How sad. 

Remember the good old days when the major record labels and their publishing partners would get on their knees for you guys. Now they are extorting money from digital streaming startups and treating you like the second ex-wife. Where's the respect?

It's not called "show friends" it's called "Show Business."

Broadcast radio likes to complain. But I would not group this into the internet radio royalty problems that seem to be on going.

Broadcast radio is not doing terribly well at the moment. The large broadcasters have loads of debt, consistently higher expenses, a complete failure on the HDRadio front, dying AM radio.... The list goes on. An industry that has been quite profitable for decades is struggling greatly to make ends meet with no relief in site. In many markets, the AM stations may not be making ends meet. At this point, broadcasters and the NAB will do anything they can to stay afloat. Even if they means fighting SESAC.

That's because they overpaid for their stations during the consolidation craze post-Telecommunications Act. They screwed up, and songwriters have to pay the price? How does that make sense? It's not that the stations are not profitable. It's simply that the debt load they incurred when they paid as much as 20 times multiples for the stations is crushing them. They need to talk to their bankers not the people who provide them with their content.

Outside of the top markets, there are a lot of stations barely breaking even or losing money. Even stations will little to no debt. It is tough outside the major markets, especially for an AM station. So stations are going to do anything possible to fight the trend. Voice-tracking, syndication, even paying songwriters less. This is a typical response for any industry. If you can lower your costs, you will do so at any expense. Right or wrong, that is the way it is.

Whatever, local radio is still kicking ass!  They do things nobody else in the world does, and when that happens...people grab it.

Why don't these radiostations look for alternatives? For instance like Creative Commons or VillaMusicRights. 

If only it were that simple.  Let's say a radio station decides to not take a SESAC license and instead tries to broadcast only ASCAP and BMI music.  A reasonable free-market solution, right?  Well, if a single SESAC song slips through the cracks (via a commercial or maybe a brand new song where the publishing isn't publicly known, etc.) the station could face $150,000 in infringement damages.  And that's $150,000 per song.  That's a mighty big stick for SESAC to wield behind its back.  And it's this fear of "guessing wrong" by radio stations that has allowed SESAC to extract supracompetative rates, allegedly, from its licensees who may otherwise prefer to avoid SESAC music altogether.

its $150k for wilful infringement, and that's hard to prove, and certainly wouldn't be the case for a song slipping through the cracks. It might only be a few thousand for such a slip up, and that's a reasonable cost of doing business if they decided to kick Sesac to the curb.

A radio station that chooses to drop its SESAC license, knowing full well that some amount of SESAC music is likely to be broadcast despite its best efforts, purely because it expects that any infringement damamges (plus legal costs) will add up to less money than the license fee SESAC wants to charge sounds pretty willful to me.  And judging by the various threat letters that have been published on blogs over the years, I would expect SESAC to take this position as well.  Regardless, I can't imagine that any risk-averse radio station would consider this to be a "reasonable" strategy.

wow. 

Nice bit of info. 

Thx DMN

From economist Roger Noll of Stanford: ”Why do we still have ASCAP and BMI, which we regulate through a judicial process, when information technology has eliminated the reason for those things existing in the first place?”  Further: ”In the modern information technology era, with the internet and virtually free storage, and virtually free access to data, there is no longer any rationale for the existence of a performance rights organization. But it’s still there, it’s still having its price regulated by a judge.”

By this logic, the price paid to Sesac should be set by the market, not some regulated amount set by a judge.

 Is Noll right when he says technology has advanced to a point where a free market arrangement for paying Sesac would work smoothly?

Right.   ASCAP, BMI, SESAC are all legacies that will just ride it out for 10 or more years as sunset businesses.  Right now businesses exist like MRI that can track and pay every song played with complete accuracy under direct one to one deals.  Sirius Satellite is already doing it but legacy businesses are fighting back as hard as they can, fearing change but most importantly their paychecks.  The good news is that you don't need that many songs for a successful station to exist as long as you don't take requests and the like.

I agree with everything you say.

It is sad that so many businesses associated with the music industry cling to old business models and are incapable of adaptation or innovation.  

Finally these companies use litigation to buy a few more years of existence before the "sun sets."

Paul,

 You don't link to anything to support your comment regarding Pandora, above.  I assume it is based on the company’s support of the recently introduced Internet Radio Fairness Act.  

 Two points on that:

 (1) the Fairness Act doesn’t address songwriters in any way.  IRFA deals only with performance royalties.

 (2) the legislation doesn’t set or change royalty rates for Internet radio. It only ensures that the standard applied is the same rate standard applies to satellite radio, cable and the record labels themselves.

 Even assuming royalty rates were to decrease, it is a mistake to assume that reducing the *rate* is equivalent to reducing payments, or conversely, that increasing the rate would increase payments.  The current high rates have forced businesses out of the digital radio market; a fairer rate which promotes growth, and market entry, and innovation in the digital radio space, would increase payments to artists.

Matt, 

You don't link to anything to support your comment regarding Pandora, above.  I assume it is based on the company’s support of the recently introduced Internet Radio Fairness Act. 

> That, and a broader campaign by Pandora founder Tim Westergren to reduce royalties.  IRFA is the main vehicle for this objective.

 (1) the Fairness Act doesn’t address songwriters in any way.  IRFA deals only with performance royalties.

> You're right. 

One thing I'd mention is that publishers are next.  They are not happy with current rates, esp. the huge disparity with recordings.  That's the next battle (or one of the next battles).

(2) the legislation doesn’t set or change royalty rates for Internet radio. It only ensures that the standard applied is the same rate standard applies to satellite radio, cable and the record labels themselves.

Oh c'mon, that's just a talking point.  At worst, Pandora gets parity with the same, existing rate.  More likely, 'equality' means lower rates for Pandora.

Even assuming royalty rates were to decrease, it is a mistake to assume that reducing the *rate* is equivalent to reducing payments, or conversely, that increasing the rate would increase payments.  The current high rates have forced businesses out of the digital radio market; a fairer rate which promotes growth, and market entry, and innovation in the digital radio space, would increase payments to artists.

I don't necessarily disagree with this as an idea, but not sure if it would really be true if rates were decreased.  So, the argument is a little convoluted on its face: lower the rates for us, and we'll make you more money.

Westergren is now arguing that he's paying millions to certain musicians, and could pay more if only he had lower rates.  But... the obvious question is if he's paying so much to artists, why can't he afford the current rates?  Why does he need this discount?

We're going down a special interest rabbit hole it seems, on both sides.

/paul