DiMA and SoundExchange Trade Blows (Plus Weeklong Summary)

SoundExchange and the Digital Media Association continue to presentconflicting viewpoints of SoundExchange's offer to cap webcasters'
minimum per-station fees, with the organizations trading blows in letters sent to each other today.

Before we get to these letters, whichhave been posted below, here's a short summary ofwhat has happened with these webcaster royalty rate negotiations overthe past week.

Wednesday, 7/11: A federal appeals court refused to delay the July 15/16 royalty due date.

Thursday, 7/12: At a closed-door Congressional hearing,
SoundExchange executive director John Simson said that SoundExchange wouldallow webcasters in good standing to continue streaming on Monday 7/16 as negotiations continued, and agreed to webcasters' proposal of minimum per-station caps of $50,000 per year, but only if webcasters "become much more compliant intheir reporting" and "work on a technologically-feasible solution" tostopping people from recording internet radio (a.k.a. "stream-ripping").

Friday, 7/13: DiMA accepted SoundExchange's "offer," promising that as part of the deal, its member webcasterswould"improve,
streamline and make more efficient" royalty reporting, and would also"research, identify, review, and evaluate the prevalence of'stream-ripping'... and potential technologies which may be implementedby record companies and/or webcasters for purposes of limiting and/oreliminating stream-ripping."

Monday, 7/16: SoundExchange denied
having made the offer as DiMA apparently understood it, claiming thatDiMA's statement "[did] not accurately represent the terms offered bySoundExchange."

Tuesday, 7/17: DiMA sent an letter to SoundExchange (posted below), accusing that organization of "revert[ing] back to makingunrelated and unworkable demands as a condition for resolving the minimum fee issue."

Wednesday, 7/18: DiMA issued a statement claiming thatSoundExchange "backtracked" on its offer to cap minimum per-stationfees. SoundExchange issued a letter in response, accusingDiMA of "misinformation, mischaracterization, and politicalmaneuvering." The statement and both letters are posted below,
bringing us up to date on these increasingly heated (and public)
negotiations.

DiMA's 7/17 letter to SoundExchange:

Dear John:

We are disappointed that SoundExchange has reverted back to making unrelated and unworkable demands as a condition for resolving the minimum fee issue. Nevertheless, DiMA companies are prepared to set a time to meet with the SoundExchange Board to negotiate the royalty rates for the 2006-2010 CRB term. At that time, we can also discuss the establishment of working groups that would address other technical industry concerns such as reporting and piracy. Between now and then, it is our hope that we can resolve the minimum fee issue in the cooperative spirit that was displayed at Chairman Markey’s roundtable.

Sincerely,

Jonathan Potter
Executive Director

DiMA's 7/18 statement on SoundExchange's so-called "backtracking"____:

In contrast to its cooperative spirit during last week’s House Commerce Committee Roundtable regarding Internet radio royalties, on Monday night SoundExchange informed DiMA that it will not agree to reduce the $1 billion minimum "administrative" royalty unless Internet radio services agree to unrelated technology mandates that have previously been rejected several times.

Jonathan Potter, Executive Director of the Digital Media Association, offered this statement:

"This is a disappointing turn after what we thought had been a very productive roundtable.

"The uncapped $500-per-channel minimum fee generates more than $1 billion annually for what the CRB determined are supposed to cover SoundExchange's administrative costs. This is far more money than needed to administer a mere $20 million in Internet radio royalties. DiMA would like to get the per-channel minimum off the table and SoundExchange has said publicly that it does not expect to collect this money.

"DiMA and our members are happy to cooperate on issues of common interest even if outside the scope of the CRB decision, but SoundExchange has demanded enforceable technology mandates that are unreasonable, unworkable and way off-topic. They seek to leverage this absurd fee to impose mandates that they have unsuccessfully sought elsewhere.

"DiMA companies are prepared to set a time to meet with the SoundExchange Board to negotiate the royalty rates for the 2006-2010 CRB term. At that time, we can also discuss the establishment of working groups that would address other technical industry concerns. In the meantime, we would like to get the per-channel minimum off the table and move on to royalty rate negotiations."

Sincerely,

Jonathan Potter
Executive Director

SoundExchange's 7/18 letter to DiMA:

Dear Jon,

I have reviewed your press release of this morning and I am compelled to respond to the
Digital Media Association’s (DiMA) pattern of misinformation, mischaracterization and political maneuvering at a time when we should all be focused on negotiating, as several Members of Congress have urged. Your comments over the weekend and this morning are, at best, disingenuous.

SoundExchange is not "backtracking" on its offer from the roundtable. Rather, you are intentionally mischaracterizing our proposal. Your claim that you didn’t understand our request for census reporting strains credulity. You could not have really believed that SoundExchange was simply asking that DiMA’s members do no more than follow their current obligations for sample reporting? It would have been pointless to make "following the law" a condition of our offer, as we presume (perhaps incorrectly) that DiMA’s members would honor the Copyright Royalty Judges’ existing rules regardless of our negotiations. Everyone at the table – including you – agreed wholeheartedly that all artists whose works are used should be fairly compensated, and that comprehensive reporting is therefore reasonable and justified. It appears that DiMA is really the one "backtracking" from its commitments during the roundtable.

Your pattern of failing to deliver is becoming a major obstacle to having productive discussions. When you asked me to put together a group of my Board members to meet with some of your members in New York, I did so on short notice. At that meeting you promised deliverables. We are still waiting. The pattern is clear:

• First promise: March 9th: You will put together a proposal. Status: Unfulfilled
• Second promise: June 8th: You will provide us approvals to view important proprietary
company materials. Status: Unfulfilled
• Third promise: Date ongoing: You will get us a proposal. Status: Unfulfilled

You broke each of those promises. And, with each broken promise, more time passes, and these issues remaining unresolved to the detriment of all parties with an interest in these issues. The pattern here is clear, Jon. Rather than do as you’ve promised, you keep running to the press and to the Hill instead of sitting down and negotiating.

We have made ourselves available and have had many fruitful meetings with other
constituents, and, contrary to your press release from this morning, you know full well that we have already offered a specific date and time to meet with you next week.

We noted yesterday our distaste for the way you handled your supposed "acceptance" of
our cap offer. Namely, late on Friday night you sent me a self-serving letter which did not accurately portray the offer we made at the Roundtable. You then accepted your own offer and released that to the press before I even had a chance to read it, much less respond to it. And now you accuse us of backtracking when you clearly know that is not the case.

If you spent half as much time attempting to construct a business solution to your problem as you do constructing "spin" for the press and engaging in political maneuvering, then perhaps we would be further along on our negotiations. We regret that you feel the need to conduct business this way, and suggest that perhaps we could have more productive discussions if we started dealing directly with your members, instead of with you.

Sincerely,
John Simson
Executive Director

(image from grandiose)