Artists to get Web Royalties Direct

By Richard Menta- 11/12/01

When the Recording Industry Association of America (RIAA) proposed SoundExchange, a new agency they set up to collect royalty fees for digital broadcasts under the Digital Millennium Copyright Act (DMCA), artists were up in arms. They had good reason, as the original plan had the artist's record label as the conduit to disperse funds.

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There, traditional record industry practices combined with creative accounting would almost guarantee that most of the generated funds would not find their way to artists. That's because most artists have a running tab of ever growing recording and promotional expenses that come out of their profits. If they earn a $4,000 check in web fees, but owe $100,000 on their tab, the labels would simply apply the 4K to the tab and the bill drops to $96,000. That's equivalent to the bank getting your entire paycheck to disperse your salary after mortgage expenses.

The artist's, through two trade unions, the American Federation of Television and Radio Artists and the American Federation of Musicians, fought back and an agreement was finally worked out. Musicians and artists will now be paid directly for broadcasts of their work on cable, satellite and Web broadcasts.

More important, the two sides also agreed they would share equal control of SoundExchange.

The RIAA could have spent considerably more time and effort to counter the artist's demands, after all control of this relatively new cash flow would be a windfall for the major labels. The problem for the record industry is that they are already fighting a larger protracted battle to control Net music as a whole and it is a battle with many fronts.

The major key to their plan comes in two yet to be released services called PressPlay and MusicNet that the industry wants to become the instrument for all consumer music downloads. Just to get those services up and running is proving to be a challenge. Royalty demands from music publishers (recently settled) as well as antitrust investigations, both here and in Europe, have slowed their progress. An artist conflict with SoundExchange, whose sole existence is as a government approved agency to distribute earnings to artists, could only postpone these services even longer. Once up, PressPlay and MusicNet still have the biggest struggle of all, gaining an audience willing to pay for digital downloads they already can get for free.

Time is the biggest enemy for the record labels as the ever-growing Napster clones add millions to their services every week. As it is, fighting free is an uphill battle for the fee-based PressPlay and MusicNet and industry lawsuits against Napster and its clones will take years (the Napster trial is in its second year and still going). A protracted fight against artists over the disbursement of payments would only threaten further delays. Picking their battles, the RIAA probably saw the forrest before the trees and compromised.

With all the stories we have heard about artist's not getting paid by their labels, this is a step in the right direction. Let's hope SoundExchange proves to be a fair arrangement. The agency has already made its first direct payment of $5.2 million to artists and other copyright holders, the most productive news we have seen in this mess we call online music in a long while.


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