"This should be administered by a third party. There should be transparency and no control by any members of the music industry in this process."
——Jonathan Potter,
Digital Media Assn.

RIAA CROWNS ITSELF DIGITAL ROYALTY COLLECTOR

Trade Org Doubles as Collection Agency, Raising Eyebrows
The RIAA has entered the world of royalty collection amid grumblings about the appropriateness of a label-advocacy group spearheading an effort to collect monies owed to artists.

In a surprising move in the battle over digital-music rights, the Big Five have agreed to give recording artists an unprecedented 45% cut of Webcast royalties for a period of three to five years.

The RIAA launched its SoundExchange program to distribute royalties for streamed music online, but the group has run into resistance with artist groups and some Internet media companies.

The initiative, which received supporting statements from AFTRA and the American Federation of Musicians (AFM), among others, will gather payments from Webcasters and cable and satellite music services, based on the performance right for sound recordings granted by Digital Millennium Copyright Act and Digital Performance Rights Act stipulations. Monies will then be distributed to both artists and labels.

As part of the deal, labels will allow artists to take the money as pure income, without having to apply it against funds the labels have advanced them in the past. The two policies are part of a Webcast royalty collection and distribution process handled by SoundExchange.

The organization will represent about 2,100 record labels and 270 recording companies if it receives approval from the U.S. Copyright Office, which selects agents to collect and distribute royalties.

SoundExchange's Governance Committee is a voting board made up of Executive Director Pat Bradley and RIAA President/CEO Hilary Rosen, along with a representative from each of the five major label groups, the Zomba Group and Real Authentic Sound. Artists will eventually have nine representatives as well; they currently have four, notably, outspoken industry critic Aimee Mann.

There's been negative talk about how much money rights holders are entitled to from online radio stations, which must pay considerably more under current law than their terrestrial counterparts. Given the RIAA's history with Internet music providers and a perception in the online community that the deck is stacked against them, it's fair to expect controversy on this front to continue.

Meanwhile, with the announcement of the concern came criticism that centered on fear that the trade group will now wield too much control over royalty payments in the fledgling online radio business.

"This should be administered by a third party. There should be transparency and no control by any members of the music industry in this process," said Jonathan Potter, Executive Director for the Digital Media Assn., whose membership includes Amazon.com and Spinner.com.

SoundExchange official John Simson downplayed the concerns and expects the U.S. Copyright Office to select his organization as an online royalty collection agent during proceedings that begin in February.

"It's a landscape that will keep changing. And while these concerns are important, ultimately it will all get settled and we'll be collecting on these licenses," Simson asserted.

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