By The Numbers

The year is barely three months old and physical CD sales continue 2006’s downward spiral while online digital purchases have yet to make up the difference, according to Nielsen SoundScan figures.

While overall music sales are up 19 percent compared to last year at this time, translating into 46 million additional music purchases, sales of physical CDs have dropped 20 percent compared to 2006.

So far this year, consumers have purchased 89 million physical CDs. That’s 23 million fewer than the 112 million music fans bought last year.

And while digital album sales increased 100 percent over last year, overall album purchases, including "track equivalent albums," where 10 digital track purchases count as one album sale, dropped 10 percent to 118 million from last year’s 131 million benchmark.

Of course, piracy is still a factor in declining music sales. Despite the recording industry’s efforts, peer-to-peer song sharing refuses to go away. Chances are you can find anything you want if you look hard enough. And, in most cases, you don’t have to look very hard.

But aside from piracy, industry watchers say the latest Nielsen SoundScan figures indicate consumers are choosing to buy individual tracks instead of complete albums.

"It comes back to consumers being in complete control of their media experience," Gartner Research music analyst Michael McGuire told news outfit AFP. "This is a tough business being a record label because they have to find new sources of revenue."

The Big Royalty Check

Internet broadcasters big and small are raising objections to the new royalty rates recently introduced by the Library of Congress Copyright Royalty Board.

Up until now, small Internet broadcasters have paid royalties based upon revenue. However, the new rates call for a per-song payment retroactive to last year. Under the new rates, Internet broadcasters will have to pay .08 cent for every song played last year, .11 cent this year and .19 cent in 2010.

For example, one Internet broadcaster, AccuRadio, paid $48,000 last year under the old, portion-of-revenue plan. Under the new system, AccuRadio’s bill will be somewhere in the neighborhood of $600,000.

So you can see why some people might be a bit upset over the new rates.

Clear Channel Communications isn’t pleased with the prices. The broadcasting giant, along with other commercial broadcasters, is asking the Copyright Royalty Board to reconsider parts of its ruling, saying methods used to calculate payments are faulty.

On the non-profit side, National Public Radio also filed a motion claiming the new rates would have "crippling effects" on NPR’s ability to serve the public interest.

In addition to having to pay a fee for every single song streamed, there’s the possible bookkeeping nightmare of having to keep track of those streams.

For small outfits it could mean having to hire an employee whose sole purpose in life is to itemize music streams. For large companies like Yahoo or Real Networks, the sheer size of the tracking data could be daunting.

Under a previous agreement, online companies could pay a royalty based upon the music played during a specified period, called a "tuning hour." An analysis of tuning hour data would then be extrapolated to provide an estimate of which songs made up a broadcaster’s programming.

For broadcasters, tuning hours represent a much easier way to track royalty charges than recording every song streamed 24/7. Already, the Digital Media Association, which represents most major online companies involved with Webcasting, has asked the Copyright Royalty Board to reconsider its decision and to give tuning hours another chance.

Aside from the new pay-per-play rates, Netcasters are also ticked off over a new charge, a $500 payment per broadcasting channel. With some online broadcasters offering hundreds of channels, it’s hardly surprising this new charge is not exactly winning the record labels any friends among the Internet radio community.

Jailhouse Rock

European lawmakers are coming up with new ways to strike fear in the hearts of infringers. Like jail time for anyone even remotely connected with intellectual property theft.

Some of the new penalties proposed by the European Union include prison time for employees if company networks, online services or software programs are used for infringing purposes, according to InfoWorld.

Under these proposals, an Internet service provider could be held liable for not preventing customers from sharing over peer-to-peer networks. The idea is to put pressure on the actual technological conduits to help prevent illicit copying and distributing of protected works.

Technology companies are already opposing the new bill that would make a criminal of anyone found guilty of "aiding, abetting or incitement to infringe" a song, movie or any other copyrighted work.

But while the proposed legislation might put the screws to service providers, software manufacturers and even mobile phone operators, it actually eases up on individual users.

That’s because the European Parliament committee drawing up the new rules agreed to exclude any enforcement or penalties for infringements that might be committed for personal use. Instead, the committee stated that individuals or companies must make a "deliberate and conscious infringement of the intellectual property right for the purpose of obtaining commercial advantage" before the long arm of the law reaches out and snaps the cuffs on them.

Under this new determination, the individual that shares songs with others would not be held liable for infringement. However, the maker of the software used to share the music, as well the ISP providing the Internet connection, could face serious jail time.

Covering The Satellites

Want cheaper satellite radio?

Want to pay only for what you listen to instead of all the channels Sirius and XM have to offer? Perhaps you subscribe to Sirius only for Howard Stern, or maybe you signed up with XM for its Major League Baseball package, and you couldn’t care less about all those other channels both services offer.

You may get your wish. In a recent Securities and Exchange Commission filing, Sirius said if its proposed merger with XM is approved, the resulting company would be able to provide an a la carte service where subscribers would only pay for what they want, not what they get.

"Customers may elect to receive fewer channels at a monthly price lower than $12.95; substantially similar programming at the existing $12.95 price; or more channels, including some of the ‘best of both’ networks, at a modest premium to the cost of one service," Sirius stated in the SEC document.

Combined, both companies offer about 300 channels. Of course, some of those channels are pretty much the same, and it is expected that the merger would eliminate duplication. Sirius claims that, by eliminating redundancy, the company formed by the merger would be able to free up channel space in order to expand its programming choices.

At this point, Sirius’ and XM’s merger plans have yet to win over government officials who fear an antitrust situation if the companies join forces. When both Sirius and XM hung their satellite radio shingles, the FCC passed a regulation stating that neither company could acquire or merge with the other.

One day after the SEC filing, Sirius CEO Mel Karmazin appeared before a Senate subcommittee and dangled a few carrots in an effort to grease the legislative skids for the merger.

For instance, Karmazin said his company might be agreeable to regulatory oversight of price increases as a condition of the merger.

Karmazin also told the subcommittee that subscribers would be able to block any programming that they find objectionable.

In short, Karmazin offered cheaper rates, government oversight and the ability to block "objectionable" programming. That should sway some of the pols on Capitol Hill.