Net radio negotiations hit snag over DRM

Large Webcasters and the music industry are butting heads over a compromise to heightened fees that would require Net radio operators to implement anti-streamripping technology.

As we reported earlier this week, many Webcasting services kept streaming without incident after feared new music royalty fees took effect, as talks with the record industry about alternative arrangements seemed to be proceeding on a favorable track .

How quickly things can change.

Now a new spat appears to be brewing between the Digital Media Association (DiMA), a lobby group representing large Webcasters like Pandora, Yahoo, RealNetworks and AOL, and SoundExchange, the group that collects and lobbied for the new payments on behalf of musicians and record labels.

The issue? Whether Webcasters should be required to cloak their streams in technologies designed to prevent "streamripping" as part of an agreement to cap the administrative fees they owe to SoundExchange.

Recall that large Webcasters have balked not only at the heightened per-song, per-listener royalty rates imposed earlier this year by federal copyright authorities but at a minimum $500 per channel administrative fee that they say would cost the three largest services, which allow users to create thousands of distinct "channels," more than $1 billion in the first year alone.

At a closed-door congressional meeting and in a subsequent press release last week, SoundExchange offered to cap that annual fee at $50,000 per Internet radio company, provided that the Webcasters agree to provide more detailed reporting about their music streams and "to work to stop their listeners from engaging in 'streamripping'"--that is, turning music streams into more permanent libraries. DiMA issued a statement over the weekend saying it was prepared to accept the cap, to provide the more detailed reports and to "research, identify, review and evaluate the prevalence of 'stream-ripping.'"

As it turns out, SoundExchange wanted more than just an inquiry on the streamripping issue. On Monday, SoundExchange Executive Director John Simson sent a letter to DiMA informing it that it had "mischaracterized" the group's offer. In exchange for the cap, the group is calling for Webcasters to "agree to implement technology related to streamripping...provided such technology is feasible and is available on reasonable terms."

That request--a copy of which was provided by DiMA to CNET News.com--drew a retort on Wednesday morning from DiMA Executive Director Jonathan Potter, who accused SoundExchange of backtracking on its original offer. He said in a statement: "SoundExchange has demanded enforceable technology mandates that are unreasonable, unworkable and way off-topic. They seek to leverage this absurd fee to impose mandates that they have unsuccessfully sought elsewhere."

SoundExchange spokesman Richard Ades blasted DiMA's latest characterization of the issue.

"What we have in the letter is the same exact terms that we discussed at the roundtable in front of members of Congress," he said in a telephone interview Wednesday afternoon. "For him to say that we're backtracking is political posturing and misrepresenting the truth. It's just totally disingenuous."

So where do we go from here? DiMA said it's still prepared to meet with SoundExchange soon to sort out the differences, and Ades said SoundExchange is also drafting a response.

It's important to note that the large Webcasters represent only one portion of the debate. Negotiations with small Internet radio outfits and noncommercial entities like National Public Radio have been occurring on separate tracks and so far appear to be progressing on a smoother course.

For more on the Net radio conflict, check out our FAQ.

Update at 2 p.m. PDT: SoundExchange has provided CNET News.com with a copy of its written response to DiMA, which contains something of a scathing rebuke.

"Late on Friday night you sent me a self-serving letter which did not accurately portray the offer we made at the roundtable," SoundExchange's Simson wrote. "You then accepted your own offer and released that to the press before I even had a chance to read it, much less respond to it. And now you accuse us of backtracking when you clearly know that is not the case."

Simson's letter said SoundExchange is also still waiting on DiMA to come through with multiple "promises," including DiMA's proposal for what to do about the fee structure and access to "proprietary company materials." It also said the group already arranged a "last minute" meeting with its board members and DiMA representatives in New York this week and had offered another "specific date and time" to meet next week.

 

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