(This article originally appeared on ArtistsHouseMusic.org.)

In the summer of 2007 news that the Copyright Royalty board was set to raise the amount Internet radio webcasters paid in performance royalties hit the Internet.

The Huffington Post, Ars Technica, Wired, and Daily Kos, among others carried dire warnings that the new performance royalty rate would be too high for most webcasters to pay thus driving them out of business.

The story was a perfect David and Goliath. In this case, David was played by Pandora, everybody’s favorite custom Internet radio station. Playing the part of Goliath was SoundExchange. They’re a non-profit company started in 2000 by the RIAA, the association that’s suing music listeners for copyright infringement. To most Internet savvy music listeners, that means SoundExchange is Satan’s spawn.

Add to this one little fact: SoundExchange collects performance royalties on all music played on Internet or satellite radio, regardless of whether or not the artist is signed up with SoundExchange to be paid those royalties.

This fact seems to confirm that they are as dirty or dirtier than their corporate parent. Suing music listeners wasn’t enough, now they were out to kill Internet radio!

At least, that’s the story that was told to those of us who were keeping tabs on the issue.

And then I happened to attend an interview session at Loyola University with John Simson, executive director of SoundExchange at the end of April. I thought of every possible scenario I could come up with that could coax the appropriate response from the head of the organization birthed by the devil, but during both the Q&A with George Howard and further still in my discussion with him after the interview, he did something I thought impossible: he made me see the David vs. Goliath setup in a whole new light.

First, let’s get their association with the RIAA out of the way. After being formed as an unincorporated division of the RIAA in 2000 they were given the right by the Copyright Office to collect performance royalties for Internet and satellite radio beginning on January 1, 2003. They were spun off by the RIAA in September 2003 as an independent, non-profit company. In the interview, John Simson claimed no relationship with the RIAA and that he purposefully acts to instill the opposite mindset from the RIAA in the organization.

Next is the idea that SoundExchange is out to kill Internet Radio. Since I grew up playing with computers and the Internet, frankly, it just sounded odd to me that a rights organization should be able to collect royalties on non-on-demand streaming audio. It just seemed crazy to me that a user could download a song for free, but if that same song was played over the Net in a stream then royalties would have to be paid.

As it turns out, it is crazy, but probably not how you might think.

The rationale goes something like this. If you use music on your website, you owe a performance royalty to the artist whose music you’re using. For example, if you get a MySpace page for your band and upload a song – you, by law, are given the ability to collect a performance royalty. The same is true for Internet radio. If your music is played on an Internet radio station, then you are entitled to a performance royalty. But only in the case of Internet radio does the site owner have a place to go to pay that royalty. In all other cases, websites are either infringing on the artist’s rights or they have made their own deals directly with the artist.

In the case of MySpace, in signing up to get a profile you give away your right to collect royalties from MySpace for its usage. That is the deal you agreed to. In this case, they give you the ability to put your music on MySpace and they agree to use it on their site without paying you to do so.

For most small webcasters, striking individual deals with artists would be both time and cost prohibitive. Rather than do that, as long as their revenue is less than $1.25 million a year webcasters can pay SoundExchange $500 a year in exchange for playing any music they want.

Think about that for a second. Is $500 going to shut down most Internet radio stations? Probably not. This current deal is good through 2010 but John stressed that they’d like to extend it to 2015.

But what if you’re an Internet radio station who only plays indie music where nobody is signed and all the artists are just looking for exposure. Would the radio station have to pay then? According to John, webcasters are free to make their own individual deals with artists giving them the rights to play the artists works for free.

By now, this isn’t starting to look like such a bad deal. But SoundExchange does collect performance royalties for non-members. Surely that’s bad and unethical.

However, in order for it to be bad and unethical, SoundExchange would have to be able to keep all uncollected money. Yet, if you go on their website (I’d give you a direct link but they helpfully built the entire site in Flash) they maintain a list of names of unregistered artists so one can easily find out if they have money to collect.

There seems to be a time limit on when you can collect but you have to remember, that’s a government imposed limit, not part of SoundExchange’s (non-profit) business plan.

So rather than coming to kill Internet radio, SoundExchange feels much more like a rights’ facilitator. It makes it easy for small Internet radio stations to pay the $500 performance royalty annual fee and gives them the entire catalog of music in return. For artists, they make it easy to collect performance royalties and easy to find out if you’re owed performance royalties even if you’re not a member. They also give you the ability as an Internet radio station or an artist to go out and make your own deals that exclude SoundExchange altogether.