Monday, May 14, 2012 - 11:35am
If the current music royalty arrangement is a "mountain" between webcasters and profitability, Michael Robertson says broadcasters have two choices: go around the mountain, or blow it up.
Robertson is founder and CEO of DAR.fm (which enables recording/time-shifted listening of online radio). He spoke on the panel "The Streaming Music Landscape" at RAIN Summit West in Las Vegas.
The first option, according to Robertson (left), entails radio creating an entirely new model that allows webcasters to avoid the high royalties. Fellow panelist Paul Campbell is founder/CEO of Amazing Radio in the UK, and is doing exactly this sort of thing. A terrestrial station, Amazing Radio plays only independently-owned music. In exchange for the promotion the publishers and performers receive by being aired on Amazing, they waive their royalty claims (allowing the station to perform the music for free).
Radio's second option is get far more involved in the royalty-setting process than it has to this point. "Unless the NAB gets off their ass and gets on the Copyright Office and influences those rates," Robertson exhorted, "as your business goes digital, you guys are screwed."
While Rhapsody Chief Product Officer Brendan Benzing thinks the "renaissance around consumer demand" for curated audio online will shine a brighter spotlight on untenably-high royalties webcasters pay, Robertson was less optimistic. "None of this other stuff matters unless royalties are radically changed," he said. His optimisim lies in the news of Sirius' lawsuit against SoundExchange (see background here). "That is the most important development this year for the Internet radio business. Fantastic development. You better hope Sirius wins."
After Robertson (also founder of the MP3Tunes.com, which recently declared bankruptcy, more here) brought up public earnings reports from Pandora that showed the company pays fully 50% of its revenues for royalties, moderator Ted Cohen (right) asked why that's so out-of-line. Cohen, TAG Strategic Managing Partner, said, "Look at physical retail, durable goods, where 60-65% (of retail revenue) goes to supplier. Is 50% that eggregious?"
The difference, according to Robertson, is in the nature of the business involved, and radio's important role as a copyright "intermediary" between creators and the public. "Look at broadcast radio, which pays about 5% (of its earnings for musical content, in the form of composer/publisher royalties to ASCAP, BMI, and SESAC). Would any radio station have a business if they paid 50% of revenue? No." The problem, he Robertson insisted, is that lawmakers now see the purpose of copyright not to benefit the public (as many interpret the Constitution to mandate), but rather to benefit copyright owners. And what the rate structure fails to take into account is the importance of "distributors" of copyright -- those entities like webcasters and radio -- that are necessary for the public to reap the benefit of copyright by broadcasting and streaming that content.
On the topic of distribution, Robertson advised broadcasters to "pay attention to mobile. That's where the majority of your listening will come from in the future." He said, "Get your signal everywhere, don't do exclusive deals. Any digital guy that comes to you (to make a deal), as long as it doesn't cost you any money, you should do it."
That is, of course, once the royalty matter is solved. The Internet radio business "is a rocket," Robertson said. Right now, "unfortunately, it's a North Korean rocket."
See the entire video of this panel, and all our RAIN Summit West content, at RTTNews here.