A Few Updates [1:43 pm]
So why did Clear Channel change its position, breaking ranks with its powerful lobbying group, the National Association of Broadcasters?
The answer apparently has nothing to do with politics; with Republicans expected to retain control of the House in this year’s elections, few in the industry predict a new Washington battle is likely. Rather, it has to do with digital music, and Clear Channel’s desire to reshape its business in anticipation of rapid changes in the marketplace.
When the first webcasting laws were passed in the 1990s, labels and artists gained the right to performance royalties for online streams. But webcasters have long complained about the size and structure of these royalties, which are set by federal statute. The more people listen, the more the companies have to pay — unlike on radio, where stations pay a set percentage of revenue to music publishers. Pandora Media pays more than half its revenue in music royalties.
For Clear Channel, digital royalties are a looming problem. Today, 98 percent of listening to its stations is through its 850 terrestrial radio stations, and 2 percent is online, the company said. But that is expected to change, which would leave Clear Channel and other broadcasters exposed to expanding royalty payments. To limit those expenses, Clear Channel struck its deal with Big Machine, bypassing the federal “penny rate” for a share of advertising revenue, both online and over the air.
Yet Eric Kessler, co-president of HBO, must have a different calculator in his office. “At this time, the economics simply don’t support a standalone HBO Go,” he said. “We make our programming, including ‘Game of Thrones,’ available on numerous platforms for our subscribers and then on DVD and electronic sell-through for those choosing not to subscribe to a TV provider.”
HBO told me that “Thrones” would be out on DVD in eight months, so I experimented with the piracy option, too. It took me all of 22 seconds to begin watching the latest episode through the illicit route of an online storage service and an illegal BitTorrent site. I get it. HBO has a great business model, and it will try to hang onto that model for as long as possible.
But technology doesn’t wait. People keep finding new ways to get what they want.
“It’s hard to stop piracy by creating laws, it’s better to ask why are people downloading these shows — that’s much more productive,” Mr. Van Der Sar said. “Downloading is already illegal. More laws are not going to help.”