Copyright Talk

Chances are you’ve never heard of the Copyright Royalty Board, but you’ll probably be hearing about it in the months to come. It was created by Congress in 2004 to handle disputes over the setting of royalty rates for various uses of copyright materials. Last Friday it issued a ruling that has been nearly two years in the making, and has the possibility of forcing significant changes in the still fledgling internet radio industry.

Music royalties are probably the most complicated in the world of copyright. There is a copyright in the song or music composition, denoted by the phrase “written by.” Then there is a separate copyright in the recorded performance of a song, denoted by the phrase “performed by.” When a traditional radio station plays a record, they pay royalties to the writer of the song, but they traditionally have not had to pay royalties to the artist performing the song or the record company. On the other hand, commercial businesses that play recorded music do pay royalties to the record companies and performing artists, as well as to the songwriter.

Without going into all the details, when digital media took off, it was determined that playing recorded performances over the internet was not the same as playing them on the radio. Therefore, playing music over the internet required the payment of royalties. The recording industry established an organization, SoundExchange, to collect and distribute these royalties.

An initial royalty structure was set up, which recognized the non-profit nature of some public stations, and which also recognized the tiny, revenue-uncertain nature of the hundreds of internet-only radio stations that were popping up. The initial royalty agreement expired in 2005. Prior to the expiration, the question of what royalty rates would be set after that date would up before the Copyright Royalty Board. For whatever reason, the ruling was not issued until last Friday, March 2, 2007, although it’s decision covers royalties due starting in 2006. No, that’s not a typo. Internet music users just found out last week what they will have to pay for using music last year.

The decision is creating a great uproar, as reported in the LA Times, as it appears to significantly increase the cost of royalties for all digital broadcasters, no matter their size or revenue structure. Many are predicting the death of independent stations that are giving voice to thousands of independent musicians.

But I have more faith in our ingenuity. Just as doomsday was predicted for independent music in the wake of the Napster “crisis,” we have a tendency to resist change. But we nearly always rise to the occasion and create new and innovative ways to handle situations. If the people want access to lots of independent music, someone will figure out a way to provide it.