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December 20, 2014

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First Mediaworks


5/14/01 The ©opyright Quagmire

Just two short years ago, it was raining money. You remember those days, don’t you? All you had to do was hang "dot-com" onto your name and — presto! — you were an instant paper millionaire. Ultimately, though, American investors decided that the New Economy was just "a new e-CON o’ me," and they abandoned everything that began with the hyphenated e. In the midst of all this came the launch of online music companies, an idea whose time had truly come. The music industry, specifically the performers, saw that this online music thing was big — really, really big. Because Radio had traditionally paid royalties only to the writers (via ASCAP, BMI, SESAC), this was the RIAA’s (Recording Industry Association of America’s) chance, in their minds, to get their fair share. So they worked closely with online music start-ups, which at the time were loaded with venture capital and the promise of huge profits.

Encouraged by its success with online music providers, RIAA told terrestrial Radio stations that, if stations broadcast their signals over the Internet, they would have to pay royalties on all Radio revenues, not just on their online billing. From the broadcasters’ perspective, it seemed kind of silly, since streaming broadcasts were reaching only a couple hundred additional listeners and since there was no prospect of selling additional ads to reach these out-of-market listeners.

The Copyright Office upheld the decision in favor of the RIAA. So did the Radio stations cheerfully begin paying the RIAA? Nope. They’re quietly walking away. So what was the net gain to the performers? Napster was spanked — but Radio isn’t Napster and shouldn’t be confused with it. The key is that you cannot save files of a Radio station that is streaming. You can hear a song only at the Radio station’s convenience. To hear that song at your own convenience, you must go and buy the CD.

If I were RIAA, I would want Radio to pay some form of royalty. If I were Radio, I would argue that if RIAA wants to charge Radio for airplay, then Radio wants to charge artists for free advertising. Is anyone so foolish as to argue that Radio airplay doesn’t help the sale of CDs?

Years ago, a similar situation erupted in Australia. Attempts to force Radio to pay performance royalties resulted in all Radio stations’ banding together, choosing not to play any new music. Their action killed new music sales and destroyed all discussions of artist royalties.

Who really won the recent court battle between Radio and RIAA? Radio stations, for the most part, have stopped streaming their signals. Might this slow the adoption rate of online Radio, since terrestrial broadcast stations are no longer promoting it? Might this ultimately mean that RIAA stands to gain nothing but a huge legal bill? Will the few remaining online music companies be the only place for RIAA to collect royalties, since Radio decided not to play?

I’ve heard the logic of the RIAA, and I agree with it. And I’ve heard the response of terrestrial Radio stations, and I agree with that, too. Though the courts have raised the RIAA hand and clearly pronounced them "the winner," I fear that the only real winners in all of this may have been the lawyers.


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