The great thing about this "administrative fee" fiasco is that it really gives no place to stand to the Congressional supporters of the RIAA/SoundExchange. They're stuck with it. Representatives Berman and Coble, both unabashed industry apologists have already "written" to SoundExchange asking them to make accomodations for small commercial and non-commercial webcasters. (I say "written" because it is pretty obvious all they did was sign a letter SoundExchange drafted which was intended to give them political cover from the IREA campaign.) Even those guys have to be wary about trusting SoundExchange again. Either Berman and Coble have to admit they didn't appreciate the full impact of the CRB decision by not addressing the administrative fees (which is pretty silly, given their committee leadership positions), or admit they intentionally didn't mention them, which would be an admission that they're fools.
Even better than all that embarrassment, however, is the pure simplicity of the administrative fee issue. There's no way to avoid the result - $1 billion in fees to collect $20 million in revenue. Even some of the potted plants who serve in the House can understand the difference. They don't have to figure out the fraction-of-a-penny pay-per-play rates, they've got a number with all those zeros to focus on.
This might be the factor that puts IREA over the top. I can't see someone from SoundExchange actually testifying that they need a billion dollars to run their operation. Someone is sure to ask if the real purpose of the $500 per channel fee is to run off as many large webcasters as possible, and they aren't going to be able to give an honest answer. The committee may not notice, or care, but the public will hear it.
And remember that the $20-35 million is split 50/50 between artists and copyright holders (read labels).
SoundExchange, however, sets aside a full 40% of the royalty pool for claims by artists they can't find. This is the money they get to keep after three years of not finding artists.
The RIAA labels get about 70% of the label share, which works out to something between $7 and $12.5 million split four ways. The A2IM, the indy label RIAA, says it gets the other 30%.
SoundExchange doesn't have to show anyone their books, but estimates of annual royalty payouts run between $20 and $35 million, depending on what number favors SoundExchange on any given day. In other words, it looks as if SoundExchange needs to spend $35 to deliver $1 in benefits.
Ain't monopoly a wonderful thing?
The IRS does keep an eye on non-profits who must file informational returns. While they keep the criteria secret, a general rule of thumb is that expenses in excess of 20% of annual revenue raises a red flag to the auditors. There are exceptions; small non-profits can have higher expenses, and at start up, large ones are generally given some time to bring expenses down to an allowable level. In a press interview two years ago, John Simson said that SoundExchange operational expenses were still above 25% of revenue, but because they don't have to show their books to anyone, no one knows if he was telling the truth or not.
The real point here is that SoundExchange doesn't want the $500 for each channel. They want those webcasters to go away. SoundExchange is probably very happy with being able to absorb money from the "unfound artist" accounts when they need additional operational money (someone has to pay for the top shelf liquor at the Christmas party), so having to spend the extra billion would mean more work for them. If SoundExchange can run off Live365, Pandora, Yahoo and Real, tbeir job gets that much easier, and they don't need the per-channel fees.
We are recording artists.
Among us, we have quite a number of gold and platinum records and almost too many awards to count. Some of us have been recording for nearly 50 years. Many of us are recording today, but you wouldn't know it from AM or FM radio. At best, you might hear one or two of our old songs every once in a while on some Oldies station. You never hear our new stuff.
So we LOVE Internet radio. There are Internet stations that play our older stuff, which is great. Even better, there are Internet stations that play our new songs, and people who have heard them tell us we sound better than ever. Those stations are often run by fans who love the music as much as we do. They aren't in it to make money; they want to share what they love, and they are even willing to pay royalties out of their own pocket to webcast our music.
Now, many of those Internet stations that we love are in danger of being turned off forever.
In March, the Copyright Royalty Board (CRB) of the Library of Congress announced a set of new royalty rates for Internet radio stations. Instead of giving these stations an option to pay a percentage of what they made from advertising, or setting up a single amount for non-commercial and hobbyist stations to pay, the CRB established high rates that will drive all but the biggest stations off the 'Net.
We think that what's going to be left will sound like regular AM and FM radio. That means you won't be hearing us much on the Internet (which means, anywhere at all) unless these rates are changed.
SoundExchange, the organization that collects those royalties and pays them out to us, is saying it thinks there are too many Internet stations, and that maybe the ones that can't make money should be "weeded out" for the good of the artists. We don't understand how having fewer stations playing music can be good for artists. The more stations there are, the more music, and more artists, will be heard. That's just logical. It's also what really is good for the artists.
The idea of "weeding out" stations that don't make enough money to pay the royalties is just ridiculous. A station that has to sell advertising to make enough to pay the royalties is going to have to increase its audience so that it can charge more for commercials. That means it's going to have play music thousands of people will tune into more of the time. That means it will sound like regular radio. Another regular radio channel not only won't do us any good, it will do us harm.
Don't get us wrong. We like to be paid for our music. Internet stations should pay a reasonable fee for playing our music. Big commercial stations should pay what a big commercial station can afford, small commercial stations should pay what they can afford, and college, non-commercial, and hobbyist stations should pay a reasonable fee, too. That's a fair solution: They get to play our music. We get heard, and we get paid. Those stations keep broadcasting, which means they keep paying the fees, and we keep getting paid. That sounds like everyone wins.
These fees should all go through SoundExchange, too, because if they do, we get our share. That's the law. Under the new system, the label can take the Internet license fees directly, and they don't have to pay the artists anything. Our experience is that if they don't have to pay us, they won't.
We already have heard about some radio services negotiating directly with the labels, and that isn't good news for artists. SoundExchange has quoted some artists who are defending the high royalty rates, but we suspect those artists don't know the whole story.
In 2002, the Library of Congress announced royalty rates that threatened to kill Internet radio before it began. It literally took an act of Congress to replace those rates with something more reasonable and logical. The result was a structure that allowed Internet radio to grow and prosper, and that got many of us paid the first royalty checks we'd seen in a long, long time.
So it is time you let your voice be heard. Call,
Direct negotiation of rates between copyright holders and webcasters will not only avoid the statutory rates, they will avoid the statutory obligations to pay artists 50% of the royalty stream and to pay artists their share directly (rather than go through the copyright holding label).
In short, direct negotiations screw the artists.
Business as usual.
Slashdot Mirror
The great thing about this "administrative fee" fiasco is that it really gives no place to stand to the Congressional supporters of the RIAA/SoundExchange. They're stuck with it. Representatives Berman and Coble, both unabashed industry apologists have already "written" to SoundExchange asking them to make accomodations for small commercial and non-commercial webcasters. (I say "written" because it is pretty obvious all they did was sign a letter SoundExchange drafted which was intended to give them political cover from the IREA campaign.) Even those guys have to be wary about trusting SoundExchange again. Either Berman and Coble have to admit they didn't appreciate the full impact of the CRB decision by not addressing the administrative fees (which is pretty silly, given their committee leadership positions), or admit they intentionally didn't mention them, which would be an admission that they're fools. Even better than all that embarrassment, however, is the pure simplicity of the administrative fee issue. There's no way to avoid the result - $1 billion in fees to collect $20 million in revenue. Even some of the potted plants who serve in the House can understand the difference. They don't have to figure out the fraction-of-a-penny pay-per-play rates, they've got a number with all those zeros to focus on. This might be the factor that puts IREA over the top. I can't see someone from SoundExchange actually testifying that they need a billion dollars to run their operation. Someone is sure to ask if the real purpose of the $500 per channel fee is to run off as many large webcasters as possible, and they aren't going to be able to give an honest answer. The committee may not notice, or care, but the public will hear it.
And remember that the $20-35 million is split 50/50 between artists and copyright holders (read labels). SoundExchange, however, sets aside a full 40% of the royalty pool for claims by artists they can't find. This is the money they get to keep after three years of not finding artists. The RIAA labels get about 70% of the label share, which works out to something between $7 and $12.5 million split four ways. The A2IM, the indy label RIAA, says it gets the other 30%.
SoundExchange doesn't have to show anyone their books, but estimates of annual royalty payouts run between $20 and $35 million, depending on what number favors SoundExchange on any given day. In other words, it looks as if SoundExchange needs to spend $35 to deliver $1 in benefits. Ain't monopoly a wonderful thing?
The IRS does keep an eye on non-profits who must file informational returns. While they keep the criteria secret, a general rule of thumb is that expenses in excess of 20% of annual revenue raises a red flag to the auditors. There are exceptions; small non-profits can have higher expenses, and at start up, large ones are generally given some time to bring expenses down to an allowable level. In a press interview two years ago, John Simson said that SoundExchange operational expenses were still above 25% of revenue, but because they don't have to show their books to anyone, no one knows if he was telling the truth or not.
The real point here is that SoundExchange doesn't want the $500 for each channel. They want those webcasters to go away. SoundExchange is probably very happy with being able to absorb money from the "unfound artist" accounts when they need additional operational money (someone has to pay for the top shelf liquor at the Christmas party), so having to spend the extra billion would mean more work for them. If SoundExchange can run off Live365, Pandora, Yahoo and Real, tbeir job gets that much easier, and they don't need the per-channel fees.
We are recording artists. Among us, we have quite a number of gold and platinum records and almost too many awards to count. Some of us have been recording for nearly 50 years. Many of us are recording today, but you wouldn't know it from AM or FM radio. At best, you might hear one or two of our old songs every once in a while on some Oldies station. You never hear our new stuff. So we LOVE Internet radio. There are Internet stations that play our older stuff, which is great. Even better, there are Internet stations that play our new songs, and people who have heard them tell us we sound better than ever. Those stations are often run by fans who love the music as much as we do. They aren't in it to make money; they want to share what they love, and they are even willing to pay royalties out of their own pocket to webcast our music. Now, many of those Internet stations that we love are in danger of being turned off forever. In March, the Copyright Royalty Board (CRB) of the Library of Congress announced a set of new royalty rates for Internet radio stations. Instead of giving these stations an option to pay a percentage of what they made from advertising, or setting up a single amount for non-commercial and hobbyist stations to pay, the CRB established high rates that will drive all but the biggest stations off the 'Net. We think that what's going to be left will sound like regular AM and FM radio. That means you won't be hearing us much on the Internet (which means, anywhere at all) unless these rates are changed. SoundExchange, the organization that collects those royalties and pays them out to us, is saying it thinks there are too many Internet stations, and that maybe the ones that can't make money should be "weeded out" for the good of the artists. We don't understand how having fewer stations playing music can be good for artists. The more stations there are, the more music, and more artists, will be heard. That's just logical. It's also what really is good for the artists. The idea of "weeding out" stations that don't make enough money to pay the royalties is just ridiculous. A station that has to sell advertising to make enough to pay the royalties is going to have to increase its audience so that it can charge more for commercials. That means it's going to have play music thousands of people will tune into more of the time. That means it will sound like regular radio. Another regular radio channel not only won't do us any good, it will do us harm. Don't get us wrong. We like to be paid for our music. Internet stations should pay a reasonable fee for playing our music. Big commercial stations should pay what a big commercial station can afford, small commercial stations should pay what they can afford, and college, non-commercial, and hobbyist stations should pay a reasonable fee, too. That's a fair solution: They get to play our music. We get heard, and we get paid. Those stations keep broadcasting, which means they keep paying the fees, and we keep getting paid. That sounds like everyone wins. These fees should all go through SoundExchange, too, because if they do, we get our share. That's the law. Under the new system, the label can take the Internet license fees directly, and they don't have to pay the artists anything. Our experience is that if they don't have to pay us, they won't. We already have heard about some radio services negotiating directly with the labels, and that isn't good news for artists. SoundExchange has quoted some artists who are defending the high royalty rates, but we suspect those artists don't know the whole story. In 2002, the Library of Congress announced royalty rates that threatened to kill Internet radio before it began. It literally took an act of Congress to replace those rates with something more reasonable and logical. The result was a structure that allowed Internet radio to grow and prosper, and that got many of us paid the first royalty checks we'd seen in a long, long time. So it is time you let your voice be heard. Call,
Direct negotiation of rates between copyright holders and webcasters will not only avoid the statutory rates, they will avoid the statutory obligations to pay artists 50% of the royalty stream and to pay artists their share directly (rather than go through the copyright holding label). In short, direct negotiations screw the artists. Business as usual.