Friday, August 21, 2009

Online radio royalty issue solved... but still not fair

Music web site Pandora has been saved from closure (and likely many others) after the music industry reached a deal over royalty rates. Online radio in the US is governed by the wonderful DMCA (Digital Millennium Copyright Act) and has mandated royalties. In 2007, judges decided to raise royalties from 0.08 cents to 0.19 cents per song starting next year. What's the big deal? Online sites streaming music have to be viable and for Pandora, the proportion of revenue spent on royalties would rise from under 30% to around 70%. Result - goodbye profit. Goodbye viability.

A debate followed, which lobbied Congress for more time to work something out. A new deal emerged. Online streaming services earning more than $1.25 million a year will either pay royalties of 0.093 cents per song, rising gradually to 0.14 cents in 2014, or a flat rate of 25% of revenue, whichever is higher. Smaller firms won’t pay per-song revenues and will usually pay a smaller percentage of royalties.

Since Pandora will likely have to pay the per-song royalties, it’s introducing user fees. Users with free accounts will be limited to 40 hours per month. Those who want to exceed this limit will have to pay a 99c fee each month.

Despite the more reasonable deal, the owner of Pandora thinks it unfair that internet radio stations must pay royalties while over-the-air stations don’t.

Once again, my position on this is clear - the music industry could clean up if they would just charge all ISPs a flat rate for unlimited access to all music. This would allow users to trade content to their heart's content and allow unrestricted streaming from anyone with the desire to do so. This would not only reduce the burden and cost of distribution from the record companies, but also allow those serious about their music to spread the word about the artists they enjoy. Because honestly - commercial radio and the music industry themselves dropped this ball ages ago.

Oh by the way - don't bother trying to actually use Pandora. Do to the wonderful DMCA, licensing constraints prevent access to Pandora for anyone located outside of the US.

Freaking DMCA....

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