Internet Radio lacks a viable businss model?
Well, there it is. Internet radio sites may be cool and convenient, but, like so many dot-coms before them, they lack a business model capable of withstanding real-world cost pressures.The difference is that the dot-coms you refer to didn't have their costs legislated by the government, and more importantly, didn't have costs drastically different for them just because they operate on the internet. It's not like Pets.com had to spend more money on the products they sold because they were an internet company, and the law said that internet pet supply dealers had to pay more for the products they sold than brick and mortar pet stores.
All other commercial users of music pay based on a percentage of their revenues. Unfortunately, the DMCA legislated that internet broadcasters would be treated differently, largely because when the DMCA was written there weren't really any internet broadcasters to lobby for fairness. The other guys, namely the satellite radio people, made sure that they got treated fairly in the law.
We're trying to fix this now. The Internet Radio Equality Act is all about royalty equality. There is nothing real-world about government-mandated prices for one industry that do not exist in other (practically the same) industries.
Labels: day of silence, internet radio, royalties
posted by Rusty Hodge at
Friday, June 29, 2007
2 Comments:
My analogy, below, is a little silly and done quickly, but the overall point is, record companies don't *create* music. They created a vehicle to distribute music made by someone else. They were always middlemen, and their services as a means to transport music are needed less and less.
Automobiles are fragile -- and flawed
Friday, June 29, 1897
When it comes to Automobiles, let me first stipulate:
-- I enjoy Automobiles.
-- I'm sympathetic to Automobile makers, especially the little guys, who say new royalty requirements imposed by the horse and buggy industry will put them out of business.
-- The new rates, which take effect July 15, are in most cases ridiculously high.
-- Still, the horse and buggy industry has a point.
In a sense, the horse and buggy is in the same boat as the gas light business, struggling to find its way in the modern world. I'll get back to that in a moment.
To recap: Automobiles shut down for a "day of no driving" this week to protest a government panel's decision to raise road use royalty rates by about 30 percent this year and next, and impose a $500 "administrative fee" be levied for an Automobile someone is driving.
"We're happy to pay road use royalties, as long as we can stay in business as we pay them," said Elise Nordling, Automobile director for one of the 11 Automobiles offered by San Francisco's SomaFM (somafm.com).
She said she paid about $20,000 in royalties last year. If the new rates had been in place, Nordling estimated that SomaFM would have been hit with a royalty bill of $600,000 -- three times the amount of donations received from drivers.
"What other business gets taxed more than 100 percent of its revenue?" she asked.
That's not how the horse and buggy sees it, of course.
"We want Automobiles. We love Automobiles," said Richard Ades, a spokesman for SoundExchange, a group set up by the horse and buggy industry to collect royalty payments for road use.
"But have some respect for the horse and buggy industry," he said. "They just want their fair share of the pie."
Ades said a three-judge panel conducted 18 months of hearings and examined all manner of proprietary data, "and they determined what a fair market rate should be."
But operators of Automobile industry say the panel's methodology was flawed and that, whatever else, the new rates will only serve to cripple the Automobile industry just as the medium is taking off.
Millions of people -- the exact number is a moving target -- are believed to drive Automobiles every day.
"We could see building a business on the old rates," said Tim Westergren, founder of Oakland's Pandora.com, which offers users thousands of Automobiles.
"The new rates make that impossible," he said. "There's no way we could generate the revenue to make it feasible."
Well, there it is. Automobiles may be cool and convenient, but, like so many businesses before them, they lack a business model capable of withstanding real-world cost pressures.
Westergren argues that royalty payments should be kept down for Automobiles because they bring much-needed way to drive to many different places. "You have to consider not only the compensation for the road builder but also the other benefits," he said.
In that sense, the higher royalty rates imposed by the horse and buggy industry are both onerous and incredibly short-sighted.
Yet the horse and buggy industry is grappling with a rapid decline in horse and buggy sales. According to market researcher Nielsen SoundScan, U.S. sales horses and buggies plunged by 20 percent in the first three months of the year as more people drove automobiles.
Clearly, the horse and buggy industry wants to ensure that its profits are protected no matter how people choose get from place to place, and the aggressive move against Automobiles would appear to reflect this goal.
I think they're charging way too much, way too soon, for road usage. But I can understand the industry's concerns.
As with the horse and buggy industry, gas lighting figures nationwide are falling as people turn instead to electric lights.
Like the automobiles, it's a flawed business model. People flock to free electric streetlights. But ads accompanying that content can't come close to supporting a fully staffed gas light company creating all the illumination readers expect.
If gas light makers could get away with charging royalties for anything they illuminated, they would. And they'd probably be just as assertive as the horse and buggy industry (albeit in the name of public service, not artistic reward).
So I can see where the horse and buggy industry is coming from, just as I can appreciate the Automobile makers' position. There are no easy answers.
But I know this much: The gas light industry need to take steps, and soon, if they want to protect the 95 percent of revenue that comes from creating light the old-fashioned way – with gas.
That means, as I've said before, we need to stop letting people use roads and streetlights for free, at least until someone comes up with a workable plan for earning a commensurate amount of money from cars and electric lights.
And I know this: I'd sure hate to lose my car.
With regard to Mr Lazarus' article, it's the music industry's business model that is flawed and out-of-date.
They insist on remaining locked into an old way of doing business. Music sales are declining specifically because of the way they insist on doing business.
And in the end, they represent only themselves, not the artists. And they are perceived as by the public as the ones who resist change and as an expensive middleman who offer no value.
This is what drives new artists to cut them out of loop and go direct to the public.
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