RIAA Agent Treated Like Royalty

Despite continuing protests from musician’s rights groups concerned with the growing power of the music industry, the recording industry launched its digital royalty collection agency on Tuesday.

Despite continuing protests from musician’s rights groups concerned with the growing power of the music industry, the recording industry launched its digital royalty collection agency on Tuesday.

The new SoundExchange service will collect royalties from online radio stations and webcasters on behalf of the five major record labels and the 275 independent labels that the Recording Industry Association of America (RIAA) has already signed up.

SoundExchange would then split the monies equally between the labels and musicians, based on the terms laid out by the Digital Millennium Copyright Act (DMCA).

All of the major labels have opted to have SoundExchange distribute the artists’ money directly.

But there is a growing concern amongst musician’s rights groups that the RIAA — which gets its funding primarily from Sony, EMI, Warner, BMG and Universal — won’t represent the best interests of artists.

“I think that if you believe as I do that in the next five to ten years the majority of music will be performed (or streamed), then we are looking at digital performances and this is going to be a substantial portion of artists’ revenues,” said Noah Stone, the executive director of Artists Against Piracy. “It’s imperative that artists get that money fairly.”

“I do believe there needs to be a third party — an organization set up for this purpose that has a constituency, which is not part of a group that is controlling the whole show,” Stone said.

Although the apparent conflict of interest might pose a public relations problem for the RIAA, Stone’s main worry was that the new performance royalty would not benefit artists.

Since artists usually don’t receive a performance royalty, he said the rush to collect the new monies might cause only the major label’s interests to be represented and the U.S. Copyright Office to set royalty rates unfavorable to artists.

“The major labels get to choose between pressing plants based on quality of service and price,” said Jenny Toomey, the executive director of the Future of Music Coalition. “But this is a system where artists can only choose one place to collect royalties.

“Plus, the independent labels who have chosen to avoid the label system shouldn’t be forced to go collect their money from the system (RIAA) they’ve chosen to avoid.”

Toomey said that the RIAA has proven in the past that it doesn’t necessarily operate in the best interests of the musicians, pointing to the trade association’s questionable actions during the works-for-hire legislation earlier this year.

“It’s particularly egregious to give the RIAA the ability to collect for artists’ work-for-hire issue, because they’ve proven untrustworthy in their actions toward artists,” Toomey said.

Last year the music labels successfully lobbied to insert into unrelated legislation a clause that prevents copyrights from reverting to their authors. In August, the industry reversed its tack and agreed with artists to recommend rescinding the change to copyright law.

But the DMCA leaves very little leeway for the RIAA or SoundExchange to misrepresent artists, said John Simson, SoundExchange’s senior director.

“The statute in the DMCA sets out how the money gets paid out,” said Simson. “We’re working very hard at this, and on the SoundExchange side we’re going to be very transparent. We’ll hire a third party to audit us and the Copyright Office stands above us as well. Not to mention, the big labels are going to be looking at this as well since we are collecting their money.”

To help assuage the fears of Stone and others, the 13-member SoundExchange board of directors will include artists Aimee Mann and David Sanborn along with two musicians’ union representatives. Since artists represent a minority interest on the board, their votes will be weighted to even out the power, Simson said.

The RIAA won’t be coming into the space unabated though. Three other companies already have systems in place to collect those royalties.

Music Reports offers musicians and publishers the only third-party collecting agency. Webcasters can send their programming data to MRI, which then processes the information through a databank of music to identify the song, composer and publisher.

Then there are the traditional composer’s collection agencies: ASCAP and BMI. Both collect performance royalties for television shows and movies, and for songwriters and publishers whose works are played. The Digital Millennium Copyright Act requires that webcasters pay a similar fee for streaming content.

ASCAP has teamed with Audiosoft to allow webcasters to track and monitor which songs are played across their networks. BMI is building out its own online licensing component to allow webcasters to calculate their royalty payments, which would then be made to BMI.

“We are now able to go out into the business world and offer low-price licenses without incurring huge costs to new licensees,” said Richard Conlon, vice president of business development for BMI. “The biggest thing we want to do is create a place where people can go to get a license, get questions answered and have their reports generated.”

While the federal government issued a consent decree that ASCAP and BMI not be allowed to work together, both sides agree that there needs to be a one-stop store front where webcasters can go to obtain — and pay — their licenses.

“The bigger point is that there needs to be a one-stop shop,” Conlon said. “As far as ASCAP and BMI working together, we aren’t allowed to do that because of a federal decree. At times it’s going to be confusing for websites dealing with ASCAP, BMI, (publisher’s agency) Harry Fox, and the RIAA.”

“In the interim, before that one-stop shop happens, we are trying to let people know where else they should be going,” Conlon said.

Further mucking up the picture is the looming problems faced when a site goes international. Licensing and royalty agreements signed and sealed in the United States don’t necessarily apply to songs played in other countries.

“You should be concerned about international licensing. We offer licenses for all performances for the United States,” said Chris Amenita, ASCAP’s vice president of new media and technology. “But if your site goes out to other countries, there are always the possibility that you’ll need to get foreign licenses.”

Because the RIAA has an international reach and represents the major labels’ stake in collecting royalties, Simson said it makes sense for SoundExchange to operate as the sole collector of digital royalties.

“We were designated as the collection agency by the Copyright Office for the subscription services like Muzak and DMX,” Simson said. “We hope (to) get that same designation for webcasters when this next round of arbitration is finished.”

Author: Brad King

News Service: Wired News

URL: http://www.wired.com/news/business/0,1367,40359,00.html

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