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The Internet Radio Royalty Follies |
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Theres a lot of commotion in Washington these days over Internet radio royalty rates. Much of it is coming from large corporate Webcasters and their lobbyists, who are trying to execute a classic Washington end-run. They dont like the results they got from a process they set in motion, so they have gone back to Congress with sky-is-falling histrionics in hopes of getting a do-over.
Theyre hiding behind a coalition that portrays itself as being a grassroots movement made up of small, independent Webcasters, when in fact large corporate Webcasters funded the coalition and are calling the shots.
The issue? Fair and reasonable royalty rates to compensate performers and record labels when their music is played via Webcasting (also referred to as Internet radio) and on satellite radio and cable audio music channels.
Panel Review
Some quick background: A few years ago, legislators set out to strike a balance between the rights of artists and labels to be fairly compensated for their work and the needs of Webcasters and satellite services to obtain licenses for massive quantities of music. To do that, Congress established a system to set royalty rates for music played via digital technology. Every recording protected under U.S. law could be used by a service, provided that service abided by the terms of the license and paid rates set by a panel of arbitrators and approved by the Librarian of Congress.
After the first Webcasting proceeding ended in 2002, Webcasters claimed that the process cost too much and yielded unfairly high rates, so they successfully lobbied Congress to set up an impartial panel to set rates. This resulted in the creation of the Copyright Royalty Board (CRB), comprised of three impartial expert judges.
The CRB convened an 18-month review that involved weeks of live hearings. Judges heard from dozen of witnesses, took countless depositions, and read tens of thousands of pages of evidence from all interested parties. The judges were privy to confidential proprietary information about the revenues and costs of large and small Webcasters, commercial and noncommercial services, the financial details of performers and record labels large and small, and private deals that had been negotiated between Webcasters and record companies.
Cyber-Chickens?
In short, the CRB did what Congress asked it to do, at the behest of Webcasters. But when the CRB set what it judged to be fair and reasonable royalty rates, the Webcasters decided they were too high, cried foul and denounced the very process they had sought.
Large corporations like Time Warners (TWX) AOL, Microsoft (MSFT), Yahoo! (YHOO), and Clear Channel (CCU) are in the Webcasting business in a big way. But you would not know it from the coalition set up by big Webcasters to fight the CRBs decision. According to the Chicken Little-themed coalition, the industry is made up of small, independent business Webcasters, and the new rates will cause Webcasting to "die."
While nothing could be further from the truth, a bill was recently introduced by Representatives Jay Inslee (D-Wash.) and Don Manzullo (R-Ill.) that would drastically cut the royalty rates and provide large commercial Webcasters with an estimated annual windfall of $10 million or more that would otherwise be paid to artists and labels. Comparable legislation was introduced in the Senate May 10 by Ron Wyden (D-Ore.) and Sam Brownback (R-Kan.).
If the intent of the Inslee and Manzullo bill was truly to help small Webcasters, a bill to push forward the Small Webcaster Settlement Act of 2003 would have accomplished that. In 2003, Congress decided on policy grounds that small Webcasters should receive a below-market rate, given the infancy of the medium.
Putting Things in Context
Viable, financially profitable Webcasters seem to feel they should be able to play music and make a healthy profit without fairly compensating performers and record labels. The nonprofit group of which I am executive director, SoundExchange, collects and distributes royalties due artists and labels when their music is Webcast and serves as an advocate for these hard-working individuals who far too often are being left out of the equation.
After all, what were talking about here is music Webcasting, where businesses are being built around a sole product: music. Those who are profiting from playing that music need to pay fair and reasonable rates, which is what the CRB set out to accomplish, and achieved.
To put the whole matter in context consider that, under terms of the CRB decision, a consumer who listens 40 hours a month to one Webcaster will cost the Webcaster only 68 cents a month in royalties in 2007—a sum far less than most Webcasters charge listeners for subscriptions.
A pretty fundamental premise for running a business is that if you make a product, you sell it for whatever price you wish and keep the profits—but if you dont make the product, you sell it only if you pay a reasonable fee to those who did make it. But thats a premise with which some of those in the Webcasting business dont agree, and that why theyre running to Congress to escape.
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Scientists convert glucose into fuel and polyesters |
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Glucose has been the building block for many zany creations round these parts, but using the widely available substance to create "products currently created from petroleum" has some fairly far reaching consequences. Gurus at the Pacific Northwest National Laboratory have reportedly "converted sugars ubiquitous in nature into a primary building block for fuel and polyesters," dubbed hydroxymethylfurfural (HMF). Aside from the obvious benefits of finding yet another renewable energy to tap into, learning to harness this power could give garb and plastic manufacturers new routes to source raw materials. So what do the creators themselves think? "The opportunities are endless" -- we say: prove it.
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Google postures security pose with Postini |
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Google have purchased comms, web security and compliance firm Postini for a whopping US $625 million, solidifying Google’s capabilities as a business-grade provider of email, IM, search and other communications and information services.
Google had already been working with Postini in Google’s existing ‘Google Apps’ offering, but by buying Postini and taking them in house, Google promise to continue investing in Postini, improving their services further and ensuring they can cater to businesses large and small without issue.
Naturally this places Google in an ever stronger positioning to take business customers away from Microsoft and others while offering consumers and businesses ever more advanced products and services.
Eric Schmidt, Google’s Chairman and CEO said in a statement that: “With this transaction, were reinforcing our commitment to delivering compelling hosted applications to businesses of all sizes. With the addition of Postini, our apps are not just simple and appealing to users -- they can also streamline the complex information security mandates within these organizations”.
Google are quick to remind us that their web based services and ‘hosted apps’ are not only much cheaper than traditional desktop and server based solutions, but are infinitely easier to use and maintain, for both users and IT system administrators.
Google says more than 100,000 businesses already use Google Apps, which offers Gmail, Calendar, Talk, Docs & Spreadsheets, and a Personal Start Page, with Postini already offering Email Security, IM Security, Web Security, Message Archiving, Message Encryption, and Policy-enforced TLS.
Dave Girouard, the VP and GM of ‘Google Enterprise’ said that: "The response to Google Apps has been tremendous, with more than 1,000 small businesses signing up for the service every day. At the same time, large businesses have been reluctant to move to hosted applications due to issues of security and corporate compliance. By adding Postini products to Googles technology, businesses no longer have to choose -- employees get the intuitive products they want, and the company achieves the security and assurance it needs”.
No doubt Google have plans to incorporate Postini technology into other areas and Google offerings, increasing Google’s appeal even further to businesses and consumers.
Google’s slow but steady approach to offering web based software solutions that are ever increasingly challenging Microsoft and others has already seen the creation of the impressive Google Apps collection.
Giving users the option of additional security and compliance features is a smart move that will only help Google in its quest to not only get more users, but to launch products that match and even outclass the competition.
We’re sure that Microsoft is watching the situation closely and planning countermeasures of their own. Still, Google needs to hurry up – when Google Apps for everyone (not just for ‘your domain) launched not too long ago, Google claimed 100,000 business users then – the same figure they’re quoting now.
Either way, the almost unstoppable Google has its sights set on business. Anyone else playing in that space should have a plan for success, or they might slowly find themselves being wiped out!
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