The GazerBlog

One of the great guys (Stephen O’Grady) over at RedMonk posted some interesting bits around the royalty and rates for net radio at: Should We Save Net Radio? The Q&A

(Via tecosystems.)

So I’ve got a bit of an extended thought proposal on an alternative to this morass I’d like you to consider:

Tiered pay rates, but not linked only to broadcaster size. Requests for more popular songs are at a higher royalty rate. Much as popular titles of software are more expensive than the less popular and from a market opinion less desirable alternatives. Thus the true “long-tail” effect where it’s sites like WOXY.com trying to get small artists exposed to discerning and eclectic listeners, the rates would be very low, and the effect to the artist it one of exposure. As the popularity climbs (lets say there has to be a log system not unlike the current radio stations have that ranks number of plays and listenership), compiled across all the various mediums of broadcast, internet and download music avenues, the rates per play/per listener would climb as well. This would do some very weird but segmenting things to the market.

Once a title went “mainstream”, odds are the independent and long-tail mediums would not be able to afford to play it. Simply, it’s a market size driver, and is a popular song. Popular songs drive listeners to stations, and that presents a potential financial opportunity to the station, and that is driven by the value the work of the artist represents. The artist (removing the label optionally in my ideal dis-intermediated world) gets compensated on the net potential financial possibility of their work, within some reasonable level of what we would determine as possible. This would drive out the “mainstream” from the fringe mediums, and force them to be true to the mandate of “fringe” and “undiscovered” artists in the traditional sense. Interestingly, if they still pay enough of that level of music, sprinkled with a few popular songs that were “discovered” on their station, they economics would still work as the listenership would be low enough as the majority of the listeners are there for the less mainstream work, and that by definition is a smaller community.

This does drive the mass-market stations to paying for the mass-market songs in a proportional way as well. But it also presents a financial incentive for them to not play “all top-40, all the time” as the rates on the less popular songs are lower. The balance and counterbalance as the big listener bases play songs and thus drive the popularity rating causes some flux, but in general, it’s not going to cause huge issues, and the rates for a song could be published or available at the beginning of the month or week from the previous time period rating.

For the artists, which are the ones I personally care about, and which has little or nothing to do with the labels in this discussion, they are given the current reality that many of the independent artists face, which is that they provide websites of their works with samples or downloads for free in order to get exposure, and use it as marketing to sell CDs. The royalty system I’m proposing would have them get minimal compensation as they introduce themselves or new works into the market, and concurrently prices the new offerings in a way that would make it attractive to play the new and less-played offerings. As they are “voted on” by the various listener bases, and the station programmers who may hold a chunk of the power in this case, their compensation rises proportionally to the value it brings to the stations.

One thing this does is stop an internet radio station from abdicating the responsibility of compensating the artists. And running a business model that cannot pay its suppliers is abdicating that responsibility. Right now, with a percentage of profits plus an annual fee. That system essentially allows them to distribute the works of artists for whatever their annual fee is, and operate as a non-profit or loss-leader for other enterprises. Essentially, their staff can get paid for playing work of artists that they are not in turn paying a decent wage to. Note that the same fee structure applies to terrestrial radio and other mediums as well. Public broadcast and/or entertainment or establishment licenses could even factor in in some ways, although some hand-waving on the numbers and listeners/tracks quantities always is in the mix, and that gets to be approximated.

I believe I do see the point of the new royalty fee structure, but the issue is that it’s more old-world thinking from the old-world labels, and they again ignore getting the measures and using those measures of the actual value in the fee structure.

Now, before we get some sort of open-source or other free as in beer argument going, I would venture that an artist always has the right to defer or waive the royalty on a work or body of work should they choose for any given period of time. If they want to “open source” or Creative Commons their work, that is perfectly fine, and should be fully supported by the royalty system I propose. For those that are trying to make a living and wish to be fairly compensated for their work, they have that right as well, and can charge for their works. It is not the right of the market to deny them compensation for the enjoyment of their work, it is the right of the market not to enjoy their work and in doing so deny them compensation.

This would also operate across the board, and the whole copyright vs. artist debate can go wallow in the past. The fee gets paid to whatever rights holder or agency is attached to a work, and the split between copyright holder, artist, and whatever else is done internally to that entity as a joint-venture, independent and irrespective of the fees charged and collection structure or medium of delivery. Note that download and retain systems like iTunes could use this system and pay a higher per-work fee but still with the same tiered structure so that the margin on less-popular works is higher (at least until they become more popular).

This posting and all content is copyrighted. Copyright © 2007 by Dallas C. Hockley. All rights reserved. If the labels and industry want to use this approach, talk to me. You’ll find I’m surprisingly reasonable if the artists and the listeners are the winners. Links to other sites and content owners are copyright those respective parties.

Currently playing in iTunes: Freetime by

Kenna