Quick Roundup 209

Thursday, June 21, 2007

Taking out the Trash

Be sure to claim your pickings in the Dumpster Queen competition at the end of my post on freegans! Currently, Ron Paul is tied for the lead!

Here's a First

One guy on my blogroll fisks another.

Darren Cauthon, commenting on a recent government decree that retroactively raised the rates that Internet broadcasters have to pay, threatening some with bankruptcy, makes many very good points, especially his central one:

If Dismuke was really concerned about the property rights of music owners and if he really believed that the free market was "honorable," he would advocate for the elimination of the CRB and the compulsory license for internet broadcasts.
I agree that in the murkiness, intellectual and political, of any such debate in the context of our welfare state, that one must be clear about where one stands in the grand scheme of things -- in this case, being an advocate of capitalism.

Where I think he is out of line is the tone he takes in his criticism of what he calls "the webcaster-side of the net radio royalty rate debate", which he states (through attribution) that I am on and sounds like he regards as anticapitalist. I will not attempt to speak for Dismuke on that matter, but I will start by saying that I plainly stated long ago in a PS to the first post I ever made on this subject that the government should get out of broadcasting altogether and that I had major reservations about the webcasters' side:
After examining the Live365 site, I must add a major reservation to this post. From the table at the top of the page, it appears that no rates had been set for 2006. Leaving aside whether the government should be involved at all in setting royalty rates, it seems foolhardy on everyone's part to have entered any kind of contract to broadcast anything without a preexisting, agreed-upon rate. If I am drawing the right conclusion from this table, then in this sense, the rate increases are not really ex post facto. (But then, if the government is "supposed to" set the rates, why hadn't it at least set a temporary one?) [Update: Dismuke elaborates further on this in the comments. Based on what he says, I have no problem with asking Congress to intervene on an ad hoc basis. Needless to say, Congress ultimately should not be setting rates.]

Also, for the record, I cannot fully support the aims of Live365, which are stopgap measures at best. Ultimately, the government must get out of broadcasting altogether, including auctioning off the airwaves, and act only to enforce mutually agreed-upon contracts between buyers and sellers of copyrighted works. I would be very interested in hearing more on the various subjects this episode is bringing up from others more knowledgeable than myself.
Having said that, I do think Dismuke should have clearly and explicitly stated his fundamental opposition to the CRB. Too bad that not a single one of the copyright owners that I know of did the same, either. True, some webcasters probably do want to use the government, as Cauthon puts it, to steal from copyright owners. But apparently, many copyright owners are more than happy to abuse the same tool for the sake of establishing a higher rate than they could get on a free market.

This debate reminds me of a comment I recall from an Objectivist intellectual about not wanting to get drawn into the Dubai Ports World controversy some time ago. The whole debate existed because we are establishing a welfare state abroad and a garrison state at home rather than fighting a war. In other words, whatever the merits of that debate, it basically amounted to a distraction from the central issue, which is: How do we defeat our enemy? Likewise, this debate exists only because our government is wrongly involved in setting broadcast royalty rates rather than simply enforcing agreements (and arbitrating them if necessary) between consenting parties.

A mixed economy inherently makes intellectual debates over political issues difficult by hiding black-and-white issues, like whether the government should be in the business of setting rates at all, behind skirmishes between factions of sometimes barely perceptible shades of grey. While I completely agree with Cauthon that this means that advocates of capitalism should be exceedingly diligent about where we stand on the issues fundamental to such debates, I found his tone unnecessarily combative considering the fact that he plainly seems interested in persuading like-minded people of his point.

When I first saw the comment about the Dubai Ports World controversy, I wondered why the Objectivist intellectual I was reading seemed so irritated. Now, I understand. (This is not intended as a slam of Darren Cauthon. My irritation is aimed squarely at myself for being too fast to jump into this debate.)

To Quote Eric Cartman: "Awesome!"

Via email:
Dear Subscribers and Friends of The Objective Standard,

The print version of the Summer issue has been mailed, and the online version has been posted to our website. Also, we've enhanced our website to enable the purchase of single and back issues online.

The contents of the Summer issue are:

From the Editor

Letters and Replies

The False Promise of Classical Education [Link is to entire article.] by Lisa VanDamme

Neoconservative Foreign Policy: An Autopsy by Yaron Brook and Alex Epstein

"The Balm for a Guilty Conscience": Moral Paralysis, Appeasement, and the Causes of World War II by John David Lewis


Craig Biddle, Editor

The Objective Standard
[Some links dropped. Minor format changes. Short descriptions of all articles can be found by following the link to the contents. --ed]
I look forward to firing up the grill, sipping a beer, and kicking back with some very good reading any day now!

Politically Incorrect Indians

Reader Dismuke emails me a link to some interesting photos like the one shown here and makes the following comment:
Here are pictures of some windows in an Indian office of some sort that I came across in Okmulgee, Oklahoma on my way back from Tulsa. I think they are hilarious.

What is about the most politically incorrect substance that exists? Tobacco, of course.

And what is the most virtuous group of people according to the politically correct? Native Americans, of course.

So these pictures have to cause the politically correct who pass through Okmulgee to scratch their heads a bit.
Not only did they smoke, the Indians weren't exactly the "noble savages" of environmentalism the left would have us believe.

-- CAV


: (1) Added a parenthetical note. (2) Fixed a hypertext anchor.


Darren said...

Gus, I'm sorry for the confusion on this issue. I absolutely did not mean to include you as one of those in the "webcaster-side" of the debate, nor was I meaning to address you at all in the post. I did link to your the comment on your site that first directed me to Dismuke's original post, just because that's where I first learned about it. I assumed that anyone who clicked on the link would immediately be taken down to the commenter I addressed, not you, but I'm sorry about that.

Just to be clear, when I referred to the "webcaster" side I meant those who are pushing the government for the compulsory royalty licenses. I've read most of what you've written recently on it, and based on that I never thought you should be included in that group.

I know I usually sound combative when I write, you're not the first person to tell me so. It's something I've been trying to overcome. I was not screaming or yelling at my keyboard as I wrote that, I swear.

I'd like to address a couple other things you wrote, but I won't have time until later. Sorry if I broke some net-etiquette rules, I'm new to writing like this! And... what is a "fisk?"

Gus Van Horn said...

Adjusting between polemic mode and persuasion mode is something most opinion writers, including myself struggle with. I figured this was the case and wasn't so much offended as feeling the need to clarify myself on a point I thought I'd already been clear about....

As for the term, "webcaster side", I remain a little confused by your usage, possibly because I have not spent as much time on this subject as you have. Do you mean generally people who want the CRB to set rates? If so, many of the "anti-webcasters" would fall into this classification. The only difference would be that they want higher rates.

I was using the term "fisk" very loosely, but FWIW, this is a good introduction to the term.

Darren said...

The two sides in the debate are, roughly, the CRB and record companies against the webcasters. The issue between the two are the royalty rates the CRB has set for the compulsory license that webcasters use to play the music. One wants high rates, and the other wants lower rates.

You are right that copyright owners aren't arguing for their rights, and when I argue against the webcasters I'm not necessarily siding with the copyright owners. Like many debates, sometimes the correct position is the one neither side is taking. Still, the fact that copyright owners won't or can't argue for their rights doesn't mean they don't have them. The copyright owners seem to be using the current situation to retain control of their product and make money, and the webcasters (those that push the "Save Net Radio" idea) are trying to use other people's property without permission. That's why I've been standing so strongly against them.

I don't see how copyright owners can use this situation to establish higher royalty rates. No matter how high the CRB sets its rates, webcasters are always free to walk away or negotiate lower rates outside of the compulsory license. However, if the CRB sets its rates too low, it would give webcasters a fantastic tool to make record companies do what they want.

The only leverage I can see the ruling giving record companies is how last year's rate was set today and at a high amount that could put a severe financial hurt on small webcasters who play music as a hobby. However, I believe that SoundExchange announced a month or two ago that they were going to let smaller webcasters continue paying the current, low rate (effectively taking them off the hook) and were only going to raise the rates for businesses that are being built on the compulsory license.

Dismuke said...

I consider Cauthon's posting to be a highly rationalistic and "beyond disgusting" distortion of my viewpoint.

To set the record straight, I do not and never have supported statutory royalties or the CRB process. I could just as easily and just as unjustly twist Cauthon's previous remarks in Gus Van Horn Blog comments into suggesting that he supports the CRB process.

Cauthon suggests that it is somehow webcasters who are the ones leading the charge for the CRB process and statutory royalties. But the reality of the matter is the process was established by the Digital Millennium Copyright Act which was written largely in accordance to what the RIAA's lobbyists asked for and at a time when what very few webcasters there were had minuscule audiences and zero political clout. And it is SoundExchange - which was established by and for a while run by the RIAA - which is the loudest and staunchest supporter of the CRB process and statutory royalties. Furthermore, the very worst aspects of statutory licensing have been part of our copyright laws since 1909 in the form of compulsory mechanical licenses which allow record companies to issue performances without copyright holder permission. This law has been around long before there was any Internet or any Algore to invent one - and it was advocated by the record labels who take advantage of it to this very day. To single out and indict webcasters for the evils of statutory licensing is, at best, indicative of ignorance of the issues or, under a less benevolent possibility, deliberate context dropping.

But to address the distortion of my position. In my posting I very clearly prefaced my conclusions advocating a percentage or revenue model as opposed to the crippling per song per listener model with the following:

"So long as the government is setting the rates...

THAT is the context in which my posting was written. And for operators of Internet radio stations right now threatened with impending bankruptcy, that is the ONLY context which is relevant. The FACTS OF REALITY of the situation is that, whatever the rates end up being after July 15 (the date that the CRB ruling goes into effect and which, if unchanged, will immediately bankrupt the vast majority of station operators), those rates will have been set by the government

Whether or not statutory royalties and the CRB process should exist is certainly a valid and, indeed, important, question for discussion. But in the context of the situation that Internet radio operators must deal with at the moment, it is a question which is entirely academic. To do away with statutory royalties would require a major overhaul of our copyright laws and an outright repeal of or, at the very least, major alterations to the Digital Millennium Copyright Act. None of that is going to be on the table anytime soon - and certainly not before webcasters are retroactively driven into bankruptcy. The odds of a truly free marking existing any time soon with regard to performance royalties even less than one coming into being with regard to the fields of medicine or education - even less so because the lobbyists of the RIAA will be the very first to oppose one.

Recognizing the realities of a mixed economy and acting accordingly in order to remain alive in that context does NOT constitute an endorsement of a mixed economy.

To be very clear about the matter: I staunchly oppose the very notion of statutory licensing - just as much as I oppose the RIAA's attempt to use the statutory licensing process as a means to prop up its technologically and economically obsolete industry by killing off emerging competition. Under a free market, they would never get a way with it - their industry would be even further along on its downward death spiral than it already is.

And for the record, I actually have put forth a very specific proposal advocating the elimination of statutory licensing and updating the copyright laws to allow for a genuine free market which would respect the wishes of all copyright owners and not just the RIAA affiliated copyright owners - something which I rather doubt that Cauthon has done himself. I don't, of course, expect Cauthon or Mr. Van Horn's readers to already be familiar with my proposal as it was first published a couple of months ago in a members-only broadcaster forum. But one of the broadcasters there asked for and received my permission to repost it on his website.

So that nobody is in doubt about where I stand as a result of Cauthon's distortion of my position, I will reproduce below my proposal in its entirety. The handful of points that Cauthon has made that might have validity when considered outside the context of his posting are more than adequately addressed in it. I also point out why the Orren Boyle type mentalities at the RIAA would NEVER stand for such a free market approach to come into existence.

So that there is basis for potential distortion of my position, the "benefits" I refer to in my first paragraph are NOT an endorsement of statutory licensing but rather an acknowledgment that it has at least provided some process of legality to a situation where previously existed nothing but anarchy in which no intellectual property rights were acknowledged or defined and which made it impossible for either party to act. Whatever my negative views of statutory licensing, they do constitute the very first time in American history that a public performance property right with regard to sound recordings - a right which very few webcasters question.

- - - - -

A Free Market Answer To Statutory Royalties - And How It Would Kill The RIAA

I actually have a problem with the very notion of a compulsory license - though I agree completely with what you describe as its benefits and that HR 2060 and NOT the DMCA should be our object of focus right now.

My problem with the compulsory license is that it is a rather pathetic and grotesquely unfair way of protecting intellectual property rights. The fact of the matter is that not all owners of intellectual property have similar interests in the marketplace. Indeed, as we have seen, the marketplace interests of the vast majority of intellectual property owners - i.e. the independents - are very much at odds with interests of the RIAA labels. In a free marketplace, everyone is able to battle it out and everything is ultimately decided by what the customers have to say. Under a compulsory license, everything is pretty much determined in advance by a governmental body and the one who wins is usually the one with the largest amount of political pull.

This is exactly what we have seen with the CRB which has set rates at a level that favors the interests of the lowest common denominator recordings of the RIAA labels by basically making it too expensive for broadcasters to stream less famous artists and niche genres and thus depriving them of the valuable Internet radio exposure they have come to depend on. In other words, the CRB basically has set itself up as the agency that exists to protect the interests of the RIAA by keeping emerging competitors from gaining access to the marketplace.

One of the cardinal rights of ownership is the ability to charge whatever price one wishes and is able to voluntarily get. If you make pencils and want to sell them for $100 each and someone is dumb enough to buy them - go for it. Likewise, if a copyright owner wishes to charge $100 per song per listener or to not license his recordings at all - well, that is a major part of ownership and he should have every right to do so. And likewise, we have every right to treat them the same way we would someone who offered to sell us a ten cent pencil for $100.

In reality, however, people do not charge $100 for ordinary pencils. And, unless there happens to be a temporary shortage of certain raw materials, nobody goes around complaining that pencil prices are outrageous and pencil manufacturers are not at each others throats over what price pencils should sell for. The marketplace takes care of that. It ought to do the same thing with regard to what price, if any, broadcasters pay for royalties.

Here is basically what I propose in place of compulsory licensing:

When a sound recording is copyrighted, the automatic default will be that NO license is required for public performance. Copyright holders who are eager for exposure and publicity might consider this to be their very best option - and it certainly will give broadcasters a HUGE incentive to play their material.

Copyright owners who do not wish to allow free public performance of their material have the option of specifying which Performance Rights Organization (PRO) they wish to license their material through - or they have the option of requiring that any license must be granted by the copyright holder exclusively.

Note that I say "which PRO." The notion that SoundExchange should be a monopoly is absurd. If the RIAA wishes to license all of its material through SoundExchange for outrageous rates - then it should be able to do so. But it does NOT have the right to demand that all other copyright holders be forced to either do the same or else give the material away for free. Copyright holders who wish to charge rates that are more reasonable have every right in the world to form their own PRO for such a purpose.

What I also propose is that every sound recording sold carry a notice of the licensing requirements. For example: "Public performance license granted" "Public performance license through SoundExchange" or Public performance through SoundExchange Competitor X or "Must contact copyright holder for public performance license." The Library of Congress would also maintain a database of all recordings under Federal copyright where broadcasters could quickly and easily check the status and licensing requirements of any recording.

Under my proposed system, if the RIAA wished to charge outrageous rates for its material, it would be very easy for broadcasters to identify such recordings and refuse to buy them or include them in their playlists. And it would be very easy for broadcasters to identify those copyright owners who DO want airplay and are willing to either give it away for free or else charge reasonable rates.

Such a system would protect the rights and interests of ALL copyright holders. It also would enable the RIAA to get what it claims to want - the high prices it claims its recordings are worth.

But the fact of the matter is, if such a proposal was put forth, the RIAA would fight it tooth and nail. A free marketplace is the LAST thing they want - because they know they cannot survive in one.

SoundExchange and the RIAA is lying through its teeth when it says that Internet radio airplay does not have value. Who gets airplay and who doesn't is the only thing this royalty battle is about. The RIAA wants to make sure that only the mass market products of the Big Four get Internet airplay - which is why it has tried to use the SoundExchange monopoly to price everyone else out.

If a free market were to come about and the RIAA charged the sort of rates that they have pushed through the CRB - well, Internet stations would have little choice but to pull RIAA recordings and play only those which are more affordable or, at the very least, severely restrict the number of RIAA recordings which are played. What that would do, of course, is give greater airplay and more exposure to those recordings that are not so overpriced. This, of course, would only hasten the RIAA's demise as the extra exposure would enable audiences to discover artists that they most likely would not have otherwise and the RIAA's market share will decline even faster. Their only hope of being competitive in the market for Internet radio airplay would be to lower their prices to rates that make it attractive for stations to play them. The only reason they could get away with charging high prices would be if a recording is a huge hit - but if they don't get airplay on Internet radio, which will very soon replace FM as the medium where musical trends are set, they will not have any huge hits that anyone would be willing to pay high prices for. They will have priced themselves and not their competitors out of the market.

If the RIAA wants to price recordings out of the market for airplay, it should be free to do so - but only with its OWN recordings and not everybody else's. If the RIAA does not wish to participate in Internet radio - well it shouldn't have to. It can stand on the sidelines and become even more obsolete as Internet radio becomes more and more important in people's daily lives and in our culture. But it does NOT have a right to determine the conditions and terms that its emerging competitors must operate under in order for them to participate in the many wonderful things that Internet radio has to offer. Quite frankly, we need a system where the RIAA has to play by the same rules that everybody else does and where it has absolutely no more status or privilege in the eyes of the law and the government than does any other copyright owner.

The notion of a "willing buyer and a willing seller" being determined by a GOVERNMENT PANEL is absurd. Despite the pseudo-free market verbiage, such is NOT a free market approach. A system where the GOVERNMENT determines what prices ought and ought not to be is the premise of communism/socialism and not a free market. I am actually all for prices being set by "willing buyers and willing sellers" - provided that all parties are actually willing. Perhaps certain broadcasters would be willing to pay .0019 cents to stream some recordings - but no broadcaster in his right mind would be willing to play such a price for all recordings as the vast majority simply are not worth that much in terms of attracting audiences. And perhaps the RIAA labels are willing to sell performance rights to their mega hit recordings for .0019 - but no independent artists or niche genre artist in his right mind would be willing to charge that much for airplay for the exact same reason that pencil makers do not charge $100 for an ordinary pencil. If we are going to have a "willing buyer/willing seller" strandard then it actually needs to be decided by willing buyers and willing sellers - i.e. by a free market and NOT by the RIAA on grounds that it has political pull. And webcasters and independent copyright owners should not have to be forced to spend the time, money and energy to go out and acquire their own political pull in order defend themselves from the RIAA political schemes.

The problem with the compulsory license is that it is a "one size fits all" proposition for both copyright holders and broadcasters. As a consequence, the results will never be to everyone's satisfaction: either one side or the other or both will always feel that they are being screwed. In a free market, each player makes his own decision as to what he wants to charge and to pay - and if it does not work out, then only he is to blame. Under a free market, the only party that loses is the RIAA because it is no longer able to use its political pull in order to keep a flood of emerging competitors in check. It will be forced to compete in a marketplace where it has no special advantage over anybody else and is no longer needed or even particularly wanted anymore by either artists, customers or broadcasters. Establish a genuinely free market and the RIAA is toast because, quite frankly, it no longer has anything to offer that other players in the marketplace cannot do better and much more efficiently.

Sid said...

Since it was I who posted that link, I think I should respond.

I agree with you fully when you say that the ideal solution is for the government to get out. From what I understand of Dismuke's post, so does he.

Nevertheless, the reality in the US is that this won't happen any time soon. So for the RIAA to in effect set artificially high rates, for ALL music (not just that owned by the companies), AND to use the government to do it, is WRONG. (I believe the independent artists will have to join the RIAA to collect the royalties as well, though I'm not sure of this.)

Therefore I support the intervention by the US legislators, but purely as an ad hoc measure.

This is something like Rand's support for tax credits for private education, again as an ad hoc measure.

Dismuke said...

Gus Van Horn wrote:

"True, some webcasters probably do want to use the government, as Cauthon puts it, to steal from copyright owners"

Yes, there are such webcasters. They are called pirates. They operate illegally and do not pay any royalties at all. And if they CRB rates stand, the pirates will be the only stations that will remain on the air.

The webcasters who will be impacted by this are those who do pay royalties - and when it comes to the very largest and most successful webcasters such as Live 365 or Yahoo or AOL or Pandora, they pay dearly for them as the old rates were anything but cheap. The new rates will put them out of the webcasting business.

Here is something else to consider. One of the ways the rates are designed to kill off webcasters is through a $500 per channel administration fee which is clearly targeted towards Live 365 which aggregates thousands of small Internet stations (i.e., "channels), including some of Radio Dismuke's streams. SoundExchange claims that this fee is necessary to cover "administration costs."

Let's put that in context. Those $500 per channel fees for four major webcasters alone, Real Networks, Live 365, Yahoo and Pandora would add up to over $1 BILLION per year. That is on top of any royalties that they will have to pay. By contrast, last year SoundExchange collected $20 million in combined royalties for ALL Internet radio stations.

So it costs $1 BILLION to administer a measly $20 million worth of royalties? Even the Federal Government is not that inefficient.

And in the fact of such an absurdity webcasters are supposed to sit on their hands and just keep quite in the months leading up to their purposely planned extinction - and if they do complain, well they, and not the professional practitioners of political pull at the RIAA, are the statist, anti-capitalist bastards? I don't think so.

Gus Van Horn said...

To state something which may or may not be obvious: The preceding four comments have effectively been posted at once, as I found them in my inbox late last night.

For now.I am posting them with only cursory review. I may or may not decide to comment on them later myself.

-- CAV

Dismuke said...

Sid wrote:

"I believe the independent artists will have to join the RIAA to collect the royalties as well, though I'm not sure of this.

Actually, they do not need to join the RIAA.

In order to collect royalties, artists must join SoundExchange. While SoundExchange was founded and once operated by the RIAA and, for all intents and purposes, remains an RIAA puppet, it is technically a separate organization. To the best of my knowledge, an artist or copyright holder does not lose any rights by joining SoundExchange in order to collect royalties. (The way it works is statuatory royalties are split 50/50 between copyright holders and artists. With independent artists, that may or may not be one and the same person)

The big evil of SoundExchange to an independent artist and/or copyright holder is this: It is the ONLY Peformance Rights Organization (PRO) out there. It is a monopoly - and it functions in such a way to protect the interests of the RIAA labels from potential competition from the independents.

The need for a PRO is crucial. Cauthon's comments to the contrary, it is NOT a practical matter for most webcasters to seek licenses directly with individual copyright holders. That is an ENORMOUS amount of hassle in terms of time, energy and paperwork. There are something like 10,000 non RIAA affiliated record labels out there. Tracking them down and getting them to fill out the appropriate legal forms correctly - well, most webcasters are simply not going to do that. They will just find some other field of endeavor - which is EXACTLY what the RIAA wants. The result is that this kills off the one braodcast media where independents are able to enjoy airplay and to become discovered by new fans.

With the SoundExchange monopoly - well, the independents do not stand a chance at airplay because their music simply does not have enough of a following to justify a webcaster paying .019 cents per song per listener SoundExchange charges. To justify paying rates that high, webcasters have to generate VERY large audiences. If one only has a few hundred listeners at any given time - well, one cannot charge enough for advertising to pay for the cost of the sales calls to drum up the business let alone cover the royalties. And since the labor cost of tracking dozens or hundreds of independent labels down for a one-on-one license deal would be even more expensive, the independent would be totally shut out - again, what the RIAA is after in order to maintain its entrenched position.

The solution is what I proposed in my previous comments - a free market where there are multiple PROs that copyright holders can choose from and copyright laws which allow a copyright holders wishes with regard to performance rights be easily and immediately known to broadcasters.

Sid said...

Dismuke, I was thinking: wouldn't these PROs spontaneously evolve in a free market? As you say, they are required.

I'd be very happy if the government limited its role to punitive damages for breach of contract.

Dismuke said...

Sid asked:
"Dismuke, I was thinking: wouldn't these PROs spontaneously evolve in a free market? As you say, they are required."

Yes, they would - just as similar PROs, ASCAP, BMI and SESAC emerged with regard to composers' royalties. Indeed, BMI came into existence because radio stations were not satisfied with ASCAP's policies.

The proper function of government in this context is to identify and legally define the property rights of sound recording copyright holders with regard to public performance and to establish a process by which copyright holders can make their wishes clear and easily known to webcasters and others who might wish to perform their works.

It is NOT the proper function of the government to micromanage all aspects of the interaction between copyright holders and potential customers by dictating rates and setting up a government sanctioned monopoly which exists for the purpose of protecting a technologically and economically obsolete government sanctioned cartel from emerging competition.

What I do not yet know is whether some form of competitive PROs would be permitted to emerge under the present system. If that is the case, then that would certainly nullify many of the negative effects IN THE LONG RUN. But, even so, that does not change the fact that, as of right now, SoundExchange has a government granted monopoly over the wholesale, blanket licensing of ALL copyrighted music, including copyrights held by RIAA competitors and is being used to keep those competitors in check. The fact that future non-RIAA copyright holders and webcasters might be able to come up with a way to bypass and eliminate SoundExchange's monopoly over blanket licensing does not mitigate the injustice of those whose hard work and investments will be destroyed by the monopoly while it exists.

For more information on on the SoundExchange monopoly over blanket, wholesale licensing and why such licensing is crucial to webcasters and independent copyright holders alike, see this response I have just posted in response to Cauthon's assertions.

My guess - and a guess is all it is - is that the RIAA is not especially concerned about additional PROs emerging in the future. My guess is that the high powers that be at the RIAA know very well that they are technological dinosaurs and that their days are numbered. My guess is what they are trying to do is to use their political pull to buy time to keep them as relevant as possible and their legacy revenue streams coming in as long they can. The longer they can do this the more time they have to perhaps find some new area of endeavor or some new way to buy legislation that will give them artificial relevance in the future. An article in the New York Times recently said that it was widely acknowledged in the industry that this next Christmas season will be the very last year for heavy seasonal CD sales. After the New Year, things will fall apart very quickly as big box retailers who now account for 65 percent of all CD sales (which, considering the VERY limited variety that such stores offer, only goes to show how just a TINY fraction of all CDs produced account for the VAST MAJORITY of CD sales - and it is that tiny fraction of lowest common denominator type drivel that the RIAA labels make their money on) are expected to drastically cut back on the amount of floor space devoted to CDs and use it to sell more popular and profitable items.

If Internet radio is killed off next month - it will only be a temporary victory and reprieve for the RIAA. The best it can hope for is that Internet radio's demise will kill off the various devices that are about to come to market that will bring Internet radio to people's automobiles thereby preserving the RIAA labels' ability to promote music via their lock on FM radio for a while longer. Eventually, independent artists and a new generation of webcasters will find a way to circumvent SoundExchange - but by then it probably will not matter much to the RIAA as it will likely be reduced to a quaint, old fashioned organization that represents the legacy companies that hold the copyrights to the nostalgic music that people's parents and grandparents once listened to. In the very long run, what will happen to them is what happens to all Luddites.

Darren said...

I will respond to some of the things said in response to my original post in a while, but because I'm running a little short on time right now and I didn't mean for this debate to spill over to Gus' site, I'll keep this pretty short.

First, I don't think that SoundExchange constitutes a "monopoly." It is true that SoundExchange is the only place for webcasters to go if they want a blanket license over all music recordings, but this is true because of two reasons:

1.) The government used its power to create the blanket license (which we all seem to disagree with), and
2.) Every copyright holder to a sound recording have never gotten together and agreed to create such a blanket license.

There are thousands and thousands of copyright holders and more are created (and lost) every day, so I don't think a license that covers all recordings could ever exist in the free market. It only takes one copyright holder to pull his music out to destroy the blanket license.

A blanket license such as the one SoundExchange offers can only be created by the government through coercion (by keeping dissenting copyright holders from pulling out). So yes, SoundExchange does have a "monopoly" on that type of license in the sense that they're the only ones that have it and nobody else can get it, but that type of license should not exist at all.

A proper license is one in which all copyright holders have voluntarily agreed to be a part of. Such a license is possible, even in today's market. Like Dismuke stated, webcasters do have the ability to negotiate with individual copyright holders. That also means that copyright holders have the ability to form their own licensing organizations that cover their own music, if they wish. SoundExchange does not have a monopoly on the establishment of royalty rates.

As for the claim that I am sanctioning statism by siding with SoundExchange in this matter, I think I've made it clear that I'm against the very existence of such an organization. I would love if the debate were about whether we should demolish it, but unfortunately that option is not on the table. What is, though, is how much damage will be done to copyright holders who are forced into this situation. When I say that I want the fees to be set according to what organizations like the RIAA want (as opposed to lowering the fees to accomodate webcasters), I'm doing so because I want to lessen the damage that copyright holders face. If we must have an organization like SoundExchange, I want it to operate as close to the free market as possible. And in a free market, the copyright holders have the final say.

My position is no different than, say, if I voted for a law that allowed me to control how some of my Social Security payments are invested. My vote does not sanction the Social Security system, I'm just trying to put a limit on how much I'm hurt by being in such a system.

Dismuke said...


"There are thousands and thousands of copyright holders and more are created (and lost) every day, so I don't think a license that covers all recordings could ever exist in the free market. It only takes one copyright holder to pull his music out to destroy the blanket license.

This is a good example of why it is important to have some actual knowledge about the issues involved before going off half cocked and to actually read what I write and keep it in context before misrepresenting my positions.

It is indeed correct that a license which would cover all recordings would not likely exist in a free market - and I never said it would. Either you did not read the posting I reproduced above describing what a free market might look like or you were too focused on trying to rationalize your position to grasp what was actually said.

Furthermore, you reveal your ignorance on the relevant issues by betraying the fact that you clearly do NOT understand what a blanket license is. A blanket license is NOT the same thing as a statutory license or a license which "covers all copyright holders."

For example, blanket licenses exist and have existed for decades in the realm of composers' royalties. If the RIAA gets it way on July 15 and my service providers are bankrupted - well, the recordings I pay are not covered by Federal Copyright which did not cover sound recordings until 1972. Strictly speaking, SoundExchange does not have jurisdiction over vintage material. I will probably go out and get a blanket license from ASCAP to cover the composers royalties on those compositions I play that are still under copyright. That BLANKET LICENSE will entitle me to play ANYTHING I want that is in the ASCAP repertoire. It will NOT entitle me to play anything in the repertoires of BMI or SESAC which are competing PROs for composers' royalties. If I wanted to play such material, I would need to get a BLANKET LICENSE from one or both organizations or else negotiate directly with the individual copyright holder.

Composers do have the option of not licensing their material through any of the above three organizations - but very few do that because doing so is not commercially viable as they would lose access to potential customers, almost none of which are going to bother with the enormous and costly hassle of contacting copyright holders directly. Composers NEED and DEPEND on PROs such as ASCAP/BMI and SESAC because it is not practical for their customers to license music by any other means than blanket licensing.

What I am describing is STANDARD PRACTICE in the music industry and has been in place for DECADES.

The difference between SoundExchange and ASCAP/BMI/SESAC is that SoundExchange is a government sanctioned monopoly created by the RIAA which is currently the ONLY alternative that exists for wholesale licensing of sound recordings - and which is set up in a way to prevent non-RIAA recordings from being competitive in the marketplace for Internet airplay.

Cauthon wrote:

"As for the claim that I am sanctioning statism by siding with SoundExchange in this matter, I think I've made it clear that I'm against the very existence of such an organization.

Excuse me, Mister - but YOU are the one who acused ME of sanctioning statism. I NEVER made any such accusation about you. What I said in response to your accusation was that IF someone here could be accused of sanctioning statism, the shoe fits on you far more than it does on me.

Again, please read what I write and keep context so that you do not continue to misrepresent what I say.

Cauthon wrote:

""What is, though, is how much damage will be done to copyright holders who are forced into this situation.

Yes, exactly - the damage that will be done to the copyright holders whose recordings that the RIAA does not want the public discovering or listening to because they know once that happens it will spell the end of their ability they have enjoyed for decades as a result of technological limitations which no longer exist to heavily influence which music comes to the public's attention and which does not.

Cauthon wrote:

"I'm doing so because I want to lessen the damage that copyright holders face. If we must have an organization like SoundExchange, I want it to operate as close to the free market as possible. And in a free market, the copyright holders have the final say.

For your information, the RIAA is no more a valid spokesman for all copyright holders than Jesse Jackson is a valid spokesman for all black people or Orran Boyle is a valid spokesman for all steel producers.

And if some form of "getting what one wants" is what you equate with "as close to a free market as possible" - well, you are could not be more wrong. In a free market a pencil manufacturer does have a right to demand $100 for an ordinary pencil - but in a free market a pencil maker would never do such a thing as his his competitors also have something to say about what sort of price he is realistically going to get for it. The only way that a pencil manufacturer could ever seriously demand $100 for his product is if he uses the government to make it impossible for those who would sell pencils for 10 cents to bring them to market.

I agree that, so long as an evil such as statutory licensing must exist, that it should function as closely to a free market as possible. But creating a marketplace for Internet airplay is NOT the purpose of the CRB rates. Those rates were set at a level which is designed not to create or facilitate such a market but rather to KILL it. Please name me a SINGLE example in ANY free market which has ever existed where a product is sold at a price that is between 300% and 1,500% of its most successful and commercially viable customers TOTAL annual revenues? That is the sort of absurdity that you are trying to rationalize and justify.

And if you wish to assert that in a free market the RIAA labels would somehow seriously consider refusing Internet radio stations airplay of their material - well, that would be bizarre. In a free market it would be SUICIDAL for them to do that because it would mean that they would be abandoning a wonderful and increasingly influential and popular medium to their competitors. In a free market, the RIAA labels would BEGGING for stations to play their material just as they currently beg FM stations to play their material. Why do you suppose the word "payola" exists in our language - and why do you suppose the RIAA labels try to get around the anti-payola laws (which are irrational and need to be abolished) by hiring staffers to smile nicely at influential FM program directors and invite them to parties with lots of rock stars, drugs and prostitutes? It would be absurd to think that the RIAA would wish to refuse to participate in a free market for Internet airplay if one was ever allowed to come into existence.

In a free market, the RIAA labels would have NO CHOICE but to participate in Internet radio at rates that webcasters could afford because to do otherwise would be to surrender exposure and market share to their COMPETITORS. And it is the purpose of the CRB rates to PREVENT such competition from ever coming about. The ENTIRE purpose of these rates are to keep RIAA competition locked out of the Internet in the same way that technological limitations have for decades locked them out of the market for FM airplay.

"Like Dismuke stated, webcasters do have the ability to negotiate with individual copyright holders. That also means that copyright holders have the ability to form their own licensing organizations that cover their own music, if they wish. SoundExchange does not have a monopoly on the establishment of royalty rates.

Do you know for a fact that copyright holders do have a right under the present laws to form their own sound recording licensing organization? I, for one, am not sure what the law says about it. If it permits it - well, that would be a silver lining in the context of a rather crappy situation. If that is the case, than I guarantee you over time that is exactly what WILL happen - and, yes, something like that would basically render the SoundExchange monopoly and the CRB more or less obsolete when and if it ever happens

But that does not address the injustice that is being done to CURRENT copyright holders and CURRENT webcasters who will be forced into bankruptcy on July 15 by laughably ABSURD rates announced and imposed RETROACTIVELY. I don't think the RIAA even cares what will happen in the long run or whether competitive PROs emerge because everybody already knows that they will not be around in the long run. This is nothing more than a Luddite's attempt to kill off an emerging technology and to try an hang on to their legacy markets for as long as they can.

Prior to the DMCA which set the current system up, our copyright laws recognized NO public performance property rights AT ALL in sound recordings - and such rights were granted ONLY within the context of satellite and Internet transmissions. A marketplace is not something that just pops into being overnight. It takes time for the people involved to set up the infrastructure and such. What we have gone from is anarchy where NO rights existed to a system that is basically a form of fascism where a government sanctioned cartel of private interests gets to dictate the conditions that all other players and competitors in the market must abide by.

I think valid points can be made in the argument that, if we are to have statutory royalties, it is better for those rates to be set well above the market rate to protect those very rare and isolate instances where a player wishes to exclude himself from the marketplace altogether. But, if so, one has to keep in mind the CONTEXT in which such a system is imposed. The relevant context here is that technology is developing at a rate much faster than the government is able to keep up with regard to copyright implications and that new rules are being applied to a PRE-EXISTING industry. If one wishes to make the case that the CRB rates should be set very high on the premise that competitive PROs will emerge as a result - I would be perfectly fine with that so long as enough time given to all players involved for such PROs to emerge To impose such rates on an existing overnight from the get go - well, all that is going to do is kill the existing players in that industry off. It was YEARS after the first webcasts started before the government finally got around to announcing what the royalty rates would be in 2002 - and they were very high and retroactive back to 1998. The injustice of that alone ought to be obvious. Webcasters operating from 1998 to 2002 knew that they would have to pay SOME royalty but had no idea how much. Imagine trying to operate a business where your major supplier tells you he will send you a bill later for an unspecified amount his buddies in Washington will eventually come up with. How is one supposed to know how much to set aside each month as a contingency? In other words, webcasters are supposed to be omniscient.

There has been NOTHING about the entire CRB process from the get go designed to encourage anything even remotely resembling a free market to emerge. The ONLY objective from the get go has been to DESTROY an emerging industry.

To rationalistically defend the RIAA's agenda in the way that Cuathon does on ground that, since the RIAA represents "creators"of values such as recorded music and have a substantial portion of market share, they must, therefore, be heroic "producers" who are examples of virtuous businessmen looking out for their rational interests - well, that's no different than saying the same about James Taggart and Orren Boyle on grounds that they ran railroads and steel mills.