Kurt Hanson over at Radio and Internet Newsletter offers an excellent (and expansive) rundown on the history of copyright law leading up to the recent decision by the Copyright Royalty Board to set higher royalty rates for webcasting. The history is to long to quote, but Hanson rightly diagnoses (with one major caveat) the problem with the ruling:
"And thus we end up with a situation in we're in right now, in which a trio of judges granted the copyright owners a royalty rate from Internet radio that is effectively, I believe, more than 100% of the total industry's revenues!...Hanson is right in this section -- the higher royalty rates will doom many webcasters who are exposing independent artists and music genres that don't receive much attention. Losing them will move the Internet one step closer to the bland homogenization of commercial radio. But he goes to far when he seems to imply later in the conclusion that webcasters do not owe artists any digital performance royalties.
Clearly the process has spun off the rails. Particularly if the CRB decision drives Internet radio off the air, the public clearly doesn't benefit, meaning that the purpose of copyright law is not being served.
The purpose of Congress granting copyright protections is supposed to be to maximize the availability of creative output to the public. In other words, from the copyright owner's side, it's supposed to encourage bands like Clap Your Hands Say Yeah to keep recording music, and from the copyright user's side, it's supposed to encourage the development of new services like radio station's Internet simulcasts and "B" channels and LAUNCHcast and AccuRadio and Live365 and Radio Paradise and Pandora. When both sides are doing what they do, the public benefits. Copyright law is not supposed to shut down an entire industry."
As the FMC points out in its new position paper on the webcasting ruling, the problem is not paying artists royalties, but a "one size fits all" system that charges small webcasters like LAUNCHcast and large commercial radio stations the same royalty rate. There should be a balance. Small webcasters should pay a lower royalty rate -- one that won't knock them off the air. Large commercial stations, who can afford the higher rate, should pay it. This is the best approach for ensuring artists and small webcasters continue the explosion in creativity we have seen online in the last decade and both benefit from the proceeds.