A Riddle: When is a broadcast no longer a broadcast?
Thoughts from The Kagan Streaming Broadband Summit
This has been a riddle over which the music and broadcast industries have been debating for some time now. The RIAA claims that an AM/FM broadcast, whether analog or digital, is not a broadcast once it is streamed over the Internet. Currently, AM/FM broadcasts are exempt from public performance of sound recording license obligations. The broadcast industry, understandably, argues that a broadcast is a broadcast, regardless of the delivery system, and thus exempt under the Digital Performance Right in Sound Recordings Act from license obligations. And if we are to believe webcasters complaints about the process and terms to get a license, we can certainly sympathize. It's in this context that RIAA president & CEO, Hillary Rosen, spoke to a unenthusiastic gathering of broadcasters and webcasters at the Kagan Streaming Broadband Summit on March 1st.
Broadcasters are in line with what has been a government policy of providing a technologically neutral playing field for companies to compete in a converged media world. Traditionally, various media channels, including publishers, broadcasters, cable and communications, had been subjected to very different rules. In addition, players in one media channel often were prevented from operating in other channels. And so telephone companies were prevented from offering video and cable from offering voice, while cross-channel ownership restrictions were imposed across all industries. As illustrated by the AOL Time Warner and Bertelsmann/RTL Group mergers, though, those rules have progressively been put aside as a fragmented media industry converges around digitization and the Internet.
In keeping with this convergence, government policy has shifted from sector specific rules (ie., one set for broadcaster, another for cable,…) to technology-neutral rules. The logic is if a bit is a bit, then it really doesn't matter how it is packaged or delivered, it should still be treated as a bit. Now back to the broadcaster's argument: content and programming are nothing but bits that can be delivered through an array of delivery channels, including analog and digital terrestrial broadcast, satellite broadcast, webcast and wireless, to name a few. To treat that content/bit any differently on any of those delivery systems would skew the market, providing an advantage to one medium over the others. Simply put, if broadcasters have to pay license fees to webcast programming that they are broadcasting license-free, why would they webcast? This in turn would deprive consumers from choosing how they can access music.
The broadcasters' argument, though, misses an important fact: webcasters must and should pay mechanical licenses. If the interest is to create a level playing field, then Hillary is right in that extending the broadcast exemption to simulcasting "would not be fair for webcasters, artists or consumers." Not only would extending the exemption put webcasters at a distinct disadvantage (they already start the game at a tremendous disadvantage as compared to established broadcasters), it would lead to higher licensing fees for webcasters since labels would likely make up some perceived losses from the exemption to broadcasters - at least this is my interpretation of Hillary's remark that labels' ability to increase their returns over multiple channels would ultimately allow them to "a fairer sharing of our investment across [those] outlets."
But why are broadcasters exempt anyway? The promotional impact of radio airplay on CD sales, the major labels' cash cow, would warrant an exemption for broadcasters, one they do not enjoy in regards to performance rights since songwriters do not benefit financially from those sales. This raises the question of whether webcasters should be subject to licensing obligations at all. There is every reason to believe that as webcasting matures, it could have a much greater impact on music sales, whether downloadable or CD, particularly with one-click purchasing. And what about Napster for that matter? There is mounting evidence that Napster, which has recently started to include a direct link to, Bertelsmann-owned, CD Now in its latest software version, may in fact promote album sales. Whatever one's view, let us at least remain consistent: either we side with broadcasters and abolish the licensing regime in order to legitimize their broadcast exemption, or make broadcasters face the same rules as any other music outlet and pay their due.
AOL Time Warner - www.aoltimewarner.com
Bertelsmann - www.bertelsmann.com
CD Now - www.cdnow.com
Kagan - www.kagan.com
Napster - www.napster.com
RIAA - www.riaa.com
RTL Group - www.rtlgroup.com
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