All Those Dollars For A University Education

I'm sitting in the United Terminal of LAX waiting for the redeye back to Toronto.  Yeah, I know it's 5p, I like to be early.  I was at MusicIP (my portfolio company) today and then stopped in to see Justin Beckett, CEO of FluidAudio. 

Meanwhile, the blogworld continues its collective breathing in a bag over the Internet radio providers surprise: Rate Increases. Whoa! The suppliers want to charge more. And unlike every other industry on the planet, these businesses gasp and scream to the customers: Write your congressmen!

In every other business, either the business eats it, passes price increases to customers or, and this is the scary part: dies.  They die because there was not enough value to compel a sustainable business where somebody pays. 

I was ignoring this stuff because I have this general belief that free markets always solve these issues.  

But, alas, my bright, beautiful, and wonderful daughter decided to reach out, grab the bag and join the hyperventilating crowd which included Matt Dunn of MusicIP , Tim Westergren of Pandora, and Ari Shohat of Digitally Imported Inc.

Rachel has a clip about the Copyright Royalty Board raising rates, has a clip from Pandora's CEO and ends with a suggestion that this sucks so head over to www.savenetradio.org and help get congress involved.

Rachel, Rachel, Rachel. <sigh>

The last thing in the world anybody should want is Congress getting involved. People, we've seen this movie. Anybody got a WIN button? Or how about we go back to regulated airlines and fares? The government? Gimmie a break.  Free enterprise depends on markets deciding and self correcting as needed or warranted by demand, not by congress telling us.

That save the net radio site has some fairly "interesting comments" which hyping this issue beyond belief.

They claim this action will "take away consumer choice, hurt working artists, damage small record labels, and put small webcasters out of business."

Let's address small record labels and working artists. As I type this, I am listening to Live365's Soft Jazz FM.  A little Peter White,  Bonnie James, Jaszzmasters, Fattburger and more.  Jimi King is lining up the tracks for me.  I've paid for this service.  The VIP service.  In two hours of listening, I've heard no small record labels and zero 'working artists' as I expect means small/independent folks.  What I've heard is popular (and good) stuff.  I like it and I'm paying for it.  If the price goes up, that might mean I will pay more or quit. It might mean live365.com shuts her doors. 

But regardless of what I or live365.com does, that small guy isn't any better or worse off because all these Internet radio stations are not giving these independent/working artists air time.  So the notion that writing your congressman is going to suddenly put food on the table of a starving artist is just wrong.

People are jumping on this call Congress bandwagon because the Copyright Royalty Board is part of the U.S. Copyright office. There is this assumption that pounding on Congress gets us all free Internet radio. 

My view is that letting a bunch of people from the RIAA lobby the CRB to jack up the rates is the perfect incentive to solve the problem with good old fashion free enterprise. 

Let the rates go to 100 bucks a minute. Watch everybody shut down. I guarantee you that within 48hrs there will be 50 new replacement services with new technology, new services, and new choices all at rates people want to pay (or free, advertiser supported).

And within months of those services happening, the artists who watch play counts drop will start screaming at labels who in turn will start putting stuff into these services and we will be back to listening to what we want.

We've seen this movie.  Those monopoly cable companies prompted satellite services which all in turn got us Internet TV, etc, etc.  Free markets, folks, free markets.

Jason Fry at the Wall Street Journal got it right with the headline: Music Industry wants higher rates but are the labels undermining themselves. Exactly right.

This is a lemon to lemonade opportunity brought to you on a silver platter by a bunch of bureaucrats and pheaked out old guys who can't see the new media delivery systems freight train coming right at them.

I love my daughter dearly and I am tremendously proud of her.  I am, however, going to have her repeat that class on free market economics. 

Comments

[Michael Clark]

Hi, Try sampling some of the other 7,000+ stations at Live365. Many of them are filling niches that can't be heard elsewhere.

The major problem with this decision is that it changes the playing field so completely. The old plan was to base the copyright fees on the income and expenses of the broadcaster. We professional broadcasters have to file monthly statements with SoundExchange certifying our income and expenses. We were to pay a minimum of $2K/year for this. The new plan charges us a set amount of each listener for each song. The increased my fees for 2006 from $2,000 to $4,773. And with one year of solid work under my belt (I was the third most popular station at Live365 in December 2006), with a solid core of listeners who will return next season, and with the improvements I have made and was planning to make for the Christmas '07 season, my estimate of my fees for 2007 will increase to $15,200.

So maybe, I'm proving your point, that the RIAA/SX is simply cutting off their nose to spite their face.

But the hard work I've put into my station (a hobby) and to be told that it doesn't matter, is ridiculous. The damage will be done, if this decision is not altered. A reasonable compromise perhaps? Start the new fees on January 1, 2008. Give us (and the market) time to react/adjust. Some of the broadcasters at Live365 are looking at retroactive copyright performance fees in the 6 digit range.

[Greg]

Ordinarily I would agree with you that getting Congress to regulate something is a terrible idea. However you are blatantly ignoring that the webcasters are up in arms precisely over a GOVERNMENT decision that regulates the business in a way that would shut them out. CRB = Copyright Royalty Board, you know, the CRB of the US government. Before this round small webcasters, for example, had a private deal negotiated with SoundExchange, and hopefully they will in the future too. But you can't argue with a straight face that webcasters should just take it when the whole thing is about government getting intervened and screwing up the market in the first place.

GW

[Rick Segal]

Michael,

Thanks for stopping by. I agree that it would be great if there was a longer time for a phase in so people could adjust. I don't think the CRB really thought this through, rather just did what the RIAA wanted.

Sux all the way around because it isn't free enterprise which is at the core of my argument.

I will check out some other stations, good advice.

[Rick Segal]

Hi Greg,

Thanks for stopping by. In my draft post, I said, let's kill the CRB, make it go away and let the market decide. SoundExchange has a good dB and there are technical ways to keep track of all this. I backed off on that and maybe I shouldn't have. The core of the problem, you are exactly right, is the gov't in the first place. Probably well intentioned people trying to look out for the little guy; trying to be fair. Rarely works out that way, witness where we are today.

So, you are right that the Gov't screwed this up in the first place and there should be some way to unwind it, move to free markets without killing the little guy in the process.