Soundexchange, Lobbying, and the Nature of Bureaucracy

Lynne Kiesling

SoundExchange is a nonprofit that is meant to collect royalties on behalf of artists and recording labels. As such, its legal activities are strongly legislatively circumscribed; this Wired article cites SoundExchange’s legal activities according to the relevant legislation:

“(A) the administration of the collection, distribution, and calculation of the royalties;

“(B) the settlement of disputes relating to the collection and calculation of the royalties; and

“(C) the licensing and enforcement of rights with respect to the making of ephemeral recordings and performances subject to licensing under section 112 and this section, including those incurred in participating in negotiations or arbitration proceedings under section 112 and this section, except that all costs incurred relating to the section 112 ephemeral recordings right may only be deducted from the royalties received pursuant to section 112.”

I’m shocked, shocked I tell you, to learn in the same article that evidence exists that SoundExchange has been lobbying to persuade Congress to enact the unreasonable, disproportionate royalty rates on Internet radio that would ensure SoundExchange’s ongoing, coffer-filled existence (all of their revenue derives from royalties). They have also been engaging in public relations activities.

As the article points out, SoundExchange denies these accusations in the most vigorous language they can muster, not by denying them, but instead by deflecting the attention back to saying that broadcasters will use any tool in the arsenal “so as not to pay artists for their work”. What a load of crap. Nonprofits cannot engage in lobbying and PR and still retain their nonprofit status, and that includes funding other lobbying groups.

Whether or not SoundExchange’s lobbying efforts prove to be illegal, its presence as an advocate in this debate undercuts its role as neutral administrator of royalty fees set and approved by the Copyright Royalty Board.

But the most insightful and truthful line in the whole article comes at the very beginning, from the author’s trenchant observations on the nature of bureaucracy:

A federal appeals court recently rejected a plea from webcasters to postpone the deadline for a new royalty scheme that sets the stage for SoundExchange to begin levying billions of dollars from internet radio stations in the coming decades. It already collects a tidy sum from satellite radio and now it has set its sights on U.S. terrestrial radio stations, which currently pay no broadcast performance royalties. If it wins there, its power could grow exponentially.

This reflects a well-known law of any bureaucracy: Once authority is created, it works inevitably to expand its sphere of influence, grabbing for more power and bigger budgets. With each success, its appetite only grows.