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SoundExchange puts a stop on its royalty hike and decides to hash a new plan with webcasters

Several days ago, DailyTech reported the online radio industry was about to meet its end when the D.C. Circuit Court of Appeals declined to put a stop on a new royalty scheme. Championed by SoundExchange, the new royalty scheme increases money flow for artists and labels.

Despite the court decision to go ahead with the new scheme, SoundExchange announced the new royalty scheme will be postponed, without any indication it will be continued. According to SoundExchange Executive Director Jon Simson, the group is in debate with online radio stations on an alternative plan, one that will allow them to continue their operation while compensating artists and labels.

The outcry by online radio stations was heard several weeks ago when a large number of stations banded together to protest against SoundExchange. While the government in large ignored the complaints, SoundExchange did listen -- even though it was the last entity on any stations' mind that would listen.

Pandora, one of the four largest online radio companies was one of many stations that took a stance against SoundExchange. Pandora founder Tim Westergren said users who called into Congress to voice against the changes all helped.

"This is a direct result of lobbying pressure, so if anyone thinks their call didn't matter, it did. That's why this is happening," said Westergren in a blog on Listening Post.

SoundExchange said it will now work closely with webcasters, large and small to form a new plan.

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A Miracle? I think not.
By papabear27 on 7/16/2007 6:12:44 PM , Rating: 5
While this is certainly a boon for online radio, this does not surprise me in the slightest. This is a good, old-fashioned case of "Get That Money". Had SoundExchange gone ahead with it's plan and internet stations shut down en masse, a huge portion of potential income would be gone. It's a time honored principle of business; Better to get less money than none.

RE: A Miracle? I think not.
By TomZ on 7/16/2007 6:15:52 PM , Rating: 1
I agree. It is also a negiotiating tactic whereby you threaten to put all your customers out of business, and then at the last minute, you decide to "save" them. Then at the negiotiating table, you have a lot of leverage, since many of these businesses had already visualized their own demise. It leaves them much more willing to pay.

SoundExchange is pretty brutal. I hope what goes around, comes around.

RE: A Miracle? I think not.
By hubajube on 7/16/2007 7:00:34 PM , Rating: 2
SoundExchange must actually need that revenue if they're willing to negotiate at all (last minute or not) otherwise they would've let the stations die on the vine. The stations still have some leverage here as they can just bail out of the negotiations if things don't their way. Granted that means their demise but better to die on one's feet than live on one's knees.

RE: A Miracle? I think not.
By TomZ on 7/16/2007 7:09:24 PM , Rating: 2
They need the revenue from the big online radio stations, the AOL's, MSN's, etc. The revenue from the little guys probably doesn't total up to much, at least for now. But it's not too hard to imagine how, in the future, you could see a much larger number of smaller stations.

Small plug - my favorite station is

RE: A Miracle? I think not.
By Emryse on 7/17/2007 2:14:02 PM , Rating: 2
Couldn't agree with you more.

Fact of the matter is:

1.) They were greedy.

2.) They bluffed.

3.) Internet radio stations called their bluff.

4.) They caved.

Although they state they're going to work on a new plan to create a "fair compensation" for artists represented, the truth is that this is clearly a case of "what the market was willing to bear".

They have absolutely no negotiating power whatsoever now - either they accomodate the current profits they recieve from this industry, or they destroy the industry. I only wish this scenario could be replicated in the fight on-going between the RAB and similar greed-driven representation groups.

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