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Webcast Genocide: Casting Lambs to the Slaughter

Turns out there are now some big-time losers in the wash-up from the US Copyright Royalty Board’s decision late last year. Sure, broadcasters did OK, from what, on the surface, looked to be a victory for common sense in regards to web-streaming.

But alas, like most legal quandaries, the devil is in the detail.

While the impost of broadcast royalty rates thankfully went down about 30-percent, making it just a little bit easier for many of middle America’s commercial radio stations to keep operating above poverty levels, the rates for internet-only webcasters, went up.

For those of us primarily interested in the survival of Australian commercial radio, that really didn’t mean a lot at the time, but when you look into the US Board’s decision, small niche web-only operators have been hung out to dry.

Now, I’m sure those parties, who’ll benefit directly from the increased royalty payments, are no doubt saying it’s ‘a great breakthrough’. Pecuniary interest is a substantial motivator when it comes to working out which side you’re going to be barracking for.

However, short-term wins, like this, are often extremely short-sighted, as those of us, who have been in the media business for a while, know all too well. The fallout from the new US webcaster streaming rates means that only those services that attract more than one million unique listeners a month will be able to survive financially. The likes of Pandora, Spotify and Apple will be the only dogs left in the hunt, and, it virtually puts paid to any future streaming start-ups.

Since the decision came down in December, smaller niche webcasters, like AccuRadio and Pulse 87, have found themselves facing a situation where royalty payments will increase so much faster than advertising revenues. Those niche players, many of whom have really been in the business for the love of the music, will now face the prospect of being cast on the scrapheap of history. Several have already ‘fallen on their swords’ this month knowing they are ultimately facing a financial Armageddon.

These are the webcasters, who have been catering for and promoting specialty genres like folk, piano bar music, jazz and alternative AC, when no one else would take the chance. Until now, it’s been a real struggle for most of them, but they’ve been able to operate by paying the record companies based on a percentage of their often-meager revenues. Unfortunately, that no longer suits the bean counters of Big Music.

Lawyers for the US royalty group, Sound Exchange, managed to convince the Copyright Royalty Board that their client should be entitled to be paid on a ‘per-stream’ basis by webcasters, regardless of the webcaster’s financial circumstances.

That’s the same line PPCA has been running here in Australia against commercial broadcasters in the Copyright Tribunal.

Thing is, everyone involved in the process, both in Australia and the US, knows deep-down that financially, the ‘per-stream’ model simply isn’t viable across the entire industry. What happens when this sort of model is put into practice in any industry, you see Darwin’s Law prevailing – only the strong will survive. Smaller players are forced to fold and the overall diversity of the market contracts.

Gordon Gekko is wrong when it comes to Sound Exchange and small webcasters.

Greed isn’t good and doesn’t benefit anyone.

The upshot of the American scenario, just one month after the court decision, is becoming very clear, and, confirms what I have previously said. The ‘per stream’ model only works for the big boys with their big economies-of-scale. This outcome probably suits Sound Exchange, and other copyright collection agencies, because natural selection wipes out small webcasters, and, they’ll be left with only two or three large players to negotiate with. It’s so much easier than allowing a diverse industry to prosper.

There’s little evidence that copyright groups care at all that these niche players are being forced to shut down their webcasting and move on. The industry perception of these copyright groups is that, for them, it’s never really been about the music, the musicians, the songwriters or the end-user, it’s always been about the money.

From a creative perspective, it’s highly regrettable, that we now starting to see small start-up webcasters across the US, like Pulse 87 in New York, forced to put up the shutters and call it quits.

It really is a sad irony that the ones who’ll suffer most from this webcast genocide will be the grass-roots musicians, particularly those who aren’t locked into the mainstream genres of Big Music. These musicians are standing to lose the few outlets that have been available to showcase and promote their works.

But, who’s going to worry about that?

Certainly not the business side of Big Music, because there’s not enough money in niche music to change their mind! I’m sure the mainstream music industry will, however, view this rate increase in webcasting royalties as a ‘just and righteous’ outcome to pay for their legal costs of fighting the copyright battle.

Until they finally see the light, many of the musicians these groups represent may also see these new percentages as a form of ‘sweet revenge’.

But, what is it they say?

If you embark of a course of revenge, be sure to dig two graves.

Perhaps, that’s exactly what’s happening now.

The smaller webcasters are being wiped from the internet landscape, while their previous owners now stand in the unemployment queue.

But, what of the music industry and its musicians?

Well, they could have benefited fairly and consistently over a lengthy period, if they’d just worked with these small webcasters until they built a mature business model.

Instead, the music industry’s greed to push for immediate and excessive benefits appears to have been a more powerful desire than approaching the situation rationally. Sure, Big Music may have been granted its pre-Christmas wish for an increase in webcaster royalties in the short term, but now, many of their members won’t benefit at all from the specialty audiences that smaller webcasters could have generated, because it appears the Sound Exchanges of this World would rather see these webcasters off the air than conceive of taking a lesser payment.

Gosh …. and all this New Year drama, just as we thought some common sense was returning to the royalty debate in the US.

It has occurred to me that if these multinational music conglomerates are happy enough to play these fiery games on American soil, we can only imagine what surprises they may have planned for us on the Australian copyright front this year.

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