SoundExchange's Hollow Offer to Small Webcasters


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Wackbag Staff
Aug 14, 2000
Daily Tech

SoundExchange's Hollow Offer to Small Webcasters

Paul R. Gathard (Blog) - August 27, 2007 1:52 PM

SoundExchange Makes a Hollow Offer to Small Webcasters In Order To Fend Off Congressional Action on the Internet Radio Equality Act

(Editor's Note: Paul R. Gathard is president of Barnabus Road Media, a company that provides streaming radio services to several hundred commercial radio stations throughout the United States, Canada, and Europe, as well as several internet-only radio stations. Mr. Gathard has also served as an advisor to Small Webcaster Community Initiative. As such, Mr. Gathard is in a unique position to understand the needs of both commercial and non-commercial webcasters, and has proposed a royalty solution he sees as reasonable as it is equitable.)

SoundExchange’s offer to extend the terms and provisions of the Small Webcaster Settlement Act (SWSA) of 2002 to the smaller webcasters that qualify for this special treatment rings especially hollow, when you consider by their own statistics, that during 2006 only 52 service providers qualified for and applied for SWSA treatment.

Within these 52 service providers are some stream aggregators that may provide a streaming service to thousands of Internet Radio Stations. Only SoundExchange can elaborate on whom this offer may apply.

Only 52 of the 1000 or so registered service providers asked to pay their copyright bills under this supposedly life saving SWSA provision last year. Will the SWSA provisions also apply to all of the other small commercial webcasters that number in the hundreds? What about the onerous limits exacted on non-commercial webcasters?

Why will SWSA qualified webcasters receive preferential treatment on up to 5,000,000 Aggregate Tuning Hour, or ATH, per month and non-commercial webcasters only 159,400 ATH per month and commercial webcasters no relief at all?

The answer appears to be the reality of SoundExchange’s offer to extend the SWSA rate rules to small webcasters was not intended to be of economic reality to all but very few service providers. Even then, the stream aggregators will blow through the 5,000,000 ATH monthly thresholds easily and most service providers will have a very difficult time tracking SE member artists versus non-member artists. So, who does that leave that will actually qualify and benefit from this magnanimous SoundExchange offer?

This unilateral offer is a publicity stunt intended to misdirect Congress into believing SoundExchange has actually participated in earnest negotiations with smaller webcasters. The reality of this offer may turn out to be that SoundExchange intends no such negotiations and this action is intended to forestall Congress from passing the Internet Radio Equality Act.

In my opinion, SoundExchange fears Congress will set aside their windfall high royalty rates mandated by the CRB judges in March 2007. SoundExchange will say or do anything except actually compromise their superior negotiating position granted by the CRB judges last March.

SoundExchange is attempting to present themselves as an angel of light and beacon of webcaster confidence, when in fact; the literal Devil is in the undisclosed detail. I don’t want to be cynical in thinking Congress will believe this hollow gesture, but if Congress is looking for a way to back out of this fight, it may decide to accept SoundExchange as having made an earnest attempt to negotiate a settlement. I pray this is not the intention of Congressional leaders. One House Sub-Committee asking SoundExchange to extend the SWSA rules to webcasters does not constitute a two party negotiation.

Misdirection, omission of detail and heavy handed tactics appear to be the hallmark of a music industry PRO bent on establishing the CRB issued copyright royalty rates as the true benchmark for the market value of digital performance royalty rates. It matters not the rates they think to be so correct are flawed as a result of the rate establishment process. The new CRB rates are inherently unfair to webcasters of all types and sizes. Congress gave SoundExchange the CRB rates and only Congress can take them away.

I am suspect of SoundExchange in so many ways as to hold their very establishment as a Provider Rights Organization in serious question. I am suspect of SoundExchange because of their too close affiliation with the RIAA, the make up of their Board of Directors and their lack of openness to fully disclose their operating policies and lobbying actions.

I have no direct knowledge of misconduct by SoundExchange officers, but this organization just doesn’t pass my business ethics smell test and this is so especially when I consider they are a non-profit organization. It seems their own budget and revenue requirements drive their actions more than their half-hearted efforts in finding and making royalty payments to artists.

I sincerely hope our US Representatives and Senators are not duped into believing SoundExchange has negotiated anything with any smaller webcasters. They have not.

SoundExchange has made a nice sounding unilateral offer to what may appear to be a large number of webcasters, but the true number of webcasters able to apply the SWSA opportunity without major drawbacks will prove to be very few indeed.

Here is my take on the bottom line. Until Congress sets the CRB ruling aside, SoundExchange will not loosen their grip on the March CRB rates and their position will remain that any copyright royalty rate less than the new CRB rates are “discounted” and subject to one-sided provisions dictated by SoundExchange exclusively.

There will be no sincere negotiations with SoundExchange until the heavy hammer of the CRB’s punishing copyright royalty rates has been removed from possibility.