The Streaming War: A Battle of Gladiators

June 3, 2016

 

AUDIO VERSION IS ALSO AVAILABLE IN OUR PODCAST SECTION 

 

 

 

Finally, some common sense seems to be glimpsing the light of day after three years of vicious bickering over the simultaneous streaming of radio programs.

 

However, it appears this ‘ray of hope’ is not of PPCA’s making.

 

Its dogmatic, almost Soviet-style pursuit of an imagined ‘pot of gold’ in copyright fees from Australian broadcasters has ended with nothing, but tears, for Big Music.  You may recall this fight began over commercial broadcasters wanting to continue streaming their on-air programs over the internet, without having to pay additional music royalties, as had been industry practice for more than a decade.

 

In the other corner of the ring was the music industry, which was equally determined to make ‘the commercials’ pay through the nose for the privilege. Ultimately, the Copyright Tribunal had to step in with a big stick and enforce a judgment when, after many months of private talks, the two sides failed to arrive at any meaningful common ground.

 

It’s my understanding that during talks between PPCA and Commercial Radio Australia, the music industry consistently refused to give so much as an inch on almost every issue, and, in the end, this didn’t augur well for them. Mind you, I’m sure CRA would have been playing it tough in those meetings too.

 

In the end, it seems the Copyright Tribunal had finally had enough of this obfuscating, having given the two parties adequate time to thrash things out, and, come up with a workable agreement between broadcasters and the music industry going forward. That, apparently, was never going to happen in those private talks, as PPCA held steadfastly to its proposal of a highly complicated scheme, under which broadcasters would pay for every streaming listener and every song.

 

In its judgment, the Copyright Tribunal said, in essence, as a standalone scheme, that dog was never going to hunt.

 

In fact, the Tribunal judge even refused a PPCA demand to have the industry compulsorily migrate to that model down the track.

 

The answer was an emphatic – NO!

 

Perhaps, in coming to that determination, the Australian Copyright Tribunal reflected on the highly destructive consequences of the U.S. Copyright Royalty Board’s decision in December. Just before Christmas, the CRB ordered that rates for U.S. broadcasters streaming on the net should fall by approximately 30-percent. That was a welcome relief for the embattled radio industry, albeit that they have been forced to work on a pay-per-stream and pay-per-song basis.

 

In the same judgment, the CRB, at the request of Big Music, increased the rate for non-broadcast webcasters by 22 percent, and, revoked an agreement made in 2011 allowing small webcasters to elect to pay on a percentage of revenue basis. Throughout the Christmas/New Year period, the full ramifications of the CRB decision became apparent, particularly amongst the niche webcasters.

 

For them, it was hardly the Season on Joy!

 

By early January, hundreds of webcasting services began pulling the plug and folding up shop. Thousands of employees were shown the door, and, non-mainstream musicians, who relied heavily on these niche webcasters to expose and promote their music, lost their only outlets.

 

It turns out that when they did the math, only the big webcasters, like Pandora and Spotify, could reach the breakeven point of more than a million listeners a month to be able to survive under this new fee regime.

 

Big Music and Big Webcasters. apparently, make great bed-fellows.

 

Now, the CRB’s decisions are up for appeal, but here’s the rub.

 

Big Music and the big streamers are both crying foul in their appeals, but, justice, it seems, is only for the Big Boys. 

 

Those small webcasters, who have now all but bitten the dust, won’t get a look in with the justice system.

 

The rules are that only those operators, who could afford to appear before the original CRB enquiry, will be entitled to appeal. As with Australia, the small webcasters have been disenfranchised by one of the best legal systems money can buy. The most vocal appeal will come from SoundExchange – PPCA’s equivalent in the U.S. They seem to believe that broadcasters have got away with highway robbery.

 

Now, maybe I’m alone here, but, it seems to me both in the U.S. and Australia, Big Music would rather see broadcasters forced out of the streaming business, than accept a realistic fee for their music, because, to them, it’s all about winning. Greed may be good … but, it doesn’t necessarily work for long-term viability in this industry.

 

Meanwhile, the Australian Copyright Tribunal’s decision appears to be a reasonable outcome for commercial radio, as long as it doesn’t get screwed up in the final negotiations. As they say “the devil is always in the detail’.

 

Once this case went to the Tribunal, it was never going to be a complete win for either side; it was just a case of ‘how much?’ 

 

The Tribunal’s directive allowing stations to pay on a percentage-of-revenue, is an intelligent one.

 

It takes away the need for unbelievably onerous record-keeping, which was always going to be completely impractical for small and medium-sized regional radio stations. On the surface, a reasonable person would think a percentage of ‘broadcast revenue’ scheme would immediately simplify the royalty process.

 

Wouldn’t you logically conclude, that on a percentage basis, there could never be a dispute over how much is due to PPCA?

 

Each station would simply multiply its ‘broadcast turnover’ by the 0.35% the Tribunal specified, right? Well, you see, that’s part of the detail still to be sorted out. Both parties are now supposedly back bickering, arguing over what a station’s ‘broadcast revenue’ is. PPCA, understandably, wants to make the definition of ‘broadcast revenue’ as broad as possible. Of course, they do! It means a bigger slice of the pie for them.

 

Frustrations are said to be boiling over in negotiations, as Big Music allegedly wants almost every facet of a licensee’s revenue to be included in the calculations. Hypothetically, you can only imagine what that could entail.

 

Not only would the definition include monies received for the station’s on-air commercials, but potentially, may include production fees, website advertising, sub-letting real estate in their building, share dividends, tower rentals to third parties, the sale of incidentals, like station T-shirts and other merchandise, or even, returns from external business ventures, like property development, or perhaps, even owning interests in a local hotel or cafe.

 

Oh yes … this dispute may still have a long way to go.

 

Although, to me, it seems quite clear that, on this issue, the Tribunal’s patience is, understandably, nearing its end, it has given the parties more time to sort out these definitions. If the two parties continue to just bicker, like school children, without producing an acceptable result, the Tribunal judge is going to have to impose a final solution.

 

This copyright dispute has been a debacle since Day One.

 

It has cost the parties reportedly $15-million between them, and, it’s a complete disgrace. This was a process that could have been so quickly resolved in the early days by the-then Communications Minister, Malcolm Turnbull, who chose instead the ‘Pontius Pilate’ approach, of washing his hands of the issue and wanting it sorted out in the commercial marketplace.

 

Instead of showing some backbone and clarifying the situation for all parties, as the radio industry repeatedly begged him to do, the Minister chose to see the matter become a dog-eat-dog tussle to be played out in the legal equivalent of the Coliseum.

 

For three years, the gladiators, representing commercial radio and Big Music, slogged it out blow-by-blow in a grudge match, that has torn both industries wide open. Neither is mortally wounded, but it’s going to take many years for those battle scars to heal.

 

Both sides, of course, will claim a victory. That’s already happening.

 

PPCA can go back to their foreign-owned masters and say ‘well, we got something, where previously there was nothing’. 

 

… and, Radio?

 

Well, CRA can say it saved its member stations from being enslaved by a bureaucratic nightmare of hideous record-keeping and outrageous fees that would have driven many smaller stations deeply into ‘the red’. 

 

Did anyone really win or was the whole action ill-conceived by both sides from the outset?

 

You know, on reflection, it’s highly likely, that the only winners from all of this war-mongering were the lawyers.

 

Gosh … whatever were the chances of that?

 

 

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