July 31, 2007 10:23 AM PDT
Perspective: Recording industry threat looms over Net radio
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Time and time again, the industry has tried to get the government to require electronics manufacturers, Internet service providers and digital radio services to lock down music with "digital rights management" systems.
Now, the recording industry is threatening the survival of Internet radio. Behind closed doors, the record companies are turning a fee negotiation into a bid to control what applications and file types you can use to play online music.
Webcasters, who provide the public with Internet radio by streaming music over the Web, are required by law to pay royalties to SoundExchange, a collecting society that distributes those fees to record labels and artists. Those royalty rates are set by the U.S. Copyright Office.
Recently, the Copyright Royalty Board raised the royalty rates so high that many Webcasters--businesses and hobbyists alike--would simply have to shut down. These prohibitively high rates have now given SoundExchange and its allies in the recording industry a tremendous amount of leverage to use against Webcasters.
That's because there is an exception to the rates set by the board. SoundExchange can offer rates lower than the ones set by the government, if the rates are the result of a negotiation. But SoundExchange won't agree to lower rates unless Webcasters agree to restrict the public's uses of the music by installing DRM that will prevent people from recording off Internet radio.
While this recording technology goes by the ominous name of "stream ripping," it is no different from recording songs off the radio. Putting these provisions into the contracts with Webcasters will create a technology mandate that harms consumers, and it won't do anything to curb copyright infringement.
Placing these locks on streamed content prevents consumers from making legitimate use of the music they receive. Consumers have fair use rights to, for example, excerpt, comment, criticize, and time-shift the content they receive. DRM prevents them from doing even that, and current laws make it a crime to get around the DRM, even if you're not violating copyright law.
Underlying all of this, though, is the largest problem with Webcasting DRM: it won't prevent infringement. Music piracy isn't coming from Web radio recordings. It's faster and easier to download a near CD-quality song from either iTunes or LimeWire than it is to wait for a song to roll around on an Internet radio station and then record it--at a far lower quality.
So if DRM for Webcasts won't prevent piracy, why do the record labels want it? The reason is that requiring these digital locks gives the record industry more control over your music. The objective is to make every step in the process of moving music around involve a flow of cash to the labels, even if that movement is "me to me"--from my CD to my computer, or from your computer to your iPod.
SoundExchange seems to be winning this battle for the labels, since the Copyright Office has given it the upper hand with the royalty fee hikes. If anyone walks away from the negotiation, the higher fees will prohibit a large number of Webcasters from doing business or pursuing their hobby. SoundExchange might be willing to take a lower rate, but it will take its payment in the form of consumers' rights.
Biography
Sherwin Siy is the staff counsel for
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The same is happening with the recording studios, the big names are falling apart at the seems, but this time there's a safety valve. It's in amatuer productions, podcasts, freelance musicians, youtube video pioneers... things like this will cause the eventual splintering of the big name studio system.
The question is, will a similar system grow up from the ashes this time? Or will something radically different grow up to fill the void?
As for right now... This soundexchange extortion attempt pukes snot up the ass of every red blooded American. Yeah, I have copyrighted stuff I don't want people stealing from me, but at the same time if someone wants to play a clip from my song or use some of my artwork, I don't some artificial DRM system making it impossible for me to even give permission to people to excercise fair use.
Shame on the big studio names. The days are gone where you can pump bilge into my ears and expect me to pay for it. I'd rather have a mule sick with dysentary dump diarreah in my ears than listen to the crap the spew. I've developed the self control, not only to not pay for this crap anymore, but not even consider stealing it either.
You lose, Punks. Get a few million more of me and you're toast. Have a nice time at the breadline.
There is NO WAY I will help finance an industry that wants to DRM the crap out of us like some presumed-guilty-criminals. No way!
And if the American consumer ends up allowing them to spread their DRM-virus, well, then they get what they deserve.
I think people are completely right when they argue about whether price and terms are fair -- but it's nonsense to argue that consumers are served if the "technology mandate" is that all content to MANDATE that it be in the clear.
"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."
Adam Smith, The Wealth of Nations, 1776
DRM is easily bypassed.
It is long since time for the recording industry to face facts.
Review how you price music. Higher prices drive down sales and prices out of the market those most likely to use P2P services ... kids.
Conversely, a lower price will increase sales and decreases the incentive to steal the music.
The same is true for the royalty rates being imposed on webcasters and on satellite radio and satellite TV, and cell phone companies.
Make the rates high and LESS music is played. That converts to LESS royalties being collected.
Drop the rates and the USE of music will increase expotentially and that will bring in MORE revenue to performers, record companies, composers and publishing companies.
It's the bottom line that counts.
We see the same principles in other aspects of the economy. Higher taxes reduce revenues. Risk is increased and incentive langers.
Lower taxes INCREASES revenues expotentially and results are dramatically higher than anything that higher taxes would have achieved EVEN if output and consumption remained the same. That's what's wrong with the "higher taxes" argument ... output and consumption is reduced in a high tax environment.
Or, take welfare. Rewarding those who are not working with higher and higher benefits does not reduce poverty; it increases it. Rewarding those who are working with credits and exemptions increases the work pool and reduces poverty.
A recent symposium in Canada discussed DRM and the March 2007 CRB royalty decision. One of the panelists stated that the REAL cost of music should be ten cents per track. At that rate he estimated that hardly anyone would waste time downloading tracks from a P2P network when they could get a non-DRM copy which was at a much higher quality level from a legitimate online service. A similiar pricing strategy could be used for retail CDs. Sales would skyrocket. He estimated that the recording industry would DOUBLE their revenues and reduce the cost they now pay to distribute music.