number of musicians paid by radio stations decreased when recording were allowed on the air, but the overall number of musicians grew because more artists were exposed to more people.

The several legal issues of the 40's which resulted in the ability to operate a music stations were first the breaking of the ASCAP monopoly in collecting performance rights. With the establishment of BMI and the unlocking of ASCAP's stranglehold on public performance, the first step was taken.

Then, with the fall of the power of the American Federation of Musicians and the indictment of Joe Petrillo, its mob-style boss, stations could play recorded music without having to "compensate" with a corresponding number of hours of live music by the station band.

No sooner had the AFM matter been concluded than we suddenly had independents like KLIF playing lots of recorded music, albeit in the block programming model of the era. But very soon we had Top 40 rising out of Omaha to take the nation by storm.

But the root issue was performance royalties. Radio paid, and still does not pay an artist royalty for analog transmissions; it pays a burdensome rate for digital streaming transmissions.

So the issue is not about hosted or personalized or local or national, it is about digital and analog. The record industry, an historic stifler of progress, sees digital as a way of giving every consumer a master copy of a recording, and wants to charge accordingly. They don't understand that making music accessible and affordable are the requirements for reducing piracy, not putting DRM controls on physical media and making it hard to use and hear music.

But, to return to the subject area this thread is dealing with, the whole rights thing is about digital vs. analog. It's questionable whether digital performance royalties leave a margin for profit in radio and among pure-plays as well. The CC thinking has to be along the lines of trading a bit of the previously non-royalty-subject analog part for a lower rate on digital. Since analog is fading, and digital growing, there is obviously a tipping point in the near future where sacrificing the old (cash) cow will benefit the rest of the herd in the future.

Introducing things like "you don't recognize the contributions of talent..." into an area that is purely a digital vs. analog issue may satisfy your localism (whatever that is today) and local talent (assuming anyone cares anymore) agenda, but does not respond to the digital vs. analog issue.

[SirRoxalot]

If the platform is immaterial - as some contend - then "radio" is platform-independent. It then makes sense to differentiate based on the service, not the platform.

If you're providing interactive on-demand service, you are indeed providing a digital copy of that material in a convenient, easy-to-obtain package. If you're providing curated content, it's not as convenient to obtain a particular song or performance, and you're providing additional content that may enhance or highlight that performance, or put it in a more favorable context. That's what helps to make new, or infrequently heard music, more desireable to listeners.

Simply put, different services should pay different rates because the benefits (or costs) to the recording companies are different. It's not as simple as "digital vs. analog". At this point, recording from an analog FM tuner of a decently-processed radio station would likely provide better quality than most MP3s. That, BTW, does not include the processing used on most CHRs and Hot/ACs. Then again, the original recordings these days have the dynamic range of a brick, but that's an entirely different discussion.

One of these days - if it hasn't already happened - some smart guy at a record company will pay Pandora for extra "spins" of their music. It'll be like Google, where whoever pays the most comes up at the top of the list. I don't know if that's happening already, but it's only a matter of time, and AFAIK there are no Payola provisions to prevent it. No wonder the big corporates want to play in the digital domain. No pesky towers, transmitters, or rules to deal with. In their ideal world, people will pay monthly to be subjected to content that's already being paid for by the highest bidder. What's next, blipverts?

[TheBigA]

If the platform is immaterial - as some contend - then "radio" is platform-independent. It then makes sense to differentiate based on the service, not the platform.

"What makes sense" doesn't matter when there's a law on the books that seems unable to change. It would be nice if Congress earned their pay, but they don't.  They barely even show up for work.  So private business is stuck operating under laws that make no sense.  This is why CC made this deal directly with Big Machine.  The recording industry wants to get paid for it's content, regardless of platform, and wants that payment to be based on the per-play price rather than percentage of revenue.  Radio companies prefer the system they've been using with BMI and ASCAP, which is why nothing has happened.

One of these days - if it hasn't already happened - some smart guy at a record company will pay Pandora for extra "spins" of their music.

Pandora received a discount on the royalty that they say saved the company from bankruptcy.  And they agreed to do things in exchange for that discount.  We don't know exactly, because those negotiations took place behind closed doors.  That discount was a defacto form of payola.  The labels employ indie promotion people to promote spins of their music on digital outlets, similar to the people who were outlawed at OTA radio.  The labels are paying money and granting royalty discounts for specific "spins" and services on Sirius XM and many other places.  What is considered payola and against the law for OTA doesn't apply to the digital domain. 

[Casey]

Pandora received a discount on the royalty that they say saved the company from bankruptcy.  And they agreed to do things in exchange for that discount.  We don't know exactly, because those negotiations took place behind closed doors.  That discount was a defacto form of payola.  The labels employ indie promotion people to promote spins of their music on digital outlets, similar to the people who were outlawed at OTA radio.  The labels are paying money and granting royalty discounts for specific "spins" and services on Sirius XM and many other places.  What is considered payola and against the law for OTA doesn't apply to the digital domain. 

There is actually a webcaster, Jango, that openly sells plays on their internet radio service through their "Airplay" platform. Although designed specifically for indie artists, artists can buy plays then have them target people who are fans of similar artists. I wouldn't be shocked if more webcasters did this. Have to pay the bills somehow.

[TomZ]

Related:

Radio Royalty Deal Offers Hope for Industrywide Pact

http://www.nytimes.com/2012/06/11/business/media/radio-royalty-deal-offers-hope-for-industrywide-pact.html?_r=1&nl=todaysheadlines&emc=edit_th_20120611

[TheBigA]

It might not be an unrelated story that the publishing royalty negotiated by the Radio Music Licensing Committee with BMI, ASCAP, and SESAC has lowered the OTA radio royalty bill by over $1 billion.  Could that money be part of another attempt by the NAB to do an industry-wide deal with the labels?  Would stations be more willing to pay labels if it didn't actually cost them more than what they're paying now? 

[Chuck]

It might not be an unrelated story that the publishing royalty negotiated by the Radio Music Licensing Committee with BMI, ASCAP, and SESAC has lowered the OTA radio royalty bill by over $1 billion.  Could that money be part of another attempt by the NAB to do an industry-wide deal with the labels?  Would stations be more willing to pay labels if it didn't actually cost them more than what they're paying now? 

That may be. I suppose that most station owners really don't care how the money they currently  pay is divided.  I'll even go so far as to say that many feel the performing artist should share in the royalties.  A lot of great performers have died penniless due to bad deals from their record companies.  That’s not right, but it is not radio's fault.

What has most of us concerned is the high additional cost of streaming, as well as the Byzantine song reporting and collection process that is imposed by Sound Exchange.  At least BMI, ASCAP and SESAC just send a bill, which you pay.  Sound Exchange makes you calculate how much you owe them every month.  What kind of a business model is that? Worse yet, they  have a very time consuming song reporting process.  I can see how a large cluster could need to have an extra employee, just to deal with Sound Exchange. 

It seems to me if you are going to charge someone for something, the least you can do is to make it easy to pay what you owe. That concept seems to have totally escaped Sound Exchange.

[TheBigA]

What has most of us concerned is the high additional cost of streaming, as well as the Byzantine song reporting and collection process that is imposed by Sound Exchange. 

Yep...I think the mindset there was all the onus was on the stations, which was unfair, especially considering the methodology for calculating the royalty needed a staff of accountants.  This is why the NAB wanted this to be handled by a different group rather than SoundExchange.  Someone who is independent and not a subsidiary of the RIAA.  The relationship with BMI, ASCAP, and SESAC has been relatively good for the most part, and radio has come to expect that level of professionalism. 

And I agree that radio stations don't care how the money is divided.  What we objected to was creating a new royalty that was ten times as much as what we were paying the songwriters.  The various rights holders should share equally in the money.  Songwriters should not make less than artists, especially when artists typically base their performance on the songwriter demo.  And musicians should not receive royalties.  They get paid regardless of whether or not the song gets played on the radio.

[Chuck]

And musicians should not receive royalties.  They get paid regardless of whether or not the song gets played on the radio.

Even though many of my friends are musicians, I have to agree.

If you are one of the session players, you have been paid very well for your time when the recording was made.  Any further income really isn't justified.  If you are a session player, 99% of the time you are doing tracks for used car commercials (or worse) with no expectation of further compensation. That is normal.  On the other hand, if you do a track for a major recording artist,  the same work involves residuals.  I don't blame anyone for trying to make a living, but somewhere it becomes ridiculous. 



I suspect the s. 

[TheBigA]

The reason musicians received a point was to ensure their support in Mitch Bainwol's war.  Same with AFTRA.  His strategy was a completely unified music industry, where no one blinked.  But Mitch is gone, and it's time to make a deal.  I think once they get down to it, the deal will look similar to what exists in Europe, where the labels get the money through an intermediary, and they distribute to the artists.  AFM and AFTRA will be left out.  That will leave AFTRA available to negotiate a deal for commercials.  Poof.