After a
two-year proceeding, the Copyright Royalty Board (CRB) has set rates
for commercial and noncommercial webcasts and Internet simulcasts,
which some executives say will put them out of business.

Why did the record industry want royalty rates for webcasting to go up
so high that it may force many webcasting outfits to go under?
Because this may also cause on-demand licensing rates to go up.

Webcasters in the US are legally able to play music from the major
labels because of a compulsory license. Most other online uses of
music require one-to-one negotiations between a record company and the
publishing site. These 1-1 negotiations include virtually all
big-budget music distribution, such as at the Rhapsody, Napster and
Yahoo! Music Unlimited subscription services and the iTunes
pay-per-download store.

Rates paid under the webcasting compulsory are the floor under these
negotiated rates. Rhapsody et al always have the choice of dropping
back to webcasting. They negotiate only because they want to offer
enhanced services such as on-demand downloads.

Rates for on-demand downloads are the point here. If the lowest price
possible — the webcasting compulsory — rises, the prices for
on-demand services should also. Or at least that is the plan.

To the major labels, revenues from webcasting royalties are not
significant in comparison to revenues from the iTunes store and
comparable online distributors. The iTunes store, mainly. If
the webcasting industry disappears from the face of the internet, that
is an acceptable level of collateral damage as long as revenues from
premium services like iTunes rise enough.

I imagine the labels modeled this all out in great detail before
going for it, since nuking the webcasters is a risky move, not to
mention as hardball as it gets. But then again, getting to show that
they have balls of steel was probably considered upside.

Two points that you’ll have to accept as assumptions for this all to make sense:

1. The new royalty rates cannot be supported by the webcasting industry. The webcasters aren’t just working the referee.
2. The CRB rate decision was controlled by the major labels.

Originally from the weblog of Lucas Gonze, ReBlogged by yatta on Mar 19, 2007 at 3:12 PM

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[tags]radio, music, business, webcast[/tags]

(Via unmediated.)