Hi Steve,

I understand that there is a difference between 50 percent before and after expenses, but ... you state that "50 percent of the royalties go DIRECTLY to artists (without passing go)," yet 50 percent of royalties paid to artists is extremely different from 50 percent of royalties paid after numerous deductions have vastly decreased this amount.

You mention that SoundExchange is moving to no longer be part of the RIAA and discuss the "mechanism to ensure that RIAA's investments in building the infrastructure of SoundExchange won't be lost to reckless decisions by the board. Remember, RIAA (not the artist community) invested millions to establish SoundExchange." If the RIAA and its member labels have the right to get back the present value of their investment in SoundExchange (all of SoundExchange's assets), there's no way that it can be inferred that the RIAA no longer controls SoundExchange. It's like saying, "Yes, we have a gun pointed at your head, but no one really expects that we're going to shoot it."

As far as the RIAA recouping its CARP-related costs, and your stating that the FMC agreed to this, that is false. The actual language that FMC released, while endorsing many of the major points of the agreement you reference, was:

"There has been some discussion regarding the desire of some SoundExchange members to attempt to recover legal costs related to the ongoing CARP proceedings out of the SoundExchange pool. We consider this to be an inappropriate use of these monies, and believe this agreement should not be used as a means to this outcome.

Music and technology companies that were negatively affected or put out of business by the lack of an interactive statutory webcast license will never be able to recover the costs or the equity that they lost due to the uncertainty of access to licenses and the eventual fees. Furthermore, there is reason to believe that musicians are now suffering in a landscape of reduced business models and opportunities due to this practice. It is therefore particularly inappropriate for a lobby group like the RIAA to recoup lawyers' fees out of the artists' and copyright holders' shares for actions that A) many folks feel have hurt the artists; and B) limited the public's ability to encounter new artists."

If you feel as you state that "why should record companies, which fronted millions for the CARP on behalf of all royalty recipients, be stuck with the bill for 100 percent of those costs?" you are obviously ignoring dozens if not thousands of interested parties who have lost and wasted substantial time and money working toward A) a solution, and B) complying with the onerous requirements thrust onto webcasters due to the RIAA's lobbying these rules into existence, who will not be able to recover any of their costs, let alone costs out of the artists' share, as the RIAA intends to do.

If the outcome wasn't worth the effort, there's no one to blame but the RIAA, which pushed the DMCA through. Recouping out of the artists' share is despicable, especially when it's debatable if the media consolidation and obstructing of new technologies that will result is beneficial to artists, or actually harmful.

As for your comment regarding the limiting of costs to webcasters, if the copyright owners were to provide information on what they actually own in a publicly accessible database, this would save everyone huge amounts of money, and prevent webcasters from each having to enter the identical information in numerous data fields for each song. This is a huge effort that is being forced on all webcasters, whereas if you uniquely identified a track, SoundExchange could simply backfill the rest of the data.

Nonetheless, it appears that the aim is to keep the database private. Is the database owned by the SoundExchange as some have told me, or is the database owned by the RIAA with SoundExchange licensing the database from them? I was told by an RIAA employee (or maybe it was SoundExchange, I can't tell them apart as SoundExchange e-mails come from riaa.com addresses) that SoundExchange pays to license the database from the RIAA, and then SoundExchange feeds the data back to the RIAA, improving and increasing the value of the private database. So what really should be a public database provided to webcasters is improved at the webcasters' onerously excessive expense, and claimed as private information (by the RIAA, or is it SoundExchange?) to make a profit on.

I must also disagree with your comment that the yet to be imposed royalties had nothing to do with webcasters' going out of business. When faced with a business decision, knowing that you're going to have excessive (and unknowable) costs can clearly force you out of business, especially as financing is rarely forthcoming when you're a company that cannot predict their costs. I will also note that bandwidth has become much more inexpensive, and thus your claims of bandwidth costs exceeding upcoming royalty costs are not true among many of the webcasters I am familiar with. It is true that almost no webcasters have revenue exceeding expenses at this point, but the same was true for many other industries that are now invaluable to our culture (not to mention the record industry), and adding costs that do not apply for doing the same thing as other media (such as broadcasting on traditional radio) simply does not make sense to anyone but the RIAA, and the politicians whom they convinced.

I am thrilled that you intend to work with hobbyist broadcasters, and I am glad that you brought up that they were not represented at the CARP. Simply because the RIAA has more money than hobbyists to put into the CARP proceedings (which they intend to recoup in any case) does not make it right that the RIAA got their way, and that small webcasters are now screwed (even more by the absurd reporting requirements than by the rate) and must deal with the RIAA to beg permission for their existence. Or is it SoundExchange to whom they must beg? Steve, you work at the RIAA and refer to "we," yet claim that SoundExchange and the RIAA are separate. Who is it that you represent when you mention that "We are prepared to work with true hobbyists to find a solution"?

As for SoundExchange's inability to update its Web site due to not having an on-staff webmaster, please take a look at this 10-minute guide to HTML. I'm sure some of the talented folks at SoundExchange could pick up the skills needed to update the text of your Web site within a couple of days, and it would have saved many hours of many people's time (and prevented much confusion) if there hadn't been a number of folks pointing to the SoundExchange site as proof that (for instance) SoundExchange will not be paying the artists directly.

Looking forward to everyone's coming to a better understanding of the situation, which will hopefully occur through open dialogue.

-- Brian Zisk

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