Save Net Radio Press Release

INTERNET RADIO MAKES A COMEBACK IN THE SENATE The Grassroots Movement to Save Internet Radio from Extinction is Reinvigorated by Senate Judiciary Committee – Brownback Offers Industry Saving Legislation

Save Net Radio Press Release

WASHINGTON D.C. – Legislation introduced in the House and the Senate last year to bring parity and equality to the new radio market made a comeback today during a Senate Judiciary mark-up. The Internet Radio Equality Act (IREA), which would establish a flat rate for performance royalty fees paid by cable, satellite and Internet radio providers, was offered as an amendment to the Orphan Works Act of 2008 (S. 2913) by Senator Sam Brownback (R-KS) during a scheduled mark-up of the intellectual property legislation today.

The amendment, which was later withdrawn, signals the renewed efforts of Net radio webcasters to reverse an unprecedented 2007 rate increase by the Copyright Royalty Board (CRB) that threatens to bankrupt the industry. Expressing his “strong support for internet radio,” Chairman Leahy welcomed future consideration of Internet radio royalties.

“It has been more than a year since the CRB raised the cost of webcasting to an untenable amount,” said Jake Ward, spokesperson for the SaveNetRadio campaign, “and all we are is a year older. Last year, more than two million people called on Congress to take action, and 150 Members in the House and Senate heard them and signed on in support of the Internet Radio Equality Act, but we still don’t have a solution. In the past year, rates have been set for net radio’s direct competition, satellite and cable radio providers, at a rate three and four times less than their proposals to Internet radio. It is disappointing and absurd that while Net radio is fighting for its survival, the industry has been put at an even greater disadvantage. This is unacceptable and hardly the good faith negotiations the House Commerce committee directed SoundExchange to participate in more than nine months ago.”

“Senator Brownback has been a staunch ally of small businesses and independent artists whose livelihoods depend on Internet radio since this fight began a year ago,” Ward continued. ”The offering of the amendment today and Senator Brownback’s leadership and dedication to equality should serve as a reminder to other Members that Internet radio and its tens of millions of supporters are not going away quietly. We should all be in this together. This continued battle is perlexing but we are committed to fighting for fairness – fairness for artists, fairness for independent labels, and fairness for webcasters. In the coming weeks and months, SaveNetRadio will be directing our formidable grassroots to support legislation that ensures artists are fairly compensated while leveling the playing field for webcasters.”

Following a March 2, 2007, decision by the Copyright Royalty Board (CRB), a division of the Library of Congress charged with establishing performance royalty rates for “digital radio” broadcasters, to increase rates for webcasters by an unjustified and unprecedented 300 to 1200 percent, a national coalition of webcasters, independent artists and Net radio listeners began petitioning Congress to take action. The Internet Radio Equality Act (S. 1353/H.R. 2060), which would set the rate for all digital radio – cable, satellite and internet radio – at 7.5% of revenue, was introduced in the U.S. Senate by Ron Wyden (D-OR) and Sam Brownback (R-KA) and in the House by Congressman Jay Inslee (D-WA) and Don Manzullo (R-IL).

In November of 2007, SoundExchange formally proposed that cable radio services pay royalties between 7.25% and 7.5% of their revenue to sound recording copyright owners and recording artists. The following month, the Copyright Royalty Board, citing market constraints and a desire not to disrupt the industry, further reduced the royalty rate for satellite radio to 6% of broadcaster revenue –increased incrementally to 8% over the next five years. Cable and satellite radio generated $2 billion in 2006 while Internet radio produced less than $150 million. Under the current CRB ruling webcasters would pay an average 30% of revenue in royalty fees – and as much as 150% in some cases.

Radio And Internet Newsletter reports: SENATE JUDICIARY COMMITTEE TO LOOK AT WEBCASTING ROYALTIES

SENATE JUDICIARY COMMITTEE TO LOOK AT WEBCASTING ROYALTIES:

"At a hearing of the Senate Judiciary committee this morning, Sen. Sam Brownback (R-KS) revived the issue of Internet radio performance royalties by proposing to add the Internet Radio Equality Act as an amendment to an unrelated copyright bill. Committee chairman Sen. Patrick Leahy (D-VT), while expressing his support for webcasters, countered by suggesting that the committee examine the issue in June in the context of broadcast radio performance royalties.

[RAIN will] have more details as they emerge. You can also check the SaveNetRadio website here: http://www.savenetradio.org."

I guess it may be time to go back to Washington DC again. Perhaps this time we can get some traction on that bill.

CRB sets satellite radio royalty rates.

and guess what? They're lower than internet radio!

AP is reporting:

``Satellite Radio will pay a performance license rate of 6 percent of certain revenue this year for sound recordings played over its network, according to Copyright Royalty Board decision`` and ``also will pay a performance license rate of 6 percent of gross revenue subject to the fees for 2008, which will then increase by 0.5 percent annually before reaching 8 percent in 2012.``

Just to put that into context, Net Radio up until 2006 paid 10-12% of their revenue. And of course, unless we get a deal from SoundExchange that's codified by Congress, most net stations are going to pay what amounts to 300-600% of their revenues. That's right: 3-6 TIMES their revenues.

Perhaps it is time to start turning up the heat on Congress again to do something?

Washington Post: Web Radio Seeks Resolution

Good article in Washington Post:

SoundExchange has already proposed a fee schedule that is lower than the Copyright Royalty Board's rates for commercial webcasters whose annual revenue is less than $1.25 million, and Ades said about 30 companies have accepted it. SoundExchange and the Digital Media Association also agreed in August to cap the total amount of per-channel fees that a Web service would have to pay, an issue that was of particular concern for webcasters such as Pandora that have millions of channels set up by individual users.

Still, webcasters say that even if there are favorable results to the negotiations, they are hoping for long-term legislation that will force all radio platforms -- including traditional AM/FM radio, which does not currently pay any royalties to SoundExchange -- to pay the same rates.

Read entire article

Internet Radio Hearing this Wednesday: Call your Senator and ask them to attend!

Just found this out a bit late:

This Wednesday morning (tomorrow), the Senate Commerce Committee will meet to hold a hearing on the future of radio in the United States. Representatives from broadcast radio, music industry, and Internet radio will testify before the committee about the current state of the radio industry and how royalty fees and other issues, like competition and innovation, affect the future of the industry. This is an unprecedented opportunity for Internet radio to explain its value to Congress, and we need your help to make sure they are listening.

Call the Senate switchboard at (202) 224-3121 and ask to be connected to your senator's office. If you don't know your Senator's name, just tell them your state, and they'l connect you.

Or look up their direct number on the senate site.

Here's what you should say:

• I am a constituent, and an Internet radio listener calling to ask that as a member of the Senate Commerce Committee, the Senator attend Wednesday's hearing on the future of radio.
• Internet radio has been a revolutionary force in the music industry since its creation and now empowers artist, consumers, and music lovers of every kind. The Copyright Royalty Board's unprecedented and ill informed decision to increase royalty fees for Webcasters by more than 300% has threatened to bankrupt this important industry and we need the Senator's help.
• The real future of radio for music lovers, artists, and the music industry as a whole is online. To save this industry and allow it to prosper, there must be parity and equality between webcasters, satellite radio, and broadcast radio. Today Internet radio pays a recording royalty fee more than twice that of satellite radio, and terrestrial radio pays none at all. To fix this unfair and inexplicable inequality, please cosponsor the Internet Radio Equality Act, S. 1353, pending in the Senate today.

Details on the hearing:

Full Committee Hearing on the Future of Radio

Wednesday, October 24, 2007, at 10:00 a.m. in Room 253 of the Russell Senate Office Building

Witness List

Mr. Mac McCaughan, Musician and Cofounder, Merge Records
Chapel Hill, North Carolina 27514

Mr. W. Russell Withers Jr., President, Withers Broadcasting Group
Mt. Vernon, Illinois 62864

Mr. Tim Westergren, Chief Strategy Officer & Founder, Pandora
Oakland, California 94612

Mr. S. Derek Turner, Research Director, Free Press
Washington, DC 20001

Ms. Carol Pierson, President and CEO, National Federation of Community Broadcasters
Oakland, California 94612

Ms. Dana Davis Rehm, Senior Vice President for Strategy & Partnerships, National Public Radio
Washington, DC 20001

More Details

Radio Royalty Update

Official Internet Radio Royalty Update: both sides still "in discussions". Nothing has changed there. The Internet Radio Equality Act is feeling doomed as congress is more interested in a long term copyright change.

I think what Congress is hoping is that everyone can keep "negotiating" long enough for them to pass the next set of laws. That forces net radio into an uncomfortable position- we're potentially assuming some huge royalty obligations.

I think we still need to put pressure on congress. But I think we've lost their ear.

Can Internet Radio survive under current legislation?

No, it can't legally in the US.

We still have a long way to go to get legislation passed. Congress seems to have lost interest in us, and is satisfied now that a few very small webcasters have taken the so-called "offer" from SoundExchange (that only covers big label and SX-member artists, not useful for independent broadcasters!)

Meanwhile, attention has turned to the new bill which will put a royalty on over-the-air broadcasters as well. Alas, that royalty will be "penies on the dollar", well below the 10-12% paid in the past by webcasters, and way below the rates set by the CRB last March.

Paul Gathard at Daily Tech says it well:

Becoming a pirate internet radio station is no way to run a business or to live in peace and harmony with the law. The risk is far too great for rewards that are elusive at best for even well funded statutorily licensed internet radio stations.

If you have a passion for the medium and the music, the answer is new legislation. If you have an overwhelming desire to build an internet radio empire, the answer is new legislation. If you simply want to listen to your favorite internet radio station any time you want, the answer is new legislation. There will be few options or choices for any internet radio ambitions unless the current CRB ruling is overturned and a new law crafted.

Read the whole article...

CNN: SoundExchange spent $50,000 lobbying

CNN:

SoundExchange spent $50,000 in the first half of 2007 to lobby against Senate and House bills that would nullify the new payment system set by a three-judge copyright panel in March, according to a disclosure form posted online Sept. 7 by the Senate's public records office.

Frankly, I'm surprised that they only spent $50k. And doesn't this money belong to the artists?

Press Release: Webcasters Stand Firm

(Released in conjunction with SaveNetRadio and the stations listed below)

FOR IMMEDIATE RELEASE:

Webcasters Stand Firm

Deal With Us In Good Faith or No Deal!

Wednesday, September 19, 2007 SAN FRANCISCO, CA. – Thousands of webcasters stand firm by rejecting the most recent Copyright Royalty Rate proposal made by SoundExchange. The latest take it or leave it “offer” made by SoundExchange on behalf of the recording industry has done nothing to further negotiations with webcasters, and a mere 24 small webcasters have felt they had no choice but to give in to the record labels demands.

“The latest proposal made by SoundExchange is extremely disappointing, at a time where we need real progress, not hollow tricks.” SaveNetRadio spokesperson Jake Ward said. “While the clock continues to tick for webcasters, SoundExchange continues to play games with their good faith The resounding rejection of this offer should serve as a reminder to SoundExchange, and to Congress, that the webcasting community is intent on a lasting and fair resolution to this issue, and willing to fight for it”

We, the undersigned have made it very clear to the Sound Exchange exactly why this latest offer is unrealistic and unacceptable. Its terms are not viable for webcasters seeking to run profitable businesses. One such term is the newly added ATH (Aggregate Tuning Hour) cap which immediately makes many mid-level webcasters ineligible for the recently presented agreement. For stations with revenues far below the $1.25 million cap, but with healthy listener bases, this ATH cap forces payments at the CRB rates.

This deal is not feasible for anyone who wants to grow their business. It contains the aforementioned $1.25 million revenue cap, which limits growth and puts in place a dangerously low hard ceiling for revenue generation. The Small Business Administration revenue cap for over-the-air broadcasters to be considered a small business is $6.5 million – this would seem a fair cap, with precedent.

Also, the offer only covers copyright holders that are SoundExchange members, of which there are approximately 20,000. Between us, the undersigned webcasters played far more artists than that in the last year. Under the SoundExchange offer for artists not on that limited roster, webcasters would have to pay at the bankruptcy-level rates, which were set in the fatally flawed Copyright Royalty Board (CRB) ruling in March. Those CRB rates were condemned by webcasters, the press, and members of Congress and deemed as wildly out of line and detrimental to all parties concerned – including the RIAA.

We have asked for a reasonable, long term solution, not one that is subject to increase at the whim of the record industry every five years. 2010 is little more than 2 years away, and it would be difficult for any business owner to accurately forecast profits and build a successful business model with a huge expense variable looming in the future.

Although several of the webcasters listed below are currently involved in direct negotiations with Sound Exchange, the process remains exceedingly slow and increasingly unpromising. In the continuing absence of a genuine offer that would allow internet radio to continue to be the vital medium for new music discovery we implore our listeners and fans of internet radio to continue to urge your legislative representatives to pass the Internet Radio Equality Act (HR2060, S.1353).

For information on how you can contact your representative, please visit http://www.savenetradio.org.

Signed:

Jeff Bachmeier, .977
Val Starr, GotRadio.com, 100hitz.com
Rusty Hodge, SomaFM.com
Rick White, BigR Radio. 1faith.fm
Donnie Mowbray, 181.fm
Kurt Hanson, AccuRadio
Dave Landis, Ultimate 80’s
Bill Goldsmith, Radio Paradise
Ted Leibowitz, BagelRadio
Sal Amato, Dot1media
Brandon Casci, Loud City
Jim & Wanda Atkinson, 3WK
Ari Shopat, Digitally Imported
Mike Roe, Radio IO

No deal on the horizon

Some places are reporting that a deal is just about finalized with SoundExchange, but this is not correct. I think they're referring to the NPR/SoundExchange deal, which I hear is getting close to being finalized. But that doesn't do any good for all the other webcasters out there!

SaveNetRadio.org Press Release

For Immediate Release
Contact: Jake Ward (SaveNetRadio) 202 6833156
Thursday, September 6, 2007

Webcaster Coalition Welcomes Progress and Congress Back to Town
Negotiations to Save Internet Radio from Rate Hike Moving Slowly

WASHINGTON D.C. –In a statement released as Congress returned to Washington D.C. after the August recess, SNR spokesperson Jake Ward said that while some progress was made in August it was not enough, and should not satisfy Congress. “The recent “minimum royalty” agreement between DiMA and SoundExchange was a good start, but there has been no success reported on basic royalty rates that are agreeable and sustainable for any class of webcasters – large, small, public radio, traditional broadcasters or college radio. During the August recess SoundExchange unilaterally issued revised small webcaster licenses that it characterized as helpful but were soundly rejected by many, and the Internet radio industry is still teetering on a precipice.”

In late July, amid growing public support and an increasing number of cosponsors for the Internet Radio Equality Act, Members of both the House and Senate called on SoundExchange to engage webcasters in good faith discussions during the August recess.

“Though several Members of have called for negotiated resolutions, SoundExchange seems to be playing out the clock in order to avoid Congressional action. Now that Congress has returned to Washington we hope they will hold SoundExchange to its word and the modest progress will develop into a full-scale resolution before the end of September.”

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

SoundExchange extends (not very good) offer to small webcasters

Yesterday, SoundExchange emailed a not very good offer to small webcasters. This offer is separate from an offer being negotiated with a group of 6 small webcasters who were parties to the CRB hearings known as the Small Commercial Webcasters group and represented by David Oxenford.

There has been some news coverage about webcasters' reactions to this.

As for my reaction to parts of parts of the offer:

These attached rates only apply toward each webcaster’s first 5,000,000 aggregate tuning hours (“ATH”) of usage each month. For any usage in a single month above 5,000,000 ATH, the webcaster must pay the applicable commercial webcaster rates (currently $0.0011 per performance during 2007.) By way of example, a service would need to have an approximate average of 6,945 simultaneous listeners, each listening for thirty consecutive days, 24 hours a day, in order to exceed 5,000,000 ATH of usage.

It should be pointed out that this number is very low; to put that into context, we're capped at an AQH of under 7000; but for example WBUR, a public radio station in Boston has an AQH of over 40,000. Currently, SomaFM averages a little over this, typically around 7800 average listeners.

Now according to a discussion I had with John Simson, this only applies to listeners in the US. So that reduces our amount of listeners by 40%. But at the rate we're growing, in 2 years we'll be over that limit with our US listeners. So this agreement won't work for us.

If a webcaster’s total annual revenue exceeds $1.25 million, it is no longer eligible for these offered rates and terms. After the conclusion of a six-month “grace period,” during which time it may continue to pay under the offered rates and terms, the webcaster must calculate any subsequent liability using the applicable commercial or noncommercial webcasting rates, as defined in the Federal Register at 72 Fed. Reg. 24084 (May 1, 2007).

So if we exceed that revenue cap, our royalties would go from $150,000 a year to over $2 million or more a year. In fact, if we extrapolate our current revenue to royalty ratio, our rates would go from $150,000 to $5 million at the point we hit the $1.25 million revenue cap.

So if we can increase the size of our business to over 1.25 million dollars, we'll be forced out of business.

This isn't an offer. This is a restraint of trade.

Please note that SoundExchange is making this offer only on behalf of its copyright owner members and has no authority to make this offer on behalf of non-members of SoundExchange. For transmissions of sound recordings owned by non-members of SoundExchange, webcasters must comply with the rates and terms in the Final Determination of the CRJs, published in the Federal Register at 72 Fed. Reg. 24084 (May 1, 2007).

This is the real problem here, and why we need congress to act. SoundExchange only represents 20,000 artists, and many artists SomaFM plays are not SoundExchange members (we are playing about 8000 different artists currently). To put the 20,000 number in context: Live365 plays over 250,000 different artists.

Bottom line: this is an unworkable offer, and it is not in any webcaster's interest to accept this offer.

Here's the full text of the letter, or get a PDF of this letter and the actual SWSA Term Sheet 2006:

Dear Small Commercial Webcaster,
 
  I am writing on behalf of SoundExchange, Inc. (“SoundExchange”) and its member copyright owners to offer certain small commercial webcasters an alternative rate structure to that enacted by the Copyright Royalty Judges (CRJs) in the recent webcasting proceedings.  Through this offer, qualified webcasters have the option of utilizing the attached rates and terms for nonsubscription transmissions of SoundExchange member sound recordings under 17 U.S.C. § 112 and § 114. 
 
  At the request of members of Congress and congressional committees, SoundExchange is making the attached offer available to small commercial webcasters which do not exceed an annual revenue threshold or a monthly threshold on aggregate tuning hours.  The attached rates and terms generally track those previously available under the prior agreement negotiated pursuant to the Small Webcaster Settlement Act (SWSA), which allow qualified entities to pay royalties based on a percentage of revenue (10% or 12%) or a percentage of expenses (7%) as long as their total annual revenue (both direct and affiliated revenue) does not exceed $1.25 million.  However, there are certain additional terms:  

           
• These rates and terms are available for eligible nonsubscription transmissions for 2006-10, thus effectively extending the rates and terms negotiated pursuant to SWSA for an additional 5 years.  
           
•           These attached rates only apply toward each webcaster’s first 5,000,000 aggregate tuning hours (“ATH”) of usage each month.  For any usage in a single month above 5,000,000 ATH, the webcaster must pay the applicable commercial webcaster rates (currently $0.0011 per performance during 2007.)  By way of example, a service would need to have an approximate average of 6,945 simultaneous listeners, each listening for thirty consecutive days, 24 hours a day, in order to exceed 5,000,000 ATH of usage.  
           
•           If a webcaster’s total annual revenue exceeds $1.25 million, it is no longer eligible for these offered rates and terms.  After the conclusion of a six-month “grace period,” during which time it may continue to pay under the offered rates and terms, the webcaster must calculate any subsequent liability using the applicable commercial or noncommercial webcasting rates, as defined in the Federal Register at 72 Fed. Reg. 24084 (May 1, 2007).  
           
•           Webcasters must provide census reporting to SoundExchange and be willing to work with SoundExchange on implementing technology, developed at SoundExchange’s expense, to track transmissions and provide the census reporting required under the agreement.            

            As with SWSA, a condition of this offer is that all parties affirm that this agreement is non-precedential and does not reflect an agreement between willing buyers and willing sellers in the marketplace.  Rather, this agreement reflects the desires of certain members of Congress that certain small commercial webcasters receive a below-market rate and as a compromise motivated by the unique business, economic and political circumstances of small webcasters, copyright owners, and performers.  All parties agree that this agreement (including any rate structure, fees, terms, conditions, or notice and recordkeeping requirements) may not be introduced in any proceeding, including those related to the setting of rates and terms for the licensing of sound recordings.  

              Please note that SoundExchange is making this offer only on behalf of its copyright owner members and has no authority to make this offer on behalf of non-members of SoundExchange.  For transmissions of sound recordings owned by non-members of SoundExchange, webcasters must comply with the rates and terms in the Final Determination of the CRJs, published in the Federal Register at 72 Fed. Reg. 24084 (May 1, 2007).  SoundExchange is working, however, to implement an industry-wide resolution that would apply rates and terms similar to the attached for all eligible small commercial webcasters and all sound recording copyright owners.  In the event that industry-wide regulations are adopted by the CRJs (or other appropriate authority) with rates and terms substantially similar to those contained in this agreement, this agreement will cease to operate and all parties will be governed by the industry-wide regulations.  Ultimately, an industry-wide resolution will be easier for all parties to administer, so it is our hope that such a resolution can be obtained.  

              If you are interested in accepting these rates and terms offered on behalf of SoundExchange’s members, please sign the attached election form and return the signed form to SoundExchange by September 14, 2007.  

              Should you have any questions about any of the information within, please contact Kyle Funn, Licensing & Enforcement Specialist, at 202.640.5881.  
  
  Respectfully,
  
    John L. Simson
   Executive Director
  SoundExchange, Inc.

 

Ray of Light For Internet Radio?

Jason Thomas at Crawdaddy Magazine has a great article on the state of net radio, here's a snippet:

The original laws were crafted in a time when technology was seen as having a limitless possibility to change everything about our lives, and much of the very things that the DMCA creates rules for were in states of infancy. Given the way the saga has unfolded over the last 12 years, the only way that harmony is going to be reached is either tossing out or amending the DMCA and, in doing so, re-evaluate exactly how the changes in technology have played out in the forms of digital media. There is little chance of fixing the tangle of existing legislation and Copy Right Board rulings, especially given the fact that webcasters have evolved into quite divergent forms with distinct business models, organizations and revenue/profit streams. Treating them the same would make little sense, and would open the door to fighting amongst themselves over a single rule that applies to them all as they have different interests. That is exactly what SoundExchange is hoping for.

I encourage you to ">read the whole article.

Performance Right and Platform Parity webcast

Tuesday, 31-Jul-07, Elise and I will be attending the hearing of the Subcommittee on Courts, the Internet, and Intellectual Property Hearing on Ensuring Artists Fair Compensation: Updating the Performance Right and Platform Parity for the 21st Century hearings will be webcast live(RealVideo)

I'll post an archive link as soon as I get it.

Hearing on Ensuring Artists Fair Compensation: Updating thePerformance Right and Platform Parity for the 21st Century

The Copyright Office is having a hearing tomorrow to discuss expanding the sound recording performance royalty to analog broadcasters. The good news is that this will entail a rewrite of Section 114 and there is a good chance that this rewrite would put internet radio, satellite radio and over the air radio on the same basis for royalties. Currently, Internet Radio pays the highest royalty rates of any medium.

Tuesday 07/31/2007 - 10:00 AM; 2141 Rayburn House Office Building
Subcommittee on Courts, the Internet, and Intellectual Property
Hearing on Ensuring Artists Fair Compensation: Updating the Performance Right and Platform Parity for the 21st Century

Tell your congressman there is no settlement in process.

I've learned that people calling Majority Leader Hoyer's (D-MD) office are being told when they mentioned HR.2060 that there is a settlement going on, and implying HR.2060 is no longer necessary.

This is completely incorrect! As expected, the RIAA and SoundExchange are using the guise of a settlement to derail the passage of the Internet Radio Equality Act.

We need to let Hoyer's office know there is no settlement going on. The RIAA and SoundExchange have not proposed a settlement, and they haven't even acknowledged SomaFM settlement offer, and they haven't acknowledged the NAB's settlement offer, and DiMA (who represents larger webcasters and Pandora and Live365) isn't even close to settling with them; as the heads of DiMA and SoundExchange (which has a board of directors majority controlled by the RIAA or RIAA member labels) are publicly calling each other liars in the press right now. Not much of a settlement in the works.

One other point: even if there is a settlement, it's only good through 2009 and then the CRB process starts over again. HR2060 fixes this broken process.

SoundExchange: if there is a settlement being offered, make it public. And don't make it a settlement offer you know webcasters can't accept.

IREA Update

Here's links to the updated co-sponsor list: S.1353 in the Senateand HR.2060 in the House. We currently stand at 5 Senate co-sponsors and 139 house co-sponsors. We need 51 and 218 co-sponsors respectively.

Thanks to Sally for reporting in on her calls to the Judiciary Committee this morning:

Durbin (no position) Feinstein (no position)
Biden (no position prior to vote)
Kennedy (staff still discussing this)
Feinfold (no position)
Leahy (no position)
Brownback (co-sponsor, they said he had just had a briefing on this)

You should continue to call your representatives! If they are already sponsoring the IREA, thank them for it and ask them to do what they can do to get the bill out of committee and ready for a vote. If they're not supporting it, reiterate your desire to have them support it.

Congressman Ed Markey jumps to webcasters defense!

Congressman Ed Markey jumps to webcasters defense, From Congressional Quarterly:

Markey brought webcasters and representatives of the music industry together in last-ditch talks late last week. Some progress was made in that closed-door meeting and, for now, the old fees are still in place. Negotiations are still ongoing.
"Markey decided to host the Web radio negotiations because “he does have jurisdiction over the Internet, and he has a longstanding interest in the issue."
As a result of the meeting, SoundExchange, the nonprofit that collects royalty payments and distributes them to recording artists, has agreed to keep the old royalty rate in place as long as good-faith negotiations continue.
Christine Hanson, Inslee’s spokeswoman, said he prefers negotiating to legislating. “Simply because of the time involved, it just would be a lot faster,” Hanson said. “But for Jay, the number one thing is reaching an agreeable solution to both sides, where artists feel like they’re being compensated fairly and webcasters can have a sustainable economic model.”

Read entire story...

Are the CRB rates going to be enforced on July 15th?

John Simson on (APM's) Marketplace just now said that he expects webcasters to be in compliance with the rates that take effect on Monday. This seems counter to what has been reported by others.

It's available as a podcast at Marketplace.org, it's about 10 minutes (or 1/3 of the way) into the July 13th episode.

The critical piece:

Tim Westergren at Pandora asks John Simson, "Are these rates going to be enforced on Sunday?"

To which Mr. Simspon replies, "There is a ongoing business discussion going on between us and the representatives of these companies, but while that discussion going on, we expect them to comply with the law as it is on July 15th and July 16th."

Eliot Van Buskirk at Wired has this to say in his latest post:

Here's the deal, according to SoundExchange. Payments under the new rates are legally due on Monday, but no lawsuits are going to be meted out on that day for webcasters who do not pay, as negotiations continue. Fees that are not negotiated away will still be due retroactively -- plus interest.

We have a truce right now with the RIAA and SoundExchange, but the "Peace Accord" is still to be worked out. We still might get a bomb dropped on us.

Please keep calling your reps. And if you haven't supported SomaFM lately, we could user your financial support right now.

Pandora Exec: SoundExchange Will Not Enforce New Royalty Rates on Sunday

Wired's Eliot Van Buskirk is reporting that SoundExchange has promised that there won't be any enforcement of royalty collection on Sunday (or Monday for that matter):

The SoundExchange executive promised -- in front of Congress -- that SoundExchange will not enforce the new royalty rates. Webcasters will stay online, as new rates are hammered out.

This was to be expected. At worse case, SoundExchange would start sending out notices that stations are not in compliance, and that they are subject to the 1.5% late fee. It's a process that doesn't happen overnight. But still, this implies that they are willing to continue negotiations and that's a good thing:

Going forward without the royalties being collected, SoundExchange and webcasters will negotiate a new royalty rate with Congress looking over their shoulder -- "and last but not least, the public looking over Congress's shoulder." Alternatively, Congress now has time to consider the Internet Radio Equality Act, which would set webcaster royalties at 7.5 percent of revenue and allow them to continue operating pretty much as they have been.

Read the whole article here.

Online Radio: It was nice while it lasted

Eliot Van Buskirk at Wired writes:

Congress's attempt today to broker a deal between webcasters and record labels will amount to nothing, according to a SoundExchange representative, because Wednesday's decision by a federal court of appeals made the new online radio royalty rates "etched in stone."
Overall, the person I talked to seemed certain that the rates are going into effect -- regardless of what's going on in Washington today.

The RIAA has a very powerful lobby. They almost always get their way when it comes to Washington DC.

As it stands now, the only fiscally prudent path now for webcasters is direct licensing, which reduces sound recording performance royalty payments legally by cutting out the artist's 50% share of the royalties. Labels can offer broadcasters discounted, direct-license deals at up to a 50% discount over crb rates and still make the same amount of money. Or by offering just a 40% discount, webcasters would pay the same as they've paid in the past, and RIAA labels would earn a 10% premium by bypassing the revenue share with artists. It's just a simple money-grab from the artists by the big labels.

But the other problem with direct licensing is that it is almost impossible to do with all the different artists and labels we play on SomaFM. 10% of the music we play is rare, out-of-print tracks. There isn't even a label to contact to get permission to play it from anymore.

Note to the RIAA: smooth move, forcing a legal music service out of business due to your greed, and it will server you right when those people all turn to the illegal file sharing networks to get the music they want.

Notes from the Hill

Misc notes from DC on the status of the IREA and any settlements:

Today, at 4pm Eastern, Rep. Ed Markey has called for a roundtable about the web radio royalty issue.

The IREA has 128 co-sponsors now, and 5 in the senate. Finally starting to see some progress in the senate.

I've heard that there are lots of negotiations going on right now with the RIAA. Technically, they're negotiating with SoundExchange, but all the negotiators have RIAA business cards. SoundExchange is effectively the RIAA's puppet, since their board is controlled by RIAA and AFM (Musicians Union, who works closely with the RIAA).

There are separate negotiations with NAB, NPR, IBS and CBI (college broadcasters). Rumor is that nothing came out of NPR's meeting. The Small Commercial Webstasters are also talking to SX and are represented by David Oxenford. (I had previously reported erroneously that David Oxenford was not at the negotiations.)

DiMA, representing SaveNetRadio as well as AOL, Yahoo, Real, Live365 and others, is reported to not getting anywhere with the RIAA. Apparently the RIAA is refusing to compromise (gee, imagine that).

It is all about control, control via money. RIAA wants more control over what NPR stations like KCRW are playing, as more and more NPR stations in major metro areas are hosting influential music programs. And of course they want more control over the bigger internet stations. The RIAA doesn't like the fact that their (often inferior) product isn't being promoted as heavily as independent (and superior) music on these channels.

We basically have one more day to keep the rates from going into effect. so please call your senators and congressmen now and ask them to support the IREA, the internet radio equality act.

AN URGENT MESSAGE FROM THE SAVE NET RADIO COALITION

Time and options are running out for Internet Radio. Late Wednesday afternoon, the court DENIED the emergency stay sought on behalf of webcasters, millions of listeners and the artists and music they support.

UNLESS CONGRESS ACTS BY JULY 15th, the new ruinous royalty rates will be going into effect on Sunday, threatening the future of all internet radio.

We are appealing to the millions of Internet radio listeners out there, the webcasters they support and the artists and labels we treasure to rise up and make your voices heard again before this vibrant medium is silenced. Even if you have already called, we need you to call again.

The situation is grave, but that makes the message all the simpler and more serious.

PLEASE CALL YOUR SENATORS AND REPRESENTATIVES RIGHT AWAY and urge them to support the Internet Equality Act. Click here to find the phone numbers of your Senators and Representative.

If they've already co-sponsored, thank them and tell them to fight to bring the bill to the floor for an immediate vote. If the line is busy, please call back. Call until you know your voice has been heard.

Your voices are what have gotten us this far - Congress has listened. Now, they are our only hope.

We are outmatched by lobbying power and money of the RIAA but we are NOT outmatched by facts and passion and the power of our voices.

U.S. Court of Appeals denies webcasters' "Motion to Stay"

RAIN is reporting the U.S. Court of Appeals for the D.C. Circuit has denied webcasters' "Motion to Stay" the new webcast royalty rates. This means that the new rates go into effect on July 15th, 2007 (which is a Sunday, so it will actually be that following Monday).

Our only hope now is that we can get a vote on HR.2060 before Friday. That basically means today, Thursday, July 12th, 2007.

Naked Corporate Greed

Flint Journal quoting John Simson:

"I don't see any other way to characterize this as anything other than naked corporate greed," said John Simson, executive director of SoundExchange.

When I first read this, I assumed he was talking about the RIAA and the Big 4 record labels they represent. Actually, he was talking about internet broadcasters!

The complete quote, from an RIAA press released issued by SoundExchange:

"This legislation is a money grab by big corporations like Clear Channel and AOL at the expense of artists and labels," SoundExchange Executive Director John Simson said in a press release issued last month. I don't see any other way to characterize this as anything other than naked corporate greed. It's just not fair to artists."

This is where the RIAA is trying to mislead the public into thinking that only a few big webcasters are going to be affected by the new royalties. In reality, the big corporations who are going to be affected most are AOL and Yahoo. But they'll end up just cutting direct licensing deals with the Big 4 and the only difference will be that they play less independent artists.

Other "large webcasters" who aren't so large and will be adversely affected are Live365 and Pandora, both who qualify as small businesses under US SBA guidelines.

But he never talks about who is really going to get screwed: the small independents like SomaFM.

Thanks John. When I hear you talking about naked corporate greed, I know who you're really talking about.

Representative Jay Inslee addresses Congress

Congressman Jay Inslee (WA-01), original cosponsor of the Internet Radio Equality Act, spoke on the floor of the U.S. House of Representatives in support of his bill. The following is the complete text of Congressman Inslee’s statement:

Mr. Speaker, I come to the floor of the House this evening to discuss the potential loss of Internet radio by Americans, a tremendous service that, because of Internet software and musical geniuses, 70 million Americans now enjoy the ability to listen to music by Web broadcasters over the Internet.

It is a tremendous service. It is as ingrained in a lot of Americans' daily lives as a cup of coffee and the morning newspaper.

Unfortunately, I have to inform the House that that service may be gone in a matter of a few weeks if we don't reach a resolution of a, frankly, wrong decision decided by the Copyright Royalty Board. What I am disturbed to report to my colleagues is that some time ago, March 2, 2007, we had a decision by a Federal agency, the ramifications of which would be to shut down the ability of Americans, on a realistic basis, to continue to enjoy Internet-based radio.

The reason this happened is that this board was given the authority to set the royalty that should be paid by Webcasters who stream out this great music, by the way, tremendously diverse music. One of the great things Americans love about Internet radio is you have such eclectic, different types of music, not just top 40. You know, I haven't progressed past the Beach Boys in the 1960s, but there are a lot of kinds of other music. Internet radio has been tremendous by allowing people to enjoy thousands of different genres and types of music.

But now this Copyright Royalty Board has issued a decision which will explode the royalty that these Webcasters are forced to pay to those who generated the music, to the extent that it will make it totally economically impossible for these businesses and these Webcasters to continue to stream music to the 70 million Americans who now enjoy it.

We need to fix this problem. We need to fix it urgently, because the decision will, this guillotine will come down on July 15 if either Congress doesn't act or an agreement is not reached between the parties to adjust this copyright fee that will have to be paid by the Webcasters.

So we need to fix this problem, and, in doing so, we need to do it in a way that is fair to the musicians and artists who create the music that 70 million Americans enjoy over the Internet. These artists work hard in producing this music. They share their genius. It's an artistic gift they have, and they share it with Americans. They need to be compensated fairly to allow them to maintain their business model as well.

Unfortunately, this was a wildly disproportionate decision by this board that is grossly unfair to the distributors of music and simply will allow them not to continue in business. And to give folks a feeling of how distorted this decision will be, I would like to refer to this graph which shows Internet radio per-song royalty rates under preexisting law starting in 2005, that started at $.00008 dollars in 2005, and by 2010, we will have foisted on us 149 percent increase in these royalty rates.

I am not sure any business model can tolerate a three-fold increase just in the per-song royalty rates that these folks are having to undergo. Unfortunately, this royalty rate means about a 300 percent increase for big Webcasters. But because of the particular rules here, it's a 1,200 percent increase for small Webcasters, so the small Webcasters, which are the vast majority of Webcasters will be hit potentially by 1,200 percent increases.

Now, this board, this Copyright Royalty Board has refused to reconsider their decision. What it means in the real world is the Internet going silent. Many of the stations a few days ago went silent to demonstrate and to protest its decision. I know Americans are disturbed by this, and they are now talking to my colleagues. I know thousands of them have communicated with my colleagues as a result of this, so we need to fix this problem.

I know in my district, I am from an area just north of Seattle, First District in the State of Washington, we have a Webcaster called Big R Radio. They stream to over 15,000 listeners who enjoy their product. But because of this decision, their rates are going to go up to a level, and you have got to understand how bad this is, the rates they would have to pay just for their royalties, not for their overhead, their rent, their salaries, the royalties they would have to pay for this exceed by 150 percent the revenues that this business is getting in.

Well, obviously, that's untenable, and this company will have to either go offshore or simply shut down if some change is not made. That is bad for Big R Radio, the company, and it's bad for the 15,000 people that enjoy their music right now. We need to fix this problem.

So the first damage that was done is this per-song radio royalty, but there was another, perhaps even more odious thing that this board did, the preexisting rule required a $500 charge, or, excuse me, a per-station minimum fee. This new ruling required a $500 charge for each streaming station that they offered. Webcasters, of course, stream under certain channels. But under this decision, there was no limit on the amount total in this per streaming channel that would be placed. Many, if not most Webcasters, have multiple channels.

So, if you look at what it will cost, just three of these Webcasters, Pandora, RealNetworks and Yahoo, because they are getting socked with this $500 per channel, and they broadcast literally thousands of channels with no limit, just those three Webcasters would have to pay $1.15 billion, with a B. These rates will dwarf the radio- related revenues by substantially more than $1 billion.

In other words, it will charge these businesses more than $1 billion more than the revenues they generate from this business. That's absurd. It's ridiculous. It has no relationship to economic reality, and it is a government glitch, a foul-up of the highest order that needs to get repaired.

This would result in 64 times more the total royalties collected by the group called SoundExchange that collects these royalties in 2006, an increase of more than, this is a pretty amazing number to me, 10 million percent over the minimum fee of $2,500 per licensee. Clearly, this is beyond the realm of economic reality.

Finally, this royalty board, the third thing that they did, they eliminated the percentage of revenue fees that many small Webcasters use to determine their performance royalty, which would be severely damaging to small Webcasters. So, to put this in perspective, in a global sense, I want to refer to what this will mean in total royalties.

If you look at this chart, you show total royalties in 2004 of $10 million. The estimated fee under the old royalty rule in 2006 would be $18 million. But under this decision, this flawed decision, it will actually be $1.150 million. So if you want to see the difference graphically of what the old royalty would be in 2006, this bubble would go to this supernova, I would call it, in 2006. This is untenable. It needs to be fixed.

Now, in order to fix this, Representative Manzullo and myself have introduced the Internet Radio Equality Act, it's H.R. 2060, and this bill would fix this problem by doing something that appears eminently fair to me, which would simply have the same rate to be paid by Internet-based Webcasters as broadcasters now pay over satellite radio, over cable radio and over juke boxes.

What we are simply saying is that we ought to have equality, fairness, that is why we named it the Radio Equality Act, by having parity, the same level, which is 7.5 percent of revenue, a transition rate, in 2010. This is something that is fair, equal, and economically realistic to allow 70 million Americans to continue to enjoy their radio over the Internet. And now, 128 Members of the U.S. House of Representatives have cosponsored this bill just in a matter of a month or two; and the reason they have done so is I think they have heard from their constituents who want to keep their service going and realize how ridiculously out of whack this particular decision was.

Now, I know it may surprise some Americans to know that government agencies can make mistakes, but certainly one was made here and we need to fix it, and we need to fix it quickly. O