With July 15 now less than a month away, the new Internet Radio music royalties are still scheduled to go into effect.  Congressional legislation is slowly being considered, and a Motion for Stay to put the regulations on hold pending appeal has been filed (see our post here).  Some discussions on settlement have also taken place, though no deals have been done.  Without some action, payments under the new rules will soon be due.  See our memo, here, for more details on the CRB decision, and all of our posts on this issue, here.  While the legal and legislative actions are still proceeding, and the clock is counting down, the coverage in the popular media continues to grow.  In two recent discussions of the issue, SoundExchange spokesmen seem to blame Internet Radio for the current woes of the recording industry and to justify the high royalty rates through comparisons to the illegal pirating of copyrighted music.  All of these issues will be discussed at a seminar that I am moderating later this week at the Digital Media Conference in the Washington DC area.

One example of SoundExchange’s recent claims can be found in a series of articles found on the Los Angeles Times website featuring a "Dust-up" exchange of viewpoints on the Internet radio issue,  between Kurt Hanson, owner of Internet radio broadcaster Accuradio and the publisher of the Radio and Internet newsletter, and Jay Rosenthal, a Board member of SoundExchange.  Mr. Rosenthal, in attacking the value of Internet radio as a promotional tool, said that while webcasters might excite people about new music, most new music is now illegally downloaded so that the promotion doesn’t actually help the artists.  But, as Kurt Hanson points out, that would essentially be an excuse for never promoting any music in any venue – in fact it seemingly would be an excuse for shutting down the recording industry.  If music promotion just leads to illegal file sharing sites, and little or no music is ever to be sold again, why bother?  Does the recording industry really expect to make up for lost sales by receiving royalties from Internet radio?  Yet the same point seems to be made by SoundExchange President John Simson in a piece done by the PBS program NOW.  That program focused on the Internet Radio station Radio Paradise and how its popular, eclectic music mix will be silenced if the new royalties go into effect.  In that story, Simson also points to illegal downloading as causing the woes of the music industry, seemingly implying that this justifies outrageous royalties – yet offers nothing to tie downloading to Internet radio.

SoundExchange’s recent discussions of the issues seem to accept the fact that the royalties will put much of the advertising-supported Internet radio industry out of business.  Initially, when the decision was first released, the public responses of SoundExchange seemed to be that the industry was crying wolf – that it could really afford these rates.  That claim is not heard as often any more.  As more evidence was advanced to show that the royalties would exceed the revenues of most ad-supported webcasters, the next argument advanced by SoundExchange seemed to be that it accepted that most webcasters would go out of business, but it was the webcasters’ own fault because of their lousy business models.  That too seems to have quieted, as Congress seems to want there to be diversity among webcasters(see our article about the settlement offer made to small webcasters after Congressional pressure).  Now, it seems that illegal file sharing has become the principal justification for the rate – almost as if the claim is that if the record industry is suffering so should the Internet radio industry.

Of course, there are other justifications offered for the rate – that the decision is one that was legally arrived at and should therefore be followed, that big webcasters can indeed afford the high rates, that the copyright belongs to the artists and labels and they ought to be able to do what they want with it.  We will see in the next 30 days how all these arguments play out.  We will be exploring these issues on a panel I will be moderating at the Digital Media Conference in Silver Spring, Maryland on Friday, June 22.  The panel will feature representatives from SoundExchange, from NPR and DiMA, and Kurt Hanson from Accuradio and the Radio and Internet Newsletter.  If you plan to be in the DC area on Friday and are interested in this issue, you may want to attend.