I was asked to guest blog over at Grooveshark, and after I finished the post I decided it would be apropos to share it with the How To Split An Atom readers as well. The basic question, why did SoundExchange push so hard for the royalty increase only to pull back at the last second.

SoundExchange

July 15th has come and gone and “The Day The Music Died” simply did not happen. As of last week, SoundExchange, the company that would have been responsible for collecting the increased royalties seemed ready to come to the table for compromise. After some shaky negotiations, SoundExchange agreed to cap the rates that they would charge to $50,000 a year and temporarily suspend royalty collection from those stations that would be destroyed as a result of the increase. As the sun set on July 15th, it looked like everything was going to be alright for internet radio. However, like most things, the devil is in the details.

A statement from SoundExchange states, “SoundExchange has offered to cap the $500 per channel minimum fee at $50,000 per year for webcasters who agree to provide more detailed reporting of the music that they play and work to stop users from engaging in ’streamripping’—turning Internet radio performances into a digital music library,” which, when you read between the lines, says that SoundExchange won’t sink net radio if they agree to lock down their stations. Of course, the best and most likely mode of “stopping” streamripping is through DRM.

This would not be so bad other than the increasingly obvious fact that DRM does not work. Like almost all historical attempts to use external software to lock a product down, the only people who will be hurt are the legitimate users. SoundExchange has pushed for DRM on net radio for quite some time now, and they seem to be using this situation as a leveraging tool to finally get webcasters to stand up and listen.

What I find to be most surprising is that having seen the problems that DRM has caused for the RIAA, that SoundExchange doesn’t want to stay as far away from that powerkeg as they possible could. History teaches us, however, that it is very rare that common sense wins out over corporate fear. Unfortunately, for the time being, webcasters have little choice but to agree to play ball with the regulators.

Web 2.0 Roundup

Here is my suggestion for SoundExchange, learn from the past. No, even better, learn from the present. Digital Rights Management is never the best way to stop piracy. All you will accomplish is to take a relative small set of pirates and give them the anger they need to really go after your product. Right now, streamripping is right up there with copying 8-tracks on the list of “cool” web crimes. Given DRM to contend with, and an intellectual exercise to get them going, web radio with DRM will likely become the type of nightmare that you do not want to deal with. Use your current leverage to develop workable policies, don’t just throw DRM at the problem and hope it will go away.

Thanks for having me Groovehshark!

[Disclosure: I do consulting work for the company. Be sure to subscribe to the RSS feed before leaving.]