Thursday, July 19, 2007


This article originally ran on the 7/19/07 issue of Metroland.

You may have seen a lot of headlines over the weekend screaming about the death of internet radio that was supposed to happen on Sunday. It didn’t happen. Here’s what happened:

New royalty rates set by a federal board were supposed to go into effect on Sunday. These rates were proposed by the major record companies (who would be collecting the lions share of the revenues) and rubber-stamped last Spring by the federal board. Compared to the rates previously in effect, the new rates were insanely high, and, unbelievably, retroactive. So, if these rates went into effect, many internet stations, which are fledgling and don’t exactly have great revenue streams, would be not only out of business, but bankrupt as well. The bill for the retroactive royalty payments would simply transform the stations into hopeless debtors.

The effective date of the new rates was set for last Sunday, and in the meantime web advocates went to court and to Congress to get the new rates repealed. They struck out in court late last week, and meantime Congress has been taking a hard look at the issue, and telling the parties to try to resolve all of this with a compromise agreement. SoundExchange, the record company-backed organization that’s in charge of collecting and disbursing these royalties, has made some significant offers of reduced royalty obligations, especially for the smallest webcasters, the folks webcasting out of their basements, the real fringe folks. And negotiations are continuing.

So right now it looks like this: the new rates are technically “in effect”, but they’re not being enforced while Congress huffs and puffs and the various players are coming closer and closer to reaching some sort of agreement. The big issue right now seems to be how long a rate détente will last—larger webcasters want a long term agreement, so they can have some certainty going forward that they can continue to invest in their ventures and not have this royalty nightmare repeat in a couple of years. The record companies want a short-term agreement, because if web radio blossoms and becomes a big money deal, they want to share in the action through a greater royalty flow.

Meantime, web radio looks generally safe, at least for now. The tiny community radio station I’m involved with, for instance, won’t see a dramatic increase in royalty payments for its web stream, which maxes out at 20 listeners. Neither will the lunatics who play Hawaiian death metal 24-7 for a handful of fellow lunatics around the world. The folks who’ll get dinged the worst will be the big webcasters, like AOL and Yahoo, who can readily pay the royalties, even if the money isn’t coming directly out of their web-radio operations.

In other news, the renegade Russian download site, AllofMP3, is back. The site, which sold songs for a fraction of what iTunes charges, claimed that its operations were perfectly legal under Russian law, and even had a Russian court decision to back it up. Record companies everywhere claimed they weren’t getting paid, and tons of diplomatic and economic pressure was brought to bear on AllofMP3, including a pullout of service support by Visa, Mastercard and Amex. For a while the only major credit card that would work was Diner’s Club! The site disappeared a couple of months ago, but was resurrected this week with the new name The site looks and feels the same as AllofMP3, and for now it’s claiming to accept all major credit cards.

Who knows whether the site will still be there by the time you read this, but it took the powers that be a couple years to kill AllofMP3, so maybe it’ll hang in for a while. You can bet that there are a bunch of lawyers, diplomats, and trade officials going through conniptions right now.

Finally, a British economist just published a study about the optimal term of copyright. Using a dizzying array of assumptions, theories, formulae, calculations, and big words, this guy came to the conclusion that the societally optimal term of copyright is about 14 years. The term of copyright has been repeatedly increased since the laws were first created in the late 1700’s. 14 years is a lot shorter than the present term of the life of the author plus 70 years, which is tantamount to forever. It’s also pretty remarkable (or not) that 14 years is the original term of copyright provided for in the Copyright Act of 1790. You can read the study at


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