Friday, the Copyright Royalty Board issued its determination about the compulsory royalties that webcasters will have to pay for streaming music. Various commentators report that, at the rates set by the CRB, the business of streaming music over the web, is dead. The less-fatal viewpoint is that the RIAA intends to distribute streaming music, but over websites it selects, at agreed royalties, rather than at the CRB’s compulsory rates.
In the CRB’s 115-page determination, the rate structure evolved from a debate between a per-play royalty versus a percentage of revenue royalty. The webcasters would be benefitted by revenue-percentage model, which would enable both small and large to streamcast and grow their businesses. The per-play rate would put many streamcaster’s operations into the net-loss category. The put-out-of-business argument got this sort of reception from the CRB. Copyright Royalty Judges cannot guarantee a profitable business to every market entrant. Indeed, the normal free market processes typically weed out those entities that have poor business models or are inefficient. To allow inefficient market participants to continue to use as much music as they want and for as long a time period as they want without compensating copyright owners on the same basis as more efficient market participants trivializes the property rights of copyright owners. What cut stings more, being branded as inefficient or being trivialized? Neither – an .08 cents per performance royalty is the killer!
The CRB decided against the revenue-percentage royalty, based on several factors, mostly difficulties with calculating and assessing the sums due. The absence of persuasive evidence of what constitutes an unambiguous definition of revenue that properly relates the fee to the value of the rights being provided militates against reliance on a revenue based metric. The Copyright Royalty Judges do not find a sufficient clarity of evidence based on the record in this proceeding to produce a revenue-based metric that can serve as a good proxy for a usage-based metric.
In the end, the determined rate, for 2007, is .08 cents “per performance.” A “performance” is streaming one song to one listener, so do the math. Streaming 10 songs each hour, 20 hours a day, for 30 days is 6000 performances, if you have only one listener. Streaming to 20,000 or to 200,000 listener is many more, and at .08 cents per performance, the monthly rate only can be borne by a webcaster with substantial, consistent revenues (not inefficient or trivial ones).
The CRB’s determination goes for publication and comment in the Federal Register. A web-copy, provided at no royalty, is at http://www.loc.gov/crb/proceedings/2005-1/rates-terms2005-1.pdf