RIAA and Net Radio Broadcasters Reach Agreement

An anonymous reader writes "The RIAA and internet web broadcasters have reached a royalty agreement. Instead of facing massive increases per song played, they will be generally charged 10.5% of their yearly revenue."

Comments

This is unheard of, but...

[dada21]

...it's also a sign that the RIAA knows it is outdated and is only grasping at the few straws remaining.

If you're thinking of starting a business venture, there are two words for you: supply and demand.

No amount of laws or regulations can overcome supply and demand in the long run. The RIAA relied on preferential laws and regulations to maintain their control over distribution. Recorded music has a near-infinite supply in terms of distribution online. Hence the price of it should fall to nearly zero (yes, some people who see value in compensating the artist will never believe the price should be zero).

The RIAA is screwed, no matter how you look at it. Most monopolistic corporation unions who rely on legislation and not on supply and demand are just as screwed.

Re:This is unheard of, but...

[WTF Chuck]

100% of nothing is nothing. If you are going to charge your distributors more for your "product" than your they will make selling that "product", then you get the full 100% of nothing. On the other hand, if you see that they will walk away and find some other line of work if you insist on the full 100%, then you know it's time to come to somewhat more reasonable prices.

Re:This is unheard of, but...

[Ihmhi]

Very true.

The future will be "Songs are our promotion, and concerts are where the real money's at."

For about $5,000 you can buy a complete set of recording equipment - the necessary laptop, software, mics, etc. to go with your instruments. If you want to do it on the cheap, well... that's why recording studios exist. How often do you hear about recording studios going bankrupt and having an unsuccessful business model? They don't.

The RIAA is the middleman that can be cut out far too easily. All they have going for them is their marketing power, and as they lose money that will be waning as well. Artists will form coalitions, collaborations, etc. and pool their resources to get the word out - like a record label, but less concerned with selling plastic discs and more concerned about advertising.

Either the RIAA is going to reinvent itself into a successful business or it's going to collapse under its own weight. Either way, it will be interesting and the artists will survive.

Re:This is unheard of, but...

[Daniel Dvorkin]

The RIAA is screwed, no matter how you look at it.

As long as they can buy laws, copyright regulations, and even international treaties, they're doing just fine. Sooner or later, their influence will probably wane, but don't hold your breath waiting. They've got a lot of life left in them, sad to say.

Re:This is unheard of, but...

[akirapill]

For about $5,000 you can buy a complete set of recording equipment - the necessary laptop, software, mics, etc. to go with your instruments. If you want to do it on the cheap, well... that's why recording studios exist. How often do you hear about recording studios going bankrupt and having an unsuccessful business model? They don't.

While you are correct in saying that the huge drop in price and increase in quality of recording equipment has made it easier for artists to publish their music independently, the same fact is actually driving professional recording studios out of business. Engineers are making a fraction of the money they made 15 years ago now that every middle schooler knows how to use Garage Band, and small studios are increasingly losing out from competition at home if they're not backed by a label. Whether or not this is a good thing is debatable because on the one hand it removes obstacles from musicians and further minimizes the impact of the recording industry on music, but it hurts the art of recording when its harder for professionals to make a living.

Re:This is unheard of, but...

[Technician]

For about $5,000 you can buy a complete set of recording equipment - the necessary laptop, software, mics, etc. to go with your instruments. If you want to do it on the cheap, well... that's why recording studios exist.

5 Grand isn't needed. Using a laptop, free software (Ubuntu Studio) an inexpensive interface, small mixer, & mics can be done for about half that. It works fine for the band I record. Many small bands already have most of the supplies already such as a laptop, mixer and microphones. If these already exist, then free software and an under $300 interface will work nicely.

Cheap is the under $30 Berhinger which does CD or DAT sample rates and bits. In Linux Ubuntu Studio it it truly plug an play as a USB input/output device. Open Audacity and select the USB audio for the source and hit record.
http://www.zzounds.com/item--BEHUCA202

Don't record off a Sound Blaster compatible card except for maybe webcasts and other lower quality work. The hardware has a fixed bitrate, regardless of what you set in software.

The next step up in hardware will give you 96K 24 bit recordings.

Many studios are finding competion from the inexpensive gear that just works.

My setup excluding the already purchased computer cost under $500 for the mixer, a couple mics, and the interface. I have the ability to record 4 tracks at once and and layer over 30 tracks for post processing and adding wet tracks.

A typical session is recording the 4 drun tracks to a click track which are then played back while recording the back-up vocals, bass, keyboard and lead guitar. These are synced (remove latency) and then the lead vocal is recorded while the prior 8 tracks are played back. This is followed with adding wet tracks with EQ, effects, delay, reverb, etc. prior to the final mixdown for the CD.
Under $200 4 channel interface able to do 96K 24 bit recording is here;
http://www.bhphotovideo.com/bnh/controller/home?O=&m=Y&IC=PRI1394&A=RetrieveSku&Q=

For a little more money, recording 8 tracks at once is the studio standard for PC based recording studios, but mics, mixer, and interface will run over $500 for that set-up.
http://pro-audio.musiciansfriend.com/product/Echo-AudioFire8-8-Channel-FireWire-Audio-Interface?sku=247003

The cost of the set-up is less than a typical studio session. This recording in your own studio is common now that the high cost has been eliminated.

Re:This is unheard of, but...

[CaptainZapp]

For about $5,000 you can buy a complete set of recording equipment - the necessary laptop, software, mics, etc. to go with your instruments.

I believe that Steve Albini may disagree with you.

If you don't know who he is, this essay is extremely interesting.

Re:This is unheard of, but...

[Cyberax]

Or compress it to sound louder...

Re:This is unheard of, but...

[Lumpy]

And experienced professionals can make it sound like raging crap as well. Listen to most of the stuff out there now. They compress it hard so most of the dynamic range is not there, plus they EQ it for some pimply faced 16 year olds cheap car stereo and speakers propped in the back window.

It's very hard to find a RIAA disc that was mastered by a pro that did it right instead of their cookie cutter nastyness they have been creating lately.

Re:This is unheard of, but...

[vux984]

That's fine if you are Gordon Lightfoot and still have the stamina and the talent to fill the 3000+ seat Shea's Buffalo at age 69.

A tile setter won't have the stamina at age 69 either. That trade is deservedly considered to be 'back breaking'. Do the users of bathrooms he tiled in his prime pay him a royalty?

Maybe not so fine if your burn out from the rigors of a full concert tour at a much younger age.

Maybe they'll need to find new jobs when they age? Its how the rest of society copes with the fact that they can't do the jobs they did when they were younger.

--- or you know that you are never in your professional career going to see a booking at a first, second or even third tier concert venue.

And?

Most models passing through expensive modelling schools never even earn enough at modelling jobs to pay back what it cost to go through 'school' and keep their portfolio maintained. The VAST majority never do better than a department store catalog job. And as they age and become less marketable... long before that, in most cases, they find another job.

So most musicians won't be successful enough to live off concert revenue, so what? They can get jobs like everyone else, and can join the ranks of: most poets, most authors, most fencers, most basketball players, most playwrights, most actors, most open source contributors...

Re:This is unheard of, but...

[garett_spencley]

The compression is done first on the master and then finally even further at the radio station.

So yeah it's not entirely incorrect to say that engineers are to blame, after all the mastering engineer is called such for a reason. BUT a general rule of good practice is that the mastering engineer not be involved in any of the recording, mixing or production process at all until the final master. The reason behind this is that it's considered to be a very good idea to have a completely fresh set of ears on the mastering. When you listen to an album over and over and over again your ears start putting on all kinds of filters and your objectivity goes down the toilet. It's one of the many reasons that mastering engineers (as a specialty) exist.

But yeah, of course professionals can do a bad job. I'm not disagreeing with your post. Just trying to point out that compression is almost never performed before mastering (which has nothing to do with recording or mixing). The only exception being on a track-by-track basis where compression is deemed required to achieve a particular effect on a particular instrument. Only the mastering compresses the entire recording. Then radio stations compress it even further for playback.

Re:This is unheard of, but...

[electrictroy]

The Slashdot summary is wrong. (Surprise.) It's 10.5% for places that allow the user to pick his/her songs. But broadcast internet radio, where the DJ controls the music, is still unresolved. They are still paying the "per play" royalty fee.

So places like Shoutcast are still in danger of going bankrupt due to the tyrannic fees imposed from above.

Re:This is unheard of, but...

[Guysmiley777]

The net radio companies need to pay bandwidth, they have to have some money coming in.

The way I read the agreement, it seems to be 10.5% of gross revenue, so basically for a break-even operation this would essentially be a 10.5% operating tax.

This doesn't appear to affect Pandora though. FTFA:

Limited download services include online stores such as Napster to Go or Rhapsody, where the end user can keep the music he or she downloads - albeit for a "limited" time. Interactive media sites, such as IMEEM and Last.FM, allow the end user to pick and choose the song he or she wishes to listen to. Both these concepts are different from internet radio, where like terrestrial radio, the play list is determined by the radio operator. Unfortunately for sites like Pandora, the agreement leaves their issue unresolved.

Re:This is unheard of, but...

[shark72]

"Yes, but 0.1% of something really large is still a significant number. I agree that the price can't go to zero for buying a song online, but I fail to see how it couldn't go down to say $0.10 per song."

The laws would have to change for this to happen. Mechanical royalties (we're talking downloads, not the new interactive streaming model discussed in TFA) are around $0.08 by law. The lyricist and the composer of the music each get their own mechanicals, and this doesn't include performance royalties -- the per-track royalty that the performer negotiates with the label.

There are exemptions and other tricks that the labels use to lower the mechanical royalties, but for a track that, say, has music written by Joe, lyrics written by Fred, and is performed by Lindsay who's negotiated $0.05 per track, the royalties are liable to be more than $0.20. Record companies can't hold back mechanicals to pay for production costs, but even if they hold back Lindsay's $0.05 because the record hasn't yet made money (which is the case for most records), the record label still owes the mechanicals.

There's also a big disagreement about the true costs of producing a track. Many Slashdotters believe that production costs are next to nothing, and that record companies don't have significant costs for marketing, salaries or overhead. This helps foster the notion that each download is cost-free to the record label. The popularly understanding among people who are familiar with business is that record labels do indeed often have significant costs, and those costs are amortized into the cost of sale.

Your assertion that there's no reason that tracks won't go to $0.10 is hugely popular on Slashdot -- no doubt about that. I encourage everybody who truly believes this to start their own record label and sell music for $0.10 a track. Paraphrasing Gandhi, you can be the change in the music industry that you want to see.

Re:This is unheard of, but...

[shark72]

You've actually amplified my point. There's a huge difference between parts cost and actual cost per sale, and an essential difference between net margin and gross margin.

That mouse you might see on sale for $19.99 might have less than a couple of bucks worth of plastic. But the cost sheet developed by Acme Mouse Incorporated might have a dozen line items consisting of R&D charges which are amortized into product costs based on forecasts. These are very real costs that can't be ignored. You're correct that they're paid upfront, but Acme needs to get the money, and if Acme is in the sole business of selling mice, then they recoup those costs one mouse at a time. The amortized overhead and development costs are as real and genuine as material costs in the eyes of accountants and investors. It's not play money; it's not "soft dollars." If the mouse has $2 in material costs and another $4 in burdened development costs, if they sell the product into distribution for less than $6, they're losing money.

And record companies aren't much different than than mouse companies. Even with digital goods (and whether it's a song or a piece of software or a stock photo), up-front costs are amortized as a cost of sale. Record labels are primarily in the business of selling music, so it's the sales that must recoup the development costs.

I know this may seem counterintuitive or even nonsensical for many Slashdotters. But it's a concept that folks in the retail industry understand all too well.

Some folks have pointed out that if supply of digital goods is theoretically infinite, then amortized cost per sale should be a limit approaching zero. The issue here is that amortization applies to sold items. If you sell 10,000 instances of software and a metric squillion copies are pirated, you're only allowed to amortize your costs over those 10,000 sold. Taking the analogy to hard goods, Acme Mouse must amortize R&D costs over the forecast of units sold; even if they bury a million mice in the Arizona desert or shoot a billion into orbit via Space Shuttle missions.

10.5% of the yearly revenue?

[Noryungi]

What about the radios that don't make any profit?

I am specifically thinking of SOMA FM and WCPE. I know that WCPE is a non-profit, for instance, and they are two of the best radios I know.

Are these exempted or not? Does anyone know?

Re:10.5% of the yearly revenue?

[fyoder]

What about the radios that don't make any profit?

Revenue is what they bring in total. Profit is what's left after expenses. In other words, they want 10.5% off the top, regardless. And the RIAA doesn't have a history of sympathy for the argument "But I wasn't making any money off of the music I was sharing," so while it would be nice if they'd give non-profits a break, it would be out of character.

Re:10.5% of the yearly revenue?

[QuantumG]

Strangely, being a "non-profit" does not mean you are not allowed to, or even that you typically dont, make a profit. Being a non-profit simply means that the stated goal of the organization is something other than profits, and so the directors of the organization do not have to justify their decisions in terms of how much profit it makes for the organization. There's also different accounting regulations, like publicly declaring the assets and expenditures, etc.. and in exchange they get a tax break.

Re:10.5% of the yearly revenue?

[Apple Acolyte]

I had to do a double take when I read 10.5% of yearly revenue. 10.5% of profits sounds excessive, but 10.5% off the top is outrageous.

Re:10.5% of the yearly revenue?

[DrLang21]

Actually, being "non-profit" means that there is no profit in the business to be paid out to investors, directors, or employees. All "profit" is recycled back into the company. The directors can profit by increasing their salary when business is steadily doing better. Running a successful non-profit can be quite lucrative, but not nearly so much as running a successful for-profit.

Re:10.5% of the yearly revenue?

[Guysmiley777]

In your fluffy, shiny little world how does Pandora pay for its bandwidth?

Remember to pay the tithe you teabaggers

[$RANDOMLUSER]

Perhaps if there were some mention of what broadcast radio stations were paying for their tithe or per-song charges we could make a reasonable comparison. Somehow I doubt that all-talk/mostly-talk broadcast stations are paying 10% of revenues in tribute.

Re:Supply and demand, indeed

[mcwidget]

There will always be a segment of the population who wants to produce music simply for the fun of it. But they still need to eat.

More than this; the potential to earn enough cash quickly (and easily?) enough to allow you and your family to live comfortably for the rest of your life is a major driving factor for many of the people in the business today. The less reward there is available, the less motivation. Rightly or wrongly, with less reward you have less talent - or at least, less depth of talent.

Turn their own tactics on to them...

[Anonymous Coward]

We've all heard about RIAA tricks to scam the artists out of their fair share. Like taking a percentage of revenues for 'breakage' based on the rates of vinyl records breaking in shipping even though CDs are much more sturdy and MP3 downloads are impervious.

So I suggest the radio stations change their business models to run revenue-free. Like becoming an ancilliary service that does not generate revenue under normal conditions - like you can pay a fee so outrageous for the radio service that no one in their right mind will pay it, or you can get it 'free' as part of membership (paid or advertising-supported, or some other scheme) with some other web-site or service provider. Let the free-radio and the revenue-generating service be subsidiaries of the same parent company and you are all set.

Of course I am writing this without actually reading the details of the contracts - those MAFIAA lawyers are really good at putting together contracts that fuck the other guy in novel and unexpected ways, so anybody trying to fuck them back needs to pay real close attention to the details.

About time

[Auckerman]

Profit motive is a fascinating thing. It's not in the RIAA's best interest for web radio stations to go offline, because they generate no money from web radio that way. Whatever they charge is going to be the highest possible without alienating their customer base, which is the web broadcasters. It took them long enough to finally admit that their pricing was extraordinary to say the least.

I do find it fascinating that the major labels, via "Independent promotors" actually pay radio stations to broadcast specific songs, whereas they do no such thing for web radio services. I would think that something like the web radio in iTunes would be a perfect target for this.

10.5% of yearly revenue...

[SupremoMan]

Is that their monthly fee?

Re:Supply and demand, indeed

[Daniel Dvorkin]

Everything you say is true. The problem is that there is no evidence whatsoever that the RIAA contributes anything toward the ability of musicians to make a living off their music. Given the numerous horror stories about just how much industry parasites suck out of the music buyer's dollar on its journey from the buyer's wallet to the musician's bank account, it's quite reasonable to believe that it is more difficult to make a living as a professional musician with the RIAA around than it would be in the absence of such an organization.

I'm not sure I understand...

[calmofthestorm]

I read TFA and something is seeming strange to me.

You pay 10.5% of all revenue to the MAFIAA. Does that mean that they're waiving the current royalties? Or is this tax in addition to the old royalty rate?

If this is all they pay does that mean I can:

* Stream RIAA music all I want if I don't make any money?
* Broadcast it DRM free?
* Get from the RIAA their music to play?

Clearly I'm missing something big somewhere, 'cause there's no way the RIAA would allow that chain of events.

Re:I'm not sure I understand...

[IBBoard]

Taking the definition of "revenue" then you'd only be able to do that if you didn't bring in any money at all, not if you don't make money (profit). Even then I suspect they might have other ways around it (like not selling the music to you in the first place and then enforcing copyright/DMCA legislation on the CDs that you probably got the music from).

It'd be great if some rich person did put their money towards a station that brought in zero money (including no ad revenue) though!

Re:Supply and demand, indeed

[akirapill]

It's an expensive habit, most of us are just trying to break even.

Only for on-demand services

[Anonymous Coward]

Sorry for posting as AC but I just would like to point out that this agreement is only for On-Demand services and not pre-programmed web radio services (which most web radio stations are).

So for most stations this does not change anything and the insane royalty rates that threatens the whole web radio industry is still very much in place.

Re:Only for on-demand services

[Atnevon]

I read about this yesterday on Betanews actually and headed to the source (DiMA to take a closer look). There's actually *even better* news in the agreement for non-interactive services: "Outside the scope of the draft regulations, the parties confirmed that non-interactive, audio-only streaming services do not require reproduction or distribution licenses from copyright owners." Hard to believe, I know, but take a look: http://www.digmedia.org/content/release.cfm?id=7243&content=pr

RIAA or MAFIA?

[TheCybernator]

Seriously. RIAA is acting like a mafia. Asking for a flat cut as protection money. Civilized extortion.

Ahhh...how biblical

[oDDmON oUT]

It's the RIAATithe©.

Re:Supply and demand, indeed

[BlueStrat]

It's an expensive habit,...

Yeah, I think that statement should be in the running for some sort of award for "Most massive understatement in a /. post".

most of us are just trying to break even.

Anything that's music-related...instruments, amps, etc...is extremely pricey. A decent brand-name USA-made professional-quality electric guitar will set you back $2,000-$3,000, and the same with an amp (thinking of an example of a new Gibson Les Paul and a 50 watt Marshall half-stack). That's the best part of $10,000 for just *ONE* guitar players' personal rig in an average good-quality bar/club cover band!!

That's not counting effects pedals and/or rackmount effects/processors, cabling, strings, picks, stands, microphones ($100-$150 each), PA gear, and the maintenance costs of keeping all the equipment (which can be quirky) and the instruments in shape. Heck, just a new set of tubes for a guitar amp can easily run $200-$300! That's just for starters. Then there's transportation and storage costs for all the equipment, and personal transportation and lodging plus food costs, and even laundry for those on the road, on top of that for all the band members.

Most average bar/club bands don't come anywhere near to paying even ongoing expenses, never mind also recovering their investment in the equipment and instruments when you factor in all the costs. Most bars only pay a band $350-$500, many even less. Many times a band will get stiffed altogether by shady bar owners. These guys do what they do because they love playing and entertaining. Please keep this in mind the next time you go to a bar or club and see a tip jar at the edge of the stage.

Cheers!

Strat

Mod Parent Up

[rsmith-mac]

He's spot-on. This agreement only covers services such as Imeem, Last.fm, and Napster, which are based on streaming individual songs. It does not cover services such as Pandora, AOL Radio, or Digitally Imported, which stream pre-programed/tailored stations like a meatspace radio station does. Those guys are still fighting to avoid having to pay the massive $0.0019/user/song that the Copyright Royalty Board passed down last year. Generally when people are talking about internet radio they are talking about these services, so internet radio is not saved.

Re:Supply and demand, indeed

[fprintf]

The thing is, hobbies are expensive. The fact that you have an opportunity to make some money on it is just an extra bonus. Think the guy who is into sailing moans about the $10-$200K he has in gear, and how "the man" (e.g. the Coast Guard) makes all these laws conspiring against him earning some income off his investment? Or how about the airplane pilot, with $200,000 sunk into his private plane that cannot take private passengers for hire?

What makes musicians so special and whiney? It is a hobby, albeit an expensive one, that if you are really really good at, you can get paid to do. Same with pilots. Same with boat captains. No one owes anyone an income from their hobby.

10.5% sounds like a protection racket to me

[DragonTHC]

How much of that will go to artists? apparently none since no one is keeping track of the artists whose music is played.

Nope, this is more payola. Fat Tony wants 10.5% of the take for your continued ability to play music without issue.

Notice, it says 10.5% of the yearly revenue. Not yearly profit.

Yep, this is bad for artists and bad for consumers and bad for everyone except the RIAAfia

Re:Supply and demand, indeed

[electrictroy]

>>>Listen to music produced today and compare it to what was around up to 15 years ago.

So 1993 or earlier. The tops hits at that time were New Kids, Vanilla Ice, MC Hammer, Janet Jackson, Mariah Carey, C+C Music Factory, Snap, Black Box, Boyz-II-Men, Will Smith, Salt-N-Pepa, Red Hot Chili Peppers, and so on. It was the middle of the dance music craze where almost all songs were composed around a simplistic beat box, with an occasional love ballad "to break-up the monotony of that hardcore dance that has gotten a little bit out of control".

Are you really sure your statement, that these artists were "better quality" than what's on the radio today, is accurate?

I honestly don't see much difference in talent.

Re:Supply and demand, indeed

[Digital End]

You could earn $500 a week working clubs (if you're very lucky). Of that money, you pay the whole band, eat, fix equipment, and so on.

The RIAA shows up, and offers to show your material to everyone in the country with their advertising, which means instead of a bar's worth of people, you have a country full... but they get 1/2 your money and get to decide what you write music about (prepare for angsty teen drama).

Still a net gain financially... even if it means your giving up creativity and freedom for it. Just depends if the artist finds writing and preferming their own music more important then money.

Possible fixes to the system? Independant website that works kind of like Pandora... mods mark a song with certain genres, people listen, vote for songs with a simple 'thumbs up or down' option, pay the artist based on how often his song is listened to (obviously more $$ if the song is good), people who don't suck get paid, people who do suck don't.

And yes, exploitable... bugs would need ironed out... but it's 9am, lucky I can type this early...

There is a good reason for that

[Weaselmancer]

The music industry would prefer to be in control these days. Allow me to explain a bit.

Back In The Day(tm), you had bands with enormous talent. Let's pick Led Zeppelin as an example. Please - no flames or debate on my choice of band. I've picked them for a reason, so bear with me.

They were pretty revolutionary. Fantastically talented and ahead of their time. It's been almost thirty years and you can still hear them on the radio.

And the stories on how they behaved were equally legendary. They'd blow into town, rent entire floors of hotels and absolutely trash them. Their post-gig parties were the stuff of legend. Once the dust had settled they'd simply pass it off to their label. "Deal with it." And if anyone complained it was "Fuck you - we're Led Zeppelin. You can't replace us, and you know it."

So they flaunted that. Most bands of the era did, but they were famous. Their partying habits were closer to acts of nature. I'm sure at the time you if you were a hotel owner you could buy Led Zeppelin insurance. At a premium.

So understandably, the labels got sick of this. That's why music is the way it is today.

Look at what's popular. Rap and bands like the one you mentioned. And what do they have in common? More style than talent. Why? Talent is rare. Style can be manufactured. Music stopped becoming something special that only a gifted few could do well, and became a product. Something you could buy in a shrink wrapped box. And replaced just as easily.

Bands today could not get away with Led Zeppelin-esque excess. Let All Saints try that crap with their label, just once. "Fuck you, we're All Saints. Just try and replace us." Every single person in the band will be working in a 7-11 the next Monday, with a bill for the damages.

This is beneficial to the labels, of course. But the problem is that the special spark that makes truly great music is systematically removed from the system in an attempt to make everything easily replaceable. Nobody stands out anymore. They can't, by definition. Anyone irreplaceable is too much potential trouble. They want mediocrity. Polish it up a little bit so it sells, and receive maximum benefit with minimum hassle.

The downside is that you will never hear truly great and innovative music ever again. At least from the big labels, anyways. It would be like being able to buy a really excellent coq au vin at McDonalds. The business model of bulk production and speedy turnaround simply forbids it.