There is no greater enemy of the music business than the music industry itself. Never before in the history of mass entertainment have we witnessed an industry who worked harder to destroy itself. Maybe once upon a time, music companies tried to expand their business and reach wider audiences, but those days ended long ago…and if the RIAA has its way, they’ll be gone for good.
Let us count some the major mistakes the industry has made in our lifetimes: cheering on ownership consolidation that squeezes out diversity on local radio; standing on the sidelines while the Internet revolutionized the way listeners access music…and then trying to close the barn door after the horse had galloped to the next continent; applauding the Copyright Royalty Board’s decision to raise royalty rates on Internet Radio.
In the past several weeks, we’ve seen the recording industry agree to pay penance for engaging in the age-old practice of payola. You know, where the companies pay to have their music played on the radio. Because, you know, radio is the greatest possible promotional device known to the industry. It leads to sales of music (unless you count those pesky souls who tape record songs off the radio). Of course, these same executives who authorize illegal payments are starting to realize a sad truth about radio: the music companies don’t really make money off the radio.
“But wait!” they say, sitting in their executive suites. “We have new technology. We can turn this to our advantage.” It’s quite simple, you see. Radio stations have traditionally paid royalties on the music they play; now, with this new ruling, traditional radio will continue to operate as it always has, but rate for Internet radio will increase substantially. And that increase will be retroactive. Ostensibly, this increase is designed to compensate the performers. In reality, a huge chunk o’change will be going to copyright owners. Often, the copyright owner is none other than the music label.
Can you see the happy dancing in the halls of the music industry?
Making it worse, traditional exceptions for entities such as public radio are all but erased. That’s where National Public Radio comes in. The cost to NPR to play music will increase substantially. The costs to your local public radio station — those entities who are always begging for cash as it is — will increase substantially. Given the economics of the situation, it makes sense that if this ruling stands, these stations will chose to change their business models. Right now, they’re actively increasing audiences by streaming and podcasting and broadcasting online. That’s going to stop if the cost goes up.
NPR is fighting the good fight. Actually, NPR is fighting mad. To quote from Andi Sporking, NPR’s Vice-President of Communication:
…we are being required to pay an internet royalty fee that is vastly more expensive than what we pay for over-the-air use of music, although for a fraction of the over-the-air audience.
NPR’s particular beef is with being treated on par with commercial radio, and it has already filed a petition for reconsideration. One petition is not enough. This ruling impacts Internet broadcasters who operate like traditional radio as well as services like Pandora. Pandora, which follows the crazy set of rules created to, wow, I dunno, stop music from being enjoyed — no requests, limited number of “skips”, limited number of songs by one artist — will see its payments increase to an estimated $3.5 billion. Not a bad punishment for a service that drives listeners to purchase the music they hear.
Kind of makes you wonder what other ways the music industry can devise to torture the very people who are fighting to keep it viable.
SoundExchange, the arm of the RIAA that collects royalties due performers, isn’t worried. Why would they be? The new rules were essentially proposed and written by SoundExchange.
“They’ve been saying this since 2002, that they were going to go out of business,” said Willem Dicke, a spokesman for SoundExchange.
“Instead what’s happened is the industry has grown tremendously.”
Dicke said the advertising revenues from online music broadcasting have grown rapidly over the past few years, from about $50 million in 2003 to $500 million last year, giving Webcasters enough resources to cover the new royalty rates.
Granted, there is nothing to support these numbers from Dickey that I can find. And that’s not really the point, is it, that Internet radio has increased its advertising revenue? When terrestrial radio increases ad revenue, does the music industry demand a bigger share of royalty money? Finally, sure, the big boys make bigger money, but this ruling impacts many broadcasters operating under the Small Webcasters Amendment; these new rules will likely create payments due that exceed the revenues of these stations, according to analysis done by Radio and Internet Newsletter.
The ruling also changes the reporting requirements for small broadcasters — a change they may not be in a position to accommodate. In the estimate of increased fees for Pandora noted above, a $500 per channel cost is also assessed. Channels are not clearly defined, meaning that these channel-based services will need to plan for extremely high costs if they choose to continue operations. That’s going to kill services.
They say this about the performers. Always, always, always be suspicious when someone says that. It’s about the corporations. CD sales are down and these companies are trying to replace lost revenue. That’s a fair goal. But their solution is one that continues to favor the big hit model over the Long Tail model, and the big hit model is not as sustainable as it once was.
NPR is fighting. Others are fighting. You need to fight, too. Make sure your voice is heard. Don’t just sign a petition, contact your members of Congress.
Make no mistake about it: if this ruling stands, the big loser will be the entity that wanted it so badly. The music industry. As smaller, adventurous stations who operate legitimately fall off the map, consumer will turn to, well, pirate radio. They will not go backwards to commercial radio, they will not return to Tower Records — heck, they can’t. They will find the music they want. And the RIAA will spend exorbitant amounts of money chasing these pirates.
Is that really a business model?
A few good links:
- Webcasters Unite
- Broadcast Law Blog (Very good analysis)
- Radio Killed The Radio Star, Part Two
Tony C says
I say let the RIAA shoot itself to death, once they start to fail, new companies with new business models will take thier place. And hopefully it’ll be mutually beneficial to the Artist and the Label.
I have a friend who works for an internet radio company. He said that basically the RIAA and the internet stations went before and arbiter, both expecting a negotiation and a compromise.
The radio stations came to the table asking for 1/3 of the current cost, and the RIAA asked for 3X the current cost. These were supposed to be the staring positions.
Well the arbiter came back and gave the RIAA everything they asked for. Which everyone agrees is too much.
The RIAA can’t possibly want to put all these guys out of business (maybe I’m wrong about that) but maybe they just got more than they bargained for.
My friend seems to think that this will be resolved, so he’s not too worried.
Here’s the solution to the RIAA’s problem. Let’s boycott buying music. We’ve all hear the radio play more than enough. If no one buys anything new for a year, it might make them listen.
With more and more artist creating their music without label support and holding their own copyright – how will this pan out for them?
I see this as a simple situation. Stop playing RIAA music. NPR already doesn’t play “top 40”. Maybe now is the time for Creative Commons music, or for the indie labels?
Quick note — stations such as WFMU are already working outside the RIAA “system” (if I recall correctly) and this limits the music that can be played. For those artists who self-distribute or are independent, it depends on how the music is licensed and administered. Hopefully someone else can expand on this as I’m racing and can’t pull up the information right now.
I think there is a Creative Common license (or type license) for music. The problem comes when you try to mix types. Accounting nightmare, and I doubt these small stations are prepared for that. Tracing back licenses is a complex process.
See my netlabel compilation and it’s associated PDF booklet for my take on this war on the RIAA:
netBloc Volume 3: La Plus Belle Guerre
I say to NPR, to stop playing RIAA audio and make the jump to strictly CC’d music. The more broadcasters do this, the less value that RIAA/major music-industry music holds.
Ugly American says
It’s quite simple.
Stop buying RIAA products.
They have been *convicted* of systematically cheating artists multiple times.
They have been *convicted* of price fixing multiple times.
They have been *convicted* of knowingly filing false charges multiple times.
They have been *convicted* of bribing DJs and radio stations multiple times spanning decades. It seems this is a long term strategy for them.
There are more non-RIAA artists with more variety and talent anyway.
Please don’t fall for (much less repeat) the RIAA party line that “CD sales are down”. There are lies, damn lies, and statistics. The major labels have been releasing fewer and fewer albums per year to manufacture this statistic. They’ve been doing it this whole decade, and suppressing as best they can the number of new releases ever since 2000. Here’s an older story making this point.
Cezar is right. I ran (and will have back up later in the year) a radio station based on supporting indie artists. MySpace, SoundClick, Mperia and others have all opened up artists to a closer connection and greater feedback from their fans.
Most non-label artists are only too happy to have their music streamed for others to hear, without charge. Not only that, but they understand and heavily support small online radio stations and help them get all the tools they need to promote the artists and so do the indie labels. Labels like Dancing Ferret Discs, Metropolis records and Projekt are clear examples of such companies.
So go right ahead RIAA, keep screwing it up, because the underground scene they continually pilfer from for their watered down top40 acts will always exist, no matter the genre, be it pop, dance, rock, jazz or country. The fans and the musicians will remain and charges like this are just going to push more of them into finding affordable alternatives (it also helps the indies sell CDs for between $5-$10, which you know is all going to them). Which is just going to accelerate their demise.
The RIAA here is just trying to control the distribution of music more tightly. My suspicion is that they are trying to shut down small webcasters because the logistics of ensuring that all of these small entities are abiding by the limitations set by the RIAA is too difficult for them. They would rather only deal with a small number of large entities. With this in mind, i expect that they will strike a deal with NPR, perhaps exempting them from the new rates.
As far as small independant broadcasters go, looks bleak. But, i’m sure that they’ll find a new way to innovate.
Look, I enjoy music as much as the next guy, and historically have purchased and listened to music from my favorite artists.
No more; Until the RIAA and their business practices have been wiped from the face of the industry, I will never buy another song. Not one. Good job RIAA.
Mick Wagner says
This could very easily end up being a re-hash of the ASCAP “broadcast ban” of 1040, which not only led to the rise of BMI and a corresponding loss of literally BILLIONS of dollars to ASCAP over the years, but which also brought about the greatest surge in performer-composed music in American musical history. RIAA’s original benefit to the broadcast and recording industry, was to ensure that recording quality would be to “broadcast standards”, i.e.: not too much hiss, sibilance, etc. Sooo…in this day of DDD recordings, they really don’t serve any purpose anymore, do they?
I think it’s time for a change and I really hope that this marks the begining of the end for the RIAA and for commercial radio. If a few smaller commercial projects fall as a result so be it. I haven’t honestly listened to any radio in 5 years and turned it on the other day to be amazed at how terrible not only the commercials/announcers have become but how terrible the music is. Everything is extremely over produced and repetitive to a point I personally cannot take. This is why I stick to underground atrists. I gladly pay $15 a CD directly to an artists at a show versus ever giving a major record company a dime.
One thing I just discovered that, if affected, would kill me is last.fm. I believe all the music on there is uploaded by the artists themselves so I’m not sure if this ruling applies…
in the time it took me to read this article the number of “diggs” increased from 11 to 142, word is spreading.
Kelly Sutton says
Great post, I whole-heartedly agree. Not to plug myself or anything, but I wrote a similar article geared more towards the college crowd (often the victims of the RIAA’s extortions–ahem–lawsuits).
The RIAA, Arcade Fire, and How Music Will Get Better
what the RIAA doesnt understand, is that when i download an album, it doesnt cause them to lose any money. i most likely would not have bought it if i couldnt get it for free. also, the bands i listen to dont support the RIAA either, and put out their own records, which i do buy. when i was in a band, we gave our music away for free, online, and by hand. in return we got shows all over the country, food, beer, a place to sleep, gas money, and an experience to last a lifetime. who needs the RIAA? not us.
lastly, when i was eight years old, me and my friends would buy cassette tapes and copy them from each other so we didnt have to each buy a copy of the same one. should i get sued for that?
Kuddos to NPR. I’ve always loved them anyhow.
We need create laws so that ALL music controlled under RIAA LICENSING authority should be required to read a legal disclaimer before every single public performence, including radio and internet.
After all, how can we as listeners determine what rules apply to a song that we hear if different artists use different music distribution rules.
I’d love to turn on a radio station and hear legal disclaimers over and over every single day. Ha ha. Natually, I’d stop listening to artists affiliated with the scallywags.
Muscians would revolt and lawsuits would fly. But we as consumers really need a way to identify scallywags before each and every public performance.
I want musicians to take a stand and get us away from these thugs and thieves. We need to put the bite back on thes guys.
Musicians, open your fiiddle case and start earning a living like the rest of us. One or two concert tours coupled with good money managment and you can be set for life.
We don’t need ubber rich music industry terrorizing the public.
Stevieo, I like your idea! That would work! Completely piss off everyone, but it would be hilarious and I say let’s do it!
I think it’s reaching a tipping point. We should find a way to make the RIAA pay. We should make it so bad to be part of the RIAA that no one in their right mind would consider joining, and the ones who are part of the organization now let their memberships expire.
as #9 says, NPR should stop using RIAA products. Also, I understand that many NPR stations are switching away from music formats anyway and going with all talk, which seems to be proving more popular anyway.
You might want to update that digg link. It’s pointing to the “wrong” page. Here’s the one everybody’s digging:
I stopped buying music in 2003. I will continue to ban most bought music until they get their head out of their ass. I made a letter, called “Open Letter to Sony” If they would take my advice, may be their revenue would increase…no instead they continue to act like they rule. Without devout loyal customers willing to spend their last twenty on a CD, you rule jack after your bank account is gone. Have fun wasting it on nonsense suits that will eventually bleed you dry.
great article, but
They donâ€™t? I thought they made a lot of money from controlling the airwaves. Donâ€™t they sell tons of bad music to those who know no better?
Just another reason why I refuse to listen to radio. Find the music yourself, instead of being told what to listen to.
For further examples of the music industry trying to kill itself off, just look at the history of recorded music. The musician’s union was heatedly against recordings, their logic being that if people could just play records, they would never hire a live band again. They didn’t realize that records were just another way they could make money. Then radio came along, and the recording industry was against it, since if you could just play the readio, why would anyone ever buy another record? They didn’t realize that the radio is a great advertising trool for the recording industry. They did the same thing about cassettes, VCR’s, and finally succeded in killing of the Digital tape recorder for everyone but those who owned recording setups in the first place. All that did was to make it impossible for people recording their own music from being able to make a digital copy of it. And they never got in on any of the royalties they COULD have gotten from those sales.
And now they have killed off Napster, for all intents and purposes, which was their best advertising among the young.
The real thing here is that you have an industry that isn’t being run by people who have a clue about what is going on. They never have had. And now that it’s being run by lawyers instead of those who love music and want to see it flourish, it’s even worse. Their product sucks, and they go around suing their CUSTOMERS! There isn’t another industry on the planet stupid enough to do that (Except for SCO in the software world. They are doing it single handedly, though). Maybe if they would actually put out music that didn’t suck, and wasn’t aimed at the 12-25 demographic, they might find they actually have a market.
Oh, and BTW, I am a professional musician and recording engineer, and I am disgusted by what my industry has done to itself, time and time again.
RIAA is killing music
There’s a good companion piece in Salon today.
The fate of indie music as we know it | Salon News
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Martin Lindeskog says
Here is my comment on how to save internet radio.
All the Best,
Martin Lindeskog – American in spirit.
I think that between services like Jamendo or CCMixter and the independent online labels, to say nothing of the hundreds or even thousands of artists who put their own works online for free, there’s enough music to listen to that the RIAA’s catalogues could be completely ignored for years. After a decade of nobody buying their homogenized garbage they might start wising up. Either that or blame the pirates again.
Dave Strand says
This is exactly why my band has retained control over the copyrights, and distribution of our music. We offer mp3 downloads, and cd sales through our site and say FORGET THE INDUSTRY as a whole. The fans come to us, and they buy our music. That money goes into our band fund and bypasses this whole stupid RECORD COMPANY process. I encourage all bands to DIY. Sure, you won’t get the MTV exposure, but you will have a closer connection with the fans and you won’t have some money hungry executive to deal with.
ALSO, I am interested in granting NPR rights to play my music, royalty free, if they want to.. because I CAN, and because I love NPR’s Coast To Coast program.
Arizona Industrial band The Strand
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