Copyright Board's ringtone decision shows failure of the system
The Copyright Royalty Board's decision last week to keep composer royalties for downloads at 9.1 cents per song keeps Apple's iTunes store online (OK, the idea that Apple would shut down the key leg of its iPod empire was just corporate posturing) but the Board also set a rate on ringtones at 24 cents.
That rate, Saul Hansell says in the New York Times, is government pricefixing at a rate higher than the publishers even asked for.
This means that the government has basically endorsed the current pricing scheme that sets the value of ring tones at $2 to $3. . . . [B]y setting a 24-cent royalty for publishers, the government for now is heading off any possible experiments to see if there is an even bigger market for $1 or $1.50 ring tones.
Such an experiment could go a long way towards a system of fixed royalties for all playing of copyrighted music: "Some service could measure every time a song was downloaded, say, and a pool of money would be divided among publishers and labels." But having these CRB judges set the rates is proving to be just a terrible way to do it.
The bigger problem with this idea is that there seems to be no evidence that a board of judges, responding to complex arguments from all sides, is particularly good at setting the right rates for these standard royalties. The decision about ring tones is one example, where I’d argue that setting the royalty as a percentage of the revenue would give the market more time to settle on prices.
And the Board's decision on the SoundExchange royalties for webcasting was an unmitigated disaster. Ultimately, though, Hansell has no better way out than anyone else:
All this leads me to conclude again that there are very few good solutions to getting the music industry out of its intractable battle with its customers. If the market can’t set fair prices that take into account the realities of technology, and the government can’t impose a solution, where do we go from here?
Perhaps you have a reasonable solution? Personally I think that parties have to be able to contract, rather than adhere to a judge-set rate. What if the Board dictated a range of rates: the rate will be no lower than, say, 15 cents and no more than, say, 22 cents. Now bring in your economists and projections and find a rate that allows both businesses to prosper. And if they still can't settle, then have the Board look at the evidence from both sides and how far apart they are and basically just split the difference.