(Cell phone comparison - Imagine if a ring-tone supplier had to pay EACH TIME the phone rang? Would that be fair? No... but that's how net radio stations are forced to pay. Hell, we even have to pay if someone is connected but not in the same room with their computer!)

UPDATE
Jim Griffin retorts:

I am keenly aware of and have studied the webcasting situation in depth, and was an expert witness at the proceeding.

Without regurgitating all the specifics, my thoughts are these: There should be an on-going panel, ala the Federal Reserve Board, that adjusts rates on a continual basis to effectuate the purpose of the Act and the Copyright laws and their foundation in the constitution, i.e., maximize public exposure to art with a balance to generate revenue to incent creation.

In my opinion, this requires a balance between setting a known rate in advance that allows proper business planning and adusting that rate to reflect changes in market and other factors. Further, I think the rate should respect differences in digital-bit-rate used (for example, 8 karat gold is quite different from 18k gold) and similar changes in technology.

The rates you mention are a product of a number of factors that have to do with not only the RIAA's request but equally those proposals advanced by webcasters participating in the negotiations and the hearing. I am sympathetic to the notion that rates shouldn't be "per song" and should instead reflect revenues or profits or some similar criteria, but this isn't what was put before the panel by either side or necessarily practical for other reasons. Do I think more webcasters should've participated and advanced proposals more consistent with what they now claim is their economic reality? Sure, but for various reasons they chose not to participate or could not participate based on other considerations.

As a result, please don't interpret my remarks as support for the current rates, which I think may be too low for some well-healed webcasters and too high for others.

Ultimately, I think the key here is that the rates are not mandatory, but access to the content is, and there is plenty of room for negotiation with SoundExchange and its constituents and waivers ala Artemis' recent actions. If the effect of the rates is to produce sub-optimal revenues for SoundExchange, I have little doubt that this provides an incentive for different rates based on negotiation. The rates are mandatory for those who do not negotiate an alternative, but not set in stone for those who want to bargain with rights holders.

It is tough to substitute for a market with public policy decisions. Indeed, under the applicable consent decrees judges review ASCAP and BMI rates. This was the first of what may be many hearings on what is appropriate, and these rates — assuming they apply to a particular webcaster and they have not negotiated an alternative in advance or after the hearing — expire at the end of the year.

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