Yesterday, major label-backed licensing authority SoundExchange gave small and non-commercial music webcasters a temporary reprieve, stating that they would continue negotiations and not immediately enforce the ridiculous statutory royalty rate increase. SoundExchange is also negotiating a lower rate for large commercial stations like Pandora.
However, Net radio isn't in the clear yet. In fact, it appears that such negotiated lower royalty rates may come at a very steep price: taking away DRM-free streaming and your ability to lawfully record music radio.
The Washington Post and Radio and Internet Newsletter (RAIN) are both reporting that SoundExchange wants licensees to adopt technical measures to limit recording music webcasts ("streamripping"). It's unclear whether this condition applied to all potential licensees or just a subset. Regardless, it could force music webcasters to adopt DRM-laden proprietary formats like WMA, rather than the MP3 streaming format used by Live365, Shoutcast, Digitally Imported and many smaller webcasters (like Santa Monica's KCRW and Seattle's KEXP). And you can say goodbye to innovative tools like Streamripper that help you time-shift online radio so that you can listen to it later and move recordings to a portable player.
SoundExchange's licensing condition smells a lot like the PERFORM Act, which would have forced webcasters to adopt "reasonable recording" restrictions or lose their statutory license. By pricing out webcasters, the Copyright Royalty Board's recent statutory rate hike may end up having the same effect
This represents another way in which the current statutory licensing system is failing. Its intent was to give copyright holders fair compensation for music webcasting while not allowing them to hold back and control the future of this burgeoning medium. While the statutory license imposes certain restrictions, it does not tell webcasters what technology to use. Now SoundExchange is set to dictate streaming technologies and how users can record online radio.
So while SoundExchange's temporary reprieve is good news in the short run, the licensing system is still broken, and considering legislation like the Internet Radio Equality Act, which would sensibly alter the statutory rate-setting standards, remains important.