The Internet Radio Fairness Act, And Two Things I Hate About Copyfights

by Rob Pegoraro on November 26, 2012

There are few tech-policy stories that I’ve covered for longer than the fight over Web radio royalties, and almost none of which I’m more sick of covering.

The problem (Web stations pay far higher rates than other broadcasters) and the solution (have the same rates everywhere) seemed obvious 10 years ago. Yet the discussion remains stuck on repeat.

And recent arguments over a bill intended to fix this situation–in ads, op-eds and contentious debates at the Future of Music Summit two weeks ago in Washington–have served up a fresh reminder of what I hate about not just this dispute but intellectual-property squabbles in general. A quick recap if you haven’t tuned into the royalties issue lately:

  • The government only moved to remedy that injustice at some digital broadcasters: satellite radio, pay-TV music services and Internet radio, but not FM, AM, or even digital HD Radio FM.

The best-known Internet radio service, Pandora, says it pays more than 50 percent of its revenue in performance royalties–even as individual musicians may not earn much either. (Galaxie 500 co-founder Damon Krukowski wrote last week that Pandora paid $64.17 for three months’ use of the influential indie-rock band’s catalog.) So after years of wanting out of this deal, the Oakland, Calif., Webcaster has been pushing hard for a bill called the Internet Radio Fairness Act–S.3609 in the Senate, H.R. 6480 in the House–that would move Internet radio to the same legal regime as satellite and cable.

You don’t have to like the Internet Radio Fairness Act. You can object, as I do, that it still exempts FM and AM from performance royalties. You can complain about a vaguely-phrased clause that might limit artists’ collective-bargaining rights, as singer-songwriter David Lowery did loudly at the FMC summit.

(Disclosure: I conducted an onstage interview there and have moderated FMC panels in past years. Also, note that DisCo’s parent organization, the Computer & Communications Industry Association, backs the Internet Radio Fairness Act.)

But the bulk of the anti-IRFA argument boils down to two points that hit their expiration dates long ago.

“Artists have a right to get paid.” This shows a misunderstanding of why we made up such a thing as intellectual property. Yes, made up: The Constitution allows Congress to grant copyrights to “promote the Progress of Science and useful Arts.”

Rewarding creative types is well and good–as a writer, I aim to collect my share–but it’s a byproduct of this legal foundation. Properly understood, copyright is less a full-employment act for artists than a full-enjoyment act for their audiences.

The same thing happens in patent-policy arguments all the time, and it’s equally bogus there. Inventors don’t have a right to profit from their inventions until we the people redeem our right to a patent system that yields the most innovation.

(In the music industry, this argument often also features a sorrowful invocation of an artist facing crushing medical bills, which raises a different question: Isn’t something like the Affordable Care Act a more direct remedy for a problem many non-artists also face?)

“It’s only one greedy company whining about things. Pandora may have an icon on most smartphone screens, but it’s not rolling in cash. It lost money in its most recent quarter and only hopes to eke out a narrow profit in its next; its skidding stock price suggests little investor confidence about its fortunes.

But Pandora is only playing the designated-villain role earlier occupied by the likes of Google (news search results) and Apple (ripping CDs). And even if Pandora were the Comcast or ExxonMobil of Web radio, that still wouldn’t justify writing royalty rates to punish it. The law also covers Webcasters like tiny Radio Paradise or SomaFM.

The other problem with those emotional arguments is that they point both ways. If you slam Pandora as a freeloading dot-commer, you can’t whine if somebody asks why an innovative startup must pay punitive royalties to get Katy Perry another vacation home.

Meanwhile, fighting to preserve the existing, market-distorting royalties regime (as if that creation of unelected judges represented capitalism at work) only gets in the way of setting consistent rules for all broadcasters. If Pandora hates its current rates, how do you think SiriusXM or ClearChannel–each with a lot more experience lobbying Washington–feel about falling under the same system?

  • http://twitter.com/TheFree_Lance Jeff A. Taylor

    You might have a point here, but frankly you are all over the map.(And your Obamacare  shout-out really does not help.)

    Specifically on Point One — Yes, artists sometime have a faint grasp of the value of their work, as well as the law of supply and demand. I’ve heard outrages directed at the price of out-of-print LPs on eBay as an example of artists not getting paid. (Use Tunecore to distro the same original recordings via iTunes etc, I counseled. Scarcity solved.) Part of this confusion is also the failure to understand the value of cataloged and curated systems which happen to deftly deliver bits that are arranged as their songs — along with songs from many, many other artists. This is value add. But even with these nods in the direction of your Artist as Unreasonable Bumpkin formulation, “Artists have a right to get paid” is still a strawman. No one advances that line without some important qualifiers — more like “Artists have a right not to get ripped off.” Meaning, if someone is making money off of their creation, some of that money better find its way back to them. How much? There’s the rub, right? Then there are non-monetary issues of licensure that always crop up in election years, the use of so-n-so’s song in Mr. Beltway’s campaign ad. Believe it or not, the concept of not getting ripped off extends to controlling (or having some say) in how copyrighted works are presented to the public. The extreme case of Gail Zappa and the Zappa estate proves that. Of course, specifics of contract law move us away from IP universals.

    • http://robpegoraro.com Rob Pegoraro

      I admit that I’m trying to cover a lot of ground in this post–I’m venting about the last 15 years or so of copyright arguments! 

      Two thoughts:

      * I don’t, in fact, think that it’s possible to bill for every profitable use of an artist’s work. Eventually the snippet gets too short (see my prior post on newspaper publishers), the use too transformative, and the transaction cost too high.

      * From our discussions on Twitter, you seem to be a free-market, limited-government conservative. Does the current state of Web-radio royalties, in which one medium pays far more than others, square with those ideals at all? 

  • http://twitter.com/future_of_music Future of Music

    Rob,Thanks for your thoughts—and thanks especially for underscoring the importance of including the terrestrial performance right in these debates. I want to suggest that there are at least two valid reasons that health care gets brought up when discussing rate-setting legislation.  First, while musicians are certainly not the only ones affected by a broken health care system, they are impacted disproportionately.  FMC’s 2010 study found that musicians lack health insurance at about twice the rate of the general population.   Second, many music consumers still see musicians as millionaire pop stars in mansions (e.g. your Katy Perry jab), and see musicians’ attempts to organize for better compensation as “greedy.”  The health care crisis is one of the starkest ways of illustrating the difference between MTV Cribs fantasies and the challenging realities faced by working musicians.   Regardless of one’s ultimate opinions on IP law, shouldn’t any debate about labor issues be rooted in an accurate understanding of current conditions for working people, not just an assessment of stock prices? I’m sure some will argue your premise about the original intent of copyright law, but even if we accept it, it’s important to understand that price isn’t the only metric for evaluating impact on consumers.  Race-to-the-bottom pricing impacts consumers negatively; it drives fairly-run, ethical businesses out, and creates markets where only mass-scale options can be economically viable.  Just as consumers benefit from having mom & pop retail options, even if they end up paying a little more, we all benefit from having a creative environment where a broader diversity of critical and alternative voices have a shot at sustainability. So it’s quite frustrating to see you raise the canard of “full employment”, which is something no one is actually advocating for. It’s a strawman argument that doesn’t orient us towards an honest debate. In fact, the assumption animating much of the musicians’ side of these debates is that “musicians deserve to get paid when people consume and enjoy their work”. Or even if you reject that assumption, as some free-culture advocates do, there’s another principle: “Musicians deserve to get paid fairly when third parties are actively monetizing their work.”-Kevin EricksonFMC

    • http://robpegoraro.com Rob Pegoraro

      Thanks for the detailed reply. My point about insurance was mainly to note that copyright reform is a roundabout fix for a much bigger problem–I know health insurance is an issue for musicians, having heard it discussed at prior FMC events, but other people have it just as bad or worse. 

      I don’t think you all are advocating for full employment, but that’s the logical underpinning of many copyright-maximalization arguments (like what I hear from the likes of the MPAA). I do agree that the economy in general should reward work, but that’s a bigger debate than IP policy–just as health care is. 

      We do seem to agree on much of the Web-radio-royalties debate, to judge from the testimony FMC submitted to today’s hearings: http://futureofmusic.org/filing/testimony-music-licensing-part-one-legislation-112th-congress

      “Rate-setting should be reasonably platform neutral. Although business models and competition should be factored into any rate-setting scheme, we believe that no single technology should be penalized and no platform should be exempted from compensation obligations. Even if rate-setting standards are harmonized, rates may still differ based on unique market factors.”

  • http://www.facebook.com/kalpanaganeshm Kalpana Ganesh

    Informatics Outsourcing is an Offshore Intellectual Property Services company. They are providing Intellectual Property services for Bio Technology, Biochemistry, Drug Discovery, Chemistry, etc

  • Viva_Kevin

    when does this bill go to vote?

  • http://twitter.com/JeffreyBarkin Jeffrey Barkin

    Why do all countries on the planet pay acknowledgeable radio broadcast royalties EXCEPT the USA, North Korea, Iran, China and Rwanda?

    Don’t artist performers and music innovators / creators deserve to be rewarded in the USA?  Isn’t this the land of opportunity that recognizes creators and innovation?

    Shouldn’t musicians be encouraged and rewarded for their content like other industries’ creative developers for their work?  Why should music be “free” or exempt?  Should music remain free because people have become comfortable pirating and stealing it?

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