Wednesday, April 18, 2007

Open letter about Internet radio royalties

For those that live in the United States, I encourage you to write your representatives in Congress to protest the unfair royalties that are being foised on Internet radio stations. Here is the letter that I am sending to my Congressmen in Utah:

As my representative in Congress, I would like to know what you are doing to prevent the veritable destruction of Internet-based radio stations. As you have undoubtedly heard, the government recently adjusted the sound recording royalty rates for a compulsory license, raising them to a level that will force all small and medium-sized Internet-based radio stations out of business. It concerns me on several levels: as an employee of a local Salt Lake City broadcaster, as a graduate student in Computer Science, and as a citizen that enjoys music.

In my opinion, the problem does not lie with the Copyright Royalty Board's ruling on the new rate structure. Rather, the source of the trouble is Congress and its strange, unfair approach to sound recording royalties. Why do traditional over-the-air stations receive an exemption from having to pay this royalty while digital stations do not? This disparity is unexplainable, and is truly the root cause of the current problem.

Any serious examination will show that the arguments used to justify this discrimination do not stand up to logic. As the argument goes, over-the-air stations encourage CD sales for artists, and thus serve as a form of promotion, while digital stations supposedly transmit "perfect" copies of songs, which could be saved and played back later, thus driving down artists' CD sales. This is wrong for multiple reasons. First, virtually all digital stations transmit songs in a "lossy" format at very low bit-rates, resulting in audio that is noticably worse than a CD or even traditional FM radio. Second, it is no trivial task to save digital radio transmissions -- specialized software is required, and if someone wanted a digital copy of a song they will get it in an easier way (legally via Apple's iTunes or illegally via a peer-to-peer network). Third, digital rights management (DRM) technology can be used to encrypt and protect the transmitted songs from being archived by listeners.

Finally, I am concerned about the long-term consequences of the current situation. The high royalty rates will undoubtedly drive out small and mid-size Internet radio stations; only the largest stations will be able to pay such a royalty structure. This will consolidate more power into the hands of large existing station owners, like Clear Channel. In addition, it will encourage Internet radio stations to negotiate individual licensing deals with record labels so as to obtain cheaper royalty rates, which will be very damaging to the recording industry; it will be too expensive to try to manage hundreds of individual licensing deals with small record labels and independent artists, thus forcing Internet radio stations to only play music from the three or four largest record labels that have given them royalty deals. This will deal a body blow to the small labels and artists, possibly killing one of the most exciting aspects of the modern music industry.

Given the weak argument for treating digital radio differently from traditional radio, I encourage you to undo the mistakes of past Legislators and introduce a bill to grant a sound recording royalty exemption for digital transmissions, just like traditional radio enjoys.


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