WSJ: Online-Radio Royalty Fight Reaches New Pitch

``... the Internet Radio Equality Act, would replace higher performance-royalty rates, unveiled in March, which charge Webcasters a fee per song and per listener, with a rate of about 7.5% of revenue. While that could reap the record labels less money in many cases than the per-song, per-play fee schedule that Webcasters are railing against, it would still generate more than the music companies get from other sources. Satellite radio pays about 3.5% to 4% of revenue in performance royalties. Because airplay for years was seen as promotional, regular radio doesn't pay anything, though the record labels are trying to change that.``

emergency stay filed

WASHINGTON, May 30 /PRNewswire-USNewswire/ -- An emergency stay filed today in the U.S. Court of Appeals for the D.C. Circuit could delay the looming D-Day for Internet radio. The motion, filed by the Digital Media Association in conjunction with National Public Radio, and the Small Commercial Webcasters, formally requests the court delay the implementation of a "radical and arbitrary" recording royalty rate increase imposed by the Copyright Royalty Board May 1. Legislation that would repeal the rate increase is pending in the Senate and the House, but may not be brought to a vote in either chamber before July 15th, the day the first payments for the newly increased rates for webcasters are due. "July 15th, D-day for Internet radio, is fast approaching," SaveNetRadio spokesperson, Jake Ward said, "and we are hopeful that today's motion for an emergency stay will afford the Internet radio industry crucial time to rehear this case. We have every confidence that Congress will continue to give the Internet Radio Equality Act the attention it deserves with the urgency it requires, as evidenced by the over 100 cosponsors who have signed on H.R. 2060 since its April 26th introduction. SaveNetRadio and the millions of webcasters, artists and listeners we represent urge the Court to give this motion full consideration."

IREA gets 100th house co-sponsor

We are up to 100 co-sponsors in the House right now. Good work everyone! If you haven't contacted your representative, call them now.

read the press release

Small Commercial Webcasters stance on the SoundExchange offer (via David Oxenford)

From RAIN : the Radio and Internet Newsletter, David Oxenford, an attorney with Washington, DC-based Davis Wright Tremaine LLP, represents the "small commercial webcasters" to which yesterday's SoundExchange offer was directed. (SomaFM has contributed to the legal fund for the Small Commercial Webcaters (SCW) but is not on the board and therefore has no direct say in what they do. However, we are all "friends" and historically, SomaFM has fully supported the SCW group and David Oxenford.)

Here's what David wrote in RAIN:

While there has been much in the press about SoundExchange extending the SWSA [Small Webcaster Settlement Act of 2002], that really is not what happened. They simply made a preliminary, conditional offer to settle the case to the group of independent commercial webcasters that I represented in the CRB proceeding .

Their offer is to extend the SWSA with some "tweaks" that are yet to be negotiated. An SWSA extension would limit small webcasters to $1.2 million in revenue, and once they earned a dollar more, all their performances back to the beginning of the year in which they exceed the cap would be subject to the CRB per performance royalties, effectively exceeding their revenues by many multiples.

While the $1.2 million cap was fine in 2002 when it was used in the SWSA negotiations, it doesn't work in 2007. This would effectively limit the independent webcaster's growth and investment opportunities, as who would invest in an entity with an absolute cap on their financial growth?

While my clients are pleased that SoundExchange has finally made us a proposal -- after we have been requesting one for the past two years -- their offer is simply to extend the SWSA with some modifications that they want. We are studying these proposed modifications. The independent webcasters have suggested modifications of our own to the SWSA, modifications which were not addressed in the SoundExchange proposal.

We welcome this proposal as what it is: the first step in a negotiation process which we hope to be able to conduct in a business-like fashion in the coming weeks, rather than one negotiated through press releases.

That statement is in sync with SomaFM's position on this, although usually my wording isn't quite as nice as Davids. :-)

A response to Senator Dianne Feinstein's response to constituents

Several people have emailed me copies of the letter that Senator Dianne Feinstein is sending her constituents who wrote or called about the Internet Radio Equality Act. The good news is that her office seems open to the the bill, much more now than in the past. But her response has two points which need to be clarified, below:

Senator Feinstein writes:

        I understand that this decision has raised serious concerns for webcasters, in particular, who are worried that the increased rate will force their businesses to shut down.  In response, Senators Ron Wyden (D-OR) and Sam Brownback (R-KS) introduced a bill, the Internet Radio Equality Act, which would vacate the Board's decision and apply a lower rate for 2006-2010.

The bill more importantly changes the standards by which the Board calculates the royalty rate; and uses the same calculation methods that satellite radio and cable music services are calculated under. Currently, internet radio royalty rates are calculated on a very different (and less fair) basis than satellite radio.

Senator Feinstein continues:

        Clearly, there are important interests that need to be balanced.  I am hopeful that it is not too late for a rate compromise to be worked out by the parties involved so that Congress does not need to intervene; however, I will take a close look at the legislation and this issue.

Even if a settlement occurs between the parties involved (webcasters and SoundExchange), this would only cover SoundExchange member copyright owners. Unlike the statutory law (as defined in Section 114) which allows webcasters to play any publicly released sound recording (as long as they are paying royalties under the statutory license).  A webcaster who signs a settlement agreement with SoundExchange can only legally use recordings by SoundExchange members.  This is why it's so important for congress to pass the Internet Radio Equality Act, which would create a fair statutory rate

Otherwise, internet broadcasters will not be limited to recordings from SoundExchange members, and a large number of independent artists won't be able to have their music played on the air.

If you have received a response from Senator Feinstein's office, please respond (either call or write) and try to clarify these issues with them.

SoundExchange Settlement entails further negotiations

I asked the PR contact at SX, "Could you please provide details on the revenue cap and a usage cap and any other modifications to the SWSA extension that SoundExchange is offering?" and the response I received was:

"They are subject to negotiations."

That's the entire response. Now I understand these are Washington, DC Blackberry-toting PR specialists and I did get this response later in the evening DC time, and you can't type long emails on those thumb-boards, but I expected a bit more.

So they're offering a settlement BUT it is still subject to further negotiations.

Not exactly how I define a settlement.

SoundExchange's offer: perception vs. reality

it seems like SoundExchange is trying to diffuse the grass roots effort by trying to strike an acceptable but short-lived deal with small webcasters. The perception is that they're making a great offer to appease small webcasters. But the reality is that there are un-stated changes to the original SWSA and that this deal is only for the next 30 months, and then royalties will increase again.

Their press release says:

[SoundExchange] offered to extend to small webcasters through 2010 the terms of prior legislation known as the Small Webcaster Settlement Act (SWSA) with some minor modifications."
(snip)
These minor modifications include a revenue cap and a usage cap.

The details of of these caps are not provided. What if that revenue cap is $100,000? What if the usage cap is 500,000 hours a month?

I tried calling SoundExchange's news department to get more details on this, but I had to leave a message, maybe they'll call me back tomorrow.

As it currently stands, this press release seems to be all fluff, and no substance, and needs to be called out for what it is: an attempt to derail the current Internet Radio Equality Act now in congress.

Also, if anyone received a copy of the actual "settlement offer" that SX released, could you send it to us?

SaveNetRadio's response to SoundExchange "offer"

This is the official response from the SaveNetRadio coalition to SoundExchange's "offer":

For Immediate Release
May 22, 2007

Proposal Would Decimate Internet Radio Industry
SaveNetRadio Rejects SoundExchange Offer to "Small Webcasters"

WASHINGTON, D.C. In response to SoundExchange’s announcement today that it plans to offer those they designate as "small webcasters" an extension of current royalty rates through 2010, SaveNetRadio has released the following statement:

"The proposal made by SoundExchange today would throw "large webcasters" under the bus and end any "small" webcaster’s hopes of one day becoming big," SaveNetRadio spokesperson Jake Ward said. "Under government-set revenue caps, webcasters will invest less, innovate less and promote less. Under this proposal, Internet radio would become a lousy long-term business, unable to compete effectively against big broadcast and big satellite radio – artists, webcasters, and listeners be damned."

"Labeling webcasters small or large is a distinction without a difference," continued Ward. "Two of the most prominent webcasters, Pandora.com and Live365 are models of industry success but would be bankrupted by the CRB and by the SoundExchange proposals. Pandora employs 100 people in an enterprise zone in Oakland, California, but its popularity would put it out of business. Similarly, Live365, an aggregate webcaster that provides a platform for more than 10,000 individual webcasters, has a staff of fewer than 40. Though clearly small as a business, Live365’s enormous importance and scope among webcasters would force them to shut down."

By broadcast radio standards, even the largest webcasters (i.e., the Internet radio divisions of Yahoo! and AOL) are small broadcasters. (A few years ago, broadcast groups that didn't even make the list of the 40 largest radio companies -- Fisher, Service B'casting, Arso Radio, Curtis Media, Mid-West Family, Hubbard, etc. -- all had annual revenues of over $20 million, making them larger than the largest webcaster.)

The revenue caps SoundExchange is proposing are an extension of those put in place during the 2000-05 period which created an insurmountable barrier to growth for small webcasters. This revenue cap has had the perverse and unintended consequence of forcing thousands of webcasters to stay small if they want to stay alive, thereby weakening the industry – the very opposite of Congress’ intention.

Under the "willing buyer / willing seller" standard set by the Digital Millennium Copyright Act, the distinction between "large" and "small" is irrelevant. Indeed, it is that standard, combined with the judges interpretation, that led to this unexpected consequence of a royalty rate increase on March 2nd. A standard that would set a royalty rate more than 300% of a webcaster’s revenue was not what Congress had in mind, and it must be adjusted if the industry is going to survive.

SaveNetRadio is a national coalition comprised of hundreds of thousands of webcasters, artists, listeners and labels from throughout the country committed to preserving the future of Internet radio. Legislation currently before Congress, H.R. 2060 and S. 1353 - the Internet Radio Equality Act - would vacate the Copyright Royalty Board’s decision and set a 2006-2010 royalty rate at the same level currently paid by satellite radio services (7.5% of revenue.) The bill would also change the royalty rate-setting standard used in royalty arbitrations, so that the standard applied to webcasters would align with that applied to satellite radio.

For more information on the SaveNetRadio coalition visit www.savenetradio.org

###

Contact: Jake Ward
(202) 448-3156

SoundExchange "offers settlement" to Small Webcasters via Press Release

This just in: SoundExchange offers a "settlement" to Small Webcasters. The catch: it only is good for 2 and a half more years, then the huge huge huge rates kick in again. This settlement offer is less of an olive branch than it is a thron-covered branch; the idea is to lessen the momentum behind the Internet Radio Equality Act, satisfy our immediate needs and then ream us again in a few years.

It also doesn't help folks like Live365 and Pandora. This seems like the traditional RIAA-influenced Divide and Conquer routine than an actual "offer". Do not be fooled, this offer is not a viable alternative.

FOR IMMEDIATE RELEASE: MAY 22, 2007     
CONTACT: RICHARD ADES OR   GREGG PERRY 
    202-640-5894 
NEWS@SOUNDEXCHANGE.COM 

SoundExchange Extends Offer to Small Webcasters

Move Responds To Request From Congress To Allow Small Webcasters More Time With Below-Market Rates

WASHINGTON, D.C. SoundExchange today offered to extend to small webcasters through 2010 the terms of prior legislation known as the Small Webcaster Settlement Act (SWSA) with some minor modifications. The 2002 act that sunset in 2005 had set temporary below-market royalty rates for small Internet radio stations in order to provide them additional time to build their businesses. SoundExchange's offer to extend the core SWSA terms represents a continued subsidy for these small webcasters in the form of lower payments to artists and content owners.

Today's offer comes as a direct response to a request from the House Judiciary Subcommittee on Courts, the Internet and Intellectual Property to "initiate good faith private negotiations with small commercial and noncommercial webcasters with the shared goal of ensuring their continued operations and viability." The Subcommittee's request was sent to SoundExchange last week in a letter co-signed by Representatives Howard L. Berman (D-CA) and Howard Coble (R-NC)1.

"Although the rates revised by the CRB are fair and based on the value of music in the marketplace, there's a sense in the music community and in Congress that small webcasters need more time to develop their businesses," said John Simson, Executive Director of SoundExchange. "Artists and labels are offering a below-market rate to subsidize small webcasters because Congress has made it clear that this is a policy it 1 Chairman and Ranking Minority Member respectively of the Subcommittee on Courts, the Internet and Intellectual Property. desires to advance, at least for the next few years. We look at it as artists and labels doing their part to help small operators get a stronger foothold."

This offer is only for small webcasters and defers the new rates set by the CRB on May 1, 2007, retroactive to January 1, 2006 and effective through 2010. While the subsidy is an effort by SoundExchange to address alleged weaknesses of the small webcasters' businesses, SoundExchange noted that this proposal is an adjunct to the CRB process.

"The copyright royalty judges conducted a thorough and comprehensive legal proceeding. The judges determined fair rates based upon marketplace evidence provided by all parties. Nobody is questioning the integrity of the CRB process," said Michael Huppe, General Counsel of SoundExchange. Indeed, the Subcommittee noted that, "we have not yet been provided with a single credible assertion by a party to the proceeding that tends to demonstrate the CRB deviated from the process specified in the Reform Act."

Huppe added, "This offer is not about displacing the Judges' correct analysis of the market, but rather about extending for a limited time the below-market rates that these small businesses received several years ago. We have heard the concerns of Congress and we are responding."

As suggested by the Subcommittee, SoundExchange is proposing that the subsidy be based on a percentage of revenue model and is proposing the same rates that prevailed under SWSA: small webcasters would pay royalty fees of 10 percent of all gross revenue up to $250,000, and 12 percent for all gross revenue above that amount. The proposal includes both a revenue cap and a usage cap to ensure that this subsidy is used only by webcasters of a certain size who are forming or strengthening their business.

"These modest limitations assure that the subsidy is targeted only to those webcasters that Congress believes need the additional financial flexibility to build their businesses. When a company's revenue or listenership reaches a certain level, our proposal appropriately provides that they share those full gains with the artists who helped create this opportunity for them," said Huppe. "The net result of this proposal is that small webcasters would be guaranteed no increase in royalty payments for 13 years, from 1998- 2010."

Of particular concern to SoundExchange and the thousands of artists and labels it represents is the lack of compliance by most small webcasters, including many that have complained the loudest about the CRB decision. Indeed, in their letter Representatives Berman and Coble noted that, "In return for compelling sound recording copyright owners to make their works available, the qualifying services agree to meet the terms and conditions of the compulsory license, which, inter alia, requires the periodic filing of statements of account and the timely payment of statutory royalties to the copyright owners whose works they have elected to perform."

In order for the process to work, small webcasters need to register with the copyright office, comply with all reporting requirements to SoundExchange and not avoid paying royalties that are lawfully owed. "The artists and labels are acting in good faith today, giving small webcasters a break. In return they expect the integrity of their music and their copyrights to be respected. That includes proper tracking and reporting of how their music is used, and that they are properly compensated," said Simson.

Background On May 1, 2007 the Copyright Royalty Board issued a fair and reasonable decision that sets compensation rates to be paid artists and record labels for the public performance of their works by Internet radio broadcasters from 2006-2010. The three-judge panel heard testimony from dozens of witnesses and conducted a comprehensive review of tens of thousands of pages of evidence submitted by all interested parties over an 18-month period. The decision is a reflection of the need for artists to be fairly compensated for the use of their work by webcasters who benefit financially or otherwise from their talents. As the music industry evolves from CD-only sales to multiple distribution platforms it is critical that creators of music share in revenues from all platforms.

SoundExchange is a non-profit organization representing more than 20,000 artists, 2,500 independent record labels and the four major record companies for the collection and distribution of digital performance royalties for recording artists and sound recording copyright owners (usually a record label) when their sound recordings are performed on Internet radio, satellite radio and digital cable. For additional information please visit www.soundexchange.com

###

NAB supports Internet Radio Equality Act

From the trade journal FMBQ: "The radio board of the National Association of Broadcasters recognizes that the new streaming rates established by the Copyright Royalty Board (CRB) will cause significant harm to broadcasters that stream over the Internet," the NAB said in a statement. "The radio board supports a comprehensive approach to addressing the CRB rate determination, including legislation that vacates the CRB decision and establishes an interim royalty rate structure."

Where online music discovery is heading?

Widget provider RockYou inks music promotion deals with SNOCAP, Fliptrack, Pump Audio and Nettwerk Records. Here's how it works: Labels / distributors who want to promote music let RockYou use it for free (or for substantially less than the DMCA statutory rates). The "end users" can then use free music from this pool that's being promoted by the labels. But only the music from those labels.

So much for independent radio, where the music choices are made by music directors and DJs based not on economic issues, but based on what is truly the best music available.

But this is definitely the way that people will get music for free and without commercials. Maybe radio as we know it is dead, and these new distribution methods will be the only ones viable in the future?

Jia Shen, CTO and co-founder of RockYou! says in their press release:

“Artists have realized that giving users access to tracks as background music for their sites, slideshows among other widgets, only enhances the user experience, but more importantly, truly offers them an incredible outlet to be discovered and retain new fans. RockYou! currently showcases hundreds of artists music for people to sample and insert into their widget of choice.”

Just what we used to say about radio.

Artists and labels seek royalties from AM/FM radio

First they came for the internet broadcasters. Then they came for the over the air broadcasters.

From the LA Times, Artists and labels seek royalties from [over the air] radio:

Mary Wilson, who with Diana Ross and Florence Ballard formed the original Supremes, said the exemption was unfair and forced older musicians to continue touring to pay their bills.

"After so many years of not being compensated, it would be nice now at this late date to at least start," the 63-year-old Las Vegas resident said in Milwaukee, where she was performing at the Potawatomi Bingo Casino. "They've gotten 50-some years of free play. Now maybe it's time to pay up."

So let me get this straight: Mary Wilson, one of the Supremes, feels ripped off by over-the-air radio because they have never paid royalties for the music they broadcast. Yet if over-the-air radio would have never broadcast the Supremes, Mary Wilson would have never been at all famous, and would have to be doing something far less rewarding than touring to pay her bills.

The thing that bugs me about this- Mary Wilson and others like her got paid for singing on the records they made in the past. These were either "work for hire" or contracts where the performers received a percentage of the record sales. If the record never got airplay (or as some would say, free advertising for music), then the records wouldn't have sold nearly as well.

One more thing artists like Mary Wilson should keep in mind: if the royalties are so high that broadcasters are driven to make deals directly with the labels, then the artists and backup performers won't get anything at all; the labels will get everything.

AM and FM broadcasters are already talking about only playing music that they can charge record labels to broadcast, saying these are just music commercials. Oh, wow, isn't that a novel twist on Payola?

Washington Post: Higher Music Royalties Create Static on the Net

From the Washington Post, starting out with the doom and gloom:

Royalty payments are about to go up as the result of a decision this year by the Copyright Royalty Board, a three-judge oversight panel that is part of the Library of Congress. At the urging of SoundExchange, the board decided in March to raise fees, which will eventually triple from their current rates. The previous rates had expired.

Simson disputes the assertion that the new fees will have a destructive impact on the diversity of music available from Web-based broadcasters. Over the past three years, the online audience listening to Internet radio stations has doubled, he said.

Towards the end of the article, they shed some hope on the situation:

The Digital Media Association, a tech industry trade group, is trying to get the new royalty fees overturned under a bill called the Internet Radio Equality Act of 2007, sponsored by Reps. Jay Inslee (D-Wash.) and Donald Manzullo (R-Ill.). A similar bill was introduced in the Senate a little over a week ago, sponsored by Sam Brownback (R-Kan.) and Ron Wyden (D-Ore.).

"It's always hard to pass legislation," said Jonathan Potter, the group's executive director. But, he said, "we've gone from one sponsor to 82 sponsors [in the House] in two weeks. The energy around this issue is everywhere."

It looks like Elise and I will need to go back to Washington to do even more lobbying as well. We have to get these bills passed. Soon.

Senate version S. 1353 status

You can check the status of S.1353, the Internet Radio Equality Act online, currently it has been referred to the Senate Judiciary committee.

Call your senators now and ask them to co-sponsor S.1353. So far there is only 1 co-sponsor.

Here's all the members of that committee. If your senator is on this list, please call them ASAP.

Patrick J. Leahy CHAIRMAN, D-VERMONT
Edward M. Kennedy D-MASSACHUSETTS	Arlen Specter RANKING MEMBER, R-PENNSYLVANIA
Joseph R. Biden, Jr. D-DELAWARE	Orrin G. Hatch R-UTAH
Herb Kohl D-WISCONSIN	Charles E. Grassley R-IOWA
Dianne Feinstein D-CALIFORNIA	Jon Kyl R-ARIZONA
Russell D. Feingold D-WISCONSIN	Jeff Sessions R-ALABAMA
Charles E. Schumer D-NEW YORK	Lindsey Graham R-SOUTH CAROLINA
Richard J. Durbin D-ILLINOIS	John Cornyn R-TEXAS
Benjamin L. Cardin D-MARYLAND	Sam Brownback R-KANSAS
Sheldon Whitehouse D-RHODE ISLAND	Tom Coburn R-OKLAHOMA

We are up to 84 co-sponsors for HR.2060

According to the continually updated status of HR.2060 website:

Rep Abercrombie, Neil [HI-1] - 5/9/2007 
Rep Akin, W. Todd [MO-2] - 5/7/2007 
Rep Arcuri, Michael A. [NY-24] - 5/2/2007 
Rep Baldwin, Tammy [WI-2] - 5/1/2007 
Rep Bartlett, Roscoe G. [MD-6] - 5/1/2007 
Rep Blumenauer, Earl [OR-3] - 5/1/2007 
Rep Boucher, Rick [VA-9] - 5/1/2007 
Rep Brown, Corrine [FL-3] - 4/30/2007 
Rep Buchanan, Vern [FL-13] - 5/2/2007 
Rep Capps, Lois [CA-23] - 5/16/2007 
Rep Capuano, Michael E. [MA-8] - 5/1/2007 
Rep Cardoza, Dennis A. [CA-18] - 5/15/2007 
Rep Chandler, Ben [KY-6] - 5/7/2007 
Rep Cleaver, Emanuel [MO-5] - 5/14/2007 
Rep Cohen, Steve [TN-9] - 5/2/2007 
Rep Courtney, Joe [CT-2] - 5/1/2007 
Rep Cubin, Barbara [WY] - 4/30/2007 
Rep Cummings, Elijah E. [MD-7] - 5/7/2007 
Rep Davis, Danny K. [IL-7] - 5/16/2007 
Rep Davis, Susan A. [CA-53] - 5/2/2007 
Rep DeFazio, Peter A. [OR-4] - 5/1/2007 
Rep Doolittle, John T. [CA-4] - 5/14/2007 
Rep Ellison, Keith [MN-5] - 5/1/2007 
Rep Ellsworth, Brad [IN-8] - 5/2/2007 
Rep Eshoo, Anna G. [CA-14] - 5/7/2007 
Rep Farr, Sam [CA-17] - 5/3/2007 
Rep Fattah, Chaka [PA-2] - 5/14/2007 
Rep Filner, Bob [CA-51] - 5/1/2007 
Rep Fortuno, Luis G. [PR] - 4/30/2007 
Rep Foxx, Virginia [NC-5] - 5/3/2007 
Rep Gillmor, Paul E. [OH-5] - 5/15/2007 
Rep Green, Al [TX-9] - 5/7/2007 
Rep Grijalva, Raul M. [AZ-7] - 5/1/2007 
Rep Gutierrez, Luis V. [IL-4] - 5/3/2007 
Rep Higgins, Brian [NY-27] - 5/3/2007 
Rep Hill, Baron P. [IN-9] - 4/30/2007 
Rep Hinchey, Maurice D. [NY-22] - 5/3/2007 
Rep Hirono, Mazie K. [HI-2] - 5/14/2007 
Rep Honda, Michael M. [CA-15] - 5/1/2007 
Rep Jackson, Jesse L., Jr. [IL-2] - 5/1/2007 
Rep Johnson, Timothy V. [IL-15] - 5/9/2007 
Rep Jones, Stephanie Tubbs [OH-11] - 5/14/2007 
Rep Kagen, Steve, M.D. [WI-8] - 5/9/2007 
Rep Kildee, Dale E. [MI-5] - 5/1/2007 
Rep Kind, Ron [WI-3] - 5/15/2007 
Rep Kirk, Mark Steven [IL-10] - 5/2/2007 
Rep Kucinich, Dennis J. [OH-10] - 5/15/2007 
Rep Lee, Barbara [CA-9] - 5/9/2007 
Rep Lewis, John [GA-5] - 5/3/2007 
Rep Manzullo, Donald A. [IL-16] - 4/30/2007 
Rep Matheson, Jim [UT-2] - 5/9/2007 
Rep Matsui, Doris O. [CA-5] - 5/15/2007 
Rep McCaul, Michael T. [TX-10] - 5/15/2007 
Rep McDermott, Jim [WA-7] - 5/1/2007 
Rep McMorris Rodgers, Cathy [WA-5] - 5/3/2007 
Rep McNerney, Jerry [CA-11] - 5/9/2007 
Rep McNulty, Michael R. [NY-21] - 5/9/2007 
Rep Michaud, Michael H. [ME-2] - 5/3/2007 
Rep Miller, George [CA-7] - 5/15/2007 
Rep Moran, James P. [VA-8] - 5/1/2007 
Rep Musgrave, Marilyn N. [CO-4] - 5/14/2007 
Rep Norton, Eleanor Holmes [DC] - 5/14/2007 
Rep Oberstar, James L. [MN-8] - 5/16/2007 
Rep Olver, John W. [MA-1] - 5/7/2007 
Rep Pallone, Frank, Jr. [NJ-6] - 5/9/2007 
Rep Paul, Ron [TX-14] - 4/30/2007 
Rep Price, David E. [NC-4] - 4/30/2007 
Rep Rahall, Nick J., II [WV-3] - 5/15/2007 
Rep Reichert, David G. [WA-8] - 5/1/2007 
Rep Ryan, Tim [OH-17] - 5/3/2007 
Rep Salazar, John T. [CO-3] - 5/7/2007 
Rep Shays, Christopher [CT-4] - 5/9/2007 
Rep Shea-Porter, Carol [NH-1] - 5/1/2007 
Rep Sires, Albio [NJ-13] - 5/15/2007 
Rep Smith, Adrian [NE-3] - 5/9/2007 
Rep Space, Zachary T. [OH-18] - 5/9/2007 
Rep Spratt, John M., Jr. [SC-5] - 5/2/2007 
Rep Stark, Fortney Pete [CA-13] - 5/14/2007 
Rep Terry, Lee [NE-2] - 5/2/2007 
Rep Thompson, Mike [CA-1] - 5/7/2007 
Rep Tierney, John F. [MA-6] - 5/14/2007 
Rep Walz, Timothy J. [MN-1] - 5/7/2007 
Rep Wolf, Frank R. [VA-10] - 5/9/2007 
Rep Woolsey, Lynn C. [CA-6] - 5/1/2007

Gonzales proposes new crime: 'Attempted' copyright infringement

`` General Alberto R. Gonzales today highlighted the Justice Department’s ongoing efforts to protect intellectual property rights, and announced a comprehensive legislative proposal entitled the “Intellectual Property Protection Act of 2007,” before members of the U.S. Chamber of Commerce Coalition Against Counterfeiting and Piracy.``

The Intellectual Property Protection Act of 2007 would:

Increase the maximum penalty for counterfeiting offenses from 10 years to 20 years imprisonment where the defendant knowingly or recklessly causes or attempts to cause serious bodily injury, and increase the maximum penalty to life imprisonment where the defendant knowingly or recklessly causes or attempts to cause death;

• Provide stronger penalties for repeat-offenders of the copyright laws;
• Implement broad forfeiture reforms to ensure the ability to forfeit property derived from or used in the commission of criminal intellectual property offenses;
• Strengthen restitution provisions for certain intellectual property crimes (e.g., criminal copyright and DMCA offenses);
• Ensure that the exportation and transhipment of copyright-infringing goods is a crime, just as the exportation of counterfeit goods is now criminal.

Ex-SoundExchange Lawyer on why Direct Licensing won't work

Gary R. Greenstein, former general counsel for SoundExchange, explains via the Pho list why direct licensing won't work for most net radio stations:

The Section 114 statutory license grants licensees the right to make digital audio transmissions of any sound recording released to the public with the consent of the copyright owner. A separately negotiated agreement with SoundExchange, on the other hand, would likely only grant the licensee the right to make transmissions of the sound recordings over which SoundExchange had the authority to license. From a practical standpoint this likely means that if a webcaster enters into an agreement with SoundExchange for a rate structure that differs from that adopted by the Copyright Royalty Board, then the webcaster would be entitled to pay the privately negotiated rates for those recordings licensed under the license entered into with SoundExchange while those sound recordings not covered by the license with SoundExchange would still need to be paid for at the rate adopted by the CRB. This could also mean that webcasters streaming non-SoundExchange covered recordings might have to continue to file for the statutory license, pay the CRB-established minimum fees for the non-SoundExchange covered recordings as those minimums are currently required whether you stream one song during a year or 1 million, and comply with the final interim recordkeeping regulations for those recordings that are not covered by a direct license.

Because SoundExchange represents the four majors and a large number of independent labels, the amount of repertoire covered by a private agreement with SoundExchange would likely be substantial but for those copyright owners who have not authorized SoundExchange to license on their behalf, they would likely have a claim to the CRB-established royalty rates for the transmission of their recordings. An open question is whether those copyright owners would look to SoundExchange to pay them the full statutory rate (thus leaving SoundExchange's own copyright owners and artists with even less money) or might seek to go after the individual webcasters for payment of the full CRB-established amount.

Each webcaster may need to evaluate their exposure to infringement liability if they stream recordings not covered by a direct license and fail to pay royalties under the CRB rates and the likelihood that any copyright owner(s) might file suit for such non-compliance.

This is why politicians need to understand that a legislative solution is required, and that it can't be worked out between the parties privately. Private deals will not cover everything. Private deals would force broadcasters to play music from the major and largest independent labels only and would not allow them to play tracks that weren't covered by the agreement.

Running the survival numbers

I'm running some numbers, to try to figure out potential ways to keep SomaFM on the air if the current royalties don't get overturned.

We could cover our costs if we sell 6 commercials a minute for $5 CPM (the cost per thousand current listeners). For audio ads on net radio, this is kind of expensive, typically ads are going for $1.50-2.00 CPM. At $2 CPMs, we're talking 15 ads an hour.

The subscription service numbers are equaly crazy. If we assume that someone listens 24x7, our cost is $22 a month. Of course, if they only listen on average 2 hours a day, it's only $1.84 a month.

4 hour a day average listen time: $3.68
6 hour a day average listen time: $5.53
8 hour a day average listen time: $7.37
10 hour a day average listen time: $9.21

And those rates are just to cover our costs and don't include money for growing SomaFM.

It also assumes we can actually sell all the ads we need to... which is a big assumption. One of the issues in net radio ad sales today is that there is more "inventory" (slots to put ads in) than there are ads to go around.

Music lawyer Nancy Prager takes issue with a statement that is being heard more and more these days, that music is a commodity:

A product that is a commodity generally is something that is interchangeable with others of the same class. Cotton is a commodity. Even some services have become commodities, as the telecommunication services for pre-paid telephone cards have.

But music? Led Zepplin is not interchangeable for Linkin Park. Yo Yo Ma is not interchangeable with Yaz.

I once had a lovely shirt that was 100% Sea Island Cotton. It felt amazing. It was not interchangeable for generic cotton. Organic cotton isn't interchangeable either. Within a commodity, there are always exceptions, items that differentiate themselves by their quality. Even in screws! I go to Home Depot and can buy generic no name screws cheap, or pay extra for special, unique nails that are teflon coated or have a special head that makes them harder to strip, etc.

Music is more of a commodity now than it has ever been. People listen to it in the background, and they're not that picky about what they listen to. The difference is they're listening to music more than they've ever listened to it before. That doesn't mean they don't have non-commodity music they like. They always have those special songs they love.

Music is a commodity with the average consumer; but it's a non-commodity with music lovers. There are just so many more commodity music users now than music lovers. (And I don't think that's because the music lovers have decreased).

Wyden-Brownback “Internet Radio Equality Act” Introduced in Senate

We finally have a senate bill! Time to call your Senator and ask them to co-sponsor it!

Wyden-Brownback “Internet Radio Equality Act” Introduced in the Senate

Bipartisan Bill Would Save Internet Radio

WASHINGTON D.C. – Legislation introduced by Senators Ron Wyden (D-OR) and Sam Brownback (R-KA) today would save Internet radio from a recent royalty hike that threatens to bankrupt the industry. The Internet Radio Equality Act would vacate a Copyright Royalty Board (CRB) decision to increase fees webcasters pay to play music online by a devastating 300 to 1200 percent. Companion legislation (H.R. 2060) introduced in the House of Representatives on April 26th, by Congressman Jay Inslee (D-WA) and Don Manzullo (R- IL), has already garnered the support of more than 60 cosponsors.

SaveNetRadio.org, a national coalition of webcasters, recording artists, listeners and record labels applauded the bill’s introduction, expressing their gratitude to Senators Wyden and Brownback for their leadership at this critical time for the Internet radio industry and the millions of Americans who listen online every day. “Since the CRB’s ruling, Internet radio listeners, webcasters and the artists they promote have joined together to urge Congress to prevent this vibrant industry from going silent on July 15th,” said Jake Ward, a spokesperson for the SaveNetRadio campaign. “On behalf of Internet radio’s 70 million monthly listeners, thousands of webcasters, and the incredible diversity of talented artists it supports, we commend Senators Wyden and Brownback for their understanding of Internet radio’s importance and for their leadership in taking the steps needed to save it”

Other members of the SaveNetRadio coalition offered their support for the Internet Radio Equality Act:

The Roots Music Association, an international organization representing more than 2200 independent artists and labels, headquartered in San Marcos, Texas said, “we are very pleased by the introduction of the Internet Radio Equality Act in the Senate today. Internet radio has become the lifeblood for so many independent artists that depend on the promotional accessibility it provides niche roots based genres. This legislative solution is the last best hope for the future of Internet radio, and we fully support it.” Tim Westergren, Founder of Pandora, one of the country's leading Internet radio webcasters, commended the legislation, saying, “we are grateful for Senators Wyden and Brownback's introduction of the Internet Radio Equality Act. Their support shows an understanding of the invaluable exposure that Internet radio provides to emerging artists, as well as an acknowledgment of the diverse listening experience it offers to music lovers. We are hopeful that, with the Senators' support, this promising industry will finally be treated fairly so that it can continue to grow."

Outbound Music, a Christian webcaster and retailer said, “we are delighted to see the Internet Radio Equality Act introduced in Senate today. Internet music programming reaches millions of listeners who are not within range of Christian broadcast stations. With the passage of this bill, we can rest assured that our spiritually edifying content will continue to reach as wide an audience as possible while allowing fair compensation to artists and affordable rates to webcasters."

Lisa Mathews from the critically acclaimed band Milkshake offered her support of the Internet Radio Equality Act saying, "Milkshake makes original rock music for kids, and kids-at- heart. When it comes to radio, there just aren't many venues for Children's Music via the traditional radio stations. Webcasters provide an outlet for kids and parents to hear new music-- music that is pretty much ignored by traditional radio. For me the value is undeniable. I should pay them for the service they do--I really should. The least I can do is keep their rent low, and be fair when it comes to royalties."

Ian Rogers, VP and GM, Yahoo! Music, said, "Internet radio has empowered and benefited artists and music lovers alike by removing the physical limitations and barriers that once separated musicians from their fans. The recent royalty rate increase threatens to limit the potential of net radio as an outlet for musicians, option for music lovers, and a business for webcasters. The Internet Radio Equality Act strikes the appropriate balance between compensating artists for their work and allowing this industry to grow. We applaud Senator Wyden and Senator Brownback for their leadership and urge congress to take notice and action."

Grammy nominated artist, SONiA said, “Internet Radio allows artists like myself in every imaginable form to sing and be heard around the country and around the world. And because my music is now frequently heard on Internet Radio I am maintaining a successful career that would be impossible without this open medium. The tendency is to build a cage, because maybe that is how it was done in the early days of broadcasting. The Internet Radio Equality Act is the only way that thousands of artists can be heard, and I am one of them."

The Internet Radio Equality Act would vacate the CRB’s decision and set a 2006-2010 royalty rate at the same level currently paid by satellite radio services (7.5% of revenue.) The bill would also change the royalty rate-setting standard used in royalty arbitrations, so that the standards applying to webcasters would align with the standard that applies to satellite radio royalty arbitrations. The bill also re-sets the royalty rules for noncommercial radio such as NPR stations that offer Internet radio music.

For more information on the SaveNetRadio coalition visit www.savenetradio.org

HR.2060 now up to 60 co-sponsors

HR.2060 now up to 60 co-sponsors. The bill status lags a day or two behind the realtime status, but you can see who has and hasn't endorsed HR.2060.

We still need to double this number of supporters. if you haven't already called your congressman, head over the SaveNetRadio.org, pop in your zip code, and you'll get the number to call. I truly only takes a minute or two, it's easy to do and it makes a huge difference. It's much harder for them to ignore phone calls than it is for them to ignore emails!

Jazzmen To Congress: Save Net Radio

From Wired News: "Clarinet wizard Dr. Michael White, legendary trumpeter Kermit Ruffins, jazz phenom 'Trombone Shorty,' Kidd Jordan" and over a dozen other jazz luminaries sent this letter to John Conyers (D-Michigan) and Patrick Leahy (D-Vermont) -- chairmen of the House and Senate Judiciary Committees who are therefore in the best positions to intervene." (Full article)

New laws cracking down on used CD sales...

Via ArsTechnica: ``New "pawn shop" laws are springing up across the United States that will make selling your used CDs at the local record shop something akin to getting arrested. No, you won't spend any time in jail, but you'll certainly feel like a criminal once the local record shop makes copies of all of your identifying information and even collects your fingerprints. Such is the state of affairs in Florida, which now has the dubious distinction of being so anal about the sale of used music CDs that record shops there are starting to get out of the business of dealing with used content because they don't want to pay a $10,000 bond for the "right" to treat their customers like criminals.``

More background from a piece in Billboard, which also states that these laws specifically are targeting CDs and don't apply to used video games.

Speaker Pelosi's Office meeting report

I had a great meeting with CongresswomanSpeaker Pelosi's Senior Policy Advisor Melissa Shannon this morning (well, 1pm DC time), they were very interested in what we had to say and seemed extra interested because SomaFM is based in San Francisco as well. I had a "professional lobbyist" (largely paid for by DiMA, the trade group that represents a variety of webcasters) along for moral support (mostly to help me find my way through the capitol, via security, and all that).

I got to go through all these innards of the Capitol Building. From the beautiful "statue room" (under the giant dome), to the Speaker's Office, to the 4th floor speaker's expansion area (via a tiny elevator and down some strange almost-catacombs) to meet with Pelosi's Aid.

Melissa Shannon was very interested in what I had to say, asked relevant questions (to which I even knew most of the answers), and were very engaged. I ran out of things to say before they got bored with the meeting (as opposed to a meeting earlier in the week with staffer who was paying more attention to her blackberry than to us).

I will be having further phone follow-ups with Melissa, and another staffer who is more involved in copyright issues. (Melissa is an advisor on technology among other things.)

If over-the-air radio had to pay SoundExchange

According to the Radio Advertiing Board, 2006 total broadcast radio revenue was $21,669,000,000 - or $21.7 billion. If over the air braodcasters were paying just 3% of their revenues to SoundExchange, that would be $650 million a year in royalties. ($21,669,000,000 x 3% = $650,070,000). Which would be 15 times the total revenues that SoundExchange pulled in last year.

Yet, over the air radio is exempt from paying these royalties. But Satellite and internet radio is not.

Here's an idea for SoundExchange: charge all radio broadcasters the same rate, and charge them 3% of gross revenues. You would increase your revenues by at least 1500%. That sounds pretty fair, doesn't it?

You'd make LOTS of new revenue, and you wouldn't kill off small, independent internet radio stations.

(inspired by a speech by David Carson, General Counsel of Copyright, Library of Congress at the Future of Music Coalition Policy Conference)

Satellite Royalty Rates: now and in the future

Yesterday at the Future of Music Coalition Policy Summit, I learned that XM and Sirius aren't paying royalties on a percentage of their revenues, they've been paying a flat annual fee for the last few years, "while they were getting started". Last year, that fee worked out to be under 3% of their revenues.

According to SEC filings:

XM revenue 2006: $925.55
Sirius revenue 2006: $636.01 million

Total Revenues for both satellite companies: $1.561 BILLION.

Yet SoundExchange states (on page 2 of this PDF) they've received $43 million in royalties for 2006. And that is ALL the royalties they've received, not just satellite radio. Yet 43 million is 2.8% of $1.561 billion. So we know that Satellite Radio is paying less than 2.8% of their revenues in royalties to SoundExchange. That's also less than half of what webcaseters are asking for in the Internet Radio Equaliy Act (which is 7.5%).

There are over 12 million XM and Sirius subscribers. At $12.99 a month, that's over $1.8 billion a year in revenues for satellite radio. SoundExchange said it anticipates collecting roughly $55 million to $60 million this year. That's still less than 3.3% of sat radio's gross revenues. And that is the total royalties they expect to collect, not excluding the revenues paid by webcasters and cable music services (like MusicChoice).

But SoundExchange and the RIAA are negotiating for higher rates for Satellite. According to Forbes.com, the CRB is considering new rates ranging from 10% to 23% of total revenue each year through 2012. That's a serious jump. And since webcasters would be trated the same way as satellite radio is if HR.2060 passes, these numbers are good to keep in mind.

More images from the "Hill Walk"

Some more pictures from our "Hill Walk" which should probably be called a "Hall Walk" as you're walking through seemingly endless corridors and tunnels between the various House office buildings.

HR.2060 list of co-sponsors (Updated)

33 Confirmed Co-Sponsors of HR.2060, the Intenet Radio Equality Act, as of May 3, 2007.

Rep Arcuri, Michael A. [NY-24] - 5/2/2007
Rep Baldwin, Tammy [WI-2] - 5/1/2007
Rep Bartlett, Roscoe G. [MD-6] - 5/1/2007
Rep Blumenauer, Earl [OR-3] - 5/1/2007
Rep Boucher, Rick [VA-9] - 5/1/2007
Rep Brown, Corrine [FL-3] - 4/30/2007
Rep Buchanan, Vern [FL-13] - 5/2/2007
Rep Capuano, Michael E. [MA-8] - 5/1/2007
Rep Cohen, Steve [TN-9] - 5/2/2007
Rep Courtney, Joe [CT-2] - 5/1/2007
Rep Cubin, Barbara [WY] - 4/30/2007
Rep Davis, Susan A. [CA-53] - 5/2/2007
Rep DeFazio, Peter A. [OR-4] - 5/1/2007
Rep Ellison, Keith [MN-5] - 5/1/2007
Rep Ellsworth, Brad [IN-8] - 5/2/2007
Rep Filner, Bob [CA-51] - 5/1/2007
Rep Fortuno, Luis G. [PR] - 4/30/2007
Rep Grijalva, Raul M. [AZ-7] - 5/1/2007
Rep Hill, Baron P. [IN-9] - 4/30/2007
Rep Honda, Michael M. [CA-15] - 5/1/2007
Rep Jackson, Jesse L., Jr. [IL-2] - 5/1/2007
Rep Kildee, Dale E. [MI-5] - 5/1/2007
Rep Kirk, Mark Steven [IL-10] - 5/2/2007
Rep Manzullo, Donald A. [IL-16] - 4/30/2007
Rep McDermott, Jim [WA-7] - 5/1/2007
Rep Moran, James P. [VA-8] - 5/1/2007
Rep Paul, Ron [TX-14] - 4/30/2007
Rep Price, David E. [NC-4] - 4/30/2007
Rep Reichert, David G. [WA-8] - 5/1/2007
Rep Shea-Porter, Carol [NH-1] - 5/1/2007
Rep Spratt, John M., Jr. [SC-5] - 5/2/2007
Rep Terry, Lee [NE-2] - 5/2/2007 Rep Woolsey, Lynn C. [CA-6] - 5/1/2007

There are more "most likely" sponsors we are hoping to announce as confirmed today or tomorrow. If your representative is not on this list, call them and ask them to co-sponsor HR.2060.

Official list of HR.2060 co-sponsors here.

Royalty due date extended to July 15, 2007

The Copyright Royalty Board, that panel of three judges that determined the new rates, has announced that the first fees (for 2006 and the first part of 2007) are no longer due on May 15, but instead, 45 days after they were published in the Federal Register - so that means July 15th is now the due date. This extension comes via a loophole which they said their decision was not "final" until published in the Federal Register.

Uodate from Capitol Hill

Elise and I are in Washington DC today, visiting Congress for support of HR2060. (There are a bunch of other independent webcasters here as well, we're doing a full on "save net radio" assault on the lawmakers.)

So far, we're up to 25 co-sponsors of the bill! This is great. We've gone into meetings and they've told us they've gotten tons of messages and phone calls about it, so you're doing a great job! And if you haven't called, or written yet, PLEASE do it now!

There are many other congressmen who are "on the fence" about this issue (the RIAA propaganda machine is well funded and they have well-connected lobbyists) so we still need all of you to let congress know that they should support HR 2060, the Internet Radio Equality Act.

Thanks again to everyone who has supported us in our fight to stay on the air.

SomaFM's Elise Nordling and GotRadio.com's Val Starr outside Dan Lungren's office in Washington.